Slope of Hope Blog Posts
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Time and the Late 30s Analog
Having gone through my old Trading Tomes (and tossing off items I felt of low value – cough cough – Spiral Calender – cough cough), I thought I would take a fresh look at my 1937-1942 analog, which I still like very much. I made a pretty fascinating find. First off, here's the scan of the page for posterity (for better or worse).
So here's what I find interesting:
(a) I scaled the drop from 1937 to 1938 onto the 2007-2009 drop
(b) I computed the 63% rise from March 1938 to November 1938 took 224 days
(c) I then calculated, if the analog holds, what the date and time of our current contra-trend peak would be. My result was 10,544 on December 27, 2009.
Now………..I realize we're a little past December 27th, and I also realize we are a big three-one-hundredths of a percent above this "target." But what I find fascinating is that on the 28th (since the 27th was a Sunday), we did indeed print 10,544 on the Dow.
So let's just suppose that we give this analog the tiny bit of "wiggle room" with respect to time (we're ten trading days past the target) and price (virtually nil). What would the ensuing drop mean?
It would call for a drop to 7,960 on the Dow by…….if the time analog holds……….July 17, 2010.
Of course, if we just keep chugging higher, this entire exercise is moot. But for the moment, it's close enough to merit my attention. Although, I've got to say, on a day like this, which should have been a godsend for the bears – – – it's hard to stay "optimistic".
Warren Buffett is a very rich man. He's very famous. He's an amazing investor. And people hang on to his every word.
Every time I hear about the "Oracle of Omaha", I have to cringe a bit, because the vast, vast majority of this man's fortune was made during the amazing wealth creation of the 80s and 90s. He'll be riding those coattails until his dying day. Not everything his says in the gospel. And not everything he does is destined to succeed. Plus – and most importantly – not every bullish pronouncement he makes can be embraced as objective.
Looking at the chart of Berkshire, in black below, you can see that over the past several years, it hasn't been anything to write home about. For a while, it was basically no better than owning SPY, and recently, it's been outperformed handily by just the general market. It's just a little unsettling that the public views him as infallible.