Ch1.
- Got very lucky and made money in one stock, then became interested. It was a canadian mining stock, so he kept looking for similar ones. Eventually started taking tips from patrons in his restaurant and realized he kept loosing money following their advice
Ch2
- Got Wall Street research and a broker and tried following their tips but it didn't work either.
Ch3
- Mortgages his house to invest in a stock he thinks is going up, and it goes down about 20%. He almost goes broke. Then he slowly starts developing his theory.
Ch4 - Box Theory
- Stocks trending up move in trading ranges (boxes). Once they move from one range to the next they shouldn't fall back into the previous trading range. If that happens you should sell. The range he uses is based on the daily chart hi and low. Ranges appear to be 5 - 10 day, and every stock has their own characteristics. Time frames were not necessarily important.
- The boxes on the chart should stack up to form a pyramid in time.
- It is normal and beneficial for stocks to have swing lows because it shakes out weak hands and enables the next jump upwards.
- Lessons:
- You will only be right about 50% of the time
- must look at stocks w/o emotions or attachment
- must reduce risk as much as possible
- He would buy on breakouts with stops in the previous range
- Look for high volume on the breakouts that hold (large % of the float)
- Keep stop below the box (it looks like he kept it about $1 below)
Ch 5
- He travels around the world for his career and he can only get Barron's weekly articles and a few stock quotes from his broker. This teaches him that he can ignore most of what is going on and still pick decent stocks.
- He makes 'Cause of Error' tables that show the stock, price bought / sold and the cause of error. These tables became one his most important tools. He describes this like driving a car. You may have knowledge how it works, but you need to develop a feel for how hard to press the accelerator / brakes, and what a is a safe distance to trail the preceding car.
- Errors: bought too late, stop - loss to close, overlooked weak market conditions, bought on decline, wrong timing
Ch 6 - During the Baby bear market
- Technofundametalist view - He would select stocks based on technical action, but only buy when he could give improving earning power as the fundamental reason for doing so.
- Takes a 20 year view of industries for those whose future he could expect revolutionary new products that would sharply improve the company's earnings.
- At this time the industries were electronics, missiles, rocket fuels (which were very small cap stocks)
- stocks go in and out of fashion ever couple years, just like women's styles
- Find stocks that would be hoisted up because they stirred people's imaginations of the future
- Not interested in the company's products, and didn't want to know in case the extra info would inhibit him. Only care about whether the company belong to a new vigorous infant industry and whether it behaved in the market according to his requirements.
- Watch these stocks weekly
- During this bear market he noticed that most companies who didn't fall as much had earnings trends that pointed sharply upwards. The capital was still following the eps improvements. He would only look for improving earnings power or anticipation of it.
- That was the position for which I had now trained myself for five years. My Canadian period taught me not to gamble; my fundamentalist period taught me about industry groups and their earning trends; my technical period taught me how to interpret price-action and the technical position of stocks - and now I reinforced myself by piecing them all together.
- Gets a office on wall street at a brokerage and then loses his touch because he is too close to the quotes. Loses 100k in 1 month from the 500k he made
- He moves to France and instructs his broker to just give him the daily quotes, and he will read his weekly financial paper to get new ideas
- Also, my brokers must never quote any stock to me, except the ones I asked for. They must not tell me about any new stock because that would immediately come into the rumor class. I would pick new stocks myself, as I had always done, by reading my weekly financial paper. When I saw one that interested me and seemed to be preparing for a rise, I would ask for quotations. I would only ask for one new quotation at a time. Then, as I did before, I would study it carefully before deciding if it was worth going into.
- After a month he starts to get his 'feel' for the market back
His TI investment was probably a micro-cap company at the time. It looks like it would be about a 15M market cap now.
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