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I don't disagree that fundamentals often have no validity to market prices
and that they are boring to boot. Markets are not about fundamentals,
markets are about the cycles of human psychology which range from extreme
greed to extreme fear. The truly major cycles run quite regularly ...
roughly every 3-4 generations. There is no great mystery as to the why ...
the collective memory of the living requires 3-4 generations to forget the
extremes of the previous fear ... there was a period in the 1930's during
which investors paid interest (a simplification) to the government for the
privilege of owning treasury bills. And this is where the fundamentals come
in ... one needs to keep an eye on the broad picture of fundamentals because
they tell the trader/investor how everything fits into the big cycle and
that provides guidance regarding market risk. There have been investor
manias for all of recorded history with some of the more recent including
South Sea trading companies, tulips, and the great stock market bubbles of
the 20's and 90's. There have been others, of lesser note such as the bull
market of the 60's led by computer stocks which have not ridden the great
extremes, but never-the-less exhibit the same swings of greed and fear. It
is the basic purpose of technical analysis to attempt the measure and
quantification of fear and greed in the time frame being analyzed whether it
be minutes, hours, days, weeks, months, years, or decades.
My parents vividly remembered and told me stories of the Great Depression
... these were people who were comfortable with cash and would never touch
stocks. I was a hot shot, twenty-something computer entrepreneur during the
1960's. I became intimately familiar with the view of the investment banking
community of those years which would take any carcass public as long as it
was named "computer" something and could be kept on a resuscitator long
enough to extract the 10-15% in various fees to be extracted from the
public's money (AKA IPO proceeds). Eventually, the computer bubble (and
Nifty Fifty) burst and we were treated to televised congressional
investigations, investment bankers vowing to erect "Chinese Walls" (no
disrespect to the Chinese) between investment banking and retail analysts,
and hand wringing regulators vowing to fix things. Any of that sound vaguely
familiar?
The major difference between the 1960's and now is that in the 1960's there
was still enough generational memory remaining from the 1930's to mitigate
some of the excess. As the last great bull market progressed, any
half-witted student of market history could see that there was zero
collective memory of the 1930's. The last of the regulations enacted during
the 1930's were being tossed aside in the name of deregulation, free
enterprise, and the "public good". I vividly remember the congressional
hearings on the repeal of the Glass-Stegal provisions just a few years ago
and thinking that the end of the major cycle could not be far off. And
before Kenneth Lay and Enron there was a guy named Samuel Insul who managed
to construct the greatest corporate Ponzi scheme of the 1920's. It was
probably no coincidence that the foundations of both Enron and Chicago
Edison lay in none other than the boring old utility business. Naturally,
all those old utility regulations passed during the 1930's had since been
relegated to the scrap heap of history so that energy traders could reap
vast profits while screwing the public.
To summarize, your dismissal of history and apparent lack of knowledge
regarding human psychology do not speak well for the quality of your
educational experience. Not only does the end of the latest great bull
market have enormous implications for the pocketbook, but it has enormous
social and political implications. In short, it marks a major shift from the
end of one era to the beginning of another era. In the great scheme of
things, it matters not where one's personal political and economic beliefs
fall in the spectrum, it matters that one understand the shifts of the
cycles. Those who learn from history will understand some of the
implications of this sea change and be in a position to profit from the
opportunities of the new era. It is worth noting that some of today's great
family fortunes were built from the wreckage of the 1920's bull market.
Earl
> I am sure your a cutie but I hardly see how history can be related to
> what is happening in the markets. Our generation has shown the world
> just a taste of what is yet to come. I think fundamentals look
> like they have no consistent validity, not to mention they are
> boring. Maybe someone can make that stuff work, but when I was
> trading FX some time back you had better pay attention to price
> action.
>
> I watched TV today and they were talking about how all the books are
> rigged with public corps, so what's the use in using that data? I
> think you just watch tha tube and whatever they put down you buy and
> what they tout you sell. Wrong -Right? Logical - Not?
>
> thx
> TG
>
>
>
>
>
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