Quote from shortie:
the range is not a problem. SPX had a similar range recently. the problem is that FV is mostly out of sync with SPX.
There is no range problem in FV.
Calibrated FV may have a range problem [only if you don't listen to what it measures], since that is saying the market is overvalued by about 200 handles, or about $2T. FV on the other hand, currently says that that market is overvalued by 100 handles, or $1T. That sounds like alot, but consider that AAPL by itself has destroyed about $1T in other companies value. At 40 VIX, it is three bad days.
Calibrated FV is a measure of odds of recession and where we would be if we were in a recession NOW, and it thinks they are extremely high.
FV on the other hand thinks the odds of a recession are mild.
do any of the older versions work in the current environment? during 2010 crash that particular version caught most of the turns very nicely.
You are stuck on older versions of FV. It could be that we get miraculous month or two where it shocks and awes us again if we went to older versions. But I am going after different fish, and perhaps accidentally, it fits my own psychology better. Look, the closer you get to smaller time frames, the more you are affected by chaotic instabilities. By broadening your horizon and focusing more on macro, you are able to get averaging results, and the mathematics of statistics and probability regain their power. It is going from a matrix, to the eigenvalues and eigenvectors of that matrix. Higher moments exist again instead of going to infinity.
Neither is correct, it is a matter of where you feel you have a better understanding, and more importantly, where your tools have the greatest chance of succeeding.
I think people like to go towards the high frequency because it is sexy, because it allows them to see their progress incrementally, and it feels more like a paycheck. It allows them to say, "see how smart I am" often. Feels good. But the closer you get to that scale, the more intense the technological commitments get.
Analyze the reason the markets have not followed FV and you will see that it has taken trillions of dollars of external exogenous intervention from central banks and governments to force SPX and FV to diverge "far". Of course FV is going to lag some of that. Over the months, and now going on years, I have made FV get smarter so that it re-calibrates itself to those events as fast as possible. But it is not foolproof, and one of the consequences of that is that the smaller time frame loses predictability. It is a compromise. It is a consequence of the Fourier Transform, and it is inescapable:
The more you localize in time, the more you lose on position/momentum space, and vice versa.
I am done explaining that. I don't know how else to say it.
