Alan's Finance Blog

The Stock Market Is Not Physics: Part I

By Elliott Wave International

The following series is excerpted from two classic issues of Robert Prechter’s Elliott Wave Theorist. Although originally published in 2004, the valuable series has been re-released in the Independent Investor eBook, along with over 100 pages of other reports that challenge conventional economic thinking.

Here is Part 1 of the series. Check back in a few days to read Part 2, or you can download your free copy of the Independent Investor eBook here.

See if you can answer these four questions:

1. In 1950, a good computer cost $1 million. In 1990, it cost $5000. Today it costs $1000.
   Question: What will a good computer cost 50 years from today?
2. Democracy as a form of government has been spreading for centuries. In the 1940s, Japan changed from an empire to a democracy. In the 1980s, the Russian Soviet system collapsed, and now the country holds multi-party elections. In the 1990s, China adopted free-market reforms. In March of this year, Iraq, a former dictatorship, celebrated a new democratic constitution.
   Question: Fifty years from today, will a larger or smaller percentage of the world’s population live under democracy?
3. In the decade from 1983 to 1993, there were ten months of recession in the U.S.; in the subsequent decade from 1993 to 2003, there were 8 months of recession. In the first period, expansion was underway 92 percent of the time; in the second period, it was 93 percent.
   Question: What percentage of the time will expansion take place during the decade from 2003 to 2013?
4. In 1970, Reserve Funds kicked off the hugely successful money market fund industry. In 1973, the CBOE introduced options on stocks. In 1977, Michael Milken invented junk bond financing, which became a major category of investment. In 1982, stock index futures and options on futures began to trade. In 1983, options on stock indexes became available. Keogh plans, IRAs and 401k’s have brought tax breaks to the investing public. The mutual fund industry, a small segment of the financial world in the late 1970s, has attracted the public’s invested wealth to the point that there are more mutual funds than there are NYSE stocks. Futures contracts on individual stocks have just begun trading.
   Question: Over the next 50 years, will the number and sophistication of financial services increase or decrease?

Observe that I asked you a microeconomic question, a political question, a macroeconomic question and a financial question.

Trend Extrapolation
If you are like most people, you extrapolated your answers from the trends of previous data. You expect cheaper computers, more democracy, an economic expansion rate in the 90-95 percent range, and an increase in financial sophistication.

It appears sensible to answer such questions by extrapolation because people default to physics when predicting social trends. They think, “Momentum will remain constant unless acted on by an outside force.” This mode of thought is deeply embedded in our minds because it has tremendous evolutionary advantages. When Og threw a rock at Ugg back in the cave days, Ugg ducked. He ducked because his mind had inherited and/or learned the consequences of the Law of Conservation of Momentum. The rock would not veer off course because there was nothing between the two men to act upon it, and rocks do not have minds of their own. Earlier animals that incorporated responses to the laws of physics lived; those that didn’t died, and their genes were weeded out of the gene pool. The Law of Conservation of Momentum makes possible our modern technological world. People rely on it every day. Despite its use in so many areas, however, it is inapplicable to predicting social change. For most people in most circumstances, the proper answer to each of the above questions is, “I don�t know.” (Socionomics can give you an edge in social prediction, but that’s another story.)

The most certain aspect of social history is dramatic change. To get a feel for how useless — even counterproductive — extrapolation can be in social forecasting, consider these questions:

1. It is 1886. Project the American railroad industry.
2. It is 1970. Project the future of China.
3. It is 1963. Project the cost of medical care in the U.S.
4. It is 1969. Project the U.S. space program.
5. It is 100 A.D. Project the future of Roman civilization.

In 1886, you would have envisioned a future landscape combed with rail lines connecting every city, town and neighborhood. Small trains would roll around to your home to pick you up, and a network of rail lines would help deliver you to your destination efficiently and cheaply. Super-fast trains would make cross-country runs. You could eat, read or sleep along the way.

Is that what happened? Would anyone have predicted, indeed did anyone predict, that trains in 2004 would often be going slower than they did in 1886, that they would routinely jump the tracks, that they would be inefficient, that they would have little food and few sleeper cars, that the equipment would be old and worn out?

In 1970, the Communist party was entrenched in China. Over 35 million people had been slaughtered, culminating in the Cultural Revolution in which Chinese youths helped exterminate people just because they were smart, successful or capitalist. Would anyone have imagined that China, in just over a single generation, would be out-producing the United States, which was then the world’s premier industrial giant?

In 1963, medical care was cheap and accessible. Doctors made house calls for $20. Hospitals were so accommodating that new mothers typically stayed for a week or more before being sent home, and it was affordable. Would anyone have guessed that forty years later, pills would sell for $2 apiece, a surgical procedure and a week in the hospital could cost one-third of the average annual wage, and people would have to take out expensive insurance policies just in case they got sick?

In the space of just 30 years, rockets had gone from the experimental stage to such sophistication that one of them brought men to the moon and back. In 1969, many people projected the U.S. space program over the next 30 years to include colonies on the moon and trips to Mars. After all, it was only sensible, wasn’t it? By the laws of physics, it was. But in the 35 years since 1969, the space program has relentlessly regressed.

In 100 A.D., would you have predicted that the most powerful culture in the world would be reduced to rubble in a bit over three centuries? If Rome had had a stock market, it would have gone essentially to zero.

Futurists nearly always extrapolate past trends, and they are nearly always wrong. You cannot use extrapolation under the physics paradigm to predict social trends, including macroeconomic, political and financial trends. The most certain aspect of social history is dramatic change. More interesting, social change is a self-induced change. Rocks cannot change trajectory on their own, but societies can and do change direction, all the time.

Learn to Think Independently — Download Your Free Independent Investor eBook “The Stock Market is Not Physics” is just one report in the more than 100 page, two-volume Independent Investor eBook. You’ll get some of the most groundbreaking and eye-opening reports ever published in Elliott Wave International’s 30-year history; you’ll also get new analysis, forecasts and commentary to help you think independently in today’s tumultuous market. Download Your Free eBook Now.

Avoid the Dead Money Strategy

Dear Sovereign Investor,

Give me a few minutes and I can change the way you look at investing.

In the pursuit of profits in the stock market, investors always seem to want to get in on the “the next Microsoft” or “the next Wal-Mart.” Instead, they often end up buying Microsoft and Wal-Mart and other big names after the magic is gone.

They can’t see what’s happening tomorrow, so they stick to what worked yesterday – and hope the fire reignites.

It’s largely a dead-money strategy, because once a company reaches a certain stage, the growth that made it famous is gone. It essentially becomes a utility racking up cash and spitting it back out as dividends. But the share price barely budges.

That’s not necessarily bad if you’re an income investor. But it’s not good if you are seeking the fast growth that made companies like Microsoft and Wal-Mart stand apart.

To profit from those kinds of companies, you need to have an advantage, an indicator that puts you onto the right path.

The Path to the Hottest Long-Term Trends

Everyone prognosticating the future ultimately claims that their crystal ball is cracked.

Mine is not.

I can tell you with 100% accuracy that demand for milk, dairy and soy is on the rise among the emerging-world’s new consumers. I can assure you without doubt that beer, palm oil and plastic consumption shadows rising wealth. I know with certainty that people who move from poverty onto the lowest rungs of the middle class spend their first additional discretionary dollars on protein such as chicken, fish and pork.

Best of all, it’s easy to profit from these assurances.

Just about any trend you can think of – from the 1950s fascination with hula-hoops to rising demand for better hygiene products among the new consumer class – follows what’s known as an S-curve, named for the shape of the letter.

It is as perfect an indicator as you will find – a divining rod of profits that can’t help but lead you to the hottest, long-term trends.

Take a look at the chart below. The red line depicts the curve we care about …

This particular S-curve shows how sales per capita rises alongside GDP – in essence, a depiction of consumer spending going up as a country’s economy expands. But I’ve thrown a few notes onto the chart to show you what’s really important about the S-curve.

Notice the three zones – Warm-up, Hot Zone, Cool-down. And notice there’s a take-off point and a point of saturation.

To explain how all of these pieces come together, consider the history of Wal-Mart. It perfectly exemplifies the S-curve and how you can use it to create real wealth in your portfolio.

Wal-Mart began in the 1960s as a tiny, Arkansas retailer with a novel idea – bring big-box stores with discounted prices to small-town America, where the retailing culture of the day insisted big stores couldn’t survive because local populations were too small.

Yet Wal-Mart proved the know-it-alls wrong and began to open additional stores with great success. The retailer was in its warm-up zone.

The company hit its take-off point when it launched its initial public offering in 1970 … and for the next 29 years Wal-Mart was in the hot zone. The shares – at a split-adjusted price of just $0.008 – rose more than 864,000%, ultimately topping out at $69.69 on Dec. 28, 1999.

It was on that day that Wal-Mart hit its saturation point.

Ever since then, the stock has been dead money, orbiting within a narrow band around the $50 mark. The business is fine. It kicks off huge cash flow that will fund ever-larger dividend payments. But the growth that makes investors long for “the next Wal-Mart” is long gone.

There’s Money to be Made
Everywhere on the S-Curve

It’s easy with hindsight to pick on Wal-Mart. But the fact is, had you been an active investor in the 1970s, the 1980s, or even the 1990s, you would have known (depending on what decade you were in) that retailing was either taking off in America or had become a huge part of the American consumer/cultural landscape. And you could have made big profits owning retailers like Wal-Mart that were obviously winning.

Heck, even if you’d waited until the summer of 1998 to finally get onboard the Wal-Mart story you would have still more than doubled your money.

Anywhere between take-off and saturation profits await.

When you know the trends of the day, those are the S-curves that will generate the huge profits of tomorrow. Find the key companies that are playing a big role in those trends (and they’re not hard to find), and then invest with an eye towards patience.

Wal-Mart’s hot-zone run, after all, was not a smooth, uninterrupted 45-degree ascent from left to right. It was choppy. At one point Wal-Mart’s shares fell more than 50%.

But those who held on, resolute in their belief that the American consumer trend was still strong … those people turned a modest investment into generational wealth.

The same opportunities are out there right now, in stocks markets around the world where the new consumer class is taking off. All you have to do is follow the S-curve, and it will lead you unerringly to profits.

Until next time, keep a global view …

Jeff D. Opdyke
Editor, Emerging Market Strategist

Attention Canadians – Questrade is giving $50 in free stock trades and a chance to win $1000!

Greetings fellow Canadian investors and traders. I have a pretty cool promotion passed on to me by Questrade – my current favorite stock broker. They’ve instituted a promotional program called “refer a friend” which allows any existing Questrade account holder to refer a friend, and if that friend opens and funds a Questrade account they get $50 in FREE stock trades AND a chance to win $1000. Pretty cool!

So I was thinking if any of you are interested in opening a Questrade account and wish to get $50 in free trades, then let me refer you. So you might be thinking what’s in it for me. Well, according to the Questrade e-mail I received if any of the people I refer wins $1000 then I win $1000 as well.

To bring you on board Questrade requires that I provide them with a few pieces of information about you so they can contact you to guide you further in the account opening process. These pieces of information are: First name, last name, e-mail address, and phone number.

The easiest way to collect this info from you would be via e-mail. So here is what you need to do. Fire off an e-mail to opportunity at alansfinanceblog.com (replace the word “at” with the @ symbol) with the subject line “Questrade referral” and include the required info and I will input it into their system ASAP.

This promotional is for a limited time. As Questrade puts it “friendship lasts forever, but the contest to win $1000 only lasts until January 31st, 2012″

Thanks everyone, and I hope to get you on board with $50 in free stock trades.

Cheers,

Alan

Questrade stock broker offers free technical analysis newsletter

Hi there.

My current favorite stock brokerage firm – Questrade – is offering a free technical analysis newsletter delivered by email five days a week (Tuesday through Saturday). The report features bullish and bearish stocks from the U.S. and Canadian markets, and analyzes them using classic price chart patterns. Bear in mind though that to get the free technical analysis report you have to become one of their client. But that’s not such a bad idea really as I found them to be a pretty good brokerage firm. I used to be with the now defunct (bought out by Scotiabank) e-trade Canada, and I switched to Questrade because of the lower transaction fees and I have been pretty happy so far.

I guess I should also mention that Questrade is a Canadian stock broker so I’m afraid this free newletter offer is available only to Canadians. They really should open up a US subsidiary too!

Thanks for your attention.

Cheers,

Alan

The Personality of Stock Market Waves

The Personality of Stock Market Waves

Elliott waves don’t merely reflect prices plotted over time. Each wave
has its own “personality.” Listen to this video by EWI’s Wayne Gorman
to learn more about the psychology behind the waves and how it affects your
investment decisions.

This video was taken from the free Club EWI video series: Learn the Why,
What and How of Elliott Wave Analysis. This 3-video series is a great way
to get started with the Wave Principle. You can get these videos free with
a Club EWI Membership.

Watch your free videos now >>

Already a Club EWI member? Access
the video series Learn the Why, What and How of Elliott Wave Analysis here.

What Will Happen to the Stock Market When QE2 Ends?

Club EWI’s free “Independent Investor eBook, 2011 Edition” offers you an unorthodox view of the Fed’s quantitative easing program

By Elliott Wave International

The second round of the Federal Reserve’s quantitative easing program, better known as QE2, will expire this week.

The QE2 policy was officially announced on November 4, 2010, and has been widely credited with subsequent stock market gains. And now, according to rumors, the end of this “experimental” program will kill the stock rally — with potential impact across all markets.

Let’s think about that.

For starters, there is little “experimental” about QE2. As EWI’s November 2010 Elliott Wave Financial Forecast pointed out to subscribers, “In Japan, the very same remedy the U.S. is applying today — rate cuts followed by quantitative easing — finds its stock market still down more than 75% from its December 1989 peak.”

Also, this chart, from EWI president Robert Prechter’s January 2011 Elliott Wave Theorist, shows “the effect” the first round of quantitative easing (QE1) had on the market:

But investors have short memories. And even many of those who remember how powerless the Fed was during the 2007-2009 crash are convinced that “it’s different this time.”

What do the facts and the evidence say? Read the expanded, 2011 edition of our popular free Club EWI resource, The Independent Investor eBook.

From the very first pages, the charts and graphs will show you that the Fed’s QE programs are far less powerful than is commonly presumed.

The Worst Stock Pickers in the World

Looking for some simple guidance on what stocks to buy or sell?

Well, Wall Street is more than happy to help.

In fact, big banks in Wall Street employ hundreds of equity analysts who spend countless hours analyzing stocks. These highly educated analysts then issue very clear “buy” and “sell” recommendations.

So when a bunch of Wall Street Analysts have a “buy” rating on a particular stock, obviously you should be buying, right?

Wrong!

The reality is the weatherman is better at predicting the future than most Wall Street analysts. These highly paid experts are horrible at picking stocks.

Take now, for example. At the moment, Wall Street analysts all hate one emerging market in particular. Personally, I can’t wait to grab some shares in it…

When Analysts Say “Sell”, it’s Time to Buy

Recent data from Bloomberg proves you could have outperformed the stock market just by buying stocks the mainstream analysts hated the most.

Since the market bottomed in March of 2009, stocks with the best ratings rose 73% on average. That may sound great, but considering the market has risen 100% since then, that’s a pretty lame performance.

On the other hand, stocks that had the worst ratings rallied by 165%.

Analysts’ favorite sectors for 2010, healthcare and technology, were among the worst performers across 10 industries in the S&P 500. These losers gained less than 10%. Meanwhile, out-of-favor sectors, like banks and real estate firms, gained at least twice as much.

This is just one more reason to disregard all those so-called “great stock tips” coming from Wall Street.

Don’t get me wrong. These Wall Street types are pretty smart people. But when all analysts give a specific stock a “buy” rating, it means everyone is already in love with it. When that happens, there aren’t a lot of investors left to buy and push the stock up higher.

The other side of the coin is that when all analysts hate a particular stock, there’s a great potential for outperformance.

Right now analysts hate one of my favorite emerging markets: Brazil.

Why Everyone Hates
One of My All-Time Favorite Markets

Wall Street analysts are now giving Brazilian stocks the fewest “buy” ratings in history. In other words, Latin America’s biggest equity market is out-of-favor.

That’s interesting considering everyone was in love with Brazil up until recently. It was one of the best performing markets in 2009. But it has been moving sideways for the past year or so, while stocks rallied here in the U.S.

Why did these Wall Street guys change their minds?

Like many other emerging markets, Brazil is struggling with rising inflation. Its Central Bank has started a series of rate hikes to cool down the booming economy. So analysts are concerned higher interest rates will slow consumer demand.

The fact that analysts don’t like Brazil now is telling me it’s time to buy. But I see two other reasons to buy now, especially if you’re a long-term investor.

The Perfect Time to Buy

Analysts are right about higher interest rates pushing stocks lower. But that’s already priced into the market. In fact, that explains the underperformance of Brazilian stocks.

But these rate hikes will soon come to an end.

The Brazilian Central Bank has increased the benchmark lending rate by 1% to 11.75% this year. Local economists expect rates to finish 2011 at 12.5%, bringing this cycle of rate hikes to an end.

So interest rates will peak soon. History has shown that it’s always a good time to start accumulating a country’s stocks once rate increases come to an end. The chart below shows that whenever rates peak, stocks rally.

End of Interest Rates Hikes is Good News for Stocks

It’s also hard to not like the Brazilian market when it’s this cheap.

Brazilian stocks are trading at a price to earnings (P/E) ratio of only 10.6. Compared to the U.S. market, sitting at 13.4, that’s incredibly cheap. In fact, Brazilian stocks generally trade at a ratio 22% higher.

Anyway you look at it, the Brazilian market is trading at a discount. Usually, you only see these types of discounts when there’s something fundamentally wrong with Brazil.

On the contrary, Brazil now has a growing middle class, thriving commodity exports, and exposure to rising oil prices with their booming oil reserves. Not to mention it’s also hosting the next football World Cup and Olympics.

These are all reasons why Brazilian stocks are on my buy list this year. For Americans, there are easy ways to buy Brazilian stocks through both ADRs and ETFs.

So it’s really a no-brainer to buy – even if the financial geniuses on Wall Street haven’t caught on yet.

Mark my words: It won’t take too long for investors to fall in love with Brazil again. But in the meantime, this is the perfect opportunity to buy this scorned market.

Remember: once all analysts have “buy” ratings on Brazil, it will be too late.

Best Regards,

Evaldo Albuquerque,
Editor, Exotic FX Alert

3 Stocks that Could Plunge if Oil Surges Above $100

Want a peek at this summer’s headlines? Then just watch the action in the oil market. The price of oil has been rising steadily for nearly two years, and it’s coming close to the point of inflicting real pain on many businesses. If current trends continue, we may be talking about $4 for a gallon of gasoline by spring, and surging home heating oil costs later in the year.

In many respects, the United States can tolerate $70 oil, or even $90 oil. But at $100 or even $110, so many companies will start speaking of profit-margin pressures. And profit margins are the key factor behind many strategists’ forecasts for continued stock market gains in 2011. This is why you should be worried, even if you don’t own oil stocks in your portfolio.

Up until now, stocks have been rallying in tandem with oil prices. That’s quite unusual. We’ve been in a rare period where rising economic activity has been good for both assets.

Yet if history is any guide, further oil price spikes will tend to deflate stock prices. Here are three stocks in particular that simply cannot withstand oil prices above the $100 mark.

AMR (NYSE: AMR)
All of the major airlines are in far better shape than a few years ago. Surging oil prices really hammered them in 2007, and a sharp drop in air travel kept shares down in 2008. Yet during the past two years, lower oil costs and rising demand have helped the Amex Airline Index (AMEX: XAL) to triple in value. Further gains will be hard to come by as the cost of jet fuel will likely be well higher in 2011, and no carrier is more vulnerable than AMR, the parent of American Airlines.

While other carriers have slowly migrated to more fuel-efficient fleets of planes, AMR’s cash crisis forced it to stick with older inefficient planes. The typical plane is 15 years old, nearly twice the average age of planes being flown by carriers such as JetBlue (Nasdaq: JBLU) or Southwest (NYSE: LUV). Just how bad would it get for AMR if oil prices surged? Analysts currently think the carrier will lose a modest amount of money in 2011 if oil prices stay at $90. But at $100 oil, AMR might lose upwards of $1.50 a share. And $110 oil would translate into an earnings per share (EPS) loss of around $3. Make no mistake, any further spikes on oil prices will start to push AMR’s shares down below the 52-week low of $5.86.

[More from David Sterman: "Forget Exxon: Buy This Stock Instead"]

Darden Restaurants (NYSE: DRI)
This operator of restaurant franchises such as Red Lobster, Olive Garden and Longhorn Steakhouse has staged an impressive rebound, with shares doubling in less than two years. But rising energy costs would inflict pain in several ways.

For starters, its client base would be paying a lot more to fill up gas tanks. The difference between filling a tank at $2.50 a gallon versus $4 a gallon is about $30. That’s money that has otherwise been spent dining out. In addition, Darden incurs energy costs throughout its supply chain, from the fuel used by agricultural suppliers, to the diesel burned by delivery trucks that may look to once again look to add fuel surcharges as they had done the last time oil spiked in price.

Right now, analysts think Darden will boost sales around 6% in fiscal (May) 2012, with profits growing at twice that clip. But downward revisions to those forecasts appear inevitable. Right now, it’s the surging cost of food — most notably beef and seafood — that will pressure margins in coming quarters. At a recent analyst day, Darden expressed plans to trim costs to offset some of the cost pressures and expressed plans to raise menu costs. Passing on those cost increases to customers at a time when gasoline prices are rising will be difficult to master.

Shares may start to feel the heat before those trends play out. A very difficult winter, highlighted by above-average snow and below-average temperatures in the eastern half of the United States (a trend which is expected to continue through February), looks increasingly set to crimp reported sales for Darden and its peers such as Brinker International (NYSE: EAT). Rising energy costs, rising food costs and traffic-sapping weather make you wonder why shares are within a point of their all-time high.

GM (NYSE: GM) and Ford (NYSE: F)
I’m very curious to hear what GM has to say about its 2010 fourth-quarter results (the date for the announcement has not yet been released). As I noted a few weeks ago, analysts at Morgan Stanley are predicting a very strong quarter. [They think it can jump 150%]

And they stand by that view, even after Ford’s disappointing quarterly results.

But regardless of how recent results are trending, rising oil prices would be a real disaster for both of these companies. Even as investors focus on all of the new fuel-efficient cars coming out of Detroit, industry profits are still rising on the backs of high-margin pick-up trucks. Sales have rebounded nicely for these trucks, and 6% sales growth in 2011 for each firm is predicated on truck sales rising even higher. In GM’s case, it’s a big factor behind forecasts for EPS to surge more than 40% this year.

In December, GM noted that truck sales rose 28% from a year earlier. That surely helps the bottom line, as trucks can deliver $4,000 to $8,000 in profits, depending on how they are configured. On the plus side, if home construction ever gets going, demand for trucks by contractors could really pump up GM’s numbers. But a spike in oil prices would work against that factor as well as put a brake on broader economic growth.

Action to Take –> On a purely fundamental basis, oil prices need not rise any higher. Supplies are ample and demand remains below levels seen a few years ago. But the International Energy Agency (IEA) recently noted that it expects global oil demand to expand by 1.4 million barrels a day or 1.6% year-over-year in 2011. The projected increase will be driven entirely by emerging markets, which underscores the greatest risk to the U.S. economy: that oil prices could rise even before the U.S. economy builds a true head of steam if emerging economies stay hot.

Now is an important time to assess the potential impact of rising oil prices on your portfolio. The stocks mentioned above would likely feel the heat of rising oil prices even more deeply than most other companies, but it’s important to keep this in mind for all the stocks you own.

–David Sterman

Posted by David Sterman, StreetAuthority Investor Update

Questrade no-fee RSP now comes with 10 free trades

Hello my dear fellow Canadians. I just got word from my stock broker – Questrade – that their no-fee RSP now gives you 10 free trades if you open an account by March 1′st. I just thought I’d let you all know in case you’re looking for a no-fee RSP account.

To find out more details see the Questrade homepage.

Like I said this is a limited time offer.

Wishing you the best.

Alan

Earnings Drive Stock Prices? See This Chart Before You Answer

By Elliott Wave International

Since the time of buttonwood trees, Wall Street has had its own version of the Ten Commandments — the cornerstone principles of conventional economic wisdom. The first of these writ-in-stone notions is the widespread belief that earnings drive the stock market.

By this line of reasoning, knowing where a market’s prices will trend next is simply a matter of knowing how the companies that comprise said market are expected to perform. On this, the recent news items below capture the public’s devoted following of earnings data:

• “Stocks Rebound As Investors Await Earnings.” (Associated Press)
• “US Stocks Drop As Earnings Data Fall Short” (MarketWatch)
• “Sideways Market Looks For Direction: Earnings Could Point The Way” (MarketWatch)

In reality, though, much of this belief is based on faith, not facts. While earnings may play a role in the price of an individual stock, the stock market as a whole marches to a different drummer.

You get this ground-breaking revelation in the FREE report from Club Elliott Wave International (Club EWI, for short) titled “Market Myths Exposed.” In Chapter One, our editors shatter the smoke-screen surrounding the widespread notion that “Earnings Drive Stock Prices” with these enlightening insights:

• “Quarterly earnings reports announce a company’s achievements from the previous quarter. Trying to predict futures prices movements based on what happened three months ago is akin to driving down the highway looking only in the rearview mirror. It leaves investors eating the markets dust when the trend changes.”
• And — There is no consistent correlation between upbeat earnings and an uptrend in stock prices; or vice a versa, downbeat earnings and a decline in stocks. Case in point: During the 1973-4 bear market, the S&P 500 plummeted 50% while S&P earnings rose every quarter over that period. Here, “Market Myths Exposed” provides the following, visual reinforcement: A chart of the S&P 500 versus S&P 500 Quarterly Earnings since 1998.

As you can see, the market enjoyed record quarterly earnings right alongside the historic, bear market turn in stocks in 2000. Then again, the first negative quarter ever in 2009 preceded the March 2009 bottom in stocks.

“Market Myths Exposed” dispels the top TEN fallacies of mainstream economic thought. The misconception that “Earnings Drive the Stock Market” is number one. The remaining nine are equally capable of knocking your socks off and most importantly, helping you protect your financial future.

Get the 33-page Market Myths Exposed eBook for FREE
Learn why you should think independently rather than relying on misleading investment commentary and advice that passes as common wisdom. Just like the myth that government intervention can stop a stock market crash, Market Myths Exposed uncovers other important myths about diversifying your portfolio, the safety of your bank deposits, earnings reports, inflation and deflation, and more! Protect your financial future and change the way you view your investments forever! Learn more, and get your free eBook here.