Summary
Phil Anderson argues that stock prices, like land, are ultimately capitalised earnings, and that the market mis-prices equities most severely at real estate cycle turning points. He combines Gann seasonal timing (solstice/equinox midpoints), the Mexican Pete chart pattern from Gann’s Truth of the Stock Tape, and the Bessembinder finding that just 86 stocks created half of all U.S. stock-market wealth over 90 years to argue that cycle-aware pattern screening is the superior alternative to passive index investing.
Key Claims
- Stock price = capitalised earnings; land typically prices at ~20× earnings, banks at 8–12× earnings — confidence: high
- Markets generally get valuations right but overshoot at real estate cycle peaks (e.g. 2007) and undershoot at troughs (e.g. 2009) — confidence: high
- The 1 August – 4 August 2025 retracement aligned with a Gann seasonal midpoint (halfway between solstice and equinox) — confidence: high (author’s direct claim)
- Companies with pricing power, particularly those in monopoly or near-monopoly markets, can pass tariff costs to consumers and see earnings rise — confidence: medium
- Tariffs structurally benefit the land monopoly and large incumbent corporations — confidence: medium
- Bessembinder (Arizona State): over 90 years, 86 stocks accounted for $16 trillion (~half of all U.S. stock-market wealth creation); 96% of stocks collectively matched one-month T-bills — confidence: high (peer-reviewed source cited)
- A follow-up Bessembinder study (1990–2020, 64,000 stocks): more than half of public stocks underperformed one-month Treasury bills — confidence: high (peer-reviewed source cited)
- Gann’s secrets are hidden in his charts, not his prose; most readers study the text but never reconstruct the charts — confidence: medium (author’s interpretive claim)
- The Mexican Pete pattern is the practical tool for filtering out the ~96% of wealth-destroying or flat stocks and identifying the minority of big winners — confidence: medium
Mex Pete References
- Primary reference: Gann’s Truth of the Stock Tape (published with Wall Street Stock Selector as a two-in-one volume, available at wdgann.com), page 67, chapter titled “Habits of Stocks” — Mexican Pete was an oil stock used by Gann as the pattern illustration.
- Anderson explicitly states that nobody reconstructs Gann’s charts and that doing the Mexican Pete chart on page 67 is essential; the pattern is described as the method for isolating long-side winners from the large pool of underperforming stocks.
- The fund Anderson assists with is cited as a live example of applying the Mexican Pete pattern; a performance chart is referenced as displayed alongside the video.
- Wesfarmers (ASX: WES) is mentioned as a prior Mexican Pete-style call made at a Melbourne meet-and-greet in 2023 (linked videos: Part 1 and Part 2 on YouTube).
Stock Picks / Signals
- Wesfarmers (ASX: WES): Referenced as a prior positive call made in 2023; no new entry signal, price target, or stop loss given in this email.
- No new specific tickers, buy/sell/hold signals, stop losses, or price targets are issued in this email.
Predictions / Forecasts
- Implicit forecast: U.S. stocks with pricing power will continue to rise despite tariff environment, confounding economists, because earnings will be supported by cost pass-through — no specific index level or date target given.
- The 1–4 August 2025 pullback is framed as a completed seasonal retracement (Gann midpoint), implying the broader uptrend remains intact — no explicit price target stated.
Notable Quotes
“Just 86 stocks over the last 90 years have accounted for half of the wealth creation in the stock market.” — paraphrasing Bessembinder, as relayed via John Authers, Bloomberg, 7 August 2025
“Everybody reads the book, but nobody does the charts. Gann hid his secrets in all the charts.”