(Tia explains how historically there is a saying that if the hemlines go down so does the market. She uses that to compare the current state of the market to the current length of hemlines to what they were before the Great crash of 1928. We get the history of market communications as well as an excellent example of a day trading strategy presented in a very understandable way.) 

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Tia: let us move into the markets, the stock markets and an interesting article I was reading concerning fashion……..very interesting article actually……..and a comparison between hemlines and the Dow……..

(Skip starts chuckling)

Tia: yes?

Skip: I’ve heard that one.

Russ: yeah I have too.

Shane: I haven’t.

Tia: okay, what have you two heard?

Skip: as the hemlines goes up so does the market, as they come down so does the market.

Tia: uh-huh.

Russ: yep.

Tia: now the funny thing is that the fashions for fall, guess what?

Skip: they go down.

Tia: uh-huh, long down.

Skip: uh-huh, ankle-length.

Tia: further, touching the ground. 

Skip: uh-huh.

Tia: hmm, interesting.

Shane: hmmm.

Tia: if that is correct, take the roaring 20s for example, the hemlines came right up almost to where they are right now……

Skip: yeah they went just a little bit above the knee.

Tia: uh-huh, well actually they went up a little bit higher towards 1928.

Skip: yeah I think so.

Tia: yeah and then all of a sudden like two or three months before, long, flowing ankle-length skirts came back into vogue and the market went phhhttt.

Skip: yep, like the bottom dropped out of it.

Tia: yeah so if the theory is correct and right now it’s almost to the point of showing the underwear, if the hemline drops right down to the ground oh dear, if the theory holds true.

Skip: because they’re up to 900 points right now.

Tia: no, just under 8,000. Now, the problem is as far as I see with the market on its downward trend is that it’s been pushing and pushing and pushing up and up and up and as I’ve stated in the past, it’s got to run out of steam eventually. Now last time I made these comments that it was fluctuating rapidly, I was hesitant to say if it would continue its upward trend or if it would continue a downward trend. I’m going to say and be bold and brave that it will continue this up-and-down motion for some time, it may even set a new record but I see that as unlikely, what I do see is heavy fluctuation. One of the factors to watch is the technology markets and how they start to respond. The fact that the earnings have been wonderful for the past three years and suddenly they’re not making the profits that they have been, the profits have been very disappointing. Also a factor into the NASDAQ, and I’m trying to stay away from this issue, is the current investigation and indictment of Microsoft. I’m not going to get into that because that is a whole political field that I’m trying to stay away from……are you busy there?

Russ: no I’m thinking because the whole thing with Microsoft is holding up the market but if it does go through in a positive way for Microsoft, the market's going to take a wild jump…..

Tia: uh-huh.

Russ: and if it takes the other way….

Tia: uh-huh.

Russ: it’s going to take a major downward slump.

Tia: correct. Okay now, any questions?

Skip: darling…….

Tia: uh-huh.

Skip: the fluctuation in the market today, in today’s market…..

Tia: third day that it’s fluctuated.

Skip: I believe, now this is my personal opinion okay?

Tia: uh-huh.

Skip: I believe the speed of communications has a lot to do with that.

Tia: oh yes most certainly.

Skip: when back in the '20s you didn’t have the speed of communications you’ve got today.

Tia: yes and no, you had the wire.

Skip: we had teletype which is a tape running out of a machine but you didn’t have the worldwide communication instantly like you do today.

Tia: no, no, it was more probably about a 10 minute delay from one place to the other, that's as long as there was connections. There’s a big word there, the connections between point A and point B.

Skip: yeah if their telegraph or phone lines weren't hooked in, well actually it was all telegraph in them days……

Tia: well and telephone.

Skip: it wasn’t even over the phone.

Tia: telephone was just starting to get going.

Skip: yeah right and so your telegraph was your main means of communications other than smoke signals.

Tia: yes, uh-huh, personally I prefer smoke signals.

Skip: but today you have instant communication all over the world, I think that’s why you have so much fluctuation in the stock market.

Tia: oh most certainly, most certainly.

Skip: because now they’re talking about, "well the Nissan market’s down or the...."……..well who cares about the Nissan market? Let’s pay attention to our own business.

Tia: unfortunately what happens in the Nikkei market in Japan affects what happens in the F&T Index and that in turn affects what happens in the NASDAQ or the Dow Jones which in turns affects what's happening in Australia. You see it goes from where the sun comes up first, who opens first which is Japan to who closes last which is in Wellington in New Zealand. So you see it works in this whole big circle. Now if it’s a bad day in one place, it means that there is a possibility, a higher possibility than a good day in another place which means that the next place that opens………..let’s say we start off with Japan, Japan opens and they drop 158 okay? Which means that when the London market opens or the Frankfurt market opens or the Madrid or the Paris or the Vienna or Warsaw, when they open, their chances of having a bad day are higher. Let’s say they have a bad day which means that the chances are even higher for a bad day in the United States which means more than likely it’s going to be a bad day in Wellington. The following morning just as Wellington closes, Japan opens back up………let’s say they have a okay day, they’re up just a tad which means that the chances are now higher that it’s going to be up in Warsaw which means a possibility it's going to be higher again in London which means that it’s probably more than likely it’s going to be a good day in New York. Now let’s throw a little bit of an equation in there, let’s say Japan opens and it has a bad day, Warsaw opens and it has a hmmm okay kind of day. And now there is a possibility either way for the London F&T index to have a good day. Let’s say that has an okay day which means that the chances are in the United States either way, could have a good day could have a bad day. See that’s where it starts to get a little tricky on predictions is that if it’s a constant down, down, down, more than likely is going to be down. Not will be, more than likely, there is a possibility that it could be an okay day, up maybe ten points, maybe down two points, that’s an okay kind of day. That’s the way with the instantaneous communication that things work.

Russ: well the question’s been asked whether or not that’s such a good thing because with instantaneous communication, if there is a depression, a crash or some problem somewhere else, then basically you’re going to have computers which run on automatic mode instantly communicating their desires for all of their people who deposit money into those basic funds....

Tia: uh-huh.

Russ: saying sell here because all these parameters are met.

Tia: yes, in a way it's designed to save money however there is procedures to stop that, that at a certain point…..

Russ: they’re speed bumps….

Tia: correct.

Russ: it doesn’t stop them it just slows them down.

Tia: it slows them down long enough for people to respond.

Russ: but if there’s something really bad, people aren’t going to really respond too much to the fact that well, "alright, let’s think about this, now let's dump it."

Tia: well if you remember when the Dow dropped 550 points in the space of six hours, trading ceased for that day.

Russ: right.

Tia: that gives everybody enough time to regroup and look at the situation. And it bounced back bigger than it had ever done and in the following week after that kind of loss it bounced back and bounced back over by a hundred.