November 3, 2014

Corporate Logic vs. Macroeconomics

Paul Krugman, a boogeyman for most conservatives, is nonetheless an Economics Nobel Laureate and knows a thing or two about his specialty, macroeconomics and how what is logical in microeconomics is not so in macroeconomics.

This is probably his (I'm making this number up but you get my drift) 1,187th post about the simple (and yet so hard to understand for so many people) fact that what works for a corporation (or a small business) does not work for a country as a whole (especially for one as big and interconnected as the U.S.):
About that bad advice: Think of the hugely wealthy money managers
who warned Ben Bernanke that the Fed’s efforts to boost the economy
risked “currency debasement”; think of the many corporate chieftains who
solemnly declared that budget deficits were the biggest threat facing
America, and that fixing the debt would cause growth to soar. In Japan,
business leaders played an important role in the fiscal mistakes that have
undermined recent policy success, calling for a tax hike that caused growth
to stall earlier this year, and a second tax hike next year that would be an
even worse error.
 
And on the other side, the past few years have seen repeated vindication
for policy makers who have never met a payroll, but do know a lot about
economic theory and history. The Federal Reserve and the Bank of England
have navigated their way through a once-in-three-generations economic
crisis under the leadership of former college professors — Ben Bernanke,
Janet Yellen and Mervyn King — who, among other things, had the courage
to defy all those tycoons demanding that they stop printing money. The
European Central Bank brought the euro back from the brink of collapse
under the leadership of Mario Draghi, who spent the bulk of his career in
academia and public service.
I know I haven't been very loquacious these past few months (years) as far as my blog goes - my excuses ranging from "too busy trading" to "what's the point?" - but...just saying: come on people, this is not rocket science. Not only that, but aren't these past 6 years proof enough? Isn't it time for some people to admit they were, if not totally wrong (that would be too much to ask), then at least, let's say, slightly mistaken?

August 30, 2014

A Technical Analyst's Dream of a Times Article

Courtesy of the New York Times, a concentrated fount of TA trivia about the last 20 years in the stock market. A little taste:

While taking 16.6 years to double seems awfully slow, it took 17.4 years to go from the first close over 100, in 1968, to the first one over 200, in 1985. A significant bear market in the 1970s intervened. And it took more than 29 years to go from the first close over 25, in 1929, to the first one over 50, in 1958. That period included the Great Depression.

March 12, 2014

What Say You, Mr. Market? (the Early 2014 Edition)

It is way past time we took a little technical look at the market.

While laziness has certainly played a role in my not having updated my last post on the subject in over 6 months, another reason (or excuse if you will) is that, despite the ups and downs (mainly ups) of the market, the many scary dramas (Russian roulette with the debt ceiling culminating with the government shutdown, the Syrian crisis, etc...), the key personnel changes (Janet Yellen's taking over of the Fed being the most notable) and other news-related or corporate developments, things have not changed from a Technical Analysis viewpoint.

Which is to say, we are still in the midst of a Bull market that started in March 2009, and nothing that has transpired to this date would suggest otherwise. While I am not a Technical Analysis absolutist in that I do not believe TA is the ultimate predictive model, I feel it is an excellent descriptive one. I am also obligated to add the disclaimer that what was true at the end of last month may be wrong at the end of the current one. In other words, markets evolve (sometimes much faster than others) and therefore, so do outlooks.

To make my point and for the sake of continuity, I will use, once again, the 20-year monthly chart of the Dow Jones Industrial Average with only one technical indicator (Bollinger Bands with the default 20-period/2-standard-deviation setting). The chart (which is basically a moving 20-year window) will this time be covering the 02/28/1994 to 02/28/2014 period (click chart to enlarge):





To Be Continued...