Wednesday 22 June 2011

Contrarian Trading Signal

This article in the Financial Times really got me thinking today; markets wise I have been most depressed of late, my portfolio doing worse than 2008 and no light at the end of the tunnel.

Clearly, many people think the same. All the hedge fund managers in the article are blowing it too, some quite spectacularly. No one can see any good news, all the macro news looking forward is bad with poor US growth and Euro crisis (delayed a week by the positive Greek vote last night, hooray).

In fact, they say they are moving into cash, so much are the markets now linked by the algorithmic trading that everything is correlated and there is nowhere to go ( I wonder why they are not taking big short positions though?)

Often, though not always, articles like these can be a bottom of the market bear signal. Everyone thinks the future is doomed, there is no upside. Therefore any good news is not priced in - allowing markets to improve?

The very mention in the article of summer 2008 has a big flashing red signal to my mind - are we really due another financial storm already just 3 years later? It may of course turn out that way.


Anonymous said...

It's a big problem for me as a private investor - what do you go for if you know that the ECB and a good chunk of the French and Herman banks are technically bankrupt once Greece falls over. Add in the British ones that will go if Ireland follows and it's bloody grim.

Mr Ecks said...

Believe it and act accordingly.

CityUnslicker said...

Mr Ecks - explain per chance how cash does in an environment where the recapitalisation of the European banks can only be done with printed money?

Really, that is the doomsday sceanrio and I don't think anything works....except perhaps being short and even that might screw up if the providers go down.

personally, I am always sceptical of the gold, guns and beans brigade, they have always been with us and never correct.

Timbo614 said...

@CU - It's not a tunnel - It's a very long cellar. That's why I got out of it :)

Anonymous said...

I've been weighing up this conundrum for a while, as things stand my portfolio is down about 20%. I can see it going lower in the next month or two, but then QE3 has to happen, if it doesn't then derivatives kill the western world.
So I'm holding on for now.

Anonymous said...

Obvious that private wealth will now be progressively seized, initially by 'stealth' means such raids on pensions, then we'll have a 2% capital tax on property, then forced conversion of liquid assets in 0.25% perpetuals. After that, I guess survivalism!

tory boys never grow up said...

If the government has been running a deficit, the private sector has been increasing its debt and there haven't been massive capital inflows from overseas then logic dictates that the corporate sector is rather flush with funds at the present. But then markets were never that rational.