Friday, October 10, 2008
Still air in the balloon
The FTSE ended 2007 at 6,456.90. Back in August, I constructed a rough RPI-related graph from 1984 onwards, and to get back to the equivalent of 1984 in real terms, the index would have to drop to around 3,000: at the end of that year the FTSE closed at 1,181.10. We forget how far we've come.
Elliot Wave again
Like Robert McHugh, "Mish" also follows the Elliot Wave theory:
In Elliott Wave terms the index is in an impulsive wave 3 down. At some point there will be a corrective wave 4 up, with still more down to follow in wave 5. A lower low can be expected.
In Elliott Wave terms the index is in an impulsive wave 3 down. At some point there will be a corrective wave 4 up, with still more down to follow in wave 5. A lower low can be expected.
Back to Kondratieff
Some people are now revisiting Kondratieff''s theory of economic cycles. Seems to fit winter, at the moment. The above image is modified from this source: smart fellows.Thursday, October 09, 2008
A question
What would have happened if the UK had not followed suit with monetary inflation over the past 5 or 6 years?
Would prudence have been rewarded, or would a Protestant adherence to the right course of action have been punished by falling exports and unemployment? In a global trading system, when one major player makes a mess of their money, must others do the same or be sorry?
Can the world be run on the principles of the efficient-market purists, or is there an advantage to the first to break ranks? Are monetarists doomed to merely understand what is going on, incapable of preventing it?
Would prudence have been rewarded, or would a Protestant adherence to the right course of action have been punished by falling exports and unemployment? In a global trading system, when one major player makes a mess of their money, must others do the same or be sorry?
Can the world be run on the principles of the efficient-market purists, or is there an advantage to the first to break ranks? Are monetarists doomed to merely understand what is going on, incapable of preventing it?
Hope
Brad Setser sees hope in the correction:
I increasingly suspect that one consequence of United States and Europe’s recent financial crisis will be a smaller deficit in both regions, and a smaller surplus in the emerging world.
I increasingly suspect that one consequence of United States and Europe’s recent financial crisis will be a smaller deficit in both regions, and a smaller surplus in the emerging world.
Robert McHugh was right!
15 months ago, Robert McHugh predicted this:
[The Dow] can be expected to drop to about the start of the pattern, at a minimum, meaning into the 9,000s over the intermediate-term... It is looking increasing likely to us that world central banks will choose hyperinflation rather than nominal decline in stock indices, which will force precious metals prices to rise sharply.
In gold-price terms, McHugh's Dow prediction came true on January 22 this year. Now it's come true in nominal terms, too (9,153.22 at 13:04 ET today) (UPDATE: 8.731.87 at 15:41).
It seems McHugh is an adherent of the Elliot Wave principle. Wikipedia gives a criticism of the theory:
The premise that markets unfold in recognizable patterns contradicts the efficient market hypothesis, which says that prices cannot be predicted from market data such as moving averages and volume. By this reasoning, if successful market forecasts were possible, investors would buy (or sell) when the method predicted a price increase (or decrease), to the point that prices would rise (or fall) immediately, thus destroying the profitability and predictive power of the method. In efficient markets, knowledge of the Elliott wave principle among investors would lead to the disappearance of the very patterns they tried to anticipate, rendering the method, and all forms of technical analysis, useless.
I think one could riposte that events have demonstrated that the efficient market does not exist.
[The Dow] can be expected to drop to about the start of the pattern, at a minimum, meaning into the 9,000s over the intermediate-term... It is looking increasing likely to us that world central banks will choose hyperinflation rather than nominal decline in stock indices, which will force precious metals prices to rise sharply.
In gold-price terms, McHugh's Dow prediction came true on January 22 this year. Now it's come true in nominal terms, too (9,153.22 at 13:04 ET today) (UPDATE: 8.731.87 at 15:41).
It seems McHugh is an adherent of the Elliot Wave principle. Wikipedia gives a criticism of the theory:
The premise that markets unfold in recognizable patterns contradicts the efficient market hypothesis, which says that prices cannot be predicted from market data such as moving averages and volume. By this reasoning, if successful market forecasts were possible, investors would buy (or sell) when the method predicted a price increase (or decrease), to the point that prices would rise (or fall) immediately, thus destroying the profitability and predictive power of the method. In efficient markets, knowledge of the Elliott wave principle among investors would lead to the disappearance of the very patterns they tried to anticipate, rendering the method, and all forms of technical analysis, useless.
I think one could riposte that events have demonstrated that the efficient market does not exist.
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