The Charts Posted Over The Last Few Days
If you couldn't tell, the prior couple of day's posts were of Russia, Emerging Markets, Brazil and the Nasdaq 100. The Nasdaq 100 chart is not a current chart but of the blow off into 2000. The other three charts are current charts. Similarities? They look like the same chart both in percentage gains and pattern. What I didn't post is that the Nikkei, the Kospi and quite a few other charts have similar patterns today. Oh, there are other charts with similar patterns such as the Dow in 1929. I won't go into the psychology of this pattern but it is a sign that human behavior is repeated.
Which markets don't exhibit this pattern today? Large cap European and American stocks. What's driving large caps in Europe and America recently? Many dynamics at once. Money coming out of commodities, money coming out of Asia and money coming out of emerging markets. Since many of the moves are coming very early in the day, I am quite confident much of the money fueling this rally is out of Europe. Obviously not all of it but European and American money fuels the world and it is repositioning. The safest markets on earth are in North America and Europe and money is plowing into large caps, which are by nature somewhat defensive and defensive issues. Much of it likely anticipating the next economic cycle. Wrongly in my opinion but one must remember that some funds and investment vehicles must remain invested. They don't have a choice as individuals do. So, where are they to go? Brazil? Peru? Mexico? Korea? China? Malaysia? Where transparency is like a morning fog in San Francisco? Where risks are truly unknown and without bounds?
There is no doubt global economic softness is here. Where we go, no one knows. You must be willing to rediscover as you go. The biggest problem with perma-bulls and perma-bears is a rigid value system. One cause of rigid values is ego. The manifestation of that cause is premature diagnosis and the inability to identify new facts. How many people were bearish on housing in 2004 and were calling for and end to the bull market then? They missed massive rallies in technology followed by larger rallies in industrials and energy in 2005. How many times in the 1990s did you hear people saying the rally couldn't continue in technology but it did? Or in the early 80s when interest rates were at 21%, how many people would have told you to invest in equities? People talking about peak oil are primary examples of people with rigid values. People saying America is kaput. People telling you we have massive inflation and the long bond is at 4.5%. People talking about gold at $10,000 should so similarly be named. The people telling you China is the next economic miracle have rigid values. All they can only see is 1.3 billion people and dollar signs associated with every one of them. Yet, China has been in a haze for centuries. If it was just about population size....
The point is you must be flexible. You must be willing to rediscover as you go and admit your mistakes and move on. China might become a global economic power some day but today are they really? Peak oil may happen some day yet we are pumping 7 million more barrels per day than six years ago and awash in oil. Thinking in absolutes with your investments is no different than rigid thinking in other aspects of your life. It is dangerous and is actually the cause of personal strife, world conflicts and missed opportunities. You must free your mind of bias.
Which markets don't exhibit this pattern today? Large cap European and American stocks. What's driving large caps in Europe and America recently? Many dynamics at once. Money coming out of commodities, money coming out of Asia and money coming out of emerging markets. Since many of the moves are coming very early in the day, I am quite confident much of the money fueling this rally is out of Europe. Obviously not all of it but European and American money fuels the world and it is repositioning. The safest markets on earth are in North America and Europe and money is plowing into large caps, which are by nature somewhat defensive and defensive issues. Much of it likely anticipating the next economic cycle. Wrongly in my opinion but one must remember that some funds and investment vehicles must remain invested. They don't have a choice as individuals do. So, where are they to go? Brazil? Peru? Mexico? Korea? China? Malaysia? Where transparency is like a morning fog in San Francisco? Where risks are truly unknown and without bounds?
There is no doubt global economic softness is here. Where we go, no one knows. You must be willing to rediscover as you go. The biggest problem with perma-bulls and perma-bears is a rigid value system. One cause of rigid values is ego. The manifestation of that cause is premature diagnosis and the inability to identify new facts. How many people were bearish on housing in 2004 and were calling for and end to the bull market then? They missed massive rallies in technology followed by larger rallies in industrials and energy in 2005. How many times in the 1990s did you hear people saying the rally couldn't continue in technology but it did? Or in the early 80s when interest rates were at 21%, how many people would have told you to invest in equities? People talking about peak oil are primary examples of people with rigid values. People saying America is kaput. People telling you we have massive inflation and the long bond is at 4.5%. People talking about gold at $10,000 should so similarly be named. The people telling you China is the next economic miracle have rigid values. All they can only see is 1.3 billion people and dollar signs associated with every one of them. Yet, China has been in a haze for centuries. If it was just about population size....
The point is you must be flexible. You must be willing to rediscover as you go and admit your mistakes and move on. China might become a global economic power some day but today are they really? Peak oil may happen some day yet we are pumping 7 million more barrels per day than six years ago and awash in oil. Thinking in absolutes with your investments is no different than rigid thinking in other aspects of your life. It is dangerous and is actually the cause of personal strife, world conflicts and missed opportunities. You must free your mind of bias.
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