With the U.S holiday week and no doubt a slow down of career and acceleration of consumerism this week, I wanted to pay homage to a mentor while providing a fascinating look into his wisdom from 2007, when everyone was still drinking the Kool-aid. The euphoria was very similar to today. I hope you enjoy this conversation on your holiday travels. It is avail to listen offline on major platforms. You can even download the episode here on Substack as well. Click the three dots to the right of the play button to download mp3. I have written about Bill Cara here many times. I learned quite a lot from this Wizard over a few decades. You can read more about him and his storied career here: https://billcara.com/aboutAs you know I have this new toy/tool called NotebookLM and I wanted to experiment by applying it to 169 lessons, or “gems” by Bill Cara from 2007, right before the doo doo hit the fan in financial markets. One of Bill’s readers named Kyle compiled these 169 gems over six months from March 1, 2007 to August 23, 2007.How prescient, as The Dow 30 reached a high of 14,198 in Oct 2007 and plummeted to a low of 7,033 in Feb 2009.Now you can listen to AI summarize the 169 gems for you in a podcast format while you drive, ride the train, or fly this holiday week. Here are the custom instructions I gave the NotebookLM software along with the source material:Source: “Blast from the Past”- Of the 169 Gems from the source Bill Cara, find the most repeated themes and summarize into relevant subject groups that are cohesive- The audience is intermediate to advanced- two hosts discussion- Compare and contrast Bill Cara's subjects, warnings, and insights to what actually happened in the financial markets from 2008 to even todayDisclaimer: This podcast was created by Alphabet and their NotebooksLM AI software. The output may or may not be 100% accurate in citing the source material. This AI technology is new and please use as entertainment and a starting point for your own research. At the very least it can help us use our imaginations to see how this new technology will impact us in our lives in the near future.#1The point really is that global markets do not operate in a vacuum. Prices are not random. They are pushed and pulled by economic and financial forces. Sometimes we discover later what those forces are. In the meantime, we just have to watch those prices.And that is precisely why I believe that Relative Strength Index (RSI) is the most important technical indicator available to traders. You see, RSI helps me assess when prices are very high and when they are very low. I believe in the practice of selling high and buying low. Over the years, I found that’s a practice that has never failed me.But this is also the phase of the price cycle I call the Distribution Zone, which is another word for “extremely over-bought”. That doesn’t mean that it’s time to sell. No, you ought to be looking for a break-down in that pattern. For me (based on a trading time horizon I feel comfortable with), I look for the time when the RSI-7 on the Hourly and Daily then falls below the 70-line and, if so, I look to see how close the Weekly RSI-7 data is crossing back below the 70-line. If it’s close I probably sell.But I seldom look at a single stock to make any decision. It’s true that the concept of a “broken” company or a “broken” stock occurs at times, but typically the price of stocks move up and down in groups. That’s because traders buy and sell ETF’s, or mutual fund managers tend to buy industry ideas or traders generally play follow the leader. So I look at the market by group, and when I see the RSI-7 going above the 70-line for several or all stocks in the group, and then the RSI-7 falls back below 70, I believe that a sell-off has started.Posted by Bill Cara on March 1, 2007#2These are tense times in global stock markets. Increasingly the quants are crowding out the rest of us with their programmed trading that is causing temporary but extreme fluctuations between futures and cash markets. But at the end of the day, remember, the (intermediate-term) trend is your friend.Posted by Bill Cara on March 1, 2007#3And loans will be called because too many debtors cannot make the loan payments. That’s called debt service, and when it becomes a problem, the banks start calling loans. That’s when things like houses and automobiles and stocks and mutual funds have to get sold in order to pay back the banker.This might not seem fair, but it is. And every few years, we go through this cycle. As long as we live in a credit-based, sell-side directed society, we always will. What the central bankers of the world need to do now is to rebalance their currencies so that international trade and commerce and cross-border investment can be optimized.#4The problem is that academic literature has its place. How many students of the market have learned as much in the classroom as they have in this blog, ...
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