Being in the Market!

Some days I struggle for things to rave or rant about in this morning missive. Often, after bleeding at the keyboard for an hour or two, something seemingly worth saying pours on to the screen; but there are those days when only the keyboard is stained. Today is one of those days.

So, my guest columnist, if you will, is F.J. Chu. Mr. Chu wrote a wonderful little book titled “Paradigm Lost.” It’s a real gem of a book that I often return to, and consistently find increasing amounts of wisdom each visit.

Point/Counterpoint

Since I penned my Comdol falling off a BRIC wall piece the other day, the commodity currencies and oil have of course rallied nicely—they didn’t follow the plan. But, hope springs eternal in the world of investing, and hope also usually gets one into trouble ... as we know.

We hope our views are right and our losses don’t get bigger; and we worry we might give back that profit we made because our view may be wrong.

Lose the Correlation

The correlation between stocks and currencies is working; risk-appetite at its finest.

But say we didn’t have this connection ... say a 0.023% rise in the S&P 500 didn’t equate to the same 0.023% rise in the Australian dollar or euro or whatever. How would these currencies behave without this risk correlation?

Would it be an all-or-nothing proposition for the buck like it is now? I’d like to think not.

Humpty ComDols Sat on a Wall ...

If you get a chance, we think Martin Wolfe’s piece in the FT today is worth the read, as it compares where we are in this global recession relative to where we were this time during the great depression. I like the part above we used in Quotable:

“The policy response has been massive. But those sure we are at the beginning of a robust private sector-led recovery are almost certainly deluded.”

Delusion has always been part of the market process. It always will be. And it’s why trying to find the perfect trading algorithm is a long journey with no destination in site.