“Markets can remain irrational longer than you can remain solvent” – John Maynard Keynes
Much like Newton was inspired to understand gravity as the Apple fell on his head (or maybe not according to this article!)so too Phil was inspired by nature in his profound work which I affectionately label “Phil’s Market Wave Theory”.With this week’s move in the markets, it seems a particularly appropriate time to recall what Phil said:
At the beach, many people stake out spots near the water but, as the day goes on, the tide gets higher and the people move to higher ground. Some people go much higher and some people move just a little but there’s a certain point where the water crests up onto the beach and sends everyone scurrying for higher ground in a mad dash.
Then it goes the other way!
Just when it seems that the water is going to go higher than it ever went before (and, thanks to global warming it does!)and just when you start to think the next wave will wash over the top and soak everyone, it suddenly stops and an hour later you can’t believe you ever thought the water would get that high as it seems so impossible as you watch it pull away from the beach, exposing sand that hadn’t been seen since the morning .
“The markets are like that. Frothy highs and "impossible" lows and lots of investors scurrying back an forth trying to guess where the next wave will stop (day traders) while others stake out medium-term positions (deck chair people) and still others make substantial long-term plays (beach house owners) and are willing to ride out even the harshest storms. While I have fun playing in the waves I guess I have to think of myself as a shell collector, looking for the opportunities that are uncovered once all the excitement dies down. Let the other people get soaked trying to guess the waves – we can do very well renting deck chairs in any market!
Rolling Options to Ride the Waves
In the stock market, renting deck chairs is akin to selling options (in this case call options).Always a buyer is on the prowl for the next…
I approach the subject of the physics of energy and the economy with some trepidation. An economy seems to be a dissipative system, but what does this really mean? There are not many people who understand dissipative systems, and very few who understand how an economy operates. The combination leads to an awfully lot of false beliefs about the energy needs of an economy.
The primary issue at hand is that, as a dissipative system, every economy has its own energy needs, just as every forest h...
I know…I know. As soon as I wrote that I could almost hear the cries of the “perma-bull” crowd exclaiming “how many times have we heard that before.”
They would be right. The problem with the majority of technical analysis, in my opinion, is that time frames are too short for most investors. When looking at technical price patterns using daily data, there have been numerous occasions where analysts have spotted “Head and Shoulder” patterns, “Hindenberg Omens,” and &ldqu...
The dollar nursed losses around three-and-a-half-month lows on Wednesday, pressured by fears of a global economic slowdown following recent falls in oil prices and growing concerns about the health of European banks.
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Throughout the past 30 days of wild volatility, here’s what I didn’t do.
Panic. Worry. Sell.
In fact, the best I did was add to a couple of positions yesterday. The world was already in an uncertain state for the past 3+ years. It’s just that with the market rising, we pushed the issue to the back of our mind and ignored it.
A number of systemic, structural forces are intersecting in 2016. One is the rise of non-state, non-central-bank-issued crypto-currencies.
We all know money is created and distributed by governments and central banks. The reason is simple: control the money and you control everything.
The invention of the blockchain and crypto-currencies such as Bitcoin have opened the door to non-state, non-central-bank currencies--money that is global and independent of any state or central bank, or indeed, any bank, as crypto-currencies are structurally peer-to-peer, meaning they don't require a bank to function: people can exchange crypto-currencies to pay for goods and services without a bank acting as a clearinghouse for all these transactions.
Last year, the S&P 500 large caps closed 2015 essentially flat on a total return basis, while the NASDAQ 100 showed a little better performance at +8.3% and the Russell 2000 small caps fell -5.9%. Overall, stocks disappointed even in the face of modest expectations, especially the small caps as market leadership was mostly limited to a handful of large and mega-cap darlings.
Notably, the full year chart for the S&P 500 looks very much like 2011. It got off to a good start, drifted sideways for...
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Baxter Int. (BAX) is splitting off its BioSciences division into a new company called Baxalta. Shares of Baxalta will be given as a tax-free dividend, in the ratio of one to one, to BAX holders on record on June 17, 2015. That means, if you want to receive the Baxalta dividend, you need to buy the stock this week (on or before June 12).
Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself.
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 email@example.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.
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