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comment by kleinbl00
kleinbl00  ·  368 days ago  ·  link  ·    ·  parent  ·  post: Trading in a post-truth world

Point by point:

    One could argue that the day-to-day market swings don't have a lot to do with any longer term movements.

I think that by definition, day-to-day swings don't have anything to do with longer-term movements. At the same time, a market that responds so swiftly to any signal - regardless of its provenance - is not a healthy, durable nor rational market.

    One could also make the case that this kind of financial reporting is just picking whichever cause feels like a good fit for the effect observed. Not by which is plausible.

One could indeed. However, the assertion gains credibility in the absence of an alternative or contradictory hypothesis.

    Kleinbl00 you told us you aren't optimistic and went to cash for now, but what makes you think there isn't more time left in this bull market.

Historically speaking, bubbles last much longer than the doom-callers predict. The Crash of 1929 was being called in 1926; the Crash of '87 was being called in '86. Some of the guys I have been following have been predicting a bear market for eighteen months now; none of them has called the top yet.

In other words, there's every reason to predict that the bull market will go on a little longer. However, if you look at market trends over the past year or so we have gradual (or negligible) rises followed by abrupt, catastrophic falls. When the market moves, it moves like a ski jump. I, personally, am willing to skip out on some of the rise if I can skip out on most of the fall.

    Housing has gone out of control in a few places, but not so bad everywhere else.

Housing didn't go out of control "everywhere else" last time. It was the response of superheated markets that broke the world, not national or global uniformity.

    The equity bull market is historically long, but not so remarkable in gains, and there have been some corrections (Jan 2016) which have let of steam and kept people at least partially risk-aware.

This is why most people assert that markets are currently overpriced - market performance has been sluggish-to-even but equity prices are nuts. What corrections there have been have been negligible.

    I think there's a couple years left before there is a big drop in prices.

Rather than simply stating "I think you're 18-21 months long on that one" I will ask why you think this. What aspect of market behavior are you seeing right now that indicates there's another 2 years of runway on this bull market? What tea leaves are you reading? Because history doesn't repeat itself but it rhymes and apparently I'm not seeing what you're seeing.

ThurberMingus  ·  367 days ago  ·  link  ·  

On news: An old, misleading, video may be the most plausible trigger for a bad day for the market, but I think it's more accurate to say the cause is the guessing-game of interpreting the effect of any info, and the effects of effects, and so on. I think nearly all reporting on daily fluctuations is a search for a story that feels right, and I think the weirdness of the stories or the size of the reaction doesn't shed light on the health or durability of any long term trends. I am skeptical of believing in the market's rationality even while it looks like it's rational.

That's my interpretation of it. A relationship between daily market news and anything would be hard to prove or disprove in any meaningful way.

On time until a correction/recession/meltdown:

I am not making a confident prediction that there is 2 years left moving up, just that I don't think a big correction is immanent. I think really slow growth or flat over the next couple years is more likely than big growth or a crash.

I don't see much of the "irrational exuberance" that I would expect in the lead up to a large correction. There are a lot (A) who seem overconfident that the stock market will preform well, a lot (B) who are trying weird things to get a good return, and a lot (C) who are sure it is about to crash. When someone in group B finds a silver bullet and group A starts to join in on the wonderful new thing, I'll be scared and join group C. I hope I will anyway.

Market breadth - was under the impression that market breadth was in a pretty boring range, but while trying to double check that I found a lot of conflicting info, I'll update on that when I get time to look more deeply.

Debt & Housing

Some regions are ripe for a big drop in housing prices, but I don't believe that will have much affect outside of those regions because:

There is less investment money riding on mortgages because rates have dropped, so the financial effects of a housing drop are smaller.

A broad drop in housing is less likely because the delinquency rate is lower and the housing debt service load is lower (because of lower rates).

    What aspect of market behavior are you seeing right now that indicates there's another 2 years of runway on this bull market? What tea leaves are you reading? Because history doesn't repeat itself but it rhymes and apparently I'm not seeing what you're seeing.

Some of the warning signs you see look like unimportant noise to me. And without the warning signs, I think slow overall growth is likely, with some small corrections and rallies along the way.

kleinbl00  ·  367 days ago  ·  link  ·  

Really, our point of contention is about market cycles and their causes. We both agree on the guessing game, but I'm arguing that the guesses get wilder when the market gets more chaotic. You don't see much "irrational exuberance" but it's possible you're not seeing what I'm seeing.

You don't think a broad drop in housing is lower - yet the bankruptcy laws that led to it the first time (harder to discharge debt through bankruptcy) remain and now, the bulk of the workforce is dealing with student loan debt.

So really, it comes down to what we think is important... and you're right - I think this stuff is important.