by Jason Bodner
August 25, 2020
Thomas Edison may have been a murderer.
Or so some have speculated.
Edison was a prolific inventor and also a fierce competitor. Many of his inventions are purported to be taken from others. Nikola Tesla and Edison fell out and it is thought Edison appropriated Tesla’s work.
For example, Edison claimed to be the sole inventor of the light bulb, which was the technological prize of the time. Yet, historians say he borrowed and even stole ideas from other inventors. He wanted to be the sole patent owner for many innovations, and so he relentlessly promoted his image as a sole inventor.
He was also in a race to be the first inventor of cinematography, but in October of 1888, French inventor Louis Le Prince recorded the first set of moving images. Edison wanted the patents for himself and was frantically trying to secure them. On September 16, 1890, Le Prince left his brother in Dijon on a train bound for Paris. Neither he nor his belongings ever arrived. He simply vanished, never to be seen again.
It was convenient for Edison’s main competitor to suddenly evaporate. Conspiracy theories percolated. Was Edison a murderer? Maybe farfetched, but, either way, through a series of court battles, Edison eventually won. He refiled his patents, allowing him to dominate the film industry for years.
That seemed to be the end of that, until 118 years later, historian Alexis Bedford was digging through papers on Edison’s lighting work. In them he saw a leather notebook. Edison used these for ideas and data. Deep inside, Bedford saw an entry from September 20, 1890. Thomas Edison’s handwriting said:
“Eric called me today from Dijon. It has been done. Prince is no more. This is good news, but I flinched when he told me. Murder is not my thing. I’m an inventor and my inventions for moving images can now move forward.”
History tends to get whitewashed. Today few know about this potential bombshell or Edison’s fierce “win at all costs” attitude. For most, he’s the guy who invented the lightbulb, and so much more. But he made the equivalent of billions of dollars, potentially by stealing the work of others.
Perception becomes reality, regardless of actual reality. That holds true in stocks, too.
People often ask, “Why is this stock up so much?” because they need a reason for everything.
They don’t like hearing my frustrating answer: “Stocks rise because more people are buying than selling.”
There’s never a shortage of more interesting reasons, since it is against human nature to accept that there may not be an observable reason for prices to do what they do.
The real answer lies in big money. The true mover of stocks going up and down is simply: Money is either moving into the market or out of it. That’s it.
I focus on big money investors. These are big firms, like pension funds, asset managers and hedge funds. They have the power to buy or sell more stock than market liquidity can handle.
When Big Money can overwhelm the market’s liquidity in available shares, one of two things can happen.
- Buy all at once: “Full steam ahead,” like a bull in a china shop. Buy whatever shares are available and make a huge impact on price and volume. The obvious drawback here is that they are competing against themselves. Once the market knows there is a big buyer out there, they will also leap in to buy shares too. By not being discrete, the big buyer has undercut his opportunity.
- Operate quietly under the radar for as long as possible. This is what big money usually does. They want to wait until the bulk of their order is complete to let the cat out of the bag. Maybe a press release or required SEC filing of ownership gets out. Once they own their shares, everyone else rushes in to be the next buyer. This, of course, pushes prices in the original buyer’s favor.
Which would you rather do?
Put this way, the answer is obvious. This is why I devoted decades of my life devising a system to track big money flows, even when they’re done quietly, before the knowledge becomes public. It’s crucial to be able to buy right when the big money starts flowing, while they are trying to keep it quiet. When they do this on the best quality stocks, I believe I have the best odds of making some good money in those stocks.
Big money also tends to move in herds. This is why I look at which sectors either collect or lose capital. These rotations help us identify which sectors lead and lag and therefore we can track down when big money pours into the best stocks of the leading sector.
It’s all about putting odds in your favor.
Last week, we continued to see Tech and Healthcare take a pause in leadership. The sectors collecting money last week were Discretionary and Staples. Health and Tech were close 3rd and 4th, but nowhere near the frothy buying levels we saw in prior months. Health also saw the only notable selling last week.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Perception says Edison was a luminary and a master of invention. Digging below the surface, we find supposed evidence that he may have stopped at nothing to win, even if that meant sanctioning murder.
Perception also says stocks need a reason to go up or down. What’s the story? But digging below the surface, I find the answer is simple: What moves stocks up and down is big money flows, in and out.
Identifying big money flows early on can be one big key to unlocking high-odds success in stocks.
Edison wanted to be perceived as the most prolific inventor (and investor) of all time. He did everything to promote that as reality. Did he go too far? We may never know.
Lee Atwater understood this. He was known as a dirty-playing RNC campaign operative. He wrote the book on nasty political tricks. True or not, it didn’t matter, because Atwater said: “Perception is reality.”