The Big Bang

In the previous blog post, I made the following comment and thought it needed its own post.

"As for the wall of worry and the slope of hope, I think none of our precious sayings and assumptions hold water these days.

I highly recommend a new skinny book - The Stock Market Philosopher written by a hedge fund manager. He likens (or lichens, for you naturalists) the stock market to the jungle and evolution. Adapt or die. Last year dumped the big meteor on the dinosaurs."

Usually, we see small changes in what works and what doesn't. I like the saying, "I worship in the church of whatever is working now." But usually, it is one assumption that breaks, not all of them.

I think we got a major wake-up call last year and since we were so close to economic disaster, at least that's what they told us, I think just about all of our assumptions broken.

Buy low, sell high? Hard to do when the volatility is greater than the typical expected profit.

Buy breakouts? The market breaks out and stops dead. We close or get stopped and then it breaks out again. Unless, of course, you buy the breakout, in which case it was a blow off.

I believe in technical analysis but if I were starting in the business today I would quit. The stuff we learn from existing literature has not done well for a year. It is only the experience to recognize evolutionary, if not revolutionary changes, in the analysis world that keeps me going.