Tuesday, March 27, 2012

Dow hit a new high

I think Dow hit a new high yesterday. I'm still feeling very uncomfortable because of contradictory evidences that I have seen. I like this piece written by John Hussman. It's a long article but I will just extract the charts for you. For more details, please visit http://hussmanfunds.com/wmc/wmc120326.htm. He has done a great job to refute some of the popular beliefs.

Evidence #1: Valuation wise, we are no where near a secular bull market. His valuation model says the return of the next 10 year is only 4%. Sucks!!!!!

Evidence #2 : The stock is cheap. Yeah but profit is seems to be out of norm. Reversal to mean will make stock valuation expensive.

Evidence # 3: The consumers are doing fine. How would they are doing fine if wages disbursement have not shown any improvement?

Evidence # 4: "The Fed is creating huge amounts of money, and all of that money has to go somewhere."

My comment on evidence # 4: Probably Keynes is correct. We are all dead in the long run. Things are absolutely not making sense to me empirically but what can I do? The bloody Fed force everybody to spend and borrow.

SPEND!!!!!! and BORROW!!!!!!

They export the similar model to the rest of the world as well. Trichet was making a comment of what he called behavioural contagion. His successor Daghi seems to prescribed the exact same medicine. (http://globaleconomicanalysis.blogspot.com/2012/03/trichet-warns-of-behavioral-contagion.html)

This kind of investment environment is absolutely disastrous. You can get caught at the wrong end very easily.

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