FW: The future...

 

 

From: Michael Berman [mailto:micksonmatch@gmail.com]
Sent: Thursday, 16 July 2009 10:16 AM
To: 'Dani Peer'
Subject: RE: The future...

 

Hi Fonz,

 

We are loving the new house.

 

I have like the Elliott guys been expecting the market to climb on higher, my error in judgement was that I thought there would be a steeper pullback before we went higher. I am more convinced than ever that Fundamentals and Sentiment are 2 separate beasts or maybe more correctly the causality link is the reverse of what is commonly believed. That is the sentiment ultimately fashions the fundamentals.

 

Looking at sentiment and fundamentals as 2 separate entities for now, I think fundamentals are very slow moving metrics but they are reactive not causative, always reacting to changes in sentiment. Sentiment on the other hand contains this inner charge of its own energy and it tends to be shorter in its cycles but it contains within it deeper levels or layers. What we are experiencing is the cycle of sentiment whereby there is a need for hope and this has caused the sentiment to improve despite the economic fundamentals.

 

The causative link is only as strong as the underlying conviction of the sentiment. Hope tends to be a very weak emotion and usually ends in disappointment. I think were we may have been at fault isn’t being too pessimistic it is perhaps being too rigid in our beliefs and not accepting that the market is an expression of many peoples emotions and therefore requires more intuitive understanding.

 

I am currently working with a mathematician in the US a freelancer on the markets imbedded memory. I started with this line of thinking a number of years ago, and Charis, Ebrahim and myself collaborated on a paper whereby we were able to prove that data is “sticky” and contains traces of memory, i.e.   more recent data has a greater significance than older data, this is what drives those feedback loops which cause markets to behave irrationally to what we would expect. I maintain there is a way to predict these patters on a probabilistic basis, this incorporates the Elliott Wave Principle and a few quantitative overlays.

 

I edge closer to the grail but I believe there is an element of evolution to all these understandings which means that 1 model will not fit all circumstances. Anyway that is my thinking currently.

 

Mickson

 

From: Dani Peer [mailto:dpeer@bigpond.net.au]
Sent: Thursday, 16 July 2009 8:44 AM
To: Michael Berman
Subject: The future...

 

Hello Mickson...

 

I hope that you are enjoying your new home. Don't rush to finalise everything at once. That's your mother's style. Just take it as it comes. There's always lots to do.

 

I must say that I am surprised with the market's behaviour over the last week. From what I understood, the engine was much more damaged. There's still quite a few toxic debt instruments to step up, more unemployment in the pipeline and a very underpowered consumer - the backbone of Western GDP. However, the mood seems upbeat and there's much talk of emerging from the crisis and better days ahead.

 

Have you and I been too pessimistic? How do you account for such optimism at a time of such fundamental headwinds? Am keen to hear your thoughts.

 

Fonz

 

 

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