Down goes the Dow

Ghost of Igloi wrote:Also, loser runs 10 miles with 10 goat heads in their jock strap mixed with 2 tablespoons of Atomic Balm analgesic.

Upping the stakes? I accept!

You run in a jock strap??

Ghost of Igloi wrote:(1) Well there is as much validity to them as your statistical analysis.

(2) The S&P 500 spent considerable time at 2000-2200 from 8/14-11/16. There is a collective memory there; that is what is important. ...

(1) Well, you might be right! I don't think so, but there you have it...

(2) I think the notion of the markets having a memory has been pretty much demonstrated to be statistically untrue (with a couple of exceptions), and in fact Sornette (in the book you recommended me) goes on at some length on this topic.

Maserati wrote:

You run in a jock strap??

No, but in my junior/high school years in Los Angeles it was mandatory. We did slip some Atomic Balm on one of our teammates jocks. Some gym teachers had jock checks where you had to snap the elastic. We get quite a few goat heads on the trails here in Idaho. You don’t want to step on them barefoot.

the idiot wrote:

Ghost of Igloi wrote:(1) Well there is as much validity to them as your statistical analysis.

(2) The S&P 500 spent considerable time at 2000-2200 from 8/14-11/16. There is a collective memory there; that is what is important. ...

(1) Well, you might be right! I don't think so, but there you have it...

(2) I think the notion of the markets having a memory has been pretty much demonstrated to be statistically untrue (with a couple of exceptions), and in fact Sornette (in the book you recommended me) goes on at some length on this topic.

By memory I don’t mean literally. Investors have purchases and the big gains in the most overvalued period occurred after 11/16. Look at the slope. Just as the run up has a “fear of missing out” the opposing emotion is much stronger of “fear of being wiped out.”

Sold TM and NGG.

Ghost of Igloi wrote:By memory I don’t mean literally. Investors have purchases and the big gains in the most overvalued period occurred after 11/16. Look at the slope. Just as the run up has a “fear of missing out” the opposing emotion is much stronger of “fear of being wiped out.”

Ah, OK, I get you now. I think my "statistical analysis" (which was crude, took about 3-4 hours a couple of years ago) is saying almost exactly the same thing, except that my expectations about reversion to the mean are captured in the forecast I made earlier today, and I'm expecting fluctuations about a line that goes through 3300 at the end of the year, with (I think) most probably a drop below that line for the next couple of months or so so relieve the pressure that's built up with frenzied herd-buying over the past few months. I don't however, share your view that the market is massively overvalued and on the verge of bursting a monstrous bubble like 1929, 2000 and 2008. Time, of course, will reveal whose beliefs are better founded...

the idiot wrote:

Maserati wrote:... +/-500 on a broad exchange is a pretty broad range, not sure if it has any value.

Somebody in this thread (Racket I think) has criticized me in the past for making similarly soft projections

Yes, probably admittedly over-zealously. If you accept that stock movement is generally random (as all accepted mathematical models currently do) then predicting stochastic movement is a difficult task. Personally, I don't place much value in predictions because environmental factors (like, what if a giant flu bug breaks out in China) means that a "accurate" model has to have a conceivable range of like 80% of the entire index. So if the prediction is in a tight range then I'm inclined to think it's total b.s. and if the prediction is in a huge range then I'm inclined to think it's just stating the obvious

idiot,

I believe in the general concept of the log periodic model, but believe the ability to predict timing with same somewhat of a crap shoot. Also, since there is so much belief in index funds and the power central bank I find the systemic risk greater. The fragility of the system is masked by the collective beliefs. So your models may be very accurate on the upside but equally wrong on the downside.

Igy

Racket wrote:... if the prediction is in a huge range then I'm inclined to think it's just stating the obvious

And yet, only Igy has offered a different forecast than me (that I can remember), and when I bracketed the projected market way back on 23 March 2018 (somebody can look back to hunt if they like; the image links at tinypic will all be dead), I had the most likely (median forecast) value at right around 3000 today, with 80% confidence it would lie between 2300 and 3800 (and admittedly wide and useless range), and 40% chance of being between about 2800 and 3300. I claim that this was a more accurate forecast than a claim it would be at 1000 within a year, or the like. And much MUCH better than all the forecasts that were not made... :-)

the idiot wrote:

Racket wrote:... if the prediction is in a huge range then I'm inclined to think it's just stating the obvious

And yet, only Igy has offered a different forecast than me (that I can remember), and when I bracketed the projected market way back on 23 March 2018 (somebody can look back to hunt if they like; the image links at tinypic will all be dead), I had the most likely (median forecast) value at right around 3000 today, with 80% confidence it would lie between 2300 and 3800 (and admittedly wide and useless range), and 40% chance of being between about 2800 and 3300. I claim that this was a more accurate forecast than a claim it would be at 1000 within a year, or the like. And much MUCH better than all the forecasts that were not made... :-)

Of course 99% of Wall Street is in the same camp, but that same number was shocked by the 2000-2002 and 2007-2009 bear markets. I find the psychological behavior of investors far more interesting than the typical mark-up of earnings to a multiple to reach an index price target. The herding behavior is a collective insanity. We’ve had a couple of pretty good breaks and central banks have come to the rescue each time and driving equities to a new level of extreme. To believe that this process can be repeated without recourse begs a greater level of gullibility.

Ghost of Igloi wrote:... To believe that this process can be repeated without recourse begs a greater level of gullibility.

I'm 100% on board with this, but as I've just been criticized (fairly) for the relative uselessness of my own forecasts, yours too are of (relatively) little value when the time frame for the next crash / significant correction / long bear market is unknown, except as a loose basis to (help, in some unknown, unmeasurable) way decide how to allocate investments for an appropriate degree of risk to the individual.

Ghost of Igloi wrote:

The fragility of the system is masked by the collective beliefs.

Igy

Or in other words, the strength of the system is maintainred by the collective beliefs.

Indeed, there is nothing else to the markets, at all. There is no “system external to our beliefs” which can act as an inertial reference frame.

Maserati wrote:

Ghost of Igloi wrote:

The fragility of the system is masked by the collective beliefs.

Igy

Or in other words, the strength of the system is maintainred by the collective beliefs.

Indeed, there is nothing else to the markets, at all. There is no “system external to our beliefs” which can act as an inertial reference frame.

Of course that is why posters on this thread freak when their “belief system” is challenged. That is why I see this market run-up to 3,000? insures a very nasty bear market.

the idiot wrote:

Ghost of Igloi wrote:... To believe that this process can be repeated without recourse begs a greater level of gullibility.

I'm 100% on board with this, but as I've just been criticized (fairly) for the relative uselessness of my own forecasts, yours too are of (relatively) little value when the time frame for the next crash / significant correction / long bear market is unknown, except as a loose basis to (help, in some unknown, unmeasurable) way decide how to allocate investments for an appropriate degree of risk to the individual.

My only true prediction, yet to be proven wrong is at some index level there is poor risk/reward in equities. Overvaluation in any asset class is a function of cash flow and price paid. One can believe, foolishly I might add, that there is some new reality to 4,000 years of financial history. A few weeks back I went thru the financialization of AAPL, and this is actually a very good company. If I say in 2016 the market is 50% overvalued and in 2020 it is 65% overvalued, these are just measurements relative to history. The value of these metrics are never realized at market tops. So none of these comments are surprising—they challenge the religion.

“Oh the hubris of it all. What if the Fed made a major mistake having been way to accommodative, exacerbating asset prices to the record tune of 157% market cap to GDP right in front of a major crisis? What if growth continues to slow as the bond market is suggesting? What if, gosh, it’s not different this time?”

—Sven Henrich, Northman Trader

100 points off the dow session lows, at this point.

Busy, see you all tomorrow for the post-mortem.

Ghost of Igloi wrote:

believe, foolishly I might add, that there is some new reality to 4,000 years of financial history.

Honestly what does this even mean?