Friday July 14, 2006 - 10:35:36 GMT
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Black Swan Capital - www.blackswantrading.com
Boom-bust is all?
â€˘ The Bank of Japan raised interest rates for the first time in almost six years. (Bloomberg)
â€˘ Key Reports (WSJ):
8:30a.m. June Import Prices. Consensus: +0.2%. Previous: +1.6%.
8:30a.m. June Retail & Food Sales. Consensus: +0.4%. Previous: +0.1%.
8:30a.m. June Retail Sales, Ex-Food & Energy. Consensus: +0.4%. Previous: +0.5%.
9:45a.m. Mid-July Univ. of Michigan Sentiment Index. Consensus: 86. Previous: 84.9.
10a.m. May Business Inventories. Consensus: +0.4%. Previous: +0.4%.
â€śUnfortunately the world has not been designed for the convenience of mathematicians. There is much in economics that is best described by this wilder, unpleasant form of randomnessâ€”perhaps because economics is about not just the physics of wheat, weather, and crop yields, but also mercurial moods and unmeasurable anticipations of wheat farmers, traders, bankers, and consumers."
Benoit Mandelbrot, The Misbehaviour of Markets
Interest rates, inflation rates, liquidity, supply, demand, relative value, intermarket correlation, irrational behavior, and geopoliticsâ€”to name a few variables in this equation we call speculation.
â€˘ A real catalyst starts the ball rolling
â€˘ Traders jump on the trend, validated by the fundamentals
â€˘ More traders hop on, validated by price
â€˘ More traders hop on, motivated by greed
â€˘ Some traders hop off, thinking about value
â€˘ More traders hop off, as prices donâ€™t bounce
â€˘ The rest run for the exits, motivated by fear
Whatever name we want to give this game, in whatever time frame we wish to play it, it seems the more and more we try to break down its components, we can come back to only one consistent patternâ€”boom and bust.
Japan did its thing. Stocks are tumbling. Gold is rising. Oil is rising. The Middle-East is burning. And we have June import prices to worry about this morning. Be careful out there.
Jack Crooks, Black Swan Capital Black Swan Subscription-based Service
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