One of the problems with conditioned seasonals is the lack of a large data base. When Longstreet was doing conditioned seasonals, they had a database that went back to the 1890's. But people who now do conditioned seasonals, such as yourself, tend to focus on the post-WWII period or even the post-1973 era. Does the lack of a large sample size limit the usefulness of this technique because you may only have three years to compare it against?

Yes and no. Yes because if your database went back into the 1800's then you would have more data to support this conclusion and you would therefore you would have more confidence in your analysis. So that's an advantage in having a database that goes back that far. The disadvantage is that prior to 1971, we had very stable market conditions. When we went off the gold standard and began to float the dollar, the relationship of everything changed. We are in a new economic era. We can't measure the worth of a dollar today against the worth of a dollar in 1950, for instance. You get too many distortions when you go back to using years when we had a convertible currency. In today's time, we have way too much money in the world. Not just dollars but also yen and marks. There's just too much money.

No, just you Bill. The rest of us don't have enough.

I wish I had a little of it. But we have too much money floating in the world. Now we have to measure things in terms of the dollar index and we see this sea of currency attracted to first one area and then to another area. We tend to over inflate and under inflate these areas for longer periods of times. For instance, in the 1970's, we ended up over inflating hard assets such as Gold, Silver, and grains. To cool inflation, the Federal Reserve came in and pushed interest rates to record highs in the early 1980's and we cooled inflation but then these surplus dollars began to go into financial instruments. At first they went into T-bills and Bonds that were paying high interest rates. As interest rates went down, the sea of currency then began to move into equities. It's still there and has been since 1983. We've had the biggest bull market in history in equities. That's where we are. Now, equities are becoming over inflated. Some of that money is starting to trickle back into hard assets and commodities that people use everyday. While we were inflating this equity side, a lot of this money found its way to underdeveloped nations. These underdeveloped nations have made tremendous strides in building their economies and their populations have more spending power. One of the first things they do is eat better. So now, we're not producing enough food in the world to meet this increasing demand. That's why we're very bullish on a long term basis in commodities.

Why do you use fundamental analysis?

It's something I can hang my hat on.

You can hang your hat on moving averages. Why fundamentals?

A moving average is a moving average. It's just a mathematical manipulation of price.

Isn't that what a conditioned seasonal is?

No. A conditioned seasonal is actually using an intelligent reason for selecting the years. A moving average is nothing more than going to the roulette table. You're going to win some and lose some. You know it's going to work but you don't know when it's going to work. You don't know when the big bull move is going to come and when it's not going to come. What we try to do is to hone those kinds of things down so that, talking of roulette, we're going to bet when the odds are more in our favor. In other words, we increase our odds of being in the market when we have a greater propensity to a major bull move. I'd rather be in that market and have more of my eggs in that basket at that time than I would just using a moving average. If I use just a moving average, I have to place my bet every time.

The common criticism of fundamental analysis is that the current price discounts all the currently known information. How can you use fundamental analysis to give you an edge if the information is already embedded in the prices. Do you believe that the fundamental information is embedded in the price?

No I don't believe that it is embedded in the prices. The data is there. It's a matter of taking the data and the way you put it together and approach it. Over the last fifteen years, we've lost the people that knew how to do that type of thing. Everybody kind of moved to the technical side and used moving averages and all kinds of things.

Why are fundamentalists so hard to find now? What's happened in the last fifteen years?