Saturday 20 July 2013

Market timing

Conventionally, we are told that market timing is impossible and that you'll miss short,sharp gains by staying out, etc.

But the market is no longer conventional. The swings have become much greater, there's all sorts of jiggery pokery behind the scenes (how is co-location legal?) and debt is a sword of Damocles over the whole system.

Rob Arnott at PIMCO (htp: Wall Street Ranter) recently contrasted US equities with emerging markets stocks, thus:

Reversion to the long-term US mean would involve a 29% drop  in value - and usually there's a significant overshoot. Let's not forget that the market has halved twice since the year 2000, and the recoveries seem to be down to monetary life support rather than healthy fundamental economic growth.

There's a San Andreas Fault running under this financial edifice. And the US market and economy are so large that a fall there would surely shake the foundations in other parts of the world.

Doubtless there are some traders who will make, are making, fortunes on short-term speculation, but the odds against outsiders managing to do it make the game one not to join.

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