đź”´ How to Time the Market (w/ Milton Berg)
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Published 2019-07-19
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Milton Berg, the Turning Point Master
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Transcript:
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GRANT WILLIAMS: Yes, exactly right. So taking that into account, how do you then start to build your own framework using that and applying it to tops and bottoms?
MILTON BERG: So what I try to do is say, is the market actually a random movement, which we were taught in the schools? Actually, the CFA program goes with random movements, modern portfolio theory. Or is a market not necessarily random? Is there some edge you can have? Of course, Benjamin Graham did not believe the market's random because there wouldn't be an undervalued stock if the market would be random. It would be efficient. Everything would be traded at intrinsic value. But the reality is I found that the market generally is random. On a day-to-day basis, you have the talking heads on TV and you have the analysts giving research reports every day, trying to analyze the reason for today's move, the reasons for tomorrow's move, maybe the reason for the next week's move, most likely explaining the reason for last week's moves. But I found that on a daily basis, on a weekly basis, movements of the market are random. However, there are particular times when the market movement is very far from random. When the market generates data that tells you the market's close to a top or has topped, or the market is close to a bottom and has a bottom. So what we call that is turning point analysis. Turning points at turning points, the data generated by the market is no longer random. In fact, if you take a bell curve, for example, and it lets you track something simple as five-day volume. You look at the average five-day volume, ascent of the curve. You look at the extremes. You'll find that the extremes of five-day volume are associated with turning points. Now intuitively, it makes a lot of sense because you know at a market low, everyone's
selling their stocks. It's at high volume. But people haven't looked at that as a technical indicator. We say, we're not going to be one of those who panic and create the five-day volume. We're going to wait for five-day volume, greatest in one year, greatest in two years, greatest in six months. We track these kinds of things. And that tells you that an impending turn in the market we see. That's just one indicator, an increase in five-day volume as an example.
GRANT WILLIAMS: So let's just jump back in time to '87 because that was a call you famously got right to the day. It's extraordinary, reading the story of your work around '87. So take us back there and talk about in the days leading up to that. And perhaps the month before September, what did you see, and how did you go about making use of that?
MILTON BERG: Well, we saw a spike in volume on August 11 of 1987, a big spike in the five-day volume that we look at. The market actually peaked a couple of weeks later, less than 2% above that level. So that was the first indication that something was going to change. And the logic of it is that if people are-- why would the volume increase after the market's up 30% of the previous 12 months?
All Comments (21)
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Didn't know Robert De Niro was a hedge fund manager!
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This guy is awesome to listen to! Thanks Grant and Real Vision.
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One of the best interviews that Real Vision has done.
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The Kiril Sokoloff Real Vision interview with Stanley Druckenmiller, the David Rubenstein Peer to Peer interview with Jeff Bezos, and this interview are among the best I've listened to in a long time. Thanks for the great interview!!
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It's hard to find the dip or the peak, but as long we trade or investment in the right way or based on your plan with proper risk management. You are in a good track.
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Takeways: 0. Turning points are not breakouts. Turning points precede breakouts. If you buy at breakouts, you are already late, but you can still make money if you are systematic. 1. On a daily / weekly basis market moves are mostly random (ie. cannot be trivially attributed to few specific causes) 2. However, at specific times in market movements, markets signal they are close to top or bottom. These are called turning points, and these are not random and can be analyzed 3. Do not try to find turning point signals that work in EVERY turning point. If you do, you are working like every other analyst AND you will miss MOST turning points. Try to find consistent signals that work consistently for SOME turning points, and you will nail those turns AND you will be ahead of the herd on those points. Repeat the finding of these signals for the rest of the turning points (finding specific signals for them). 4. You don't need to nail 100% of turning points. Even if you nail c. 50% of turning points and on the rest of the turning points have tight controls when you are wrong, you will beat the market AND most hedge fund returns. 5. Milton W. Berg's approach is NOT 100% computerized/systematic trading. There is a deep market experience / pattern recognition decision embedded into his methodology. So statistical analysis + market experience. 6. Find your own edge that allows you to see differently, but is still backed up by data and performance. 7. The ultimate time bomb ticking is the underlying total debt outstanding 8. Nothing is perfect, everything is probability. Adjust accordingly. 9. Everything I've learned, I've learned from humans.
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Fascinating guy. Lot's of insightful info and I love that he brought notes.
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I'm taking notes! I'm sick of people with less $$ than me saying you can't time the market!
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This guy is a genius, glad i found this video! I am an investor myself also looking for tops and bottoms, however i look at individual stocks instead of the whole market. This video gave me some ideas to explore and maybe add to my strategy. Thank you!
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really great conversation . thanks for giving us the opportunity to learn from it.
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Subscribed! Thanks for the interview. Milton Berg is definitely an on-the-level guy and I like how he doesn't talk down to his audience. He must've revealed a couple of his trade secrets because I never heard of a lot of his indicators.
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This video is incredible. Thank you. Five day volume. Never would have put that in my list without this video.
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Wow fantastic video. One of the best. What an amazing guy. You have to have him on again and be more specific jn this time period. Congrats
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Very sharp cat. Valuable insights. Thanks for taking the time to share.
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Is there a share fund from 1900 still operational now ?
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This is great. I hope to hear more from Mr. Berg in the near future.
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good interview, thanks keep em comin
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Great interview!! I love seeing a money manager who’s actually trying to dramatically outperform the s&p.
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Thanks for all the Great info...
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Where can i find the transcript please. I tried the link but couldn't find it
