Mar

3

 "Hey, red pants, old man, whats trading like in America?"

Everyone plays it off the announcements. But not the way you'd expect. If the economy is weak, say the unemployment is up, that's very bullish because the Fed will do more QE or they will keep interest rates below zero for longer and interest rates will stay down and then stocks will go up. But then interest rates go up regardless. But stocks go down anyway. And the opposite happens when say the Manufacturing is up. That means less QE. And interest rates will go up. And that 's bearish for stocks, but then interest rates instead go down. But instead of interest rates going down they go up. But stocks go up anyway. Almost all the announcements are ephemeral. Meaningless because of seasonal adjustments, or in case of manufacturing, they only take account of 15% of the US economy for one month, or even worse in one region. But still they effect the market by 1 or 2%. You want to throw up your hands and say, "this isn't right, or as good tennis players used to say when the opponent stayed at the baseline and pushed, "this isn't tennis". But it is the market. Why are things so topsy turvy and volatile after meaningless numbers? To get people to do the wrong thing. To lean the wrong way. To trade and dissipate their wealth through commissions, bid asked spreads, and fear.


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3 Comments so far

  1. anand on February 19, 2015 4:31 pm

    Victor .. I have just discovered your two fantastic books and I have studied them closely, together with Turf Betting by Bacon which you recommend (after an arduous bargaining process with a vintage book dealer across the pond). You have inspired me to look at things in a different way .. albeit after crushing some of my previously closely held beliefs (which was somewhat deflating).

    Could you clarify something for me please which I don’t quite understand yet, you (& Bacon) allude to this at many points .. who is trying ‘to get people to do the wrong thing’? The market as a whole? If this is the case, are you inferring the market has a type of intelligence all of its own, or is it a case of the form moving as part of ever changing cycles?

    Would be grateful for your insight. Anand

  2. Jim Davis on February 22, 2015 10:40 pm

    If I may offer an answer, to give to chair time to do something more productive.

    There are always forces at work , mostly the biggest whales , seeking to create dislocations from fair value, so that they may buy and sell at advantageous prices.

    They will use any excuse and opportunity to inject volatility. Since they are the source of the movement, they can buy the dips and sell the spikes with impunity, having no fear they are on the wrong side of the trade.

    I imagine they get it wrong once in a while, but that just keeps them honest, it doesn’t scare them away.

  3. chair on February 27, 2015 11:58 pm

    Thank you Anand for an excellent query. the market has an invisible evil hand that is designed to maintain its survival. this requires the bottom trophic levels to continuously provide sustenance and chips to the higher levels thru excessive trading, stops, bid asked spreads and commissions. this must always be done while providing the eternal spring of hope. vic Jim your observations are completely consistent with mine and you have expressed it very mordently and well. vic

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