Market Analysis

Matt’s Market Insights

Understand how market participants think -- and you will understand which direction the markets will head. With that in mind let's take a look at another cognitive bias, hyperbolic discounting. As a reminder, cognitive biases are established tendencies of individuals to deviate from normal rationality under certain circumstances. For a broader description, please see the Daily Remarks posted on October 21, 2013.

Ever wonder why so many people these days are focused on short-term trading as opposed to long-term investing? Or why it's so hard to get younger individuals to effectively plan and save for retirement? Hyperbolic discounting can help us understand these phenomena.


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Posted in: Bonds Debt Federal Reserve Inflation

Matt’s Market Insights

Nearly three quarters of S&P 500 companies have reported Q3 earnings and so far results have been decent. As of Friday, 74% of companies that reported have beat earnings estimates and 53% have beat revenue estimates. This puts earnings growth at roughly 3.1% year-over-year if the trend continues. The big gripe that investors have been complaining about is the lack of revenue performance. Investors tend to rely more on revenue growth for indications that companies (and the economy) are expanding than on earnings growth. This is because earnings growth is easily manipulated by anything from cost cutting measures to accounting gimmicks.


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Posted in: Earnings Economy Federal Reserve Interest Rates Momentum

Matt’s Market Insights

The Fractal Nature of Price Trends.

Warning: this is going to be a bit complex and philosophical in nature.

The term fractal refers to an object or system that maintains self-similarity across multiple scales. Fractals exist everywhere in nature and describe the infinite complexity of our universe. Fractal mathematics is one of the principles underpinning Chaos Theory -- which can be described as the science of the unpredictable. Chaos Theory aims to understand the behavior of dynamic systems which are impossible to predict or control, such as weather, our brain states and -- yes -- the stock market.


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Posted in: Bonds Dollar Economy Federal Reserve Inflation Momentum

Matt’s Market Insights

Question: How many Brokers does it take to change a light bulb?

Answer: Two. One to take it out and drop it, the other to sell it before it crashes.

Sometimes in this business we need to keep things light-hearted ... no offense to all our esteemed subscribers who are Brokers!

The theme of yesterday's action was confirmation. We saw it everywhere. The Dow finally hit a new all-time high and provided our long-awaited confirmation of the Transports.


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Posted in: Economy Federal Reserve

Matt’s Market Insights

My piece will be short and sweet today, as we remind ourselves of a simple, yet profound dynamic regarding all of investing. It has been said that the number one and number two rules of investing respectively, are: never lose money and don't forget rule number one. We all know that's a great ideal to shoot for but not the least bit realistic. As investors we understand that we will inevitably have both winning positions and losing positions.


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