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The Russian Machines Are Coming. Save Yourself

Great analysis of how Skynet will take over the world and nuke mankind back to the stone age. In all seriousness, a great read if you believe robotics will have a significant impact on our economy and our labor force over the next few decades. While I believe the author comes to a “pie in the sky” conclusion, the reality is brutal. 

Today’s robots can already replace some of the blue color/white color workers at the cost of $3.40/hour. With technology improvements the cost of robotics is expected to plummet over the next decade. Will anyone be able to compete against $1.10/hour robots who don’t whine, form unions or take pissing breaks? Let me think about that for a second.

terminator-investwithalex

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The Bear’s Lair: What happens when the robots take over?

February 3, 2014 posted by Martin Hutchinson

The economic disruption will be considerable, but robots will likely be a boon to the economy by pushing technological frontiers and facilitating entrepreneurship.


MIT professors Erik Brynjolfsson and Andrew McAfee in their new book, “The Second Machine Age” (Norton, 2014), look at recent advances in machine capability and suggest that we are going through a second Industrial Revolution, with robots soon capable of taking over massive new areas of human activity. Their picture of a world with ubiquitous robots is interesting but lacks definition; there is rather too much popular, but fallacious, economics and not enough futuristic robot wisdom. I thought therefore that I would fill the gap, using their admirable analysis of what robots might be able to do and consider, using better economics albeit infinitely less understanding of robots, what kind of a world this would produce. 

The move to a world of robots has been slower than the 1950s expected. On the one hand, Moore’s Law, formulated by Intel founder Gordon Moore in 1965 and which says that the capacity and speed of computers doubles every two years, has been fully in operation since that time. On the other hand, many quite simple operations are in fact very difficult indeed for robots to carry out. For example, according to “The Second Machine Age,” it currently takes a robot fully 24 minutes to fold a towel.

This makes robots a lot less useful than they might be. The Jetsons world of a universal robot housemaid is still decades away. If it takes a robot 24 minutes to fold a towel, it presumably takes it several hours to make a bed properly and days-upon-days to clear up the living room after the kids have been through. We therefore are reduced for the foreseeable future to the simple iRobot Roomba, an admirable machine that is nevertheless modestly capable only of vacuuming the apartments of compulsive neat-freaks who don’t scatter junk about.

The most exciting part of the book is its description of the ways in which the power of computers is beginning to make things possible that were previously regarded as beyond the machines’ capability. While the doubling period has slowed somewhat, from little over a year to about two years, sophisticated advances in design have enabled engineers to overcome physical barriers that had been thought impenetrable. 

That means that problems that appear impossible may be relatively straightforward only a decade later when computers are some 32 times more powerful and faster. In 2004, a DARPA race for self-driving cars was a fiasco; ten years later Google self-driving cars are buzzing all around the streets of Mountain View (although there still may be difficulties in extreme driving situations). Beating Grandmasters at chess was the great achievement of IBM’s Watson in the late 1990s; 15 years later Watson can even match wits with the far greater intellects of “Jeopardy” champions (though switch to “Wheel of Fortune” without reprogramming and Watson is toast).

There is thus good news for harried homeowners: the move to a “Jetsons” robot housemaid is only a matter of time. For example the robot which takes 24 minutes to fold a towel simply needs a few more iterations of Moore’s Law. After 10 more iterations, in 2034, the robot will be able to fold a towel in 1/1,024 of its present time, or 1.4 seconds. Problem solved: the towel closet will no longer be a baffling intellectual Matterhorn for the robotic household help. 

Before rejoicing at the future capabilities available to us, we should however remember the Great Moore’s Law Compensator, propounded by Niklaus Wirth in 1995, which says that software is growing more sluggish and complex faster than computer power is increasing. For example, according to a 2008 InfoWorld article, the 2007 version of Microsoft Office performed approximately half as fast on a 2007 computer as the 2000 version did on a 2000 computer.

The entry into robot bliss is thus not guaranteed. What’s more, the authors lose considerable credibility when they take a mechanistic approach to technological change, asserting that very little changed in the millennium before 1750 and that “human population growth and social development were very nearly flat until the steam engine came along.” 

While I defer to nobody in my admiration for Song Dynasty China, the fact remains that from about 1500 technological change was rapid in the West. In Britain, at least, this was accompanied by considerable economic growth. Anyone who has read N.A. M. Rodger’s excellent history of the British Navy, for example, will know that Nelson’s flagship “Victory,” built in 1759, could have blown the entire 1588 Spanish Armada out of the water single-handedly because of its guns’ greater range, higher muzzle velocity and much faster reload time.

Even today, productivity has advanced less than you think. The great Earl of Clarendon, exiled in 1667, compiled his magnificent “History of the Great Rebellion” of about 1.2 million words, a three-volume autobiography, an excellent refutation of Hobbes’ “Leviathan” and several other books—a total of about 2 million carefully researched words—almost entirely in the seven years before he died. And he was working with a quill pen, in candlelight and moving from one temporary exile abode to another, haunted by the illnesses of old age and seventeenth-century medicine. Given the amount of learning involved and the quality of the prose, there is no modern writer who could do as well, with all his modern equipment. 

While a computer could certainly compose 2 million words in half an hour or so, they would be rubbish, little better than the output of a million monkeys on typewriters. Even at the level of investment recommendations, one can easily spot the automated ones, and however many further iterations of Moore’s Law we get, they are not going to enable a computer to write like Clarendon. Typesetting and proofreading Clarendon’s “History” took the Oxford University Press several years in 1699-1703; that would certainly be quicker today, but the actual writing wouldn’t.

One area where future robots may provide major productivity lifts, however, is medicine. IBM is already attempting to turn Watson into “Dr. Watson,” capable of undertaking medical diagnosis. The theoretical knowledge is of course no problem here; the difficulty is applying that knowledge to individual cases. Once diagnosis is possible, one can imagine robots undertaking surgery—presumably only after they have got towel-folding down cold. There are a number of mechanical operations in surgery that one would not wish carried out at one hundredth the normal speed.

This offers the possibility of a really major advance. Medicine is, after all, only maintenance of the human body; it is thus ridiculous that it should cost 17% of GDP. It’s as if a $30,000 automobile required $5,000 of garage work every year in order to keep it on the road. That may have been the case with the unreliable beasts of 1910, but today the maintenance proportion is far below that. Similarly, we can envisage medical costs being reduced by robotics to the 5% of GDP or so that they historically averaged in 1960. That would leave 12% of GDP available for other things and relieve a huge burden from government budgets.

The authors’ economic prescriptions for dealing with a robotized world are disappointing – standard Whig rubbish including higher taxes on the rich, handouts to the unemployable impoverished and, incredibly, more immigration in spite of their assumption of massive low-skill unemployment. Their one really helpful insight is that in many areas a combination of machine and human can produce results superior either to unaided humans or unaided machines (apparently a man-machine combination can still ace “Jeopardy” against IBM’s Watson.) Presumably a man/machine combination might prove especially capable in the medical area, at least for highly specialized processes.

At first sight, that sounds like a solution to the unemployment problem the authors so eloquently point out. As robots take over household and low-wage tasks, such as janitorial services, landscaping, food service and low-end retail, people can be attached to the robots in areas where a robot-human combination is optimal. However, there are almost certainly far too many humans for this to work, because as in a modern factory one human will be able to supply the “human factor” for a dozen robots or more, leaving a huge surplus of unemployed labor. Once again, as in so many other areas of human activity, when one looks forward one is forced to the conclusion that the system will only work properly with a population perhaps one tenth of that today – in other words about the 1 billion humans of 1800 about which the authors are so scathing. Maybe the population increase that accompanied industrialization isn’t permanently sustainable after all, but merely a giant blip.

Contrary to the authors’ estimate, I do not see further inequality or mass unemployment from the robot revolution. By all means, there will be actresses and athletes paid excessive sums, as the entertainment complex has always valued the tiny extra stratum of excellence. For the rest of us, however, apart from those who design robots or interact with them in some way, there will be the universe of “long-tail” products and services appealing to a small minority audience. 

Authors, artists and musicians have always made a living appealing to a relatively small group of connoisseurs.  While J.K. Rowling is a billionaire, that kind of wealth from the arts is a modern phenomenon. Dr. Johnson, the most successful writer of his age, was only able to live comfortably because of a royal pension of £300 per annum granted by George III. In a world of robots and 3D printing, the opportunities for specialized, quirky, non-machine-made output in the arts and crafts (or, by all means, “twerking” pop music) will be much greater than today, and hundreds of millions may find satisfaction and a modest living thereby.

I can almost get enthusiastic about the advent of genuinely functional robots. I was brought up in the 1950s and 1960s expecting that everything would be robotized by now, so it’s good that it’s actually happening. The economic disruption will be considerable, but I refuse to believe we will enter a world where 80% of the population lives on welfare while the other 20% pay 90% income taxes to support them. Instead, I think arts and crafts will support far more of us than they do today, while others will work with the robots and a small group will push forward the technological frontiers or engage in entrepreneurship. It will be a more prosperous world if we have fewer people. But that also is a problem we can solve if we have to, possibly through interstellar travel—that other fantasy of the 1950s that has been unaccountably delayed. Above all, it will still be free, and we will be richer, not poorer.

The Russian Machines Are Coming. Save Yourself Google

Ukraine Imposes Capital Controls. Is Ukraine About To Collapse?

Typically, governments don’t impose capital controls on bright shiny days. They do it right before shit hits the fan. Argentina and Venezuela are perfect examples of that. No doubt Ukraine is on the brink of a political collapse or worse, much worse, economic collapse. With political meddling from EU, US and Russia, this powder keg is about to explode. If you know anything about the region, understand one thing. There is no way in hell, in this universe and the next, that Putin will let Ukraine go to the EU or Western side. As far as Russian government is concerned, Ukraine is still part of the iron “Soviet Union” and will remain so for the foreseeable future. No matter how many tantrums the UE or the US throws. Yet, even with Russia’s support I would expect Ukrainian economy to be flushed down the toilet and soon. Capital controls are never short term and are never good. Expect the worst especially when the Ukranian Government assures otherwise. 

ukraine currency

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Ukraine Imposes Capital Controls as President Meets Putin

Ukraine’s central bank imposed limits on foreign-currency purchases, bolstering a sagging hryvnia after interventions failed to, while President Viktor Yanukovychprepared to meet Russia’s Vladimir Putin in Sochi.

The monetary authority set a monthly cap on foreign currency purchases for individuals and imposed a waiting period of at least six working days for companies and people, according to a statement on its website yesterday. The crisis, in its third month, has rocked the hryvnia, squeezing reserves as authorities struggle to contain a record current-account gap.

With a leak of undiplomatic language from a U.S. diplomat rattling ties with the European Union as they discuss potential aid, Yanukovych traveled to the opening ceremony of the Sochi Olympics where he is to meet the Russian president, who halted payments from a $15 billion bailout after nationwide protests led to the cabinet’s collapse.

“It may be difficult for the central bank to contain the situation until there is more clarity regarding a bailout from Russia or, potentially, from the West,” Ben Griffith, an analyst at Victoria 1522 Investments LP in San Francisco, said by e-mail. “The market needs to know what changes would cause Russia to pull its agreement or cause the Western bloc to step in with assistance.”

Hryvnia, Bonds

The hryvnia, which has fallen to a five-year low of 9 per dollar several times in the past three days, gained 3.6 percent to 8.545 by 12:59 p.m. in Kiev, the biggest gain since September 2009, according to data compiled by Bloomberg. That pared the decline this year to 3.4 percent.

“The decision by Ukraine’s central bank to impose targeted capital controls should bring some short-term relief to the hryvnia,” Neil Shearing, a London-based analyst at Capital Economics, wrote in an e-mailed report today. “But it is unlikely to prevent further falls in the currency over the coming months.”

The yield on Ukraine’s dollar bonds due this June rose 191 basis points, or 1.91 percentage points, to 16.67 percent yesterday, the highest since before the Russian bailout was announced Dec. 17. The rate was 97 basis points lower at 15.70 percent at 2:18 p.m. today.

The cost of insuring the country’s debt against non-payment for five years using credit-default swaps fell 15 basis points to 1,071 after reaching the highest in almost two months yesterday, CMA data showed.

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Ukraine Imposes Capital Controls. Is Ukraine About To Collapse?  Google

Why Is Donald Trump Freaking Out? He Knows What Will Happen In The Real Estate Over The Next Few Years. It’s Time You Find Out As Well.

housing bubble

Today’s 5-10 Minute Podcast Covers The Following Topics:

Reader’s Question: “I am thinking about buying a house, the prices are up significantly in my area over the last few years, should I do it now or wait?”  – Lili, Maryland. 

    • The Secret Behind Today’s Real Estate Prices. 
    • What The US Government Doesn’t Want You To Know About Real Estate. 
    • What Will Happen Next. Trust Me, It Is A 100% Certainty Now. 
    • What You Should Do To Save or Make A Lot Of Money Over The Next Few Years. 

Please tweet me your questions @investwithalex

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Daily Stock Market Update. InvestWithAlex.com February 4th, 2014

Daily Chart February 4, 2014

Continue to maintain a LONG/HOLD position if invested -OR- be in CASH if not. 

2/4/2014 – A fairly slow bounce day in the market with the Dow Jones being up 72.44 points (+0.47%) and the Nasdaq being up 34.5 points (+0.86%). 

As of right now there is no indication in my mathematical work that this particular bear leg from the December 31st, 2013 top is over. I have a number of points of force showing a lower Dow Jones before an eventual turn around and a bounce. I advise that you continue to maintain our In Cash -or- Hold/Long position as we wait for the bear market confirmation. 

While such a stance might cause further short-term losses, it is the most prudent thing to do from a long-term trading strategy.

Short Term Update:  My short-term update includes exact points for force and anticipated turning points in both price and time. If you would be interested in knowing when the market will turn around….please visit our premium Subscriber section. 

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Daily Stock Market Update. InvestWithAlex.com February 4th, 2014 Google

Why Is National Association of Realtors Trying To Destroy America …..Again

 CNBC Writes: Pending homes plunge, surprising economists

evil realtos investwithalex

Signed contracts to buy existing homes dropped 8.7 percent in December as abnormally cold weather hit much of the U.S., according to a new report from the National Association of Realtors.

The plunge caught economists by surprise. Economists polled by Reuters had forecast pending home sales would tick up 0.3 percent.

This pending home sales index fell to 92.4 from a downwardly revised 101.2 in November. These signed contracts are an indicator of sales in January and February, and are at the lowest level since October 2011.

“Home prices rising faster than income is also giving pause to some potential buyers, while at the same time a lack of inventory means insufficient choice. Although it could take several months for us to get a clearer read on market momentum, job growth and pent-up demand are positive factors,” said the association’s chief economist, Lawrence Yun.

There is close to 1 million Real Estate Agents in the US. I think it’s time we give a serious consideration to rounding them all up and shipping them to Siberia.  Maybe we can make some sort of a deal with Mr. Putin in exchange for oil or natural gas.  For all I care, let them sell pine trees to hungry bears in Taiga and get paid with berries. We should start with Lawrence Yun.

Come on!!! Does anyone even believe NAR fools anymore.  Keep in mind, NAR  is the same organization that was cheering the housing bubble all the way until it blew up and killed all of those poor souls in Florida, California and Nevada who couldn’t fog a mirror yet each had 10 houses to their name. Now they are blaming the “cold weather” for a severe plunge of 8.7%.  Jesus Christ, I guess it was too cold for all of those Chinese investors and hedge funds with bags full of money to buy real estate in southern states.  

Unlike NAR, dear reader, I will not insult your intelligence.  You see, in my October post  “I am Calling For A Real Estate Top Here“, I clearly outlined a case for why the real estate market is finishing its “Dead Cat Bounce” and is about to roll over to continue its bear market that started in 2007.

What is a dead cat bounce? Allow me to present a powerful illustration I worked on for 2 days.

Dead-cat-bounce-graph-yahoo-finance

Such bounces exist, once again, to fool the masses. They act to suck people back in with the promise that the worst is over.  Fools rush back in only to have the trap snap shot right behind them.  On Friday I wrote about Hedge Funds funneling money to plumbers and dentists so they can become “landlords”. If that doesn’t scream out “Market Top”, nothing else will and you are on your own.

Today’s real estate market is not the function of economy, jobs, supply/demand, family formation or any other crap real estate propaganda machine (aka NAR) would like you to believe. It is a function of credit and speculation.

It is has been artificially driven up by over $3 TRILLION of monopoly’s money being pumped into our economy by Uncle Ben.  No, not the Uncle Ben that sells rice, but the one at the FED.

When the credit bubble goes, you will find the real estate bubble collapsing along with it…..again. 

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Why Is National Association of  Realtors Trying To Destroy America …..Again Google

TIMED VALUE is ready. Get Your Copy Today

3d Timed Value Cover  2

 

My investment book is finally ready. I am incredibly excited and proud of it. This is a one of a kind book that talks about my “Timed Value” style of investing and my secret mathematical approach to market timing. If you would be interested in learning more about the book please CLICK HERE to get 2 free chapters and further information.

Book summary…. 

Have you ever wondered if it was possible to generate outsized investment returns by timing the stock market and/or individual stocks with great precision?

If you have, this book is for you.  Financial media and most financial professionals would lead you to believe that such a task is impossible.  Yet, Timed Value challenges this traditional assumption head on by presenting a clear cut case that the stock market is not random,  on the contrary, it is precise.

The book starts by discussing the traditional aspects of “Value Investing”, its hidden secrets and problems.  The second part of the book shifts into the timing aspect by showing the reader the exact calculations needed in order to time the market or individual stocks with stunning accuracy.

Further, the author shows “HOW” once the stock market structure is understood in its entirety,  the market or individual stocks can be timed with great precision. Not by some arbitrary technique that cannot be replicated, but through the use of modern science and mathematics. Math doesn’t lie and when the market turns/reverses at exact mathematical points of force,  only one explanation remains. The market is not a randomly volatile instrument, but a mathematically precise tool that baffles the mind. 

As such, this “How & Why” stock market timing masterpiece is a must have book for any true market practitioner or those wanting to improve their overall returns. 

From Flipping Real Estate To Flipping Real Estate

Breakout Writes: Underwater mortgages are a bigger problem than the national average suggests

flipping real estate investwithalex

If you follow real estate prices or sales trends or the number of homes going into foreclosure, you’re apt to have a pretty positive feeling that things are improving. If you dig a little deeper, however, and look only at the 15 hardest hit states, you’ll find a totally different story.

While these outlier markets and metropolitan areas are also seeing improvement, they are still years away from breaking even and being whole again.

For example, December’s headline data from RealtyTrac showed the national rate slipping to 18% of homes being underwater or having negative equity (which simply means a homeowner owes more than the property is believed to be worth), but at the bottom of the scale, there are still 9.3 million “deeply underwater” homes that are in the hole by twenty five or more. In fact, six states that are at least ten points above the national average of 18%, including Nevada (38%), Florida (34%), Illinois (32%), Michigan (31%), Missouri (28%), and Ohio (28%).

The case in certain cities is even worse, as the latest data shows towns such as Las Vegas, Orlando, Tampa and Chicago still have negative equity ranging from 33 to 41 percent.

Read The Rest Of The Article

What a shocker. Las Vegas still has negative equity to the tune of 33-41% even though Blackstone and other investors have been buying real estate by the billions in the city (to the tune of 50-70% of all transactions in the city are to all cash buyers/investors). I wrote about it in my previous article Timing The Real Estate Market Crash.

Is this good or bad? It depends on who you listen to. If you listen to traditional media and real estate professionals, this is of course, great news. The real estate market has bottomed and on the way up. Eventually, the negative equity in question will be recovered. However, if you listen to assholes like me, someone who would publish a blog post titled I Am Calling For  A Real Estate Top Here, you would have a different point of view.

Listen, this is fairly basic and easy.  The real estate market recovery has been driven by excessive credit available to financial institutions, private equity and investors (not you). Still, while some select markets, such as So. Cal, have almost fully recovered, the rest of the country continues to lag behind. As the article above suggests, to the tune of 30-40%.

What troubles me the most is the fact that the real estate market is starting to roll over. As the stock market declines into the 2017 bottom, the US Economy will once again experience a severe recession. The real estate market will also roll over and begin its 3rd leg down. As I have suggested previously, the 3rd down leg down is the most severe. As such, I wouldn’t be surprised to see real estate decline to the tune of 20-50% from this point on.

My valuation work displayed HERE showed that real estate could and technically should decline to the tune of 45-70%. As such, it pays to anticipate things. 

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Why Smart Hedge Funds Are Betting On Further Housing Collapse and Why You Should Do The Same

abandoned_house_2 investwithalex 

Bloomberg Writes: Gundlach Counting Rotting Homes Makes Subprime Bear

For Jeffrey Gundlach, the U.S. housing recovery isn’t so rosy.

The founder of $49 billion investment firm DoubleLine Capital LP is largely avoiding the subprime-mortgage bonds that jumped about 17 percent last year after home prices surged by the most since 2006, deterred by the lengthy process to sell foreclosed houses and the destruction that’s creating.

“These properties are rotting away,” Gundlach, 54, said last week on a conference call with investors, about homes stuck in foreclosure pipelines, adding that it could take six years to resolve defaulted loans made to the least creditworthy borrowers before the real-estate crash.

 “The housing market is softer than people think,” Gundlach said, pointing to a slowdown in mortgage refinancing, the time it’s taking to liquidate defaulted loans and shares of homebuilders that have dropped 13 percent since reaching a high in May. D.R. Horton Inc., the largest builder by revenue, has tumbled 20 percent.

Read The Rest Of The Article Here

A great read to understand why the housing market is in a Bear Market Bounce as opposed to any sort of a sustained recovery.  Well, what used to be a bounce.  In a gutsy call, I called for a real estate market top on October 3rd, 2013. You can read about it here I Am Calling For A Real Estate Top Here  Further, I believe my call was right on the money and we should see negative year over year numbers once October of 2014 rolls around.

No doubt, just like the stock market, the real estate market is rolling over. While I have already talked about various stages of the bounce and what awaits us in the future, I haven’t really talked about what is driving this housing recovery. There are a couple of things.

1. Cash Buyers (aka. Investors, Hedge Funds, Financials):  Nationwide that number stands at around 30%.  This staggering number has one driver. Too much credit. In layman’s terms, the FED floods the market with cheap credit, financials/investors take this FREE money and invest/speculate in real estate or other mortgage backed instruments. Driving the recovery and housing prices higher.

cash-sales

“Blackstone Group LP and Colony Capital LLC have been central to the rebound, buying more than 366,200 properties in just a few cities”. — I mean seriously, come on!!! Good luck unloading those.

2. Backlog Inventory: Financials and banks, whether directly or through mortgage backed securities are sitting on a massive stockpile of properties even though the market has rebounded. How many? The article states 1.2 Million, but I fathom the number is a lot higher due to various off balance sheet and accounting tricks the banks are playing.

The bottom line is this. Don’t confuse this “dead cat bounce” with true economic recovery. The real estate market bounce has been driven by cheap credit and speculation. Nothing more. When the steam runs out, expect the housing market to decline below 2010 lows. 

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Why Smart Hedge Funds Are Betting On Further Housing Collapse and Why You Should Do The Same

Stock Market Update, January 23rd, 2014.

Daily Chart January 23 2014

 

Summary: Continue to maintain a LONG/HOLD position.   

1/23/2014 – An ugly day in the market today with the Dow being down -176 points or (-1.07%) and NASDAQ down -24.13 points or (-0.57%). Please note that the divergence between the DOW and Nasdaq as it continues to increase. 

Also, note that the DOW gapped down at the open to the tune of 100 points. That “hole” is still open. If you follow my blog you know what I am going to say next. This opening must be closed before the market can gather up a sustained bear move. The market always closes its gaps. For the time being, this doesn’t change our overall market position. Even thought the DOW most likely topped on December 31st, 2013, technically speaking, the overall market trend is still up. As such, we must wait for a trading confirmation before taking a short position. 

Tomorrow I will have a much longer explanation on why my work shows the market has topped out and what you should do about it. 

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Stock Market Update, January 23rd, 2014.

Timed Value Introduction, Part 2

Continuation of part 1. 

 timing2investwithalex

So began my exploration of various sciences and mathematics in my attempt to time the markets. If Mr.Gann was able to figure it out, given enough time, I should be able to as well. Over the last few years I have followed every path that have made any scientific sense at all. Some were dead ends, while others started to produce tiny results.  Little by little and crumb after crumb, I started to gauge a better understanding of what Mr. Gann was talking about in the article above.  For the first time I started to get indications that it is, indeed, possible to time the stock market and individual stocks though the use of modern sciences and mathematics. Shortly thereafter, small bits of progress turned into significant breakthroughs.  Significant breakthroughs then turned into real understanding.

While I am aware of controversy surrounding Mr. Gann’s life and his approach to the stock market, let me firmly state that everything that was said in the article above is 100% true. Once the stock market structure is understood in its entirety,  the market or individual stocks can be timed with great precision. Not by some arbitrary technique that cannot be replicated, but through the use of modern science and mathematics. Math doesn’t lie and when the market turns/reverses at exact mathematical points of force,  only one explanation remains. The market is not a randomly volatile instrument, but a mathematically precise tool that baffles the mind.  

Let me clearly and categorically state the following. When the true market structure is fully understood, it is possible to time the market with amazing precision. Not only to the day, but in many cases to the hour.  It is  the purpose of this book to explore this notion in greater detail. 

(***I highly encourage you to read the article in its entirety to form your own opinion.  The Ticker and Investment Digest was later renamed  “The Wall Street Journal”). 

 

The Ticker and Investment Digest
(Ticker and Investment Digest, Volume 5, Number 2, December, 1909, page 54.)


William D. Gann 
An Operator Whose Science and Ability Place
Him in the Front Rank

His Remarkable Predictions and Trading Records


By Richard D. Wyckoff:

Sometime ago the attention of this magazine was attracted by certain long pull Stock Market predictions which were being made by William D. Gann. In a large number of cases Mr. Gann gave us, in advance, the exact points at which certain stocks and commodities would sell, together with prices close to the then prevailing figures which would not be touched.

For instance, when the New York Central was 131 he predicted that it would sell at 145 before 129. So repeatedly did his figures prove to be accurate, and so different did his work appear from that of any expert whose methods we had examined, that we set about to investigate Mr. Gann and his way of figuring out these predictions, as well as the particular use which he was making of them in the market.

The results of this investigation are remarkable in many ways.

It appears to be a fact Mr. W, D. Gann has developed an entirely new idea as to the principles governing stock market movements. He bases his operations upon certain natural laws which, though existing since the world began, have only in recent years been subjected to the will of man and added to the list of so-called modern discoveries. We have asked Mr. Gann for an outline of his work, and have secured some remarkable evidence as to the results obtained therefrom.

We submit this in full recognition of the fact that in Wall Street a man with a new idea, an idea which violates the traditions and encourages a scientific view of the Proposition, is not usually welcomed by the majority, for the reason that he stimulates thought and research. These activities the said majority abhors.

W. D. Gann’s description of his experience and methods is given herewith. It should be read with recognition of the established fact that Mr. Gann’s predictions have proved correct in a large majority of instances.

“For the past ten years I have devoted my entire time and attention to the speculative markets. Like many others, I lost thousands of dollars and experienced the usual ups and downs incidental to the novice who enters the market without preparatory knowledge of the subject.”

“I soon began to realize that all successful men, whether Lawyers, Doctors or Scientists, devoted years of time to the study and investigation of their particular pursuit or profession before attempting to make any money out of it.”

“Being in the Brokerage business myself and handling large accounts, I had opportunities seldom afforded the ordinary man for studying the cause of success and failure in the speculations of others. I found that over ninety percent of the traders who go into the market without knowledge or study usually lose in the end.”

“I soon began to note the periodical recurrence of the rise and fall in stocks and commodities. This led me to conclude that natural law was the basis of market movements. I then decided to devote ten years of my life to the study of natural law as applicable to the speculative markets and to devote my best energies toward making speculation a profitable profession. After exhaustive researches and investigations of the known sciences, I discovered that the law of vibration enabled me to accurately determine the exact points at which stocks or commodities should rise and fall within a given time.”

The working out of this law determines the cause and predicts the effect long before the street is aware of either. Most speculators can testify to the fact that it is looking at the effect and ignoring the cause that has produced their losses.

“It is impossible here to give an adequate idea of the law of vibrations as I apply it to the markets. However, the layman may be able to grasp some of the principles when I state that the law of vibration is the fundamental law upon which wireless telegraphy, wireless telephone and phonographs are based. Without the existence of this law the above inventions would have been impossible.”

“In order to test the efficiency of my idea I have not only put in years of labor in the regular way, but I spent nine months working night and day in the Astor Library in New York and in the British Museum of London, going over the records of stock transactions as far back as 1820. I have incidentally examined the manipulations of Jay Gould, Daniel Drew, Commodore Vanderbilt & all other important manipulators from that time to the present day. I have examined every quotation of Union Pacific prior to & from the time of E. H. Harriman, Mr. Harriman’s was the most masterly. The figures show that, whether unconsciously or not, Mr. Harriman worked strictly in accordance with natural law.”

“In going over the history of markets and the great mass of related statistics, it soon becomes apparent that certain laws govern the changes and variations in the value of stocks, and that there exists a periodic or cyclic law which is at the back of all these movements. Observation has shown that there are regular periods of intense activity on the Exchange followed by periods of inactivity.”

Mr. Henry Hall in his recent book devoted much space to “Cycles of Prosperity and Depression,” which he found recurring at regular intervals of time. The law which I have applied will not only give these long cycles or swings, but the daily and even hourly movements of stocks. By knowing the exact vibration of each individual stock I am able to determine at what point each will receive support and at what point the greatest resistance is to be met.

“Those in close touch with the market have noticed the phenomena of ebb and flow, or rise and fall, in the value of stocks. At certain times a stock will become intensely active, large transactions being made in it; at other times this same stock will become practically stationary or inactive with a very small volume of sales. I have found that the law of vibration governs and controls these conditions. I have also found that certain phases of this law govern the rise in a stock and an entirely different rule operates on the decline.”

“While Union Pacific and other railroad stocks which made their high prices in August were declining, United States Steel Common was steadily advancing. The law of vibration was at work, sending a particular stock on the upward trend whilst others were trending downward.”

“I have found that in the stock itself exists its harmonic or inharmonious relationship to the driving power or force behind it. The secret of all its activity is therefore apparent. By my method I can determine the vibration of each stock and also, by taking certain time values into consideration, I can, in the majority of cases, tell exactly what the stock will do under given conditions.”

“The power to determine the trend of the market is due to my knowledge of the characteristics of each individual stock and a certain grouping of different stocks under their proper rates of vibration. Stocks are like electrons, atoms and molecules, which hold persistently to their own individuality in response to the fundamental law of vibration. Science teaches that ‘an original impulse of any kind finally resolves itself into a periodic or rhythmical motion; also, just as the pendulum returns again in its swing, just as the moon returns in its orbit, just as the advancing year over brings the rose of spring, so do the properties of the elements periodically recur as the weight of the atoms rises.”

“From my extensive investigations, studies and applied tests, I find that not only do the various stocks vibrate, but that the driving forces controlling the stocks are also in a state of vibration. These vibratory forces can only be known by the movements they generate on the stocks and their values in the market. Since all great swings or movements of the market are cyclic, they act in accordance with periodic law.”

“Science has laid down the principle that the properties of an element are a periodic function of its atomic weight. A famous scientist has stated that ‘we are brought to the conviction that diversity in phenomenal nature in its different kingdoms is most intimately associated with numerical relationship. The numbers are not intermixed accidentally but are subject to regular periodicity. The changes and developments are seen to be in many cases as somewhat odd.”

Thus, I affirm every class of phenomena, whether in nature or on the stock market, must be subject to the universal law of causation and harmony. Every effect must have an adequate cause.

“If we wish to avert failure in speculation we must deal with causes. Everything in existence is based on exact proportion and perfect relationship. There is no chance in nature, because mathematical principles of the highest order lie at the foundation of all things. Faraday said, “There is nothing in the universe but mathematical points of force.”

“Vibration is fundamental: nothing is exempt from this law. It is universal, therefore applicable to every class of phenomena on the globe.”

Through the law of vibration every stock in the market moves in its own distinctive sphere of activities, as to intensity, volume and direction; all the essential qualities of its evolution are characterized in its own rate of vibration. Stocks, like atoms, are really centres of energy; therefore, they are controlled mathematically. Stocks create their own field of action and power: power to attract and repel, which principle explains why certain stocks at times lead the market and ‘turn dead’ at other times. Thus, to speculate scientifically it is absolutely necessary to follow natural law.

“After years of patient study I have proven to my entire satisfaction, as well as demonstrated to others, that vibration explains every possible phase and condition of the market.”

In order to substantiate Mr. W. D. Gann’s claims as to what he has been able to do under his method, we called upon Mr. William E. Gilley, an Inspector of Imports, 16 Beaver Street, New York. Mr. Gilley is well known in the downtown district. He himself has studied stock market movements for twenty-five years, during which time he has examined every piece of market literature that has been issued & procurable in Wall Street. It was he who encouraged Mr. Gann to study the scientific and mathematical possibilities of the subject. When asked what had been the most impressive of Mr. Gann’s work and predictions, he replied as follows :

“It is very difficult for me to remember all the predictions and operations of W. D. Gann which may be classed as phenomenal, but the following are a few. “In 1908 when the Union Pacific was 168-1/8, he told me it would not touch 169 before it had a good break. We sold it short all the way down to 152-5/8, covering on the weak spots and putting it out again on the rallies, securing twenty-three points profit out of an eighteen-point market wave.”

“He came to me when United States Steel was selling around 50, and said, “This steel will run up to 58 but it will not sell at 59. From there it should break 16 points.” We sold it short around 58 with a stop at 59. The highest it went was 58. From there it declined to 41-17 points.”

“At another time, wheat was selling at about 89¢. Gann predicted that the May option would sell at $1.35. We bought it and made large profits on the way up. It actually touched $1.35.”

“When Union Pacific was 172, he said it would go to 184-7/8 but not an eighth higher until it had a good break. It went to 184-7/8 and came back from there eight or nine times. We sold it short repeatedly, with a stop at 185, and were never caught. It eventually came back to 17.”

“Mr. Gann’s calculations are based on natural law. I have followed Gann and his work closely for years. I know that he has a firm grasp of the basic principles which govern stock market movements, and I do not believe any other man can duplicate the idea or his method at the present time.”

“Early this year, he figured that the top of the advance would fall on a certain day in August and calculated the prices at which the Dow Jones Averages would then stand. The market culminated on the exact day and within four-tenths of one percent of the figures predicted.”

“You and W D Gann must have cleaned up considerable money on all these operations,” was suggested.

“Yes, we have made a great deal of money. Gann has taken half-million dollars out of the market in the past few years. I once saw him take $130, and in less than one month run it up to over $12,000. Gann can compound money faster than any man I have ever met.”

“One of the most astonishing calculations made by Mr. Gann was during last summer [1909] when he predicted that September Wheat would sell at $1.20. This meant that it must touch that figure before the end of the month of September. At twelve o’clock, Chicago time, on September 30th (the last day) the option was selling below $1.08, and it looked as though his prediction would not be fulfilled. Mr. Gann said, ‘If it does not touch $1.20 by the close of the market it will prove that there is something wrong with my whole method of calculation. I do not care what the price is now, it must go there.’ It is common history that September Wheat surprised the whole country by selling at $1.20 and no higher in the very last hour of trading, closing at that figure.”

So much for what W D Gann has said and done as evidenced by himself & others. Now as to what demonstrations have taken place before our representative :

During the month of October, 1909, in twenty-five market days, W D Gann made, in the presence of our representative, two hundred and eighty-six transactions in various stocks, on both the long and short side of the market. Two hundred and sixty-four of these transactions resulted in profits ; twenty-two in losses.

The capital with which he operated was doubled ten times, so that at the end of the month he had one thousand percent of his original margin.

In our presence Mr. William D. Gann sold Steel common short at 94-7/8, saying that it would not go to 95. It did not.

On a drive which occurred during the week ending October 29, Mr. Gann bought U.S. Steel common stock at 86-1/4, saying that it would not go to 86. The lowest it sold was 86-1/3.

We have seen gann give in one day sixteen successive orders in the same stock, eight of which turned out to be at either the top or the bottom eighth of that particular swing. The above we can positively verify.

Such performances as these, coupled with the foregoing, are probably unparalleled in the history of the Street.

James R. Koene has said, “The man who is right six times out of ten will make a fortune.” Gann is a trader who, without any attempt to make a showing, for he did not know the results were to be published, established a record of over ninety-two percent profitable trades.

Mr. W. D. Gann has refused to disclose his method at any price, but to those scientifically inclined he has unquestionably added to the stock of Wall Street knowledge and pointed out infinite possibilities.

We have requested Mr. Gann to figure out for the readers of the Ticker a few of the most striking indications which appear in his calculations. In presenting these we wish it understood that no man, in or out of Wall Street, is infallible.

William D Gann’s figures at present indicate that the trend of the stock market should, barring the usual rallies, be toward the lower prices until March or April 1910.

He calculates that May Wheat, which is now selling at $1.02, should not sell below 99¢, and should sell at $1.45 next spring.

On Cotton, which is now at about 15¢ level, he estimates that after a good reaction from these prices the commodity should reach 18¢ in the spring of 1910. He looks for a corner in the March or May option.

Whether these figures prove correct or not will in no way detract from the record which W. D. Gann has already established.

William Delbert Gann was born in Lufkin, Texas, and is thirty-one years of age. He is a gifted mathematician, has an extraordinary memory for figures, and is an expert Tape Reader. Take away his science and he would beat the market on his intuitive tape reading alone.

Endowed as he is with such qualities, we have no hesitation in predicting that, within a comparatively few years, William D. Gann will receive recognition as one of Wall Street’s leading operators.

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