All Articles

This blows up fundamental analysis

The Fed just killed fundamental analysis forever


It’s been an interesting few weeks, hasn’t it?


Beyond the roller coaster of a ride and panicked market reaction to what is normally good news (like rate cuts and the Fed injecting liquidity), below the headlines a fundamental transformation of the markets is taking place.


We’ve seen interventions by the Federal Reserve in the marketplace before, most notably after the 9/11 attacks and again in 2008 and 2009 as liquidity became an issue.


But what is happening now is unprecedented in size and scope.  The US government, through the Federal Reserve, is injecting so much money into the markets through multiple instruments that it’s impossible any longer to make evaluations on price action based on fundamentals.


Put another way, the whole notion of price as a reflection of an honest, transparent, voluntary ‘struggle’ between a buyer and a seller has been washed away by the flood of money.


Banks, funds, huge corporations and institutional investors have been given almost free access to an unlimited amount of money (rumored at more than $3 trillion), to prop up the markets.  Congress and the President are talking about even more money.


With all that ‘new’ money chasing a fixed number of stocks (now trading at 30% or so off their highs), the prices we will see in the future don’t really reflect reality.  It’s like entering the Matrix with all sorts of superpowers that alter the laws of the universe.  But what happens when you’re in the Matrix and something happens that affects you in real life?


If you’ve been using the strategies I shared in “The 30 Minute Stock Trader”, you already know that it doesn’t matter what the fundamentals look like, because they’re not a predictor of future price action.  They might not even be a predictor of the future viability of the company.  They might not even be ‘real’ at all (as we saw with Worldcom et al).


The strategies that I explain at length in the book empower even the average investor to ignore all the noise about Earnings Per Share, Price to Earnings Ratios, anticipated earnings growth and all those other completely irrelevant metrics.


Instead, we focus on strategies that establish probabilities of general price trends and pair those strategies with other non-correlated strategies to protect us if our assumptions are wrong.


Sometimes people ask, “But aren’t you creating a huge blind spot by ignoring fundamentals?”.  The answer is, “No.  I know what I don’t know; I’m not blind to it.  I choose to remain focused on the only thing that really matters; price action’.


It’s a simple, but immensely powerful trading methodology.  Those who’ve read my book and implemented these strategies have traded profitably from ups and downs in the market over the last 20 years.  Just as importantly, we trade with confidence and without fear or panic.


In fact, the more irrational the market becomes, the better we will do.


If you would like to develop your own automated trading strategy built around your personality, risk tolerance and portfolio goals, I’d like to invite you to join my Elite Mentoring Program.  I’ll have an opening for one or two investors to join me next month for one on one training and mentoring.


With the US sliding into recession, much of the global economy shutting down and the markets in a panic, it’s the ideal time to master the principles of the most successful traders in the world.


Apply here.


Have a great day!