There are times in life when the greatest learning lessons come from the harshest experiences. And the lesson learned only arises in hindsight after you have gone through trial and tribulation. I learned my lesson during 2008, and while it was a painful year for most from a financial perspective, in hindsight it was one of the most rewarding of my entire career.
My story begins around August 2008. For 13 years I had worked as a Financial Advisor when a colleague suggested I begin reading a daily newsletter to learn what the industry fails to teach most financial professionals – the technical aspects of the stock market. While I believe our industry does a good job educating most professionals on product knowledge, I believe it does a poor job of educating most on the technical characteristics that can help identify turning points in individual investments and the stock market as a whole.
For several weeks I had been reading Richard Russell’s daily comments leading up to the market selloff in September 2008. I’ll never forget when he wrote one day, “the Dow Jones Industrial Average has violated the 50% principal. If the Dow closes below 10,750 all subscribers should be out of common stocks.” On September 17th, 2008 the Dow closed at 10,609. Over the following days the Dow dropped an additional 4,062 points until it bottomed on March 9, 2009 at 6,547, or 38% lower.
It was during those few months that I realized there was a fundamental problem with our industry. How could a subscription service charging $300 per year provide more accurate and timely advice compared to the multi-million dollar research department of the publicly traded firm I represented at that time? Was Richard Russell just “lucky” that day? Or did his comments reflect an expertise that I, along with many others, failed to possess? My vow that day was to learn how to identify the warning signs the market tends to provide before major declines occur. To do so required me to challenge every preconceived notion, idea, belief, and philosophy I had learned over the preceding 13 years. Needless to say I am thankful I did because as a result Blue Line Investing™ was founded.
Blue Line Investing™ is a disciplined investment process designed to identify and monitor a recurring behavior pattern found in most publicly traded investments. By understanding and monitoring this behavior pattern an investor can make proactive investment decisions. They can decide to either protect their money during negative stock market trends or to remain invested during positive stock market trends, while the news, their emotions, and general anxiety might normally cause them to make a poor investment decision.
In hindsight, you might be surprised to learn:
The stock market gave warning of problems months before it sold off in September 2008.
The behavior pattern leading up to and through 2008 was almost the same as from 2000 through 2003.
The broad stock market, individual stocks, bond market, commodities, and economic sectors follow a similar, if not same, behavior pattern over time.
It is said the definition of insanity is doing the same thing over and over and expecting a different result. While 2008 may have been painful from a financial perspective, it turned out to be one of the most rewarding financial lessons of my entire career. I hope you learned something rewarding from it as well.
Jeffrey D. LINK
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow back in 1896. It is not available for direct investment. The Nikkei 225, more commonly called the Nikkei, the Nikkei index, or the Nikkei Stock Average is a stock market index for the Tokyo Stock Exchange (TSE).
Past performance is not indicative of future results. This material is not financial advice or an offer to sell any product. The actual characteristics with respect to any particular client account will vary based on a number of factors including but not limited to: (i) the size of the account; (ii) investment restrictions applicable to the account, if any; and (iii) market exigencies at the time of investment. Guardian Capital Advisors, LLC (GCA, LLC) reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The information provided in this report should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any of the investment recommendations or decisions we make in the future will be profitable.
GCA, LLC is a registered investment advisor. More information about the advisor including its investment strategies and objectives can be obtained by visiting www.GuardianCA.com or in its Form ADV Part 2 which is available upon request.
IMPORTANT DISCLOSURE NOTE: At the time this blog entry was published, M.r Link was an Investment Adviser Representative with Guardian Capital Advisors, LLC (GCA, LLC). In December, 2015, GCA merged with Gordon Asset Management, LLC (GAM) a registered investment adviser, at which time Mr. Link’s registration as an Investment Adviser Representative was transferred to GAM. more information about GAM, including its investment strategies and objectives, can be obtained by visiting www.WealthQB.com, or in its Form ADV Part 2, which is available, at not charge, upon request, by calling (866) 216-1920.