Galt's Gulch

Consensus on ‘scary’ 1929 chart: Enough already, it’s not happening

Posted by mminnick 10 years, 2 months ago to Business
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The market will do what the market will do. Just remember one thing - the market is a GAMBLE notan INVESTMENT. Make sure you can afford to loose everything you put into it.
SOURCE URL: http://blogs.marketwatch.com/thetell/2014/02/14/consensus-on-scary-1929-chart-enough-already-its-not-happening/

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  • Posted by deBohun 10 years, 2 months ago
    And pay no attention to the men behind the curtain, they are confidence cons. They will tell you what you want to hear, until your pocket is empty.
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  • Posted by CircuitGuy 10 years, 2 months ago
    Markets are places where people come together to buy and sell things. You can use them to get things you need, sell things you have, invest, or gamble. Markets are not gambling, although people can gamble with them. Markets are just a herd of people buying and selling stuff.
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    • Posted by mminnick 10 years, 2 months ago
      The market are random process drive by the behavior of a very minor number of players who may or may not be rational players. Participation in this "game" is gambling. You have no control over the outcome of you wager (investment). You only control the point at which you quit playing the game and sometimes not even that.
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    • Posted by straightlinelogic 10 years, 2 months ago
      Your last sentence is more right than you know. Markets are just a herd, and they act like herds. I spent most of my career trading bonds (now I'm a writer) and after 28 years, the main conclusion I've reached is that markets are merely exercises in crowd, or herd, psychology. After 5 years of a rising market, most people think the market will keep rising. They always do at the top. Nothing is certain in life but looking at options pricing and implied volatilities, a bet the other way is both cheap and potentially lucrative, since markets go down much faster than they go up. As I said in my latest novel, The Golden Pinnacle (available on Amazon), "The crowd never thinks. People are only comfortable in a pack, and they're most comfortable in one that's racing off a cliff."
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      • Posted by CircuitGuy 10 years, 2 months ago
        Right. You cannot work out something's value based on how it's value has changed. Say they build a bridge near some land and some big company locates there. The land might go up, but that doesn't mean the next news will be good.

        A company's earnings go up because they invent a new technology. As that technology commoditizes, they may or may not be able to continue doing well. They may do very well by getting into the non-commoditized portions and letting integrators buy the modules and do the low-tech stuff. It all depends on how well they server their customers.

        I basically agree with what you're saying on VIX time premium, although I don't know if there's a clear contrarian formula that usually works. When you enter any options contract, someone wins and someone loses. Both parties may "win" if the intent was to transfer risk, as in insurance, but no other value is created. If someone creates a new product or service, though, that's real value, not something based on speculative herd mania.
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