“Humility is the only true wisdom by which we prepare our minds to all possible changes of life.”
George Arliss
Comment & Analysis
Induced by the media Rubbernecking
Sometimes it feels good to blame the media for their inept, irrelevant, or ill-informed views. But the problem may be with us and the large amount of useless “news” we are willing to absorb. I do not think this is a new idea – which has more or less used as an explanation of why there are so many stories about the horrible things happening and stories are so few good things are happening.
It’s a bit like driving by the scene of a car accident – there is nothing good to watch, however, it is almost impossible not to look. It’s called browse. And we’re seeing something like half-induced rubbernecking the earthquake and tsunami of Japanese.
In the last week, I can not count the times I’ve seen the economic future of Japan described as uncertain, or its potential global impact described as unknown. Reports are flooding in Japan, however, nobody seems to know what’s going to mean for global markets. Not that we expect anything else, but looking at the markets is obvious. But that has not stopped speculation among reporters broad, commentators and analysts as to what Japan will mean disaster for equities, crude oil, or in the global economy.
It has become profitable to seek risk. I’ll plead guilty:
Europe still seems trapped in a situation between balancing strong financial position in its core and periphery countries. It’s hard not to look at the ugliness of the current euro area, although the market is sending a totally different message.
China has a lot of construction of the ugliness inside its walls. Of the housing bubbles, credit bubbles to the unbalanced growth, with manipulation of the currency, rising inflation – the country commentators gives many reasons to be concerned. However, China has held together in the context of rising risks to its economic model.
The Middle East is no stranger to unrest, and the resulting behavior of crude oil are known to serve some uncertainties. But despite the many calls of threats of supply and inflationary pressures, hitting major economies and global markets have not materialized.
Of course, as the black swan, 2008, commentators have increasingly considered profitable, efficient and powerful to keep readers abreast of all the risks accumulate around the markets. Investors want a sense of security and now understand the value of keeping abreast of events potentially big-time risk.
A reader just sent us this quote for the night:
You should probably change its name to “White Swan”, because the black swans now outnumber whites.
Touché, salesman.
Although many legitimate risks have recently come to light, apparently only this disaster in Japan has the characteristics of a black swan event.
Policy makers have adopted the slogan “Do something, just do nothing.” And despite the critics, their actions have somehow inspired investor confidence and encouraged self-fulfilling way. This is how Martin Feldstein described the recent development of the U.S. economy:
“The key factor in increasing the final sale was a sharp increase in consumer spending. Actual expenditure for personal consumption grew at a robust pace 4.4% as spending on durable consumer goods increased by 21%. That meant the acceleration of growth in consumer spending accounts for almost 100% increase in GDP, increased accounting expenses lasting for nearly half of that increase.
“The increase in consumer spending was not, however, due to increased employment or faster revenue growth. By contrast, reflects a decline in personal saving rate. Household saving has increased from less than 2% of income after tax in 2007 to 6.3% in spring 2010. But then the savings rate fell by one percentage point to 5.3% in December 2010.
“A likely reason for the drop in savings rate and a consequent rise in consumer spending was the strong increase in the stock market, which increased by 15% between August and year-end. That, of course, is what the Fed had been expecting. “
With so many people in search of the risks and many policymakers recognize them and their plans to mitigate these risks, what is left to worry about? Nothing will surprise the markets and clean my property before I have the opportunity to react. I’ll be happy sitting on my investment position so far there is no reason to be afraid.
Not sure what could be a real reason. And in fact, a real reason would be back to its nature as a black swan event truth. But now, sitting and staring into the face of uncertainty is pretty smart.
This brings me to an extract from The Merchant software by Mark Fisher, of not knowing what the market is behaving a certain way, and honor the movement anyway:
If a market is making a major move and traders seem to understand why this market trend will not last long. However, if the market is moving in one direction and nobody has any idea of why then the trend will be prolonged. When the market goes up or down for no apparent reason, it tends to go much further in that direction that people can imagine.
I will argue that the recent rally is 2009-2011 snuck up on many, myself included.
In that sense, it is common vernacular markets climb a wall of worry. That could mean the race-in stocks and commodities is the beginning of a long-term uptrend will continue after some of the doubts are washed through a correction and a subsequent rally to new highs. They call it the “trend is not recognized” the sequence of boom and bust that marks the beginning of a bull market, if you will:
O … that’s not where we are in the sequence and should instead prepare
Otherwise – this sharp rise was simply a “proof of success.” If the decrease in
Last two weeks beyond the explanation, then maybe something is changing
do not see. If the Elliott wave away with it I would bet that we had placed too close to the top of a
Bear market rally, perhaps looking for a little something like this in the S
