Against the mass opinion, there’s always a cat who walks by himself
Against the mass opinion, there’s always a cat who walks by himself
Like a restless vampire with staring eyes, beard and wild hair, Ian McAvity prowls in the dead of night through his silent Victorian town house in Toronto’s Cabbagetown, a tumult of conflicting memories, ideas and reflections. Periodically, he stops to consult one of his five cats, all Siamese crossbreeds perfectly accustomed to the nocturnal creative frenzy at fortnightly deadlines for Deliberations, McAvity’s technical stock market letter. His white cat sits by the electric typewriter, watching intently. She is convinced that once she has figured out the mechanism, she will be able to halt it in mid-sentence, just like the old manual machine, by inserting a paw.
McAvity is among the best-known of Canada’s 20 or so practitioners of the esoteric art of technical analysis. Recently he’s been attracting the investment community’s attention with his fierce rejection of the consensus view that the stock market is due for a temporary decline. He believes that prices will keep rising and that Canadian markets will outperform the U.S. Technical analysts operate on the theory that the past, recorded statistically or in McAvity’s case with charts, predicts the future. Some even claim that recurring patterns exist throughout nature, pointing to evidence, such as the structure of crystals and the cyclical arrival of sunspots and caterpillar plagues, which has the irritating inexplicability of spoon-bending and fireballs. By contrast, the conventional wisdom that stocks move in rational response to corporate profits—“fundamentalism” —seems comfortingly mundane.
Technical analysis has been around a long time, but its current glamour is a direct result of the stock market carnage of recent years. Professional money managers, who handle the investments of trust and insurance companies, were humiliated by the crash of the early 1970s. In early 1973, orthodox investors were mesmerized by increasing corporate earnings, which were actually an illusion of inflation. Technicians were already alarmed by the deterioration of their wider-ranging forecasting techniques. But by late 1974, when despair on the market was unconfined, technicians were pointing to a classic buy signal they detected in the specialized Dow Jones indexes. They were right, and since then no stock has risen faster than their own. Despite the profusion of statistics and theory, technical analysis is profoundly subjective. Like a matador, the technician faces a dangerous foe alone. No one escapes unscathed. McAvity was gored himself in early 1974: “I started telling the market what to do,” he says, properly chastised.
One year ago, with a deep Mexican tan and yellow hair down to his shoulders, a safari-suited McAvity was the technical analyst for Toronto stockbrokers Draper Dobie & Co. He was variously estimated to be making $35,000 to $70,000 a year, depending on bonuses. It was a remarkable achievement for 33. McAvity’s father, then president of Seagrams, had been unable to persuade his son to stomach even a year of the University of New Brunswick after graduation from Trinity College School at Port Hope. But after four years in the bowels of the Bank of Montreal, a defeated squash opponent introduced McAvity to
3 U.S. stockbrokers Dominick &, Dominick 5 Inc., with whom he trained in New York $ and Montreal, before joining a Canadianü owned house, Mead & Co.
Today, McAvity is drawn and pale, with outbreaks of acne; his hair is shorter and lacklustre. He no longer feels the old compulsion to be the only man in the room not wearing a tie, a feature of the iconoclastic lifestyle he adopted after his move to Toronto and the end of his marriage in 1970. His decision to quit the stockbrokerage business (“an industry managed by salesmen in a negative regulatory climate”) and publish an independent letter has been costly financially and in nervous energy invested by his girl friend and himself.
Twelve hours after his deadline, licking envelopes in the printing shop, a sleepless McAvity is still erupting with ideas, justifying his stands. The markets have been static for several months after this year’s early surge, he says, but there’s no volume behind the selling, and last night a whole new theory of low-priced stock behavior occurred to him, also bullish. His belief that Canadian markets will outperform the U.S., which is finally being accepted here, is based on their historical tendency to do so in later phases of past bull markets.
His confidence is combined with acute alertness. Antennae practically sprout from his brows at the mention that McConnell Craig, an American who publishes a market letter circulating mainly abroad from his farm in Muirkirk, Ontario, is not enthusiastic about stocks. Thinking aloud, he begins to review the reasons, such as the rate of increase in margin debt and the traditional post-election malaise, which led him to call for Dow’s rise to reach a top of up to 20% above current levels by early 1977, and Toronto to stop higher, later.
When McAvity launched his stock market letter, he found that apart from the inevitable problem of snaring subscribers at $150 a year, the Ontario Securities Commission, the regulatory body that effectively dominates the Canadian securities industry, has an informal policy of discouraging market letters, apparently through fear of the tip sheets mining promoters used to circulate years ago. Although he hardly ever mentions individual stocks, McAvity is now dourly crunching through examinations similar to the ones he took as a trainee 10 years ago in New York to obtain the right to publish his letter under his own name. (It is currently handled through investment counselors Beutel, Goodman & Co.)
But McAvity is deeply satisfied that his publication is now succeeding. Age and experience seem to be confirming his lone wolf inclinations. His closest fellow-feel-
ing is probably for the giants of his lonely and demanding profession in the United States and Europe. Two thirds of his subscriptions are from outside Canada, and he regards attempts to portray as patriotism his bullish-on-Canada stance as naive. “Money,” he says, “has no emotions and no home.” PETER BRIMELOW
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