Down goes the Dow

agip wrote:

bizarre day...

the SPX is down 0.25%

The equal weight SP500 is down 2.2%.

Tech is through the roof...everything else is down quite a bit.

Throwing money at AMZN and Apple can go on for a long time.

Banks, real estate and oil down 4-5%

Tesla up 9%

United Airlines down 11%

Ghost of Igloi wrote:

Giles Corey wrote:

Bought Tesla at $590 something a couple of months ago..so have made @ 70% on it in a very short time.

Good thing.

The two airlines I bought last week have killed me so far.

Caveate emptor:

https://twitter.com/robintrack/status/1270823748292222977

Igy, you've been posting warning like buyer beware for years, and i offer the following i dragged up from this thread, posted 5 months ago, and referencing your familiar warnings from July 2018:

seattle prattle wrote:

POST FROM 07/24/2018

Ghost of Igloi wrote:

Seattle,

No problem in their business, you just hold them at ridiculous valuations. You think just like ever investor blinded by greed.

What is wrong headed is your view of how this ends.

We’ll see.

Igy

Microsoft reported earning after market close today, and at this time is up approximately 64% since then.

Thoughts?

On average, the stocks mentioned are up more than 50% from when you said they were grossly over-valued in July 2018.

Most popular stock by number of accounts holding the position. Not by dollar value is my understanding. A day or two ago it was HTZ, and before that JET, or individual airline stocks. The inference is unhinged speculation jumping here or there.

seattle prattle wrote:

Ghost of Igloi wrote:

Caveate emptor:

https://twitter.com/robintrack/status/1270823748292222977

Igy, you've been posting warning like buyer beware for years, and i offer the following i dragged up from this thread, posted 5 months ago, and referencing your familiar warnings from July 2018:

seattle prattle wrote:

POST FROM 07/24/2018

Microsoft reported earning after market close today, and at this time is up approximately 64% since then.

Thoughts?

On average, the stocks mentioned are up more than 50% from when you said they were grossly over-valued in July 2018.

Run your analysis from July 2018 to March 23rd. All of these companies told you their earnings were going down. So all you have is people paying more for falling earnings. The term for that is multiple expansion. In fact I showed their balance sheet distortions here numerous times. The problem was apparent on that March day, and it probably shook your confidence. Now that the Fed and Congress pumped $Trillions in liquidity your bravado is back. OK, we’ll talk about this again.

Seattle,

On a different topic what do you think of a bunch of anarchists taking over a part of your city? Seems pretty weird to me.

Igy

Ghost of Igloi wrote:

seattle prattle wrote:

Igy, you've been posting warning like buyer beware for years, and i offer the following i dragged up from this thread, posted 5 months ago, and referencing your familiar warnings from July 2018:

On average, the stocks mentioned are up more than 50% from when you said they were grossly over-valued in July 2018.

Run your analysis from July 2018 to March 23rd. All of these companies told you their earnings were going down. So all you have is people paying more for falling earnings. The term for that is multiple expansion. In fact I showed their balance sheet distortions here numerous times. The problem was apparent on that March day, and it probably shook your confidence. Now that the Fed and Congress pumped $Trillions in liquidity your bravado is back. OK, we’ll talk about this again.

How many days were the markets at the March 23rd level? One. Why would i pick a day that doesn't represent average value over a time period? The point is that even with two rather huge downturns between the start date and the present, the stocks are trading up strongly.

Fed interventions helped, but that's what the Fed does. And even if their earnings growth rate is slowing, it is outpacing that of the broader market, which creates demand, prices rise accordingly.

Simply, their valuation have been high for a really long time yet they continue to rise. IF that is going to continue to be your predominant metric, your not going to be in sync with price performance of this sector, as proven over the last several years.

OK.

Ghost of Igloi wrote:

Seattle,

On a different topic what do you think of a bunch of anarchists taking over a part of your city? Seems pretty weird to me.

Igy

Mostly peaceful protests going on now. For a few days there, esp. in the beginning, the property damage was getting out of control. And i don't believe that was being done by the protesters gathered to protest racial injustice, but was opportunists seizing an opportunity to wreak their destruction and havoc. I do think the police could have done a better job in those first few days. But i vehemently support the right of these people to gather and call out for reforms.

It's not disrupting the business of the city at this point.

Thanks for asking.

They’re tearing down a statue in St. Paul right now. Interesting most of this lawlessness is happening in liberally run cities. Job losses and frustration in my view. Tolerance for lawlessness surprising—Democrats and Republicans.

By the same token, peaceful protesters shouldn't be met with military responses. Not on our own citizens. That's not the way it works here.

National Guard is military. My high school cross country coach was in the National Guard and was called out to the Watts Riots in 1965. A period of similar social and economic stress in my view.

Peaceful protesters are not the same as a riot.

Sure, agreed. I do think rather than protesting one’s time would be better spent actually working for change. Most of these folks have never had a Black person at their dinner table, let alone work in minority communities. A lot of fake symbolism politically driven,

Ghost of Igloi wrote:

Sure, agreed. I do think rather than protesting one’s time would be better spent actually working for change. Most of these folks have never had a Black person at their dinner table, let alone work in minority communities. A lot of fake symbolism politically driven,

Why don't you let them decide how their time is best spent? If you want to do those things, likewise, you should do them!

seattle prattle wrote:By the same token, peaceful protesters shouldn't be met with military responses. Not on our own citizens. That's not the way it works here.

If it does, that's when you will know the US is in a new revolution. Fingers crossed things don't go that way. It seems the adults in the WH are trying their best to squash the crazy talk...

Ghost of Igloi wrote:Run your analysis from July 2018 to March 23rd. ...

Igy, I sense others, like me, get irritated when you bring up irrelevant past events like this. The markets have been lower than today on almost 100% of all preceding days; March 23rd isn't particularly different than any of those when viewed through the lens of what happened today and what will happen in the future, except to show that wild swings are possible (and will happen again).

The value of the markets (or our portfolios) on 23 March 2020 is completely irrelevant today, as a practical matter. My holdings today and in the future are not tied to what they were on 23 March, except in the respect that they are quite a bit higher now. Looking forward into the future, they may approach similar levels again (I think unlikely but surely not impossible), or they may continue to run away from those levels for some time (much more likely I think, given what we know today).

An equivalent question for you might be to look at what happened between March 23rd and June 8th. We went from 2237 to 3232, a 44.5% increase over 54 trading days. That's sharper than any previous rebound in the record (if we look at 1950 to 2017); previous biggest over 54 trading days was 35%. Unless I've done the math wrong, which is possible...

Racket wrote:(1) ...Probability densities are not subjective. They are rigorously defined. It'd be akin to saying the real number line is in the eye of the beholder.

(2) Appropriateness of a fitted model can be tested through residual diagnostics (for stochastic processes).

(3) You entire argument seems to suggest that all models are equal and none are better than any others ...

(1) Since you use the expression "rigorously defined" I presume you are talking about about probability density functions, which are mathematical constructs, rather than probability distributions, which are a mathematical representation of a set of observations (or a window into some part of reality). Perhaps you conflate the two? The functions are convenient simplifications, and our best effort to represent reality, or fit functions to data. But they are not reality itself. The distributions (which we may attempt to fit PDFs to) are our best effort to inventory reality, subject to whatever uncertainties affect the accuracy of the individual observations. Some probability distributions can be reasonably well represented by probability density functions, from which we can derive some important practical meaning. Others, not so much. Or at least the important parts of the distribution (e.g., the tails for chaotic phenomena) can be devilishly hard to capture meaningfully. I think Igy understands this better than you

(2) I defy you to show this for a model that has accurately (whatever you would like that to mean) forecast / predicted financial markets or asset classes. I'm very interested to see how well you can do this. That would be the pot of gold at the end of the rainbow.

(3) Nonsense. Utter rubbish. I never said that; if you've inferred that, it may begin to explain where our communication is failing.

And I realize I'm conflating terminology also, which likely isn't helpful. A probability distribution, say the normal distribution, can also be a mathematical construct (rather than reality), rigorously defined, or it can represent the observed distribution of observations (which is the sense I was using), which is not a mathematical construct, but is rather a look at reality (subject to uncertainties). So we can attempt to fit the distribution of observations with a probability distribution. Apologies if terminology is getting in the way of concepts. I prefer not to write with academic precision outside academia, and this too may explain part of our communications disconnect. I'm trying to convey concepts with lay language.

Racket wrote:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=424500

If you look at the set of daily changes for S&P 500 from 1950 to 2017, most of them (roughly 60%) fluctuate within +/- 0 to 0.5%, and that set of observations can be fairly well represented by a normal distribution (or a slightly skewed variant). However, the tails don't conform remotely well, and are much better defined (very well defined, actually) by power laws (rather than exponential decay). It's almost impossible to define a PDF that captures the important behaviour of the regular run-of-the-mill market behaviour and also that of the extreme events. You can do a good job of one or the other.

There seems to be a phase transition, or critical point separating domains of different behaviour, at about +/- 0.5%. Outside that range, behaviour starts to get more chaotic or turbulent, and outside +/- 1 to 2 % is entirely chaotic / turbulent.

"Prediction" of chaotic phenomena is a fool's game and can't be done (in my view), except in a statistical sense (through random walks, brownian motion, levy flights, markov chains, whatever).