Posts Tagged ‘asset correlations’

THE UNCORRELATED RETURN MYTH?

THE UNCORRELATED RETURN MYTH?

Courtesy of The Pragmatic Capitalist

Dragon painting

I came across this interesting paper (which can be found in its entirety below) the other day, while perusing Paul Kedrosky’s website, regarding uncorrelated returns.  The basic premise of the paper was that there is no such thing as uncorrelated assets. The author conveniently cherry picks the last 36 months to prove his point. Of course the last 36 months can easily be described as unique if not an outlier. Many have been quick to come to the conclusion that the last 36 months not only disprove the efficient market hypothesis, but also disprove the theory of uncorrelated assets.  This is highly flawed in my opinion.

Let me begin to dissect this issue from the beginning (without getting bogged down in too much mundane theory).  Anyone who is a regular reader has likely taken the time to read the “about us” section on the site.  If so, you know that my investment theories aren’t just some cookie cutter “fill the  Morningstar box” approach.  I believe the efficient market hypothesis is one of the greatest tricks ever played on the investment community.  Any market is nothing more than the summation of the decisions of its participants.   Markets, by definition are highly complex dynamic systems that are susceptible to chaos.  To assume that the summation of these decisions is somehow efficient would mean that the decision makers as a whole are efficient.   While this might be true to some extent, human beings (and even the algorithms written by humans) are guaranteed to be inefficient decision makers in a chaotic system.

The investment world is the civilized version of natural selection.  It cuts to the core of every emotion imaginable.  When Joe Schmo goes to work for 25 years straight in an attempt to create a better life for his family and suddenly sees his life’s savings going down the tube because Lehman Bros went bankrupt you can’t possibly expect him to react rationally in such an environment.  This is no different than the man whose family is attacked in the middle of the night.  Do you expect that man to react rationally when everything he lives for is suddenly in harms way? Do human beings make rational and efficient decisions in chaotic scenarios? Even more important, will 1 million humans working…
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Market News

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Financial Markets and Economy

Are We Ready for the Next Recession? (PS Mag)

Sometime in the next three years, the United States economy will likely enter another recession.

In Australia, All That Glitters Isn't Gold (Bloomberg View)

If Australia is an economic miracle -- the so-called Lucky Country, beneficiary of more than a quarter century of uninterrupted growth -- then its banks are its most visible sign of strength. After a near-death experience in the 1990s, they’ve reformed and bounced ...



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Zero Hedge

The Global Bear Market In Freedom

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Erico Matias Tavares via Sinclair & Co.,

Americans will be celebrating Memorial Day this weekend, to honor those who fought and died for the values they have traditionally cherished the most as a nation: life, liberty and the pursuit of happiness.

The world has changed dramatically in recent decades. The geopolitical situation is much more complex, with rising powers challenging America's supremacy. The intractable war on terror seems interm...



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Phil's Favorites

Study Says Lie to Employees to Get Them to Work Harder Without Paying Them More

Courtesy of Mish.

A study that no doubt wasted money concluded employers could get employees to work harder by doing one of two things:

  1. Giving them meaningful work
  2. Convincing the employees their work is meaningful when it isn’t.

Please consider How to Get Employees To Work Harder Without Paying Them More.

A new study walks through a solution to an age-old conundrum for employers: how to make employees work harder without paying them more.

The answer is to give them meaningful work, acc...



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Chart School

Respectable Finish To Week

Courtesy of Declan.

Semiconductors were the star of the week.  The index cleared Match/April congestion and posted six consecutive winning days in a row. Technicals are all in the green and the index is above all key moving averages. Weakness will be a buying opportunity; a test of the 50-day MA would be a good start.


The Russell 2000 managed to regain the prior rising channel. Technicals are positive although it still has to make up relative ground against the Nasdaq. The index hasn't yet cracked new highs but one more days gain may be en...

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ValueWalk

Brian Bares on His Favorite Investment Books and Resources

By Jacob Wolinsky. Originally published at ValueWalk.

Brian Bares on His Favorite Investment Books and Resources

Here are some books he recommends

Berkshire Hathaway letters 

...



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Kimble Charting Solutions

Gold Mining Stocks- Most dangerous time to own them in years?

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

The rally in mining stocks since the first of the year has been very impressive.

The rally has taken Gold Miners ETF GDX up to test the 23% retracement of the collapse over the past 5-years. At the same time it is hitting the 23% level, two other resistance lines are being put to a test, with momentum at the highest levels in the past 5-years.

Joe Friday Just The Facts...



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Insider Scoop

Graham Media Group To Buy WCWJ, CW affiliate In Jacksonville, NBC Affiliate in Roanoke

Courtesy of Benzinga.

Graham Media Group, Inc., a Graham Holdings Company (NYSE: GHC) subsidiary, said it struck a deal with Nexstar Broadcasting Group, Inc. and Media General, Inc. to purchase WCWJ, a CW affiliate television station in Jacksonville, Florida and WSLS, an NBC affiliate television station in Roanoke, Virginia for $60 million in cash and the assumption of certain liabilities.

The agreement to acquire Nextar Broadcasting included pension obligations. Graham Media Group, Inc. would continue to operate both stations under their current network affiliations.

Graham Media said the acquisition is subject to approval by the FCC, other regulatory appr...



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OpTrader

Swing trading portfolio - week of May 23rd, 2016

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Digital Currencies

The Biggest Bitcoin Arbitrage Ever?

Courtesy of Chris at CapitalistExploits

Do you remember when you were growing up and all your friends were allowed Atari game consoles but you weren’t?

Well, I do and the things seemed as foreign to me as Venus. Mostly because the little time I managed to spend on the gaming consoles when my friends weren’t hogging them I found it all a bit silly. I never “got” computer games, and to this day still have poor comprehension of things like Angry Birds.

I suspect that many people around the world view Bitcoin in the same way as I view Angry Birds: with mild amusement and a general lack of understanding as to what the hell all the fuss is about.

I was thinking of this since a buddy of mine recently started ...



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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Biotech

This Is Why Biotech Stocks May Explode Again

Reminder: Pharmboy and Ilene are available to chat with Members.

Here's an interesting article from Investor's Business Daily arguing that biotech stocks are beginning to recover from their recent declines, notwithstanding current weakness.

This Is Why Biotech Stocks May Explode Again

By 

Excerpt:

After a three-year bull run that more than quadrupled its value by its peak last July, IBD’s Medical-Biomed/Biotech Industry Group plunged 50% by early February, hurt by backlashes against high drug prices and mergers that seek to lower corporate taxes.

...



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Mapping The Market

About that debate last night

Although we try to stay focused on finding and managing promising trade ideas, the comments in the comment section sometimes take a political turn (for access, try PSW — click here!). So today, Jean Luc writes,

The GOP debate last night was just unreal – are these people running to be president of the US or to lead a college fraternity! Comparing tool size? The only guy that looks semi-sane is Kasich. The other guys are just like 3 jackals right now. 

And something else – if Trump is the candidate, that little Romney speech yesterday is probably already being made into a commercial. And all these little snippets from the debate will also make some nice ads! If you are a conservative, you have to be scared now. 

Phil writes back,

I was expecting them to start throwing poop at each other &n...



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We know you love coming here for our Stocks & Options education, strategy and trade ideas, and for Phil's daily commentary which you can't live without, but there's more!

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News: If you missed it, you can probably find it in our Market News section. We sift through piles of news so you don't have to.   

If you are looking for non-mainstream, provocatively-narrated news and opinion pieces which promise to make you think -- we feature Zero Hedge, ...



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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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