Original Alan H. Andrews Materials intro Roger Babson This brief biography is directly from published materials collected and published by Babson College "I more and more see the need both of courage to stand fast and the willingness to change. Even though these two characteristics seem contrary and paradoxical, a successful life demands a proper mixture of them both. One is the lock and the other is the key; either without the other becomes useless." --Roger Babson, "Before Making Important Decisions" Roger Ward Babson (1875-1967) achieved many successes in his lifetime. His personal and professional accomplishments as entrepreneur, educator, and philanthropist demonstrate the merits of his particular formula for success: the combination of tradition and innovation. The Babson Ancestry Representing the tenth successive generation of Babsons to live in Gloucester, Massachusetts, Roger Babson valued his heritage. He researched his ancestors, investigating their personalities, professions, and lifestyles. Beginning with Isabel Babson, who came to Massachusetts from England in 1637, Roger Babson discovered a lineage of farmers, merchants, midwives, religious preachers, and sea captains. Believing that personality traits were hereditary, Roger Babson continually looked for opportunities to foster and benefit from his ancestors' individual attributes. Educating Roger Babson Roger Babson also valued lessons from his childhood, especially the business and investment practices he learned from discussions with his father, Nathaniel Babson, who owned a dry goods store. Despite Roger's interest in business, his father had little faith in colleges and their academic programs. Against Roger's wishes, Nathaniel decided his son would pursue a rigorous, technical education at the Massachusetts Institute of Technology. Feeling that the instruction "was given to what had already been accomplished, rather than to anticipating future possibilities," Roger Babson believed that his professors had failed to foresee the great industries of the 20th century: automobiles, aviation, motion pictures, phonographs and radios. The one aspect of his studies at M.I.T. (1895-1898) that he valued throughout his life was learning about the British scientist, mathematician, and philosopher, Isaac Newton. Roger Babson was impressed by Newton's discoveries, especially his third law of motion--"For every action there is an equal and opposite reaction." He eventually incorporated Newton's theory into many of his personal and business endeavors. Business Beginnings While on break from M.I.T., Roger Babson applied his engineering studies to various highway projects throughout Massachusetts. Upon graduating in 1898, Roger knew for certain that he preferred an alternative career. Nathaniel Babson counseled Roger to find a line of work that would ensure "repeat" business indefinitely. After careful consideration, Roger Babson decided to try the world of finance and looked for work as an investment banker. In 1898, Roger began his business career working for a Boston investment firm where he learned about securities, stocks, and bonds. Inquisitive by nature, Roger Babson soon knew enough about investments to get himself fired. Acting in the best interests of his clients, he had questioned the methods and prices of his employer and quickly found himself out of work. Babson subsequently set up his own business selling bonds at competitive prices in New York City and then in Worcester, Massachusetts. By 1900, he returned to Boston to work once more for an investment house and in March of that year, he married Grace Margaret Knight and moved to Wellesley Hills, Massachusetts. A New Lease on Life In the fall of 1901, Roger Babson contracted tuberculosis. His doctors initially told him that that a cold "had settled on his lungs." When Roger demanded to know the exact nature of his illness, he was given a decidedly gloomy prognosis. The tuberculosis had seriously affected one lung and had begun to attack the other; it was not certain if he would survive. For Roger Babson, resignation was not an option. Demonstrating his characteristically dogged determination, he resolved to fight the disease and live a productive life. Rather than seek a "fresh air" cure in the milder climates of the American Southwest, Roger remained in Wellesley Hills. Cared for by Grace, a nurse by training, Roger gave a great deal of thought to how to continue his investment career away from a city environment. He ultimately decided to start a business based upon his investment expertise. While Roger finalized his business plans, Edith Low Babson, Roger and Grace Babson's only child, was born on December 6, 1903. Wall Street Comes to Wellesley Hills Aware that every financial institution employed statisticians who duplicated each other's research efforts, Roger chose to develop a central clearinghouse for information on investment information and business conditions. He would publish his analysis of stocks and bonds in newsletters and sell subscriptions to interested banks and investors. In 1904, with an initial investment of $1,200, Roger and Grace Babson founded Babson's Statistical Organization, later called Business Statistics Organization and then Babson's Reports, which continues to thrive today as Babson-United Investment Reports. As pioneers who helped revolutionize the financial services industry, the Babson's and their organization realized millions of dollars in annual revenues in the company's first decade. Pass It Along: Entrepreneurship and Philanthropy Having amassed a sizable fortune, Roger Babson was not content to join the idle rich. Instead he shared his business knowledge to protect investors, and invested his own wealth in industries and endeavors that would benefit humanity. After witnessing a dramatic stock market crash and financial panic in 1907, Roger Babson expanded his investment practice to include counseling on what to buy and sell as well as when it was wise to purchase or unload stocks. Working with M.I.T. Professor of Engineering George F. Swain, Roger Babson applied Isaac Newton's theory of "actions and reactions" to economics, originating the Babsonchart of economic indicators, which assessed current and predicted future business conditions. Although the Babsonchart has since proved to be an imperfect tool, through it Roger Babson earned the distinction of being the first financial forecaster to predict the stock-market crash of October, 1929, and the Great Depression that followed. Roger Babson extended his interest in the public's welfare beyond investment counseling. He encouraged industries to develop products to improve public health and safety. Among businesses receiving Roger Babson's approval and financial backing were select manufacturers of sanitary paper towels and other hygienic products, fire alarm call boxes, fire sprinklers, and traffic signals. Roger Babson saw it as his duty to share his insights and experience. An avid reader and writer, he sought to dispense his brand of advice and wisdom beyond the readership of Babson's Reports. From 1910 to 1923, he commented on business and other matters as a regular columnist for the Saturday Evening Post. He also contributed weekly columns for the New York Times and for the newspapers owned by the Scripps Syndicate. Babson eventually formed his own syndicate, the Publishers Financial Bureau, to disseminate his writings to papers across the United States. Over the course of 33 years, he authored 47 books, including his autobiography, Actions and Reactions. Although his writings covered topics as diverse as business, education, health, industry, politics, religion, social conditions, and travel, the primary message behind each work was that individuals and society could and should change for the better. The Founding of Babson College Beginning in 1908, Roger Babson offered through Babson's Statistical Organization a correspondence course on how to sell bonds. This endeavor was an instant success and courses in economics, finance, and distribution soon followed. He then saw the need for a private college that specialized in business education. In June 1919, in a special letter to clients of the B.S.O., Roger Babson announced the establishment of a school of business administration to provide not only practical but also ethical training for young men wishing to become business executives. On September 3, 1919, with an enrollment of 27 students, the Babson Institute (renamed Babson College in 1969) held its first classes in the former home of Roger and Grace Babson on Abbott Road in Wellesley Hills. From the very beginning, Roger Babson set out to distinguish the Babson Institute from other colleges offering instruction in business. The Institute provided intensive training in the fundamentals of production, finance, and distribution in just one academic year, rather than the standard four. The curriculum was divided into four subject areas: practical economics, financial management, business psychology, and personal efficiency, which covered topics such as ethics, personal hygiene, and interpersonal relationships. The program's pace did not allow time for liberal arts courses and it was assumed that students would learn these subjects elsewhere. Believing experience to be the best teacher, Roger Babson favored a curriculum that was a combination of both class work and actual business training. Seasoned businessmen instead of career academicians made up the majority of the faculty. To better prepare students for the realities of the business world, the Institute's curriculum focused more on practical experience and less on lectures. Students worked on group projects and class presentations, observed manufacturing processes during field trips to area factories and businesses, met with managers and executives, and viewed industrial films on Saturday mornings. The Institute also maintained a simulated business environment as part of the students' everyday life. The students, required to wear professional attire, kept regular business hours (8:30 a.m. to 5:00 p.m., Monday through Friday, and 8:30 a.m. to noon on Saturday) and were monitored by punching in and out on a time clock. They were also assigned an office desk equipped with a telephone, typewriter, adding machine, and Dictaphone. Personal secretaries typed the students' assignments and correspondence in an effort to accurately reflect the business world. Roger Babson prepared his students to enter their chosen careers as executives, not anonymous members of the work force. The Babson Legacy Babson College continues to be one of Roger Babson's greatest achievements. Remaining close to his initial conception of offering practical business and management instruction, the College now offers a graduate business degree and courses in executive education in addition to a four-year undergraduate business program. Roger Babson's success with Babson College led him to establish Webber College in Babson Park, Florida, in 1927. Named after his granddaughter, Camilla Grace Webber, the College initially provided business education to women, similar in many ways to the courses at Babson College. Webber College is now a coeducational institution. To bring practical business instruction to other parts of the United States, in 1946, Roger Babson established a two- year, certificate-granting school, Utopia College, in Eureka, Kansas. Utopia College graduates were invited to complete their baccalaureate degrees at the Babson Institute. Due to declining enrollments, Utopia College closed in the early 1970s. Following Newton's law of "actions and reactions," as one venture in Roger Babson's life concluded, a new endeavor naturally began. He was never discouraged by setbacks. One of his greatest assets was his willingness to take chances and to rebound when risks overshadowed outcomes. In addition to his pursuits in education and business, Roger Babson actively engaged in religion, politics, and scientific advances. According to Roger Babson, the greatest experience of his life was his religious conversion at the age of fifteen. Indeed, an unshakable faith in God was one of his primary personal beliefs. From 1936 to 1938, Babson served as National Church Moderator for the General Council on the Congregational-Christian Churches (later known as the United Church). During his term, he forced the Council to examine itself and its weaknesses as he continually pushed himself, his business colleagues, and the students who studied at the Babson Institute. Using statistics, Babson showed that church development and attendance followed a cyclical pattern that was similar to business trends. He feared that the declining interest in religious activities was a clear and accurate indicator of the declining moral state of society. His appeals to chart a more morally correct course for the church, and for society, were met with defiance and personal threats. Roger Babson's tenure as moderator ended in great disappointment. However, not one to give up easily, Babson turned his attention to the promotion of an "Open Church." Through a volunteer network, church doors would be unlocked every day, all day, so that persons of any faith could pause for private worship within the spiritual and curative sanctuary of a church. This experiment began in Wellesley in 1938; by 1942, the national Open Church Association was incorporated with its headquarters in Roger Babson's ancestral home of Gloucester. Roger Babson's religious convictions also extended into the world of politics. In 1940, he ran for President of the United States as the candidate for the National Prohibition Party. Although the church-affiliated party was best known for wanting to outlaw vices such as alcohol, gambling, and narcotics, as well as indecent movies and publications, the party also advocated reducing debt and taxation, conserving natural resources, aiding farmers, and "assuring workers and consumers a fair share of industry's products and profits." Although Roger Babson knew his party would not win the election, he felt it was his duty to bring its moral and religious agenda to the nation. Out of a field of eight candidates, Roger Babson followed third behind Franklin Roosevelt and Wendell Wilkie. Another risk that Roger Babson took, although he was often ridiculed, was to promote research on gravity. Believing that the scientific community had done very little to expand upon Isaac Newton's studies of gravity, he created the Gravity Research Foundation in 1948. Roger maintained that a conductor could be built, along the same principles as a waterwheel, for harnessing gravity waves as they occur in nature. He hoped that the invention of a perpetual motion machine would solve the world's dependence on nonrenewable fuels. The nonprofit foundation, which still exists today, encourages research and acts as a clearinghouse for studies on gravity. Throughout his long life and his many enterprises, Roger Babson was able to successfully foresee and foster change while holding fast to fundamental spiritual and ethical values. As a devoted educator, he saw it as his mission to pass along the basic truths that he learned from experience: "It is not knowledge which young people need for success, so much as those basic qualities of integrity, industry, imagination, common sense, self-control and a willingness to struggle and sacrifice. Most individuals already have far more knowledge than they use. They need inheritance and development of a character which will cause them properly to apply this knowledge. . .Real business success comes through the qualities above mentioned, not through money, degrees, or social standing." THE FOUNDATION FOR ECONOMIC STABILIZATION Welcome to the FFES (Foundation for Economic Stabilization) Case Study Course applying principles of mathematical probability to the production of profits from prognostication. The old Romans were wise enough to know that things change and fluctuate. They therefore recognized that the best way to know what would probably happen in the future was to study how changes took place in the past. To symbolize this, their two headed Janus was their chief deity with one head confidently looking to the future as the other head had studied the past. While it is true that few things are certain to happen in the future at a definite time such as the time that a certain person will die in the future, this mathematical probability has made tremendous profits for the insurance concerns that use it, as well as similar profits for investing individuals who employed it. What are some of the important profit making principles that you are now about to learn to use. One is the application to price fluctuations of Newton's law of physics to which the late Roger Babson attributed his fortune of over $50,000,000. The Action and Reaction Rule that states these are equal and opposite. Another is how drawing a single line will enable you to know where the price of any stock or any future is now headed and the probable time it will reach there. Then there are principles that enable you to switch positions so near to the turning points or pivots that start each new trend, that you may be constantly either long or short making money whether price is rising or falling. Also in each weekly letter on the right hand column you'll see some abbreviations that are headed "reasons for actions taken". As a course member now you'll have the glossary of these abbreviations so you can now verify on your own chart that every change of position from long to short has a scientific reason. Have you ever seen elsewhere anyone making such information available. Many of our members have taken other courses and we hope you'll find as they have that this one of yours in the best. Besides the above principles that are unique to this Course you'll also find what we have been informed are better ways of using other well known methods, and as an example we've added channel lines to the popular moving average method in a way that you'll find helps eliminate some of the whip-saws the usual moving average followers frequently find troublesome. Then various members of the past have added improvements that bear their names, as you may do in this wide open field of probability applications to price fluctuations. Your glossary of abbreviations is enclosed so that you may soon get the meaning of the abbreviations that summarize the rules. Other Course studies including some recent Course letters will follow soon. So many investors have doubt as to the possibility of constantly predicting when and where prices will turn. Therefore the Marechal Chart is a good starting point for your studies as he was one of the first to use mathematics to show what the DJI would do during the coming 20 years from the time he copyrighted his chart. Feel free to write whenever you have questions and am confident you'll be happy you've joined this wonderful group of investors who want to become "Good Stewards" as in the parables in Luke 19:11 on and Mathew 25:14 on if my memory is correct. You investors are the life-blood of the economy. Without you there's be no banks, chains or factories, etc. where a person could choose jobs, nor would the government be able to collect the taxes they now get. Your importance has been neglected, too long. Sincerely, Alan H. Andrews, Trustee FFES. {AR 2} THE FOUNDATION FOR ECONOMIC STABILIZATION Alan H. Andrews Trustee 5738 S.W. 53rd Terrace South Miami FL 33155 You will find enclosed the first study of the Course concerning the ML (median line) Method. This enables you to know where the trend of anything that fluctuates at random is headed. What everyone wants to know is where the latest trend is headed, and where the next pivot (P) will be from which the reverse trend will start. The probability of the next P being at the latest ML seems to be about 80%, and even without any additional rules that enable you to be constantly either long or short , the profit potential of this simple rule is tremendous for you. Although Marechal never left us exactly how he was able to predict twenty years in advance what his copyrighted chart showed the Dow Jones Industrial Averages would do, you can draw in the MLs from each P bisecting the distance between the 2 latest alternate Ps, and see that nearly every time the new P occurred when prices met that latest ML. You'll also see that on the right hand side of his chart prices were too strong to drop to the ML that started from the high in 1945, which always signals that a big rise is ahead unless the next trend fails to reach the new ML. This cancels out the prior signal and signals a big move contrary to the big move previously signaled. And as there was no contrary signal after prices failed to drop to reach the ML from the high in 1945, you could be confident of realizing a big gain from your long position taken as soon as prices crossed the parallel to the ML from the high of 1945. You draw this parallel from the third top that the ML was drawn half way below on the distance to Previous P. You can now tell from the enclosed Glossary what the abbreviations mean, in the right hand column of each weekly letter. This enables you to understand the scientific reason for each new position taken based on simple geometry. When you change a position your new methods enable you to be one of the few persons who knows how to be constantly either long or short, in this way you make profits after each rise and fall that follows the rise. You may be whip-sawed a few times but if you get you order in before the market opens the next day, should prices move against the position you have just taken, your losses will be small and often show a small profit. You will see all this after you've done some "paper trading" which you should start on right away showing on your chart where each position was taken. You should concentrate on the ML method applying that even if you have had experience with other methods. For we learn best by concentrating on one thing at a time. When you have a question mark where the question arose and send me a copy of your chart that should also list our profits from the two contracts you take each time you change position. When you write out your question leave a space where my answer can be written and mailed back to you. After you see that your paper trading has made well over the 100% profit rate, it will indicate you are ready to learn the Action and Reaction Method to which my friend the late Roger Babson attributed his fortune of over $50,000,000. Then after that let us know and you will be sent the rest of the Course Studies. Sincerely. Alan H. Andrews, Trustee FFES. Original Alan H. Andrews Materials {AR 3}Glossary and Abbreviations of Course A/R Action Reaction Rule Bears Persons expecting market to go down, or who are "short" the market. From the French Proverb about selling the bearskin before catching the bear. Bulls Persons expecting a rise in prices B Buy Bottoms Low pivots on a price chart CL Center line about which moving averages fluctuate or the line used in A/R DL Daily limit for price fluctuations D Down, usually as applied to trend, as in DT meaning down trend. DT is usually indicated by lines through top pivots, showing the slope of drop in prices. EP Expanding pivots where price swings get wider toward tops of a trend. IEP means inverted expanding pivot found near end of a DT. SEP means skewed EP where swings get wider but not about a level line as in EP, IEP means swings get wider about a sloping CL. ER Elliot's Rule FL Fan lines or radiating ribs as in the Courses exclusive "Horn of Plenty" study FND First notice day, the day holders of positions are notified of delivery due under each terminating futures contract GAP Denoted by G as in GU meaning gap up, or GD means gap down. Shown on bar charts when no price on today's range is opposite any of Yesterday's range. Technically and empirically the price at one extreme of a days range may be opposite the extreme of the next day's range, and still have the properties of a true gap. HR Hagopian's rule found only in this Course Hedge To take insurance of some kind against loss. E.g. sale of a future by a producer who thinks prices will be lower when he is able to deliver. ITL Imaginary trend line used by Morton's Rule found only in this Course MA Moving average MIT Market if touched means that your order is to be executed at market when a specified price has been reached even if only the prior orders to yours were executed at the specified price. ML Median line, & MLH means median line parallel. Used to signal change in trend when price touches or pass past these lines, under specified conditions. MPL Multi-pivot lines, lines that pass through 3 or more pivots. Used as CL about which to measure A/R MMPL Maximum MPL, the line on any chart that passes through the greatest number of P. used as a CL it has the highest probability in measuring A/R OI Open interest, the number of contracts open in a future at a given time. P Pivot, a turning point. It is the extreme on a bar chart where a change in trend takes place. Knowing where Ps will occur is key to profit from fluctuations. P-L A line from the Peak of a price swing to the Low. L-P from Low to Peak. R Reaction line, the equidistant line from a CL that the Action (A) line is opposite. This law of physics stated by Newton that Action and Reaction are equal and opposite was first applied to prices by your Course Director's friend the late Roger Babson, who attributed his earnings of over $50,000,000 to this law. S Sell SH Sliding parallel W or WL Warning line parallel to MLH and same distance from MLH as MLH is from ML. Probability of pivot at or near WLs. There may be several WLs all equidistant, and several MLs and CLs such as RML, meaning reverse ML or MPL and (0-3) and (0-4) or (4) both minor through closes, or major through end of ranges. {AR 4}FFES CASE STUDY COURSE RULES Median lines and MLH: the MLs enable the user to be one of the few who can tell where the prices are headed, and the place they will reach about 80% of the time, and when approximately that place will be reached. Slopes of alternate MLs of comparable length indicate the trend. When both recent MLs slope in the same direction the trend is strong and price change rapid. A reverse ML is formed when 1ML2-3 is exactly reached at P4, and is a reliable CL for applying the AR method. There is a high probability that: 1. prices will reach the latest ML 2. prices will either reverse on meeting the ML or gap through it 3. when prices pass through the ML, they will pull back to it 4. when prices reverse before reaching the ML, leaving a "space", they will move more in the opposite direction than when prices were rising toward the ML. 5. Prices reverse at any ML or extension of a prior ML. Frequently, after crossing a lower MLH, prices continue to rise along the MLH before the further drop that was signaled by passing through. So here you can use a sliding parallel through the bottom of the range of the most recent day as a sell signal if prices drop through that SH. MLH are places beyond which each day you place a buy or sell order before the market opens the next day if prices pass through that MLH. MLs between P2 and P3 can start from nearby or more remote P1s, and prices tend to reverse at each of these MLs. The distance of each MLH from its ML is the distance of the next warning line (WL) from that MLH. When a second "space" reversal