Feb

20

Investors are often perplexed by the lack of warning of market tops and bottoms, until after the fact. There is no alarm bell tolling. However, there are warning signs at the tops usually based upon enthusiasm, and at the bottom signs based on despair. Didn't Mutual Fund Magazine close its shutters at the end of the last bear market, ringing the bell near the bottom? So now we have a new FOX Business Channel to start broadcasting this year.

Is this a warning bell that the market is flirting with the top?

Victor Niederhoffer writes:

This is all very well and good except that there are approximately 1 billion qualitative events like starting a new business channel that come within a month of all market tops, bottoms, and continuations. It is impossible to differentiate the cause, effect, or any other factor related to the seemingly and for the large part random movements from drift.

From Jason Goepfert:

My local Barnes & Noble is relatively small and its business magazine section is sparse, Forbes, Fortune, BusinessWeek and not much else.

Last year, they started carrying Active Trader, which I found at the back of the top rack. If I weren't 6'6", I never would have seen it.

This weekend, on the second shelf, I was taken aback when I saw the following magazines all prominently displayed: Active Trader; Equities Magazine; Technical Analysis of Stocks & Commodities; Traders Press; Trader Monthly; and Bloomberg Magazine 

Jim Sogi writes:

My daughter called last week and said, "Dad, I want to buy some stocks, now." I said, " Wait till they go down a bit." She said, "You always say that." I told her that, as with the rest of the public, with recent all time highs, the urge to buy stocks at high levels is typical but often wrong. It is better to buy stocks when they are down so you aren't down a couple percent as soon as you buy. She looks at her stocks about once a quarter.

From Stefan Jovanovich:

The actual use of canaries in coalmines fails to provide the historical lesson that the metaphor promises. Mining for "sea" coal (named because the earliest pits were at the coastal towns like Newcastle in what is now the United Kingdom) began in the 1400s. Canaries were first used in British coal mines in 1911. As part of the political alliance between the Liberals and the new Labor Party, parliament adopted regulations requiring that two canaries be placed in every mine. That, of course, required that someone be assigned the job of canary keeper.

The requirement for canaries was finally abolished in 1986. There is no evidence that the canaries served any useful purpose; the scientific justification was so weak that they were first described as being uniquely qualified to detect carbon monoxide. When that proved not to be the case, they were rationalized as being peculiarly sensitive to methane. The canary in the coalmine is probably better compared to the caboose on the rail train, a "safety" requirement that provided a comparatively soft berth for the man assigned to the useless activity.


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