Market Update

Guy W. Gane, Jr.

There are many strategies or systems that investors, and stockbrokers for that matter follow when buying, holding, or selling a security. Buy and Hold’ is by far the most popular strategy encouraged by most financial advisors to their clients. There are sound reasons for this, however.
During my career, I found that most investors are not adequately educated enough to follow the multiple indicators that could allow them to make prudent, sensible, and informed decisions. It may be surprising to learn that only 35% of Americans who own stocks, bonds, mutual funds, or any type of registered security work with a financial advisor. Of those, many are not active stock traders and may hear from their advisors only periodically. The remaining investment public ‘go it alone’. Some not by choice!

Relative to company-sponsored retirement plans (401K’s, 403B’s) as well as traditional IRAs, ROTH IRA many people have the exact positions that were allocated when they began their participation in the plan when it was first initiated or when they were hired.

Hello! My name is Guy W. Gane, Jr. Entering the financial field at the age of 20 (the Dow Jones was at 577 that day!) I was to spend the next 34 years as a Stockbroker, becoming a Registered Investment Advisor (RIA) at the mid-point of my career.

As an RIA I managed clients’ accounts on a fee – only basis, , not charging a commission. By this point I owned my own firm, eventually expanding to 4 offices nationally. My method of money management was to take advantage of market upswings by placing my clients in growth while attempting to reallocate their funds into the safety of money market accounts during market downturns. My service consisted of overseeing clients’ accounts on a daily basis. I totally enjoyed my years as a stockbroker and as a Registered Investment Advisor. For those of you who are new friends, a bit of background is in order - 
It is sometimes said that failure can bring you closer to your inner self and your unique abilities because now you are forced to reflect on them. Failure also gives birth to your creativity. It forces you to redesign your goals, your future, and of course, your thinking. That day happened for me many years ago and I determined then to make that set-back my personal set-up. I resolved to live the words of Henry Ward Beecher “Ones best success comes after their greatest disappointments.”

While I was 'away' I was constantly asked (ironically, I suppose) by staff for investment advice. When I returned home, people still asked me what I thought was going on with the economy and the stock market. Thus began the genesis of GaneWisdom/Market Edge. For a more in-depth look at my background, I invite you to visit my website at www.ganewisdom.com

These days, no longer a broker or RIA, I offer analysis and market opinions through my weekly newsletter ‘GaneWisdom/Market Edge’. These insights are especially helpful to those with retirement accounts which allow the client the capability of internal transfers between sub-accounts within their particular plan.

While no one can predict market upswings or downturns 100%, there exists a variety of indicators that can signal significant moves in the major indexes. 

Using these indicators however, can offer a general idea of what is known as the ‘Market Trend’. Among the indicators used in ‘GaneWisdom/Market Edge’ is such barometers as the Consumer Price Index (CPI), the CBOE Volatility Index (VIX – also known as the “Fear Index”), the Price-Earnings Ratio (P/E Ratio), Interest Rate movements, Geo-political events, Charting and much more.

The hypothesis behind this subscription is to avoid large losses due to market volatility while attempting to take advantage of market advances when they appear.

The opinions offered through ‘GaneWisdom/Market Edge’ are not - nor should be - an assurance or guarantee against loss or gain therefore personal judgement along with a person’s own analysis should always be employed. These opinions, however, can be another medium in which to assist in making investment decisions and choices.

The subscribers to ‘GaneWisdom/Market Edge’ are not looking for a ‘get-rich-quick’ scheme, but an alternative, another qualified opinion if you will, in which to consider and determine the most appropriate course of action based on their financial goals and risk tolerance as well as their allotted time frame.

Emotional Entanglements

When making investment decisions, most investors combine (or confuse!) their emotions with logic. Or more accurately what they think is, ‘common sense’. This is akin to going to the race track and placing money on the horse whose name sounds the nicest! I recall the euphoria I witnessed during the Dot.Com craze of the 1990’s. It seemed that everyone during the years @ 1995 – 2000 thought of themselves as a market expert. For a few years investors (and neophytes as well) were able to throw a dart at a list of companies and come out a winner!

Many of the companies that were trading during the Dot-Com years were being bought on what’s known as “Anticipated Earnings”. In essence what this meant is that instead of buying a company on their strength, with a sound P/E Ratio (Price to Earnings) investors were buying on enthusiasm (read: emotions) of the product or idea indicative of the company itself in the anticipation of large future returns. The general consensus of a P/E Ratio of between 12 to 15% is considered attractive and intelligent, but what we saw during these years was. nothing short of “Irrational Exuberance” as then - Fed Chairman Alan Greenspan observed in 1996.

Although the 90’s saw many companies trade on the exchanges, not many of them survived. The few that did however have now become household names. Priceline (1997), E Bay (1995), Go Daddy (1997), E Harmony (2000) and of course Amazon (1994). The quandary facing investors is to know which investment - as well as strategy - to pursue.

A personal observation is appropriate here: In the summer of 1999 I had the opportunity to speak to a schoolteacher who had recently retired at the end of that school year. As we spoke, he let me know how well he was doing with his investments. Now that he could ‘take it easy’ he would be happy to allow his portfolio to supplement his retirement.

He proudly pointed out that he was now realizing an annual return of @18% which would give him the necessary discretionary income he needed. He scoffed when I related that to assume a continuous return of 18% was unrealistic. Not wanting to offend him (or his ‘assumptions’) I offered him my card and an invitation to talk with me again in the future. 18 months had passed before I had that opportunity once more. He was now working with his son. As a roofer! Most of what he invested was now gone due to his portfolio’s heavy involvement with start-up companies. Eyes welling with tears as he related the story to me, he had now learned a VERY valuable lesson – don’t buy emotionally.

Emotional trading is exacerbated by losses as well as gains. Let me explain. When an investor loses money, especially big money as above, they usually think and invest (or not) on their feelings, on their emotions. This also includes their observing other investors getting into and out of the market. A potential investor can feel that they have been ‘left out’ or that they ‘got in (or out) too late.’ These are very difficult human responses to overcome. It takes a very high degree of discipline to not trade on someone’s emotions. Warren Buffet once observed “An investor will succeed by coupling good business judgment with an ability to insulate his thoughts and behavior from the super-contagious emotions that swirl about the marketplace.”

You’ll notice (if not outright feel) the euphoria investors exhibit when the markets hit a high level. Or the nauseousness of hitting a low! The mission of Gane Wisdom/Market Edge is to take the emotional decisions of investing and replace them with sound strategies involved with observing the trend of the market and then acting upon that knowledge. We offer advice and opinions based on what the charts exhibit. What the numbers are trying to tell us despite the average investor buying through a ‘hunch’.

The best part of subscribing to GaneWisdom/Market Edge is knowing the only person you need to trust – is you! We do not receive your statements, nor do we offer personal money management. With the analysis that is provided with your subscription YOU decide what is most helpful to your achieving your financial goals. Our mission is to provide you with weekly updates, interpretations and commentary to assist you in doing so!
market edge

Mission of GaneWisdom/Market Edge

Take the emotional decision of investing and replace it with sound strategies based on observing the trends of the market.
We offer advice and opinions based on what the charts exhibit.
We evaluate and summarize what the numbers are trying to tell us.
We provide you with weekly updates, interpretations, and commentary.
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