1 Birkelbach Management Corp. “ “ Investors are irrational in a predictable Investors are irrational in a predictable way” way” “ “ Listen to the markets” Listen to the markets” “ “ Let the markets tell you what to do” Let the markets tell you what to do” Birkelbach Investment Securities, Birkelbach Investment Securities, INC. INC. and and Birkelbach Management Corp. Birkelbach Management Corp. since 1974 since 1974
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“ Investors are irrational in a predictable way” “Listen to the markets”
Birkelbach Investment Securities, INC. and Birkelbach Management Corp. since 1974. “ Investors are irrational in a predictable way” “Listen to the markets” “Let the markets tell you what to do”. How to make money in the Stock Market?. Buy and Hold? 50 Years : 9% - PowerPoint PPT Presentation
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1Birkelbach Management Corp.
““Investors are irrational in a predictable way”Investors are irrational in a predictable way”““Listen to the markets”Listen to the markets”
““Let the markets tell you what to do”Let the markets tell you what to do”
Birkelbach Investment Securities, INC.Birkelbach Investment Securities, INC.
Redistribution of wealth from Shareholders to Redistribution of wealth from Shareholders to managementmanagement
Banks, corporations and individuals need to rebuild Banks, corporations and individuals need to rebuild balance sheets.balance sheets.
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The Great SidewaysThe Great Sideways
Since 1997 – UP 50%Since 1997 – UP 50%
DOWN 50%DOWN 50%
Do you have an Investment Strategy for this kind of market ?Do you have an Investment Strategy for this kind of market ?
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New Market RealityNew Market Reality
Increased VolatilityIncreased VolatilityUP 50%; Down 50% will continueUP 50%; Down 50% will continue
Investors must become more FLEXIBLEInvestors must become more FLEXIBLE
AVOIDAVOIDBuy & Hold StrategiesBuy & Hold StrategiesMutual FundsMutual Funds
New StrategyNew StrategyLearn market timing techniques to Buy Low & Sell HighLearn market timing techniques to Buy Low & Sell HighUse ETFs to be Long and/or ShortUse ETFs to be Long and/or Short
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To be To be SuccessfulSuccessful in the in the stock market become stock market become
represent investors’ represent investors’ perception of the futureperception of the future
And Price is determined by supply and demand…
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Nobody controls the marketsNobody controls the markets We do control our selection and timingWe do control our selection and timing We can’t tell the market what to doWe can’t tell the market what to do We We cancan let the market tell us what to do let the market tell us what to do ““The trend is your friend”The trend is your friend”
Technical Analysis (The forgotten art)Technical Analysis (The forgotten art) A Picture is worth a thousand wordsA Picture is worth a thousand words
Investors are irrational in a Investors are irrational in a “predictable” way“predictable” way
Learn to listen to the marketLearn to listen to the market
Let the market tell you what to do.Let the market tell you what to do.
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The “Lone Bull” I – The “Lone Bull” I – Barron’s 1982Barron’s 1982
DOW : 1,000 to 11,000
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The“Lone The“Lone Bull” II – Fall Bull” II – Fall
20022002
Dow: 7,200 to 14,200 --up 97.22%
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Head and ShoulderHead and ShoulderHeadLeft
Shoulder
Right Shoulder
Neck Line
Volume
Head and Shoulder Top Formation
Head
Left Shoulder
Right Shoulder
Neck Line
Volume
Head and Shoulder Bottom Formation
Amount Up
Amount Down
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The Dow…The Dow…
Giant Head and Shoulders Formation(2001 – 2005)10,753 – 7,197 = 3,556;3,556 + 10,753 = 14,309Projected Goal? (14,309 + 32%)
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The S&P 500…The S&P 500…
Giant Head and Shoulders Formation(2001 – 2005)1,170 – 820 = 350;350 + 1170 = 1,520Projected Goal? (1,520 + 31%)
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The NASDAQ Composite The NASDAQ Composite Index…Index…
Giant Head and Shoulders Formation(2001 – 2005)2,000 – 1,195 = 805;805 + 2000 = 2,805Projected Goal? (2,805 + 45%)
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Lone Bull IIILone Bull IIIDow: 6,470 to 10,000 --up 54.56%
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Price of FordFebruary 12 2009- $1.79
Now-$7.61
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Apply technical analysis Apply technical analysis for evaluationfor evaluation
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The Dow TheoryThe Dow Theory
Phase I
Phase II
Phase III
Phase I
Phase II
Phase III
Bull Market
Bear Market
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Characteristics of the Characteristics of the Market CycleMarket Cycle
Accumulation
Progr
essi
on
Distribution
Reversion
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Trend movementsTrend movementsLook at 3 month chartsLook at 3 month charts 1 year charts 1 year charts 10 year charts 10 year charts
Intermediate
Trend
Intermediate
Trend
Major Trend
Line
Intermediate
Trend
Intermediate
Trend
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EXXON (XOM)EXXON (XOM)5-Years as of 10/29/20095-Years as of 10/29/2009
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EXXON (XOM)EXXON (XOM)1-Year as of 10/29/20091-Year as of 10/29/2009
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Monitor your investmentsMonitor your investmentsLet the market tell you what to Do.Let the market tell you what to Do.
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Resistance AreaResistance Area
B
A
C
D
E
Resistance Area
GOOD
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Support AreaSupport Area
B
A
C
D
E
Support Area
BAD
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Trendlines and Trend Trendlines and Trend movementsmovements
Uptrend
Broken
Downtrend
Broken
Sideways Trend
Broken
BAD
GOOD
GOOD
BAD
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Determine your Determine your risk/reward tolerancerisk/reward tolerance
Step-1Step-1
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A stock is only a A stock is only a vehicle to get you vehicle to get you to where you want to where you want
to goto go
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What are the benefits of What are the benefits of using ETFs?using ETFs?DiversificationDiversification
- Exposure to wide spectrum of asset classes and investment stylesExposure to wide spectrum of asset classes and investment styles- Helps to limit single-stock riskHelps to limit single-stock risk
Tax EfficiencyTax Efficiency- Passive management and the creation/redemption process can help Passive management and the creation/redemption process can help
minimize capital gains distributionsminimize capital gains distributions
Trade on major stock exchanges throughout the dayTrade on major stock exchanges throughout the day- Not subject to trading issues associated with 4:00 pricing of open-Not subject to trading issues associated with 4:00 pricing of open-
end fundsend funds
HedgingHedging- Be long and/or short the market- Be long and/or short the market
IYY IYY Dow Jones Index IsharesDow Jones Index Ishares DOGDOG Short Dow 30 IndexShort Dow 30 Index ProsharesProshares QQQQQQQQNASDAQ-100 PowersharesNASDAQ-100 Powershares PSQPSQ Short NASDAQ-100 IndexShort NASDAQ-100 Index ProsharesProshares IVV IVV S&P 500 Index IsharesS&P 500 Index Ishares SHSH Short S&P 500 Index ProsharesShort S&P 500 Index Proshares IWM IWM Russell 2000 Index ProsharesRussell 2000 Index Proshares RWMRWM Short Russell 2000 Index ProsharesShort Russell 2000 Index Proshares IEOIEO Oil & Gas-Ex Index IsharesOil & Gas-Ex Index Ishares DDGDDG Short Oil & Gas ProsharesShort Oil & Gas Proshares VFHVFH Financials Vanguard ETFFinancials Vanguard ETF SEFSEF Short Financials ProsharesShort Financials Proshares EEMEEM MSCI Emerging Markets Index IsharesMSCI Emerging Markets Index Ishares EUMEUM Short MSCI Emerging Markets ProShares Short MSCI Emerging Markets ProShares
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Current Market Current Market AssessmentAssessment
Step-2Step-2
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We avoided another Depression We avoided another Depression (Large Government Debt)(Large Government Debt)
SRP vs S&P 500SRP vs S&P 500Socially Responsible Portfolio UP by 0.96% and S&P500 Index DOWN Socially Responsible Portfolio UP by 0.96% and S&P500 Index DOWN
by 9.58%by 9.58%
-60.00%
-40.00%
-20.00%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
Month/Year
Perc
enta
ge C
hang
e
SRP % Change
S&P 500% Change
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Investors are irrational in a Investors are irrational in a “predictable” way“predictable” way
Learn to listen to the marketLearn to listen to the market
Let the market tell you what to do.Let the market tell you what to do.