Timing the markets part 3: How I got started timing.
I have always been interested in market crashes and bear markets. I remember the bear market of 1974. I remember people telling me that taking money to Wall Street was tantamount to flushing it down the toilet. The market surged for a few years before another pull back. Here almost 40 years later the market has never dropped close to the levels seen then. In the four years following October 1974 the NASDAQ nearly tripled in value. That taught me a lesson I will never forget. When everyone is giving up on the stock market buy!
In late 1990 I was getting sick of my funds dropping like crazy. I was in a 401K which had 3 choices, balanced, growth and aggressive. I remember getting angry and moving it all from balanced to aggressive. I figured if I was going to lose it I may as well lose it all fast. It turns out I was either very lucky or very good.
In February 2000 I happened to tune into a guy by the name of Bob Brinker who was telling his listeners to get out of the market. Bob was giving specific reasons from a technical and economic view why he felt the market was overvalued. I watched in awe as the market dropped in the following months. Perhaps the market could be timed.
As it turns out I was working for a badly managed company that has since gone bankrupt. I had a boss who ordered me to sit out on the production floor 12 hours a day and watch a machine run. This machine was worth about 50 million and needed to run. I was to be there to fix it. After a month of reading robot manuals and pneumatic schematics it was time to do something else with my time. Reading the paper got dull (as well as being forbidden by company policy) as did listening to the guys running the machine telling the same story day after day. I decided to take load up my lap top with as much data as I could with market data and determine any patterns that may exist.
I had spent years working on machinery and knew that if you could predict failure or production increases based on things most people never see. Could this be done with the stock market as well? I did not have to predict every break down nor did I have to predict every production increase, just if an event happened I wanted to be sure the line would break down of production would increase. To look at it from the stock market perspective I just needed to know if an event happened would the market go up or would the market go down depending on the event.
I spent the next few weeks with tons of data creating spread sheets to predict the next moves in the stock market. I still use those formulas today. Even those I dismissed as being somewhat ineffective, I resurrected and back filled with 9 years of data I found to be somewhat effective in predicting the markets movements.