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Question is, in a volatile market, how safe is the DOLLAR anymore? Is cash still the same "safe haven"?
Actually, the dollar looks like it's making a double bottom after a long downtrend.
There's a large open interest position in the Euro which has correlated with the rising stock market. This morning's ECB news boosts the Euro as rising German interest rates narrow the spread with the US treasuries.
Interest rates are still below those at the time of the Lehman collapse. They're comparable to the levels set in 2003 and early 2004.
I don't think there is any doubt about this. Unfortunately that leads to my Idiots Theory. The market behaves in a fickle fashion based on rumors, perceptions and downright idiocy. The market is controlled by actions of a small number of professionals. Those professionals must therefore be idiots largely acting on emotions and fickle behavior rather than acting on logic and analysis. Based on the Idiots Theory, I trust no financial professionals especially advisors and the talking heads who make a living with their talk and/or publications.
The market isn’t “controlled” by anyone – professional or amateur, facile or sophisticated, salubrious or sinister. Have you ever seen one of those constellations of small black birds, first flying in aggregate in one direction, then suddenly turning, as if lashed by preternatural whip? The whole constellation pivots, rotates, goes in other direction; then again, first spooked, then reassured, first in chaotic meandering, then in sturdy unimpeded progress. Is there a leader? Is there an alpha-bird who beats-time, shouts commands, harangues the stragglers?
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Originally Posted by mathjak107
believe it or not there is not a whole lot of link between higher earnings and higher markets .
as much as we think higher profits lead to higher stock prices it really does not work like that .
markets are based on greed ,fear and perception not the here and now .
Long-term trends necessarily must be driven by earnings. If corporate earnings in the year 2000 were the same as they were in the year 1900, I doubt that the Dow would have made much progress over the 20th century.
Indeed, the main premise of buy-and-hold, or as some people piquantly term it, “buy-and-die”, is that as human generations come and go, as wars are fought and governments fall and currencies get replaced by new ones, as horses get replaced with cars and cars become self-driving, well, as all of this dynamism churns, businesses figure out how to sell more stuff and to make more profit. Stocks are a bet on this trend being permanent.
Quote:
Originally Posted by jrkliny
I would also call them talking heads; i.e., they promote their publications to advance their consulting and careers or the need for publish or perish in academia.
We’re all guilty of this. What sales or clicks would be generated, by monotonous intoning, “Do nothing, do nothing, do nothing”? But to Mathjak’s point, there is a difference between aggregating the past, fitting a curve through known data; and extrapolating that curve into the future.
Quote:
Originally Posted by lchoro
Actually, the dollar looks like it's making a double bottom after a long downtrend.
All the better, for it to stay seated the more commodiously.
Long-term trends necessarily must be driven by earnings. If corporate earnings in the year 2000 were the same as they were in the year 1900, I doubt that the Dow would have made much progress over the 20th century.
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.actually stocks have to meet the future perceived earnings . that is why when they miss earnings the stock falls like a rock usually
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the rate the stock increases starts to diminish as it gets closer and closer to meeting those earning expectations . like a stock option , the farther out the date is the more you make . the closer to the end and the closer to expectations the less you make . don't make the expectation and you get punished .
so stocks jump the most when we are still in the depths of stock market hell and still turning the corner . as markets rebound and those earnings materialize the gains slow down more and more . kind of like buy on the rumor sell on the news . it would take underestimated earnings again vs the perception of greater earnings again to get te cycle started again .
.actually stocks have to meet the future perceived earnings . that is why when they miss earnings the stock falls like a rock usually
.
the rate the stock increases starts to diminish as it gets closer and closer to meeting those earning expectations . like a stock option , the farther out the date is the more you make . the closer to the end and the closer to expectations the less you make . don't make the expectation and you get punished .
so stocks jump the most when we are still in the depths of stock market hell and still turning the corner . as markets rebound and those earnings materialize the gains slow down more and more . kind of like buy on the rumor sell on the news . it would take underestimated earnings again vs the perception of greater earnings again to get te cycle started again .
Yes, of course - if we can accurately discern these trends, we can exploit them, and profit more. But is this possible? My point was that ultimately it is actual earnings that move stocks. Expectation of future earnings have to be realized. Those expectations can be rigorous or naive, exuberant or dour. But eventually theory and practice catch up. The question is, how long is that "eventually"? In some cases, it might be decades.
What I am trying to internalize, in light of the dot-com ascendancy and subsequent crash, the Great Recession, and the long (but uneven and uncertain) recovery, is that even a period of say 20 years, is still perhaps "short". This is especially curious, as the whole history of modern stock markets as we know them, it perhaps only 150 years.
This is especially curious, as the whole history of modern stock markets as we know them, it perhaps only 150 years.
Yup. And a lot of the rules of thumb we use are based on less than 100 years of market history. That's not much. So when saying things like "the market always comes back", or "100% stocks is the best allocation if you can mentally handle it"... well, that's all based on a very, very short amount of time.
One of the best arguments for diversification is that we really cannot know for certain if the future will be a lot like the past. Probably it will? But if not I would like to at least eat and stay warm.
Yup. And a lot of the rules of thumb we use are based on less than 100 years of market history. That's not much. So when saying things like "the market always comes back", or "100% stocks is the best allocation if you can mentally handle it"... well, that's all based on a very, very short amount of time.
One of the best arguments for diversification is that we really cannot know for certain if the future will be a lot like the past. Probably it will? But if not I would like to at least eat and stay warm.
we have had 117 30 year rolling periods which is a fair amount of history, all of them have been within 2% of each other in stock market annual average returns. pretty wierd considering how some start and some end .
Things like the original Trinity Study only use data going back to, I think it's 1926. So basically three 30-year periods that don't overlap. Not very much. Mentioning numbers of overlapping periods gives a false impression of more history than is available.
I'm not a bear. Right now is a time for basically a nominal allocation IMO. Been overweight stocks since the Great Recession, but now I think it's time to go to a default stance.
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