| "> | | | | this length is derailment, and then it will stop in feet, |
| What does "the trend is your friend" mean? We all | | | | not miles. |
| probably know what this means intellectually, but | | | | There is a very easy way to determine the trends in |
| how many of us actually follow it in our real lives? | | | | stocks, bonds, gold, and commodities. The most |
| For those who haven't heard this phrase, I'll explain. | | | | revealing way to look at a trend is to look at a price |
| When investing, or for that matter when studying | | | | chart of one of the above-mentioned investment |
| almost anything in life, there is almost always a flow | | | | vehicles. |
| or general movement to how things work. | | | | This, incidentally, is how I've been investing the last |
| The general trend in the workplace is, the more | | | | ten years. I believe the reason price charts and |
| experience one has the more one understands and | | | | trends are the only way to invest is because they |
| the more money one earns. Hopefully. | | | | never lie. AND they are the purest form of data |
| The old general theme in American stocks was that | | | | available. |
| everything goes up: stocks, bonds, income, | | | | What could be better than pure data and a trend to |
| employment and house prices. Some of these trends | | | | point you in the right direction? |
| have ended while others in progress. | | | | A trend points to investments that provide the |
| When a trend is happening, the best advice is to | | | | highest returns with the lowest risks IF you |
| step aside or take part in it, but never to try to | | | | understand how to invest in them. But at least you're |
| prove it wrong. People try to prove trends wrong | | | | looking at the right investments. |
| because they intellectually believe that these trends | | | | A rising trend is like a train moving up a mountain. At |
| shouldn't be happening. | | | | the top of the mountain, money grows the most. At |
| Whether a trend should or shouldn't be happening | | | | the bottom of the mountain, money grows the least. |
| doesn't matter. Reality is reality is reality. When I look | | | | A simple way to determine whether you're on the |
| at a trend all I want to decide is whether to stay out | | | | train going up the mountain, or down, is to look at a |
| or take part. The problem with trying to prove a | | | | price chart. |
| trend wrong is, well, it's really damaging to the bank | | | | Which way is the price trending? The answer may |
| account. | | | | not always be up or down; sometimes the trend is |
| What are some trends that are taking place in the | | | | erratic and sideways, but even with erratic and |
| world? We, as a species, are getting healthier and | | | | sideways trends you have a better picture of which |
| living longer. Drinking water has been getting cleaner | | | | way the stock is moving. |
| for the past 1,000 years and will continue to get | | | | Looking back at a trend is easy. Anyone can look at |
| cleaner. | | | | an 80-year history of stocks and see that it went up. |
| Quality of life has been trending up during the past | | | | The problem is that during those 80 years there |
| 200 years in America and in most of the world. | | | | were ups and downs. |
| Unfortunately, the amount of debt America and | | | | And life would have been grand if you had invested |
| Americans have been building is also a sharply | | | | your money on Day One, 80 years ago, and took it |
| increasing trend. | | | | out 80 years later. But I've yet to meet anyone |
| As of today, the amount of debt that our federal, | | | | who's done that. Here's the detail-understanding when |
| state, local, personal and corporate entities have piled | | | | the trend has changed, or is changing, and knowing |
| up is in excess of $40 trillion (this number came from | | | | what to do about it. |
| Richard Russell's Dow Theory Letters). | | | | I believe we are in one of those trend-changing |
| That's an incredibly huge number and was never a | | | | stages right now. A lot of stubborn people are going |
| real problem before because our growth and | | | | to look back and say, "How could I have been so |
| profitability trend always grew faster than our debt | | | | stupid?" The decisions people are making right now |
| trend. But America's growth and profitability trend | | | | will have the biggest impact on their future. |
| got derailed a couple of years ago. Unfortunately, | | | | There is a lot of pain in learning these rules, but I |
| American's debt trend hasn't changed one iota. | | | | sincerely believe humans aren't able to learn unless |
| We all know what happens to companies like Enron, | | | | pain is involved. The pain of losing money isn't enough |
| WorldCom and United Airlines when they carry too | | | | for learning to occur. Think how kids learn that a |
| much debt and can't manage it properly. | | | | stove is hot. |
| The same holds true for countries that can't pay | | | | The kids were told by their Moms or Dads not to |
| their debts: Argentina, Uruguay and maybe soon the | | | | touch it. Parents know that a stove is hot; they |
| USA. | | | | touched it decades ago and still remember the |
| But what happens when the biggest debtor in the | | | | experience. But for a kid with zero pain to reinforce |
| world can't pay its bills? Who's going to come after | | | | the warning, the meaning of the warning is not |
| us to collect? Perhaps no one, but we are still going | | | | learned. |
| to be in serious pain. | | | | So how do kids learn? They touch the stove. Not |
| If America can't manage its debt, foreign investors | | | | just once, but a few times to make sure the lesson |
| will stop investing in our country and will start pulling | | | | is remembered. The same happens in school. |
| their money out. It's already happening. Direct foreign | | | | Students who don't do their homework get in |
| investment in the US has slowed considerably. | | | | trouble. There's pain again. |
| We used to be the number one receiver of foreign | | | | Tony Robbins said in one of his books that a person |
| direct investment, but guess who the number one | | | | won't change anything in his life until the pain of not |
| receiver country is now? China. When foreigners | | | | changing exceeds the pain of changing. How true this |
| start taking their money out of this country, the | | | | is. |
| markets will over-correct and we could see a big | | | | Take the time to look up your investments online at |
| drop in the markets. In the immortal words of Bob | | | | See which way they are moving and then ask |
| Dylan, "The times they are a change'n." | | | | yourself where you'd like to be going. Look at |
| Back to the question. What does "the trend is your | | | | one-year, two-year and three-year charts. What is |
| friend' really mean? The trend shows which way a | | | | the general trend? |
| 'thing' is moving, and unless something big happens, | | | | You may find you are on the wrong train. Do |
| that trend will continue. Think of a trend like a freight | | | | something now to limit the amount of pain you will |
| train with 100 cars. | | | | have to endure in the future. I know that looking up |
| I've been told that a train of this length takes MILES | | | | stocks might not be fun for everyone, but being |
| to stop. The other alternative for stopping a train of | | | | 50% poorer in a few years seems rather painful. |