Sep

25

Interesting points making the rounds that many asset managers like to keep their ratio of bonds to stocks at a constant percentage. With the 10% increase in bonds and 10% loss in stocks, that could add to a 20 % + increase in stocks assuming bonds unchanged to get back to even. That could put some wind at the back one would think as would the differential between the two rates of return. One would think that the bond interest rate in addition to its other virtues now signals what it thinks the growth of the economy is going to be since inflation generally goes up according to the quantity theory about the same amount as growth. Thus, the fed's signaling of bond yields also forecasted growth.

The declines in the last days of the week brought many unpleasant memories of Oct 19th, 1987, and a relative emailed me to tell me it was reminiscent during the trading fray. One wishes one had paid more attention to that similarity with 1987 and wasn't on such a high horse about the absurdity of similarities dating back 100 years, as well as the cotton trader's knowing that 1987 was going to be the same as 1929 because the monthly moves looked similarly to him.

Such reasoning if widely accepted no matter how absurd can create the seeds of a meme.


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2 Comments so far

  1. Andre Wallin on September 27, 2011 9:23 am

    market rhythm has predictive value for direction rhythm friday midday vs. wed/thurs. went from sharp moves to feeling like it was floating on a cloud.

  2. Andre Wallin on September 27, 2011 8:32 pm

    today megaphone price action with prior swing highs and lows being taken out both ways before decline into close

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