Buy and Hold Is Dead: How to Make Money and Control Risk in Any Market

Chapter 11. 2009: Return to Parity

The next step in our overall process is an exposé of the tools we use to leverage our proactive abilities over time. Specifically, these tools are the next set of building blocks as we progress toward the comfort zone. Reasonably, in order for us to incorporate proactive models we must first understand the foundation on which they were built. Accordingly, this is the first step in that process.

Until now, our longer-term assessment of the Investment Rate has acted as the foundation for all of our analysis. That will always be true. However, reasonably, our longer-term evaluation of the Investment Rate usually leaves behind a void in our current analysis. In turn, that needs to be addressed. The Investment Rate itself is the longest longer-term analysis available. Stemming from 1900, the average duration of the up cycles is 26 years and the average duration of the down cycles is 11 years. Reasonably, opportunity exists in between those peaks and valleys as well. However, the sweeping guide of the Investment Rate, as a standalone observation, fails to identify the tighter frequency oscillation patterns in between those extended durations with precision. However, our return to parity analysis does. Our return to parity analysis satisfies that void. It can be used to determine current demand ratios and therefore it can be used to project more immediate economic conditions as well.

Going into 2009, our return to parity analysis can help us determine the ...