And about the future of this Dow Theory blog
I am proud to announce that I joined Schannep’s letter “thedowtheory.com” as a contributing editor. From this blog, I can only express gratitude to Schannep and his wonderful family for inviting me to join them. I also want to thank them for their gentlemanly. More than a negotiation between two parties, it was like drinking coffee with some good friends.
I’m genuinely excited about this new undertaking. I express from this blog thanks to all the people who have been following me (many of them subscribers to “thedowtheory.com”) for all these years. I also thank Schannep’s subscribers who sent kind and encouraging words of support.
My first contribution to the Schannep’s Monthly Letter to Subscribers was posted on “thedowtheory.com” website last April 1st. The next contribution will be published on May 1st. Currently, both the Schannep’s team and I are fully immersed in the drafting of such a letter. I would have never thought than writing a 7-page letter entailed so much dedication. Going from draft to finished product is a fascinating process of brainstorming. As Schannep wrote to me some days ago, “words have meaning”, and thus, even the slightest nuance of a word is being discussed. I am amazed at the sharp focus and youthfulness that oozes Jack Schannep.
I also realize that it is not the same to write in this Dow Theory blog, which I consider my “home,” and I can walk around with slippers than to write on a professional basis where certain expectations must be met. Here I write what I please and when I please. Writing for a base of Subscribers who expect to get first quality and timely information is quite a different thing. One must remain much disciplined. This is not to say that the “quality” of this blog was defective (it is up to the readers to judge). Still, it is an entirely different beast to pen musings about finance than to be addressing a public who expects specific advice just on time. It is the transition from the theoretical (albeit I put to use many insights of my blog) to the practical. I give you one example of what I mean: Some days ago, I wrote the first draft of my assessment of the current trends under both Schannep’s Dow Theory (more accurately “21st Century Dow Theory” and the “Rhea/classical” one). In a similar vein to that of this blog, I started to almost lecture about the intricacies of the current market situation (i.e., further decline following the signal, specific details as to the weighting of positions following capitulation, etc.). The result was a loss of focus. I am learning to differentiate between what constitutes “lecturing” or “researching” from giving accurate and punctual advice about trends where the less verbiage, the better so that the message doesn’t get clouded by words. This doesn’t mean that I cannot get philosophical and continue carrying out research. However, it means that there is a space where one needs to deliberately go to the point and leave study and deep thinking for other areas.
Currently, “thedowtheory.com” only covers US stock indices. We have agreed that in the coming future (let’s say around 6 months), we’ll probably start covering US interest rates (of course, under the Dow Theory). After all, the US bond markets greatly exceed that of stocks in capitalization, and my take is that bonds lend themselves very well to being analyzed under the Dow Theory. I hope that the broadening of topics will make most of Schannep's Subscribers happy. If I can cope with the additional workload, and as I continue the process of adapting myself to the new environment, Schannep and I will probably include more markets such as precious metals (and energy??, and currencies??, who knows!). From here, only the sky is the limit since readers of this blog know that I have many Dow Theory related projects in my pipeline. However, I insist, writing professionally is not the same as blogging, so I feel that I have to take baby steps. My joining "thedowtheory.com" is a long term endeavor.
And
what about the future of this Dow Theory blog? Well, the blog will
continue.
The blog will remain to be the place for
digressions, musings, and deep cogitations (although some of them may be
exclusive to“thedowtheory.com”). Perhaps some pieces of cumbersome and
time-intensive research (i.e., the last chapter of the capitulation saga which
is full of vital information enriched with the developments of February/March
2020) are going to be exclusively made available under “thedowtheory.com” which
I think is fair to its Subscribers. However, I plan to keep the blog alive and
with good content. The only thing that is going to change partially will be
providing information about the change of trends on the very same day they
occur. I have just written “partially” because, most of the time, I never gave
information about changes in trends in real-time. So there is no significant
change. Maybe the delay will be a little bit longer. Two or three days? Such
delays also occurred occasionally in the past.
Furthermore, it wouldn’t surprise me that even the
quality of this blog gets heightened thanks to my contributing to “thedowtheory.com”. My being committed to providing extra quality
service there will spill over to this blog. I hope to improve the quality of my
charts, the spreadsheets I use, etc. Since to whom a good tree draws near good
shade shelters, I know that my joining efforts with whom I consider my mentor,
Jack Schannep, will further contribute to my mastering the Dow Theory, and in
general, the analysis of the markets. What now follows is no empty flattering
since long time readers of this blog know that I praised Jack Schannep’s wit
from its very inception (when I not even remotely thought that one
day we would be working together). Although this blog is full of posts
demonstrating Schannep’s accomplishments (i.e., here), I’d like to stress the following about Jack
Schannep:
·
He’s a man of character, a gentleman.
He’s always been willing to lend me a hand, even when I was a rookie blogger.
Ever patient (particularly these days of hard work in common), always gentle,
always good-spirited.
·
His rendering of the Dow Theory is a
true accomplishment that, as time passes, will be more and more recognized. Why
am I so sure? Because of:
1. He
has
made the Dow Theory tradable for the layman. A common (and justified) criticism against the
“classical” Dow Theory is its subjectivity. No two Dow Theorists seem able to
reach a common ground. Schannep has provided clear-cut rules with very little
room for interpretation. And such rules work!
2. Such clear-cut rules result in outperformance
(ca. 2% p.a. more than “Rhea’s/classical” Dow Theory) and a marked
reduction of drawdowns. In technical
jargon, a much better risk-adjusted profile.
3. By generating a slightly higher amount of
good quality trades than the classical Dow Theory
(due to capitulation and somewhat shorter duration of trades, due to a shorter
definition of secondary reaction) drawdowns are comparatively smaller than
those of the “classical” Dow Theory.
4. The timing indicator
provides us with an additional source of excellent quality trades and portfolio
diversification (capital is supposed to be
committed 50% to Schannep’s Dow Theory and 50% to the timing indicator). By the
way, in the past, I couldn’t write about trades following Schannep’s timing
indicator because it is proprietary. Now from "thedowtheory.com” my
research will be made available together with this great indicator. As I wrote here, Schannep’s timing indicator has
outperformed buy and hold for the last 60 and odd years by ca. 4% p.a. The last
20 years have witnessed an outperformance of 4.19% p.a.(CAGR of 9.40% versus 5.21% for buy
and hold).
5. Schannep is one of the few newsletter
writers that fully discloses all his trades since the ninety fifties, and, more
importantly, their performance. One thing that irks me is seeing most
investment “gurus” giving their investment recommendations in a way that
results almost impossible to track. Furthermore, their newsletters don’t
provide their readers with an accurate rendering of the outcome of the trades
recommended in the past. They are masters in
vagueness, and in hedging their words. No wonder that 90% of investment
letters fail to beat their stated benchmarks, as explained by Investopedia. This is not
the case with Schannep, who belongs to the selected 10%. In my opinion,
investors should be very reluctant to follow investment recommendations not
sufficiently backed up by a track record. Furthermore, Jack Schannep eats his own cooking and invests his own money based on his trading recommendations posting on his Letters the actual performance of his portfolio. He delivers.
So readers of this blog are encouraged to continue
visiting me. The blog will continue to exist full of content.
There is one thing that most likely could change soon:
The wording. Jack Schannep and I are currently discussing the wording to depict
each market situation. For instance, what I call “primary bull/bear market”
could change into a “preliminary bull/bear market” so that we distinguish this
movement from the real “bear/bull” defined by the confirmed -16%/+19% movement.
So some minor terminology aspects might slightly change.
As an expression of gratitude to the followers of this
blog, and as an invitation to follow me on my new home “thedowtheory.com”, I
offer you a free two months subscription. For a FREE Trial, send an email with your name
SUBJECT: Free Trial
That's it!
Such a free trial will give you access to a wealth of
information (i.e. access to letters since 1962 and their concomitant trade recommendations,
the power of the consumer confidence report as a timing device, the special
report about the yield curve, and much more)
At least for me, becoming a subscriber served me to
become a much better investor. It did make a difference. It proved to be a valuable companion to Schannep's book.
Sincerely,
One Dow Theorist
