The Dow Theory Barometer's editor/publisher Mike Johnson, is an equities
trader who has spent years trading Bull and Bear markets.
Stung by the day-to-day volatility that is the norm in 21st century
markets, Mike actively sought out a style of mid to long range investing
that would limit client portfolio volatility, while maintaining the
long-term wealth compounding every investor seeks. Years of study led
repeatedly to Dow Theory, the century old technique for gauging market
opportunity. Dow Theory remains the topic of countless financial papers,
from The Wall Street Journal and the Financial Times to Investor's
Business Daily and Barron's.
Mike uses a variety of approaches to cover the current state of the markets
under Dow Theory, constantly working to deliver the client to a "smooth as
can be" process of compounding wealth. From insisting that clients grasp
the meaning of The Value Thesis, buy-cheap / sell-dear, to charted examples
of current market action with interpretation of that action at critical
fulcrums.
Always willing to express his opinion, Mike steps into the fray with each Dow Theory Barometer by expressing his
thoughts on future expectations one can realistically anticipate from
current market based investments.
Mike lives in the Heart of the Silicon
Valley in California with his wife, Lineo.
The Dow Theory Barometer will always endeavor to point you in the direction
of today's best-written articles covering the markets. Check the main
site at Dowtheoryproject.com to view any new postings of interesting,
insightful or timely articles that will point inventors in the direction
of proper wealth enrichment.
The Dow Theory Barometer is guided by the following;
We believe in Dow Theory.
Each subscriber will come to understand that Mike builds each newsletter "Inside the lines" of Dow Theory tenants that have evolved
over the last Century. In each market brief, you may find stock market comics, and
micro/macro social commentary, but when we talk market direction or
potential, rest assured, Dow Theory is our only algorithm.
Q & A with Mike Johnson
Q:Why do people need the Dow Theory Barometer now? A:
With the Dow Theory Barometer I saw the opportunity to create a fresh, inclusive approach to a market newsletter. Few newsletters today even understand the discounting mechanism that exists within the markets. Charles Dow said;
Nobody in the world knows everything- but, that the price movement of the averages did, because they represent the aggregate knowledge of all investors.
With each market brief, client subscribers become a community of analysts, all able to define the present market opportunities for themselves from within the foundation of this newsletter, which is Dow Theory. By understanding the intricacies contained within the markets as seen through Dow Theory, they are empowered to take charge of their own investment path. I view myself as the moderator in a room of highly educated, serious minded investors who come to be challenged and pushed to Think, Grow and Prosper. With subscribers from nearly a dozen countries around the globe, I think it is fair to say, we are meeting our goal! Now, consider this thought; The United States has over 70 million Baby Boomers heading
lock step towards their golden age, with a total labor force of
around 150 million. Yet, only a select few, about 15%, believe they
have taken the necessary steps to truly enjoy a golden retirement
or believe they will earn enough to obtain the goals they have set.
Simple supply and demand requires that these investors be empowered with serious minded, thoughtful, future looking guidance. Consequently, I have created the Dow Theory Barometer as a means to serve these proactive individuals who are
interested in the same low-volatility investment style that has
served the elite few so well for the past century. I focus on savvy investors
with a mid to long-term time horizon interested in the compounding
of their personal wealth.
Q:Why did you decide on a Monthly newsletter, instead of Weekly or Daily? A:
Great Question. It's all in the appeal I suppose. After a year of publishing a weekly newsletter, I found out something very interesting about my client subscribers - They naturally divided themselves into two groups. First, I have many subscribers hungry for short-term ideas; this group is what I think of as my active traders. Individuals who are looking for short term market direction to capitalize on. Then, there is the much larger group of members who use the Dow Theory Project and the Dow Theory Barometer in an effort to understand the larger market forces @ play. They are here in search of a time when a Primary Bull market once again emerges and allows for a safer long-term entry into the stock market.
Consequently, after a year of publishing a weekly newsletter, I decided to take a pro-active step to help both client groups. For my active traders, I created a BLOG (Web Log) that I post trading ideas and any thoughts I might be having about the day-to-day markets. I look at the BLOG as my "notes" for the monthly newsletter. For my Primary trend following investors, I followed the advice in Dow Theorist Robert Rhea's great book, The Dow Theory where we
learn that; "…a series of charted daily movements always eventually
develops into a pattern easily recognized as having forecasting value."
So, as the days begin to add up, the picture can and does become clearer.
This led me to make a move to create the Dow Theory Barometer as a monthly newsletter. This allows me to add up the daily movements of the
markets, without giving any one-day too much emphasis. Seemingly huge
daily stories are allowed to evolve and be absorbed into the market
averages, consequently, what I write for each Dow Theory Barometer, has
a stronger perspective on the "Big Picture". At least, I hope.
Q:Is there anything in Dow Theory's "Big Picture" now that we should know? A:
Yes, absolutely. My current Dow Theory research that is taking us into 2005 shows me that
with, 1) average stock prices selling above 20 times the current
earnings of corporations and, 2) stock dividend yields from these
same companies paying less than 2% on average, that the divergence
in January 2004 between the Dow Jones Transportation Average and the
Dow Jones Industrial Average was an important signal to the end of
the great 2003 rally. My subscription clients have known since
January 30, 2004 that the market was set to tread water or head down. Now as we head into 2005, with the Dow Jones Industrial Average threatening to break out to the upside, I am again warning my client subscribers against becoming too Bullish. Today, the typical buy and hold investor who places
money to work in stocks is likely to have a NEGATIVE return on their
investment looking out over the next five to ten years. Please tell me,
have you heard any Investment advisors, mutual fund managers or corporate
CEO's willing to tell you to stay out of the markets? Not likely.
Q:Does this mean that investors must stay out of the markets over the
next five to ten years? A:
Actually no. It means that in January 2004, Dow Theory signaled
a great point to take profits from the run-up of 2003. The macro realities for profit realization in the market today and during the rest of the decade
are going to be directly
correlated to the timing of each individual investor. I believe
my client subscribers will benefit greatly from being nimble and
flexible in their approach. Opportunity is driven by the business cycles, elections, global conflict, innovation, hope, fear and greed. These opportunities in the markets
constantly expand and contract. Movements up and down will continually
test investor's confidence, as well as create great opportunities. Dow Theory gives the clues to each
trend in the market. Over the next decade, I will assure you
that the nimble and flexible investor will greatly outperform
the "Random Walkers" in returns, while owning a lower volatility
portfolio.
Q:How does the Dow Theory Barometer help avoid a negative return? A:
This is where I believe the Dow Theory Barometer thrives by taking
a survey of the "Big Picture" of future
market trends. By serving the "Big Picture" view of the economic,
political, and business trends through Dow Theory, a detection of
the "Primary Trend" in the market is revealed. Once we know the
trend in the market, proper action can be taken to compound and
protect wealth. The following is important. Low-Volatility
investing can only be achieved if money is removed from the
market at times when market crashes or market downturns are
highly probable, and if money is added to the market when the
sky seems to be falling all around us. It is no secret that
most people do the exact opposite.
Q:Are you saying your Dow Theory Barometer can predict Market Crashes? A:
Absolutely not, but Dow Theory has a track record of giving important
clues that have preceded most market upturns and downturns, including
a perfect warning prior to the 1987 crash, and, in March 2003 to the
upside. With the Dow Theory Barometer, I am committed to a
"smooth-as-can-be-expected" process of compounding wealth.
Specifically, when the market goes to historical extremes, I
believe that it is prudent to start protecting your money if a
downturn is expected, and proper to get your money to work, when
the market is projecting long-term strength. As you can tell, I
don't care much for the "Random Walk" theorists, who let their
clients money sit in the markets from 1999-2002, while hundreds
upon hundreds of stocks lost over 90% of their value, flushing the
hard earned money of investors right down the drain.
Q:How do you judge the extremes in today's volatile markets? A:
We have all heard the joke that the Government's Budget office has
predicted 5 of the last 2 recessions. Dow Theory can appear similar
to that to the neophyte theorist. There are times when the theory
gives false signals within some aspects of the time tested "rules".
This is where history comes in to lend a hand with clues. By having
an unbiased view of P/E and Yield bands, together with an understanding
of 1) the phase of the primary or secondary trend, 2) the extent of
market moves, and 3) the conviction of the participants measured by
volume and breadth, a delicate prediction of market direction can be
detected. Once detected, a continued use of these hallmarks reveals
the confirmation of the primary trend in the stock market. These are
the tools I use to construct the Dow Theory Barometer's Investment
Position.
Q:What are the biggest benefits for subscribers? A:
The biggest benefit is learning how to grow investments comfortably. This
involves learning how to allocate your money, the proper times to allocate
it, and when to move to cash. These are the toughest decisions an investor
must make, and the Dow Theory Barometer is here to assure proper allocation.
We work to take away the two biggest enemies of investing - fear and greed,
which can cloud proper investment technique. With the Dow Theory Barometer, you get crucial market insight that you won't
get from the mainstream financial papers. We keep it light from time to
time with political or stock market cartoons from today's best illustrators,
as well as maintaining the entire Dow Theory Project site for all to use
towards their investment advantage.
Q:Do you make specific stock and investment suggestions? A:
The New Year will bring a mix of new stock picks that I personally will trade, and perhaps a specific portfolio to show the type of returns available to the Dow Theory Investor through the use of Dow Theory tenants. It is most likely that specific trading stock picks will be posted to the Dow Theory BLOG, while an organized portfolio will be formulated on the pages of the Dow Theory Barometer newsletter.
Q:So who should subscribe? A:
Certainly anyone with an investment account, 401k, or capital they are
thinking of putting into the stock market, would be best served
with proper guidance for their mid to long term investment
future. More specifically, any investor who is ready to be empowered to take charge of their own investment path. Serious minded investors who want to be challenged and pushed to Think, Grow and Prosper.
Q:What's your best one sentence of advice for individual investors? A:
Sure, that's easy - No Position, is a Position. Avoid Financial
Advisors who are always invested in the markets. Oops, that was
two sentences.
The Dow Theory Barometer will always endeavor to point you in the direction
of today's best-written articles covering the markets. Check the main
site at Dowtheoryproject.com to view any new postings of interesting,
insightful or timely articles that will point inventors in the direction
of proper wealth enrichment.
