From: owner-canslim-digest@lists.xmission.com (canslim-digest) To: canslim-digest@lists.xmission.com Subject: canslim-digest V2 #1882 Reply-To: canslim Sender: owner-canslim-digest@lists.xmission.com Errors-To: owner-canslim-digest@lists.xmission.com Precedence: bulk Content-Transfer-Encoding: quoted-printable X-No-Archive: yes canslim-digest Sunday, December 2 2001 Volume 02 : Number 1882 In this issue: AW: [CANSLIM] Market Cycles ( was: Clarify Group RS) [CANSLIM] DYII [CANSLIM] DYII Re: [CANSLIM] Market Cycles ( was: Clarify Group RS) ---------------------------------------------------------------------- Date: Mon, 3 Dec 2001 03:13:18 +0100 From: Andreas Himmelreich Subject: AW: [CANSLIM] Market Cycles ( was: Clarify Group RS) Well, Boucher (The Hedge Fund Edge) said already in 1998 that a Bear Market is likely to come soon and that chances are high that it will be a secular Bear Market (like from 68 to 86). But even throug this time Canslim made money (at least this is what WO states in his books). Between 68 to 86 there where only 5 Years the S&P did not made money (1981 - -9.73, 1977 - 11.50, 1974 -29,72 1973 - 18,3 1969 - 11,98). And I assume they could be spotted with the tools of Canslim (Diss Days, 200 Day MA Breaking, etc.) But very high inflation lead to a Bull Market in Real Estate and Comodities During the late 80s we had high inflation and the Feds could not lower interest rate. But right now we do not have very high inflation, we have very low interest rates and I can not see why we should not have a bull market the next 18 Months or so. I do not say that we will top the old highs, that will not happen. So Canslim says: Stay in in Bull Markets (even an intermediate) and stay out in Bear Markets. If you are experienced use the Screens of Boucher (He has taken Canslim and has developed it further, and other stategies and combined them) and go short. But I would not do it know, since the market is not breaking down. For this I would look for 4 or more Days in the red with high volumne (like 6/8 - 6/18 of this year), then its time to short. What really is not nice right now, that I can not spot real leaders like in 98 and I can not imagine that the industries leading right now can maintain a bull market. I am still positive. > -----Ursprungliche Nachricht----- > Von: Patrick Wahl [SMTP:pwahl@prodigy.net] > Gesendet am: Monday, December 03, 2001 2:33 AM > An: canslim@lists.xmission.com > Betreff: Re: [CANSLIM] Market Cycles ( was: Clarify Group RS) > > I find this macro market stuff pretty interesting, but its not CANSLIM, it probably > doesn't help in investing, so I don't comment on it too much.... But since we started, > I'll toss out one more comment - > > The market is pretty much the economy, and Warren Buffet pointed out a couple > years ago that the market can't outperform the economy indefinitely, it has to reflect > the growth of the underlying businesses that make up the market, and that growth > was much lower than the 20% returns the market provided for 5 years or so, or was > it even more for longer? Anyway, you have to do something to regress to the > mean, which the market certainly did in the last year, but it may need an even > longer sideways period, given the excesses we just went through. I'm not enough of > a bean counter type to work those numbers out, but I know the S&P still has a P/E > in the twenties (yes, those are recession earnings, so other things have to be > factored in to evaluate that number). > > (one other thing I find interesting is that there are a lot of people that don't seem to > grasp this simple principle. half of the 30-40 year olds in this country in 1999 > thought the market would go up like that forever and they would all be able to retire > in 4 or 5 more years.) > > On 2 Dec 2001 at 11:29, Katherine Malm wrote: > > > Whew...cat out of the bag indeed! > > > > Thought I'd try and collect the related thoughts here into the thread that > > we can continue... > > > > From Barry M--market history > > From Patrick W--stagnant periods > > From John K--flat markets and index funds > > From John A and Warren K--how to prepare? mental or strategic? > > From Kent N--math and regressing to the mean, heretofore called the "RTTM > > curse" in his honor. > > > > It would be easiest for me to first stage this from a personal perspective. > > It really started with the IBD wall chart I bought at the seminar in May > > '98. Though I'd been a student of market history up to that point, I don't > > think it really hit me until I saw how "real" that long flat period was. > > About a month after that a new book, "The Bear Book" by John Rothchild, came > > out. How amazing that he was able to get this published at the height of the > > mania. By then, we'd had the late '97 rude awakening, but we certainly > > hadn't been through the late '98 reckoning , the bubble mania, the Big Bear. > > I read it in one sitting and realized I'd have to go back and reread my > > market history with a new sense of urgency and attentiveness. > > > > What that yielded is a perspective. That is, while the businesses and the > > economy goes through certain cycles, the market goes through cycles as well. > > I'm not talking about Elliott wave theory and all that stuff...this is > > BUSINESS and MONETARY POLICY related cycles. I'm also not talking about > > predictive models. What I really like about CANSLIM and WON's approach is > > that he says...you do not need to predict, you only need to be able to read > > the signs. So, you have business going through capacity adjustments, > > inventory adjustments, product and market innovation, restructuring, > > strategic refocusing, etc. etc. You have the Fed going through tightening > > and loosening cycles to manage liquidity during crisis, international > > turmoil, Y2K, etc etc. You have fiscal policy which affects dollars flowing > > or not flowing to certain parts of the economy. Then, you have a bunch of > > people, market players, with all these emotions, risk-taking or risk-less > > behaviors, psychology, etc. etc. > > > > If you're investing in equities, there are universal truths. And that is, > > price is an expectation about something in the future. Earnings, inflation, > > interest rates. If you make forecasting errors, you might over or under > > estimate earnings. I saw this all the time in consulting with manufacturing > > companies. Their forecasts were *always* wrong, and that meant that their > > additions and deletions of capacity were always wrong. But as long as a > > current trend continued in the same direction, their errors weren't all that > > awful. They could make minor adjustments in capacity and materials > > utilization that would absorb the error. But as soon as something major > > happened and the trend changed, they were sitting ducks. To make up for the > > forecasting error, they had to scurry about and make major sweeping changes > > that had huge impact on the business. Very bad. So, imagine that same effect > > on market pricing and expectations. What if our tendency to project the > > current trend is always wrong? At some point it catches up with us....we get > > a bear market. Now add to that all the complexities of changing expectations > > about inflation and interest rates, deflation of a bubble, changing global > > economies, etc. etc. It's very likely that in regressing back to the mean, > > we have to go through a long period where everybody gets all their > > expectations in order. Result? Long, relatively sideways market with > > oscillations up and down, a la 65-82 or thereabouts. > > > > More to the point, what does that mean for us as individual investors? If > > the market *as a whole* goes relatively sideways, indexing is decidedly out. > > Add to that the tendency of most mutual fund managers to be closet indexers > > and you're really cooked. Where do the oscillations in the market come from? > > Business innovation and restructuring, industry restructuring and > > innovation, monetary and fiscal changes, expectation changes, and more. That > > leaves us with rebalancing our portfolio overall to adjust (bonds, cash, > > equities). And for the equity portion, it means we have to very, very, very, > > very good at riding the cycles up AND down. There's no margin for error like > > there used to be. It's not an ever-rising tide, so you can't pick any boat > > and ride it up, up, up. You cannot be a "buy and holder." Why? Because > > between now and the next 15 or 16 years, your real return vs. inflation will > > be negative. > > > > So lets say I'm all wrong about the sideways market thing. Let's say we > > return to a long uptrend. You have lost nothing by being an excellent > > investor who understands a business and how it translates strategy and > > execution into accelerating earnings and revenues. You've lost nothing by > > understanding industry cycles and fashions. You've lost nothing by being > > superb in candidate selection, buying skills, selling skills. No matter what > > the market looks like, you win. But if you have sloppy habits and the market > > it sideways, you lose big. > > > > Katherine > > > > > > ----- Original Message ----- > > From: "Barry Marx" > > Sent: Saturday, December 01, 2001 11:31 PM > > > > > > > On the subject of flat vs. trending markets, below is pasted a message I > > saw > > > a while back on one of the fool.com boards. I'm not sure how accurate the > > > numbers are, but from eyeballing the Dow chart, at least the basic > > > weak/strong cycle idea seems to be correct. > > > > > > Barry > > > > > > -------- > > > > > > I read an interesting article recently on the major market cycles since > > > the birth of the modern stock market around 1900. Here are the cycles > > > identifed, with average annual market return (DJ Ind, I think) > > > after inflation: > > > > > > CYCLE YEARS LENGTH AVG RTN > > > > > > WEAK 1902-1921 19 years 0.0% > > > STRONG 1921-1929 8 years 25.2% (Roaring Twenties) > > > WEAK 1929-1949 20 years 0.9% (Depression) > > > STRONG 1949-1966 17 years 14.0% > > > WEAK 1966-1982 16 years -1.4% > > > STRONG 1982-1999 17 years 14.9% > > > > > > - > > -To subscribe/unsubscribe, email "majordomo@xmission.com" > > -In the email body, write "subscribe canslim" or > > -"unsubscribe canslim". Do not use quotes in your email. > > > > - > -To subscribe/unsubscribe, email "majordomo@xmission.com" > -In the email body, write "subscribe canslim" or > -"unsubscribe canslim". Do not use quotes in your email. - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: Mon, 3 Dec 2001 03:25:44 +0100 From: Andreas Himmelreich Subject: [CANSLIM] DYII - ------ =_NextPart_000_01C17BAA.31B3AC80 Content-Type: text/plain; charset="us-ascii" Content-Transfer-Encoding: 7bit DYII --> Technically not great, the rest I really love: 14,6 Mio Shares ROI 53% MGM Ownership 63% Dept 2% Institutional Ownership 11% Industry RS 83 Market CAP 313 Recent Quater EPS 83% Acc Diss B EPS Rating 99 RS Rating 98 PE 30 (could be lower ...) The Chart is pretty eratic, might be that this is not the right breakout to jump in, but I might give it a try tomorow ... The Rest of my Watch List. See you Andreas - ------ =_NextPart_000_01C17BAA.31B3AC80-- - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: Mon, 3 Dec 2001 03:26:10 +0100 From: Andreas Himmelreich Subject: [CANSLIM] DYII - ------ =_NextPart_000_01C17BAA.40CB3300 Content-Type: text/plain; charset="us-ascii" Content-Transfer-Encoding: 7bit DYII --> Technically not great, the rest I really love: 14,6 Mio Shares ROI 53% MGM Ownership 63% Dept 2% Institutional Ownership 11% Industry RS 83 Market CAP 313 Recent Quater EPS 83% Acc Diss B EPS Rating 99 RS Rating 98 PE 30 (could be lower ...) The Chart is pretty eratic, might be that this is not the right breakout to jump in, but I might give it a try tomorow ... The Rest of my Watch List. See you Andreas - ------ =_NextPart_000_01C17BAA.40CB3300-- - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: Sun, 2 Dec 2001 21:35:15 -0500 From: "Tom Worley" Subject: Re: [CANSLIM] Market Cycles ( was: Clarify Group RS) This is a multi-part message in MIME format. - ------=_NextPart_000_004B_01C17B79.3B602320 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable Hi Andreas, Generally, I agree with you. On the other hand, throughout this year, we = have been told that economic recovery is just ahead. First it was to = happen starting in the second half of this year. Then it was to show up = in Q4. Then we had the attacks of September 11, and the consequent = impact on both consumer spending and investor sentiment. Now, all signs = point towards a solid economic recovery starting in the second half of = 2002. In the meantime, oil prices have collapsed, and look to remain = weak until economic activity picks up, and increases demand. That is = directly helping to keep inflation low despite all the Fed rate cuts. I am seeing a steady increase in the number of companies reporting = earnings where the future looking comments suggest that they have = bottomed out on earnings and revenues declines. So a recovery in = earnings, and even earnings growth year to year, may actually precede an = economic recovery. As weak as the US economy is today, it still appears to be in better = shape than any other major country. Next in line appears to be Germany. = Japan's economy (2nd largest in the world) is still a disaster. Many = other economies, including Japan, appear totally dependent on a US = economic recovery in order to bail out their own. I am also having problems finding clear leadership, and suspect that = will remain the case until there is solid evidence of either a = recovering economy or earnings / revenue growth. Gru=DF, Tom Worley stkguru@netside.net AIM: TexWorley ----- Original Message -----=20 From: Andreas Himmelreich=20 To: 'canslim@lists.xmission.com'=20 Sent: Sunday, December 02, 2001 9:13 PM Subject: AW: [CANSLIM] Market Cycles ( was: Clarify Group RS) Well, Boucher (The Hedge Fund Edge) said already in 1998 that a Bear = Market=20 is likely to come soon and that chances are high that it will be a = secular=20 Bear Market (like from 68 to 86). But even throug this time Canslim made money (at least this is what WO = states in his books). Between 68 to 86 there where only 5 Years the S&P did not made money = (1981=20 -9.73, 1977 - 11.50, 1974 -29,72 1973 - 18,3 1969 - 11,98). And I = assume=20 they could be spotted with the tools of Canslim (Diss Days, 200 Day MA = Breaking, etc.) But very high inflation lead to a Bull Market in Real Estate and = Comodities During the late 80s we had high inflation and the Feds could not lower = interest rate. But right now we do not have very high inflation, we have very low = interest=20 rates and I can not see why we should not have a bull market the next = 18=20 Months or so. I do not say that we will top the old highs, that will = not=20 happen. So Canslim says: Stay in in Bull Markets (even an intermediate) and = stay=20 out in Bear Markets. If you are experienced use the Screens of Boucher (He has taken = Canslim and=20 has developed it further, and other stategies and combined them) and = go=20 short. But I would not do it know, since the market is not breaking down. For this I would look for 4 or more Days in the red with high volumne = (like=20 6/8 - 6/18 of this year), then its time to short. What really is not nice right now, that I can not spot real leaders = like in=20 98 and I can not imagine that the industries leading right now can = maintain=20 a bull market. I am still positive. > -----Ursprungliche Nachricht----- > Von: Patrick Wahl [SMTP:pwahl@prodigy.net] > Gesendet am: Monday, December 03, 2001 2:33 AM > An: canslim@lists.xmission.com > Betreff: Re: [CANSLIM] Market Cycles ( was: Clarify Group RS) > > I find this macro market stuff pretty interesting, but its not = CANSLIM,=20 it probably > doesn't help in investing, so I don't comment on it too much.... But = since we started, > I'll toss out one more comment - > > The market is pretty much the economy, and Warren Buffet pointed out = a=20 couple > years ago that the market can't outperform the economy indefinitely, = it=20 has to reflect > the growth of the underlying businesses that make up the market, and = that=20 growth > was much lower than the 20% returns the market provided for 5 years = or=20 so, or was > it even more for longer? Anyway, you have to do something to = regress to=20 the > mean, which the market certainly did in the last year, but it may = need an=20 even > longer sideways period, given the excesses we just went through. = I'm not=20 enough of > a bean counter type to work those numbers out, but I know the S&P = still=20 has a P/E > in the twenties (yes, those are recession earnings, so other things = have=20 to be > factored in to evaluate that number). > > (one other thing I find interesting is that there are a lot of = people=20 that don't seem to > grasp this simple principle. half of the 30-40 year olds in this = country=20 in 1999 > thought the market would go up like that forever and they would all = be=20 able to retire > in 4 or 5 more years.) > > On 2 Dec 2001 at 11:29, Katherine Malm wrote: > > > Whew...cat out of the bag indeed! > > > > Thought I'd try and collect the related thoughts here into the = thread=20 that > > we can continue... > > > > From Barry M--market history > > From Patrick W--stagnant periods > > From John K--flat markets and index funds > > From John A and Warren K--how to prepare? mental or strategic? > > From Kent N--math and regressing to the mean, heretofore called = the=20 "RTTM > > curse" in his honor. > > > > It would be easiest for me to first stage this from a personal=20 perspective. > > It really started with the IBD wall chart I bought at the seminar = in=20 May > > '98. Though I'd been a student of market history up to that point, = I=20 don't > > think it really hit me until I saw how "real" that long flat = period=20 was. > > About a month after that a new book, "The Bear Book" by John = Rothchild,=20 came > > out. How amazing that he was able to get this published at the = height=20 of the > > mania. By then, we'd had the late '97 rude awakening, but we = certainly > > hadn't been through the late '98 reckoning , the bubble mania, the = Big=20 Bear. > > I read it in one sitting and realized I'd have to go back and = reread my > > market history with a new sense of urgency and attentiveness. > > > > What that yielded is a perspective. That is, while the businesses = and=20 the > > economy goes through certain cycles, the market goes through = cycles as=20 well. > > I'm not talking about Elliott wave theory and all that = stuff...this is > > BUSINESS and MONETARY POLICY related cycles. I'm also not talking = about > > predictive models. What I really like about CANSLIM and WON's = approach=20 is > > that he says...you do not need to predict, you only need to be = able to=20 read > > the signs. So, you have business going through capacity = adjustments, > > inventory adjustments, product and market innovation, = restructuring, > > strategic refocusing, etc. etc. You have the Fed going through=20 tightening > > and loosening cycles to manage liquidity during crisis, = international > > turmoil, Y2K, etc etc. You have fiscal policy which affects = dollars=20 flowing > > or not flowing to certain parts of the economy. Then, you have a = bunch=20 of > > people, market players, with all these emotions, risk-taking or=20 risk-less > > behaviors, psychology, etc. etc. > > > > If you're investing in equities, there are universal truths. And = that=20 is, > > price is an expectation about something in the future. Earnings,=20 inflation, > > interest rates. If you make forecasting errors, you might over or = under > > estimate earnings. I saw this all the time in consulting with=20 manufacturing > > companies. Their forecasts were *always* wrong, and that meant = that=20 their > > additions and deletions of capacity were always wrong. But as long = as a > > current trend continued in the same direction, their errors = weren't all=20 that > > awful. They could make minor adjustments in capacity and materials > > utilization that would absorb the error. But as soon as something = major > > happened and the trend changed, they were sitting ducks. To make = up for=20 the > > forecasting error, they had to scurry about and make major = sweeping=20 changes > > that had huge impact on the business. Very bad. So, imagine that = same=20 effect > > on market pricing and expectations. What if our tendency to = project the > > current trend is always wrong? At some point it catches up with=20 us....we get > > a bear market. Now add to that all the complexities of changing=20 expectations > > about inflation and interest rates, deflation of a bubble, = changing=20 global > > economies, etc. etc. It's very likely that in regressing back to = the=20 mean, > > we have to go through a long period where everybody gets all their > > expectations in order. Result? Long, relatively sideways market = with > > oscillations up and down, a la 65-82 or thereabouts. > > > > More to the point, what does that mean for us as individual = investors?=20 If > > the market *as a whole* goes relatively sideways, indexing is = decidedly=20 out. > > Add to that the tendency of most mutual fund managers to be closet = indexers > > and you're really cooked. Where do the oscillations in the market = come=20 from? > > Business innovation and restructuring, industry restructuring and > > innovation, monetary and fiscal changes, expectation changes, and = more.=20 That > > leaves us with rebalancing our portfolio overall to adjust (bonds, = cash, > > equities). And for the equity portion, it means we have to very, = very,=20 very, > > very good at riding the cycles up AND down. There's no margin for = error=20 like > > there used to be. It's not an ever-rising tide, so you can't pick = any=20 boat > > and ride it up, up, up. You cannot be a "buy and holder." Why? = Because > > between now and the next 15 or 16 years, your real return vs. = inflation=20 will > > be negative. > > > > So lets say I'm all wrong about the sideways market thing. Let's = say we > > return to a long uptrend. You have lost nothing by being an = excellent > > investor who understands a business and how it translates strategy = and > > execution into accelerating earnings and revenues. You've lost = nothing=20 by > > understanding industry cycles and fashions. You've lost nothing by = being > > superb in candidate selection, buying skills, selling skills. No = matter=20 what > > the market looks like, you win. But if you have sloppy habits and = the=20 market > > it sideways, you lose big. > > > > Katherine > > > > > > ----- Original Message ----- > > From: "Barry Marx" > > Sent: Saturday, December 01, 2001 11:31 PM > > > > > > > On the subject of flat vs. trending markets, below is pasted a=20 message I > > saw > > > a while back on one of the fool.com boards. I'm not sure how=20 accurate the > > > numbers are, but from eyeballing the Dow chart, at least the = basic > > > weak/strong cycle idea seems to be correct. > > > > > > Barry > > > > > > -------- > > > > > > I read an interesting article recently on the major market = cycles=20 since > > > the birth of the modern stock market around 1900. Here are the=20 cycles > > > identifed, with average annual market return (DJ Ind, I think) > > > after inflation: > > > > > > CYCLE YEARS LENGTH AVG RTN > > > > > > WEAK 1902-1921 19 years 0.0% > > > STRONG 1921-1929 8 years 25.2% (Roaring Twenties) > > > WEAK 1929-1949 20 years 0.9% (Depression) > > > STRONG 1949-1966 17 years 14.0% > > > WEAK 1966-1982 16 years -1.4% > > > STRONG 1982-1999 17 years 14.9% > > > > > > - > > -To subscribe/unsubscribe, email "majordomo@xmission.com" > > -In the email body, write "subscribe canslim" or > > -"unsubscribe canslim". Do not use quotes in your email. > > > > - > -To subscribe/unsubscribe, email "majordomo@xmission.com" > -In the email body, write "subscribe canslim" or > -"unsubscribe canslim". Do not use quotes in your email. - -To subscribe/unsubscribe, email "majordomo@xmission.com" -In the email body, write "subscribe canslim" or -"unsubscribe canslim". Do not use quotes in your email. - ------=_NextPart_000_004B_01C17B79.3B602320 Content-Type: text/html; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable
Hi Andreas,
 
Generally, I agree with you. On the other hand, = throughout=20 this year, we have been told that economic recovery is just ahead. First = it was=20 to happen starting in the second half of this year. Then it was to show = up in=20 Q4. Then we had the attacks of September 11, and the consequent impact = on both=20 consumer spending and investor sentiment. Now, all signs point towards a = solid=20 economic recovery starting in the second half of 2002. In the meantime, = oil=20 prices have collapsed, and look to remain weak until economic activity = picks up,=20 and increases demand. That is directly helping to keep inflation low = despite all=20 the Fed rate cuts.
 
I am seeing a steady increase in the number of = companies=20 reporting earnings where the future looking comments suggest that they = have=20 bottomed out on earnings and revenues declines. So a recovery in = earnings, and=20 even earnings growth year to year, may actually precede an economic=20 recovery.
 
As weak as the US economy is today, it still appears = to be in=20 better shape than any other major country. Next in line appears to be = Germany.=20 Japan's economy (2nd largest in the world) is still a disaster. Many = other=20 economies, including Japan, appear totally dependent on a US economic = recovery=20 in order to bail out their own.
 
I am also having problems finding clear leadership, = and=20 suspect that will remain the case until there is solid evidence of = either a=20 recovering economy or earnings / revenue growth.
 
Gru=DF,
 
Tom Worley
stkguru@netside.net
AIM:=20 TexWorley
----- Original Message -----
From:=20 Andreas = Himmelreich
To: 'canslim@lists.xmission.com' =
Sent: Sunday, December 02, 2001 = 9:13=20 PM
Subject: AW: [CANSLIM] Market = Cycles (=20 was: Clarify Group RS)

Well, Boucher (The Hedge Fund Edge) said already in = 1998 that a=20 Bear Market
is likely to come soon and that chances are high that = it will=20 be a secular
Bear Market (like from 68 to 86).

But even = throug this=20 time Canslim made money (at least this is what WO
states in his=20 books).

Between 68 to 86 there where only 5 Years the S&P = did not=20 made money (1981
-9.73, 1977 - 11.50, 1974 -29,72 1973 - 18,3 1969 = - -=20 11,98). And I assume
they could be spotted with the tools of = Canslim (Diss=20 Days, 200 Day MA
Breaking, etc.)

But very high inflation = lead to a=20 Bull Market in Real Estate and Comodities
During the late 80s we = had high=20 inflation and the Feds could not lower
interest rate.

But = right now=20 we do not have very high inflation, we have very low interest =
rates and I=20 can not see why we should not have a bull market the next 18 =
Months or so.=20 I do not say that we will top the old highs, that will not=20
happen.

So Canslim says: Stay in in Bull Markets (even an=20 intermediate) and stay
out in Bear Markets.

If you are = experienced=20 use the Screens of Boucher (He has taken Canslim and
has developed = it=20 further, and other stategies and combined them) and go =
short.
But I=20 would not do it know, since the market is not breaking = down.

For this I=20 would look for 4 or more Days in the red with high volumne (like =
6/8 -=20 6/18 of this year), then its time to short.

What really is not = nice=20 right now, that I can not spot real leaders like in
98 and I can = not=20 imagine that the industries leading right now can maintain
a bull=20 market.

I am still positive.




> = - -----Ursprungliche=20 Nachricht-----
> Von: Patrick Wahl [SMTP:pwahl@prodigy.net]
>= ;=20 Gesendet am: Monday, December 03, 2001 2:33 AM
> An: canslim@lists.xmission.com=
>=20 Betreff: Re: [CANSLIM] Market Cycles ( was: Clarify Group = RS)
>
>=20 I find this macro market stuff pretty interesting, but its not = CANSLIM,
it=20 probably
> doesn't help in investing, so I don't comment on it = too=20 much.... But
since we started,
> I'll toss out one more = comment=20 -
>
> The market is pretty much the economy, and Warren = Buffet=20 pointed out a
couple
> years ago that the market can't = outperform=20 the economy indefinitely, it
has to reflect
> the growth of = the=20 underlying businesses that make up the market, and that =
growth
> was=20 much lower than the 20% returns the market provided for 5 years or =
so, or=20 was
> it even more for longer?  Anyway, you have to do = something to=20 regress to
the
> mean, which the market certainly did in the = last=20 year, but it may need an
even
> longer sideways period, = given the=20 excesses we just went through.  I'm not
enough of
> a = bean=20 counter type to work those numbers out, but I know the S&P still =
has a=20 P/E
> in the twenties (yes, those are recession earnings, so = other=20 things have
to be
> factored in to evaluate that=20 number).
>
> (one other thing I find interesting is that = there are=20 a lot of people
that don't seem to
> grasp this simple=20 principle.  half of the 30-40 year olds in this country
in=20 1999
> thought the market would go up like that forever and they = would=20 all be
able to retire
> in 4 or 5 more = years.)
>
> On 2=20 Dec 2001 at 11:29, Katherine Malm wrote:
>
> > = Whew...cat out=20 of the bag indeed!
> >
> > Thought I'd try and = collect the=20 related thoughts here into the thread
that
> > we can=20 continue...
> >
> > From Barry M--market = history
>=20 > From Patrick W--stagnant periods
> > From John K--flat = markets=20 and index funds
> > From John A and Warren K--how to prepare? = mental=20 or strategic?
> > From Kent N--math and regressing to the = mean,=20 heretofore called the
"RTTM
> > curse" in his = honor.
>=20 >
> > It would be easiest for me to first stage this from = a=20 personal
perspective.
> > It really started with the IBD = wall=20 chart I bought at the seminar in
May
> > '98. Though I'd = been a=20 student of market history up to that point, I
don't
> > = think it=20 really hit me until I saw how "real" that long flat period =
was.
>=20 > About a month after that a new book, "The Bear Book" by John = Rothchild,=20
came
> > out. How amazing that he was able to get this = published=20 at the height
of the
> > mania. By then, we'd had the = late '97=20 rude awakening, but we certainly
> > hadn't been through the = late '98=20 reckoning , the bubble mania, the Big
Bear.
> > I read it = in one=20 sitting and realized I'd have to go back and reread my
> > = market=20 history with a new sense of urgency and attentiveness.
> = >
>=20 > What that yielded is a perspective. That is, while the businesses = and=20
the
> > economy goes through certain cycles, the market = goes=20 through cycles as
well.
> > I'm not talking about Elliott = wave=20 theory and all that stuff...this is
> > BUSINESS and MONETARY = POLICY=20 related cycles. I'm also not talking about
> > predictive = models.=20 What I really like about CANSLIM and WON's approach
is
> = > that=20 he says...you do not need to predict, you only need to be able to=20
read
> > the signs. So, you have business going through = capacity=20 adjustments,
> > inventory adjustments, product and market=20 innovation, restructuring,
> > strategic refocusing, etc. = etc. You=20 have the Fed going through
tightening
> > and loosening = cycles to=20 manage liquidity during crisis, international
> > turmoil, = Y2K, etc=20 etc. You have fiscal policy which affects dollars
flowing
> = > or=20 not flowing to certain parts of the economy. Then, you have a bunch=20
of
> > people, market players, with all these emotions,=20 risk-taking or
risk-less
> > behaviors, psychology, etc.=20 etc.
> >
> > If you're investing in equities, there = are=20 universal truths. And that
is,
> > price is an = expectation about=20 something in the future. Earnings,
inflation,
> > = interest rates.=20 If you make forecasting errors, you might over or under
> > = estimate=20 earnings. I saw this all the time in consulting with =
manufacturing
>=20 > companies. Their forecasts were *always* wrong, and that meant = that=20
their
> > additions and deletions of capacity were always = wrong.=20 But as long as a
> > current trend continued in the same = direction,=20 their errors weren't all
that
> > awful. They could make = minor=20 adjustments in capacity and materials
> > utilization that = would=20 absorb the error. But as soon as something major
> > happened = and the=20 trend changed, they were sitting ducks. To make up for
the
> = >=20 forecasting error, they had to scurry about and make major sweeping=20
changes
> > that had huge impact on the business. Very = bad. So,=20 imagine that same
effect
> > on market pricing and = expectations.=20 What if our tendency to project the
> > current trend is = always=20 wrong? At some point it catches up with
us....we get
> > = a bear=20 market. Now add to that all the complexities of changing=20
expectations
> > about inflation and interest rates, = deflation of=20 a bubble, changing
global
> > economies, etc. etc. It's = very=20 likely that in regressing back to the
mean,
> > we have = to go=20 through a long period where everybody gets all their
> > = expectations=20 in order. Result? Long, relatively sideways market with
> >=20 oscillations up and down, a la 65-82 or thereabouts.
> = >
> >=20 More to the point, what does that mean for us as individual investors? =
If
> > the market *as a whole* goes relatively sideways, = indexing=20 is decidedly
out.
> > Add to that the tendency of most = mutual=20 fund managers to be closet
indexers
> > and you're really = cooked.=20 Where do the oscillations in the market come
from?
> > = Business=20 innovation and restructuring, industry restructuring and
> >=20 innovation, monetary and fiscal changes, expectation changes, and = more.=20
That
> > leaves us with rebalancing our portfolio overall = to=20 adjust (bonds,
cash,
> > equities). And for the equity = portion,=20 it means we have to very, very,
very,
> > very good at = riding the=20 cycles up AND down. There's no margin for error
like
> > = there=20 used to be. It's not an ever-rising tide, so you can't pick any=20
boat
> > and ride it up, up, up. You cannot be a "buy and = holder." Why? Because
> > between now and the next 15 or 16 = years,=20 your real return vs. inflation
will
> > be = negative.
>=20 >
> > So lets say I'm all wrong about the sideways market = thing.=20 Let's say we
> > return to a long uptrend. You have lost = nothing by=20 being an excellent
> > investor who understands a business = and how it=20 translates strategy and
> > execution into accelerating = earnings and=20 revenues. You've lost nothing
by
> > understanding = industry=20 cycles and fashions. You've lost nothing by
being
> > = superb in=20 candidate selection, buying skills, selling skills. No matter =
what
>=20 > the market looks like, you win. But if you have sloppy habits and = the=20
market
> > it sideways, you lose big.
> = >
> >=20 Katherine
> >
> >
> > ----- Original = Message=20 -----
> > From: "Barry Marx" <bmarx@pobox.com>
> > = Sent:=20 Saturday, December 01, 2001 11:31 PM
> >
> >
> = >=20 > On the subject of flat vs. trending markets, below is pasted a=20
message I
> > saw
> > > a while back on one = of the=20 fool.com boards.  I'm not sure how
accurate the
> > = >=20 numbers are, but from eyeballing the Dow chart, at least the = basic
>=20 > > weak/strong cycle idea seems to be correct.
> >=20 >
> > > Barry
> > >
> > >=20 --------
> > >
> > > I read an interesting = article=20 recently on the major market cycles
since
> > > the = birth of=20 the modern stock market around 1900.  Here are the =
cycles
>=20 > > identifed, with average annual market return (DJ Ind, I=20 think)
> > > after inflation:
> > >
> = > >=20 CYCLE    YEARS     = LENGTH   =20 AVG RTN
> > >
> > > WEAK  =20 1902-1921   19 years    0.0%
> > = > STRONG=20 1921-1929    8 years   25.2%  (Roaring=20 Twenties)
> > > WEAK   1929-1949   20=20 years    0.9%  (Depression)
> > > = STRONG=20 1949-1966   17 years   14.0%
> > >=20 WEAK   1966-1982   16 years   = - -1.4%
> >=20 > STRONG 1982-1999   17 years   14.9%
>=20 >
> >
> > -
> > -To = subscribe/unsubscribe, email=20 "majordomo@xmission.com"
>= ;=20 > -In the email body, write "subscribe canslim" or
> >=20 -"unsubscribe canslim".  Do not use quotes in your=20 email.
>
>
>
> -
> -To = subscribe/unsubscribe,=20 email "majordomo@xmission.com"
>= ; -In=20 the email body, write "subscribe canslim" or
> -"unsubscribe=20 canslim".  Do not use quotes in your email.

-
-To=20 subscribe/unsubscribe, email "majordomo@xmission.com"
-In= the=20 email body, write "subscribe canslim" or
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