Stock  Markets ^{© 2000}   

Lines in blue are "Links".
Lines in white are "quotes".
Lines beginning with a yellow (g) are news or updates.
Black lines are my text, you are allowed to copy from the text, providing the copyright is properly attributed to [© Ben Tamari ( www.ecometry.biz )]. 
Update 10-February-2008

"Knowledge born from actual experience is the answer to why one profits; lack of it is the reason one loses." p. 13.

"Over-diversification acts as a poor protection against lack of knowledge." p. 40.

 Gerald M. Loeb (1935, print 1965) "The Battle For Investment Survival" , Fraser Publishing Com.

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"If you speculate you will (most probably) lose your money in the end." p. xxiv.

"Intelligent investment is more a matter of mental approach than it is of technique." p. 21.

"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." p. 250.

 Benjamin Graham (1949, print 2005 with Foreword by Bogle) "The Intelligent Investor" , Harper Business.

"If you don't know who you are, this is an expensive place to find out." p. 26.

"Markets go in cycles like all the other rhythms of life." p. 117.

 'Adam Smith' (George Goodman) (1968) "The Money Game", Michael Joseph, London.

•

"...They would say they were right and the market was wrong because their reasons were right. If you're stubborn, you can lose a fortune with causality and plain logic."  p. 72.

'Adam Smith' (George Goodman) (1975) "Powers Of Mind", Random House N.Y..

"Never to buy anything whose price you can't follow in the newspapers."

Jane Bryant Quinn (1991) "Making the Most of Your Money", p. 671. Simon & Schuster.

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" Stocks are like Weather, altering almost continuously and without warning; businesses are like climate, changing much more gradually and predictably."

Zweig Jason (2007) "Your Money and Your Brain", p. 32. Simon & Schuster.

If you don't know the Game, here is an inexpensive site to find out.

Rules

* Keep your nerves steady as the nerves are the most important part of your body, when it comes to the Game.

* The Game has rules - patterns, graphs, math. formulas, logic, psychology and chance - but no one knows what they are for sure.
   So you are free to choose your own strategy. Your personality will dictate it for you.

* Everybody has his own mix of profit-loving and risk-hating.

The Sleeve (Pipe, Cylinder) and The Stock Market

The Speculative Indexes of the stock markets behave like water flowing through a sleeve (pipe).

Assumption: The mathematical root of the speculative stock markets is the 'sleeve (pipe) model'. (see Ben Tamari (1990) Foundations.., p. 47, Fig. 3).

     
The Sleeve (Pipe, Cylinder)          The speculative price index of Tel-Aviv stock market  The Sleeve Model  for the stock market.

Conjecture: The mathematical basis of the stock market is Pappus's theorem. (see Weisstein. "Pappus's Hexagon Theorem").

"The complete cycle, occupying two or three years, has represented the transfer of stocks from the public to intelligent interests at low  prices, the retransfer to the public at high prices, and the return of those stocks to the intelligent interests at low prices again. So the intelligent speculators are stronger. They have the stocks as well as the public's money, and the poor old public, the lambs (my bold BT), must go out and grow a new fleece."

"Since common stocks, even of investment grade, are subject to recurrent  and wide fluctuations in their prices, the intelligent investor should be interested in the possibilities of profiting from these pendulum swings (my bold B.T.). There are two possible ways by which he may try to do this: the way of timing and the way of pricing. By timing we mean the endeavor to anticipate the action of the stock market - to buy or hold when the future course is deemed to be upward, to sell or refrain from buying when the course is downward. By pricing we mean the endeavor to buy stocks when they are quoted below their fair value and to sell them when they rise above such value." p. 189.

"The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator's primary interest lies in anticipating and profiting from market fluctuations. The investor's primary interest lies in acquiring and holding suitable securities at suitable prices." p. 205.

For example: Fig. 1: Dow-Jones Industrial Average 1897-1947

gFig. 2: The Speculative Index vs. Volume, New York Stock Exchange 1960 - 2007.

 

gFig. 3,4,5,6: The Speculative Cycles of London,  Tel Aviv, New York and Tokyo Stock Exchanges.

gFig. 7: The Speculative Cycles of London, New York and Tokyo Stock Exchanges Together.

gFig. 8: The Location of London, New York, Tokyo and Tel Aviv Stock Exchanges in the Speculative Cycle, December 2007.

Note 1,  15-Februar-2007   A Note On Patterns

Zweig Jason (2007) "Your Money and Your Brain", Simon & Schuster.

"The Pursuit of patterns in random data is a fundamental function in our brains -- ..."  p. 58.

Mandelbrot and Hudson (2004) "The (Mis) Behavior of Markets.", p. 21, Basic Books.

"Patterns are the fool's gold of financial markets. The Power of chance suffices to create spurious patterns and pseudo-cycles that, for all the world, appear predictable and bankable. But a financial market is especially prone to such statistical mirages. My mathematical models can generate charts that - purely by the operation of random processes - appear to trend and cycle. They would fool any professional "chartist." Likewise, bubbles and crashes are inherent to markets. They are the inevitable consequence of the human need to find patterns in the patternless."

Mantegna and Stanly (2000) "An Introduction To Econophysics: Correlations and Complexity in Finance.", p. 5, Cambridge.

"Although it cannot be ruled out that financial markets follow chaotic dynamics, we choose to work within a paradigm that asserts price dynamics are stochastic processes. Our choice is motivated by the observation that the time evolution of an asset price depends on all the information affecting (or believed to be affecting) the investigated asset and it seems unlikely to us that all this information can be essentially described by a small number of nonlinear deterministic equations."

Here are two quotations that stand out against the ability to predict the market, since there are no patterns or equations found in stocks markets prices. My opinion is different as I believe that if we have enough information on the market it will reveal the patterns or equations hidden behind it. We need at least 10 cycles of reliable data. Since on the average one cycle lasts 10 years, we need at least 100 years of data. So far we have only 46 years of reliable data (since 1960).

In the words of Norbert Wiener "Messages (include stock's prices and indices, BT) are themselves a form of pattern and organization." "The Human Use of Human Beings" p. 21. 1954, Da Capo Press. Or in the words of Sunny Y. Auyang (1998) "One cannot see the patterns of a mural with his nose on the wall; he must step back.", "Foundations of Complex-System Theories In Economics, Evolutionary Biology, and Statistical Physics" p. 2. Cambridge UP.■

g  Note 2,  15-January-2008   A Note On "to Predict the Unpredictable"

Zweig Jason (2007) "Your Money and Your Brain", Simon & Schuster.

"No one can predict the unpredictable" p. 56, said Zweig, but he made 'the predictable unpredictable'.

"Just as nature abhors a vacuum, people hate randomness., ... , I call this human tendency 'the prediction addiction'." p. 65

Take a look at the two pictures: The first is the Jordan river and the second is the "Speculative Stock Index vs. Volume Trade",
from the point of view of predictability: what is the difference ?

■

Books:

'Adam Smith' (1968) "The Money Game", Michael Joseph, London.

'Adam Smith' (1972) "Supermoney", Michael Joseph, London.

Chorafas D. N. (1994) "Chaos Theory in the Financial Markets", IRWIN.

Fosback N. G. (1976) "Stock Market Logic", Dearborn Financial Pub. Inc.

Graham B. (1949) "The Intelligent Investor" , (print 2005 with Foreword by Bogle) Harper Business.

Graham B. (2006) "The Intelligent Investor", Revised Edition, Updated with New Commentary by Jason Zweig, Collins.

Graham B., Dodd L. D. (1951) "Security Analysis" McGraw-Hill.

Hurst J. M. (1970) "The Profit Magic of Stock Transaction Timing", Traders Press.

Hurst J. M. (1974) "Cyclic Analysis", Traders Press.

Loeb G. M.  (1935 print 1965) "The Battle For Investment Survival", Fraser Publishing Company.

Malkiel B. G. (2003) "A Random Walk Down Wall Street: Completely Revised and Updated Edition ", Norton & Co.

Mandelbrot B. B. and Hudson R. L. (2004) "The (Mis) Behavior Of Markets", Basic Books.

Mantegna and Stanly (2000) "An Introduction To Econophysics: Correlations and Complexity in Finance.", Cambridge.

McNeel R. W. (1921) "Beating The Stock Market", Cosimo Inc.

Millard B. J. (1999) "Channels & Cycles: A Tribute To J. M. Hurst", Traders Press, Inc.

Murphy J. J. (1986) "Technical Analysis of the Futures Markets", New York Institute of Finance.

Murphy J. J. (1999) "Technical Analysis of the Financial Markets", New York Institute of Finance.

Pesavento L. (1999) "Profitable Patterns for Stock Trading", Traders Press.

Peters E. E. (1991) "Chaos And Order In The Capital Markets", John Wiley & sons, Inc.

Jane Bryant Quinn (1991) "Making the Most of Your Money", Simon & Schuster.

Siegel, Shimae, Qureshi & Brauchler (2000) "International Encyclopedia of Technical Analysis", Glen lake Pub..

Sornette D. (2002) "Why Stock Markets Crash", Princeton University Press.

Voit J. (2005) "The Statistical Mechanics of Financial Markets", 3ed., Spriger.

Zweig J. (2007) "Your Money and Your Brain", Simon & Schuster.

Links

http://www.kwaves.com/kond_overview.htm (Kondratieff Theory)

http://www.fractalfinance.com/index.html (Fractal Finance)

http://www.gold-eagle.com/editorials_99/mbutler120299b.html (Elliott Wave Theory)

http://trading-stocks.netfirms.com/elliot-wave.htm (Elliott Wave Theory)

http://en.wikipedia.org/wiki/Benjamin_Graham (Benjamin Graham)

http://www.investopedia.com/

http://www.nyse.com/home.html

http://www.nasdaq.com

http://cbs.marketwatch.com/news/default.asp?siteid=&avatar=seen

http://finance.yahoo.com/

http://www.magicformulainvesting.com

http://www.nasaa.org/About_NASAA/