Archive for August, 2013

Dow trends 1970-2013

Tuesday, August 20th, 2013

Above is the chart of Dow Jones Industrials from 1970 to 2013. As can be seen from the chart, if one were to buy at point of time 1 (year 2000) the DOW is still below inflationary line 2. At point of time 4 in 1995, DOW entered the inflationary channel 2, 4. Normally, DOW grows at the trendline 5. Recently, DOW has been growing at a trendline 8, which is parallel to trendline 5. So, if conditions persist, DOW should grow to reach trendline 5 and resume it’s normal growth at around this trendline. Which, basically, means that DOW right now is still undervalued.

Market drops 200 points on… good news on jobs.

Thursday, August 15th, 2013

Well, here we have it again folks… A total misunderstanding by markets of how Fed is planning to conduct it’s monetary policy going forward in future. DOW dropped today 200 points on a good jobless claims report. I know, I know, market is within itself is efficient and basically the price is what it is. But, nevertheless, here is my second unveiling of reasoning behind, uhm, my reasons as to why DOW should continue to grow and why traders and investors (investors at least) should ignore these market fluctuations:

1) First of all, too much free money created by Fed stimulus is not a good thing – it will create too much inflation in the longer term, spiking the interest rates which may lead to catastrophic kind of scenarios. So just directly associating sizes of stimulus versus stock market value is already wrong. Stimulus is needed just enough to create monetary expansion to accommodate for growth of economy.

2) Secondly, continuous maintenance of stimulus at the same size is not realistic – the size has to be controlled, such as, maintained at level, decreased, or increased to accomodate to economical conditions. Combination of zero rates and bond purchases is keeping effectively negative interest rates. This is done to boost demand, for one thing, and, for instance if demand grows due to market forces, the effective rates can be made positive, or, in other words, stimulus size can be reduced accordingly.

3) Thirdly, good news is… good news, not bad news. Just sticking at whether Fed will “taper or not taper” is perhaps a better short term trading decision, but not a good long term investment strategy. Why? Because good news basically means, that the Fed so far has been intelligent enough to conduct it’s monetary policy in such a way so that good news on economy keep on popping up.

In summary, interest rates have always historically needed to be adjusted. Combination of zero interest rates and bond purchase stimulus creates effective negative rates. Should demand pick up due to market conditions, the effective rates needs to be changed accordingly. Fed may reduce the stimulus bond purchases, not cut them alltogether to raise the effective interest rates according to economic realities (in this case, positive ones).

My 2c…

Physics, metaphysics and philosophy resources

Sunday, August 11th, 2013

Recently scouted resources on modern physics, metaphysics and philosophy:

http://www.calphysics.org

http://www.spaceandmotion.com

http://fqxi.org

 

Towards a Science of Consciousness

Monday, August 5th, 2013

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