Seeking Alpha

Tom Madell

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  • Empirical Buy Vs. Sell Signals Suggest Long-Term Gains Ahead [View article]
    Yes, there has been a slow to moderate business cycle recovery, although my earliest Buy, for Small-Cap Growth, preceded that, and has been so good in percentage terms that it wouldn't appear to be a case of lifting all boats to the same degree.

    Actually, the business cycle is likely one of the reasons I believe my signals work. Stocks, in general, are part of the business cycle and usually go up and then down over multi-year periods in a similar way the economy tends to move.

    The period of 2001 was included in my work to create my category ratings. At that time, most asset categories and the economy was ending a long up cycle. But some asset categories were more overvalued than others and the ones that hadn't done that well during the 1995-2000 up-cycle were the ones that my method showed had the best chance of doing well going forward.

    Asset categories have been moving with high correlations to each other over the last several years, as can be seen most dramatically in Table 1 of my article. But this is not typical. Usually, there are
    much bigger differences in how asset categories perform with some doing well and others more poorly - this is starting to be truer now as reflected somewhat in Table 2.
    Mar 15 03:28 PM | Likes Like |Link to Comment
  • Determining Buy Signals for Long-Term Investors [View article]
    Regarding the Seeking Alpha disclosure policy: I have reviewed the policy shown on the site "Terms of Use". There is no mention of mutual funds, and therefore, I don't think it applies to them.

    It makes sense to try to limit people, who might be able to influence
    the movement of a stock, esp. a thinly traded one, through their articles. The policy prevents them from attempting to personally gain from any buying/selling that readers might do as a result of their article. But to assume that a writer such as myself could influence what happens to, say the S&P 500 Index or the whole Large Cap Growth category of funds, would be ludicrous, and
    I would think that the Seeking Alpha policy would agree.
    Aug 4 02:07 PM | Likes Like |Link to Comment
  • Determining Buy Signals for Long-Term Investors [View article]
    In response to Jake2: Sorry that some people cannot understand how research works. What I learned in many years of school is this: Research attempts to bring us closer to the truth, but it can never really prove it; it can also help to cast doubt on the truth of certain likely invalid propositions. Therefore, there is no "magic formula," only a hypothesis to be tested; as evidence is gathered over many trials, the argument would appear to be more convincing. So, whomever construes my research approach as an attempt to create a surefire certainty is misreading my intentions. It's merely to suggest that evidence may, and so far has, supported a very counterintuitive approach to investing. This approach, which other notable research has also supported, suggests (but does not prove) that investing in former poorer performing categories of funds usually leads to better results than investing in the best performing categories.

    As far as your statement that the best way to make money on Wall Street is to make a profit by selling things to investors and taking a cut of the proceeds, you may be right to some extent. But your statement ignores the fact that many, many people who have gained some or a great deal of wealth in this country have done so through their own efforts attempting to understand the investment world enough so that they could do quite well in their personal investing. Another way that your statement, which apparently attempts to put me in the category of people profiting off of others, is dead wrong is that my website, newsletter, and contributions to other websites are totally free. I have no ads, no paid subscriptions, etc. In other words, I publish only because I find it an enjoyable thing for me to do, perhaps helping some people along the way. Perhaps you need to grow up/wake up a little; and it would help to check out the facts before you criticize.
    Aug 2 05:16 PM | Likes Like |Link to Comment
  • Determining Buy Signals for Long-Term Investors [View article]
    In response to Wayneseek: The disclosure policy is something that perhaps needs clarification from Seeking Alpha. The way I interpret it, it only refers to individual stocks and since no such stocks were mentioned in the article, I answered that question to reflect that. So,
    I do invest in accordance with my model, a model which allows for investors to decide how much to allocate to stocks based on whether they are moderate risk, aggressive risk, or conservative risk. I personally consider myself a moderate risk investor.
    Aug 2 04:43 PM | Likes Like |Link to Comment
  • Determining Buy Signals for Long-Term Investors [View article]
    With regard to the last posted comment, I don't think you will
    find the facts back up the writer's negative assumptions.

    You can find my actual Model Portfolio performances relative
    to the S&P 500 Index at the following page on my website:

    The table there shows that my Portfolio was outperforming
    the Index on a 1 yr. (and 3 and 5 yr.) basis prior to the 2007 bear market and for several quarters during the next several years.

    The premise that I changed my approach because prior to that my methods were not working can clearly be shown to be incorrect from looking at the results presented in this link. In fact, my earlier method had a highly consistent, and I'd say admirable, record in beating the Index. I changed the method in order to quantify the process and make it more precise, not because it wasn't working.

    During the bear market itself, it became even more difficult than
    it already is for anyone to beat the Index because no matter what type of mutual funds one selected, there was little difference between how they performed and how the Index did. I have previously discussed this on my site for those who want to learn more about what my articles said.

    I'm glad that people are sometimes skeptical of things they read - that's fine. All I am doing is reporting on the results of my research; it's there for anyone to examine and either consider it worth following or ignoring it. (By following my own Model Portfolios myself, I have done far better than I would have by buying and holding the S&P 500 Index as the above table will demonstrate.)The data on my site, according to feedback sent to the site, shows that hundreds or even thousands of people, have felt that the information was highly helpful.
    Aug 1 05:16 PM | 1 Like Like |Link to Comment
  • Determining Buy Signals for Long-Term Investors [View article]
    Well to some market timing is pretty much a no-no. In reality, I'm not sure what separates market timing from the approach employed by many investors, that of attempting to buy when the price is attractive. Of course, this is different from either dollar cost averaging or merely buying when you acquire some extra cash; or from merely "buying and holding." It makes sense to me, but not necessarily to everyone, that since stocks are a volatile asset and subject to what I consider to be extremes in terms of being in or out of favor, one should focus greater attention on buying when prices are significantly more modest than long-term expectations, and vice versa with regard to selling.

    Regardless of how else one might regard my methodology, it is above all empirical. This means that it assumes (and continues to test the proposition) that the way investors have reliably behaved in the past is a very good bet as to the way they will continue to act looking forward.
    Aug 1 12:21 PM | 1 Like Like |Link to Comment
  • Why Plunging Investor Sentiment and Consumer Confidence Index Aren't Cause for Concern [View article]

    Comments on US debt are understandable, and I for one wrote about these problems years ago on my site as one reason for caution about the stock market. And several years ago, as investors went from little concern about debt to a greater realization that much of the US economy was "built on a house of cards," the stock market did suffer during the last recession.

    But now most people recognize this unsustainable debt as a problem that must be fixed. The bad news is out there for all to see and for this reason is likely already reflected in current stock prices.

    The real question, then, is not if there is a mountain of debt, but
    what, if anything, will be done about it. If you believe that
    virtually nothing can be done to improve the situation, then a
    pessimistic forecast for the economy, and likely for the stock
    market, would make sense. If, however, you believe that our country
    will learn from what has already transpired and start improving
    things going forward, then I don't think the pessimistic view
    is likely justified.

    But in any case, the debt problem, or any other problem that people
    are currently aware of, is not at all the point made by my article.
    By just stating that there are known problems with the economy,
    you are pointing out that the view that, as a consequence, stocks will suffer (or already have).

    But the research I am writing about, and which one can find many research articles supporting, is 'agnostic' about WHATEVER the reasons are for pessimism. It merely states that in the past, such excessive pessimism is more often associated with stock gains than losses. You should remember too that the economy does not always suggest the direction of the stock market. There any many times when the economy is not doing particularly well, yet the stock market excels (eg March 2009 to the present); likewise, the economy can be quite good, and not long after, the stock market can fall apart (e.g. at the end of 1999 when GDP was 7.4% and yet the S&P 500 returned -9.1% the following year).
    Jun 14 06:29 PM | 2 Likes Like |Link to Comment
  • Why Plunging Investor Sentiment and Consumer Confidence Index Aren't Cause for Concern [View article]

    Please see the following for research studies supporting the ideas containing in my article: (by Mark Hulbert)

    Uninvested cash is also a contrary indicator. When fund managers have a high cash position, stocks more frequently will surprise to the upside; the opposite is true when they have a low cash position.
    Jun 14 03:17 PM | 2 Likes Like |Link to Comment
  • Why Plunging Investor Sentiment and Consumer Confidence Index Aren't Cause for Concern [View article]
    I think you have some erroneous ideas about the variety of mutual fund fee structures available. The funds I am interested in having no loads and very low annual fees with no back end fees. Usually these funds are purchased by self-directed investors who do not work with a broker or rep. For the most part, then, when investing in these very low cost funds (or ETFs), there is nothing stopping you from withdrawing from a fund when pessimistic.

    If you check my website at, you will see that I am not really a Buy and Hold investor. I adjusted my positions considerably during the downturns, mainly by buying beaten down investments and lightening up on the most vulnerable ones.

    You are expressing the opinion that you are pessimistic. That's fine but my article is about long-standing research that shows that when the majority of investors feel that the market/the economy is not going to do well, the market often surprises people by going the other way. So the point is that peoples' feelings in a negative direction, more often than not, do not turn out supporting the obvious idea that the stock market will do badly.

    Yes, there are plenty of problems out there. But there were probably as many or more at the beginning of 2009. People were very pessimistic then too, yet the market has done extremely well since.
    Jun 14 03:01 PM | 1 Like Like |Link to Comment