In recent months, a number of "hot" markets -- including U.S. large cap technology shares, emerging market stocks, gold, and the euro -- have moved increasingly in synch.
While it is possible this convergence is either coincidental or reflects a series of overlapping fundamentals, another explanation is that there is a growing rush by trend-chasing traders into a core group of speculative favorites being fueled by their own momentum.
If that's the case, then things could get pretty ugly when the music finally stops.
I'm wondering if the reason that contrary to the health of the economy the stock market is rising at times, is due to the fact more money is chasing fewer opportunites to make money. I mean that with increased money supply in play which must be speculated into higher returns and whole areas of the market which are no longer viable or are losing propostions,like the various hedge funds,banks etc.,that investment is being channeled,(forced) into a narrower range of stocks,metals, and commodities creating an artificial sense of momentum. I'm not being conspiratorial or saying this deliberate. I'm saying this is occuring out of economic necessity. Possible?
Posted by: Marc in Victoria, British Columbia, Canada | October 12, 2007 at 03:54 AM
I wonder if the market is moving, at times, upward is due to more money chasing fewer opportunities to make money. I mean if the money supply is being increased which then must be speculatively invested for a higher return and major portions of the market -like hedge funds,banks,real estate- are no longer viable at best or losing propositions at worst,then investments are being channelled into a narrower range of options -like tech. stocks,metals,and commodities etc. creating upward momentum. I'm not being conspiratorial here, I'm suggesting it's out of economic necessity. Possible?
Posted by: Marc in Victoria, British Columbia, Canada | October 12, 2007 at 04:23 AM
are you even serious? these are all denominated in dollars!
maybe it's instead illustrating dollar weakness?
Posted by: zdust | October 12, 2007 at 05:03 AM
OK... they are moving in sync, but what do YOU expect to happen in the future?
Will Gold win out? Will the Euro drop? Will the Markets drop like a Lead Brick?
Going in sync is noteworthy, but what will happen in the future?
Posted by: Chuck | October 12, 2007 at 10:26 AM
My longer-term view are clearly spelled out in my book, and I'd recommend that you pick up a copy as soon as possible. In the short run, however, I'm bullish on the dollar and bearish on gold. One reason: there too many investors/speculators betting the other way, and Mr. Market gets a kick out of proving the majority wrong.
Posted by: Michael Panzner | October 13, 2007 at 06:03 PM
the increased correlation is, I also think, no coincidence.
the reasons in my opinion are the increased presence of leveraged speculative money in recent years. this has created a 'momentum' culture. most of this money is managed by hedge funds, who dabble in everything that is easy to trade and liquid. this has increased herding in markets.
this sort of correlation - i believe - was observed in times of crisis in the past. its probably a sign of markets driven by emotions and less by wisdom..
Jeremiah
"you will go to them, but for their part, they will not listen to you"
Posted by: Jeremiah74 | October 15, 2007 at 05:05 AM