That has now grown over the past year even further - now companies are changing value by 10-15% on a daily basis - multi billion dollar companies. Not some fly by night dot coms or companies with no defensible business model. I see 50, 75 year old companies trading as if they are small caps with $5 million in revenue. It really creates a circus atmosphere and makes the stock market lose a lot of credibility. If its hedge funds, if its the power of ETFs, if its an A.D.D. video game generation of traders now in their 20s, 30s and early 40s who now dominate trading desks - I don't know. But it is what's been created.
The long term result of this is people will completely abandon the markets as there is no advantage to actual thinking. I personally don't like casinos because I have little to no advantage - the idea is in financial markets you can if you put in the grunt work. Now it appears that this is not the case. And it is not just equity markets - I wanted to pass along some conversation on Realmoney.com today, by someone who has been a long time oil trader.... again none of this is healthy and until (if) it stops there is no investing to be had. Just trading. Mostly by computers based on programs written by PhDs. And we're just onlookers.
| Daniel Dicker | |
| Oil is ridiculous.... | |
11/7/2008 11:04 AM EST |
Absolutely ridiculous how it has traded in SLAVISH LOCKSTEP to the equity market over the last several weeks
I will no longer even countenance an argument that even vaguely mentions fundamentals when it comes to oil trade, at least for now -- there is nothing more happening than capital entry and withdrawal, with all the random motion of an accordion or large scale bellows.......in and out, in and out.
How ridiculous is this? What will the 'experts' (like me, supposedly) DO to give 'expert insight' into such a market? What can anyone say? Crack spreads for gasoline have been NEGATIVE for the last few weeks -- does anyone perceive what this means? It means that the refining product is WORTH LESS than the raw product that makes it -- it's like buying raw iron and losing money manufacturing it into steel girders, buying coffee beans and getting less for a cup of coffee ....... How many industries can survive under these conditions and for how long? That's what the refiners are laboring under ---
RIDICULOUS.
And a response
| Ken Wolff | |
| Oil | |
| 11/7/2008 11:08 AM EST |
9 comments:
I couldn't agree more. I completely agree with you. I wasted a shitload of money in the last year weighing more on fundamentals and thinking about long term. Bought more when Dow took 1000 point plunges only to see the portfolio deteriorating. Over the last week, I am just trying to catch the trend with complete disregard or fundamentals and guess what - I have made profit for consecutive trades after a while. I still think there will be a moment when the kid says "The king is naked"(http://en.wikipedia.org/wiki/The_Emperors_New_Clothes#Plot_summary) i.e. somebody realizes that this is insane and buys big time thereby screwing the big-money-holders who are manipulating at will.
I agree. Fundies are out, which is where Cramer is failing right now. He doesn't like or understand technicals, and that seems to be the only way to make any cash these days. Everything i see is trading either with or as an inverse to the market. It seems that when the dollar rises, the VIX goes up and everything else tanks. I've been pretty much day trading the Proshare Ultras, only when there is a clear market direction (two days!!). However, i suspect the massive VIX swings are slowing. I noticed this by charting $VIX.X and looking at the MACD and Stochastics ... Looks like a turn down to me.
Also, I think it was Guy Adami on 'Fast Money' that said it looked to him that the VIX spikes were receding but not over.
Lastly, yesterday I received an e-blog from Don Fishback, who sells a 'deep in the money call' program. In the article, he noted that there had only been 4 times in recorded history where VIX had spiked like this. Each time was in an October and in each instance, it only lasted a month before tapering off. Unfortunately, there is no consistency in market direction when it slows. His article can be read at :
https://www.donfishback.com/blog/2008/11/05/more-indications-volatility-has-peaked/
It has an accompanying 40 minute video which adds color and background ( and subtle sales pitches..)
If you compare the 1929 year against this last year (price and VIX) you can see an alarming similarity. (This was also noted by Louise Yamada). Unfortunately, the 3 years following that drop and minor correction resulted in a marked further drop. History suggests that the drop was caused by Herbert Hoover's belief that the market would correct itself. And when Roosevelt entered office, the market began to move up again. Hopefully Bernanke and Paulson's efforts will eliminate the Herbert Hoover effect.
jegan
I really hope the market doesn't stay like this. It is a circus. Fundamentals are thrown out the window, but technicals are becoming less reliable as well. I detest the quick capture style of investing.
I agree on the technicals. Some people are saying technicals still work but I disagree wholeheartedly. Only if you are a daytrader and using intraday technicals but that is 0.1% of the real world investing group.
For everyone else it's completely useless out there. Even on good days I don't feel good because there is no carry over day to day - tomorrow could completely erase today. There is no rhyme, reason, pattern and someone who walked in off the street and never was in the market can do as good as you. That's the part that really is a signal this is a joke right now.
one argument is that bubbles overshoot and then overcorrect on the downside. but then again you'd have to be under the assumption that oil was a bubble, which i don't think it is/was. it could be a 'temporary' one, but nothing more.
sure, the amount of quant/blackbox trading algorithms has definitely increased as a percentage of volume traded. but, overall, the percentage relative to every other type of fund/investor has not given them enough "market share" to slosh the market around in unison.
i think that things are more derived from a pushing and pulling in all different directions. every single fund out there, regardless of type, is doing something different. and, on any given day, that "strategy" might do a complete 180 due to a random margin call.
one blackbox says "sell," one large value fund says buy bc of fundamentals, another technicals trading group says sell based on technicals. top all that off with daily unexpected amounts of margin calls. hedge fund and mutual fund forced selling can come at anytime given whatever levels of cash or assets they need to raise to meet the margin call or pay off investors. these unknown kinks in the system just further complicate things.
picture this, 300,000,000 way tug of war, everyone connected in the middle. that middle knot is the market. on each end of the 300,000,000 separate pieces of rope you have someone doing their own thing, whether it be pulling, letting themselves be pulled, or hurling themselves into the middle. then, on top of that, every hour on the hour, one or more ends of the rope "blows up" and snaps, flying all over other competitors and entangling themselves with others.
its just one giant clusterfuck... regardless of type of fund
Well I appreciate TM's blog and MarketFolly's and if I didn't think you were both on the ball, I wouldn't be reading them But as a last comment, I suspect we are just at a level of extreme volatility and once the market picks a direction, that volatility will recede and everyone can go back to whatever worked for them. I've said it before.. Nobody was ready for this market (well aside from Roubini and some perma-bears.)
jegan
And MarketFolly... Thanks for the tip on Zecco Trading. I need to find out what type of trading platform they have, but I need to split my accounts with TDAmeritrade as you can't have two accounts work off their software.
actually to be technically correct everytime I post something about Roubini or anyone else does on Seeking Alpha a flood of "yes but do what he does not what he says" responses come, which must mean Roubini has revealed he has not changed his long allocation in his personal account, which I assume he revealed at some point
Peter Schiff has been dead right but he has been long gold and foreign entities - both destroyed in past half year eh?
Point being it is much easier being a strategist than an investor. If you read through this blog and only read the economic views you'd said "another Roubini! Another Schiff!" Unfortunately I have to actually pick stocks to go along with the concepts.
As for the volatility as more participants melt away why do you think those remain won't have even more outsized weight? That's how it works for elephants...
OK.. I said I was done with this thread...But I just found this ;-)
--------------------------------------------------------
By Alistair Barr, MarketWatch
Last update: 8:32 p.m. EST Nov. 7, 2008
Comments: 65
SAN FRANCISCO (MarketWatch) -- In the midst of the worst financial crisis since the Great Depression, several top hedge fund managers sent a grim message to their investors in October: it isn't over.
One said he was sickened by the crisis, while another admitted shock and embarrassment at the severity of the market slump and the losses his firm suffered. A third warned clients to be careful about buying anything and said it will be years before investors should buy stocks.
T/a doesn't work unless you are a daytrade: agreed
daytraders i know are cleaning up
for me, i am trading paper money lately and am cleaning up (up 26% since early october)
and i have barely touched a chart, i just use sentiment and psychology.
the market will take the least people up or down with it.
and I was focusing in on Schiff more, and he adjusted his forecasts bc of Obama...he says dollar index cutting in half to 40s is no longer best scenario but impossible. he thinks 20-30 now.
some of his foreign stocks are yielding 30-40% though...so he isn't down really, just collect dividends and re-invest and catch doubles/triples within a year when rationality returns
Rogers likes Ag commodities i see, he has been dead right.
but mark you have to watch schiff's audio from his radio show......he calls erin burnett a moron bc SHE IS as is conventional financial advisers (fools)
http://www.youtube.com/watch?v=9U0pHu42xm8&feature=related
that one has his discussion of Obama
and
this is where he calls erin burnett and idiot
http://www.youtube.com/watch?v=jiCQ-NaVVDE&feature=related
schiff would have made a killing shorting financials because he was calling for many to go to 0 since early 2007 but didnt short bc max gain was 100% when he thought dollar could get cut in half which means 0% gain.
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