The value of looking WAY BACK in time...

let it run · Jul 14, 2005

I've traded intra-day for a while now and have just made the decision to look at having a separate account for INVESTING in shares. Obviously, this is a totally different kettle of fish.

When trading intra-day I had my opinion on fundamentals/technicals and be prepared to adapt my stance in a short period of time. However, I thought that it would be to my advantage to focus considerably more on the bigger picture for shares+derivatives which I intend to buy and hold for a theoretically unlimited time.

I'm lucky enough to be working with a guy who has traded successfully for 30yrs and he's walked me through technical patterns and the fundamental clues that suggest when significant peaks/troughs might occur eg a boom in commodities is historically the final nail in the coffin for immediate growth in an economy. The accuracy of some of his theory is fantastic (quite heavily based on Elliott Wave which I personally didn't like up until now) but we all know how easy it is to fit a model to past events. His analysis is fantastic and fits the past 50yrs+ of data superbly.

I'm amazed at how involved this guy is in assessing the market and if I had never traded before, I'd be buying every book he's written and soaking up everything he knows. HOWEVER, he's been calling a nosedive in the Australian stock market for a while now and he has given me justification as to why. What concerns me, and remember this guy is red hot on both fundamentals + technicals, is that his fundamental reasoning for an upcoming rise in interest rates is going to arrive at some stage to support the $A.

Now, for me, that sent alarm bells off. I may be being a little naive but I genuinely believe that an independent central bank in a 'civilised' country has no political agenda and all they really tend to concentrate on is the long term stability of an economy i.e. controlling inflation. Any tweaking of interest rates to suit commodities exporters or for any other short term issue/political hot potato is something that is part of the past when the learning curve as to how to run an economy was at an earlier stage.

Basically, I'd like an honest opinion on any/all of the following issues:

1.) Do central banks still show signs of political agenda?
2.) Do central banks realistically support their own currency at the expense of stepping on the toes of other objectives?
3.) Are we at a stage now, with central banks managing the economy independently, where the value of using data from pre 80s or so is inadvisable due to the fact that boom/bust isn't as wild as it used to be?

Any thoughts much appreciated. Thanks in advance.

let it run · Jul 14, 2005

Just to tidy the above up a bit, what I was trying to get at in point 3 is that we are living in a period now where monetary policy is used more effectively than ever before. I wondered if anyone thought that the lessons learnt along the way to getting to this stage makes looking at charts from times of 'less effective operations by central banks' a less fruitful exercise.

Hydroblunt · Jul 14, 2005

Quote from let it run:

Just to tidy the above up a bit, what I was trying to get at in point 3 is that we are living in a period now where monetary policy is used more effectively than ever before. I wondered if anyone thought that the lessons learnt along the way to getting to this stage makes looking at charts from times of 'less effective operations by central banks' a less fruitful exercise.
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You mean like the 1929 crash? Loose credit policy, wildcat banks, insane margin on equities, etc. etc.

You can also look at the Carter years, where the Fed chairman hiked the rates to the high teens. Kinda the opposite.

I think that's what you mean.

So you mind sharing the advice of the super investor. I'm definitely curious, I've been investing away capital little by little in various markets.

nkhoi · Jul 14, 2005

is his name start with letter B...

mhashe · Jul 14, 2005

Quote from let it run:

I've traded intra-day for a while now and have just made the decision to look at having a separate account for INVESTING in shares. Obviously, this is a totally different kettle of fish.

When trading intra-day I had my opinion on fundamentals/technicals and be prepared to adapt my stance in a short period of time. However, I thought that it would be to my advantage to focus considerably more on the bigger picture for shares+derivatives which I intend to buy and hold for a theoretically unlimited time.

I'm lucky enough to be working with a guy who has traded successfully for 30yrs and he's walked me through technical patterns and the fundamental clues that suggest when significant peaks/troughs might occur eg a boom in commodities is historically the final nail in the coffin for immediate growth in an economy. The accuracy of some of his theory is fantastic (quite heavily based on Elliott Wave which I personally didn't like up until now) but we all know how easy it is to fit a model to past events. His analysis is fantastic and fits the past 50yrs+ of data superbly.

I'm amazed at how involved this guy is in assessing the market and if I had never traded before, I'd be buying every book he's written and soaking up everything he knows. HOWEVER, he's been calling a nosedive in the Australian stock market for a while now and he has given me justification as to why. What concerns me, and remember this guy is red hot on both fundamentals + technicals, is that his fundamental reasoning for an upcoming rise in interest rates is going to arrive at some stage to support the $A.

Now, for me, that sent alarm bells off. I may be being a little naive but I genuinely believe that an independent central bank in a 'civilised' country has no political agenda and all they really tend to concentrate on is the long term stability of an economy i.e. controlling inflation. Any tweaking of interest rates to suit commodities exporters or for any other short term issue/political hot potato is something that is part of the past when the learning curve as to how to run an economy was at an earlier stage.

Basically, I'd like an honest opinion on any/all of the following issues:

1.) Do central banks still show signs of political agenda?
2.) Do central banks realistically support their own currency at the expense of stepping on the toes of other objectives?
3.) Are we at a stage now, with central banks managing the economy independently, where the value of using data from pre 80s or so is inadvisable due to the fact that boom/bust isn't as wild as it used to be?

Any thoughts much appreciated. Thanks in advance.
More...

The 2000/2001 NASDAQ collapse was'nt "wild" ?
care to post a chart with his assesment on current markets? I'm curious where his current EW count is headed.

Free Thinker · Jul 14, 2005

i will only say this once. Elliott Wave is a load of crap.

let it run · Jul 15, 2005

To answer a few questions here, I'd say that the NASDAQ belly-up of 00/01 was hardly the nightmare of 1987 and alike.

I am quite hesitant to start dishing out a proven technical model for free (especially since it isn't mine!) but if anybody wants to PM me then I'm happy to talk about the methods a bit more intricately. I'm sitting down with him next week to put my point across about how I don't think it is fair to say that the market as a whole behaves the same was as it did 30 years ago so can talk after that.

I have to admit, I'd previously tell anyone who wants to talk about Elliott Wave to take a running jump off a cliff and take stochastics with them but the results are undeniable, even in extremely short time frames.

I'm still not 100% committed to it all but my ind has definitely been opened.....