One-on-One With a Top Market-Timer

Thomas Gleason is editor of The Gleason Report (formerly The Thomas Nogales Report), a free monthly commentary about the financial markets (http://thomasnogales.com). I have read Gleason's newsletters for the last three years, and his views on stocks, bonds, oil and international finance are provocative and often ahead of the crowd. In January 2008, the Arizona-based strategist told subscribers to sell stocks, sidestepping last year's unpleasantness.

Gleason is also the author of How to Invest If You can't Afford to Lose, a free e-book that has good advice on how to use low-cost index funds to build a market-beating portfolio.

Curious to know whether it is safe to own stocks now, I recently spoke with Gleason. Here are excerpts from our far-ranging interview.

Real Money: Market-timing is the focus of your research. Please explain.

Gleason: The "experts" say market-timing is impossible. Nevertheless, in the mid-'90s I began using my finance background and computer programming skills to run simulations on various theories I had. I did this because I needed to know how the markets worked, and the books I read didn't answer my questions. After two years of trial and error, failure, my models started to become predictive of market movements. So then I started the Web site to test my theories real-time with the public as peer reviewers. My approach is mathematical and doesn't use charting or traditional technical indicators. I focus on the broad trends in stocks, bonds and gold.

Although your model is proprietary, please give us some idea of what factors it pays attention to.

I look at earnings and a couple of precise economic indicators I've devised. Specifically, my model looks at valuation, vector and velocity. Vector is the direction of the market, and velocity is the market's rate of change. Success requires that all combine to support a decision.

What did your timing strategy say about stocks a year ago?

I saw severe danger for stocks in October 2007. Two months later, in December, I warned my subscribers. In January 2008, the model went negative, and I issued a "sell" alert. The S&P 500 was at 1366. The market then fell 35% over the next several months. In December 2008, my model issued a "buy" at 816, and a week later sold at 876. Subscribers made 7% in five days.

---

Hewitt Heiserman conceived the Earnings Power Chart and the Earnings Power Staircase. A graduate of Kenyon College with distinction in history, Heiserman is a member of the Boston Security Analyst Society and the CFA Institute. He also authored It's Earnings That Count. For additional information, please visit Earnings Power.

Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Heiserman appreciates your feedback; click here to send him an email.

TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon purchases by customers directed there from TheStreet.com.