Wall Street in Review: Insider Tips to Make You Rich

For many of us, the movements of the stock and bond markets on Wall Street are, at best, a matter of academic interest. My parents and grandparents were Italian immigrants. Their idea of finance and banking consisted of money hidden under the mattress or in the cookie jar we kept on the kitchen counter. Ultimately, my parents' financial acumen evolved to a passbook savings account, but that was only after they realized that American banks truly didn't steal your money.

Having learned from a neighbor about passbook savings, my parents struggled to balance their one statement savings account, an activity frequently accompanied by heated discussion. Going to the bank to cash and deposit paychecks was an involved procedure which required considerable planning and creative arithmetic. My parents' financial evolution took a new turn late in their marriage when my father sold two acres of non-contiguous land which he'd bought for $300 dollars. That two acre parcel fetched the astounding sum of $40,000. When someone at the local S&L suggested a CD account, their education as fiduciaries was complete. They were suddenly money market investors. Receiving interest on CDs made them feel guilty, but proud, too.

As the result of my atavistic upbringing, I've been somewhat impaired in the area of financial management. I've inherited a healthy measure of mistrust toward banking authorities felt by many immigrant families, particularly those from Sicily. In the Sicily of my parents and grandparents, mistrust began where blood ties ended. After all, many had immigrated to the United States from countries where banks did very often steal their money. Whether that happened through outright thievery or the instability of government institutions made no difference to my parents-the outcome was the same.

Moreover, I'd always found the business of economics to be one of those matters best left to bald-headed guys in sweaty vests, shade visors, and horn-rimmed glasses. Besides, being an inept financial manager has its comforts. When you don't have very much money to organize and invest, a lot of things of great concern to others need not be of concern to you. Less money, less worry.

The long and short of it is that I'm trying now to understand the business of economics and investment. It's an academic exercise. I recently paid for a subscription to the Wall Street Journal. I have a test model of an online trading account. I am often tuned to the financial channels on television, whether it be Wall Street in Review, the Bloomberg Channel, or CNBC Squawk Box.

I am learning but I am befuddled, too. The terminology is daunting. On any given day you will hear an expert saying the economy is doing well and another expert simultaneously saying things are going badly. How the same economy might be doing well and badly at the same time requires a great deal of study. Certain economic theories are proposed and soon supplanted by other whims. I have condensed much of what I've learned into a one-paragraph assessment:

The rise in oil and gas prices sends a ripple wave through the economy which is ignored by consumers hungry for the latest advances in video game technology. Inflation is holding steady at a tolerable 2.5 percent rate while the dollar drops to the lowest point against the euro since I last went to Europe. The threat of another 9-11 style attack on Wall Street is perceived as a boon for America's cities which now are beneficiaries of high government expenditures in security and defense issues. China's hungry for exports. Russia's created a favorable business environment for friends of President Putin by eliminating all competition with the assistance of the new-styled FSB, an offshoot of the old-style KGB, both of which are dedicated to the same purposes.

For several months now, I have been studying the ebbs and flows of the investment marketplace. I have learned that those most capable of benefiting from market analysis are those least in need of profit. The investment banking firm of Goldman-Sachs recently announced a 'bonus' of fifty million dollars to one of its top analysts, for example. A 'bonus', mind you.

Nonetheless, I have learned to analyze securities and the rise and fall of the stock markets with an enviable precision. Particularly fascinating is the language of the marketplace. Have you heard of the ABI (Absolute Breadth Index), a comparison between advancing and declining stock issues? What about the CAPM (Capital Asset Pricing Model)? Have you ever 'chased nickels around dollars bills'? Or viewed a corporation's financial standing consistent with LGAP (Lady Godiva Accounting Principals)? Full and completely naked accounting is not usually what investors get, apparently, so it is no wonder that some of us fail in our investment strategies. Is a rival corporation adopting a Lady Macbeth Strategy in a takeover bid? Then perhaps you would be interested in joining a group formed to retaliate against the hostile takeover with a Lobster Trap. A Lobster Trap, if you don't know, is a strategy used to prevent a hostile takeover by curtailing the amount of voting stock in the targeted corporation.

But I'm getting ahead myself, and these are complex matters. There are a few simple-to-follow rules when trying to beat the market. Here are the guaranteed basics, sworn and guaranteed by expert analysts:

Aspirin Count Theory - This is the idea of an inverse relationship between stock prices and the volume of aspirin sales. There's no doubt about this one. As prices fall for investors, more and more people get headaches and worse. The sales of aspirin and derivative and similar products rise as we seek pain-killing relief.

Super Bowl Indicator - This has been accurate about 85% of the time and football fans have a clear advantage in the marketplace. The indicator refers to the original teams of the old AFL and NFL leagues. An NFL win in the Super Bowl was regarded as an indicator of a stock market rise in the coming year and vice-versa.

Skirt Length Theory - You've probably heard this one since it's usually announced every year in advance of the spring fashion collection. Skirt length is a major predictor of stock market direction. If skirts are short, it means the markets are going up. If skirts are long, it means the markets are heading downward and it's time for some brilliant hedge fund investing (if you can afford it). Short skirts appear in confident times, when the investment crowed is feeling 'bullish'. It has a certain logic.

Bo Derek - If you're lucky, you may have picked a Bo Derek stock. In the 1979 hit movie "10", actress Bo Derek portrayed the 'perfect woman'. The slang is still used by those of advanced middle age but the 30s something crowd uses the name of a more current celebrity to represent the 'perfect 10' in choice of stock. Jennifer Lopez?

Jennifer Lopez or J.Lo - Analysis of financial chart patterns is a major obsession for some stock investors. A J-Lo means much more than the 'perfect 10'-it refers to a rounding bottom in a stock's price chart pattern. Stock traders like a rounding bottom in a chart because it can be an indication of a shift in the markets from bearish to bullish.

Leading Lipstick Indicator - This one's an inverted relationship but many women will have no trouble understanding it. When feeling down in the dumps (or lacking consumer confidence), many women turn to the purchase of small-ticket items like lipstick or other cosmetics. Though this behavior is just the opposite of the economic direction, it is nonetheless true that lipstick sales increase during periods of major market correction or recession. And what better strategy for coping? Lest you think this theory is fanciful, consider that the pattern was first noted by Leonard Lauder, chairman of the cosmetics firm Estee Lauder. Consider, too, that lipstick sales doubled in the months following the 9-11 attacks in Lower Manhattan.

Boston Snow Indicator - The key thing to remember about this indicator are the first letters (BS). Since there is no correlation at all between stock prices and the amount of snow in Boston, the BS (or Boston Snow Indicator) is aptly named. The term is highly useful, particularly in times for which there is no better reason for the stock market rising or falling during a given period.

On that last bit of Boston Snow advice, I let the investor alone to formulate his/her own strategies for the coming year. May it be happy and prosperous!