Author Topic: Investment Culture  (Read 1354 times)

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Offline msj

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Re: Investments
« Reply #15 on: February 26, 2017, 11:30:31 am »
Yes, the graph is not of a stock but of the violent crime rate over the past ten years.

The graph has little to no predictive value, imo.

At best, one can say that the downward trend has broken in 2014/2015. Which is visually true.

But that may be a blip which tells nothing of the future. 

Knowing other information such as demographic, economic, etc.... may help us think we can project the future trajectory of the trend line but we will probably only really begin to understand any correlations or causes years later.

The same principles hold for looking at stock charts.

Sure we have moving averages, RSI, advance/decline lines etc, but while price may have some "memory" the underlying trend will always regress to the fundamentals.

Not to say that some people cannot do well with technical analsyis and trading. But sometimes a big deal is made out of small countertrends which may be a fluke rather than any substantive change to the underlying secular trend. 

IOW, violent crime in the US could, ironically, roar back to the good old days when the country was more violent. 

Or this could be a dead cat bounce which will turn over and fall/flatline into the future.

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