What Do Dow Jones Mood Swings Mean?

[JAMESBJOHNSON]

Every week lately the DJ moves from one extreme to the other like a chameleon that cant find the right mood. Up 300 points on Monday, down 300 points on Wednesday, and up again Friday. WTF?

A century ago such activity was proof Fat Cat Stock Operators were manipulating Wall Street to buy and sell stocks from fools. The idea was to liquidate the small-fry investor. One of the best stock operators wrote a book about how it worked. The operators traded stocks back and forth, to inflate the price, or deflate the price enough to grab bargains from morons.

Generally speaking a stock price should directly correlate with its earnings or potential earnings unless operators are gambling the stock to swindle amateurs.

 

[4est_4est_Gump]

They only look like wild swings because of the inflated value. If you look at the percentage change, meh...

 

[Wat_Tyler]

I'd rather listen to my guts and try to figure out if the blackjack dealer is going to take that next 10, or if I am.

 

[Libsam]

zerohedge.com

JBJ, you'll probably enjoy the recent Maxine Waters article.

 

[JAMESBJOHNSON]

zerohedge.com

JBJ, you'll probably enjoy the recent Maxine Waters article.

I'm curious why all the chocolate chickies keep friending me on FACEBOOK.

 

[chillywilly2]

I'd rather listen to my guts and try to figure out if the blackjack dealer is going to take that next 10, or if I am.

always leave the dealer the next ten, unless you need it

 

[Aphro]

I'm curious why all the chocolate chickies keep friending me on FACEBOOK.

They know you like the dark meat, James.

 

[Wat_Tyler]

always leave the dealer the next ten, unless you need it

I always sit at third base for that reason. Just me and s/he.

 

[Que]

They only look like wild swings because of the inflated value. If you look at the percentage change, meh...

This, and profit taking as investors nervously look for a 'safe' chair and try to keep an eye on the needle to see when it will lift off the record. PE ratios at historic highs meaning the market is grossly over-inflated.

 

[Libsam]

That Waters article... I find it interesting that she doesn't want to flat out ban HFT. Why not? Because the government can make money off that!! They'd rather issue speeding tickets!!


Here's an article from 2014, real news, but no one is talking about it...
"Robust Evidence" Confirms Fed Leaks Data Ahead Of Rate Announcements

 

[4est_4est_Gump]

This, and profit taking as investors nervously look for a 'safe' chair and try to keep an eye on the needle to see when it will lift off the record. PE ratios at historic highs meaning the market is grossly over-inflated.

Maybe James should be paying more attention to the price of copper...

 

[trysail]

"In the short run, the stock market is a voting machine. In the long run, it's a weighing machine."

-Benjamin Graham
(co-author [with David Dodd] of Security Analysis and author of The Intelligent Investor), teacher, mentor and hero to Warren Edward Buffett​

It's one of W.E.B.'s favorite quotations.


​

 

[contrifan32]

It means what it has always meant, that the market will do what it has to do to take as much money from as many fools as it can.

 

[RobDownSouth]

It means what it has always meant, that the market will do what it has to do to take as much money from as many fools as it can.

Better hide your money under the mattress then.

 

[contrifan32]

Better hide your money under the mattress then.

Not a chance, I trust my money to those big bad Wall Street professionals that you and Lizzy Warren love to hate.

 

[RobDownSouth]

Not a chance, I trust my money to those big bad Wall Street professionals that you and Lizzy Warren love to hate.

Please don't ascribe positions to me, it's unmanly and makes you look silly. Besides, that's query's job here on the general board.

#AscriptionAgain

 

[trysail]

Excerpts from the 2013 Annual Report to Shareholders of Berkshire Hathaway Corporation
by Warren E. Buffett
​

• ...If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays.
  
• Forming macro opinions or listening to the macro or market predictions of others is a waste of time. Indeed, it is dangerous because it may blur your vision of the facts that are truly important. (When I hear TV commentators glibly opine on what the market will do next, I am reminded of Mickey Mantle’s scathing comment: “You don’t know how easy this game is until you get into that broadcasting booth.”)

...Stocks provide you minute-to-minute valuations for your holdings whereas I have yet to see a quotation for either my farm or the New York real estate.


It should be an enormous advantage for investors in stocks to have those wildly fluctuating valuations placed on their holdings – and for some investors, it is. After all, if a moody fellow with a farm bordering my property yelled out a price every day to me at which he would either buy my farm or sell me his – and those prices varied widely over short periods of time depending on his mental state – how in the world could I be other than benefited by his erratic behavior? If his daily shout-out was ridiculously low, and I had some spare cash, I would buy his farm. If the number he yelled was absurdly high, I could either sell to him or just go on farming.


Owners of stocks, however, too often let the capricious and often irrational behavior of their fellow owners cause them to behave irrationally as well. Because there is so much chatter about markets, the economy, interest rates, price behavior of stocks, etc., some investors believe it is important to listen to pundits – and, worse yet, important to consider acting upon their comments.


Those people who can sit quietly for decades when they own a farm or apartment house too often become frenetic when they are exposed to a stream of stock quotations and accompanying commentators delivering an implied message of “Don’t just sit there, do something.” For these investors, liquidity is transformed from the unqualified benefit it should be to a curse.


A “flash crash” or some other extreme market fluctuation can’t hurt an investor any more than an erratic and mouthy neighbor can hurt my farm investment. Indeed, tumbling markets can be helpful to the true investor if he has cash available when prices get far out of line with values. A climate of fear is your friend when investing; a euphoric world is your enemy.


During the extraordinary financial panic that occurred late in 2008, I never gave a thought to selling my farm or New York real estate, even though a severe recession was clearly brewing. And, if I had owned 100% of a solid business with good long-term prospects, it would have been foolish for me to even consider dumping it. So why would I have sold my stocks that were small participations in wonderful businesses? True, any one of them might eventually disappoint, but as a group they were certain to do well. Could anyone really believe the earth was going to swallow up the incredible productive assets and unlimited human ingenuity existing in America?


...If “investors” frenetically bought and sold farmland to each other, neither the yields nor prices of their crops would be increased. The only consequence of such behavior would be decreases in the overall earnings realized by the farm-owning population because of the substantial costs it would incur as it sought advice and switched properties.


Nevertheless, both individuals and institutions will constantly be urged to be active by those who profit from giving advice or effecting transactions. The resulting frictional costs can be huge and, for investors in aggregate, devoid of benefit. So ignore the chatter, keep your costs minimal, and invest in stocks as you would in a farm.


My money, I should add, is where my mouth is: What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit. (I have to use cash for individual bequests, because all of my Berkshire shares will be fully distributed to certain philanthropic organizations over the ten years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers...

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-Warren E. Buffett © 2014​

 

[contrifan32]

Please don't ascribe positions to me, it's unmanly and makes you look silly. Besides, that's query's job here on the general board.

#AscriptionAgain

Its not ascription when it is based on views that you spew... you trolling creep

 

[tactful]

Some days, it takes nerves of steel, others a quick Macro, just to keep abreast.

 

[RobDownSouth]

Its not ascription when it is based on views that you spew... you trolling creep

By all means then, show me my "hate" for those "big bad Wall street professionals"....or admit that you are a lying son of a whore.

 

[Colonel Hogan]

Excerpts from the 2013 Annual Report to Shareholders of Berkshire Hathaway Corporation
by Warren E. Buffett
​

My money, I should add, is where my mouth is: What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit. (I have to use cash for individual bequests, because all of my Berkshire shares will be fully distributed to certain philanthropic organizations over the ten years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers...

​

-Warren E. Buffett © 2014​

At the risk of seemingly picking a fight with Warren Buffet, I would put an asterisk somewhere in there that says "What you really should do with your investment funds primarily depends on three major factors which Mr. Buffet failed to mention:

1. How old you are now?

2. What do you wish to do with the proceeds which hopefully flow from your investments?

3. And when do you wish to do it?

Buffet's investment direction to the trustee of his wife's cash inheritance to invest 10% in short-term government bonds and 90% in a low-cost S&P 500 index fund is flawless in that it reflects two other obvious facts that Buffet also failed to mention. Neither the 76-year-old bequeather nor his 60-year-old future heiress has need to touch a dime of that money, nor will they likely ever. The "superior long-term results" Buffet anticipates reflects the luxury of the investor's investment horizon that literally has no horizon.

But one doesn't ascend to the pinnacle of "buy-low-sell-never" without having bought low and sold high on many, many prior occasions. Whether he did this with his own money or simply raked in the commissions from trades he advised others to make is immaterial. Had he literally put his money where his mouth is and invested his money in short-term government bonds and an S&P index while a young man in his twenties and did nothing else other than to regularly contribute to such a modestly constructed portfolio, he would not now be the second richest man in the world worth upwards of $44 billion.

He would have still done better in the long run than most people, however, and young people today would do well to follow his advice of starting and regularly contributing to an investment plan that positions the saver to take advantage of the "time value of money."

But the simple fact is that many can't. Many are necessarily burden with "educational debt" which itself is an arguably visionary policy devoted to building a foundation of personal business and professional skills that are designed to return future financial dividends.

Many others start saving later in life, not to mention the fickle finger of fate that visits catastrophic healthcare costs or devastating property loses to folks who may only have been marginally insured, if at all.

The point is, most people save for the specific purpose of eventually spending the vast majority of the interest (and perhaps much if not all of the principal) for living costs later in life when they are quite possibly unable to work.

They anticipate having to supplement Social Security and Medicare benefits at a specific time in their life and for a reasonably presumed duration.

These people often have to have their investments perform far better than average, and the pressure that comes with making the right decisions faced with a "short-term-or-else" investment horizon is not likely eased by government bonds and indexed funds.

With this in mind and after reading this thread, it is why I just liquidated a $7,500 mutual fund which I began buying in 2007, watched get brutally beaten throughout 2008 and 2009, and finally saw recover over the past four years.

Because I have other investments that are time restricted and illiquid over the next several years, I could not afford NOT to take the nearly 50% appreciation I finally realized to date on the above fund.

It was only prudent to take those profits as a hedge against those investments that I still have exposed to market risk.

In other words, my mileage (and yours and Warren Buffet's) will vary.

 

[4est_4est_Gump]

It also helps to have ears to whisper into in DC. I would have loved to have had the power to buy rail stock and then argue against a competing pipeline...

 

[trysail]

Switzerland is the world's only remaining major economy that is not intent on debasing its currency.

The irresponsible and profligate fiscal and monetary policies of the U.S. and the E.U. have made the Swiss franc attractive to savers, investors, the prudent and the liquid.

U.S. fiscal and monetary policy punish the prudent, distort capital markets, discourage savings in a desperate effort to recreate the very bubble that got it in trouble in the first place.



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[RobDownSouth]

It also helps to have ears to whisper into in DC. I would have loved to have had the power to buy rail stock and then argue against a competing pipeline...

Tell us again how you were 100% invested in gold AND 100% invested in equities from 2009-2013. My reality-based calculator says that's 200% and seemingly impossible.

 

[trysail]

At the risk of seemingly picking a fight with Warren Buffet, I would put an asterisk somewhere in there that says "What you really should do with your investment funds primarily depends on three major factors which Mr. Buffet failed to mention:

1. How old you are now?

2. What do you wish to do with the proceeds which hopefully flow from your investments?

3. And when do you wish to do it?

Buffet's investment direction to the trustee of his wife's cash inheritance to invest 10% in short-term government bonds and 90% in a low-cost S&P 500 index fund is flawless in that it reflects two other obvious facts that Buffet also failed to mention. Neither the 76-year-old bequeather nor his 60-year-old future heiress has need to touch a dime of that money, nor will they likely ever. The "superior long-term results" Buffet anticipates reflects the luxury of the investor's investment horizon that literally has no horizon.

But one doesn't ascend to the pinnacle of "buy-low-sell-never" without having bought low and sold high on many, many prior occasions. Whether he did this with his own money or simply raked in the commissions from trades he advised others to make is immaterial. Had he literally put his money where his mouth is and invested his money in short-term government bonds and an S&P index while a young man in his twenties and did nothing else other than to regularly contribute to such a modestly constructed portfolio, he would not now be the second richest man in the world worth upwards of $44 billion.

He would have still done better in the long run than most people, however, and young people today would do well to follow his advice of starting and regularly contributing to an investment plan that positions the saver to take advantage of the "time value of money."

But the simple fact is that many can't. Many are necessarily burden with "educational debt" which itself is an arguably visionary policy devoted to building a foundation of personal business and professional skills that are designed to return future financial dividends.

Many others start saving later in life, not to mention the fickle finger of fate that visits catastrophic healthcare costs or devastating property loses to folks who may only have been marginally insured, if at all.

The point is, most people save for the specific purpose of eventually spending the vast majority of the interest (and perhaps much if not all of the principal) for living costs later in life when they are quite possibly unable to work.

They anticipate having to supplement Social Security and Medicare benefits at a specific time in their life and for a reasonably presumed duration.

These people often have to have their investments perform far better than average, and the pressure that comes with making the right decisions faced with a "short-term-or-else" investment horizon is not likely eased by government bonds and indexed funds.

With this in mind and after reading this thread, it is why I just liquidated a $7,500 mutual fund which I began buying in 2007, watched get brutally beaten throughout 2008 and 2009, and finally saw recover over the past four years.

Because I have other investments that are time restricted and illiquid over the next several years, I could not afford NOT to take the nearly 50% appreciation I finally realized to date on the above fund.

It was only prudent to take those profits as a hedge against those investments that I still have exposed to market risk.

In other words, my mileage (and yours and Warren Buffet's) will vary.

Your points are both appropriate and well-taken.


I do wish to make one point, though. Very few people fully comprehend that Buffett's investment performance really isn't comparable to the S&P 500 for the simple reason that he's essentially been running a leveraged, margin account with money borrowed at a NEGATIVE INTEREST RATE for the past fifty years. Buyers of insurance from Berkshire's insurance subsidiaries have essentially been PAYING INTEREST for the privilege of having Berkshire hold their funds for the term of their policies. That's what a positive underwriting ratio translates to.



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