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Richard's Wisdom

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Richard’s Thoughts on Earnings and Dividends

Richard’s Comments

 

Earnings? Reported earnings, GAAP earnings, operating earnings, pro forma earnings -- does anyone know what in God's name corporations are earning today, if indeed they are earning anything?

 

Standard & Poor's now reports "operating earnings" for the companies in the S&P.  Barron's simply takes the S&P figures and shows them in their weekly rundown. What are operating earnings? They are earnings before interest expenses, income taxes, extraordinary items, preferred dividends and special charges to earnings.

 

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Richard’s Thoughts on the PTI and the A/D Line

Richard’s Comments:

 

The PTI is an Index that I developed during the late ‘60s and first introduced in Dow Theory Letters in 1971. It has been extraordinarily useful in defining the true, underlying trend of the stock market and specifically, the trend of the NYSE.

 

The PTI is my only secret. The reason I keep the construction of the PTI secret is that I believe that if I made its construction public, too many people would use it and it might soon become useless or at least much less useful.

 

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Richard’s Thoughts on the 200-day Moving Average

Richard's Comments

 

I spent most of last night reading, or I should say rereading, a book written by my old mentor, E. George Schaefer (Schaefer died in '74). The book is out of print, and it's entitled, "How I Helped More Than 10,000 Investors To Profit in Stocks." A dopey title, but an important book.

 

Schaefer was the Dow Theorist who de-emphasized (for investment purposes) the daily and even the secondary trend of the market. The great fortunes, stated Schaefer, are made by those who buy top-grade dividend-paying stocks and ride those stocks for as long as the primary trend continues bullish.

 

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Richard’s Thoughts on When to Sell Gold

Richard’s Comments

 

Consider this -- all your US stocks, all your US bonds, all your US financials are denominated in fiat dollars, or more accurately - Federal Reserve Notes. Nothing stands behind these notes except the words, "In God We Trust." Without meaning to be blasphemous, I submit that the preferred alternative to this would be -- "In gold we trust."

 

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Richard’s Thoughts on What Is and Is Not Dow Theory

Richard’s Comments

 

The essence of Dow Theory, and this may shock a lot of amateur so-called Dow Theorists, is VALUES. In his writing, Charles H. Dow stressed values above everything else. William Hamilton and Robert Rhea put a lot of emphasis on the action of the Averages (which Dow did not do), and later during the '70s George Schaefer went back to basics and re-emphasized values.

 

"To know values," wrote Dow, "is to know the meaning of the market." Dow advocated buying stocks when stocks represented great values, and then selling stocks when they became overvalued. As for value, Dow placed his main emphasis on yields or the return on the investment.

 

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Richard’s Thoughts on Changing Your Mind

Richard’s Comments

 

[Editor’s note – the following excerpt from Richard is a combination of four articles, written from March, 2006 to May, 2007, and presented in chronological order.]

 

March 28, 2006 - Values are rich and dividends (where there are any) are minuscule. In brief, this is not an investor's market. This is a trader's market, and most amateurs are not equipped to make money trading -- this may sound harsh but I've found it to be true over the years.

 

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