Introducing History to the Future
TransAlytics' name comes from Transactions Analysis, which is a fancy way of saying "tape-reading." While ticker tapes have been replaced by real-time quotes and charts, tape reading is an "ancient art" that reflects a time when several practices were common which have been lost today.
The first practice is to differentiate between speculation and investment. Today's marketing campaign make everyone feel like an investor and the distinction between speculative and stable stocks has been lost. While it may feel like no stocks are stable, this distinction is important for new and newly-sophisticated stock traders to understand.
The Death of Buy and Hold
For many years the common wisdom said that you hold a stock through thick and thin because eventually it would come back. This psychology of "waiting to break even" has killed many investment accounts. Think Wang Computer, once a highflyer stock that is no longer around.
For a more modern example think General Motors. Maybe GM will rise back from it's 1930's low, or maybe not. In the meanwhile, better opportunities exist. As Keynes said, "in the long run we're all dead." Equally true, in the long run some good stocks have died, even if they haven't gone to zero yet.
Investors and speculators need to unlearn lessons of the last decade. Some advice that was written nearly 100 years ago is becoming relevant again. Some advice given daily in Investor's Business Daily is ignored by many.
Little Book of Stocks Project
The Little Book of Stocks is a project to create an affordable, easy-to-read reminder of lost wisdom. The goal is to provide a foundation in basic common sense, history and economics for investors.