Rational markets do not behave like those we have witnessed during the past month. We are in a cycle of action and reaction based not on normal valuation metrics but on short-term plays by a handful of institutions using computer-based trading algorithms placing what amount to casino-like bets on statistical outcomes. If you’re not worried, you are not paying attention.
Yeah...what you said.
I simply call it a false market. Nothing appears to be what it really is.
The markets are ‘acting stupidly.’ I’m very light in them at this point.
“Rational markets do not behave like those we have witnessed during the past month.”
What is not rational is the enormous volume of liquidity created by the federal government. It is basically free money the gvt. gives away to large institutions. They can either loan it out to real people or speculate. They speculate. I think this is inflation in a narrow market. Lot’s of money chasing the same amount of equities.
At the same time, the amount of money in the real economy is crashing, nation-states are going to start defaulting, and in the real economy we are tiptoeing up to the cliff of deflation.
Program trading probably exacerbates the ups and downs. But the wild swings in the market seem to me like a rational response to an irrational set of facts brought about by our friends in the ruling class. I don’t know whether we end up in a deflationary spiral or an inflationary spiral. So how does one invest rationally? How does a market react rationally?