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Sandy-Cam

As an unabashed fan of extreme weather I bring you Sandy-Cam courtesy of a camera on the 51st floor of the New York Times building.

Punch A Hedge Fund Manager In The Head Day…..

I think a much better idea would be to allow disgruntled clients to pay to punch their hedge fund managers in the head.

Chart Of The Day

Not mine….someone else’s. The chart below dropped into one of my junk email accounts.

This is a chart of the S&P500 PE ratio – I can see what people are attempting to do when they construct such charts. My interpretation is that they are looking for signs of mania – that is a distortion in pricing and therefore increasing risk. Accompanying this is the observation that you might use such a tool to look at periods where shares have been depressed courtesy of extreme pessimism and therefore investing might present an opportunity.

The question I would pose is, how does such a tool enable you to avoid 1987/2001/2007?

The answer is that it doesn’t because what you are looking at is an interesting piece of market history – it is the sort of tool used for postdictive analysis of an event that has by definition passed.

My feeling has always been that there are two better questions to ask at any point in the market cycle.

1. Do I understand what is happening at this point in time?

2. Based upon the answer to Point 1 can you manage the risks involved in the market at present.

Speculation involves risk and their must be a return for that risk. If you are better off sitting on the sidelines because market action is hard to define then your risk management strategy is to hold onto your money. The trader starting with the most money wins – there is no way around this because a 10% loss cannot be  made up by a 10% gain. It requires 11.1% to recover your capital.

 

Surprising Stat Of The Day

This piece was on my weekend reading list and it contains the following surprising stat which I was completely unaware of.

There’s frequent evidence for that in economic data, and in the country’s destiny to become ever-smaller, doomed by demographics that will shrink the population from about 127 million today to 47 million in 2100, according to government data.

I understood that Japan had a rapidly ageing population but I didn’t  quite appreciate the overall impact this would have on population growth.

It does appear that Japan has done a good job of shooting itself in the foot. Having been the envy of the world in the 1980’s it has become mired in a strange form of corporate culture which is best typified by the Olympus scandal.

Its Friday

Why didn’t I see this before seeing the damned film………….

 

October

As we near the end of the magic month….according to some. I thought it might be interesting to see whether October is all its cracked up to be.

Apparently it isn’t, below are the average monthly returns generated using as much data as I could get.

Data trumps bullshit once again….

S&P 500

One of the markets I trade is the S&P 500 which has been in recovery mode since 2009. However, the action this week seems to have put the wind up a few people – the merest mention of a market going down in October seems to send everyone running for the shelters.

Channel breaks are not unusual in an uptrend as shown below.

Likewise drops of 5% or more are not unusual in any move that has sufficient longevity.

In the current move there have been 10 such declines including the current move down.

For the sake of reference you can also see declines of 10% or greater.

 

General Advice Warning

The Trading Game Pty Ltd (ACN: 099 576 253) is an AFSL holder (Licence no: 468163). This information is correct at the time of publishing and may not be reproduced without formal permission. It is of a general nature and does not take into account your objectives, financial situation or needs. Before acting on any of the information you should consider its appropriateness, having regard to your own objectives, financial situation and needs.