Dec

27

 1. What is the exact physical principle that makes triangles laid on their sides so strong relative to other shapes and how does this relate to market movements?

2. What is the correlation between the two year change in the S&P and the subsequent one year move, and how has this changed since the 1970s?

3. How can the sharp upward continuous move in the 1950s and 1990s in S&P be reconciled with the well known two year reversal tendency?

4.  Is there any support for the idea that the best strategy in one year is exactly the opposite of what worked in the last year?

5. When will the asset allocator boys change their mix of stocks / bonds back to its "permanent level" now that stocks are down 30% and bonds up 30% from the previous year? Of what relevance are the moves in the market in 1908 and 1909 vis a vis the 40% decline in DJI in 1907 as a comparable to present? Will the reaction to the employment numbers month by month this coming year be opposite to the movements last year, starting with the January 2007 number which was the beginning of the end? How will all the liquidations related to the purported 50 billion fraud work themselves out in the market and have they all been discounted? When will the Nebraska conglomerate sink to a price to book value ratio that befits its status as a firm or man whose mission is not in accord with the future?

Anatoly Veltman responds:

The biggest problem I see for 09 Bull is reconciling investing into paper assets with fear of:

1. …misappropriation

2. …government itself

3. …devaluation

I was previously looking for correction to previous trough as thoroughly sufficient — for Vic and Laurel's bullish quantitative (historical) considerations to kick in. But given both the government and human heart-breaking experiences of 2008 — I tend to think 2009 will not be the easy "intermittent" rebound.

Perry Metzger answers Question 1:

Triangles don’t deform easily because all triangles with a given side length are congruent — there is no way to deform the angles without deforming the length of the sides. This is not true of, for example, quadrilaterals, where you can deform the angles without deforming the length of the sides. I have no idea why any of this would be at all relevant to market movements.


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