But we will not talk of cabbages and kings. The time has come to end this blog…although I will consider starting a new one at Wealthy Investor.

If you have been following this blog and the portfolio updates at www.sydneytremayne.com/ under the Portfolio tabs you will have seen the system I have been teaching works as expected – slightly better than the major indexes and with a good deal of safety.

The methods we have spoken of are suitable for inexperienced and somewhat-timid investors. The methods are not extravagant but they add a few percentage points to the long-term average of 10 to 11 percent for the S&P 500 including dividends.

The correction is over

I warned recently that this blog was coming to an end, but I did not want to leave you in the midst of a correction that many thought was the start of a double-dip recession and attendant bear market. As expected, the doomsters were wrong. The correction (and, yes, I’m breaking one of my own rules by making a guess) the correction is over.

It is understandable that when people have lost half their retirement savings they are spooked by the first market decline. But corrections such as the one we have just had are part of the normal psychological tug of war between greed and fear. When the market gained as rapidly as it did, some prudent investors decided it was time to take their profit. The market pulled back as it always does and headline-hunting advisers weighed in with predictions of the end of the world.

As I have said before, do all you can to avoid following the crowd, and to avoid the greed and fear spread by that crowd. The way to win consistently with stocks is to use a system you trust and to stick with it regardless of what markets do temporarily.

The work is done

I am ending this blog for two reasons: I believe it has done its work. Those who have followed Gaffer (www.lunchwithgaffer.com) have an excellent and conservative tool if you will but use it. You already know more than most investors ever will and you already know that what I teach is easy stuff. Your future is in your own hands now, where it should be, not relying on others and putting your money at risk with their opinions. You have a system and you know it works.

The second reason for ending this blog (and for ceasing to market Gaffer) is that I need more time for Wealthy Investor Limited. Some truly startling things are happening in that company. I continue to test and to tweak and results with the S&P 500 and the Dow 30 are now so beyond belief that the marketing problem is being handed to a PR firm in New York.

But although the raw numbers are unbelievable (I would not believe them in your shoes) we are working on absolute proof. If you download the free book at www.thewealthyinvestor.info you will also receive some 180 annotated charts of the Dow 30 so you can see exactly what the system in doing, how it is doing it, and why.

It’s transparent – if that is not a dirty word now

You will see a system of market-driven flexible trend lines unlike anything I have seen elsewhere. You will also discover how the system uses virtually invisible resistance points to make buy or sell decisions.

Clearly, this is now where my focus must be. Too many people rely on me for it to be otherwise.

For those who have been following this blog and those who have commented, I appreciate you and I thank you for your support. The portfolio will be updated later today for the last time.

All the very best,

Sydney Tremayne

It’s embarrassing when you syndicate stuff without a link to the article. It is especially embarrassing when what is sent to all four corners of the universe is the following simple statement:

Is Tremayne Insane? Or a Liar? He Sure Needs Help

That was the title of a recent WordPress article. Now I can imagine anyone who has seen it thinking that some guy name Tremayne is being flamed by an enemy. Perhaps they are waiting with nail-biting anticipation for the next salvo. So much for credibility!

The culprit? Me! I am using new software for the syndication and was asked for a user name and API code. I misunderstood and used my WordPress user name and API code. Well, what do I know about computers?

No wonder the software that turns long URLs into short couldn’t supply an address.

Tremayne is not a liar, nor is he being flamed, but he sure needs help with computers!

I hoped for 30%

A few days ago I told you about a stock trading system I have developed that in 40 years of back testing has shown an average annual rate of return of 55.49%. I promised to tell you more about it over the next little while.

My career as a stock broker was made in the mid-1980s when I developed another system. It returned a little over 22% but I knew even then it was flawed. Despite that healthy return and happy clients, it made too many losses and caused a large number of trades. I knew I could do better but in those days there was not the computing power there is today and not the wealth of incredibly bright programmers.

Needed to reduce losses

I figured the old system should have been able to get around 30% if only I could find a way to cut down on the number of losses.

I had a heart attack in March, 2009, and landed in hospital. When I began to recover, I asked that the book I had written about the old stock trading system in 1987 be brought in. I still have the single scrap of paper on which, in less than 30 minutes, I designed the new system. I decided the old trend lines, by which market change is measured, needed to be lengthened. Frankly, what I put on paper were merely guesses I intended at some point to experiment with.

Well, I got busy with other businesses and that scrap of paper was ignored for a year…but it nagged at me.

“Embellishments”

Early in 2010 I was introduced to an exceptional computer programmer in England and we agreed to work together. I set about designing what I wanted a program to do. But instead of following what I had drafted in the hospital I made a number of “embellishments”.

Logic isn’t always logical! Testing the resulting program brought a series of disappointments with returns in the 12% to 14% ballpark – slightly better than the Dow Jones Industrial Average but frustrating when I had a sense of what was possible.

Detailed stop loss methods

The 55.49% average was a mistake brought about by frustration. The system has a very detailed approach to stop losses, more detailed than I have seen elsewhere. Anyhow, I cut one element of trailing stop losses out, thinking at the time it was an insane thing to do. That was when we got the result that nearly threw me off my chair.

Here’s the strange thing: After that, we went back to the system I designed in the hospital but without the embellishments. I was hoping for 30% but we missed; the average annual rate of return for that, with just one parameter changed, was 31.38%. And these results weren’t from volatile penny stocks; they were from the 30 companies now in the Dow Jones Industrial Average tested over the past 40 years or for however far data goes back.

By the end of this month we will release an ebook detailing the rules used for both systems. You can get a free copy from www.thewealthyinvestor.info. There is nothing to buy.

Next time I’ll talk about some of the aspects of the new stock trading system.

The 55.49% Problem

I’m going to do something off the walls. That’s not totally unusual for me; I tell friends I am crazy…but fortunately so are most of them!

I am going to give the Gaffer Wealth System to anyone who wants to learn about savings, stocks, bonds and mutual funds. This is a multimedia system. The 200-page-plus ebook is a fun way to learn for those who find most how-to investment books too dull or technical. If you have a beginner or would-be investor in your family, this is something they need.

Gaffer, the lumber mill owner in Cripple Hole Creek, population 209 (see, I told you I was crazy!), entertains three couples to lunch every week and talks about how he made his millions from stocks. The teaching is entirely conversation, which allows me to split it into bite-sized pieces, to inject humor (wait ’til you meet the sharp tongue of Gretchen Johnson), and to emphasize the key points. The characters and their challenges of daily life apart from investing keep the pages turning.

A five-year lesson

So why would I give Gaffer away? It’s part of a lesson that took five years to learn. Gaffer (just the book) became a minor best seller on Amazon when it was published by a New York publisher in 2007. It contains information every would-be investor needs.

And that’s the problem: We don’t buy what we need; we buy what we want.

If I asked you if you wanted an average annual return of 55.49% from senior stocks (and someone who would tell when to buy what, at what price, and when to sell) would you want that information? Most people would…if they believed it. But most would not believe.

Well, believe it!

My company has developed a program that in 40 years of back-testing on the 30 current Dow Jones Industrials achieved that return. I may be crazy but I’m not crazy enough to make a claim like this unless I can prove it. In my business, reputation and credibility are everything.

Just 16 losers in 103 trades

This is not for active traders. There was an average of just 4.22 trades a year in those 30 stocks. That meant the average trade lasted a fraction over seven years. There were just 16 losers in 103 trades. If you are an investor, you know how incredible that is.

One more thing: I have had a program built by a computer whiz in England. (No, it’s not for sale at a price you can afford.) Everything I am telling you was entirely machine-generated. I had to provide a starting date for each stock but that meant an element of human intervention in that first trade. To remove that influence, the first trade for each stock has been eliminated.

Look, I’m smart enough to know that my seemingly-outlandish claims will be pulled apart and examined under microscopes by a great number of people. If they cannot verify my numbers they will spread negative stories all over the Internet, so I have had to make sure there is nothing that can be remotely questioned.

Don’t worry! It’s not a gamble.

Credibility is why I chose the 30 Dow Jones Industrials. The composition of that list is beyond my influence. There could be no choosing a group of amazing stocks and forgetting about the losers. And there were overall losers: two of them. Coca-Cola lost 2.15%, and Kraft 0.03%. Maybe I’ll tell you about the five triple-digit winners some other time.

Nothing is for sale

So why am I telling you all this? No, you cannot buy the book in which I teach all the details of the system. It is not for sale; when it is completed at the end of July, 100,000 copies will be given away. The newsletter will be given away for 26 weeks, too. We will even give you approximately 150 charts that detail how, when and for how much each buy and sell was made for all 30 stocks. See the system in action for yourself.

Why? Frankly, when something is too good to be true it usually is. Look at the number of times the media has tried to sell $10 bills on the street for $1. That’s the problem with a 55.49% annual average rate of return. If I tell people about this, it will not be believed in most cases. So I want you to pick apart the method to see whether I tell the truth or not.

I ask one thing only: If you post comments here please be sure you have done your homework. Follow every trade, compare it with the rules laid out in the book, see if anything was missed or fudged, and then tell everyone what you discovered.

One-on-one help

I will help you to understand the system if there is anything at all that is unclear to you. If you are unsure, ask! That way you will get a one-on-one education in successful investing from me. You don’t have to be an expert investor – though you will be welcome if you are. You simply have to be able to follow carefully step by step to verify (or not) what I give you.

Let me know of your interest either by posting below or in an email to s02041934[at]gmail[dot]com. Since all requests will be handled manually, please let me know of your interest as soon as possible. Our project completion target is July 31 but we may beat that deadline. In any case, the Gaffer offer is available only until that date. You will be given access to it as soon as I hear from you.

I’ll tell you more about this project in future postings over the next several days.

Thank you for your interest.

Sydney Tremayne

PS: Gaffer’s portfolio will be updated in a few hours at http://www.sydneytremayne.com/Jun-10.html

May has been a wild month that has many investors spooked. Does this mean a double-dip bear market, a W bottom? Will the European currency crisis affect the U.S? What will the Korean situation mean for the stock market? Will I lose my money?

All are valid questions, particularly in a correction 14 months after the worst bear market since The Great Depression. So let me give you some encouragement wrapped up in a warning.

What is happening now is a normal correction of 10% to 15% in a bull market. After soaring prices for the past year, it was due and some people decided to take profits. This is common and we should feel more uneasy if it did not happen. The jitters occur among people who invest on gut instinct and without a system. Gut instinct says: “Danger! Flee!”

It is a follow-the-crowd syndrome that always – always – spells trouble. It causes irrational exuberance at one extreme and panic at the other. It is a major enemy to be defeated with all possible force, and that force is a workable and trusted investment system or strategy. It doesn’t matter which proven system is used just so long as you have faith in it. That faith will avoid the tendency to follow crowds. Leave that to lemmings.

Fears (and exuberance) are fanned by the media when the stock market grabs the nightly headlines. Think about this: the media has no system for saying whether worry or joy is an appropriate response. The media offers oh-my entertainment to attract eyeballs so it can sell advertising.

This is a normal correction and, if you are without a system that has kept you invested, offers a time to buy. Just be aware that the summer is often a pretty dull time for stocks. We may stay close to current levels for a few months though the next round of earnings reports may spice things up a bit.

Europe a sign of things to come

What about the Euro? Keep your eyes on the real story. The Euro is merely a symptom. Greece, Spain, Portugal, Italy are examples of what happens to societies that spend beyond their means. They all happen to use the Euro as their currency. But the British pound is also under pressure and so, except when investors flea to what they currently consider safety, is the U.S dollar.

The Euro will weather the storm in the short term. Whether the European Union could weather another major bailout is in question. Perhaps its best solution would have been to allow Greece to fail. Now, it has set a precedent that seems unwise. It seems to say that fiscal responsibility is not essential because those who do not practice it will be bailed out.

The difficulties brought on by unbridled spending are enormous. One way or another, debt eventually has to be repaid or countries have to declare bankruptcy. Governments rely on healthy employment to pay interest and to repay debt but fiscal tightening, such as that being imposed now by Greece and others, detracts from economic health and creates unemployment. Less tax revenue means greater difficulties in repaying debt. At the same time, social unrest pressures governments to reduce austerity measures earlier than they should.

The threat of a collapse in Greece has been staved off for now. Spain, Portugal and others are attempting to clean up their act. Their difficulties are not new but were an excuse for the world’s markets to correct. Their problems will gradually move to the back burner in the minds of investors, replaced with other preoccupations.

But watch out for the next world recession in two, three or five years. Debt loads will be even higher in many countries, including the U.S. Lower tax revenue will make repayment more difficult. And governments will not be in a position to stimulate their economies. Whether it is the next recession or another in the future, all debtor nations will eventually face the situation faced by Greece and, before it, Argentina.

Life will not be pretty so take advantage of this correction and the degree of uncertainty and fear in today’s markets. Build wealth for the tough times to come by investing in good companies now.

Gaffer’s latest model portfolio results are now available at http://www.sydneytremayne.com/May-10.html.

What is your greatest investment problem?

I want to know what is your greatest investment problem. I hope you will share it with me. I ask so that I might be more helpful to you. I am not in the business of giving tips, so please don’t ask me if XYZ Widgets is better than ABC Thingamajigs. Apart from that, most things to do with stocks are fair game. If I can’t help you, maybe other followers of this blog can. Let’s form a mutual help group. What do you say?

Sydney

I have spoken much in the past two years about the dangers of mixing emotions such as greed and fear with investing. Today for many retail investors would have been a day of fear if they had time to react to off-the-cliff markets.

The Dow Jones Industrial Average at one stage, as it headed toward an intra-day record-setting loss of 997 points, was losing 100 points a minute! It made back 650 points in about the last 40 minutes of trading.

The original theory was that the Greek parliament’s passing of tough wage and pension cuts that lead to riots for the second day was the cause. The two events happened at about the same time dramatic TV reports were aired. Later it transpired some kind of glitch in reporting the accurate price of Proctor & Gamble and 3M caused most of the loss.

Both are major components of the major U.S indexes. Apparently there was a price input error that was instantly reflected in the indexes. The error triggered automatic stop loss orders from major institutions and mutual funds. Proctor & Gamble opened the day at $61.91. In the afternoon it plunged suddenly to a 52-week low of $39.37. At the closing bell some 45 minutes later it was at $60.75.

3M fluctuated from $90.52 – a gain of almost $4 on the day – to $67.98 before closing at $84.24.

The market is already in correction mode and this action will weaken retail investor confidence for those who do not have a systematic approach to investing. I have one piece of advice – strong advice – for you: If you are invested, stay put! If you are not, there are some excellent buying opportunities in the near future.

Greeks and glitches aside – and exchanges should know before the market opens what caused the PG and 3M glitches – the market has been looking for a reason to correct. It would have done so without Greece, without glitches. It had risen almost continuously since March of last year. A 10% to 15% correction is overdue.

A 10% correction from the April 26 high of 11,308.95 would be 10,178.06 and we surpassed that today but bounced back to close at 10,520.32. A 15% correction would register 9,612.61. Over the next two to three months that seems credible in terms of what might be considered normal – if the stock market can ever be considered “normal”.

Despite 80% of major companies reporting earnings above estimates in the recent reporting period, the economic crisis in Greece and fears it might spread will keep investors cautious for a while. But it is my view the Greek crisis will be resolved, at least for now. The worldwide impact would be too great to think otherwise.

Either the European Union will agree to the help Greece needs or they will kick it out of the Union and allow it to go bankrupt as Argentina did several years ago. The real danger is a potential domino effect including Spain and Portugal which could potentially break the Euro Zone. Unrest in Greece will continue but that will be a minor and local issue internationally.

But all this merely boils down to guesses. Stick to whatever organized system you have for investing and if you don’t have one this is a wake-up call! Get one! Do not let emotions intrude on your long-term investment plans. If you can’t control your emotions, get out and stay out and never be tempted by greed to return.

PS: If I were a betting man I’d be using the temporarily-strong U.S dollar to buy the resource-heavy Canadian dollar. U.S debt and demand for resources in the recovery should work in your favor. I play currencies by accident only; I have Canadian and UK pensions but live on U.S dollars.

So do people! Let me start by apologizing for being late this month. I try to be closer to the beginning of the month after updating Gaffer’s portfolio but work and the need to sleep once in a while caught up with me. My programmer and I have been working to bring you something, probably in August, I am tremendously excited about…and I think you will be too. (Hey, and it will be free!)

***

But that’s another story. With the Dow down more than 250 points at one stage today you probably have a good deal of nervousness. That’s understandable. I want to try to make you a little more comfortable…though telling you there’s more of the same to come hardly seems the way to do so. Bear with me!

A few months back I said it was time for a correction, but none came. Corrections are normal. Markets get ahead of themselves, as I believe this one did, investors take profits and the market either falls or merely takes a rest. This is one of those times.

The pullback is taking place despite encouraging news in the economy – but there is not likely to be a great deal of additional encouraging news for a couple of months. The quarterly earnings reports are mostly over for now so we will have to wait for further encouragement from that quarter.

Meanwhile, there is plenty to worry about. Four countries, Iceland and three in Europe – Greece, Spain and Portugal – are in major financial trouble. Why that should appear to have so much influence on May 4 when the news is already old is a bit of a mystery. And it may not be the reason for the sell off. It might even be that this is May.

There’s an old saying that goes something like this: Sell in May and go away!

Gaffer’s portfolio took a fractional loss last month while the S&P 500 Index gained. Both are likely to lose this month. But if you have been following this space and the portfolio you know a single month is a single month. Dollar cost averaging means we will buy more shares at reduced prices and gain even more when prices turn positive again.

People who ultimately lose in falling markets are people who have no system. That’s what Gaffer is all about: teaching a system that in part reduces panic.

Timing the market can be done. My next product proves it. But again it cannot be done without a firm system. Unfortunately, a large number of the investing public works from emotions: greed on the way up and fear on the way down. The greater the distance the market travels in either direction the greater the influence of these emotions.

That’s why people scramble to buy at market tops and rush for the exits at bottoms. Why else do you suppose markets so often exhibit extreme moves at each extremity?

There is a lot to be worried about in the world today, but bull markets typically climb a wall of worry. In the U.S alone the list is long:

• Unemployment
• Political uncertainly
• Massive and irresponsible debt
• Terrorist threats
• Taxes set to rise and affect all levels of society despite promises
• A housing crisis that won’t go away any time soon

All these things are negative for markets yet the market has climbed at a healthy rate for more than a year. On the positive side, productivity is on the rise and profits along with it.

The fact that markets have generally been able to rise in the face of all the negative factors is proof a strong bull market is in control. It’s from that I believe you should take comfort, especially if you have a system. Even strong markets need to take a rest from time to time.

I am not going to say too much about the market this month. How do you make sense of a market that continues to rise along with debt that will eventually cripple the U.S?

There is no hope in Hades the mounting debt will ever be paid off. Latest reports show that if there are no accidents in the next few years, 90 cents out of every dollar earned will go to pay off the out-of-control debt. It ain’t possible!

Health care was just one example. Does America need better access to affordable health care? Of course; everyone does. But if what is now law is completely logical, why did so many politicians need to be bribed to hold their noses while they voted?

Insurance companies could have been opened up to more competition by being able to offer their product across borders. People in the health care business could have been genuinely consulted and listened to so waste in the system could be tracked and eliminated. Of course one-sixth of the economy has waste built in. There will be even more waste now with the extra layer of bureaucrats.

Health care could have been introduced gradually, looking after the greatest needs first and expanding from there as the economy improved. Instead, with at the time a majority in both Houses, the Administration rammed through a bill few voters were comfortable with. And it did so in a manner even more voters were most uncomfortable with.

Trillions are thrown around in Washington as though those in government were little boys playing Monopoly. Frankly, such cavalier behavior is both frightening and disgusting! I live in Panama, untouched by the recession, but I feel sad for those of you who have to find a way to survive the mess that is on your doorstep.

The market, as I say in the latest portfolio update at http://www.sydneytremayne.com/Mar-10.html, is a complete puzzle. It forges ahead as if everything is rosy, there’s full employment and a budget surplus in every home. I believe assets are simply being marked up in expectation of a U.S dollar devaluation – which is already taking place to some extent.

Meanwhile, the portfolio is proving the value of The Gaffer Wealth System with which it is run. The objective is to outperform the major indexes. In the past 15 months since the portfolio was established, it is up 44.46% compared with the S&P 500 at 29.47%. The portfolio’s annualized rate of return is 28.00% as of March 31.

Now indulge me for a moment to give you a somewhat commercial update.

The Gaffer Wealth System (http://www.lunchwithgaffer.com) has been available at a special price for some months. That will soon come to an end. In the intervening months, the system has been doubled in size and will soon be marketed as a monthly membership program. I gave approval to a new website today and various specialists have been hired in different parts of the world to make the new launch a success.

I have never been through such a maze of administrative things in my life, setting up a company in England (don’t ask!), getting approval of the website from credit card companies, making sure it complies with the FTC and SEC, opening a bank account in England…it seems never to stop!

The launch is expected in May and these are exciting times.

But that is not all that has been happening. In the mid-1980s I had what to me was a surprise national best selling book in Canada using my own brand of technical analysis. From that came a newsletter generated by an extremely convoluted computer program. Remember, these were the days when computers were not nearly as sophisticated as they are now.

In recent months, I have simplified the program (now being written by a talented programmer in England) and almost completed writing a new book aimed at the U.S market. (Others for 10 additional countries will follow in the next year.)

When the program is completed – I expect before the end of April – I will back test the 30 Dow Jones Industrial Average stocks for the past 25 years to show exactly what trades would have been made, when and what the results would have been. Picking those particular stocks means I cannot pick and choose the ones that perform best.

Given the average 22% results for the 1980s program that had a fair number of losses, my guess is that this program will come in at around 30% – but that’s just a guess. I expect far fewer losses.

The book will tell all. Nothing will be held back. And it will be free! I’ll let you know when the website is launched. There will also be a weekly newsletter that will give the buy, sell and stop loss levels for the following week for all S&P 500 stocks for those who don’t want to work painstakingly with charts.

Don’t look for great activity. This is for investors who don’t want to be hunched over a computer every day. I expect the average bull market trade will last for two or three years and the average bear market trades for nine to 12 months. I’ll know better after testing in May. I expect the book to be ready in June or July for instant download.

Did I mention is will be free? It’s not some flimsy 20-page report, either. There will be more than 300 pages that show exactly where, how and why each trade for the past 25 years would have been made.

Stay tuned for what happens next!

Sorry about the delay! I had some sort of upload problem that prevented me and others from seeing the February portfolio update while the people who run my server could see it fine. One of the pixel mysteries, I suppose.

Anyhow, it’s there now!

This month I talk about Toyota and why I have kept it in the portfolio. In a sense, it’s a demonstration of how diversification reduces dangerous panic – especially considering one TV commentator said he expected the company to declare bankruptcy.

But the larger portion of the article is devoted to the battles going on now in various countries between workers who want more money and governments and industries that don’t have more to give. We are at the start of financial Armageddon.

The so-called PIGS, Portugal, Iceland, Greece and Spain, are broke. So, for that matter, is the U.S, a country printing worthless paper to lend quietly to foreign governments who then use it to buy worthless U.S Treasury bonds. If the world knew the truth, there would be financial panic enough to make The Great Depression look like a warm-up.

The secret will not be a secret for much longer and then look for the U.S to devalue the dollar by as much as 50%. (The government will try to hold off until after November.) It will be one way, I suppose, to force the Chinese to have a more realistic value for its currency.

But be sure of this: Our way of life for the remainder of our years is changed forever – and in some ways that’s not such a bad idea.

The only thing that might get us out of the current mess is another war, as it did after 1939. But all that means is printing even more worthless money to be spent on destruction and not construction.

Meanwhile, and despite the fact that the majority of those in the U.S nearing retirement age are reported to have savings of $10,000 or less, somehow we will survive for a little longer.

The stock market? Don’t ask why it continues to rise. The only explanation I can offer is that it is getting ready for the massive dose of inflation to come.

Sorry to be so full of light and joy this month; I calls ‘em as I sees ‘em!

It has been too long since I last posted. One major reason is that The Gaffer Wealth System is about to be relaunched in a vastly expanded format and the marketing company looking after the launch asked me to hold off on publishing the articles I started to publish here. I paid them a lot of money so I have to listen!

But don’t worry! Hold on for a month or so and you can get all 25 for free in an ebook!

But today I want to tell you about something that may be of interest.

I have spoken in the past of portfolio rebalancing. Well, the model portfolio is now one year old and that time has come. For a real-time look at rebalancing in action, take a look at http://www.sydneytremayne.com/Dec09-rebalanced.html. You will find there a clear demonstration of how and why it works.

This is how, over time, you can be sure to buy low and sell high. You’ll understand when you view the page.

Here’s wishing you a fabulous New Year!