S&P 500 Index Analysis

Good luck to you then. While I am certainly open to the possibility that some people may be able to regularly sense future events beyond the norm, I don't yet see how that would be transferable as a skill, so it would be hard for me to incorporate such thought processes of others into my own.

 

Dr. Chen, Dr. Chen.

What are you views on China? And please let us know if your Analysis evolves from a Chinese or American or Chinese-American view point.

Thanks.

 

Optionpro007,

Thank you for your question.

As China has become the world's second-largest economy measured by GDP in US dollar, any significant news out of China -- such as its currency exchange rate, industrial production, GDP growth -- will have some bearing on the S&P 500 index. But given the fact that China's economy is largely influenced and sometimes directly affected by the government policy, it is impossible to predict its growth magnitude in fits and starts.

I attempt to avoid having the Analysis tainted by my personal background. To borrow a quote from Justice Sotomayor, "I would hope that a wise Latina woman with the richness of her experiences would more often than not reach a better conclusion than a white male who hasn't lived that life," I would hope that a man of my background would not reach a better conclusion than a man of different background who has not lived my life. (Please refrain from discussing the above quote, as this thread is about S&P 500 index.)

Dr. Chen

 

"It's tough to make predictions, especially about the future." -- "Yogi" Berra

"It's hilarious to watch people all day explaining what happened on financial television. At least we're predicting them ahead of time." -- Robert Prechter

 

I find your views interesting, so perhaps you would care to consider and perhaps comment if you will on the following view of mine:-

That companies and economies are very similiar to the human condition. There are youthful and vigorous companies like Microsoft 20 years ago which gradually mature into a state similiar to middle age. Gradually senior positions are filled with those of the time serving and brown nosing mentality.

This state continues, accompanied by a decreasing amount of vigour until the company reaches a state of senility. General Motors would be a good example. It needed rescuing or would have died.

Economies in my view are very similiar. Most Western economies are in the mature to senile state at the moment. The older companies are having difficulty in competing with the younger BRIC countries. Silicon Valley etc. are the exception and have achieved amazing feats to turn this sad state around.

 

Humpy,

Thank you for your point of view. I am flattered by your seeking my comment to your view.

Before I answer your question, I want to point out first the difference between an economist and an equity strategist, and if I had a title in a bank, my title would be the latter rather than the former.

Now I would like to treat my response as part of a lively debate rather than a comment to your view. First in response to your view about businesses, that is generally true, but unlike people who invariably become senile and eventually die without exception, there are exceptional businesses such as GE and Stanley Druckenmiller’s Duquesne Capital Management, the latter having returned on average of over 30% during each of 27 years from 1981 to 2007 despite its size.

As to your last paragraph, please note that Silicon Valley is not a sovereign state and thus is not governed by the general principle of the economic rise and fall of nations over time. Instead, new businesses are created every year within the physical boundary of Silicon Valley.

Finally, to make the circle full, your view about the economic life cycle of nations is generally true, which is why the 21st century has been dubbed by some as the “China Century,” but the underlying reason is more profound than the simple phrase of an “economic life cycle” of nations, and I, a dabbling "equity strategist," would have to defer to economists to explain this phenomenon.

Dr. Chen

 

Thanks for your insightful reply

checking the calender for this week doesn't seem to show any major fundamental output of figures imho. Beige book on Wednesday ?

 

Humpy,

I will write about it on Tuesday. Thanks.

Dr. Chen

 

Reputation is indeed very important. It attracts top inventers and entrepreneurs. I expect most business people have heard of Silicon Valley even outside of California and the USA. Here in the UK it is talked about a lot on Radio and TV as a model for success.

 

Humpy,

Silicon Valley does not have its own fiscal policy, tax code, central bank, currency, and customs for foreign trade, so its economic activities are not akin to that of a sovereign country. This is what I meant by saying that Silicon Valley "is not governed by the general principle of the economic rise and fall of nations over time," so Silicon Valley is not comparable to BRIC in many aspects.

Dr. Chen