The race to the bottom - and what lies beyond
Thursday February 20, was another important day in the markets - especially the US. The main reason is that the Dow Jones Industrials Index closed below its November lows. In technical parlance, this is known as 'making a new bear market low' and, by so doing, the market has 'confirmed' that the bear market is still in force. That confirmation was reinforced by the fact that the market fell further on Friday, rather than bouncing back. This reflects technical analysis principles which demand that every trend has to 'confirm' itself every so often, by pushing to new extremes, whether on the upside or downside. If that doesn't happen, the trend ultimately ceases to be in force and the market may be described as in a 'sideways trend', until such time as it makes a big move in the opposite direction to the previously-dominant trend - at which point it is legitimate and correct to define a new major trend as being underway. Risk is 'out' and will remain so
The previous blog focused on how so many supposedly smart people and famous names from among the professional investment community could have been taken for a ride by Bernie Madoff's scam. The inescapable conclusion was that they were guilty of either stupidity, or incompetence, probably mixed up with a good dash of either arrogance or laziness. These sterling qualities, rather than outright villainy and criminal intent, are likely to have been the cause in the great majority, if not all, the cases. So what? Where does that leave the huge profession of money management, which has grown so massively over recent years - indeed, over the three or four decades since private wealth started to expand rapidly? Will the money managers be able to put the crash and the scam behind them and get back to what they like to think of as 'business as usual'? Too good to be true, but not too bad to be true
I am pleased - no, make that proud - to say that I had never heard of Bernard Madoff until last weekend. Maybe I had come across his name when he was Chairman of the Nasdaq, or in the context of Nasdaq trading, the arena in which his company was one of the biggest players. But, in common with a surprising number of other people supposedly 'plugged-in' to the investment scene, I had never heard of him in the context of asset management. That lacuna has now been compensated for, by reading hundreds of pages about 'the Madoff scandal' or 'affair'. Yet I still have no idea how he managed to do what he himself claims he did, let alone answers to the endless list of questions about this mess. |
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