Jan

26

 One always likes to see the delphic predictions. After a market has fallen 5 % or so, a market writer will say "temporary top is in". The latest one is DeWayne Reeves an award winner. Yes, of course by random numbers it will take about 100 days. Has to be true.

Anatoly Veltman writes:

These things are different for people who must have a short or long position every day, or people who must only invest for great many years and only selectively divest at times.

I think the real question is by what percentage has the market risen (or at what rate) within the current up cycle vs. the current economic forecast vs. after-tax attraction of alternative investments. If that rate has been too fast (which I speculate), then the market may not gain in 100 or even 1500 days from here. The other matter is foreseeable drawdown, which might simply relieve one of any stake. Who can estimate the coming drag? I think the world has been subjected to more than it's regular doze of mismanagement for just enough time to teeter on the brink of critical mass, debt-wise and moral hazard-wise. So I can't exclude that we're in uncharted territory. I continue to hold opinion that so many years of ZIRP will effect the inflation/deflation perceptions in ways that were never experienced by policy makers before. Thus, I'm afraid that years and decades of markets stats have been poisoned for market application directly ahead. But of course everyone will bet in accordance to their agenda - and not every participant is in it to make money. For example, gold bugs are in it for what they believe is a strive for own freedom. There is a lot of currency uncertainty around the world; I speculate that USD will prevail, but many speculate that technology outpaced the regulators - and that alternative currencies will proliferate. Again, unprecedented.

Ralph Vince writes:

Anatoly raises an interesting point, one I have been thinking about as well: Zirp has changed our models, not just the models we are using to gauge today's market, but models in the foreseeable future will be created on data that has been zirp-perverted (and pump-perverted as well).

For example, if 90 day rates were, say, 4%, and the 3 which is currently around 3.62x%, that inversion would certainly be ominous. But we don;t get to see it. For many years, many equities models were driven in large part by rates (because, if modeled, one would have seen back then the very driving force of rates) one of the more famous and widely-followed "in the day" was that of Abby Joseph Cohen.

Zirp-n-pump has perverted these things, and the effect leaches into many other indicators I suspect (breadth, momentum, etc). I find these days we are relying far more on measures of sentiment (which is mercurial in quantification at best) and trend persistence than in the past (who, in their right mind, would have relied on trend following on equities indexes in the past? That was simply a very bad way to go, "back in the day").


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