Roger W. Babson. Three different movements of the stock market

Roger W. Babson. Three different movements of the stock market

Roger Babson - one of the first distributors of market newsletters, and pioneer of statistical analysis - was born in Gloucester, ea. Massachusetts, where his father traded in textiles, and his grandfather owned a large farm. Babson - a born entrepreneur. Even as a boy he earned a few pennies, bringing buckets of water from local wells to the city and prachechniku ??for elephants in the circus Barnum when he came to town. Kirk meantstrolling the school, but his father stopped these fun and sent to the farm to his grandfather to hoe the ground, to avoid physical labor, Babson successfully selling vegetables from the cart of his grandfather. "My eyes opened then this fact: even though the sale of more profitable than the production, but it is best to have your own business."

After graduating from high school, he enrolled at the Massachusetts Institute of Technology. At that time it was much less zaorganizovan - mo-AoAtK students were completely left to themselves, "They could give us good advice - he said - about the danger of drinking and sexually transmitted diseases." In 1898, Babson found a job at the bank, becoming the first clerk, and then issues a bond salesman. Unfortunately, in 1902, Babson contracted tuberculosis, so he decided to found a home on firms engaged in statistical collections to track different securities and predicting market movements. Part of his company eventually became "Standard & Poor's."

As a technical analyst, Babson largely written for the average investor and had its own Ten Commandments. "The first three:" 1. Do not confuse speculation and investment. 2. Do not be fooled by the name. 3. Be careful with respect to new shares. " As for the study of market movements, his specialty, Babson founded many of his theories on Newton's law of action and reaction. "Our forecast of future events - he said - based on the assumption that the law of action and reaction (Newton's) is also applicable to economic, social and human relations as it applies to mechanics." Part of this theory was his famous "Schedule Babson", described in detail in his book, fruitful "and Investing Business barometers" (Business Parameters and Investment). In "Three different movements of the stock market," says Babson what movements to use, and what - to operate.



Firstly, there are daily fluctuations, their advantage is trying to use a regular trader, these oscillations can be compared to ripples on the surface waters of the bay. They can not be predicted in any way and have no relation to actual value of the property or to the alleged conditions in general. Anyone seeking to profit from these movements, in my opinion, just a gambler.

Secondly, there is ample fall and recovery of five to ten points, continuing over several weeks and caused by the fact that the market is oversold or overbought. These broader movement can be compared with the waves caused by winds over the waters of the bay. No one can tell where poduyut winds, but knowing how they blow, relatively easy to predict whether a storm water or calm. If professional traders left the market alone, the tide slowly and constantly rising to depart or without waves, which vary in accordance with basic conditions. But because of his impatience and greed, speculators or continuously pushing the natural movement too far, or slow it down. If it is considered that the trend of the market will bear, all of these speculators are bearish on the side and sell shares shortly before rex long as the market will not be "oversold" and will be lower than justify the conditions. Once the speculators comes to what they have done, they change their positions and start buying, continuing until such time until the market turns out to be "overbought" or higher than the conditions allow. Thus, the market is very rarely found in its logical place, if we proceed from the fundamental conditions, but almost always above or below this point, based on these specifications.

And the fact that these speculators are going to do, is impossible to predict anyone, even himself. But, on the basis of a rigorous and systematic study of the ticker, you can often see that these speculators are trying to do. Thus it is often possible to guess intelligently, whether following a fall or a revival, but at best it will only be a guess. Of course, I do not advise anyone to study the technical conditions of the market to trade in such moments, but those who must sell, I strongly recommend the study to reinforce their intentions of these movements and the technical conditions that cause them.

Third, there are fluctuations in the long, lasting more than one year or more, due to corresponding changes in fundamental conditions. These long fluctuations can be compared to the movements of the tide. Ripple can not be predicted, on the motion of the waves can only guess, but the movement of ebb and flow can be predicted with absolute accuracy. Similarly zhete who study fundamentals can tell whether the market is at the top or bottom point of the tide, or that now: low tide or high tide.


STUDY FINANCIAL CYCLES
All financial and industrial history is divided into individual cycles, each cycle consists of four separate periods of two to four years. There is a period of business prosperity, during which insiders are selling shares and falling in price, the downturn in the economy, during which the shares are dragged to a very low level during the depression in the economy when insiders are buying shares and increase in price, and the period of economic growth, at the end of which the stock reaches abnormally high prices. In addition, a systematic and thorough examination of both economic and investment conditions, and their relationships with each other, we can pinpoint at any given time, which of these four periods, we're in, and close enough to calculate the time when we can expect changes.

Time can be so much to predict the long hesitation, called third movement, those who have money and confidence in their beliefs, have the opportunity to make a big state. Moreover, unlike almost all other forms of speculation, these people really take advantage of these movements provide a service to its country, helping to stabilize economic conditions. Strictly speaking, each additional investor seeking to profit from these long hesitation, helps to ensure that future periods of depression became less severe, and future periods of prosperity - less than irresponsible.

In light of the foregoing should be obvious two statements, first, there is no reliable way to make money in intraday speculation, which does not deny himself a regular trader. Ninety-eight percent of traders fail and lose not only their money but also health, reputation, and, worst of all, their courage, and self-esteem, the game is totally "unfair" to them, because the forces that govern all the attributes and tools, not subject to any laws and regulations. In Monte Carlo is just a random person and, except for two and a half per cent in favor of the bank, together with the bank has an equal chance of winning, that does not correspond to the situation when he plays against Wall Street. Not only is the commission against a speculator - and if he will win half the time, you still lose the commission - but almost all "rigged" so to defeat him.


DO NOT FOLLOW THE CROWD FOR
Most of the bulletins on the state of the market encourages the public to buy, when to sell, and sell when they should buy. Banks reduce their interest rates and facilitate people to buy when the stock should actually sell, and vice versa, they recall the loan and unintentionally do everything possible to prevent the public to buy when stocks are cheap. Corporations increased their dividends and published glossy reports, making its shares attractive when they are too expensive, and lower dividends and show a small profit when the shares are actually attractive and safe investment, and this happens throughout the chain. Banks, corporations, executives and even many of the brokers, all consciously or not combined to send the audience in the wrong direction. Therefore, only about two percent of traders who have the Wall Street can ever win in this game, despite the fact that a greater percentage of those who play in Monte Carlo, combated by the bank.

Of course, if someone knew that the Wall Street organization will invariably give the wrong advice, he would, if would have had an extraordinary self-control and independence, to win the game, always doing the exact opposite to what usually advise some leaflets, banks, officials of corporations and brokers. But it is also impossible, because the organization is sometimes advised correctly with the same objective of further churning confusing investors and the general public. Thus, the first thing I want to bring to readers, is that only about two percent of the speculators and traders did well, having gone from Wall Street to retire with at least some profit, and most of that small percentage are successful mainly because by luck

The second assertion is that I want to emphasize that although the ordinary speculator has very little chance to make a profit, and almost impossible to make money in stocks is usually practiced ways, yet there is one method by which this can be achieved. I mean a method of using long oscillations continue for a period of one to four years, it is possible a systematic study of the fundamental conditions.

And what will make the stock market today or tomorrow or even next week, or possibly next month, no one knows, and only those who are completely familiar with the technical conditions of the market, will make a reasonable assumption. Not counting the half-dozen members of the organization on Wall Street, all the rest, playing a game short hesitation, just tools. These six people are well known and achieve their strength from their close relationship with the media, corporations and brokers. Moreover, although the location of these people may be taken away from them by other people, though their number will never be far more, for as long as the cycle continues, they begin to try to beat each other, and that limits their number. Therefore we can not expect the right to become one of them.


BE GREAT MAN
However, there is another and much larger circle of people who represent Wall Street and in the public eye constantly making and accumulating huge fortunes. Nevertheless, these people are not traders and speculators, as referred to the first six people, although the public does not see the difference. The operations of these big men are based entirely on the fundamental conditions and long swings. When stocks are cheap and they believe that the fundamentals every week, becoming more stable, they begin and continue to accumulate as long as fundamentals continue to improve. This period usually lasts about five months, although they can do eighty percent of their purchases in the first months of the period, when the press, banks and corporate officials, all seem to be configured pessimistically, and the public markets.

At the end of this period, and starting at the first sign of real prosperity, these people are starting to sell, although many of them continue to talk optimistically, that the public continued to buy. In other words, the process of distribution, continued one year or more, during which all the leaders have spoken optimistically, banks lend money at low interest rates and corporations raise their dividends. Despite this, the fundamentals do not improve, and those people who study more fundamental than surface conditions quickly sell all their shares, in fact, even the money earned from the sale of shares lent by Wall Street to give opportunity to buy shares to the public easier.

Then, when the public has absorbed all the possible actions, and surface conditions are so brilliant that the average speculator does not expect any trouble, although the fundamentals are, of course, unsatisfactory, is the rumor: "time". After this, the shares start to fall, and almost everyone is pessimistic, the banks begin to recall loans, reduce the corporate dividends and everything is done to encourage the sale of shares and cause a lower quote. This method of suppression of the market lasts one year or more, as long as the fundamentals do not start to improve when started again the above process of accumulation, even though the economy, as shown by surface conditions is still very depressed.

In short, these people are constantly studying the fundamental conditions that are entering the market every few years to buy or sell, depending on the fact that these fundamental conditions show. Following the acquisition of shares they hold them a year or so by selling when the public starts buying, loaned money to the public for a year or more to alleviate the above purchase, respectively. Having sold all their shares in cash, as well as creating a large short position in the market - at a time when banks, traders and investors are overly credited and the fundamental conditions are unhealthy - they suddenly change their approach, begin to speak pessimistically and do everything possible to reduce shares, as described above, preparing for the next period of accumulation.

And what's happening in the market from day to day or from month to month, these people do not care. They do not track the market, as do ninety-nine percent of speculators, and prefer to play on long swings. Moreover, although I strongly opposed many of the methods used by some of these people, I still believe the end result of their employment brings to the country benefit by promoting a stable environment, as well as turning out profitable for them

Of course, this means the restriction of all purchases, probably one month for two years or more and ownership of these shares for some consolidation of all sales are likely to one month, and then for a time only purchase of bills. However, in doing so, you can eventually accumulate without much risk of huge state, especially if high-quality standard to limit investments in securities. Almost all of the existing vast fortunes in our country created the study of fundamental conditions, independent of the method described above. Moreover, only by studying the fundamentals, you can join these big businesses, you can not do, doing intraday or intra-trade and make money, as they do.