1. Exaggerate your origins as a deprived/abused child to mythic proportions. Your "specialness" makes you entitled to break the rules and abuse others without accountability.

2. Praise the performance of your assistants, but consistently downgrade the description of their actual contributions, e.g., if they expertly rewrote your entire book manuscript, thank them in the preface for "careful proofreading."

3. If you hire an expert consultant, don't give anything but good feedback until right before the project is completed. That way you can save that final payment!

4. Embarrass assistants by bringing up your private disagreements in public settings where effective rebuttal would be difficult for them. Especially if questionable practices are involved, this can force all the others present into colluding in an illusion of supportive unanimity. Repeat in other settings.

5. Make your own schedule inviolate. This will educate your staff and family that your needs always come first, even in their emergencies.

6. Speak to all who will listen in intimate detail about the proclivities and shortcomings of previous assistants, spouses, or significant others. This will teach people currently in these roles to anticipate similar treatment in their future.

7. Occasionally drop hints that you can ruin reputations on a whim. These hints should be subliminally perceptible to the target person, too subtle to be perceived by outsiders, and too ambiguous to be confronted directly.

8. Construct an overwhelmingly admirable public persona that makes up for your own personal reality. Do the opposite in private of what you espouse in public.

9. Tell small and big lies to stay in practice. That way, when those close to you find you out on a big one, perhaps the lie that leads to termination, they will doubt anything you have ever told them, whether you ever were who you presented yourself to be, and –- most importantly -– themselves.



TempletonFollowing his recent death, there has been much written about John Templeton. Most stories emphasized two aspects of his life: his most recent views on the market (very bearish) , and how he made his first big score.

It's this second aspect that interests me. To recap, in 1939 Templeton borrowed $10,000 and bought 100 shares of every Big Board stock selling for less than $1.00. There were 104 of them at the time and 34 of them were in bankruptcy. Four years later, only four of the 104 proved worthless, and his initial stake had increased by approximately 400%.

I have no idea where the market is heading from here but as I have read recently, were someone to have invested a given sum every month beginning in late '29, and continued to do so through '32, he would have realized a very nice return and one which would have continued to appreciate nicely throughout the Depression years. I don't believe many would argue that the current market is healthy but might argue that there are some excellent values for those courageous enough to take the risk. Maybe it's time to "Templeton" the market.

Could the same strategy work again? With a few modifications, I believe it's worth a try. The first adjustment I made was to calculate today's equivalent to '39s one dollar stock. The calculator I used determined that a dollar back then is $14.78 through 2007. It's no big deal to find equities that currently trade at or below that figure; however, unless you possess huge amounts of capital buying 100 of every equity below $14.78 would be awfully expensive.

Now, I have many, many watch lists — several of which go back a decade. Last evening I went through them and quickly found 17 which met the price threshold. Some I have owned, some I have not. Some treated me well, others poorly. Some are relatively new, some are very old (e.g, CX was purchased in '99 and sold in '01 — until last night I had not even remembered its existence). But all are flawed in that, at one time or another, I felt they'd be a good buy or interesting speculation. Their prices today when matched against the prices I recorded when adding them to one of my watch lists indicates, in most cases, I was wrong.

Alice Allen adds:

$3I was glad to be reminded of Templeton's strategy after yesterday morning (10/10) when I bought 100 shares each of six stocks under $3 that I had owned earlier at higher prices. For two stocks, industry experience gives me an edge to think these companies will survive. For two stocks, excellent customer experience makes me willing to take a chance. The last stock is a small oil company with all the potential for unexpected movement. Tierney's post has encouraged me to explicitly track how this strategy works out. I'm considering each position as simply a call option with delta=1 and no decline from theta, certainly among my least risky trades in this market. Now if I can just resist increasing position size on random positive fluctuations…

Kim Zussman Reflects:

'39 was 10 years after the crash, and fortuitously near the end of the Depression. Presumably by that time, with the main worry survival and the start of WWII, the few who had money were more disposed to buy stocks of food than stocks of companies in bankruptcy.

That the above question is being asked suggests we aren't there yet.



Dr PhilAll moving averages have to be based on a backward looking window of time. So a 10 day average is the average of the last 10 days and so on. But the center in time for that average is really about five days ago. To be more precise it is (n+1) / 2 days ago or 5.5 days ago.

So comparing two moving averages of different lengths is really comparing apples and oranges. If we compare a 10 day to a 30 day average, for example, then we are comparing the average of 5.5 days ago to 15.5 days. In other words they are not the same point in time. Mr. Glazier's enlightening 3D representation of moving averages of various lengths shows that the longer windows respond more slowly to ripples in price than do the shorter moving averages because of this lag effect.

Another feature visible in the chart is the apparently cyclical undulations. The problem with that is that it may simply be a manifestation of the Slutzky - Yule effect. Essentially Slutksy-Yule says that any series, when averaged, will show sinusoidal oscillations as a result of the averaging process. This is true even if the original series was composed of random numbers which could not possibly be sinusoidal in nature.

Another common pitfall when using moving averages is to think that all one has to do is to find the magic combination such as a 19, 27 and 79 day triple crossover with a minimum threshold of 1%. The problem with any such system is that there are an infinite number of these combinations. We quickly fall into the data mining trap where we will appear to find something even if it is merely a product of chance.

Dr. McDonnell is the author of Optimal Portfolio Modeling, Wiley, 2008

Yishen Kuik adds:

Another interesting point about moving averages is that the daily change in an N period moving average is caused by the difference between the values of the Nth day and the current day:

MA(t) = (1/N) * ( p(t) + p(t-1) + … + p(t-N+1) )

MA(t) - MA(t-1) = (1/N) * ( p(t) - p(t-N) )

So in cases where N is small, and where the p(t-N) value that fell out of the calculation is large, the moving average can experience sudden drops. This causes that cognitive dissonance when one sees a moving average fall even as the values are climbing between yesterday and today.This also provides the intuition to Slutzky Yule - for any given set of observations, there exists a cluster of points that has the highest average of all similar sized clusters, so while that cluster is passing through the calculation period of the moving average, there will be a peakedness, with two troughs surrounding it.

Alice Allen remarks:

While we’re talking about moving averages, a practical caution from my own experience with a popular commercial trading platform: If you are in a fast trading situation, monitoring a price graph with less than a 1-day display unit (e.g., 60-min, 30-min, 15-min), a line labeled “200-Day Moving Average Study” may not be the true 200-Day MA but perhaps the MA of the last 200 ticks. Under these circumstances, you may visually note that the price has crossed your MA line, but it will not necessarily be a true MA crossover as calculated by programs. Maybe this is obvious, but it took me a while to figure out and perhaps is unique to the platform I use.

Anatoly Veltman writes:

The best use of MAs that I know has nothing to do with crossovers. And it happens to be essential to one’s daily/weekly chart perspective. Extremely useful! I first saw it described by Stan Weinstein; then the periods and trading signals were optimized by a few proprietary shops. I believe it to be one of the better tools; if not for all markets, then at least for stocks.


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