We are all aware that the internet is full of blogs/sites involving trading the market. Some better then the others but most if not all do interpret the market wrongly. Wishful thinking or outwitting the market is mainly the topic or blaming outside forces and/or third parties for their losing trades.
Online Brokers have a survey of account holders and facts are that a rather scary large percentage per quarter of individual accounts is losing money. These are facts and do not be blinded by many Users, Trolls, Blogmeister, Wannabe Chartists and Hobby Analysts posting in comment sections of blogs winning trades or after fact positions. Unless a blogmeister or user can show ( even a paper trade ) sheet of entering & exiting positions (not ultra short term split seconds & minutes) in timely fashion, ignore their analysis for YOUR OWN GOOD. Trade only what you see yourself and stay away from short term trades. There is NO FAST TRACK to make money in the stock market !
In past 3 years ( don't want to go back to far in time ) we have seen self proclaimed Perma Bears giving the impression having eaten market wisdom with the spoon. When market is up, they all of a sudden have a certain number of longs and those magically make more profits then the large number of shorts. When market is down, all of a sudden they dont have longs and are short only with a large committment. To undermine their wisdom, charts are posted after the facts and usually tight stops are widened only when the stock goes their way after hours, days and weeks. Again, ignore this sort of BS.
The reason why their Pinnocchio Trades must be winners is very obvious. Without any readers of their blog or website there would be no traffic needed for large amount of advertisements or donation buttons to be clicked. The question one must ask themselves is; why does a real trader would need advertising income or worst donations ? Obviously the income does not come from trading and the blog or site is used more unless for social marketing & sales purposes. Some want to sell books others only ads and receive donations. This can only be achieved with winning god like performances.
In addition to the above, when the market goes against them they divert the topic and blame Apple and Ben Bernanke or Jobless Claims or ......... (please insert ).
Probably the most amusing comment I have ever read was " Apple is the market" . WOW, what a statement that was never even remotely supported.
Besides being most likely the dumbest thing I have ever read is the fact that Apple is a listed company that has a percentage in terms of market weight.
The market capitalization of each stock is determined by taking the share price and multiplying it the number of shares outstanding. The companies with the largest market capitalizations, or the greatest values, will have the highest weights in the index. The weight of a company in the index is equal to the market cap of that company divided by the total market cap of all the companies in the index. For example, in March 2012, the total market cap of the S&P 500 was $12.7 trillion. The largest company in the index was Apple , with a market cap of $546 billion. Its weight in the index therefore was 4.3% of the total index.
Since we have determined that the weight is 4.3%, we probably can agree that Apple is not the market.
In addition to the dumbest ever remark is the fact - If indeed AAPL would be the market, why not be long in equities past years?". Easy money for those who believe in it.
Below are the Sector Weights of Indices being far larger then Apple.
We also have a different weighting scheme. Namely, S&500 Market Weight and Equal Weight.
The different weighting schemes will result in different sector exposures. The table below shows the difference in sector weight between the two indexes as of Dec. 30, 2011. For example, in the EWI, the consumer discretionary sector had a weight of 16% but only 10.70% in the MWI. In the MWI, energy was 12.30%, but because there are only 43 stocks, the weight in the S&P 500 EWI is only 8.60%. Understanding the difference in sector make-up will help to determine which index to use.
|Sector||No. of Companies||S&P 500 %||S&P 500 EWI %|
|Sector weight comparison as of Dec. 30, 2011|
And the second dumbest remark is to blame Ben Bernanke and/or the Federal Reserve for every move the market makes against their trades. Because it makes so much sense that the FED can influence short term market moves. LOL
Primary function of the Federal Reserve is to help maintain the economic soundness of the U.S. economy by setting the interest rates that banks charge each other for overnight loans.
AND NOT TO ANNOY PERMA BEARS
The cost of borrowing has direct effects on the costs to businesses and individuals. By raising or lowering this central interest rate, the Fed can influence how fast or how slow the economy will grow or contract. However, it usually takes many months to see the full effect of any changes they make.
Many consumer interest rates are strongly influenced by changes made by the Fed. Usually when the Fed raises or lowers rates, the prime rate (the rate charged to large corporations by banks) changes almost immediately. Many credit card and consumer loan rates are tied directly to the prime rate. In addition, mortgage rates are also greatly influenced by the Fed rate changes.
Since the stock and bond markets are closely interwoven, changes by the Fed can also affect the stock market. While there is no direct link, the market tends to react positively to rate cuts and negatively to rate increases. Usually, "the markets" are already sensing what actions the Fed may take and prices may rise or fall long before the Fed actually meets and announces any changes
For those who do really think the FED is there to be responsible for the disastrous trades of certain individuals, I highly recommend literature on the effects of central bank communicatioand predominantly focused on interest rates. (Perhaps Cook & Hahn and Kuttner Studies might help )
Perhaps those Perma Bears blaming Bernanke for their disastrous trades could explain us a little bit more about monetary policies, federal funds future data, policy intervention and estimated regressions, where a change in an asset price, like a stock index, individual stocks, investment portfolios or market interest rates measured over an interval that brackets the monetary policy announcement.
Perhaps this could be a magic formula ? -> ∆yt = α + βSurpriset + εt <-
and which formula to use to calculate a Surprise ? ->
Or perhaps the Perma Bears have failed to take the Recession Indicator into consideration to capture the changes ?
Return = α + β1Target t ∗ (1 − Rec t) + β2Path t ∗ (1 − Rect) (12) + β3Target t ∗ Rect + β4Path t ∗ Rect + εt
Perma Bears might consider changing their reading materials to:
Basistha, A., and A. Kurov (2008): Macroeconomic cycles and the stock market’s reaction to monetary policy
Belsley, D., E. Kuh, and R. Welsh (1980): Regression Diagnostics: Identifying Influential Data and Sources of Collinearity. Wiley, New York.
Blinder, A. S., M. Ehrmann, M. Fratzscher, J. de Haan, and D.-J. Jansen
(2008): “Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence,” Journal of Economic Literature
Boyd, J. H., J. Hu, and R. Jagannathan (2005): “The Stock Market’s Reaction to Unemployment News: Why Bad News Is Usually Good for Stocks
Brand, C., D. Buncic, and J. Turunen (2010): “The Impact of ECB Monetary Policy Decisions and Communication on the Yield Curve
Very amusing is the fact that Perma Bears never complain about the FED when the market retreats.
Then we have the Wannabe Macro Economic Blogger Types amongs those Perma Bears and they too are indeed very amusing. Reading their Euro Crap News and thinking those EU News will have any impact on the stock market is astonishing. How dumb can any trader be believing today's news has any influence on the market. Certainly the financial problems ahead was known when the market tanked in 2008 and took most of the global listed banks with it down. The media is seeking hypes to report that are irrelevant to the markets future. A good trader is prepared to think & act irrational.
Does the ISM Manfacturing New Order Index look that bad or rather good ?
|MANUFACTURING AT A GLANCE
|Customers' Inventories||44.5||46.0||-1.5||Too Low||Faster||4|
|Backlog of Orders||52.5||52.0||+0.5||Growing||Faster||3|
Any number above 50 depicts economic expansion and below 50 contraction.
US REAL GDP is not bad as well and is actually higher today than it was pre- crisis . Importantly, earnings and the economy are both stronger yet the S&P 500 Index is still far lower compared to 2007 highs ( Please view a nice data website by clicking her )
Well, since this rather long article might have made the reader either leave OT or became tired and/or bored, I leave you with below amusement for this weekend lecture.
Stay healthy and enjoy the weekend
A FEW GOOD BULLS ( dated 7th of October 2011 )