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weiwei

what feul this current bull run

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Any strong bull run like the current one has some resaons behind it.

 

Give your view on what is it. Would love to hear them.

 

My view is that money is shift from housing market back to stock market.

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My view is that it was 'cause the rest of the world heard that I was going long after that selloff in February, and they didn't wanna mess with what I was doing.

 

of course...only kidding.

 

I think that people who are smart about real estate aren't putting their money into the stock market right now. They're buying real estate slowly. That's what I would do if I had the money anyways. I think it's probably more of a dollar undervaluation thing. But...I'm a musician by trade and have no clue about global economics...so take that with a grain of salt

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we would not know the answers until many years later, when some one collect all the data and give a better one.

 

As for now, any reasonable one has its place.

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After working for years in the stock brokerage business advising individual clients on financial affairs, I would say that 'dumb money' entered somewhere along the way and is probably still entering. 'Dumb money' refers to the people out there that just call up a broker and invest in whatever he/she says, buys stocks b/c everyone else at work is making a killing, etc. Dumb money almost all the time goes long. They don't know or understand shorting.

 

Now, when this dumb money flows into mutual funds, pension funds, IRA funds, etc. that is where some serious buying comes into play. Mutual funds and most pensions are not allowed to go short by their own rules. So, when people start dumping money into funds, the fund managers have to do something with it b/c their pay is based on beating their peers and/or indexes. You can't beat the index that is constantly going up if you are sitting in cash.

 

I think this is the very reason why over time, the markets ALWAYS rise and will ALWAYS continue to rise. If the flow of dumb money ever stopped, it would be a different story, but people have to invest for their retirement somewhere, right? And with an incredible shift of funds from one generation to the next happening now, younger adults are receiving funds and do not want the 5% cd at the local bank.

 

So, you have money going into mutual funds, stocks in a variety of ways and the overwhelming majority of this money is long and long only.

 

To help put that in perspective - in the office and FIRM that I worked for, any individual stock we sold to a client was a long position and long position only. Almost every fund and money manager we sold was long and long only. When money starts coming in, you have to get into the market as soon as possible b/c you don't want your client missing out on the move... I'm not saying that's the best way to do business, but it was in fact how things were managed.

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Many major pairs offer good swap payments on a long, few offer payments on a short. This may contribute to the "always rise" effect.

 

Also once a trader notices the "always rise" effect, they tend to trade with that, rather than against it, so experience then contributes to the rise effect.

 

In the analogy to stock markets and large funds, I had wondered if funds had been relying on EURUSD as their Blue Chip "always rise" investment. Which leaves me wondering where they will go as EURUSD settles in its place and moves up and down with all the rest, no longer a particularly steady riser.

 

A cynical answer to the question of what fuels this bull run, might be that banks make money from burning speculators. When only bears are in the market then the banks burn the bears by driving prices up. Banks move the prices, bucket leveraged traders have less impact on prices.

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Something that strikes me as unusual in this market is the fact that the dollar has weakened so much compared to other currencies yet the stock is doing well, broke all time high against EURO. I remember reading that one of the chief causes of the 87 crash was the collapse of the dollar (and few policy-related news). I'm wondering we have the scenario or not. I like to get some opinions on this.

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Guys, keep in mind that your major fund managers - Fidelity, Vanguard, American Funds, etc - do not participate directly in the FX markets very much (if at all). The majority of these fund managers are fundamental based managers that are buying for the long term. They have too much money to simply buy and sell something rapidly. If has often been said that a huge fund manager is like a cruise ship when building/exiting a position - they cannot turn on a dime, like a small fund or retail trader. The reason this is important to know is that what is often referred to as 'smart money' is these guys. They are smart b/c have they have so much of it to allocate! ;)

 

So as money just gets dumped into these managers laps, they must put it to work, usually right away, esp during bull runs. This is where these guys make their money.

 

In the end, the market is really pushed around as the result of the average Joe deciding to put additional money into the markets vs. putting that money to work somewhere else. The 'smart money' is subject to the emotions and feelings of the average investor b/c they are nothing w/o their money... food for thought.

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Something that strikes me as unusual in this market is the fact that the dollar has weakened so much compared to other currencies yet the stock is doing well, broke all time high against EURO. I remember reading that one of the chief causes of the 87 crash was the collapse of the dollar (and few policy-related news). I'm wondering we have the scenario or not. I like to get some opinions on this.

 

i don't believe a weak dollar necessarily causes a bear market, it's not historically proven. If I ever find out what does, I'll let you know. :D

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To me Fx seems out of whack, GBP and EUR too high, USD and JPY too low.

British Government complains GBP is overvalued, then GBPJPY etc keeps going up.

Swap rates should not have that much influence, so why?

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i also wonder at this point how much money is flowing in to US mutual funds from people that can change their own 401k mix. I finally convinced my father to go to a financial advisor as his "strategy" in his 401k was basically to chase whatever was up alot. I know if he had not done that he would be shifting his mix to US funds right now without question. Seems like everyone i know at this point can tinker with their own 401k mix and i'm sure 90% of people that do that are going to be chasers.

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i also wonder at this point how much money is flowing in to US mutual funds from people that can change their own 401k mix. I finally convinced my father to go to a financial advisor as his "strategy" in his 401k was basically to chase whatever was up alot. I know if he had not done that he would be shifting his mix to US funds right now without question. Seems like everyone i know at this point can tinker with their own 401k mix and i'm sure 90% of people that do that are going to be chasers.

 

Excellent point darth. As long as the 'dumb money' continues to flow into the US markets, we'll keep trying to push higher.

 

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Make sure to vote for me in the trading quote contest!! Hurry before time runs out!! http://www.traderslaboratory.com/forums/f97/trading-quotes-june-2007-votes-1879.html

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hey brownsfan, i take you post on elitetrader under the same name? i think i ran across you in a thread today.

 

as far as dumb money goes... take it as an omen that i'm even talking to you here. :) i started out 2 years ago as a silver/gold bug. Still have my silver bullion i bought then, yet i found my way here and talking to you guys with real experience.....

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darth - yes, I have the same name over at ET as well. Just easier to keep track. ;)

 

I think you brought up some great points to consider in your posts, whether done on purpose or not. Sooner or later this steam will take a breather or even 'correct' some, which is what the bears have been begging for. You especially see that thinking over at ET. Time will tell when that correction will come.

 

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Make sure to vote for me in the trading quote contest!! Hurry before time runs out!! http://www.traderslaboratory.com/forums/f97/trading-quotes-june-2007-votes-1879.html

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