Philosopher, Juris Doctor, surfer, trader, investor, musician, black belt, sailor, semi-centenarian. He lives on the mountain in Kona, Hawaii, with his family.
Jim Sogi contributes to the Dept of Changing Cycles
Why do cycles change? Why does the price go up, then shift direction and go down, from hours to hour, day to day? Why do memes take hold, spread, fade away? What gives an economy and fiat currency confidence, strength, then later weakness. What starts irrational exuberance, and depression. How do you know when the cycle has changed? How do you change public opinion? What causes events? Who knows the answers rules the world. A few hypotheses to measure markets might help advance the cause. Let's reject the hanging hypothesis from the start and consider a few smaller bits.
Dr. Niederhoffer studied the effect of news on price. Consider the converse. Price causes news. Price affects the general level of optimism and doubt which drives events and their reaction. Last week was notable how price preceded the news. Same for the prior weeks and months before. Coverage of the political climate this last week was strongly related to price movement, as was Refco story the week before, as was the hurricane last month and the month before. It is worth study.
News is reflective and descriptive, not in terms of factual accuracy, which it is not, but in terms of outlook. Unfortunately, the public following news are doubly behind the form. Recent discussions of journalists missed the mark. Journalistic analysis itself is not predictive, it is a reflection of the current meme and should be regarded as meta news, rather than meaningful analysis. Media can be manipulated to accomplish hidden agendas, but is a dangerous tool as recently demonstrated. Media uses itself as self promotion. This needs to be considered. News is a barometer. No one criticizes the barometric pressure. Like news, it is an indicator of conditions and tells you to put on a slicker not to curse the rain. News sways public opinion. There is a reflexive cycle at work.
There is information in news, but following media analysis is not the way to profit. It is descriptive rather than predictive. Analysis of news as intelligence information is the better approach, in many layers. One way news seems relevant to price is to discern relative levels. Absolute price itself give little relative value information. The news puts price in context allowing judgment of value. On Thursday, before the "Leak" announcement, prices crashed. Everyone wanted out before the bad news. A close look revealed two things. First, only the assistant was a likely target, or the VP at worst. It was not the end of the world. Second, the price seems to have built in the news before it was announced. Quite amazing how it does that. A second method is the magazine cover contrary indicator method. Both methods can offer the astute speculator an edge rather than being reactive, head 'em off at the pass.
We should not be so quick to close our minds to these issues until we understand what is happening and what the changing cycles are bringing to the plate as the past few months seem to show. Those who have the answers to the above questions need not worry about such trivia.
Jim Sogi, May 2005