Thursday, December 1, 2016

"It's Called Circle-Jerk-O-Nomics"

It's as dumb as the people who believe in it...

According to Elliott Wave Social Mood theory, stock prices are a manifestation of how people feel. Full stop. When they are optimistic they buy stocks, when they are pessimistic they sell stocks. Conversely, according to fundamental analysts, stock prices represent the fundamentals of the economy and forward profits. Which works great, until it fails catastrophically. The economy ALWAYS runs hottest at the end of the cycle due to supply constraints, wage increases etc. That leads to Monetary tightening which ends the financial cycle. In other words, fundamentals are strongest at the peak in stocks. Not necessarily the best buy signal. Kind of like what's happening right now.  

However, my humble theory of casino prices is a combination of Social Mood, fundamentals, and this thing called the greed feedback loop. In other words, people buy stocks in anticipation of improved profits, stock prices rise leading to improved social mood, they buy more junk on Amazon, then they increase their earnings projections, then they buy more stocks etc. etc...

I call it Circle-Jerk-O-Nomics.

Let's see how it works...

Before Trump got elected, his winning the election was going to cause major downside:

"Clinton's odds in the prediction markets had been closer to 80 percent, and at that level, a Trump victory would have triggered an 8 to 10 percent sell-off"

Fast forward four weeks of vertical rally. 

ZH: Dec. 1, 2016
The World Has Suddenly Changed For The Better Since Trump
"Average S&P Analyst Target Before Trump: 2,087; After Trump: 2,425"

In other words, not only did the selloff not materialize, but a massive rally ensued, AND then they raised estimates after the rally. 

You can't make this shit up. But one thing is for certain. 

They do. 

And some people have no choice to believe in further upside, because they're running out of time, and it's not their money anyway...

Hedge funds versus Dow:

"This is why we get paid the big bucks"

Clarification: They didn't bet big. They bet it all.