Monday, July 23, 2007

Singing in the Rain

This is post is about nothing. Sort of.

Indeed, momentum traders and trend-followers tend towards the optimism and see the glass half-full. This needs to be so because faith is inevitably involved in believing the past conveys sufficient information such that it will remain the best predictor of the future (or at least the bias next datapoint over the ensuing interval).

Reversion traders, and counter-trend traders, by contrast, tend towards the skeptical and err on the side of pessimism (by nature). If something isn't already going wrong, such a personality is well-trained in conjuring a scenario for why precisely the future will be unlike the past.

Knowing where one sits on this relative scale is essential for investors and traders alike, for BOTH extremes engender flaws that inimical to incorporating new information into one's view, and therefore optimal decision making.

I listen to detached economists, and they are far more sanguine than skeptics like me, and those I hang out with, certain that a disaster (or cpital dislocation event) is just around the corner. Yet when I hear them ignore what is to these panglossian observers "a wall of worry" ro be climbed, it is me, veritable litany of macro conditions that are increasingly difficult overcome and/or reconcile.

So to optimists, this post is about nothing. Really. But to skeptics and those continually re-triangulating the future course of events on the basis of emerging observations, such observers remind me of the wonderful Gene Kelly seen here at his wettest and best....


Anonymous said...

I'm sure you are aware, the crowd is always right EXCEPT at the turning points.:-)

So I see an election coming up in upper house in Japan. Will Abe get his balls kicked, ala Blair? Will this be end of near-ZIRP if LDP can't be under the thumb of Uncle Paulie (yes, I can handle being called a nutjob)? Or am I reading too much into tea leaves.


"Cassandra" said...

Dear PI

MTC, of Shisaku who I believe is an policy aide at a TeamJapan lobbying firm (in Japan) is by far more prescient on such matters.

NearZIRP may never end, but the worst of its effects - the enabling of leveraged speculation, and the neutering of the USD BondMarket during the expansion of the Refi boom - may be resolved by a credit discloation event that ultimately is deflationary, causing USD rates to converge upon nearZIRP YEN rates, rather than the other way around. Higher US taxes, concurrent to a diminshing dollar, and a more sober-minded pricing (maybe even rationing of credit) is interesting to ponder.

Anonymous said...

Thanks for the Shisaku blog, a very insightful blog similar to yours. However he is retiring. He says "I will still be writing, probably under my real name, probably in more formal settings ...". Any idea which pub should I look for, to find his writings?