I am planning on doing a longer piece on the heterogeneous nature of Asian markets as a function of their cultural and economic background. In the meantime I needed to generate a chart of the comparative performance of the Nikkei, the Hang Seng and the doggy Shanghai Composite over the past year.
I like everyone else has been ear bashed by the notion of the fiscal cliff – that is yet another seemingly childish staring contest by people who are supposedly adults. We have seen several of these this year particularly in Europe where the Greeks and the Germans tried to out dickhead each other before actually being vaguely grown up about things.
However, the question to me is what impact does this narrative fallacy that is the fact that we like a good story have upon the market. Interestingly enough it doesn’t seem to be worry it. Much like the re-election of Obama hasn’t worried it.
The chart below is of the NYSE Cumulative New High/New Low Index and the S&P500
As can be seen stocks within the US market have been making new highs since the bottom of 2009 and have continued to do so for the past three years with a slight pause in the first half of 2011.
It is easy to get distracted by all the talk surrounding markets and this talk is in large part a distraction. From my reading of the trend there are only two important considerations
1. Will the S&P500 trend beyond the 1550 mark – if it does good – if it doesn’t also good….
2. Will stocks within the US market continue to make new highs and support this move beyond 1550.
The rest is just the chatter of squealing monkeys…..
My news reader picked up this little piece this morning –
Bank of America Corp.’s Savita Subramanian yesterday joined Citigroup Inc.’s Tobias Levkovich and Bank of Montreal (BMO)’s Brian Belski in predicting the benchmark gauge for U.S. stocks will top the high of 1,565.15 set on Oct. 9, 2007. The rest of the 15 strategist Bloomberg tracks have yet to make a 2013 estimate.
I was going to write a piece on the fallacy of prediction but I have done that to death and a list of some of the things I have said over the years can be found here –
Call me lazy but I have outsourced this task today. However, if you are faint hearted look away now…….
It often surprises me that we dont seek to learn from the best in the world but rather that we slavishly copy the worst in the world. It is quite clear by many measures that Finland has one of the worlds best education systems. It produces outcomes well beyond our own which seems to be based upon a somewhat dysfunctional US model.
If we are going to be a country that does more than dig dirt out of the ground then we need to start paying attention to what others are doing.
You can also find a bullet point version of the doco here
Markets are good at telling you what the real story is. Watching price is not like listening to someone tell a story since people place their own filters on the information they receive and then filter it again for public consumption. People tell themselves what they want to hear and what they think will be palatable to others.
We continue to hear how China and their insatiable demand for everything will save the world and us in particular. Who else are we going to sell dirt to and then buy it back as a tv if not the Chinese.
The funny thing is the Shanghai Composite doesnt seem to be singing the same tune at present……
I wonder why?