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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Douglas M. Benedict who wrote (46996)	12/10/2005 4:10:33 PM
From: UncleBigs	Read Replies (2) \| Respond to of 110194

Benedict, your downfall is that you view markets as a series of binary events. Red/Green, On/Off, etc. Markets are the result of a collective human psychology. They are emotional. They are driven by a person's limbic system. Fear is more powerful than greed. That's why downside events tend to occur more violently than upside. For example, the past 4 yr. bull market in residential real estate is not a series of 48 straight green lights. When you combine easy credit with human emotions (Fear.."If I don't buy now I'll never own a house" and Greed...."If I buy 4 houses using 100% loans, I'm going to get rich"), you get a massive housing bubble that inevitably will burst. Powerful human emotions that have fueled the housing bubble aren't sustainable forever. The trick is to be able to identify trend inception and trend exhaustion. That involves a set of analytical tools far more sophisticated than calculating the odds of getting heads 10 straight times when flipping a coin.