My broker, the experts, analysts......... have been keep telling me/everyone the bear is coming, the bear is coming..... with Brexit, we are going to see a double impact to the market. But what we saw over the past few weeks was DOW, NADSAQ and S&P broke history high. Europe and Asia moved up strongly. Seem like nothing is able to stop the upside. So the question is - the markets right now is actually bull or bear?
Those who follow my blog, I am sure you know who were the big boys who pushed this markets to go higher and higher. Why not you tell me - the equities market right now is bull or bear?
I don't define the current market movement neither bull nor bear. I define the big picture as territory. Current market movement, I define them as trend. What do I mean by that?
Let's look at the big picture as well as the small picture. Let us look at what is going on with the world economic, central banks action, system, education.......history and what you should be looking out for?
It is very sad to say that today economics was taught to student more like philosophy then engineering. Economics has become mathematical rigor and modelling. The problem with this mathematical model is - in order to make problems tractable, we need to make assumptions. And assumptions become axiomatic. But then the fact is markets are not efficient, nevertheless it has been conveniently been ignored. Mathematical models also can't include unpredictable impact of speculators either.
Not only on the education, today challenges and issues are solve with that mathematical model. Print money and to print more money. There is a big risk on this continuously of QE one after the other. Market will react negatively when the amount of QE launched did not meet the investors, analysts.....expectation. Just like the recent one that happened in Japan.
Can anyone remember what happened to Y1993 when Roosevelt decided to print money and go off with the gold standard. The moved depreciated the dollar and it neglected the deflation. It didn't bring a high level of inflation. Gold and bonds went up at the same time.........
Let's take a look at a much bigger picture. The 5 phase cycles:-
Stage 1 - Countries are poor and they know that they are poor.
Stage 2 - Countries growth and they started to get rich quickly, but then they still think that they are poor.
Stage 3 - Countries are rich and they know well of themselves - yes, we are rich.
Stage 4 - Countries start to become poor and to poorer, but then they still think that they are rich.
Stage 5 - Countries go through deleveraging and relative decline, which they are slow to accept.
So, which stage, your country is, right now? Countries in stage 4 are in a danger of what I called a wake up call. Countries at this stage spending continues strong, they continues to appear rich even though their balance sheets deteriorate. They spend a lot of money on military. At time they spend even more because of war as to protect their global interest. However, their infrastructure, capital goods.......become older and less efficient. They increasingly rely on their reputations rather than their competitiveness to fund their deficits. Their debt goes higher and higher. Bubbles starts to form............... this lead to danger of entering into stage 5.
Now we go into the small picture. Anyone remember any of the financial crisis whether is sub-prime, Asia crisis..........? Let's look at the one in Y2008. When you think the crisis starts? The day when DOW plunged 500 points? Fundamentally, housing prices started to decline in Y2006. Subprime credit indexes started to go down in January 2007. Money market liquidity dried up in August 2007. Declining housing prices were impending storm clouds. But then only in end Y2007, early Y2008, investors started to realize that the crisis has took place. And between Y2006 to end Y2007, equities markets continued to take new high inside the volatility roller coaster swing.
In a bubble, who is to say how far the market can go? Who is to say when the bubble will burst? No one. During the bubble period, games and numbers are highly manipulated. You see insanity everywhere. You don't short just because your so called experts said the wolf is here. You don't long because your so-called said.......
Investors and traders get all excited on news, fundamental and price movements. But they completely misunderstand or do not understand there is a bigger picture behind. The analogy of sailing. The wind matter but the tide matter too. If you do not know what the tide is, and you plan everything just base on the wind, you are going to end up crashing into the rocks.
One of the day, 伟哥 will lose it function. Patience, wait for and recognise the right time. You may said - but I am not the expert. You need not have to the brilliant economist, experts..... You just have to recognise when something matter, and you react to that. Retail investors/traders, you really need to formulate your own opinion and not rely on the so-called experts remarks/calls.
