The-death-of-equitiies-Business-Week-cover-1979

Stories, Markets, Luck And You

“China’s central bank reduced the amount of reserves commercial banks are required to hold, freeing up about $200 billion for lending in the latest easing measure.”  The “larger-than usual reduction…is the second cut in banks’ reserve requirement in less than three months and comes after the economy decelerated to 7%…’The question is whether the PBOC is a little slow on easing.  They’re fighting the last battle, like generals do.’”  Speaking of generals, “perhaps Mr. Tsipris will step back from the brink, ditch his party’s hard-line left-wing and recast his coalition with moderate pro-Europeans willing to back reforms, thereby securing a last-gasp deal to avert disaster…The more likely scenario is that Greece defaults.”  “News from Greece and China disrupted U.S. markets on Friday, but the deeper problem was closer to home.  First-quarter U.S. corporate revenue, now beginning to be reported, is coming in even lower than analysts’ sharply reduced forecasts had indicated…’It is making investors cautious, maybe a little bit confused.’”  Meanwhile, “we like stories, we like to summarize, and we like to simplify, i.e., to reduce the dimension of matters…the [narrative fallacy] is associated with our vulnerability to overinterpretation and our predilection for compact stories over raw truths.”  Also, “the biggest threat to your portfolio is you.  China is not threatening your portfolio, nor is the price of oil or the level of the Fed Funds rate.  What’s threatening your portfolio is the way in which you may react to any of these items, plain and simple…No one will see the thing coming that derails the economy or the market next time around.  It certainly won’t be something that’s on the front page of the newspaper like Greece or interest rates…If we cannot even identify the reason for why a market tops or crashes on a given day with the benefit of looking back, what makes any of us think we can do so in real-time or in advance?  More importantly, doesn’t it make more sense to recognize the durability of the capital markets in the face of all these threats rather than try to play hopscotch with our retirement assets each time a new one arises?”  “In the financial markets, where so many investors are highly skilled (…), their actions cancel each other out as they quickly bid up the prices of any bargains — paradoxically making luck the main factor that distinguishes one investor from another.  And a streak of being right can make anyone forget how important luck is in determining the outcome…Guarding against the illusion of control takes constant vigilance.  The longer you’ve been right, the harder it gets.”

 

USA: Dr. Ed Lays Out The Evidence For Wage Pressure

 

USA: Deutsche Bank Says Defaults Are Very Low Compared To Historical Standards

 

China: $46 Billion Rail/Road To Wealthy Consumers In Europe

 

USA: Financial Situation “Getting Better” For Over Half Of Americans Surveyed By Gallup

Meanwhile, half are in, half are out, and half of those “because they simply don’t have the money.”

 

What: Jon Corzine Is “Gratified That Others Might Want To Invest With Him”

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