Kudos to MMs

Quote from Ghost of Cutten:

What on earth does 'conservation of energy' mean in markets? It's a meaningless BS analogy. The markets are not physics.

What makes you think that your model is correct?

Look, it's very simple. Stocks are cheap relative to earnings, and their earnings yield is high relative to the alternatives. If you are sitting on $1 million cash, you can either put it in 10 year bonds at 4% yield, cash at 0.5% yield, both of which are taxed, or you can put it into stocks at a 7% earnings yield. Wow, tough call there - let's take the 0.5% and 4% yields, and ignore the returns at 7% available in the stock market!

A 7% earnings yield means the stock market is going to grow wealth at a 7% real return, year after year, as long as earnings hold up and keep pace with inflation. That means each year you stay flat, you miss out 7% real return, equivalent to maybe 10% nominal return. And each year you are short, you LOSE 10%. Stocks don't have to beat estimates, corporations don't have to do anything amazing, just keep chugging along normally, and at these values they will return approx 10% per annum in the long-term.

The risk of significant earnings falls are simply not that high. We have just had one recession 2 years ago, it is very rare to back another recession so soon afterwards. So, most likely, we have at least 2-3 more years before anything close to a recession looms on the horizon. So, it's pretty safe to rely on the earnings yields and forecasts.

You talk about your model. Let me ask, is there ANY fundamental or valuation input into it? I bet you a cold beer that you take almost no account of valuation or fundamentals. And you wonder why your model isn't working...
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cutten,are stocks cheap relative to earnings ,or are stocks paying out higher dividends to borrow money or lure investors, are companies making money ,from 08 to 11,like they were from 03-07,or is this just a big ponzi scheme,i;m asking because i never learned how to value stocks by using earnings/dividends vs share price
 
Quote from Ghost of Cutten:

That's because it IS the same as selling naked options. Mean reversion systems are short gamma. They make small wins most of the time, and run into extended trends occasionally, losing a pile of dough in the process. The fact that you don't know this means that you just haven't researched the characteristics of trading systems very much.

It stops working because a major trend gets started, and it is a trend-fading system. If you can tell when it goes off the rails, then why keep trading it in a hostile environment? Stop trading it as soon as you get the warning signal, and shift to a trend-following system instead. If you can tell when mean-reverting market environments turn into trend-following environments, they you really do have the holy grail!
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Last sentence: It is not true, as you still need to be well capitalized to have the holy grail.

Nasdaq-100 upside is less than or equal to 1%. If you do not have enough money, the forecast is still useless.
 
Quote from Pekelo:

A prediction I can wholeheartedly agree with. Tomorrow is Thursday....
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Did you say tomorrow was Thursday? F*ck!!!!!!!

Yes, I know exactly what that means. I don't know what came over me. Wednesdays always do that to me.
 
By the way instead of going down, I think we will make a new top tomorrow... Or at least a doubletop with the cash at 1325....
 
Quote from tradingjournals:



I believe that Thursday can be nasty days. Thursday is tomorrow.
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You are right, Mondays, Wednesdays, Fridays, and even Tuesdays can also be nasty days.

The other 5 days not so much,.

Thanks for your insight, you make nitro look like Einstein
 
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