This is my yearly rant, with a bit of technical analysis application mixed into it. Hope you enjoy it:
I’m an old fashioned chart reader by nature. True, there are a few quantitative screens that I like to use, such as my Bear-O-meter. That indicator is a compilation of 11 factors that are assigned positive or negative (or neutral) readings, then weighted according to their importance. A total for the Bear-o-meter is compiled, and this gives me an indication of the markets’ relative risk profile. I like to remind people that the indicator is NOT a market timing tool. It’s a market RISK determination too. Big difference.
The Bear-O-meter has served me very well over the long term. I recently wrote a full research report on how it is constructed and its historical track record to 2013, although I was using most of its components to assess risk and reward prior to that point. This research report was published in the Canadian Society of Technical Analysts Journal. The CSTA has agreed to allow readers of my blog to receive a copy of the full journal, which contains my paper. Please email me via [email protected] to get a copy. I’ll email you directly with the full CSTA report.
The problem with any quantitative system, including the Bear-O-meter, is that it can be tempting to sit back and let the system do the work for you. After all, human beings are inherently lazy. This has led us to create things that make our lives better. We no longer have to walk to work, or hand-till the soil of our farms. Laziness inspired inventions to ensure those menial tasks are a thing of the past. As business author and speaker Brian Tracy says:
Human beings, by nature, are lazy, greedy, ambitious, selfish, impatient, vain, and ignorant. These traits are neither good nor bad by themselves; it is only the way in which we manifest these natural traits that make them positive or negative. These natural traits are the fundamental reasons for why people do what they do.
The problem with devices and systems that do the work for you is that you can become dependent on them. Over time, we forget how to do the work ourselves. Further, any automated system or device has inherent flaws. An influence in my life has been the essays of Ralph Waldo Emerson – which I am re-reading of late. I recall that in one of his essays (I think it was “Compensation”), he notes that all things in existence can appear strong – but they also have an inherent flaw (Achilles heel, etc). With this in mind, I never place 100% of my faith in my Bear-O-meter. Instead, I use it as an input within the technical work that I do. It’s not the entirety of my decision making process. Ultimately, no quantitative system can completely eradicate good judgement. In fact, Warren Buffett and Howard Marks (both famous investment managers) have made most of their fortunes on calls based on quantitative facts, and good instinct.
Today, mankind is replacing many of our tasks with automated tools.
- Automatic transmissions in cars was just the beginning of dulling down our driving prowess. Now we can look forward to losing the rest of our driving skills in self-driving cars!
- Computers have spellcheck and grammar applications. Many people confess they can’t spell without their WordPress application assisting them!
- Artificial intelligence is growing by leaps and bounds. Are we to look forward to the day that our brains are of less value than a computers intelligence?
- Communication skills are disappearing. One on one meetings and human interaction in person has been replaced by short snippy texts and Facebook comments. Should we LOL about this, or is it NP?
- Ask a millennial how many books they read per month, or per year…you may be surprised to learn that many people under 30 have an aversion to reading anything beyond their digital world of snappy communications and video.
- Political voter decisions are based as much by social media soundbites and feel-good snippets as substance.
- Sex robots (I kid you not) are being produced at an alarming rate. Google the topic. The talk is, you may be replaceable in more ways than you think in the near future.
To me, replacing face to face contact with social media is a cop-out. Clutch-less cars and driving aids reduce the joy of mastering a car. Replacing the great books with YouTube videos is a travesty. Voting for a politician based on selfie shots and twitter soundbites gives us, well, exactly what we have now Canada and the USA. And if my wife replaces me with a sex-bot – well, that’s her call I guess.
Happy holidays to all my readers! Back next week with my normal technical outlooks.
Keith on BNN Monday January 8th 2018 at 5:30pm
If you have questions about the technical analysis of stock trends for individual stocks, be sure to phone in with your questions for Keith during the show.
Call Toll-Free 1-855-326-6266
Or email your questions ahead of time (specify they are for Keith) to [email protected]
Keith appears regularly on BNN MarketCall to answer viewer questions on the technical analysis of stock trends, and to provide unique insights on the factors of technical analysis used in successful investment management.
Thank you for another year of your thoughts and teachings Keith. I have enjoyed them greatly. Keep up the good work in 2018! Cheers!
Thank you for your great advice over the years. I always look forward for your blogs each and every week. You have thought me a lot about investing. The thing that learned most from your blogs is emotion control at the time of investing. The charts always tell you when it is time to buy or to sell. I have read your books maybe 3 to 4 times now just to remind me of the basics so that I do not take bad habits. I wish you and your family a Merry Christmas and prosperous New Year.
Thanks so much for those kind words, Paul–its really great to hear that I’m helping. Its been a mission of mine since the mid 1990’s to educate people on the facts without bias.
Have a great holiday.