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The Concept of Synergy

Synergy is defined as the mutually cooperating action of separate substances that together produce an effect greater than that of any component taken alone. The combined effect is greater than the sum of the two parts taken separately.

In spite of all the research that takes place regarding the movement of stock prices, in spite of all the data available to investors, and in spite of all the charts produced by all the computers traders use, the simple fact remains that there are no “perfect” stock market indicators—and probably not even any near-perfect indicators. Every so often, some indicator becomes popular, usually after only two or three successful predictions. For example, based on a just a few major market cycles that took place after World War II, it was assumed that bear markets “must” take place when dividend yields for stocks decline to below 3% or when price/earnings ratios rise to 21 or 22. These parameters, which indicated the bear markets of 1966, 1969, and 1970, for example, were again approached during the mid-1990s. However, this time around, the Standard & Poor’s 500 Index did not see its bull market end until the year 2000, by which time its price/earnings ratio had risen to 46 and its dividend yield had declined to just a touch above 1%.


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