Posts tagged: bull market

Valuation levels aren’t a predictor of market corrections

“Many investors fear that higher valuations suggest that a bear market is imminent. But history suggests that bear markets more often result from factors external to the stock market, such as recessions, wars and credit bubbles. There have been ten pullbacks of approximately 20% or greater since the 1920s.

Instead of trying to time the next market correction, investors should stay diversified to protect one’s portfolio against unforeseen market shocks”.

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Fall 2012: What’s Next?

The recent U.S. stock exchange rally set the record in positively closed sessions and set us thinking whether current economic indexes justify the investors’ behavior and, more importantly, what comes next? Let us consider the fundamental market growth and earning fixation factors to conclude what can be expected in the last 4 months of 2012.

Below we will mainly talk about the American market. I will also present our global stock markets movement correlation estimates in breakdown to regional markets. Since the early 90’s correlation tendencies, pointed out by Gerhard, Poon and Khillion in their research works, show that by the end of the 20th century, the correlation between global industries decreases while the correlation between countries grows. Read more »

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Talent to Predict What Has Already Happened.

The graph below is taken from Montier’s 2002 study. It shows evidence of returns compared with the average forecast of analysts (the so-called “consensus forecast”). Analysts as a group, change their opinions regarding the dynamics of returns only when the changes have already occurred. Lag time when the analysts “came around” is distinctly seen, starting from the time indicated by the oval. Morals in a bull market: “Don’t confuse brains with a bull market”. Morals in any market: “Count only on yourself. Save your self-respect – don’t listen to the analysts”.    

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Талант предсказывать то, что уже произошло.

График ниже взят из исследования Монтьера 2002 года. Он показывает фактические данные по прибыли в сравнении со средним прогнозом аналитиков (так называемый “консенсус-прогноз”). Аналитики, как группа, меняют свои мнения о динамике прибыли лишь тогда, когда изменения уже произошли. Лаг времени, когда аналитики “очнулись”, четко прослеживается, считая от времени, обозначенного овалом. Мораль на бычьем рынке: “Don’t confuse brains with a bull market”. Мораль на любом рынке: “Рассчитывай только на себя. Аналитиков слушать – себя не уважать”.

 

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