COMMENT:
Martin,
Thank you for the laugh over your consoling words of “Cheer-up! We have a front row seat” in your bleak piece entitled, “The Elections for 2014 Are All About Creating a Dictatorship”. Talk about gallows humor! It reminded me of the story of a shopkeeper who had his store front damaged in a bomb attack in the dreadful early years of the Ulster Troubles.
Undaunted, he placed a sign upfront with the words ‘more open than usual’ and business continued.
M
REPLY: It is sad to say but unfortunately, there is always the extreme to the left or the right before the pendulum gathers enough energy to propel it back to the opposite side. When Princeton Economics emerged as the first firm to have a computer model on markets and the world economy, many NY firms began getting what became known as “quants” realizing I was applying Physics to the markets. But they missed the point.
When the 1987 Crash took place, the assumption was that it had been caused by computer models. After my experience in 1985 being told I was the only person with a model that forecasted a rise in volatility so they could not rely on just one of these contraptions, I did not want to have anything to do with the Brady Commission investigating the 1987 Crash. When Jack Schwager called me and said I had to get involved or they would come and confiscate everyone’s computer, I realized he was right – the morons would be led by the brain-dead. I succeeded in getting the Brady Commission to blame currency not computers, albeit they would not draw the final link to the G5 manipulation of the dollar.
The application of Physics to markets went full blast and eventually blew up in 1998 with Long-Term Capital Management. The fancy theories provided by the quants have proved to be often dangerous. They lack the trading experience to see that theory does not always reach the promised land.
Applying Physics to markets requires translation. But essentially, the core issue is cycles and how they function for that is how energy moves. This is the fundamental structure upon which the entire universe is constructed. It requires two opposites and an oscillation back and forth that is maintained providing energy flow to a Grandfather Clock or to politics and markets.
When the Gold Promoters try to argue manipulations that change the direction of the trend, they have left the reservation. Anyone can perhaps increase the amplitude of a move, but no one can create a bear market from a bull market that is not yet complete. Instead of understanding the true mechanism behind ALL movement, they are still trying to argue primitive concepts that have been proven to be wrong countless times. The socialists in Europe are arguing now that SPECULATION should be eliminated and then food prices would always be the same at least in their mind. It is not the greedy investors that cause the world to oscillate. They never heard about Mother Nature. I suppose a drought should have zero impact upon food prices. Good one!
