Financial history doesn't repeat itself, but it often rhymes. You can't be stupid enough to trade off anything I say.... I'm lucky they let me out of the straight-jacket long enough to trade.

J. P. Morgan

"Sell down to your sleeping point"

Wednesday, January 20, 2010

Way Too Much Time.

After a weekend of reading "Senate Race is a Market Game Changer!"

And Cramer Doug Kass, CNBC, and my local paper Telling me that the market was UP on the Senate Race.

So, Today it's "SELL THE NEWS"


Every day I wonder, is what I'm hearing today the dumbest thing I've heard this week, Month or year?

This one defiantly, ranks high on that list.


Tony said...

Have you ever read Taleb's The Black Swan? It's really a good book even tho he's kind of a tool.

I read it before he was as famous as he is and this whole pseudo news-driven market meme comes right out of his thesis. The talking heads need to fill air-time and the columnists need to fill pages, so they make up a narrative about "why" the market did something.

Sure, sometimes there is something significant that moves the market: credit crisis, geopolitical events, earnings, etc, but the actual effect is very short-lived. The market then creates a fantasy about this news event, or perhaps something altogether different, and that becomes sustainable.

Most of the time it's just self-sustaining: the young trader who said he's going to keep buying because the market keeps going up. When asked what would trigger him to sell, he said, 'I'll sell if the market goes down.'

For instance, in March we were at 666, trading at 7X trailing earnings; Goldman Sachs at 5X trailing earnings. The news was that credit froze up; the fantasy was that the world would end. The market kept going down because... it kept going down.

Yesterday the news was that health care reform is dead. Yeah! The fantasy is that the "voters have come to their senses" and reason will prevail. Market's up.

Today, the news is that BAC still sucks and the Chinese are still corrupt totalitarians. Boo! The fantasy is that this will bring down western civilization. Market goes down.

It reminds me of a fetus, which does not have a fully functional autonomic nervous system: heart rate fluctuates wildly with any perturbation of the environment.

Such wild swings may be evidence of an intermediate top. Dip-buyers are becoming more cautious.

Eric said...

I tease Taleb, but he is smarter than 90% of the market participants.

In Psychology, it's just called a rationalization.
X happened, and we make up a why, Lightning happens and we decide it must be because there is a god. It's not unique to talking heads or idiot traders..... Just Idiots.

Health care stocks are up because of the Health care bill, Health care stocks are up because the bill is going to fail.

I just don't understand when they don't realize they are being intellectually inconsistent.

If I had a Grand for every day the market was down 100+ and doug Kass called top, I'd be up 5 digits by now.
Doug is calling top because the market is down +100, there is no other reason.

But no reason to put more money against the market unless old doug gets weak in the knees.

It's Minsky that Taleb get's his outlook from, but the thesis is "the Smallest prick pops the bubble", but it's all just Rationalization, for the loss of momentum.

Price drives sentiment, market moves down, and they give it a name.

but you are still talking about Earnings/Growth/ and momentum that are the real drivers of price.

bla bla bla.

Your Fetus story, sounds like teresa's "They have lost it" MEME.

They arn't as bearish on this down day/ as they were on the last. But they just love to call top.

Mamis says, they need to not be ready for it.

Tony said...

Earnings do matter at some point. Ben Graham: "In the long run the market is a weighing machine; in the short run, it's a voting machine."

The fetus story is an anology from medicine. Fetal heart rates fluctuate wildly from 100 to 140 on a moments notice. Very labile. But with extreme lability, from 80 to 180, say, we find the fetus is is in trouble, ie, a pre-mortem tracing.

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