Wednesday, October 27, 2010

The Joys of Non Correlated Markets

Preface:  My computer is going rogue today, so in between feeling like I am on a 56k modem with spotty connection, I am trying to put out some thoughts today.  We have a host of fascinating pundit comments today and many of the 'brightest minds' are starting to come to the conclusions I've been posting for years - America has turned into one big Ponzi scheme (economy AND stock market).  So this two bit "eccentric" blogger's thoughts are suddenly becoming mainstream.  Again.

Working to get these thoughts posted on the site.... maybe if I can get up to 128k...


I've written countless pieces the past 3 years on the enormous correlations amongst markets in this increasingly computerized, ETF driven market.  It was not always like this, but these correlations have taken much of the joy out of the market as everything is a binary trade off "dollar" or "bond" or whatever the algorithm flavor of the month is.  If not a correlation to an asset, then its a correlation to an economic piece of news i.e. a software company must be sold because a durable goods order came in light.   It is beyond annoying, and caused many of us 'old school' fellows who like to research individual stories to go nutty.

In that skewed environment, on a day like today with a -1% loss in the broader market, we'd be seeing 80, 90, 95% of stocks in the red.  But as I rub my eyes and look at my 'flat' performance on the day I realize what is in my eye is a tear.  A tear of joy.  I have stocks up... on their own merits... generally ignoring the broader market.  Indeed, as I look through stocks I don't own in my watch lists I see green... as if... as if... stock picking matters again.  Oh dear... my heart is aflutter.

However, I know HAL9000 is a brazen beast and likes to tease.  He is giving me today, but tomorrow is another day.  I shall remember today to hold me through the countless tomorrows where every stock on earth must be bought or sold due to ABC algorithm.   But thank you for this one day; it reminded me of my youth when I ditched mutual funds and turned to the dark world of equities mid 90s, or when I was a 'genius' in 99, or when I could actually could hedge properly in 2004.  *dab eyes*


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