And there’s joy at Fenway as  Boston Puts It To the Yankees.

If….you love the Yankees, I understand.

Every morning after a Red Sox game, Lisa’s grandmother tells me about the game. I already know what she tells me, but she gets quite excited at age 95.

She says, “Big Poppie (David Ortiz) clocked his third home run, and things are looking up for him” and “the stock market”, I add.

OK; not so fast, Randall. We have a lot of ground to travel before returning to solid ground. No banners hanging over Wall Street yet.

Just the same, the news is better.

Market analysts support viewpoints with statistics. Most of us find the data dreary. We scan the dull parts faster than a furtive glance.

Baseball stats dull the sound of the bat, the “wave”, and a Fenway Frank. Just the same, statistics and probabilities matter.

This summer, I went to my second Red Sox game. We sat perpendicular to third base. What seats! To my right and to my left, two middle-aged men kept track of every hit and every pitch for every inning.

I asked, “How come you do that?” They both said, “I just enjoy the game more when I do.”

So, for those who enjoy stock statistics, the attached SEI Investments commentary gives you plenty to ponder.

Quiz:  Can you guess the stat before reading the right coloumn? They all seem esoteric to me.

Here’s the article, “Small-Cap Stocks: Too Far Too Fast or Just the Beginning?” by James Solloway, CFA, Senior Portfolio Manager, Global Portfolio Strategies, SEI Investments, Inc.

This cat sleeps.

Dead cat stock market bounces are “A temporary recovery from a prolonged decline or bear market, after which the market continues to fall.” (Investopedia)

If dead cats bounce, the metaphor is useful when predicting stock market trends.

Dead cats bounce along Wall Street after short sellers cover their yet-to-be-owned stock. Their doubt about the market’s continued price-drop prompts them to buy the stock (ie. cover their short position).

Dead cats bounce along Wall Street when investors cover their option positions. Their action may encourage false hopes of a bounce in the markets.

Dead cats bounce along Wall Street when speculating investors throw a dart at Wall Street “blue light specials” (for you KMart shoppers). When checking their purchase in the Sunday papers, they find their shares for sale at a deeper discount.

The dead cat bounce is a silly idiom; no experiment I know of proves a dead cat bounces. No economist or analyst predicts dead cat bounces in the stock market consistently.

“8 Who Saw the Crisis Coming…” (Fortune Magazine, August 2008)
• Sean Egan
• Nouriel Roubini
• Michael Mayo
• Robert Rodriguez
• William Poole
• Richard Baker
• David Einhorn
• Bill Eickman

  “…And 8 Who Didn’t”

• Angelo Mozilo
• Jeff Larson
• Moody’s, Fitch, Standard & Poor’s
• Greenspan, Bernanke, Paulson
• James Cayne
• Chuck Prince, Former Citigroup CEO
• Stan O’Neal, Former CEO, Merrill Lynch
• Zoe Cruz, Former CEO, Morgan Stanley

An ancient test for a prophet requires exact and fulfilled predictions every time, not some of the time.

Stock market moves are not dead or alive, bullish or bearish unless investors make them so. Momentum comes when the greater number of investors take action that opposes other investors. This makes momentum possible.

Most importantly, you don’t know until you presume the cat bounced. Predicting market direction expresses chutzpah blended with keen observations.
You may be right, but the likelihood of accurate and successive predictions confirms the unparalleled dimensions of uncertainty.

Market optimism or pessimism occurs when a mass of people make the result theoretically probable. The determination or prediction of probable outcome never eliminates uncertainty unless there are glaring market anomalies (**see Robert Schiller).

Italian economist Vilfredo Pareto’s principle asserts that 80% of value comes from 20% of those who have the potential to create value. The calculations do not support the 80/20 rule every time, but at minimum the concept retains its assertion.

Therefore, 80% of market analysts are right 20% of the time or 80% of stock market predictions are right 20% of the time. As with all predictions, there’s no certainty of which prediction is right.

For me, further proof that asset allocation, with static weighting and dynamic investment methods works when market anomalies lack affect.

When Vilfredo’s cat died, he did not drop her stiff body out of his bedroom window to see if she’d bounce.

“It is a maxim of empirical economics that if you torture the data sufficiently, they will confess.”
(Stephen A. Marglin, The Dismal Science “How Thinking Like An Economist Undermines Community” (Cambridge: Harvard University Press, 2008) 122.

Empirical economics is distinct from theoretical economic theory or the fundamental distinction between deductive and inductive economic ideas.

We’ll all know in six months.

“If you want to have a better performance than the crowd, you must do things differently from the crowd.” – John Templeton

Templeton is right, but most of us act according to John Emerson’s views posted on Scienceblogs.com.

Economists have always had trouble with bubbles, like the one we just experience (sic), and this is partly because not only are people not totally rational and not only do they not have perfect knowledge, but besides that, they communicate with one another, so the irrationality is not randomly distributed so that the irrational individuals are weeded out, but can pervade a whole population.

What will the maddening crowds do? Uncertainty prevails for the moment. We may presume, I think, that Americans possess an unwavering commitment toward work and prosperity, and these ethics should become evident in the value of stocks.

  

 

American Insurance Group

American Insurance Group: Economic historians and Ph.D. candidates will dig deeply into the annals of this economic crisis. The American Insurance Group (AIG) will be the protagonist of the historical-story line. AIG’s risk tolerance, risk analysis, and policy to insure risk could be the root of this economic turmoil.

Rather than elaborate and interpret, I will  list a series of relevant stories. Click on the titles below to read the report on a separate browser page. 

Corporate malfeasance convolutes and distorts the best qualities of a firm and its people.  Many AIG employee stomachs turned sour when learning of AIG’s failing compleasance. In the Leviathan, Thomas Hobbes’s “fifth Law of Nature, is compleasance; that is to say, “That every man strive to accommodate himselfe (sic) to the rest.”

Hobbes contrasts the man who will adjust himself, his passions, to the larger group with the “man that by asperity of Nature, will strive to retain those things which to himselfe (sic) are superfluous, and to others necessary; and for the stubbornness of his Passions, cannot be corrected, is to be left, or cast out of Society, as combersome (sic) thereunto.” AIG Corporation may “be left, or cast out of Society, as combersome thereunto.”

Here are your stories; this is not an exhaustive list. 

• Falling Giant:  A Case Study Of AIG by Gregory Gethard
• Jim Crammer Apologizes to AIG Employees
• AIG Employees on Edge as Once-Safe Company in Turmoil
• AIG On The Brink
• Crisis on Wall Street: Questions and Answers On AIG
• Charlie Rose: A Conversation About AIG with Hank Greenberg

Two intriguing observations from this data (Compiled by Dustin Woodard)

Stock market crashes can last more more than a year.

September or November are the critical months (remember October 1987).

10th Worst Stock Market Crash:
Date Started: 1/15/2000
Date Ended: 10/9/2002

Total Days: 999
Starting DJIA: 11,792.98
Ending DJIA: 7,286.27
Total Loss: -37.8%

9th Worst Stock Market Crash:
Date Started: 11/21/1916
Date Ended: 12/19/1917

Total Days: 393
Starting DJIA: 110.15
Ending DJIA: 65.95
Total Loss: -40.1%

8th Worst Stock Market Crash:
Date Started: 9/12/1939
Date Ended: 4/28/1942

Total Days: 959
Starting DJIA: 155.92
Ending DJIA: 92.92
Total Loss: -40.4%

7th Worst Stock Market Crash:
Date Started: 1/11/1973
Date Ended: 12/06/1974

Total Days: 694
Starting DJIA: 1051.70
Ending DJIA: 577.60
Total Loss: -45.1%

6th Worst Stock Market Crash:
Date Started: 6/17/1901
Date Ended: 11/9/1903

Total Days: 875
Starting DJIA: 57.33
Ending DJIA: 30.88
Total Loss: -46.1%

The 5th worst stock market crash:
Date Started: 11/3/1919
Date Ended: 8/24/1921

Total Days: 660
Starting DJIA: 119.62
Ending DJIA: 63.9
Total Loss: -46.6%

4th Worst Stock Market Crash:
Date Started: 9/3/1929
Date Ended: 11/13/1929

Total Days: 71
Starting DJIA: 381.17
Ending DJIA: 198.69
Total Loss: -47.9%

3rd Worst Stock Market Crash:
Date Started: 1/19/1906
Date Ended: 11/15/1907

Total Days: 665
Starting DJIA: 75.45
Ending DJIA: 38.83
Total Loss: -48.5%

2nd Worst Stock Market Crash:
Date Started: 3/10/1937
Date Ended: 3/31/1938

Total Days: 386
Starting DJIA: 194.40
Ending DJIA: 98.95
Total Loss: -49.1%

Worst Stock Market Crash Ever:
Date Started: 4/17/1930
Date Ended: 7/8/1932

Total Days: 813
Starting DJIA: 294.07
Ending DJIA: 41.22
Total Loss: -86.0%

NOTE: This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any stock in particular, nor should it be construed as a recommendation to purchase or sell a security, including futures contracts. For more information, including a prospectus with charges and expenses, call the number of any brokerage firm, mutual fund company, investment advisor, or insurance company.. Please read the prospectus carefully before investing. . Mutual fund investing involves risk, including the possible loss of principal. In addition to the normal risks associated with equity investing, international investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Narrowly focused investments typically exhibit higher volatility. Products of companies in which technology funds invest may be subject to severe competition and rapid obsolescence. Index performance returns do not reflect any management fees, transaction costs or expenses. One cannot invest directly in an index. Past performance does not guarantee future results. Ethos provides this news page for information purposes only and it should not be construed as legal, accounting, tax, or professional advice. Ethos Advisory Services disclaims any loss or liability which is incurred as a consequence, directly or indirectly, of the use or application of this news page or any page on ethosadvisory.com or echievements.com.

Tags: stock, market, crashes,

Never have I observed such a dispirit mass of views, political dysfunction, and public confusion. Dispirit views can be expected whenever discussion ocurrs, but political dysfunction is not what a democracy needs. Public confusion erupts because there is a lack of government leadership and public knowledge. When a crisis arrives, no one can decide on what works, and no one leads. All parties appear to play the zero-sum game: give me all I want and I’ll give you nothing of what you want, or I’ll give up something as long as you know there’s hell-to-pay.

Most people get their stock market updates from the evening news. The excitement on the way up with the gloom and doom during a market correction. Very few get much of an education. Duncan Niederauer, CEO of the New York Stock Exchange recognized this by statiing that many voters fail to understand the inextricable link between “Main Street and Wall Street”.

American voters think this is a “bailout of Wall Street”. What we face is a “credit-crisis”. Small businesses faces payroll challenges, the U.S. auto industry has no wheels, and the housing industry has no foundation. As Secretary Paulson said, “…this is much too important to let this fail,” Paulson said.

House Majority Leader Steny Hoyer said, “Why should taxpayers loan out their own money to solve a crisis brought on by someone else’s greed?” He answered his own question by saying, “…in our economy, none of us is an island. A meltdown would begin…on a few square miles of Manhattan, but before it was over…no city or town in America would be untouched.”

Mutual fund, 401(k), endowment fund, and pension investors can blame Wall Street “fat cats”, but we all chased the mice. We all gloated and took pride in the numbers on our statements. “No city or town in America” ran from the market upside, but everyone wants to blame someone on the downside.

The greater the excess or hubris, the greater the humiliation. The greater the cynicism, the greater the deliberative dysfunction when seeking a resolution. The greater the market avarice on both sides of a trade (long by owning stock and selling or shorting a stock)the worse the results for everyday, steady-hearted investors.

We can only hope that time and sensibility return our sanity. We can only hope that the stock market becomes a thermometer of economic growth, research and development, entrepreneural innovation, and a cooperative effort to keep this planet revolving for our kids.

Tags: stock, market, crash,, credit, crisis,, September, 29,, 2009,, Wall, Street