Comments for entry "Here Come the Market Manipulators" at Dilbert.com Blog

Comment from DrDr

ThuPMCDTE_Rthth

IF the Fed is smart (and I have to assume there are a few smart people there somewhere), they will NOT end QE abruptly, but slowly exit it. So they won't go from bond purchases of $85B a month to zero the next month after the announcement. They will announce a gradual reduction in the amount of repurchases so as to end the program in a time period of 9-18 months. Same thing with interest rates. So as not to shock the markets, or flip the yield curve over, they will GRADUALLY restore Fed Funds rates to "normal" levels, say 0.25% every 2-3 months over the course of two years. If smart does not prevail, and stupid does, the above pattern will NOT be used, and you should exit the markets until the dust settles. Well, at least that's what I will be doing!

Comment from DrDr

ThuPMCDTE_Rthth

You are swapping cause and effect regarding what makes the market take more than a small and short corrective "dive". The major prolonged bear markets ARE foretellable, based on other economic fundamentals, that the smart money watches like a hawk. Want a preview? Go to the website AdvancedProjections dot com. Right now, all six indicators are green...

Comment from DrDr

ThuPMCDTE_Rthth

Comment from j_l_Larson

WedPMCSTE_Rthth

Knowing how superstitious business people are, and I've known a statistically significant (to me) few. I want to make a prediction for the year that nothing much is going to happen this year. Nobody wants to start a business in 2013, because nobody wants to put on paper that they were founded in 2013 and spook all those superstitious PHBs. As a result, the economy will sort of drag along as it was last year with nothing new and exciting happening, possibly even appearing recession or depression-like. People who are working on the new and really exciting stuff are going to hold off their reveal until January 2014, when you are going to see an explosions of awesome come out of nowhere all at once. On the other hand, people who do start a business this year are commendably not superstitious, and therefore might be worth investing in. Or else they have a self-destructive streak and they would like it to be played out on a large scale. Take-away prediction: nothing much happens in 2013, shock and awe in 2014

Comment from EricZ

TuePMCSTE_Rthth

Scott you are so right on with this one. As a matter of fact you almost perfectly summarized Atlas Shrugged and more specifically the tactics employed by Francisco D'Arconia to "screw back" the other billionaires who were !$%*!$%* him. Ayn Rand took over 8 years to write her magnum opus - your summary is laser accurate -in one page- thanks!

Comment from hankfu

MonPMCSTE_Rthth

Here is why I believe the market will go up. In the macro sense, the fed low interest rates and pumping billions into liquidity into the markets will inevitably lead to this formula <= reduced purchasing power of dollar = increased equities prices>. Notice we are not talking real wealth here, just the simple math that more liquid dollars equal equity higher prices. 100% true that historically, retail investors jumping into a market is a sign of a bubble and time to get out. However, past performance is not always a predictor of future performance. The increase in equity prices may continue as long as liquidity is being pumped in. Also very true that the fed does not yet have a real strategy to unwind its liquidity moves (or at least none stated). An example of the liquidity factor is when a member of the fed hinted at cutting back on QE, the Dow tanked almost 200 points in two days. Bernanke got back on TV the following week and said he intends to keep pumping...markets go up. Also true observation that with a 2% GDP propped up by government deficit spending (true GDP without government deficit spending would be negative), equities look overvalued with growth over 2%. Again, look at the impact of liquidity on the market prices and that explains it. The day the fed suddenly announces the end of QE, then look for a 10% to 15% reduction in the markets.

Comment from lmalinofsky

MonAMCSTE_Rthth

I believe it was John P. Getty who had this advice for a young man considering putting his money in the market: "My boy, if you do go into the market, promise me you won't get out at the bottom."

Comment from lmalinofsky

MonAMCSTE_Rthth

Everyone has an algorithm or strategy to beat the market, and yours is as good as anyone's, because anyone had the right analysis if his prediction came true. However if a prediction does come true people credit the analysis rather than good fortune-- who knows what other, even more-important factors may have been in play? That's why creating a new system, even if it's based on many previous, useful systems, probably has no more chance of big success than most other new systems. An exception might be finding a non-obvious technical pattern that correlates very well with success. But then if you reveal the pattern, people start to use it, to bet on it or against it, and its value will collapse because now it's something everyone is controlling for.

Comment from EMU

SunPMCSTE_Rrdrd

karbonator: This is called "freedom". You don't need a reason to allow it, you need a reason to forbid it. So far I just don't see any: - The current crisis was caused by overly complex investment products and reckless lending. HFT played no role in it. - Flash crashes are very few and of no consequence for private investors. The only ones who get bitten are other robotraders and about them I can only say: "So what?"

Comment from karbonator

SunPMCSTE_Rrdrd

Isn't the fundamental reason for having a stock market so companies can raise cash to use in their operations? I never heard a good explanation why it's allowed and healthy for the market to keep a stock for just a few milliseconds. Couldn't we remove a lot of volatility by saying you have to keep a stock for at least 24 hours before selling it? Or what if we said, you can sell within 24 hours, but then you'd have to pay a 0.1% transaction fee? I don't get it why we allow opening the market for pure speculation as it seems to run counter to what the system was meant for in the first place...

Comment from BipolarPolitics

SunPMCSTE_Rrdrd

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Comment from RavenBlack

SunPMCSTE_Rrdrd

Last night it struck me that even that bastion of "everyone agrees on this" financial advice is statistically rubbish, "diversify". If you want to "probably barely do okay" then diversify is good advice, but on average a person who diversifies does worse than a person who picks a single stock at random. Why? Because if you're diversifying manually (picking a bunch of stocks) you pay $4-$10 for each trade, so $8-$20 for each stock you both buy and sell, which is required before you've actually made money. If you're diversifying automatically, say by buying into an EFT, then the company that runs the EFT is taking a percentage of your money every year. Since, on average, a randomly picked stock does precisely as well as a randomly diversified portfolio (and we know from other statistics that also on average a random diversified portfolio does just as well as an advisor-picked diversified portfolio), picking a single stock does better because less money goes to managers/trading companies. While it is true that by picking one stock at random you are at much greater risk of losing all your money, you are equally at much greater 'risk' of doubling or tripling your money. Diversifying to reduce the risk of losing badly is like going a casino to play roulette and betting on everything except 35. Sure, you're much less likely to lose badly, but you're guaranteed to not win that well either, and you're not actually guaranteed to not lose. Except it's actually worse because also you have to either pay an extra dollar for every number you bet on, or pay someone else to do the betting for you. The people who do benefit from diversification are the people giving the advice and the people who get the per-trade fees.

Comment from mhlong47

SunPMCSTE_Rrdrd

From a purely statistical and generally well understood standpoint, Phantom IIâ€™s comments below make quite good sense. Problem is, not every certified financial advisor is brilliant or even right. The ones who are/were, are probably rich enough themselves that theyâ€™re now in another profession (managing their own moneyâ€¦with some help). The ones that arenâ€™t are still out there. Oh, some will probably hit it right on occasion enough to keep employed. The bad ones will fall by the wayside to be replaced by new ones with a huge difference of abilities. My mother-in-law met a neighbor who is(was?) a CFA working for one of the big companies. He professionally got her into several â€˜canâ€™t missâ€™ opportunities. She told us, my wife and I talked to him and invested some. After a significant time (1 or more years, I forget), one of ours was still messing around, the other up significantly. I took the profits and got out. Both tanked after that. My mother-in-law stayed in, lost a huge amount. The guy now looks the other way when we happen to pass. So yes, see some certified analyst, listen to what he or she says, but remember, itâ€™s your money, not his or hers. So YOU have to keep paying attention. And especially donâ€™t be greedy. I manage our 401k's. Both have been moving up steadily, 2008 made a small dent (very small), and they're doing fine, not great, but acceptable (I'm diversified). But don't listen to me, either.

Comment from surfish

SunPMCSTE_Rrdrd

Right on the money. The small investor would do better stowing the money in the trashcan. Cigars can be found here, Scott: http://www.valueinvestingcongress.com/ Ask Einhorn, Cramer, Soros, Loeb, Ackman for details .... Between these guys and computer trading pingpong, we're screwed. Boycott the market.

Comment from Josh_the_Vet

SunPMCSTE_Rrdrd

Have you looked at Austrian Business Cycle theory? They're the ones who predicted the 2008 crash that "nobody saw coming" and they are still ignored by everybody who has power or influence (except Ron Paul, who could more be said to have the latter).

Comment from timmackey

SunAMCSTE_Rrdrd

I think, indeed from direct personal experience I know, cognac and cigars are still alive and well and living in Sydney, and, I dare say, in all other financial centres.

Comment from EMU

SatPMCSTE_Rndnd

emptc12: Could you be persuaded to invest in the chinese economy, particularlarly the IT and spyware sector? Btw, I take the blame for the demise of the ARM Risc PC and the Psion notebooks (you know, the ones that could run for a month on 2 AA batteries). Both went out of business after I had gotten around to buy something from them. Oh, and I've busted 2 bakeries, too, one pub and at least one ice cream cafe. I suspect my current favourite pub only stays alive because a few years ago I stopped being a regular there.

Comment from RavenBlack

SatPMCSTE_Rndnd

Oh hey, it's one of your favorites Scott, the "completely misrepresenting your position and calling you an idiot" article - http://www.huffingtonpost.com/2013/03/01/scott-adams-stock-market_n_2791557.html Icing on the cake is the conclusion, "Simply do not sell your stocks when there is bad news. In the end you will be just as wealthy as the market manipulators. You're welcome." Apparently the author believes that a person who sells before a crash, and buys back at the lower price, is in the exact same financial position as someone who just held on. I'm definitely going to take the financial advice of someone who can't do simple arithmetic! They must be right because they wrote with such confidence, and such disdain for what they imagined Scott's position to be!

Comment from Vconomics

SatPMCSTE_Rndnd

I used to work at TD a couple years back and my boss took me to lunch one day where he was meeting a couple hedge fund managers. And while at lunch they were talking about they're families, upcoming vacations and going short CAT and the RUSSELL 2000 (these were going to be big positions). That was in early July 2011 and sure enough, about a month later, the market tanked because of the Euro crisis. Some hedge fund managers do talk to each other. But your theory is basically correct. It's called synchronization. Buy the fear, sell the euphoria. They also have black boxes that have algorithms to tell them when to sell. Once an important level is breached, all black boxes will sell.

Comment from Petethefed

SatPMCSTE_Rndnd

Take a look at Sergie Eisenstein's 1925 movie "Strike". Good depiction of the fat cats who are in a room drinking their cognac and smoking cigars as they plot their next move.