Archive for the 'delusion of crowds' Category

Debt Disconnect

Published on 29 June 2010 in delusion of crowds and Financial Markets. 0 Comments

The Debt Drug

On Friday I questioned the validity of relying on a single, relatively unreliable and untested measure as a leading indicator. At the risk of sounding like an economist that is not to say I disagree with the conclusions made.

Indeed watching the UK consumers’ response to their emergency ‘austerity’ budget may be a useful predictor for the likely US retrenchment, whenever Obama decides (or more likely, is forced) to follow suit.

Though rather than being a function of the consumer, there is a case to be made that the next major index movement will come from a government’s inability to pay it’s bills and hence stopping the stimulus-led consumer ‘growth’ story in it’s tracks.

Continue reading ‘Debt Disconnect’

Fooled by Randomness, part 1

Published on 25 June 2010 in delusion of crowds and Financial Markets. 0 Comments

I don’t read too much into Mark Hulbert’s commentary over at Marketwatch. Although a contrarian he chooses to place a large emphasis on correlations that simply do not stack up imo.

Continue reading ‘Fooled by Randomness, part 1′

The Emperor Has No Clothes

Published on 23 November 2009 in delusion of crowds, Facebook and information media. 2 Comments

Slacktivism has been exposed as a joke.

Half way through last week a nation erupted; the Republic of Ireland football team crashed out of the World Cup at the hand of Gaul, that of a certain Thierry Henry. A Facebook group was established. It took on something of a life of it’s own – over 300k users inside the first 24 hours.

“Something has to be done”.

FIFA made no mention of the incident in their official match report. It was edited several times, each time the Magnum PIs on Twitter reporting to the world the latest breach of instant populist moral values and punch-drunk notions of democracy. Avatars may not have been coloured green, but the online social network air was turning a particularly dark shade of blue and the feedback loop of increasingly agitated noise fed into itself, reaching a deafening cresendo online while steadily losing touch with reality.
Continue reading ‘The Emperor Has No Clothes’

Inflection Point

Published on 17 June 2009 in delusion of crowds and Financial Markets. 0 Comments

Stocks dived from their recent range at the top of this week, largely for reasons unknown.

While the usual sources of financial infotainment were puzzled at the pullback – citing an absence of negative macroeconomic news – this is in fact a telegraphed “the rally has run out of steam” message. Trader sentiment changes as a function of time, and it is this inability to read the same data consistently that has the greatest impact on market direction beneath the long-term trend. So people have had enough of drinking the government-led recovery Koolaid for now.

What we then look to are combat indicators giving us signs of whether indeed everyone sees this and are still prepared to presevere with a contrarian rally – “climbing the wall of worry”. In such an event watch for a sharp drop as sellers get out quick followed by an equally sharp rebuttal as traders look to get in on the next leg of the rally.

The 2nd scenario is that this is indeed the end of the current rally, whether it then plays out to be a bear market one or the first phase of a recovery would remain to be seen.

So keep an eye on this throughout the week, my thinking at the moment is we’re seeing the beginnings of a summer pull back based on low volume and lack of strong recovery numbers.

Earnings: A Catalyst?

Published on 8 April 2009 in delusion of crowds and Financial Markets. 0 Comments

The smart money is on a resumption of the bear market.

The upcoming earnings season is thought to be the spark that reignites the bears’ tinder. But as this report points out, firms have already downgraded themselves to expect nothing but bad news anyway. There hasn’t been any warnings because the bar has been lowered to a point where no one will come in under it. So I think this might not be the smoking gun the analysts are looking for. Let’s face it, when something like that is telegraphed so far in advance the trades have already been made.

Likely then it will be the visibility vacuum created after the deluge of numbers dries up that provides this rumour based market with sufficient uncertainty to go to the wall once more. Looking forward the consensus is still predicting a 2nd half recovery, or at least a slowdown in the rate of economic decline. This imbalance between a somewhat doveish expectation and the fact there is far more uncertainty built into the economy as things stand is the disconnect to sell into.

If we are to look at the market as a series of quarterly themes, it is the mid-quarter that can often tell the tale for the time frame as a whole.

The phrase “sell in May and go away” is shaping up to be my key investment theme this summer…

Citi Vs GM: First to Fail

Published on 7 March 2009 in delusion of crowds, Financial Markets and Prediction Markets. 0 Comments

The thought also occurred in my head this week – “Citi Vs GM: First to Fail?” Before giving myself a hefty slap across the face and a “GM you dumbass!” sardonic response. A fairer question would be “will GM go bankrupt before Citi’s controlling shareholder is the US government?”.

Either way it’s the public who will be getting nasty over this. A lot more of them are gainfully employed in America’s flagship car wreck than in America’s flagship bad loan. Stand by for a surge in social unrest somewhere in the West in the next few years. Events elsewhere will only serve to stoke things further. My bet isn’t entirely against America on this one.

Here’s what the market thinks:

The Depression.

Published on 30 January 2009 in delusion of crowds and Financial Markets. 1 Comment

Just thought I’d call a spade a spade. At the moment the best way of measuring whether or not commentators believe we’re in the midst of a depression seems to be how often they fail to refer to it as a recession.

Anyway on the subject of blogging on the markets in general, it’s not often I allow myself the opportunity to comment on the daily financial noise, so when I do it’s with the intention of pointing out that the general short term outlook of those who should know better is more or less completely at odds with long term, set-in-stone realities. And it seems even those who do know better are unable to see any other way out of it:

The rise in debt eventually will lead to slower economic growth and diminished standards of living in the U.S

Allan Sinai, chief economist Decision Economics

Nevertheless he supports the Obama stimulus plan. I have a ‘meh’ attitude to all the political hubris surrounding the market today, but I can’t understand all his talk of building for the future when his policies will result in a poorer US tomorrow.

Another noteworthy individual coming from the ‘knows better but doesn’t appear to think there’s anything else for it’ stable is George Soros. He has been expounding exactly what circumstances the US finds itself in, but his solution seems to be to throw more public debt at it. Puzzling.

To put this into perspective, take a look at the ‘Some Inconvenient Truths’ paper causing a stir amongst the more savvy market commentaries. A depression of between 3 – 7 years. Note the FT writer covering the story was equally unable to decide on the state of the economy – the two tags she decided on to accompany the story? Depression and recession.

Things I Don’t Understand

Published on 6 January 2009 in delusion of crowds and Financial Markets. 0 Comments

If economists think we’re going to lose more jobs in 2009, why do analysts feel we’ll buy more cars then 2008?
Why does the US government think getting consumers to spend when they’ve nothing left to spend is a solution?
How far can a market rally on hope?

A Precursor to Privatisation is Nationalisation…

Published on 22 December 2008 in delusion of crowds and Financial Markets. 0 Comments

UK, US, Irish Republic. More will follow…

Once the debt has been drawn down, which will happen, will the 10s become the new 80s? Much more recognised voices than mine can articulate the cycle that may produce it.

And is Brazil, largely seen as immune (insofaras an economy can be immune from a global recession) to events elsewhere, merely being set up as the last domino to fall?

Market Inefficiency

Published on 12 December 2008 in delusion of crowds, Financial Markets and short term plays. 0 Comments

The recent climb for the Dow to just under the 9k mark has been surprising to say the least. If markets like to climb a wall of worry then they had quite a high one to get over of late, economic data in the past two weeks coming in worse than already poor expectations.

But last night the penny dropped, albeit in the form of disappointment over the automakers bailout. That in itself may prove to be unsuccessful even if it passes the senate eventually. The Whitehouse is now looking to use some of the bailout loot reserved for the banks instead. Either way it’s messy and the outcome will be highly uncertain at best, a waste of money from the outside at worst.

The Dow came out of it’s benign hibernation to finish down 200pts. It’s also poised for a triple digit decline today, although just how bad may be tempered by the news that retail sales came in not as bad as expected. Barring a high profile pre-Xmas bankruptcy, I’m looking to find support around 8,200 or if a bankruptcy occurs, somewhere around the mid to upper 7,000 (ie no lower low for the time being).

Continue reading ‘Market Inefficiency’