Why is the market rising?!

[frugal.rock]

Well: in my opinion, there is opportunity outside of the sectors; if you can time it and pick it.

When you say "outside of the sectors", can you elaborate?
I am not sure what it means!
Cheers.

F.Rock

 

[aus_trader]

Perhaps we can do great on this forum; but I will not unleash the decades of what I have learnt for pittance.

Well it's always up to individuals to share what they know. I understand not publicly sharing some secretive material/knowledge that you may have paid money to learn/acquire, so that's all good.

I have also paid for courses, seminars, newsletters etc in the past and although some were useful in developing me to who I am today, most didn't really add value. There isn't any proprietary techniques/formulae/method/recipe that I use for trading/investing. It really comes down to a lot of hard work and time spent researching. So I am happy to share what I find and what I know.

 

[Smurf1976]

I am happy to share what I find and what I know.

Only things I won't share are:

1. Anything that would be legally questionable.

2. The workings of a market indicator jointly developed by myself and another person since I don't have their permission to publicly share how it works. I will however say that it's in bullish territory at present.

Anything else no problems.

 

[ducati916]

Perhaps we can do great on this forum; but I will not unleash the decades of what I have learnt for pittance.

1. That is a common mind-set. I have had exactly that mind-set myself early on, thinking that I had discovered something new/etc. There is very little if anything that is truly unique.

2. Second: even if you were to discuss or implement your 'system' in real time, you will still have those that disagree/argue/insult you etc. Now there can be (a) logical disagreement, there can be (b) disagreement because of a lack of understanding (if your methodology is off the beaten track) and there can be (c) disagreement simply because they like to disagree. Only (c) is frustrating. The other two might actually improve your system for you.

3. A further (although unrelated) issue is this: unless your methodology was proven beyond any doubt to be 100%: ( and even then people will not use it to enter the market) anything less than 100% will have people sitting on their hands doing nothing except argue against X. This is more likely due to fear of loss. You cannot be 100% all-in when playing the market. If you are, your tolerance to risk is too low: this will in-of-itself prevent you from winning over time. You will never make it past the short term.

4. Which brings us to your last point: compensation. Earning a return on your investment of time/money is surely a function of engaging with the market. Unless you system is so sensitive to additional capital following it (which it simply won't be) or you think that others will trade against it (why would they if it is foolproof) then what harm is incurred? Nil.

jog on
duc

 

[qldfrog]

Perhaps we can do great on this forum; but I will not unleash the decades of what I have learnt for pittance.

Funny, while i get older, 8 actually get more and more willing to actually share my learnings even with some actually random strangers, just to avoid open minded people to repeat the mistakes i made.
I do not reveal full code etc to many as it would very quickly influence my own systems, but otherwise i thought giving and taking was the purpose, exchange, and how many time have i not solved an issue just by trying to explain it?
Anyway to each his her own.

 

[ducati916]

1. The problem that we will inevitably face will be stagflation/recession-inflation due to the unprecedented quantitative easing and productive destruction.

2. I believe that under-consumption is the problem that governments must address in all economic depressions. The Central Banks pumping money into the markets will not address the underlying issue of under-consumption as it won't fix the problem of unemployment due to the capital being misallocated.

3. When the nation gets back to work, we may then be faced with over-saving and still be stuck in an under-consumption environment.

4. To make matters worse, a tsunami of debt has been amassing since the 2008 GFC, and when this tidal wave inevitably crashes; the world will go into an unrecoverable economic shock.

And from the 'Trading the Bounce' thread:



Which has been re-iterated on this thread. From another earlier post, I'm assuming (always dangerous) that your economics is rooted within the Austrian methodology (as is mine).

Therefore the question becomes: What is the real economy?

I think that the confusion arises because within the total economy, there are a multitude of sub-economies. The stock market is within ( logically it has to be) the economy, but it is a different economy than that of the consumer.

The stock market is the 'Producer' economy. It is not (for the purpose of pricing shares) the consumer economy. Which is not to say that the consumer has no relevance, only that the consumer is a single variable.

In [1] above you identify 'stagflation' (which is high inflation and low growth) as a further variable. Agreed.



Inflation is simply not an issue currently. Further we must distinguish two types of inflation. Inflation (that matters to the market) is PRODUCER inflation: not consumer inflation. Consumer inflation is rampant and has been for decades. The only inflation the market cares about is producer inflation.

Why?

Because producer inflation cuts into the profit margin of the business. Consumer inflation adds to the profit margin of the business. In the chart above the 1970-1980 period was 'stagflationary'. Profitability and growth were severely impacted by producer based inflation:

(i) Commodity prices high;
(ii) Employee costs high (Union activity, Marginal productivity low/etc);
(iii) Dollar weak;
(iv) Less globalisation;
(v) Less technology;
(vi) Debt/Equity ratio was lower (cost of debt far lower than cost of equity currently adding leverage which increases profitability to a point)
(vii) Other





2. Essentially underconsumption can be defined as: a state of affairs in which a part of the goods produced cannot be consumed because the people who could consume them are by their poverty prevented from buying them. These goods remain unsold or can be swapped only at prices not covering the cost of production. Hence various disarrangements and disturbances arise, the total complex of which is called economic depression.

Instead of producing those goods for which the demand of the consumers is most intense, they produce less-urgently-needed goods or things which cannot be sold at all. These inefficient entrepreneurs suffer losses while their more efficient competitors who anticipated the wishes of the consumers earn profits. The losses of the former group of entrepreneurs are not caused by a general abstention from buying in the part of the public; they are due to the fact that the public prefers to buy other goods. Thus these businesses will go into liquidation and unemployment may well be the short-term result. This is (generally) not a desirable political result.

Keynes advocated government deficit spending in tough times. Not (as we currently have) continuously. Of course due to the levels of debt, only default is an option. Inflation is a drip-by-drip default that works both for government and Corporations.

Therefore while the deflationary forces operate in the Producer's interest, 'inflation' or expansion of the credit supply only works for the Producer, increasing profitability: although from the above chart, it can be seen that profitability is looking vulnerable. Huge bursts of QE will (in the short term) boost profitability, hence the market rising.

What is relevant is: will the COVID crisis so damage the globalisation trend that profitability tumbles? Will the oil war create an inflation in oil (commodities)? Does it even matter for some of the huge Tech firms? (Certainly to power their massive database farms energy will be an issue, hence the alternate 'green' drive?).

3. Only the wealthy save. Everyone else lives paycheck-to-paycheck.



The velocity of money is so low currently that the probability of an inflation that can damage the reserve status of the US$ is not currently a threat. Of course that may change.

4. While all the above holds true, the debt tsunami is a long way off. Of course (again) that could change.

Summary: the market is the economy: just not the consumer economy. It is the Producer economy which is quite distinct from the consumer.

jog on
duc

 

[qldfrog]

instructive as ever

 

[So_Cynical]

The market went up a lot because it went down a lot more, and all that stimulus, more than twice the stimulus of the GFC...all that money has to go somewhere.

 

[gartley]

The market went up because the FED has mastered the art of manipulation......

 

[Smurf1976]

The market went up because the FED has mastered the art of manipulation......

Given there's been a few musical references on the forum lately I'll add another one and call this the Milli Vanilli rally.

For those too young to get the reference, Google will explain. In short, fake singers who made it all the way to the top of the charts until the truth was revealed and it spectacularly fell apart. That could well be where the market ends up........

 

[bluekelah]

guys market is up becoz iron ore prices are through the roof once again! That's becoz Brazil has been hit super bad by covid and mining there has been hit. Big Bonanaza for our miners!!

 

[aus_trader]

Given there's been a few musical references on the forum lately I'll add another one and call this the Milli Vanilli rally.

For those too young to get the reference, Google will explain. In short, fake singers who made it all the way to the top of the charts until the truth was revealed and it spectacularly fell apart. That could well be where the market ends up........

Yeah, I remember those two hot model imposters

Good looking and good at lip syncing but sucked at singing !

 

[Chronos-Plutus]

1. That is a common mind-set. I have had exactly that mind-set myself early on, thinking that I had discovered something new/etc. There is very little if anything that is truly unique.

2. Second: even if you were to discuss or implement your 'system' in real time, you will still have those that disagree/argue/insult you etc. Now there can be (a) logical disagreement, there can be (b) disagreement because of a lack of understanding (if your methodology is off the beaten track) and there can be (c) disagreement simply because they like to disagree. Only (c) is frustrating. The other two might actually improve your system for you.

3. A further (although unrelated) issue is this: unless your methodology was proven beyond any doubt to be 100%: ( and even then people will not use it to enter the market) anything less than 100% will have people sitting on their hands doing nothing except argue against X. This is more likely due to fear of loss. You cannot be 100% all-in when playing the market. If you are, your tolerance to risk is too low: this will in-of-itself prevent you from winning over time. You will never make it past the short term.

4. Which brings us to your last point: compensation. Earning a return on your investment of time/money is surely a function of engaging with the market. Unless you system is so sensitive to additional capital following it (which it simply won't be) or you think that others will trade against it (why would they if it is foolproof) then what harm is incurred? Nil.

jog on
duc

You make some valid points, however all you need is just a team of a few to become very wealthy; if that is what people seek here.

 

[Chronos-Plutus]

And from the 'Trading the Bounce' thread:

View attachment 104028

Which has been re-iterated on this thread. From another earlier post, I'm assuming (always dangerous) that your economics is rooted within the Austrian methodology (as is mine).

Therefore the question becomes: What is the real economy?

I think that the confusion arises because within the total economy, there are a multitude of sub-economies. The stock market is within ( logically it has to be) the economy, but it is a different economy than that of the consumer.

The stock market is the 'Producer' economy. It is not (for the purpose of pricing shares) the consumer economy. Which is not to say that the consumer has no relevance, only that the consumer is a single variable.

In [1] above you identify 'stagflation' (which is high inflation and low growth) as a further variable. Agreed.

View attachment 104029

Inflation is simply not an issue currently. Further we must distinguish two types of inflation. Inflation (that matters to the market) is PRODUCER inflation: not consumer inflation. Consumer inflation is rampant and has been for decades. The only inflation the market cares about is producer inflation.

Why?

Because producer inflation cuts into the profit margin of the business. Consumer inflation adds to the profit margin of the business. In the chart above the 1970-1980 period was 'stagflationary'. Profitability and growth were severely impacted by producer based inflation:

(i) Commodity prices high;
(ii) Employee costs high (Union activity, Marginal productivity low/etc);
(iii) Dollar weak;
(iv) Less globalisation;
(v) Less technology;
(vi) Debt/Equity ratio was lower (cost of debt far lower than cost of equity currently adding leverage which increases profitability to a point)
(vii) Other

View attachment 104030
View attachment 104032 View attachment 104033
View attachment 104034

2. Essentially underconsumption can be defined as: a state of affairs in which a part of the goods produced cannot be consumed because the people who could consume them are by their poverty prevented from buying them. These goods remain unsold or can be swapped only at prices not covering the cost of production. Hence various disarrangements and disturbances arise, the total complex of which is called economic depression.

Instead of producing those goods for which the demand of the consumers is most intense, they produce less-urgently-needed goods or things which cannot be sold at all. These inefficient entrepreneurs suffer losses while their more efficient competitors who anticipated the wishes of the consumers earn profits. The losses of the former group of entrepreneurs are not caused by a general abstention from buying in the part of the public; they are due to the fact that the public prefers to buy other goods. Thus these businesses will go into liquidation and unemployment may well be the short-term result. This is (generally) not a desirable political result.

Keynes advocated government deficit spending in tough times. Not (as we currently have) continuously. Of course due to the levels of debt, only default is an option. Inflation is a drip-by-drip default that works both for government and Corporations.

Therefore while the deflationary forces operate in the Producer's interest, 'inflation' or expansion of the credit supply only works for the Producer, increasing profitability: although from the above chart, it can be seen that profitability is looking vulnerable. Huge bursts of QE will (in the short term) boost profitability, hence the market rising.

What is relevant is: will the COVID crisis so damage the globalisation trend that profitability tumbles? Will the oil war create an inflation in oil (commodities)? Does it even matter for some of the huge Tech firms? (Certainly to power their massive database farms energy will be an issue, hence the alternate 'green' drive?).

3. Only the wealthy save. Everyone else lives paycheck-to-paycheck.

View attachment 104036

The velocity of money is so low currently that the probability of an inflation that can damage the reserve status of the US$ is not currently a threat. Of course that may change.

4. While all the above holds true, the debt tsunami is a long way off. Of course (again) that could change.

Summary: the market is the economy: just not the consumer economy. It is the Producer economy which is quite distinct from the consumer.

jog on
duc

Great response.

Under-consumption theory is multifaceted though, as it is always the underlying problem for governments to address when in recession/depression.

I think the vast majority of governments have defaulted in the past. The reserve currency has never lasted for longer than a 100 years or so. A monetary reset is coming, whether it be in 10 years or 50 years.

The global debt tsunami is unavoidable, it will come and there is nothing that anyone can do about it.

 

[qldfrog]

https://www.livewiremarkets.com/wires/abc-of-equities-recovery-rally
Like the extra info there, etf,flows, @ducati916 Mr Le Duc might see if it fits with his views

 

[aus_trader]

https://www.livewiremarkets.com/wires/abc-of-equities-recovery-rally
Like the extra info there, etf,flows, @ducati916 Mr Le Duc might see if it fits with his views

Good article qldfrog. The following caught my attention:

 

[qldfrog]

Good article qldfrog. The following caught my attention:
View attachment 104417

It did too and so should favour my systems which are very small caps intense

 

[Chronos-Plutus]

It did too and so should favour my systems which are very small caps intense

It's the FED; that the control the market!

They will pump it up, to maintain the narrative to support the government of the day!

Trump will have an over-inflated sharemarket, when the nation is in recession.

Trade accordingly! To short this is difficult, not sure how to trade it.

 

[aus_trader]

It's the FED; that the control the market!

Trade accordingly! To short this is difficult, not sure how to trade it.

Me too, but my best guess is: stay on while FED pumps ?

I hope they ease off the accelerator, rather than slamming on the brakes !

 

[Chronos-Plutus]

Me too, but my best guess is: stay on while FED pumps ?

I hope they ease off the accelerator, rather than slamming on the brakes !

In my opinion the the DOW is going to run over 29000; but I don't have the capital and I am not willing to sacrifice fingers .