Docstoc

American Association of Individual Investors _AAII_

Document Sample
American Association of Individual Investors _AAII_ Powered By Docstoc
					        Birkelbach Investment Securities, INC.
                                and
             Birkelbach Management Corp.
                       since 1974
“Investors are irrational in a predictable way through analysis of
                    1) Pattern, 2) Trend & Ratio



    “Investors are irrational in a predictable way”
                 “Listen to the markets”
          “Let the markets tell you what to do”

                       Birkelbach Management Corp.             1
How to make money in
  the Stock Market?
        Buy and Hold?
   50 Years   :     9%
   1997-2009 :      0%

        Birkelbach Management Corp.   2
       The Great Sideways




                        Since 1997 – UP 50%

                                       DOWN       50%

Do you have an Investment Strategy for this kind of market ?




                    Birkelbach Management Corp.                3
Birkelbach Management Corp.   4
          DOW 1928-Present




                         Why Sideways?
                       Global Competition
   Redistribution of wealth from Shareholders to management
Banks, corporations and individuals need to rebuild balance sheets.

                      Birkelbach Management Corp.                     5
              New Market Reality
SLOW GROWTH
Increased Volatility
UP 50%; Down 50% will continue

Investors must become more FLEXIBLE

                               AVOID
Buy & Hold Strategies
Mutual Funds

                           New Strategy
Learn market timing techniques to Buy Low & Sell High
Use ETFs to be Long and/or Short


                         Birkelbach Management Corp.    6
To be Successful in the stock
market become self sufficient
           Brokerage Reports
        Company Announcements
                 News
             S&P Ratings
  Today’s stock market prices represent
                investors’
        perception of the future
 And Price is determined by supply and
               demand…
             Birkelbach Management Corp.   7
Becoming Self Sufficient
Lasting Truths…
   Nobody controls the markets
   We do control our selection and timing
   We can’t tell the market what to do
   We can let the market tell us what to do
   “The trend is your friend”
        Technical Analysis (The forgotten art)
        A Picture is worth a thousand words




                        Birkelbach Management Corp.   8
Investors are irrational in a “predictable” way

Learn to listen to the market

Let the market tell you what to do.
               Through
                1) Pattern
                2) Time
                3) Ratio




                    Birkelbach Management Corp.   9
The “Lone Bull” I – Barron’s 1982
       DOW : 1,000 to 11,000




                  Birkelbach Management Corp.   10
               The“Lone Bull” II
                  – Fall 2002

                     Dow: 7,200 to 14,200 --up 97.22%




Birkelbach Management Corp.                             11
 Head and Shoulder
             Head
                           Right
     Left                Shoulder
 Shoulder
                            Neck Line




                        Volume
                                                             Head            Neck
                                         Amount                              Line
Head and Shoulder Top Formation             Up


                                           Amount
                                                                         Right
                                            Down      Left             Shoulder
                                                  Shoulder
                                                                    Volume

                                             Head and Shoulder Bottom Formation
                             Birkelbach Management Corp.                      12
The Dow…
                            Giant Head and Shoulders
                            Formation
                            (2001 – 2005)
                            10,753 – 7,197 = 3,556;
                            3,556 + 10,753 = 14,309
                            Projected Goal? (14,309 + 32%)




           Birkelbach Management Corp.                       13
The S&P 500…
                           Giant Head and Shoulders
                           Formation
                           (2001 – 2005)
                           1,170 – 820 = 350;
                           350 + 1170 = 1,520
                           Projected Goal? (1,520 + 31%)




         Birkelbach Management Corp.                       14
The NASDAQ Composite Index…

                            Giant Head and Shoulders
                            Formation
                            (2001 – 2005)
                            2,000 – 1,195 = 805;
                            805 + 2000 = 2,805
                            Projected Goal? (2,805 + 45%)




          Birkelbach Management Corp.                       15
Lone Bull III
Dow: 6,470 to 11,000 --up 70.01%




     Birkelbach Management Corp.   16
                                  Price of Ford
                              February 12 2009- $1.79
                                  Now-$13.85




Birkelbach Management Corp.                 17
Apply technical analysis for
         evaluation



         Birkelbach Management Corp.   18
The Dow Theory
      Bull Market                                 Bear Market


 Phase III                                                       Phase I




 Phase II                                                       Phase II




 Phase I                                                        Phase III



                    Birkelbach Management Corp.                             19
Characteristics of the Market Cycle

                                               Distribution




  Accumulation




                 Birkelbach Management Corp.                  20
Trend movements
Look at 3 month charts
        1 year charts
        10 year charts




                         Birkelbach Management Corp.   21
Resistance Area


  B                                                        GOOD
                                             Resistance Area
  A
           C                                         E




                                         D




           Birkelbach Management Corp.                            22
Support Area


                                         D




               C                                        E
  B

                                         Support Area
  A
                                                        BAD



           Birkelbach Management Corp.                      23
Trendlines and Trend movements



  Uptrend   BAD
                                                Sideways Trend
  Broken
                                                   Broken


                                   GOOD



                      Downtrend
                       Broken


                  Birkelbach Management Corp.                    24
Unorthodox Top




   Birkelbach Management Corp.   25
   Determine your
risk/reward tolerance



     Birkelbach Management Corp.   26
A stock is only a vehicle
to get you to where you
       want to go


        Birkelbach Management Corp.   27
    What are the benefits of using ETFs?
Diversification
-   Exposure to wide spectrum of asset classes and investment styles
-   Helps to limit single-stock risk


Lower Fees & Expenses
-US Equity ETFs charge relatively lower fees than competing investment vehicles

Tax Efficiency
-   Passive management and the creation/redemption process can help minimize capital
    gains distributions

Trade on major stock exchanges throughout the day
-   Not subject to trading issues associated with 4:00 pricing of open-end funds

Hedging
- Be long and/or short the market




                                         Birkelbach Management Corp.                   28
    EXCHANGE TRADED FUNDS
            ETF’S
   IYY    Dow Jones Index Ishares
   DOG    Short Dow 30 Index Proshares
   QQQQ   NASDAQ-100 Powershares
   PSQ    Short NASDAQ-100 Index Proshares
   SSO    S&P 500 Index Ishares
   SH     Short S&P 500 Index Proshares
   IWM    Russell 2000 Index Proshares
   RWM    Short Russell 2000 Index Proshares
   IEO    Oil & Gas-Ex Index Ishares
   DDG    Short Oil & Gas Proshares
   VFH    Financials Vanguard ETF
   SEF    Short Financials Proshares
   EEM    MSCI Emerging Markets Index Ishares
   EUM    Short MSCI Emerging Markets ProShares


                    Birkelbach Management Corp.    29
Current Market Assessment




        Birkelbach Management Corp.   30
We avoided another Depression (Through Large
  Government Debt)
Recession ending
Corporate earnings improving because
-Cutting expenses
-Cutting employment

Downstream effect negative

                 Birkelbach Management Corp.   31
     The New Normal Economy
         SLOW GROWTH
Consumers account for 70% of the economy
Reverse wealth effect
1) Increasing unemployment

2) Maxed out on credit cards

3) Home equity down

4) 401K retirement funds down

5) Credit tight


                Birkelbach Management Corp.   32
Consumers not healthy enough to make recovery
                 sustainable

                   Birkelbach Management Corp.   33
          DOW 1928-Present




                         Why Sideways?
                       Global Competition
   Redistribution of wealth from Shareholders to management
Banks, corporations and individuals need to rebuild balance sheets.

                      Birkelbach Management Corp.                     34
       The Great Sideways




                        Since 1997 – UP 50%

                                       DOWN       50%

Do you have an Investment Strategy for this kind of market ?




                    Birkelbach Management Corp.                35
   Current Upside and Downside Projections

           Using 50%
                  62%

Action/Reaction Ratio



                   Birkelbach Management Corp.   36
Birkelbach Management Corp.   37
         BULLISH SCENARIO


1)   US Corporations are lean, loaded with cash and are
     active in foreign markets where middle class is
     growing.
2)   US continues to attract the best educated and highly
     trained immigrants.
3)   Corporations are growing because they are selling to
     Developing Nations (Brazil, China, India) where the
     middle class is growing

                      Birkelbach Management Corp.           38
DOW Sep 2008 to Present




 9,683 - 6,470= 3,213
 9,683+ 3,213=12,896




                        Birkelbach Management Corp.   39
       BEARISH SCENARIO

     Can Corporate America prosper if Americans are not
     prospering?
1)   Consumers not healthy enough to make recovery
     sustainable.
2)   Bank balance sheets to weak to loan.
3)   Competitive world economy.
4)   Market overbought
5)   Upside objectives fulfilled.

                     Birkelbach Management Corp.          40
  DOW 1997 to Present


                                                    11,261




Drop 14,198-6,470 = 7,728 Points
50% Retracement = 3,864
6,470
3,864
10,334

62% Retracement= 4,791
6,470
4,791
11,261
                      Birkelbach Management Corp.      41
Birkelbach Management Corp.   42
Birkelbach Management Corp.   43
Unorthodox Top




   Birkelbach Management Corp.   44
11,250
 6.470       4,780
______          62%
  4,780      _______
     50%     2,963
_______      -11,250
2,390        ________
-11,250         8,287
----------
8,860
                        Birkelbach Management Corp.   45
2,535      2,535
-1,268     -1,268
--------   -------
1,267      1,267
 50%         62%
--------   -------
  633         760
-2,535     -2,535
--------   --------
1,902      1,775

                      Birkelbach Management Corp.   46
1,220     1,220
-666      -666
------    ------
 554       554
 50%        62%
------    -------
 272       343
-1220     -1,220
-------   -------
   948      877

                    Birkelbach Management Corp.   47
                    Technical Market Comment

  Current value                   Dow 11,045          NASDAQ 2,457       S&P 500 1,175


    Current Trends                   DJIA                  NASDAQ         S&P 500

     Breakout Points


Short Term Up (Resistance)           11,451                   2,592         1,226


Short Term Down (Support)         10,750/10,000               2,300         1,141


 Int. Term Up (Resistance)           12,000                   2,861         1,300


                                                                          1,041/1,011
                                   9,262/8,087             2,100/2,061
                                                                           50% 948
Int. Term Down (Support)           50% 8,860               50% 1,962
                                                                           62% 877
                                   62% 8,287               62% 1,775


Long Term Up (Resistance)         12,896/14,198            2,861/4,256    1,440/1,576


Long Term Down (Support)             6,470                 1,268/1,108       666


                             Birkelbach Management Corp.                                48
 Establish the right
broker/client or money
 manager relationship



      Birkelbach Management Corp.   49
Choices
   1.   Discount Broker
   2.   Financial Planner
   3.   Mutual Funds
   4.   Broker
   5.   Investment Manager


              Birkelbach Management Corp.   50
Birkelbach Management Corp.   51
Birkelbach Management Corp.   52
          The Times they are changing

Investors are irrational in a “predictable” way

Learn to listen to the market

Let the market tell you what to do.

            Through analysis of
            Pattern, Trend and Ratio




                     Birkelbach Management Corp.   53