Large Financial Crashes

Paper Abstract: "We propose that large stock market crashes are analogous to critical points studied in statistical physics with log-periodic correction to scaling. We extend our previous renormalization group model of stock market prices prior to and after crashes [D. Sornette et al., J.Phys.l France 6, 167, 1996] by including the first non-linear correction. This … Continue reading Large Financial Crashes

Signs of delusion and madness

One of the signs that you have entered into a mania phase is when people have trouble absorbing non-conforming information. "Confirmation bias" is a psychological behavior where individuals disregard any information which conflicts with their current beliefs. While that bias has always been problematic for investors, in recent years, it has worsened. There are currently … Continue reading Signs of delusion and madness

Sentiment points to an imminent trend reversal in US stocks

In 1949, investing legend Benjamin Graham eloquently characterized the cyclical nature of financial markets in his book "The Intelligent Investor":"The market is a pendulum that forever swings between unsustainable optimism and unjustified pessimism. " Normally, social mood waxes and wanes positively and negatively. Thus, sentiment waxes and wanes in the form of dynamic cycles. Mood … Continue reading Sentiment points to an imminent trend reversal in US stocks

Growth stocks are more overvalued as they were in the 2000 bubble

If Value stocks are extremely cheap versus the market, it is necessarily the case that Growth stocks are very expensive. In absolute terms, that is even more true, given that the overall market is trading at elevated valuations relative to history. This chart shows the median price/sales of the Growth half of the U.S. stock … Continue reading Growth stocks are more overvalued as they were in the 2000 bubble

Employment points to an L shaped recovery for most

The U.S. nonfarm payrolls for January came in with a gain of 49,000. Revisions to earlier months showed a decline for both November and December by a total of 159 thousand. Government payrolls rose 43 thousand vs. private payrolls up 6 thousand. Education workers grew. The unemployment rate (U3), however, fell to 6.3%, well below … Continue reading Employment points to an L shaped recovery for most