The edge

Back in November, I wrote a blog entitled “Advice For Advisors“. The idea for that blog was originally to be a new book. But, I thought it best to write within a more concise, less wordy format. The blog was written with the sincere desire to help Investment Advisors make the right moves within their careers. After 33 years in the business, I do not worry about helping would-be competitors. Its a big world, and I do like to share my insights from years of wins and loses with both individual investors, and Advisors. In fact, we know that a pretty significant number of followers of this blog are Investment Advisors. Again, no worries on this end. I’m happy to help anyone. Whether you are an individual investor, or an industry person, I would encourage you to read that blog. It will be helpful in understanding market analysis and how a good investment practice should be structured.

Anyhow, one of the many factors covered is the idea that – by doing the same as other Advisors, or Investors – you have no edge. That is, you have no competitive advantage as an Advisor, and you don’t have an investment advantage as an investor. In fact, the survey of Investment Advisors (not retail investors) shows us that most Advisors are just as incorrect about their market timing as their clients – or as non-advised investors.

The AIM (Advisor and Investor Model) chart below illustrates this tendency. AIM is a model consisting of sentiment readings from several popular (and some not-so-popular) advisor and investor surveys. So its a combo-indicator, rather than just focusing on “dumb money” retail investors.  The index is computed on a weekly basis.

This model takes advantage of the fact that when the typical investor and investment advisor should be most bullish, they are most bearish. And, when the markets are getting overbought and are about to turn, these Johnny-come-lately are most bullish. You’d think with the so-called “pros”–the timing would be better, right? Not so fast, Poindexter!

The chart below illustrates moments of optimism by the so-called pros, and the novices (red arrows with red circled consolidations).

It illustrates moments of pessimism by these combined groups (green arrows, green boxed consolidations). You can see that, in a nutshell, most people, pros and retail investors, are wrong at extreme points on the markets. Right now, we are not at a point of sentiment inflection that would imply a bullish breakout.



You and I may not be any smarter than other investors. Wait…aren’t I supposed to tell you that I am way smarter than you, a “mere” retail investor? Am I not supposed to impart to the world that I’m a Technical Analysis genius, a legend in my own mind, the Albert Einstein of charting?

Or is it that I simply have an edge – one that you can have too?

Its door number 2, Monty. I have an edge. You can have an edge too! You, must, like at an Alcoholics Anonymous meeting, admit you have a problem. Here’s an embellished version of the oath that I take on a regular basis. You should too:

I, (insert your name here) have a problem. My problem is that I can be influenced by my peers, the media, by my emotions, and so-called authorities. You know, authorities like that damn TA genius, mega-star Richards guy.  I promise to consider what they may say (especially that Richards guy), but in the end, I will always default to my system.

That system was spelled out in this course. 


To wrap this blog up – An original ditty to remember (I have been saying this since the early 1990’s):

“A system will save me from myself!”

Back next week.


  • A moment of lucidity…in the vast industry. Nothing beats the school of hard knocks. But rigorous training helps, such as your course. And talent, enjoyment of investing.

  • I read somewhere that bear markets have three stages – sharp downturn, reflexive rebound and a drawn out fundamental downturn. Seems like we are now in the drawn out fundamental downturn.


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