I think a lot about thinking in an attempt to improve my ability to make good decisions. I also work hard to avoid linear thinking, which tends to extend present conditions linearly into the future. Such thinking caused investors to ignore the Dow Theory sell signal of September 1999 with portfolio consequences that are now legend. That same thinking occurred in November of 2007, concurrent with another Dow Theory sell signal, with similar portfolio consternations. Ladies and gentlemen, economic changes, and for that matter stock market changes, tend t

Over the past 10 years there have been many Hindenburg Omens triggered, but to my knowledge only one of them has actually worked (The Wall Street Journal 8/23/2010 article states the accuracy is only 25%, looking at the period from 1985). Actually, the last Hindenburg signal (December 2012) proved to be an exceptionally good point to buy stocks. I expect this Omen will prove to be yet another false signal because the McClellan Oscillator is just about as oversold as it ever gets.

Over the long weekend I decided to type the words buying stampede into Google to see what popped up. To my surprise there were more than 2,000,000 hits on the phrase buying stampede and many of them were attributed to me. While that was a pretty humbling experience, it also was surprising because I would have thought more investors would have used that phrase in connection with the many upside rally skeins that have occurred over the past dozen years.

I had a somewhat lengthy conversation with Rich Bernstein last Friday. I have been on TV with Rich over the years, but have never really had a one-on-one talk with him. Recall that Richard Bernstein was the Chief U.S. Strategist at Merrill Lynch for years before becoming the eponymous captain of Richard Bernstein Advisors (RBA). I was speaking with Rich because I have developed an interest in a few of the funds he manages for various entities. Rich began by stating he is extremely bullish, believing we are in one of the biggest bull markets ever.

The year was 1974 and Teledyne (TDY/$77.56/Outperform), on a split-adjusted basis, was trading at about $0.05 per share. By 1986 it was changing hands around $75 per share. Unfortunately, back in 1974 I didnt have enough money to buy more than 10 shares, having lived through the devastating bear market of 1973 1974 where the D-J Industrial Average (INDU/15118.49) lost 47% of its value.

Informally the TV show, That Was The Week That Was, is referred to as TW3and was a satirical comedy program first aired in the early 1960s. The program was considered a lampooning of the establishment. At the time it was considered a radical departure from legitimate television, but it set the stage for many more such radical departures. I revisit TW3 this morning because I have had so many requests for a formal repartee of a number of last weeks Morning Tacks woven into a more formal strategy letter.

We saw many outside zebras gorging themselves on stocks in late 2007 as the D-J Industrial Average (DJIA) made a new all-time high and then registered a Dow Theory sell signal in November 2007. Subsequently, those outside zebras ended up as lion lunch when the senior index shed an eye-popping 53% over the ensuing 17 months.

Last month I was reminded of Surfs Up! while rereading said report from my departed friend Stan Salvigsen of Comstock Partners fame. While that is the organization Stan, Michael Aronstein, and Charles Minter formed in the late 1980s, Stans investment career actually began in 1964 as an analyst with the Value Line Investment Survey. Subsequently, he was an equity strategist at a succession of firms, including Dreyfus, Oppenheimer, C. J. Lawrence, and Merrill Lynch.

I reflected on mathematics, probabilities, and odds over the weekend after again reading the book Fortunes Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street, by William Poundstone. The book centers on Claude Shannon, who in the late 1940s had the idea computers should compute using the now familiar binary digits 0s and 1s such that 1 means on and 0 means off.

When I was a young boy, I remember my father coming home looking very ashen from a visit with a dear friend dying in the hospital. His name was Dell Zink and he was one of my fathers closest friends. Mr. Z, as we kids affectionately called him, was a very religious man; a man who was regarded by his friends as intelligent and philosophical.

Last Thursday the S&P 500 (SPX/1569.19) notched a new all-time causing Ms. Scaggs to pen the aforementioned story in Fridays Wall Street Journal. I was particularly interested in a sentence further down in the article that read, The rally in stocks comes as investors warm up to stocks for the first time in years. That prose sparked memories of an era gone by.

According to Wikipedia, the Voyager 1 spacecraft is a 1,590 pound space probe launched by NASA on September 5, 1977 to study our solar system and interstellar space. Operating for more than 35 years, the spacecraft receives commands and transmits data back to the Deep Space Network. At a distance of more than 11 billion miles it is the farthest human-made object from Earth and is traveling in a previously unknown region of space. Similarly, the D-J Industrial Average is traveling in a previously unknown region of space as it boldly goes where no man has been before.

My luck has gotta change is a famous lament that has buried many a player on the crap tables. But as shown in the aforementioned coin toss quote, The outcomes in different tosses are statistically independent and the probability of any outcome is still 50%. While thats true in gambling, it is not so true in the stock market. The fact is, there are certain historic precedents in the stock market that can tilt the odds of success decidedly in your favor.

Investing is a lot like whaling. Investors are constantly searching for that whale of a stock with the "ambergris factor." And, that is what investors were doing last week at the Raymond James 34th Annual Institutional Investors Conference in Orlando, Florida. In attendance were nearly 800 professional investors that were listening to presentations from CEOs and CFOs of more than 300 companies. As stated, just like the portfolio managers were there looking for stocks with the right stuff, so was I.

When compound interest works in your favor, it is a blessing. When it works against you, it's a curse! That is a "Jeffreism" I learned the hard way back in the bear market of the early 1970s when I was working for a $100 per week in this business and consequently had my credit cards levered to the "max." The interest rate at the time was 18%.

The Buying Power, and Selling Pressure, indicators continue to suggest no major top is in the works. Ditto the Advance/Decline line traded to a new high before the mid-week pullback, also confirming the upside. The major averages continue to reside above their respect 50-DMAs and 200-DMAs; and, those moving averages are rising, another bullish sign. Then there is Berkshire Hathaway (BRK.A/$152,009/Not Covered), which is somewhat of a proxy for the stock market, as it traded to a new all-time last Friday.

"There were times when my plans went wrong and my stocks did not run true to form, but did the opposite of what they should have done if they had kept regard for precedent." So said Jesse Livermore, as chronicled in the brilliant book Reminiscence of a Stock Operator by Edwin Lefever; and, stock market historians will recall that Jesse Livermore is still considered one of the most colorful market speculators of all time.

"Don't Just Do Something, Sit There" is the title of a book written by Sylvia Boorstein. I was reminded of the title when I received the following email from a financial advisor at another firm last week...

It's that time of year again when the media is abuzz with that old stock market saying, "so goes the first week of the new year, so goes the month and so goes the year." With the S&P 500 (SPX/1513.17) better by 2.17% over the first five trading sessions of this year, and up 6.10% for the month of January, it is worth revisiting the January Barometer. Devised by Yale Hirsch in 1972, the January Barometer states that as the S&P 500 goes in January, so goes the year.

"For all the sad words of tongue and pen, the saddest are these: It might have been." ... John Whittier; an influential American Quaker poet. Certainly, American poet John Greenleaf Whittier's apothegm has stood the test of time, serving as a universal lament for what "might have been." I was reminded of this maxim last week as Wall Street heard increasing laments from investors on the Street of Dreams.

January is the time of year when strategists, economists, gurus, etc. all join in on the annual nonsense of predicting "What's going to happen in the markets for 2013?" For many, this ritual is an ego trip, yet as Benjamin Graham inferred forecasting where the markets will be a year from now is nothing more than rank speculation. Or as I have noted, "You might as well flip a lucky penny."

Clearly, the stock market "thinks" something good can happen given the action so far this year. To wit, we ushered in the New Year with a 90% Upside Volume Day on December 31st followed by another 90% Upside Volume Day on January 2nd (90% of total volume traded came in on the upside). Such back-to-back Upside Days are pretty rare, especially at the beginning of the year.

"Investing in the financial markets necessarily involves one's ability to change perspectives over time... And there's more of the white noise than ever before."... The Contrary Investor.com. So said the Contrary Investor; and I could not agree more given my sense that the media remains "long" volatility. Indeed, every time volatility increases, so do my phone calls from the financial media as they feel "compelled to come up with rationales for daily movements in asset prices;" last week was no exception.

Beginning of the year letters are always hard to write because there is a tendency to talk about the year gone by, or worse, attempt to predict the year ahead. Therefore, we are titling this year's letter in an attempt to share some of the lessons that should have been learned over the past few years.

So we wait for the alleged Armageddon for the second time in as many weeks. And as one smart money manager writes, "We should not forget that Congress has a magic eraser. No matter what they do, with a few strokes of a pen everything goes back to effectively January 1, 2013 and the Fiscal Cliff will take its place on the great wall of media creations (remember Y2K?)." Whether you call it Armageddon, or "orchestrated drama," there is nothing in my bag of tricks that suggests this is the beginning of a massive decline for stocks.

While last week, and this week, often see distortions in individual stock prices due to tax loss selling, Santa Claus tends to arrive the following week. Indeed, the last week of the year, into the first two days of January, has a pretty good track record on the upside with a rally coming about 65% of the time. As stated in previous missives, I expect the same Santa rally this year driven by a "staged in" solution to the fiscal cliff. Most readers know that I have lived in the D.C. Beltway and have a good working knowledge of how our system works.

I have loved New York since working on Whitehall Street in the early 1970s. Every year I return around this time of the year to attend Minyanville's Festivus event to raise money for the financial education of underprivileged children. Last week I spent time attending said event, seeing institutional accounts, doing media, and renewing friendships. I was surprised, however, to see pumps still sucking water out of the subway.

Alas, if only it was that easy to paintball the rapidly approaching fiscal cliff. For those of you traveling the North Yungas Road in Bolivia and unaware of the approaching dangerous cliff, let me explain. Before beginning, however, let me preface by recalling Bill Buckleys famous lament that he would rather be governed by folks listed in the Boston phone book than Harvard professors. To be sure, there are some good politicians inside the D.C. Beltway, but not many!

In my opinion Richard Fisher said in plain English what Ben Bernanke is trying to say in a much more politically correct way hey Congress, get your act together because I have done just about all I can do on a monetary basis, so it is up to y'all to make the tough decisions on fiscal policy that need to be made to get this economy going again. Surprisingly, I think Congress, and the President, will rise to the occasion because if they don't, and the country falls off the "fiscal cliff" for an extended period of time, it most assuredly will put us back into a recession.

The call for this week: Obviously, I am back from Europe and y'all have done a pretty poor job of holding the markets together in my two-week absence. Indeed, since the election the SPX has lost 6.28% from its intraday high to last Friday's intraday low. The biggest losing sectors over that timeframe have been Energy (-6.2%), Financials (-5.9%), and Technology (-5.9%). Given the President's views on energy and banks the weakness in those two sectors should not come as a surprise. Still, I think the surprise is going to be a more cooperative environment from our leaders going forward.

As most of you know I was in Glasgow, Edinburgh, London, Zurich, and Geneva during election week seeing institutional accounts and speaking at conferences. Of course the question on all the portfolio managers' (PMs) minds was about the election, the subsequent effect on the economy and the various markets, currencies, and the Fiscal Cliff.

By the time a queen bee is five she is old and no longer reproduces, leaving her army of honeybees torn between loyalty and survival. Since the hive cannot survive without a productive queen, the beekeeper reached into the hive with a long-gloved hand and squashes the enfeebled queen. With the entire hive as witness, all know the queen is dead. Absent the scent of their leader, the honeybees panic. Something similar to that "queen bee" sequence may be happening currently. The "old queen," at least in the private sector, was driven by exports and manufacturing.

I revisit The White Hurricane this morning because it potentially looks like another 100-year storm is heading pretty close to Manhattan. So in addition to dealing with the Benghazi scandal, Syrian atrocities, Euroquake, the "fiscal cliff," a stalled U.S. economy, softening earnings momentum, waning revenues, a dysfunctional government, the nastiest campaign I have ever seen, and who Taylor Swift should date next, Wall Street now has to contend with the potential of being flooded out.

It was Friday October 16, 1987 as I looked across Wheat First Securities' trading desk only to see a stark look on the face of my second in command, Art Huprich. At the time the D-J Industrials (INDU/13343.51) were down about 100 points with 30 minutes left in the trading session. And, as stocks swooned I said to Art, "Today is just for practice!" Little did I know how prophetic that statement would prove.

Last week a particularly wily Wall Street wag asked me, "Hey Jeff, do you know why everyone is underperforming the S&P 500?" "Not really," I responded. He said, "Because the S&P has no fear!" That exchange caused me to recall an excerpt from the book The Money Game. I like this story...

Mark Twain once remarked, "October, this is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February." However, if the typical presidential election year trading pattern continues to play, after a pause/pullback stocks should trade higher. And, this week is full of economic reports that could cause a pause/pullback. This week we get the global manufacturing data and the U.S. jobs data. The wildcard, however, is Spain.

The call for this week: To me the only question is if the stock market is going to correct its current overbought condition by going sideways, or if it is going to correct back to the 1400 - 1422 support. In either event I have been pretty confident that the Fed has already begun printing money. That has been eminently evident by the overall action in the commodity markets, the dollar, and the fact that stocks were unable to correct in the normal timing band for a daily cycle low. Indeed, I actually expected an easing of monetary policy out of last month's Fed meeting.

In last week's verbal strategy comments I suggested participants study the chart pattern of the S&P 500 (SPX/1437.92) and then think about what it would feel like if you were an underinvested portfolio manager (PM), or even worse a hedge fund that is massively short of stocks betting on a big decline. The concurrent performance anxiety would be legend because not only would you have performance risk, but also bonus risk and ultimately job risk.

Webster's defines "civility" as: civilized conduct; especially: courtesy, politeness. But, there was no civility last Friday afternoon. The place, CNBC; the time 3:05 p.m.; the anchors Michelle Caruso-Cabrera and Bill Griffith; the show "Closing Bell"; the guests were myself, Bill Spiropoulos, Lee Munson, and Matt McCormick. The interview started off well enough with each interviewee responding to the anchors' questions.

Peter Drucker was a writer, consultant, and teacher who was deemed the father of modern management theory. His groundbreaking work turned management theory into a serious discipline, and he influenced or created nearly every facet of its application. He coined such terms as the "knowledge worker," which plays to the intangible capital theme often discussed in these missives.

When compound interest works in your favor, it is a blessing. But when it works against you, it is a curse. Just ask Washington Mutual, or General Motors. More recently ask Greece, whose "debt chickens" have come home to roost. When yields are double-digits the power of compound interest working against the borrower is awesome.

I have been a "fan" of the astute Claude Rosenberg ever since hearing him speak. Some will remember him as the author of Investing with the Best, which deals with the daunting task of selecting an investment manager. Given the plethora of investment managers, picking a manager is difficult. That's why many individuals' selection process consists of nothing more than looking at a portfolio manager's track record for the past few years. We think such a simplistic approach is a mistake.

"It's hard to make predictions, especially about the future." ... Yogi Berra. To be sure, "It's hard to make predictions, especially about the future," and last week was no exception. I began the week noting that there would be a trifecta of potentially market moving news events. The first was the two-day FOMC meeting where I thought the Fed would change its policy statement with a lean toward more accommodation. WRONG.

Wall Street folklore suggests that in 10 years any fool can make every mistake there is in the stock market and that a really smart person can do the same in half the time. I don't know how long it took me, but I have tried to learn from those mistakes and avoid repeating them! Indeed, everybody who finally learns how to make money in the stock market learns his own way. I like this tale.

At the race track if too many participants bet on the same horse, the betting odds on that horse go down and if he wins the payout is small. Popularity reduces the reward. Similarly in the stock market if too many participants put their money on the same stock, and it becomes a market favorite, driving the price ever higher, the upside potential is diminished. Popularity reduces the potential reward.

This morning I awoke to headlines "Asia Signals Drop In Global Demand," "Euro Zone Fragmenting Faster Than EU Can Act," "European Worries Send Shares Lower," and "Investors Brace For Shaky Earnings Season." Such musings have the S&P 500 futures off about six points. Somewhat offsetting these negative quips are these headlines, "Fed Officials Favor QE3" and "Obama To Seek One-year Extension For Some Of Bush Tax Cuts;" but alas, this morning the negatives are outweighing the positives.

With this Gleanings report, we begin a monthly chart presentation and discussion, which attempts to pull together the separate disciplines of Economics, Fundamentals, Technical analysis, and Quantitative analysis. The report contains what we think are currently some of the most important charts. We will have an overview and then highlight some of the key near-term variables that we believe could have a measurable effect on where the various markets are going.

The call for this week: In my opinion, last week the Commodity Index bottomed and the Dollar Index topped. If so, recession fears should abate in the months ahead. Moreover, if a recession was really on the horizon "junk" bond yields would be rising on worries of increased defaults and that is not happening with the iShare High Yield Fund (HYG/$91.29) attempting to make a new reaction high (i.e., lower yields).

Perspective is the capacity to view things in their true relations or relative importance. And last Thursday the stock markets perspective changed abruptly. The day started out well enough with an opening 20-point pop to the upside, but from there the Dow Dive commenced. The causa proxima for the dive was more softening economic reports from China and Germany followed by a lame Philly Fed report, which saw that index accelerate its swoon from Mays -5.8 reading to -16.6.

M-O-O-D: That is the important word right here. And, what a difference a few weeks makes for last week the markets seemed to switch from the glass being half-empty to half-full leaving Mr. Market in a more forgiving mood. Importantly, market mood frequently sets the near-term trend. If the mood is positive, all things are possible; if it is negative, little is.