The Cocktail Party Market Indicator

Excellent take from former Magellan fund manager Peter Lynch:

“If the professional economists can’t predict economies and professional forecasters can’t predict markets, then what chance does the amateur investor have? You know the answer already, which brings me to my own ‘cocktail party’ theory of market forecasting, developed over the years of standing in the middle of living rooms, near punch bowls, listing to what the nearest ten people said about stocks.

In the first stage of an upward market – one that has been down awhile and that nobody expects to rise again – people aren’t talking about stocks. In fact, if they lumber up to ask me what I do for a living, and I answer, ‘I manage an equity mutual fund,’ they nod politely and wander away. If they don’t wander away, then they quickly change the subject to the Celtics game, the upcoming elections, or the weather. Soon they are talking to a nearby dentist about plaque. When ten people would rather talk to a dentist about plaque than to the manager of an equity mutual fund about stocks, it’s likely the market is about to turn up.

In stage two, after I’ve confessed what I do for a living, the new acquaintances linger a bit longer – perhaps long enough to tell me how risky the stock market is – before they move over to talk to the dentist. The cocktail party talk is still more about plaque than about stocks. The market is up 15 percent from stage one, but few are paying attention.

In stage three, with the market up 30 percent from stage one, a crowd of interested parties ignores the dentist and circles around me all evening. A succession of enthusiastic individuals takes me aside to ask what stocks they should buy. Even the dentist is asking me what stocks he should buy. Everybody at the party has put money into one issue or another, and they’re all discussing what’s happened.

In stage four, once again they’re crowded around me – but this time it’s to tell me what stocks I should buy. Even the dentist has three or four tips, and in the next few days I look up his recommendations in the newspaper and they’ve all gone up. When the neighbors tell me what to buy, and then I wish I had taken their advice, it’s a sure sign that the market has reached a top and is due for a tumble.”

-Peter Lynch, One Up On Wall Street

Hat tip Jeff Saut

Category: Markets, Psychology

Economic data

Higher headline inflation finally showed up in core PPI as it rose .5% m/o/m, the fastest pace since Oct ’08 and the y/o/y core rose 1.6%, matching the highest since Sept ’09. Headline PPI rose .8% m/o/m, in line with expectations and are now up 3.6% y/o/y. Inflation in the pipeline was also robust as…Read More

Category: MacroNotes

Market Overview Video

I just recorded our FusionIQ Market Overview, discussing the S&P 500 (still in bullish channel) NASDAQ (also bullish), Transports (held key near term support), Bank Index (ugly but stabilized), Hang Sang Index (broke down), US Unemployment (improving). Market seems to be setting up for speculative melt up. The video is posted here

Category: Markets

FusionIQ Market Overview

Category: Markets, Video

TV’s Top Earners

Drama (per episode) Hugh Laurie (House) $400,000+ Christopher Meloni & Mariska Hargitay (Law & Order: SVU) $395,000 (each) David Caruso (CSI: Miami) $375,000 Marg Helgenberger (CSI) $375,000 Mark Harmon (NCIS) $375,000 Laurence Fishburne (CSI) $350,000 Kyra Sedgwick (The Closer) $350,000 Denis Leary (Rescue Me) $350,000 Gary Sinise (CSI: NY ) $275,000 Patrick Dempsey (Grey’s Anatomy)…Read More

Category: Television, Weekend

Source of the Iraqi WMD Claims Comes Clean

Washington’s Blog strives to provide real-time, well-researched and actionable information.  George – the head writer at Washington’s Blog – is a busy professional and a former adjunct professor.


Source of the Iraqi WMD Claims Comes Clean … And Shows that the American and British Governments Willfully Manipulated the Evidence

As I’ve repeatedly pointed out, everyone knew that Iraq didn’t have WMDs.

The Guardian just interviewed the the infamous “Curveball” who provided false evidence about Iraq’s weapons of mass destruction. Curveball admitted that he knowingly lied about WMDs, in order to topple Saddam Hussein. The Guardian has a series notes in a series of articles out today on the issue which reinforce the conclusion that the American and British governments deliberately manipulated the evidence to justify the Iraqi invasion.

In one article, the Guardian notes :

The former head of the CIA in Europe … Tyler Drumheller, who says he warned the head of the US intelligence agency before the 2003 invasion of Iraq that Curveball might be a liar ….


“My impression was always that his reporting was done in January and February,” said Drumheller, adding that he had been warned well before 2003 by his counterparts in the German secret service (BND) that Curveball might not be reliable. “We didn’t know if it was true. We knew there were real problems with it and there were inconsistencies.”

He passed on this information to the head of the CIA, George Tenet, he said, and yet Curveball’s testimony still made it into Colin Powell’s famous February 2003 speech justifying an invasion. “Right up to the night of Powell’s speech, I said, don’t use that German reporting because there’s a problem with that,” said Drumheller.


He recalled a conversation he had with John McLaughlin, then the CIA’s deputy director. “The week before the speech, I talked to the Deputy McLaughlin, and someone says to him, ‘Tyler’s worried that Curveball might be a fabricator.

“And McLaughlin said, ‘Oh, I hope not, because this is really all we have.’ And I said, and I’ve got to be honest with you, I said: ‘You’ve got to be kidding? his is all we have!’”

In a second article, the Guardian reports:

A senior aide to Colin Powell at the time of his pivotal speech to the United Nations said on Tuesday that Curveball’s admission raised questions about the CIA’s role.

Lawrence Wilkerson, who was chief of staff to the then US secretary of state Powell in the build-up to the invasion, said the lies of Rafid Ahmed Alwan al-Janabi, also known by the codename Curveball, raised questions about how the CIA had briefed Powell ahead of his crucial speech to the UN security council presenting the case for war.

In particular, why did the CIA’s then director George Tenet and his deputy John McLaughlin believe the claim by Curveball, “and convey that to Powell even though the CIA’s own European chief Tyler Drumheller had already raised serious doubts.

“And why did Tenet and McLaughlin portray the presence of mobile biological labs in Iraq to the secretary of state with a degree of conviction bordering on passionate, soul-felt certainty?”


“This is very damning testimony and an indictment of the work the US put into the pre-war intelligence. The decision to go to war, to spend billions on sending hundreds of thousands of soldiers to the region, was in large part taken on the basis of an admitted liar,” said Ashwin Madia, head of an organisation of progressive US military veterans, VoteVets.


Judith Yaphe, a former CIA analyst on Iraq now at the National Defence University in Washington, said … “There were people at the time who doubted what Curveball was saying, but if the administration doesn’t want to believe it, it doesn’t make much difference.”

Read More

Category: Think Tank, War/Defense

What does BoE and FOMC think about inflation?

With Jan PPI out today and CPI Thursday, this afternoon the minutes from the Jan FOMC meeting will reveal their thoughts of 3 weeks ago on the impact commodity inflation is or is not having on their inflation outlook. After yesterday’s 4% CPI print y/o/y in the UK, BoE Gov King said because he still…Read More

Category: MacroNotes

Trading Rules, Aphorisms & Books

Expat writes:

I am interested in your opinion and advice. I traded oil for eighteen years before retiring to the south of France where I tend my orange trees and teach at two business schools in the area.  Since I know pretty much nothing, I am forced to teach the little I know, which is commodity trading.

I have canvassed my friends and enemies in the business and read good and bad books and articles by experts, so-called experts, and outright frauds.  I have plenty of information on fundamentals and the mechanics of markets, but it’s harder to teach students how traders think.

So, would you impart a few aphorisms, tips, or vapid advice . . .

Thanks, Chris, I have been meaning to pull all of these together in one place, and you motivated me to get off my bum and do so.

Start with these various rules:

Livermores Seven Trading Lessons

Bob Farrell’s 10 Rules for Investing

John Murphy’s Ten Laws of Technical Trading

Rules for Shorting

Art Huprich’s Market Truisms and Axioms


Lessons from Merrill Lynch

Rosie’s Rules to Remember

The Zen of Trading

Read More

Category: Trading

Madoff: Banks “Had to Know” of My Fraud

“They had to know.  But the attitude was sort of, ‘If you’re doing something wrong, we don’t want to know.’ ” -Bernie Madoff from Prison > The first interview for publication since being arrested in December 2008, Bernie Madoff speaks with the NYT. It is a bizarre and fascinating. One would expect a longer interview…Read More

Category: Legal

Bremmer: Emerging Markets Are Really to Blame for Rising Food Prices

Bernanke’s Off the Hook: Emerging Markets Are Really to Blame for Rising Food Prices, Says Bremmer
Stacy Curtin
Yahoo Tech Ticker Feb 14, 2011 03:06pm EST

Category: Inflation, Video