Don’t Believe the Hype: The January Barometer is Broken

You may have heard prognosticators talking about the “January Barometer” with trite phrases like “as the S&P 500 goes in January, so goes the year”.  Don’t believe the hype…

History is full of strategies that worked for a time, became ineffective, and were subsequently abandoned.

Examples can be found in product development, marketing, and even comedy.  But the easiest place to understand this phenomenon might be in military battlefield tactics.

From the time that bow and arrow and horses were used in battles in ancient times, no really significant technological advances came to the military until gunpowder was employed in the 13th century. 

So for thousands of years, military tactics were of paramount importance on the battlefield.  And one of the most famous, effective and enduring formations was the Greek phalanx. In this formation, soldiers packed densely together with interlocking shields and used long spears.  The strength of the phalanx lied in its unified and seemingly impenetrable front.

Many variations were made to the original rectangular formation, and the phalanx as a dominant military formation reached its peak effectiveness under the command of Alexander of Macedon (better known as Alexander the Great).  His use of unbalanced phalanx formations, ability to move troops quickly, and brilliant field leadership brought this military strategy to its zenith. 

And then, following closely behind the death of Alexander, was the death of the phalanx.  The phalanx became ineffective in the face of the faster and more flexible three-line Roman Legion.  And the Roman conquest of the Greek city states and the rest of the known world followed.

In the race to control these “superweapons,” Russia, China, and America are neck-and-neck

The U.S. military is going “all in” on defense weapons – and President Trump just authorized another HUGE defense budget increase. Right now, you can bet there’s a little-known player about to take the market ride of its life. More details

And like the rise and fall of the phalanx as a military strategy, the famous January Barometer has come to the end of its useful life. 

Just as the agile Roman Legion overwhelmed the phalanx, quick and volatile markets have killed the January Barometer as well.

My Favorite Way to Play Big Earnings Announcements

Last week, I was playing basketball with the 20-somethings in my local league.  As a member of the “multiple decades older than 20-something” club, I find that I have to bring something more to the court now that I don’t have quite the speed and quickness of my youth.

If I tried today to just drive by one of these young guns, they wouldn’t have too much trouble using their quickness to slide over and legally block my path and thwart my drive.

Instead of counting on my ability to make a quick first move, I’ve found that I can make a few easy baskets a game by playing my defender’s reaction.

Sometime early in the game, the other team usually finds out that the old guy can still shoot.  So, when I dribble up the court, they cover me tightly pretty far from the basket.

And that sets me up to, instead of trying to have success with my first move, use a fake to cause a reaction in my defender and then take advantage of that reaction.

Here’s how that set up in the game last week.  I had hit some long three-point shots already in the night, so my defender was coming out to meet me at the three-point shooting line to deny any shots.  As I came down the court, I slowed at the three-point line and did a quick head fake like I was going to shoot.  This caused the desired extreme reaction – the defender leaped out to try to block my long shot.

His lunge toward me would have thwarted any long shot, but it also me gave me the chance to zip right by him for an easy layup.

And it’s crazy how this action/reaction move on the basketball court lines up with one of my favorite plays when companies report earnings

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