Good piece on Seeking Alpha about market correlations: these days individual fundamentals don’t seem to matter as much as general market trends:
We used to be a market influenced by lemmings, but now they run the market. Remember two weeks ago? Every asset up… get out of the way. Risk is ON! Five weeks ago? You own stuff? Loser! Risk is OFF! 12 weeks ago? Everything must go up! Last week? Sell sell sell… everything!
The measured correlation of markets is around 80%, which indicates investing is more a game of follow the leader than picking opportunities.
Read on here.
And for anecdotal proof, here’s how the price of crude oil is correlated with other commodities: like alcohol:
LONDON (Reuters) – Britain’s financial regulator has fined and banned a former broker for manipulating oil prices by buying more than 7 million barrels while on a drinking binge.
The Financial Services Authority (FSA) said it fined Steven Perkins, a former employee of PVM Oil Futures Ltd, 72,000 pounds ($108,000) and banned him from working in financial services for at least five years for carrying out trades without the authority of clients or his employer.
Perkins’ unauthorized trading pushed the price of Brent crude oil futures up to almost $73.50 a barrel — at that point the highest level prices had hit on the InterContinental Exchange in 2009.
The rest of the insanity here.
It’s an absurd game we play.
“Sent from my BlackBerry® wireless handheld”