Post Holiday Reads

Equity Valuations Are Stretched, But Does It Matter?

‘Tis the Season to Be Wary

A Fed-Induced Speculative Blowoff

Excerpt:

“As for the notion that the Fed’s targeted Treasury purchases have directly aided the economy, the argument requires bizarre logical gymnastics. It demands one to believe that although the purchases were intended to stimulate the economy by lowering rates, they have been successful without lowering them, and in fact by raising them, because the expectation of lower rates was so stimulative that it caused rates to rise, so that the higher rates can be taken as evidence that lowering rates without lowering them was a success. Oh, brother.”

After Nearly Two Years Of Searching, TrimTabs Still Can’t Figure Out Who Is Buying Stocks

10 Reasons to be Cautious for the 2011 Market Outlook

***

All of these bearish thoughts ring true with me, but the views in those articles sure are hard to codify into a rigid systematic trading approach. A quiz to consider about ‘thinking’ may prove insightful (shout to Ritholtz.com for tip).

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Posted in Economics, Psychology
5 comments on “Post Holiday Reads
  1. Gene says:

    I read this stuff quite a bit but I don’t know that it’s really all that helpful. Disagreements make markets. If everyone was a bull, then the uptrend would be over. Lately I’ve been wondering about this supposed outflow from bond mutual funds into MM funds and stocks. My question is: if “baby boomers” lost tons of money in ’08 will they try to get their money back by going for more aggressive asset allocation or will they try to just keep what they have left, leading to a higher bond weighting than stocks. I don’t know and it probably doesn’t matter.

  2. Trader Ken says:

    I’ve never understood the bearish viewpoint because historically there is no basis for it. People are afraid of the debt, that is what underlies almost all the bearish viewpoints. But historically high debt has led to good/booming economies not crashes in this country.
    Comparisons to Japan and Zimbabwe are unfair because those are completely different cultural, economic, and political systems.

  3. Ken, we have had (2) 50% drops in the last 10 years…and if not for Fed intervention/bailouts…well…it’s just another can kick down the road. Trend following? Whole other story :)

  4. And of course real estate is dead as dead.

  5. Trader Ken says:

    Well I was really referring to economic growth. The economy actually grew about 30% in the last 10years. But as far as the market goes, those 50% drops were preceeded by huge speculative bubbles, the kind where the general public thought they could get rich overnight by buying stocks or real estate. I don’t see that kind of speculation in any market right now. I absolutely think that at some point in the future there will be another 50% drop but it will be after a huge speculative bubble where the entire public is involved thinking they can get rich.

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