Coxe is a fundamentalist at macro level. I am an avid follower
of his opinions and publications. Hell, the amount of money he has
made me by turning me on to commodities makes me speechless.
Not only that 5% of my retirement account is invested in the
fund he manages, and if this commodity correction/crash/whatever
drags, I will invest another batch with fresh savings. I cannot put
in words admiration I have for the man, for his honesty, knowledge,
analytical skill, and clarity of thoughts and writing
But, he is a macro level fundamentalist.
I listened to the conference (I always do), notice he said he
could not have expected the melting of gold. Notice he said he
could not have expected such drastic measures taken by the FED and
Treasury, because they are unprecented. Notice he mentions the
hedge fund deleveraging of short finance long gold trade.
In his publication, Basic Points, he laments the possiblity of a
Fannie Freddie paper deal between the US and Russia, with
guarantees in place -- now, if true, who could have expected
that?
that is the thing with macro-level fundamentals, they evolve
over macro level time frames, and along the way things, unexpected
things may happen that might change them.
Coxe, in one of his conferences, talked about a book called
Black Swan by Nasim Nicholas Taleb, black swans happen, no one can
see them, but following the charts may help us sidestep them.
Black Swansare unanticipatible events, at least in
their timing: things such as the recent Asian tsunami, the
devastation reeked by Hurricanes Katrina and Rita, the 9/11/2001
terrorist attacks on the U.S. As such, technical analysis
does not does not protect one against them. Fundamentalists,
technicians and quants are all subject to them. While it can
not be foretold when they will occur, recognizing that they do
occur from time to time and therefore exercizing good money
management can provide a fair degree of economic protection.
Of course, its possible that something could occur so severe that
it would wipe us out of existence, such as occured to the dinosaurs
and most other species when a huge asteroid struck the earth.
That sort of Black Swan, of course, is not one which should
cause us concern about our equity portfolios.
why do they have to be unexpected acts of God? why can't they be
unexpected acts of men with enough power and influence to make
significat impact upon lives and finances of other men, changing
what they (the lesser ones) perceived as the progression path
for their futures.
How is that perception of lesser men regarding their financial
future different from their perception of a house they built to
remain safe, only for a tidal wave to destroy it?
I think attributing drastic, calamitous effect of the unexpect
to only nature and God is a narrow way of evaluating events that
effect our world.
Why would not an attack on Georgia by Russia be a black swan, it
changed lives of many, it finished lives of many, it may have
already changesd some balance of power, and through that, our lives
too.
If you expected that, well good for you! For me it was as black
a swan as black can be
Please reread the message you replied to. I never said
that
black swansare limited to "acts of God" (natural
disasters), in fact, I listed as an example "the 9/11/2001
terrorist attacks on the U.S." My point was that they are
unanticipatable events, at least in their timing, and as such can
not be foreseen through technical analysis any more so than through
fundamental analysis as was the import of the message that I was
replying to.
and if you read my first message again, you will notice I
said
"but following the charts may help us sidestep them"
I used the word may, nothing definitive, if an act is to be
taken by the treasury department that would change the
market, that act is a black swan to me, but maybe someone bigger
than me knows about, and he may take market action that will
not make sense when it happens, but the charts will show.
Don Coxe did not expect guarantees given on Fannie paper, that
was his Black Swan, market knew about them, charts showed them.
all i was trying to point out, was that macro level fundamentals
(like china growing for many years) are susceptible to many events
unforseen, and charts MAY (not should, not would, but MAY) show
them,
I realy think this should be an off topic discussion
With respect to what may have been a more central point in your
first message on this topic, that forecasts, especially long term
ones, are inherently susceptible to failure as a result of
unforeseeable events, I wholeheartedly agree. In that
respect, you may be interested in reading about "
Chaos Theory", if you have not already done
so.
I did notice in your first post on this subject what you wrote
and now have reposted and that is why I responded in the way that I
did.
Since
Black Swanevents are unexpected, infrequent,
high-impact events which are unpredictable or extremely difficult
to predict, I disagree with your statement that "following the
charts may help us sidestep them." Charts do not and cannot
reflect unforeseeable events in advance.
Furthermore, the fact that you or others may not expect a
particular event does not make it a Black Swan event. I dare
say that the vast majority of events that you or I do not foresee
are not Black Swan events. If an event is not unexpected and
at least extremely difficult to predict in general by the
market at large, it is not a Black Swan event.
I tried to send this message to you by private message but can
not get to the send button after writing the message. Given
its educational nature and that it is a response to a message here
on the public board, perhaps it is better posted here anyway.
I am not posting this message, nor have I been posting
others, to try to embarass you or anybody else but simply to
clear up some matters brought up here.
"Since
Black Swanevents are unexpected, infrequent,
high-impact events which are unpredictable or extremely difficult
to predict,"
don't you agree that Russin attack on Georgia, Fed guarantee of
Fannie paper, Fed removing risk from Pet banks, are as you
say, "
unexpected, infrequent, high-impact events which are
unpredictable or extremely difficult to predict"by all
historical norms, an as such qualify as black sawn events. It's
really OK, we can disagree forever, and that's fine, our
interpretation of the matter differs, but I see events them and
interpret them as I do, and they may prove the undoing of this
cycle of the commodity market and the a real run in broader equity
markets.
BTW, there is no way you or anyone, big or small, can
embaress me, why would I feel embaressed, I either know something,
or I will learn it, no shame in learning,
I would consider the Russian attack on Georgia to be a Black
Swan event except for one thing: it was not enough of a high
impact event to be a Black Swan event IMO. Its market impact
was not particularly significant, let alone high.
I do not consider the Fed's "guarantee of Fannie paper" to have
been a Black Swan event because Fannie and Freddie have long
been considered to have an "implicit" federal guarantee, something
much discussed and criticized for years now. I do not think
that actions by the federal government to save Fannie and Freddie
when they became at risk should've been or were a surprise.
I'm not sure what you're referring to with respect to the "Fed's
removing risk from Pet banks".
I do not consider the Fed's "guarantee of Fannie paper" to have
been a Black Swan event because Fannie and Freddie have long
been considered to have an "implicit" federal guarantee,
OK, but in his last conference call, Coxe said he did not expect
such measures to be taken by the officials, so that was his black
swan, I see all things relative, in his universe, he did not expect
it and those who followed his advice suffered, many of his
followers are hedge funds who have been running with the commodity
idea
in two confrence call prior to that, he said, for gold all
systems were go, and that stood in absolute contrast with what I
was seeing studying internal dynamics of the gold sector
maybe you do not agree with my interpretation of black swan, and
that is fine, otherwise we would not be having this discussion
you see, all I was trying to say was that what Donald Coxe
believes in, however valid, may be at this moment is not the best
idea to pursue. and as for Black Swan, I think when a strategist
whose advice influences investment decision of billions of dollars,
by his own admission, cannot see what you could see, that, to
me, can be interpreted as a black swan in that universe of
gargantuan finance, it may have very dire consequences -- hedge
funds failing, further drops in oil and gold, S&P running away
from the bear?
Charts, however showed it all the time, that gold stocks
were breaking, base metal stocks were breaking, oil stock were
breaking.
he did not see that, maybe he sees decades ahead, but one needs
stretch one's capital onto decades ahead
I'm not sure what you're referring to with respect to the
"Fed's removing risk from Pet banks".
To me, by restricting the short sale of a select group, the full
force of SEC, FED, Treasury, .... is saying, it is safe to invest
in banks, whatever it takes, they'll do it, it is a question of
paper versus metal, the crisis that was brewing was a paper crisis,
a confidence crisis, and what they did was an indication to the
market that it would be safe to be on the side of banks, that
forced the short covering rally, and if they can push the hedgies
over, it may turn into a full blown blood bath resulting in a
market melt up, and change bring about a bout of assett
deflation
Again, I have nothing but admiration for the man himself, and
the thinker he is, and that admiration has grown even more,
when he admited lack of foresight, no ifs, no buts, no
bullshit, just that he did not excpect it,
and I am glad that I learned how to read charts and do my own
analysis regardless of whether others agree with my methods or
not, that will be it becomes my mistake to make and no other's
Even the best and most influential strategists are wrong
sometimes, even apart from when Black Swan events occur. That
does not mean that they are undeserving of admiration. If
that were so, none of them would deserve admiration. From
what I can tell from your messages, Coxe said that he did not
expect certain events to occur which have caused his forecasts to
falter recently but he did not claim that those events were
unforeseeable, i.e. that they were Black Swan events. That
speaks well of him; the best strategists generally have the
humility to accept and speak the truth and thus would not blame
their failures on Black Swan events which were actually foreseeable
as demonstrated by other strategists. Excellent strategists
often disagree. In such situations, unlike Black Swan
situations, the charts are likely to give prior indications to
technical analysts as to what may occur.
which were actually foreseeable as demonstrated by other
strategists.
You have a good point here. I still interpret the whole thing in
the context of the universe they impact and thos ewho inhabit that
universe, but I see your point and it is valid to me.
I to am a Coxe fan for about 2 years. The point he makes
about doing what he does since 1972 is very important. There
are very few people that are still in our industry that navigated
through inflationary times. Most people have gained there
experience in a disinflationary enviornment. I liken the 70s
with the US baby boomers entering their demand years to the world
baby boom demand we see today. Coxe made a point about 4
years ago ( at least, I think it was Coxe) that " If everybody in
China wanted to live the same lifestyle that we do in the US, it
would take the natural resources of 4 worlds to accomplish
this.
Yes, I agree with you that it looks so much like the 70s, only
the scale is bigger, a perfect Deja Vu, or maybe too perfect a Deja
Vu?
I would like to see technical evidence of a resumption of the
uptrend in commodities, Oil, I believe is the key to that door
with unlimited capital, it might be easy to ride out storms, for
mere mortals like me, that is not an option, I'll go underground
and wait for the gale to stop howling. It's a balancing act,
and so different from one individual case to anothe
In the
70'sthe U.S. suffered from soaring inflation, by
U.S. standards, along with stagnation -- thus the term stagflation
was attached to it. The soaring inflation had two primary
components: asset (commodity) inflation and wage
inflation. The commodity inflation was caused by two primary
factors: the OPEC cartel clamping down on production in
order to drive up prices and inflation hedging.
The current commodity inflation has a different primary
cause. It has primarily been caused by demand
growth (rather than by an orchestrated constraint on supplies),
largely from very strong growth within
emerging economies, putting severe constraints on excess
supply capacity.
Also, the current situation does not have a wage inflation
problem. U.S. workers power to negotiate for higher
wages has severely diminished since the 70's primarily as a
result of the much smaller percentage of unionized
workers, and the loss of strength by unions, and because of
increased competition as a result of outsourcing and technological
advances such as the internet and other info technologies.
The challenges the current economy is going through are
more akin to the
1930's. The challenges then, like now,
were primarily caused by the prior buildup of a massive credit/debt
(depending on which side your looking from) bubble. That
does not necessarily mean that the U.S. is headed into a
depression, as occurred in the 1930s. The situation in the
1930s, and similarly in Japan in the 1990s, was
badly exacerbated by some very poor economic policies by the
government, at least according to most economists.
Hopefully, the challenges of deleveraging our economy, i.e.
unwinding the excessive credit and debt levels, have been and
will continue to be handled better than then. Bernanke is one
of the world's leading authorities on the U.S. depression of the
1930s, perhaps the top authority on it. He has been very
aggressive and creative in fighting the credit crisis so far.
I think it is fair to say that most who saw the enormity of
the growing credit crisis a year or more ago expected the
economy and equity markets to suffer much more severely by now
than they actually have. As it now stands now more than a
year after the broad based U.S. indices started putting in
their bull market tops, led by the midcap and smallcap
indices, equities have only suffered a very mild bear
market and the economy a very mild recession. How much worse,
if at all, it gets remains to be
seen.
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Coxe is a fundamentalist at
gold
Posted by googool on 16th of Aug 2008 at 10:38 am
Coxe is a fundamentalist at macro level. I am an avid follower of his opinions and publications. Hell, the amount of money he has made me by turning me on to commodities makes me speechless.
Not only that 5% of my retirement account is invested in the fund he manages, and if this commodity correction/crash/whatever drags, I will invest another batch with fresh savings. I cannot put in words admiration I have for the man, for his honesty, knowledge, analytical skill, and clarity of thoughts and writing
But, he is a macro level fundamentalist.
I listened to the conference (I always do), notice he said he could not have expected the melting of gold. Notice he said he could not have expected such drastic measures taken by the FED and Treasury, because they are unprecented. Notice he mentions the hedge fund deleveraging of short finance long gold trade.
In his publication, Basic Points, he laments the possiblity of a Fannie Freddie paper deal between the US and Russia, with guarantees in place -- now, if true, who could have expected that?
that is the thing with macro-level fundamentals, they evolve over macro level time frames, and along the way things, unexpected things may happen that might change them.
Coxe, in one of his conferences, talked about a book called Black Swan by Nasim Nicholas Taleb, black swans happen, no one can see them, but following the charts may help us sidestep them.
Black Swansare unanticipatible events, at
Posted by martin on 16th of Aug 2008 at 09:18 pm
Black Swansare unanticipatible events, at least in their timing: things such as the recent Asian tsunami, the devastation reeked by Hurricanes Katrina and Rita, the 9/11/2001 terrorist attacks on the U.S. As such, technical analysis does not does not protect one against them. Fundamentalists, technicians and quants are all subject to them. While it can not be foretold when they will occur, recognizing that they do occur from time to time and therefore exercizing good money management can provide a fair degree of economic protection. Of course, its possible that something could occur so severe that it would wipe us out of existence, such as occured to the dinosaurs and most other species when a huge asteroid struck the earth. That sort of Black Swan, of course, is not one which should cause us concern about our equity portfolios.
why do they have to
Posted by googool on 17th of Aug 2008 at 04:30 pm
why do they have to be unexpected acts of God? why can't they be unexpected acts of men with enough power and influence to make significat impact upon lives and finances of other men, changing what they (the lesser ones) perceived as the progression path for their futures.
How is that perception of lesser men regarding their financial future different from their perception of a house they built to remain safe, only for a tidal wave to destroy it?
I think attributing drastic, calamitous effect of the unexpect to only nature and God is a narrow way of evaluating events that effect our world.
Why would not an attack on Georgia by Russia be a black swan, it changed lives of many, it finished lives of many, it may have already changesd some balance of power, and through that, our lives too.
If you expected that, well good for you! For me it was as black a swan as black can be
Please reread the message you
Posted by martin on 17th of Aug 2008 at 04:49 pm
Please reread the message you replied to. I never said that black swansare limited to "acts of God" (natural disasters), in fact, I listed as an example "the 9/11/2001 terrorist attacks on the U.S." My point was that they are unanticipatable events, at least in their timing, and as such can not be foreseen through technical analysis any more so than through fundamental analysis as was the import of the message that I was replying to.
and if you read my
Posted by googool on 17th of Aug 2008 at 05:32 pm
and if you read my first message again, you will notice I said
"but following the charts may help us sidestep them"
I used the word may, nothing definitive, if an act is to be taken by the treasury department that would change the market, that act is a black swan to me, but maybe someone bigger than me knows about, and he may take market action that will not make sense when it happens, but the charts will show.
Don Coxe did not expect guarantees given on Fannie paper, that was his Black Swan, market knew about them, charts showed them.
all i was trying to point out, was that macro level fundamentals (like china growing for many years) are susceptible to many events unforseen, and charts MAY (not should, not would, but MAY) show them,
I realy think this should be an off topic discussion
With respect to what may
Posted by martin on 17th of Aug 2008 at 07:39 pm
With respect to what may have been a more central point in your first message on this topic, that forecasts, especially long term ones, are inherently susceptible to failure as a result of unforeseeable events, I wholeheartedly agree. In that respect, you may be interested in reading about " Chaos Theory", if you have not already done so.
I did notice in your
Posted by martin on 17th of Aug 2008 at 07:27 pm
I did notice in your first post on this subject what you wrote and now have reposted and that is why I responded in the way that I did.
Since Black Swanevents are unexpected, infrequent, high-impact events which are unpredictable or extremely difficult to predict, I disagree with your statement that "following the charts may help us sidestep them." Charts do not and cannot reflect unforeseeable events in advance.
Furthermore, the fact that you or others may not expect a particular event does not make it a Black Swan event. I dare say that the vast majority of events that you or I do not foresee are not Black Swan events. If an event is not unexpected and at least extremely difficult to predict in general by the market at large, it is not a Black Swan event.
I tried to send this message to you by private message but can not get to the send button after writing the message. Given its educational nature and that it is a response to a message here on the public board, perhaps it is better posted here anyway. I am not posting this message, nor have I been posting others, to try to embarass you or anybody else but simply to clear up some matters brought up here.
fair enough martin, but as you
Posted by googool on 17th of Aug 2008 at 07:40 pm
fair enough martin,
but as you said:
"Since Black Swanevents are unexpected, infrequent, high-impact events which are unpredictable or extremely difficult to predict,"
don't you agree that Russin attack on Georgia, Fed guarantee of Fannie paper, Fed removing risk from Pet banks, are as you say, " unexpected, infrequent, high-impact events which are unpredictable or extremely difficult to predict"by all historical norms, an as such qualify as black sawn events. It's really OK, we can disagree forever, and that's fine, our interpretation of the matter differs, but I see events them and interpret them as I do, and they may prove the undoing of this cycle of the commodity market and the a real run in broader equity markets.
BTW, there is no way you or anyone, big or small, can embaress me, why would I feel embaressed, I either know something, or I will learn it, no shame in learning,
I would consider the Russian
Posted by martin on 17th of Aug 2008 at 08:23 pm
I would consider the Russian attack on Georgia to be a Black Swan event except for one thing: it was not enough of a high impact event to be a Black Swan event IMO. Its market impact was not particularly significant, let alone high.
I do not consider the Fed's "guarantee of Fannie paper" to have been a Black Swan event because Fannie and Freddie have long been considered to have an "implicit" federal guarantee, something much discussed and criticized for years now. I do not think that actions by the federal government to save Fannie and Freddie when they became at risk should've been or were a surprise.
I'm not sure what you're referring to with respect to the "Fed's removing risk from Pet banks".
I do not consider the
Posted by googool on 17th of Aug 2008 at 10:31 pm
I do not consider the Fed's "guarantee of Fannie paper" to have been a Black Swan event because Fannie and Freddie have long been considered to have an "implicit" federal guarantee,
OK, but in his last conference call, Coxe said he did not expect such measures to be taken by the officials, so that was his black swan, I see all things relative, in his universe, he did not expect it and those who followed his advice suffered, many of his followers are hedge funds who have been running with the commodity idea
in two confrence call prior to that, he said, for gold all systems were go, and that stood in absolute contrast with what I was seeing studying internal dynamics of the gold sector
maybe you do not agree with my interpretation of black swan, and that is fine, otherwise we would not be having this discussion
you see, all I was trying to say was that what Donald Coxe believes in, however valid, may be at this moment is not the best idea to pursue. and as for Black Swan, I think when a strategist whose advice influences investment decision of billions of dollars, by his own admission, cannot see what you could see, that, to me, can be interpreted as a black swan in that universe of gargantuan finance, it may have very dire consequences -- hedge funds failing, further drops in oil and gold, S&P running away from the bear?
Charts, however showed it all the time, that gold stocks were breaking, base metal stocks were breaking, oil stock were breaking.
he did not see that, maybe he sees decades ahead, but one needs stretch one's capital onto decades ahead
I'm not sure what you're referring to with respect to the "Fed's removing risk from Pet banks".
To me, by restricting the short sale of a select group, the full force of SEC, FED, Treasury, .... is saying, it is safe to invest in banks, whatever it takes, they'll do it, it is a question of paper versus metal, the crisis that was brewing was a paper crisis, a confidence crisis, and what they did was an indication to the market that it would be safe to be on the side of banks, that forced the short covering rally, and if they can push the hedgies over, it may turn into a full blown blood bath resulting in a market melt up, and change bring about a bout of assett deflation
Again, I have nothing but admiration for the man himself, and the thinker he is, and that admiration has grown even more, when he admited lack of foresight, no ifs, no buts, no bullshit, just that he did not excpect it,
and I am glad that I learned how to read charts and do my own analysis regardless of whether others agree with my methods or not, that will be it becomes my mistake to make and no other's
Even the best and most
Posted by martin on 17th of Aug 2008 at 11:24 pm
Even the best and most influential strategists are wrong sometimes, even apart from when Black Swan events occur. That does not mean that they are undeserving of admiration. If that were so, none of them would deserve admiration. From what I can tell from your messages, Coxe said that he did not expect certain events to occur which have caused his forecasts to falter recently but he did not claim that those events were unforeseeable, i.e. that they were Black Swan events. That speaks well of him; the best strategists generally have the humility to accept and speak the truth and thus would not blame their failures on Black Swan events which were actually foreseeable as demonstrated by other strategists. Excellent strategists often disagree. In such situations, unlike Black Swan situations, the charts are likely to give prior indications to technical analysts as to what may occur.
which were actually foreseeable as
Posted by googool on 18th of Aug 2008 at 12:08 am
which were actually foreseeable as demonstrated by other strategists.
You have a good point here. I still interpret the whole thing in the context of the universe they impact and thos ewho inhabit that universe, but I see your point and it is valid to me.
I to am a Coxe
Posted by ralph on 16th of Aug 2008 at 10:56 am
I to am a Coxe fan for about 2 years. The point he makes about doing what he does since 1972 is very important. There are very few people that are still in our industry that navigated through inflationary times. Most people have gained there experience in a disinflationary enviornment. I liken the 70s with the US baby boomers entering their demand years to the world baby boom demand we see today. Coxe made a point about 4 years ago ( at least, I think it was Coxe) that " If everybody in China wanted to live the same lifestyle that we do in the US, it would take the natural resources of 4 worlds to accomplish this.
Yes, I agree with you
Posted by googool on 16th of Aug 2008 at 11:13 am
Yes, I agree with you that it looks so much like the 70s, only the scale is bigger, a perfect Deja Vu, or maybe too perfect a Deja Vu?
I would like to see technical evidence of a resumption of the uptrend in commodities, Oil, I believe is the key to that door
with unlimited capital, it might be easy to ride out storms, for mere mortals like me, that is not an option, I'll go underground and wait for the gale to stop howling. It's a balancing act, and so different from one individual case to anothe
In the 70'sthe U.S. suffered
Posted by martin on 16th of Aug 2008 at 08:04 pm
In the 70'sthe U.S. suffered from soaring inflation, by U.S. standards, along with stagnation -- thus the term stagflation was attached to it. The soaring inflation had two primary components: asset (commodity) inflation and wage inflation. The commodity inflation was caused by two primary factors: the OPEC cartel clamping down on production in order to drive up prices and inflation hedging.
The current commodity inflation has a different primary cause. It has primarily been caused by demand growth (rather than by an orchestrated constraint on supplies), largely from very strong growth within emerging economies, putting severe constraints on excess supply capacity.
Also, the current situation does not have a wage inflation problem. U.S. workers power to negotiate for higher wages has severely diminished since the 70's primarily as a result of the much smaller percentage of unionized workers, and the loss of strength by unions, and because of increased competition as a result of outsourcing and technological advances such as the internet and other info technologies.
The challenges the current economy is going through are more akin to the 1930's. The challenges then, like now, were primarily caused by the prior buildup of a massive credit/debt (depending on which side your looking from) bubble. That does not necessarily mean that the U.S. is headed into a depression, as occurred in the 1930s. The situation in the 1930s, and similarly in Japan in the 1990s, was badly exacerbated by some very poor economic policies by the government, at least according to most economists. Hopefully, the challenges of deleveraging our economy, i.e. unwinding the excessive credit and debt levels, have been and will continue to be handled better than then. Bernanke is one of the world's leading authorities on the U.S. depression of the 1930s, perhaps the top authority on it. He has been very aggressive and creative in fighting the credit crisis so far. I think it is fair to say that most who saw the enormity of the growing credit crisis a year or more ago expected the economy and equity markets to suffer much more severely by now than they actually have. As it now stands now more than a year after the broad based U.S. indices started putting in their bull market tops, led by the midcap and smallcap indices, equities have only suffered a very mild bear market and the economy a very mild recession. How much worse, if at all, it gets remains to be seen.