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The Magic T Formula: It's the Secret of One Money Manager's Success "Nantucket, Mass - Terry Laundry is sitting in the attic-office of his home, plotting T's on graph paper spanning a 25-foot-by-4-foot table alongside a wall. What's he doing? Trying to pinpoint the beginning of the next leg up in a bull market he thinks will continue into the middle of the next decade. Laundry is no cockeyed optimist, though. Employing the "Magic T formula," he got his clients out of the stock market before the Crash, in again in January and out in the middle of July. He currently manages about $30 million and his disciples include the fabled trader Marty Schwartz (Barron's, Feb. 15). Magic T stands for the Matched Trend Time formula. Simply put, it holds that the market spends as much time going up as it does heading down. "The crux of the formula is identifying the cash-buildup phase - - when investors are either selling stock or receiving money and not investing," explains Laundry, who is sweating freely on this hot, breezeless August day. "If you can do that you'll know that when a new bull market starts, it will have a lifetime equal to the preceding cash-buildup phase." Laundry, who holds a degree in electrical engineering from the Massachusetts Institute of Technology, hatched the Magic T formula back in the mid-Seventies when he was working for Hughes Aircraft, Co. trying to locate missile sites by listening to radar echoes. Like many engineers, he is more comfortable speaking in complicated equations than simple English, but eventually he puts aside his T square and relents. "One of the first things you notice in nature," he reflects, "is the pairing of exact opposites; it is simply the most common property. Any kind of matter is made up of an equal but opposite amount of electrical charges." Convinced that market trends were also symmetrical, Laundry set out to devise a timing system. The one he came up with has helped his American Shareholders Investment Corp. post a 25% annual return over the past 10 years, mostly by investing in mutual funds that concentrate on secondary growth stocks....” ******************** American Shareholders owns reprints of the complete article and would be happy to send you a complementary copy if so requested at our CONTACT page. |
