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To quote Keynes: The market can stay irrational longer than you can stay solvent.

by VintageCool 9y ago

draw_down 9y ago
Good rule of thumb if you're an individual investor. If you're China, well...
- ethbro 9y ago
  I would also assume that a majority of the options to "call an irrational market's bluff" aren't freely available vis China. So it would be less exposed to international market driven deleveraging? (Actually asking, I know they've been loosening their financial walls but am not sure what the current controls are)
  - ryandamm 9y ago
    To the extent people are trying to trade on this model, they look for liquid marketplaces that are exposed to China's economy. Australian metals and mining stocks, for instance, or currency fluctuations in closely-pegged economies (forex being pretty darned liquid with a very deep futures market). Chinese equities are something else entirely, closer to a derivative class. And hard to trade in directly (not that I have tried or would ever try -- I'm in index funds). And the truth is, the banking system is less liquid, and the equities market much smaller, than developed economies. Oh, also, short-selling is illegal, I believe. So no, there aren't any natural, market-driven checks on this stuff.
busyant 9y ago
Or...economists have successfully predicted 7 of the last 5 recessions.
- mowenz 9y ago
  Keynes took previously unacceptable ideas and made them gospel, and he also was critical of economics when others thought they had everything figured out. Before an econ degree I thought it could all be understood the way we understand, say, a chemical reaction, or some process with rules, laws and order. But afteran econ degree the thing I realized is that money and economics, it's all about people. Money and debt has no intrinsic value (especially in 2017)--it's just promises and credits people made to each other. But people are prone to irrationality, cheating, and frankly, their own bullshit. The global financial system in 2017 has not done everything it can to minimize this, either. If anything, they take advantage of it where it profits them.

To quote Keynes: The market can stay irrational longer than you can stay solvent.

draw_down 9y ago

Good rule of thumb if you're an individual investor. If you're China, well...

ethbro 9y ago
I would also assume that a majority of the options to "call an irrational market's bluff" aren't freely available vis China. So it would be less exposed to international market driven deleveraging? (Actually asking, I know they've been loosening their financial walls but am not sure what the current controls are)
- ryandamm 9y ago
  To the extent people are trying to trade on this model, they look for liquid marketplaces that are exposed to China's economy. Australian metals and mining stocks, for instance, or currency fluctuations in closely-pegged economies (forex being pretty darned liquid with a very deep futures market). Chinese equities are something else entirely, closer to a derivative class. And hard to trade in directly (not that I have tried or would ever try -- I'm in index funds). And the truth is, the banking system is less liquid, and the equities market much smaller, than developed economies. Oh, also, short-selling is illegal, I believe. So no, there aren't any natural, market-driven checks on this stuff.

busyant 9y ago

Or...economists have successfully predicted 7 of the last 5 recessions.

mowenz 9y ago
Keynes took previously unacceptable ideas and made them gospel, and he also was critical of economics when others thought they had everything figured out. Before an econ degree I thought it could all be understood the way we understand, say, a chemical reaction, or some process with rules, laws and order. But afteran econ degree the thing I realized is that money and economics, it's all about people. Money and debt has no intrinsic value (especially in 2017)--it's just promises and credits people made to each other. But people are prone to irrationality, cheating, and frankly, their own bullshit. The global financial system in 2017 has not done everything it can to minimize this, either. If anything, they take advantage of it where it profits them.