Shout to Richard Russell for spotting it:

From Wired comes this:

Complexity researchers who study the behavior of stock markets may have identified a signal that precedes crashes. They say the telltale sign is a measure of co-movement, or the likelihood of stocks to move in the same direction. When a market is healthy, co-movement is low. But in the months and years before a crash, co-movement seems to grow.

It continues:

“The financial crisis has shown that mainstream economic theories have limitations that need to be overcome,” said Dirk Helbing of the Swiss Federal Institute of Technology, who specializes in modeling crowd behavior. “Economic systems have become much more complex, and complex systems have certain features — cascading effects, systemic shifts. This calls for new theoretical approaches.”

When will major publications (like Wired), that always love to reveal “new thinking”, learn that the strategies that take advantage of crashes — already exist. Surprise: trend following.

Some question biographical stories of successful trend following traders. They don’t initially see the relevance. I have learned, however, that when you expose people to the subject of trend following trading their learning jumps by leaps and bounds when you introduce them to the real winners. Not the shiny PR bios mind you, but real behind the scenes life stories and strategies. If you can see yourself in the backgrounds of some of the greats, if you can relate to their upbringing and values, if you can relate to their struggles, you are going to be in a much better position to grasp and utilize their trend following strategies. Better yet, by allowing yourself to feel their lives, you will also begin to see that they all have in much common – which may be the secret decoder ring if there ever was one.

View.

Caught this line from Alan Greenspan:

“I conclude that the current government activism is hampering what should be a broad-based robust economic recovery, driven in significant part by the positive wealth effect of a buoyant U.S. and global stock market.”

He means by government activism…QE2? But if there was none of that would there be a “buoyant” stock market? Isn’t Greenspan the chief architect for creating wealth effects in stocks and real estate? I am confused! Not.

I do post assorted stuff that doesn’t make it to my blog on Facebook. Join me.

You do not need to know anything about the fundamentals of a stock or a commodity to make money from it. You do not need to know when the next Apple iPad will be released or if it will be any good — to trade Apple. You do not need to know how far Gold will go up, or down, or even why. That information is irrelevant. The only thing you need to know is which way the market is trending and if you are in that direction Because unlike mutual funds, index investing or value investing, trading trends means you can make money when the market goes up or the market goes down. That is no small distinction in a world dominated by prediction experts filling the airwaves everyday.

I would argue that it is a combination of hard work, smarts and wealth that brings them here, but it is amazing how many readers and clients of mine come from Singapore, Malaysia and Indonesia. Have not been to that area of the world for a few years, but ready to go back.

You can’t spot ‘bubbles’, you can only be react to trends:

He is trying to apply fundamentals to something irrational — bubbles. Is he right about Gold? Most likely, but so what. Knowledge of a bubble doesn’t allow you to profit from said bubble.

A reader writes:

How does Michael Covel pronounce his last name?

Co-vell.

‘Co’ rhyming with toe.

‘Vell’ rhyming with bell.

Equally accented each syllable.