Posts Tagged ‘market theory’

How Did Economists Blow It?

Here’s an insightful article by Mark Sunshine in which he identifies the assumption of fair, free and open markets as a reason that economists blew it. I have less trust than him in the notion that people act rationally and would add the "people act rationally" belief to the flaws of models. A must-read article to read along with this one is Ryan Grim’s Priceless: How The Federal Reserve Bought The Economics Profession.  "Priceless" explains why not only are the markets not free, fair and open, but neither is the economic profession.  – Ilene

How Did Economists Blow It? Part 3 – The Assumed Markets Theory

Courtesy of Mark Sunshine’s The Sunshine Report

economistTwo weekends ago Paul Krugman explained in a New York Times Magazine article that many economists can’t forecast the economy because they have a cultish belief in the nearly always wrong efficient market theory. Mr. Krugman’s solution, an academic exorcism where economists renounce their loyalty to the efficient market theory and swear allegiance to neo-Keynesianism, has created quite a stir in the profession and prompted a number of personal and professional attacks on Mr. Krugman. Unfortunately, both Mr. Krugman and the efficient markets believers are both wrong. The theory is correct but the conditions necessary for the efficient markets theory to work don’t exist. 

Mr. Krugman suggests that economists missed the Great Recession because they relied upon mathematical models that assume the economy is a series of free and efficient markets and therefore a self correcting predictable economic organism. Mr. Krugman proposes “economists need to abandon the neat but wrong solution of assuming that everyone is rational and markets work perfectly”. Instead, Mr. Krugman’s solution is to substitute Keynesian models for efficient markets models when he states that “Keynesian economics remains the best framework we have for making sense of recessions and depressions”. 

Unfortunately, the usually smart and intuitive Mr. Krugman forgot that for the efficient market theory to work its primary assumption must be true; that the markets are free, fair and open, and that is simply not the case.

Mr. Krugman isn’t alone in assuming and forecasting based upon markets that don’t exist, and then not understanding why forecasting don’t work. Pretty much the entire economics profession plays a game of pretend when they write about markets without checking the most basic real world underlying operational and functional assumptions. 

Economists assume that the U.S. markets are free, fair
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Phil's Favorites

Congress is considering privacy legislation - be afraid

 

Congress is considering privacy legislation – be afraid

Courtesy of Jeff Sovern, St. John's University

Supreme Court Justice Louis Brandeis called privacy the “right to be let alone.” Perhaps Congress should give states trying to protect consumer data the same right.

For years, a gridlocked Congress ignored privacy, apart from occasionally scolding companies such as Equifax and Marriott after their major data breaches. In its absence, ...



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Zero Hedge

Key Events This Week: Trade War, EU Elections, Durables, PMIs And Fed Minutes

Courtesy of ZeroHedge

Looking at this week's key events, Deutsche Bank's Craig Nicol writes that while the unpredictable nature of US-China trade developments will likely continue to be the main focus for markets again next week, we also have the European Parliament elections circus to look forward to as well as various survey reports including the flash May PMIs which may offer some insight into the impact of trade escalation on economic data. The FOMC and ECB meeting minutes are also due, along with a heavy calendar of Fed officials speaking.

The European Parliament elections will kick off next Thursday with voting continuing into the weekend across the continent, with results expected on Sunday. With the elections surrounded by internal and external challenges for the EU, members di...



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Kimble Charting Solutions

Will S&P 500 Double Top Derail The Rally?

Courtesy of Chris Kimble.

The rally off the December stock market lows has been strong, to say the least. The S&P 500 rallied 25 percent before hitting and testing the 2018 high.

The old highs proved to be formidable resistance and ushered in some volatility in May… and a 5 percent pullback.

In today’s 2-pack, we look at that resistance level – could that be a double top? We can see similar patterns develop on the S&P 500 Index and its Equal Weight counterpart.

Both indexes are testing short-term Fibonacci retracement levels of the recent decline at point (2).

What takes place here after potential double top highs will be important. Stay tuned...



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Insider Scoop

60 Biggest Movers From Friday

Courtesy of Benzinga.

Gainers
  • Fastly, Inc. (NYSE: FSLY) shares jumped 50 percent to close at $23.99 on Friday. Fastly priced its 11.25 million share IPO at $16 per share.
  • Outlook Therapeutics, Inc. (NASDAQ: OTLK) shares climbed 37.3 percent to close at $2.10 on Friday after the stock rose over 68 percent Thursday following an Oppenheimer initiation at Outperform with a price target of $12.
  • Cray Inc. (NASDAQ: CRAY) shares rose 22.5 percent to close at $36.52 after Hewlett Packard Enterpri...


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Chart School

Weekly Market Recap May 18, 2019

Courtesy of Blain.

China – U.S. trade talk continued to dominate the week.   A heavy selloff Monday was followed by 3 up days, with Friday moderately down.

On Monday, Chinese officials announced retaliatory tariffs against the U.S., hitting $60 billion in annual exports to China with new or expanded duties that could reach 25%.

Then on Wednesday:

The Trump administration plans to delay a decision on instituting new tariffs on car and auto part imports for up to six months, according to media reports.

...

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Digital Currencies

Cryptocurrencies are finally going mainstream - the battle is on to bring them under global control

 

Cryptocurrencies are finally going mainstream – the battle is on to bring them under global control

The high seas are getting lower. dianemeise

Courtesy of Iwa Salami, University of East London

The 21st-century revolutionaries who have dominated cryptocurrencies are having to move over. Mainstream financial institutions are adopting these assets and the blockchain technology that enables them, in what ...



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Biotech

DNA as you've never seen it before, thanks to a new nanotechnology imaging method

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

 

DNA as you've never seen it before, thanks to a new nanotechnology imaging method

A map of DNA with the double helix colored blue, the landmarks in green, and the start points for copying the molecule in red. David Gilbert/Kyle Klein, CC BY-ND

Courtesy of David M. Gilbert, Florida State University

...



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ValueWalk

More Examples Of "Typical Tesla "wise-guy scamminess"

By Jacob Wolinsky. Originally published at ValueWalk.

Stanphyl Capital’s letter to investors for the month of March 2019.

rawpixel / Pixabay

Friends and Fellow Investors:

For March 2019 the fund was up approximately 5.5% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 1.9% while the Russell 2000 was down approximately 2.1%. Year-to-date 2019 the fund is up approximately 12.8% while the S&P 500 is up approximately 13.6% and the ...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

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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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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