The Power of Information...
When “modern” portfolio theory was developed in the 1950s, only the major brokerage houses and Wall Street bankers had access to objective, accurate, timely information. In the absence of such information, it is impossible to make informed investment decisions. The only defense is to make NO decision – which, when you think about it – is really what passive buy & hold investing became. Unable to distinguish top performing sectors from the bottom dwellers (at least not with the lead time necessary to gain advantage) – individual investors spread their money around and hoped for the best.
What’s changed (as recently as the last 10 years) and with implications just beginning to become clear – is the quality and speed of the available information. And like any other area of human endeavor, investing is no different: Information is key – and those who devote themselves to understanding that information gain substantial advantage.
The Nasdaq fell 39.3% in 2000, 21.1% in 2001, and 31.5% in 2002. At the October 2002 bottom, the Nasdaq had imploded 78.4% from its March 2000 high, a depth and duration second only to the Dow’s collapse of 89.5% from 1929-1932.
In the face of this brutal bear market, the importance of the BCN Advantage service could not be more evident. For the entire 3 year period, we have outperformed “buy & hold” by a cumulative 29.16%. For every $100,000 under BCN management from 2000-2002, that’s $29,160 of losses avoided.1 2 3
The Longer View...
“All major manias are followed by long periods of consolidation, typically lasting a decade or more. …Likely now is a pattern similar to the one we experienced from 1966 through 1982, when the Dow spent 16 long years butting its head against the ceiling at 1000, in the process going through repeated cyclical bull and bear markets. ...That doesn’t mean you can’t make money in such an environment. It just means that buy and hold investing won’t work. ...The only way to make money in one of these trading markets is to practice market timing… having the patience to sit quietly and hold cash when the market is going down, and having the courage to quickly move to an aggressively invested position when the market is going up.” (Courtesy of the Cabot Market Letter.)
A change in investment philosophy is underway... Active management will become as predominate in the 21st century as passive buy & hold was in the last. ...and the change springs from the power of information.
Like any other area of human endeavor, investing is no different: Information is key – and those who devote themselves to understanding that information gain substantial advantage.
The BCN Advantage service does not involve prediction. Our crystal ball is just as cloudy as everyone else's. The key to active management is watching our market indicators carefully for changes in the trend, and then responding to the new trend quickly – ahead of the crowd.
Likely now is a pattern similar to the one we experienced from 1966 through 1982, when the Dow spent 16 long years butting its head against the ceiling at 1000, in the process going through repeated cyclical bull and