In the movie Speed, the detective is talking to his boss and he says I know it, but I do not how, but the “bad guy” is always one step ahead of him. In WW II, the allies were one step ahead of the Germans because they had broke the German code from the Enigma machine and read most of the signals between Hitler and his generals throughout the war. The book The Ultra Secret by F. W. Winterbotham published by Harper and Row, NY, 1974 outlines the Allied responses. The desire to be able to read minds or to have relevant excess knowledge is the same for every industry (there should be a division who job is to try and figure out the competition – what will they do? how to react and to next steps). In the stock markets, the only method to have perfect knowledge is to look backwards to what has happened. To have inside knowledge means to be able to buy enough shares which will have a significant impact on the share price. There are methods if you only want a small price – companies that buy back shares or buy shares for their pension funds do it only select days. Companies tend to release good news on specific days and bad news late on Fridays. There are a multiple of patterns which can help; prior to CNN and other news channels it was only the traders who bought Bloomberg or Reuters terminals to have their news and be able to do something with it. At the present time information is much easier to receive.

In the book, there is an age old problem, the Allied generals could read the messages what do they do to minimize losses, while at the same time not necessarily alerting the Germans that they knew what the Germans were thinking. How do you use inside information? At first when the Germans were winning the war, it was about limiting losses. For example if the generals knew there was going to be a bombing, they tried to move people from the area and alerted fire trucks or first responders to be ready to act after the bombing. As the war turned and the Allied forces begin to win, then effective countermeasures were put in place for the element of surprise was long gone. Surprise in battle and where the troops are expected to be lead to many leaps forward.

Linking to dividend paying stocks, every since trading begun, everyone is looking for inside information. Some of your investment strategies are based on what you know in the industry where you earn a living; just working there will give you a reasonable insight into trends because that is what you pay attention to. There are many other methods – trying to hear gossip at industry meetings or i.e Chamber of Commerce gatherings; whenever people gather. The other method is to be chose profit companies which have a growing dividend and let others worry about it. As long as your information about the company and why and how it makes a profit remain constant you can let the dividends flow and the markets push up prices to record capital gains.

There are more questions than answers, till the next time – to raising questions.