A Pfennig For Your Thoughts

Dear Daily Pfennig Readers…

It’s our pleasure to be here, filling in for our dear friend Chuck Butler while he’s on vacation.

To introduce ourselves, we’re Mary Anne and Pamela Aden. We write The Aden Forecast letter, and we’ve been happily doing this for 36 years. We cover the major markets, and we’ll be posting some of our articles here.

We also publish Dow Theory Letters. It was founded by the late great Richard Russell and, along with a team of top notch writers, we’ve carried on with his work. Some of these articles will also be posted during Chuck’s R&R.

And finally, you’ll also be receiving articles from GoldChartsRUs, our weekly trading service. Here our top trader covers what to buy, what to avoid, what to do about it and much more.

We hope you enjoy our articles while Chuck’s away.

Chuck’s transition is complete and we’re proud to have him as part of our Aden Group.

Best regards and here’s to good markets,
Mary Anne & Pamela Aden

Today we’re posting an article from Dow Theory Letters.

Richard’s Comments

Nothing created by the mind of man has ever equaled the stock market in terms of its sheer ability to frustrate people. Why is this? The answer is that the stock market frustrates because millions of traders and investors across the face of the US and the world are all trying to take money out of the market.

Now when millions of people are trying to take money out of the NYSE or NASDAQ, you know right off the bat that it can’t be done. A majority of people are not fated to make money doing anything, much less beat the stock market. “It’s not fair” you complain, “why can’t all those nice, well-meaning people make money with their trading and investing?”There’s one simple fact that makes this difficult. And that fact is that throughout history, going back to the days of primitive barter, there have always been a small number of financial winners and there has always been a mighty army of financial losers.

So when we state that the stock market is “frustrating,” we must qualify the statement by asking, “frustrating to whom?” And the answer again is that the stock market is frustrating to the great majority of participant-losers, but highly rewarding to a small minority of informed, hard-working, intelligent winners.

Next question: What do you have to do to be one of the minority of investment winners? Answer: You have to work and work hard. It’s an ironic fact that people are willing to work hard and put in long hours in their own businesses or on their jobs — but then they think that they can turn around and make easy money in the stock market or in the bond market, or even in the commodity markets.

Beating the markets is the hardest endeavor in the world, and these supreme optimists believe that with a modicum of knowledge, little study, and a large portion of luck they can make money “playing the market.” It doesn’t work that way, never has and never will.

Here’s an interesting illustration of what I’m talking about. The great, historic Dow Theory writing was done by Charles H. Dow, William P. Hamilton, Robert Rhea and E. George Schaefer. How many analysts, how many professionals, have read the works of these four men?

How many pros have ever studied Dow’s Theory, which, by the way, is the basis of all technical market studies? Frankly, I think I could count on the fingers of both hands the analysts I know who have read and are familiar with the works of these men.

As far as my own personal efforts, writing about the stock market or even investing in the stock market without studying the works of these pioneers would be impossible. I learned to think in terms of bull and bear markets from Dow’s writings. I learned the history of
the stock market from Hamilton’s works. I learned how to read the Averages from Robert Rhea. I learned the real meaning of the primary trend from George Schaefer.

I added studies of my own to what I learned from the great analysts of the past, and out of all this I developed a stock market strategy and philosophy that seems to work. At least it seems to work for me and the majority of my subscribers.

I try to give investors an approach to the market that I believe will help them rather than just tell them “what to do.” To me, a typical list of stocks “that should double in the next six months” is useless. First of all, it’s a touting approach to the market which I don’t like, and secondly the odds are that few if any of the stocks on the list are actually going to live up to their billing.

Actually, my view is that 90% of my subscribers don’t have the time or the inclination to be as obsessed with the market (as I am), and therefore they are paying me to do some of the work for them. They are also paying me to present history, to present my ideas, to present my investment philosophy, and to provide my views of the market.

That’s legitimate, but I’ll let you in on a secret — I never want to be known as an expert or a guru. As far as I’m concerned, there are very few experts on Wall Street and market gurus (if indeed there have ever been any) are as rare as Australia’s DoDo birds.

“All right,” I’m asked, “then Russell, what the devil do you call yourself?” My answer is that I call myself “a market student,” but an avid one. That title is good enough for me. And it is the way I view myself.

Why am I writing all this? I guess I’m writing it out of frustration. Every day I read dissertations and tomes on why the market is doing this or that. And I say to myself, “How can this yo-yo get away with writing such nonsense? How can he mislead people so badly? How can I get over to subscribers the real picture, as I see it — the real picture minus the bunk, the wishes, the uninformed theories, even the misconceptions about Dow’s Theory?”

Then a little voice inside me says, “Calm down, Richard. You wouldn’t have a business if everybody did the work, if all the analysts were brilliant and honest.”

So I guess I will calm down and just do my own work and let it go at that. I love Wall Street although the truth is that I’ve never spent so much as a single work-day on the Street. But then, I’ve never been a chef, but I know a good meal when I’m presented with it.

For more information about Dow Theory Letters, click here.

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