|Len Oppenheim, Economics||17 Mar 2011|
|Volatility in the Casino: Musing #1246 by Len Oppenheim|
“There are only two ways to live your life: as though nothing is a miracle, or as though everything is a miracle.” Albert Einstein
“A single neuron may be rather dumb, but it is dumb in many subtle ways.” Francis Crick
“You see, one thing is, I can live with doubt and uncertainty and not knowing. I think it’s much more interesting to live not knowing than to have answers which might be wrong. I have approximate answers and possible beliefs and different degrees of certainty about different things, but I’m not absolutely sure of anything and there are many things I don’t know anything about, such as whether it means anything to ask why we’re here, and what the question might mean. I might think about it a little bit and if I can’t figure it out, then I go on to something else, but I don’t have to know an answer. I don’t feel frightened by not knowing things, by being lost in a mysterious universe without having any purpose, which is the way it really is so far as I can tell. It doesn’t frighten me. Richard Feynman
Certainly it is much more enjoyable to live one’s life as if everything is a miracle rather than nothing is a miracle. If one has a choice, the decision is a “no-brainer”.
If one could only understand a neuron one would understand everything. If there is anyone out there who understands a neuron please give me a heads up. Thanks.
Richard Feynman is one of my favorite characters. His book, Surely You’re Joking Mr. Feynman is a book which I have read over and over again. If anyone wants to watch some of his lectures, here is a link: http://research.microsoft.com/apps/tools/tuva/#data=3%7C%7C%7C
As Feynman notes, it is our fate to experience life despite not knowing all the answers. In fact we don’t even know all the questions.
Certainly none of us will ever know all the answers when it comes to understanding or predicting markets.
• • •
As I noted about 10 days ago the stock market has changed its character. Perhaps this is the long awaited correction, but it is at least equally probable that the cyclical bull market is over. In any event investors are probably best off on the sidelines.
Owing to the policies of our government and Federal Reserve there is no safe haven among financial assets. We may be heading into a period when “return of capital” may be more important than “return on capital”. In other words, buyer beware! Investors should focus on preservation of capital.
The stock market has become more and more of a casino and now volatility has been enhanced.
In the long run only gold and silver are likely to retain their purchasing power. However, in the intermediate term even the precious metals, and certainly the mining stocks are risky.
The one thing about which I am sure is that: Information is not Knowledge. Our society produces massive amounts of information. We are very long on data and short on wisdom.
The pundits who claim that the rebuilding necessary in Japan is bullish for world economies should take the time to read Bastiat (you can Google him) and his explanation of why breaking windows does not benefit the economy. Here is a link to the Wikipedia site of the Parable of the broken window. http://en.wikipedia.org/wiki/Parable_of_the_broken_window
• • •
This is a tough market for traders. I wonder if there was enough panic seen today to create at least a trading opportunity on the long side. Perhaps a down opening tomorrow or a successful retest of the lows from today might set off a short-covering rally to skewer some late to the party bears and shorts. If that were to be the case investors might consider selling into any rally of 2 or 3 % or more.
• • •
My schedule looks very full for the next couple of weeks, so I may or may not have time to send further musings.
Best of luck to everyone, and we especially send our prayers and positive energy to our brethren in Japan.