Our Fragile Economy
Over the past week I have gotten around to reading one of the potentially more important books that I bought around Christmas, yes I tend to buy a number of presents for myself when I go Christmas shopping for others. First I had to read a fun book, Neil Young’s “Waging Heavy Peace”. Now I am into the deep stuff, Nicholas Taleb’s latest, “Antifragile”. His first two books “Fooled by Randomness” and the “Black Swan” are great books and if you have not read them , should be found. This new book, however, puts it all together and if you have not read the other two books, you could start here because I think this book will make a difference in your life.
The essence of the book so far as I see, I am only twenty pages in so far, is that Antifragile is a way to see things that reflect a mechanism that by its action is react-able and sustainable . Fragile is a state created in such a way that it eventually disintegrates into a big mess. While this book is not a book about the FED, my reading of the FED’s actions after the initial response, which was appropriate, turned into an increasing fragile state starting with QE 2.
As you know, I believe that the the S&P 500 IS NOT an indication of the strength of the economy but a depository of fragile inputs of the FED. I will talk about this in much more length in the coming weeks and I may even get around to Projections for 2013 now that the market is setup.
The technical inputs I watch, ie THE NUMBERS that I have sent out to some of you and for which I make comments from time to time, have built up quite a current performance record if one has keyed on the Macro Trend indicators which have been unrelentingly bullish since around October 2009. The word Watch is for me much more relevant than to say I trade by them. My trading pattern, as long-time readers can attest, is only loosely connected to technical trend indicators. For me these indicators miss the tops and bottoms by a much larger margin than I am comfortable. My preference is on the Wave indicator, which was developed in-house, and even it missed the 2007 top on the S&P by 240 points, and the 2009 bottom by 430 points. It does have over a 400 point profit at the moment in the long indication.
So what am I saying? Basically at the moment it would probably take a close under about 1275 on the S&P to get a sell on the Wave indicator. That is a long way down and the reason that I am not reacting to the take out of the top of the 1489 S&P trap area recently.