James Dines: Some personal comments

By Lawrence G. McMillan

I was saddened to hear that James Dines has died. I first heard of him in 1972, as I was beginning to trade in my own account. Due to some previous losses, I had given up on fundamental analysis; it was useless as a predictor of short-term moves (and maybe even long-term ones). In addition, I realized that the mainstream analysts of the brokerage firms were not putting out any useful information.

I had decided that there were going to be few people that I listened to, and of them was James Dines. He was always a showman of sorts and was “all in” on the latest trend. At the time, it was gold, and I bought physical gold at $90 per ounce (which I still own). Over the years, I continued to buy gold on his recommendations (and sometimes on my own). He was early into many other trends, some of which flamed out later, but if you can’t put a trailing stop on your own positions, then you can’t blame the guy who got you into the position in the first place.

Back in those days, which was at the beginning of the 1973-74 bear market, there was only one other newsletter writer that I thought was in tune with the times – Justin Mamis, who wrote the Professional Tape Reader (before later passing it on to Stan Weinstein). Both Dines and Mamis were short that bear market, and so was I. Dines used to say things like “by geometry, the market is still bearish” and then he would draw a simple downtrend line on the chart of the Dow. Not rocket science, and not really geometry either, but effective in staying with the trend. That was classic Dines. As an aside, the TV show, “Wall Street Week,” which was on PBS every weekend, with host Louis Rukeyser was a complete joke. They were bullish all the way down in that bear market.

Dines wrote the quintessential text on technical analysis, How the Average Investor Can Use Technical Analysis For Stock Profits. Dines liked long titles like that. The book is a classic, but he let it go out of print, so if you can even find a copy today, it is probably going to be expensive (you can’t buy mine). I loaned my copy once – in the early 1980's – to my head trader on the arbitrage desk at Thomson McKinnon. He thought the book was so terrific that he flat out stated, “I am not returning this book.” I bought another copy, since it was still in print at the time.

So, R.I.P. James Dines. You were a true believer in new trends and were not swayed by “Wall Street.”

Further Thoughts

That 1973-74 bear market was my first heavily traded market. As a result of the profits from those days, I have always had a bearish slant to my market thinking. Without getting overly complicated, it seems like the current market is somewhat comparable to that one. Back then, you had clueless President Nixon (who actually instituted wage and price controls to try to control inflation), and you had Arthur Burns as chairman of the Federal Reserve. Burns was a college professor from Columbia who had been promoted by President Eisenhower to various high-level administration economic positions. Later, Nixon appointed him Chairman of the Fed. In that bear market, every time either one of them spoke – but especially when Arthur Burns spoke – the market would take another nosedive downward. Oh, yes, there were plenty of oversold rallies, but by the time it was done, the Dow had fallen from 1020 to 580. And inflation never was controlled. It continued to increase through the Carter administration and lasted well into the Reagan administration before it was finally broken.

Are things any different now? The only real difference is that when Fed Chair Powell speaks now, the market rallies for a brief time (can you say “plunge protection team?”). Currently, I see many knee-jerk bulls trying to pick the bottom – to find the oversold condition that will launch the next bull market. So far, it hasn’t happened, and if there is any karma, it won’t happen until these bottom pickers give up and try to sell a new low instead of buy it. This same bottom-picking occurred all the way down in 1974, too.

I don’t take long-term positions, so this is just my opinion, and I could reverse quickly if short-term indicators dictate it. But it sure seems to me like this market is very similar to 1974, and the bulls will find all kinds of excuses to buy the market all the way down, until they give up. By the way, that 1974 bottom was eventually a “W” bottom, which we really haven’t seen from any major declines since 2002. It would not surprise me if this current market resorts to the “old time” bottom of the “W” type, because the “buy the dip” crowd will have been completely intimidated by then.

This article was published in the 5/16/2022 editioin of The Option Strategist Newsletter now. Existing subscribers can access the article here.