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Ned Davis

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74
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2017-06-15
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2017-06-15
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  1. “Portfolio insurance, which was part of using derivatives to do portfolio insurance. And actually, I thought portfolio insurance was one of the coolest ideas I'd ever heard of. And it actually fit exactly what I want to do with my head. I want to protect my portfolio in a downtrend. And so it was a great idea and it was widely sold on Wall Street. And then, you know, the market started down. And fortunately, I was able to sort of see this one. So anyway, we had a crash that I think was caused really by a great idea that got too popular. This is the thing. When technical analysis gets so popular, everybody's looking at the same patterns and the same breakouts and acting on them, it's not going to act as well as if you could find something that nobody's looking at.”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “Well, it's a good question and the answer is complicated. There's a lot of good ideas. This happens to be one that fits my psyche on how to invest, but there's a lot of good ideas about how to invest and how to make money. The one key problem is if something gets too popular, it's going to hurt its effectiveness. But this is true of anything. I remember in the 1980s, which was a big period because it was the start of my company. And it was a bull market period. And people didn't need risk advisors for a while. And we got into 1987. And I got really worried about derivatives and what they could do to the market. But anyway.”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “Well, I think retail was more interested in just short-term movements and stocks. And institutionals were more interested in a big picture, maybe tying it in with the macro and the Fed and sentiment and longer-term things. And I had also gotten interested in the Fed Federal Reserve Board's emphasis in the stock market. And so trying to put things in perspective, a guy named Hamilton Bolton with the bike credit analyst had put together a monetary thermometer, which was really one of the first models that they had timing model using Federal Reserves to statistics. And I was really fascinated by that.”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “I think originally there were only a handful, Alan Shaw, Bob Farrell. There were really only a handful of technicians that... That were in high regard. And so it was difficult at first. But, you know, again, once you go through a bear market, people look around and say, you know, I need to, I can't just buy and hold all the time without concern over anything. I have to manage my risks. And so it's gotten obviously a lot more popular.”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “But he also really believed that the stock market and the economy were driven by crowd psychology. And he was also a studier of the Federal Reserve Board. He also became good friends with Marty's Y. He started out as a sentiment guy too, and he ended up like me, don't fight the Fed, don't fight the tape.”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “Well, you know, you start off, you read Edwards and McGee, a technical analysis book, or a lot of other really well-written books on chart patterns Then you start applying that and you see a head and shoulders bottom and you say, oh my goodness, this stock is turning up. And then you're reading another report and somebody's looking at the same chart and they say, oh, no, that's a head and shoulders top. And it was almost like you made your own reality. You looked at a chart and you saw what you wanted to see. So I said, I can't do this. I have to have it more quantitative. I've got to test these things and see whether they work or not. So that was the idea really of going to technology. I also at that point had gotten interested in other people that seemed very successful in the business. One of my mentors was a guy named Edson Gould. And he was a technician.”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “And the exception to this, of course, really, and there are not many, but the exception was Lehman, which was a panic event that was systemic. And I think that that is a key when you're looking at crisis events. If it's going to take down the financial system, then the study's not going to work. But pretty much anything else, wars, bombings, terror attacks, the worst things you can think of, assassination of a president, these things. Pretty much all fit the same pattern”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “Exactly. Sometimes, you know, they do better. The logic's a little difficult to understand. But if you're a nervous holder of stock and some bad news comes, you panic out and then who's left are strongholders of stock. So, you know, at that point, it's hard to get people to sell after you've got in the nervous people out, you've got good strongholders of stock.”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “Together and we had shown it a couple times in publications. And then on 9 11, we got a call from, we put it out again and we got a call from Barrons and they wanted to use it. And it's terrible as that tragedy was. The study was very timely in that, you know, there was a weak sell-off and it was a very scary time. But the market did recover after that pretty well.”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “Well, you know, a lot of times we'll have a chart and they'll want to see it back further or they'll want to see a different version of it. But, you know, we had a lot of crisis events when I got into the business and people said, what did the market do after there's a major crisis event? So we went back and we tried to study history. You know, there was Pearl Harbor and there was JFK's assassination. I got in the business, you know, Martin Luther King and Robert Kennedy died the first assassinated the first year. And then you had Penn Central and on and on. So we put all this together and saw what the market did. And it was fascinating. Generally, there was a sell-off, as you would expect, on the news, but very short term and almost six months to a year later, the market was almost always higher. So we had put this study.”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “Well, once we built our own software and had the computers around, you know, my idea actually was building a company similar to what ValueLine had built in the fundamental research area. And I remember specifically the date that Arnold Bernhardt died because Valueline's stock went up big that day. And I thought this is the kind of firm you want to build that people want your data. They want your charts. They want your studies. They don't necessarily looking for a guru that walks on water. So I decided to try to build a company like that. So yes, we set up a client services department where we would say, you have research questions, you bring them here and we'll do the research for you. And actually, we won't share the research with our own research team. It's your proprietary product. And it's been a good product for us. We've come up actually, you know, I don't know, I've come up with a lot of ideas on my own, but we probably, we say we're client driven and some of the best ideas I've had.”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “Reaganstein, and they were in Atlanta, which is where the sales were, and I was in. Just outside of Sarasota, Florida, where I lived. And so anyway, I had to put together some people, and it was fun being a starting manager, not something that I liked doing, but it was fun.”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “Well, you know, I'm not a manager. I'm a research nerd, and that's what I like to do. So Eddie and Kent were in Atlanta, Georgia, which is where”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “Well, the answer basically was if it ain't broke, don't fix it, which is a good answer. But this is something I wanted to do. And there were a couple Bradford brokers, Ed Mendel and Kent Reaganstein, that they wanted to go out and try this. And we already had a pretty good following. We were nervous about it, obviously, but we didn't use any debt. We put up our own money. And we had enough customers and we made a go of it from the beginning.”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “Over. In fact, they had just started over taking over the back offices. And so I wanted to make the research that I do computerize so that I could test some of these things that people saw on charts and see if any of them worked.”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “Well, actually, you know, we sell ourselves as risk managers, and it had been such a long period of high risk that people were looking around for risk managers. And also it just so happened after that period, a long period of time, 68 to 80, most of the time I was with JC Bradford. And, of course, retail brokerage firms are historically bullish and should be. So anyway, most of the time that I was there, I was negative. And it was just about the 1980, early period that I was turning more bullish on the long-term outlook. So that was a very fortunate thing. And so I left there. I was a partner at Bradford's, but I wanted to, I guess my contribution to the business is that this was really before computers had taken place.”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “They call none, not a single one of the seven recessions. And interestingly enough, in the last, since 2001, they've been 8, I think 86% of the time they've been too low on their forecasts. Excuse me, the forecasts have been too high for what the economy has actually done. So it's a very tough field forecasting.”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “Yes, you know, it's a business of forecasting. That's what clients want you to do. So that's what I tried to do. And I studied forecasts and I saw a lot of forecasters make some dramatically correct forecasts. But generally, they would make a great forecast and a couple years later make a terrible forecast. And it was just like a flame out in the night. And I didn't want my career to be that way. And I was lucky enough to have some really good forecasts, but I still was suspicious. And when you go back and study the forecasting record, for example, the Federal Reserve Board of Philadelphia has been studying for 50 years consensus of professional economists. And they look at their forecast for the following year. There's been seven recessions since 1970, and the economists as a group, obviously individual economists have done better.”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “Whole Warren Buffett's got a quote, and he says two rules for making money. And he said, rule number one, don't lose money. And he said, rule number two, never forget rule number one. So it's all about compounding interest and compounding your returns. And if you take a horrible loss, you know, if you lose 50% on a stock, it's not a 50% rise that gets you back to even. It's 100% rise. So if you have a big loss, it's really hard to compound your return. So I knew there was going to be mistakes in the business. I'm just trying to find out a mistake and cut it as quickly as possible. I think that's the key.”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “Yeah, I actually, I think that makes a big difference when you ask people what your outlook is on the market. And I said, well, when did you start in the business? And if you started in 68 like I did, you were going to live the first 14 years in a really grueling bear market.”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “I think I was pretty much a traditional Chartist at that time and just looking at chart patterns and trying to pick out stocks and uptrends and stay away from stocks and downtrends. But of course I was studying a lot of other. I'd say independent research at the time. So I was trying to learn from that. So I pretty much self-taught myself in my field.”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “Well, I really did not know much French when I went to France. And, you know, I was trying to learn the languages as best I could. And we had a class and the teacher said, oh, thank you for saying that. This was in French, of course. And she said, I always wondered what Lyndon Johnson would sound like speaking French. And now I know. And I'm thinking, well, Lyndon Johnson can barely speak English much. So I decided that speaking French was not going to be my skill set.”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  23. “Slink and I had had two jobs in the summer at a company called JC Bradford Company as an intern. And I really liked that. You were able to write and read and write and you able to use your math skills. So I said, well, this is perfect for me. So then I ended up going to Harvard Business School, which I thought I was going to learn business, but it's actually a management school. Just not what I wanted. So then I went to work full time for Jason Bradford company.”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  24. “Actually, I was at the University of North Carolina and I had decided I wanted to be a doctor and so I was a chemistry major and then I decided I did not want to be a doctor and I was spending a part of a year in France and so I had to graduate with something else and I really liked French literature. So that's the way I graduated as a French major. I wasn't really sure what I wanted to do. So they have these, I guess, psychological tests that test your aptitude and your interests. And they said my aptitude was in math, but I wasn't interested in math. And what I was interested in was verbal, but I wasn't any good at verbal.”

    2017-06-15 · Masters in Business · Interview With Ned Davis: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source