Stock charts vs. spreadsheets

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Market chart readers view stocks as being vulnerable to further declines, while fundamental analysts see stocks as a bargain given strong corporate profits, reports Barron’s Michael Santoli.

Source: Barron’s, July 19, 2010.

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1 comment to Stock charts vs. spreadsheets

  • Paul Sandison

    Instead of wishful thinking and beating around the bush in the face of the inevitable, why not estimate and then add up the economic negative factors in each global area, and begin to plan rationally?

    If the pundits did, they would find that the aggregate difficulties of each economic area are too great to avoid a double dip this fall. Yet every time there is a serious crunch coming there are these strange well-dressed people with such rational, reasonable voices, confidently dancing around putting a bright spin on things.

    The double dip is right on track to arrive in October and November. It is time for some realism. Who seriously thinks Central Banks can suddenly wake up after the first week of stock market freefall in October and blow the economy back up? Any intervention will take 6 months to take full effect. That would take us to May 2011.

    By that time the S&P will have gone well below 666, and in such a depressing scenario a retracement back up will reach only 20-30% off the new lows before going down again.

    Why do people insist in assuming the market is always rational? The stock market is a psychological mechanism of projection of hopes and fears into the future.

    The events of 2008-9 should have indelibly marked on everyone’s mind that the human being’s first, most powerful and most overriding instinct is to act on fear. Any investor still in the stock market today is taking grave risks.

    Besides, why invest without taking into account the prevalent geo-political and environmental risks? To an example of the latter – the mighty BP flare-off has already destroyed the thin upper layer of the world’s atmosphere. It is not as if the world’s oxygen is unlimited, as most people seem to go around thinking.

    Destruction of most of the world’s rainforests plus China’s coal powered plants spewing out both Co2 and heat has flipped the switch and the BP flare was just the last straw that broke the camel’s back. Most of the northern hemisphere is now having the warmest and longest summer in living memory.

    But of course humans only wake up when there is death and destruction and things are already too late. Otherwise they do everything to avoid thinking about any consequences beyond what they are going to eat for supper.

    Now there is a risk the bad BP well and the two relief wells will weaken the shale bed so the whole area around the main well is blown out of the seabed like a cork out of a bottle. Then the previous quantity of oil gush will look like a squirt from an oil can in comparison. But of course there will be no blame because no-one will have thought of that because ‘it hasn’t happened before’.

    The real problem is that human beings have gotten ahead of their own cleverness and have no idea of the extent of interconnectedness of everything on the planet, from the weather to strikes to military action to bad drilling and bad relations between nations.

    We don’t even know what will survive by Monday 26th July midday.

    In such a mad world, all the little man can do is “Plan or be planned for”. And that does not mean being in the market beyond this Friday.

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