9 www.taipanonline.com JANUARY 2005 Controlled gains       Let’s start with a control. If one simply invested
US$10,000 in the S&P 500 on January 1, 1995, and
let it ride until December 6, 2004, that ten grand
would have grown some 148% to US$24,796.77. Can
Dent’s seasonal theories improve on that basic
benchmark?       Table #2 shows what full investment of
10K would yield over the same period as
Table #1, with a few key variations. First of
all, the period has been skewed by a few
months to reflect Dent’s November-
October annual cycles. Additionally, the
two Dent cycles within each 12-month peri-
od, November-April and May-October,
have been broken out.       Initially one sees a substantial competi-
tive failure for Dent’s “altered” decade, with
the former simple formula’s gains of US$24,796.77 beating Dent’s US$19,652.58 by 26.18%.
But Dent offers several more folds to his formulation.
Note that nine out of ten of the November-April
cycles are winners, while only six out of ten May-
October episodes are successful.       While this doesn’t indicate that being invested in
the latter cycle leads automatically to losses, it does intimate an increased risk with this por-
tion of a twelve-month period. So now
let’s look at page 10 to see how you
would have done stepping aside for this
period for the entire decade. Good but not great       By investing only during the November-
April periods from 1994 through 2004, one
does see increased gains over the larger
“Dent Decade.” But the US$20,044.32 one
would walk away with still loses to the
complete decade’s US$24,796.77 by
23.71%. (See on page 10.)       Even adding another of Dent’s calen-
drical admonishments, that the period
within any decade from 5 to 9 is hot
while the years from 0 to 4 are usually
fatal, doesn’t necessarily improve one’s
gains significantly. Investing only in the
November-April cycles commencing in
’94, ’95, ’96, ’97, ’98 and ’99 still fails our
benchmark by 19.88%, yielding only
US$20,684.64.       Does this mean that cyclic investing
simply doesn’t work? Nonsense. First of
all, while Dent’s work is not infallible, it
is useful for identifying periods of
increased risk within the twelve-month
cycle. Beyond that, there is indeed a
combination of indicative systems that
would have guided an investor unerring-
ly through the in and out cycles of the
market. Next page… Table #1 Full Investment of $10,000 in the S&P 500, 01/95-12/2004 Date Open Close Gain % Gain Cash Total 2002 1,149.00 879.82 -269.18 -23.43% $18,379.87 2003 881.69 1,111.92 230.23 26.11% $23,179.28 2004* 1,112.61 1,190.25 77.64 6.98% $24,796.77 * Through 12/06/04 Table #2 Full Investment of $10,000 in the S&P 500, 11/94-10/04 Date Open Close Gain % Gain Cash Total In Out 11/94-04/95 472.17 514.71 42.54 9.01% $10,900.95 1 05/95-10/95 514.56 581.50 66.94 13.01% $12,319.07 1 11/95-04/96 581.46 654.17 72.71 12.50% $13,859.54 1 05/96-10/96 654.84 705.27 50.43 7.70% $14,926.88 1 11/96-04/97 705.24 757.02 51.78 7.34% $16,022.83 1 05/97-10/97 801.64 914.62 112.98 14.09% $18,281.03 1 11/97-04/98 915.63 1,111.75 196.12 21.42% $22,196.67 1 05/98-10/98 1,112.16 1,098.67 -13.49 -1.21% $21,927.43 0 11/98-04/99 1,099.35 1,335.18 235.83 21.45% $26,631.25 1 05/99-10/99 1,335.56 1,362.93 27.37 2.05% $27,177.01 1 11/99-04/00 1,363.15 1,452.43 89.28 6.55% $28,956.98 1 05/00-10/00 1,457.14 1,320.28 -136.86 -9.39% $26,237.24 0 11/00-04/01 1,423.10 1,249.46 -173.64 -12.20% $23,035.89 0 05/01-10/01 1,249.38 1,059.01 -190.37 -15.24% $19,525.88 0 11/01-04/02 1,063.12 1,076.64 13.52 1.27% $19,774.19 1 05/02-10/02 1,076.45 885.77 -190.68 -17.71% $16,271.43 0 11/02-04/03 885.76 916.92 31.16 3.52% $16,843.84 1 05/03-10/03 915.78 997.15 81.37 8.89% $18,340.47 1 11/03-04/04 1,051.75 1,107.30 55.55 5.28% $19,309.16 1 05/04-10/04 1,110.45 1,130.20 19.75 1.78% $19,652.58 1 Winning Cycles 9 6