Jan

13

I came across Gray Television, which operates CBS and NBC television stations, and which was recommended in Barrons this week. Its philosophy of operating stations in state capitals seems to me the soundest thing I've heard since such capitals always increase in population, influence, and commerce. According to Nock's idea, the only job that matters in the U.S. is the Secretary of the Interior. When I visited Brussels in 2001 and saw the E.C. starting there, I predicted similar growth to Washington. I thought that the real estate market there would have similar growth to that of Washington from the 30's, as more and more plucking of geese was done there. I wonder what other companies are so situated to profit from increases in capital activity.

There is much talk about this being the longest period in market history without a 10% decline, and that it's going to come soon. Noticeably absent is the testing relative to survival statistics that of course shows a hazard rate decreasing after a threshold. But all are waiting for a 10% decline and presumably they will be ready to buy when it comes. Of course, like the 9% decline in May, it will probably come just short of that, not to give them a chance, but if it does come, there should be some nice buying there. There is also talk about the Bernanke put not being as high a strike price as the Greenspan put. Hickey and Faber and R. Forsyth are also very bearish, and this time it is not because of Iraq-as in the previous Abelson world's record for consistent bearishness, comparable to the Caltech streak, or the first rounds lost in Tennis streak–but because of declining world liquidity caused by oil price declines. Discussions of the broken window effect are there, but there is a total obliviousness to the fact that when goods get cheaper, real income and real wages increase, and this raises individual and total wealth. Similarly it's not the GNP measurement problem that the broken window effect is designed to capture, but it is rather the loss in total output that occurs when a broken window is replaced with a new one due to the opportunity cost of fixing it.

With all the talk about mechanical systems that find overvalued stocks–which are all as we have posited many times broken because of faulty data, ever-changing stocks, and low priced effects–it would seem apt to find groups of stocks that are sold down hard by such things as mechanical signals triggered by earning lapses, so that a bull move similar to those by Drew (when he was on the long side, based on and triggered by Little's bearishness before his bankruptcy) in the 19th century could be engendered. The statistics on moves in short interest classified by individual stocks would seem to be a good foundation for such maneuvers.

I am reading Our Brave New World by GaveKal Research and it contains a mass of untested assertions from a money making persona similar to their view that companies that don't manufacture but are designers do much better than manufacturers. This would seem capable of testing via changes in asset levels, and return on capital figures, and one doubts that it would bear out the GaveKal thesis. But their idea that intangibles, knowledge and education, and free trade are the key to prosperity seems to put them on the weather gage.

Vic further adds:

Read this chapter on lognormality, which shows the intricacies of even preliminary work.

Steve B. comments: 

Discussions of the broken window effect are there, but there is a total obliviousness to the fact that when goods get cheaper, real income and real wages increase, and this raises individual and total wealth. Similarly it's not the GNP measurement problem that the broken window effect is designed to capture, but it is rather the loss in total output that occurs when a broken window is replaced with a new one due to the opportunity cost of fixing it.

With all the talk about mechanical systems that find overvalued stocks–which are all as we have posited many times broken because of faulty data, ever-changing stocks, and low priced effects–it would seem apt to find groups of stocks that are sold down hard by such things as mechanical signals triggered…

"The government's statistic is broken" is often heard from the caves of bears as they run out of hard evidence and resort to mud slinging and conspiracy theories. Just last week, the ADP data showed a market with jobs lost only to be replaced by the official numbers of job growth. The latter propelled the markets as the ADP shook out willing sellers and those who thought they were getting some kind of inside information from the ADP numbers.

Some mechanical systems are the shortcuts of part time traders and the sellers of fortune. There are opportunities in stocks that trade away from their peers only because they have been sold hard due to some trivial news event that caused a large enough price move to trigger mechanical systems. The price based trader will always be with us and I suspect some have already found some of their trigger points, such as was done years earlier by Market Makers holding the "book."


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