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There have been plenty of opportunities to doubt the current bull market over the past few years. And if you had acted upon those doubts, Josh Brown argues, you would have been wrong. The current moment is no different: “…you could have said ‘Sentiment is frothy’ in the spring of last year after the market had run up 12% into April. And you could have said ‘This will end badly’ on the heels of QE2 being announced in the summer of 2010. We’re up 100 per cent since then and its been more than three years – are we giving that all back? Is that what you meant by ‘end badly’? Doesn’t every bull market eventually end badly? Can you think one that ended congenially? Is that a reason not to participate in investing for the future? Did you avoid dating because of the risk of heartbreak or a thrown shoe?”
Is The Efficient Market Hypothesis Just Another Name For Circular Logic? (Philosophical Economics)
Eugene Fama’s efficient market hypothesis, which dictates that all known information is priced into stocks and which just earned Fama a Nobel, continues to be questioned. In the latest critique, Philosophical Economics believes its entire premise is basically a form of circular logic: “The EMH says that the market accurately prices securities based on all publicly available information. But market prices themselves are the arbiter of what is an “accurate” price. Thus, the EMH becomes a circle: ‘the market sets prices at the prices that it sets them at.’If market prices are the arbiter of what prices are “accurate”, then there is nothing useful in saying that the market accurately prices securities based on the information available to it. The statement is true by definitionsince the market is always the ex-post judge of accuracy.”
Barron’s polled 135 money managers on different aspects of the market. Here are 5 takeaways: 1) 65% said they were “bullish,” 24% “neutral,” only 8% “bearish” and only 3% “very bullish.” 2) S&P500 profits are expected to rise 6.6% YOY. 3) Favourite stocks for the next six to 12 months include Apple, Google, Microsoft, Kinder Morgan, and EMC 4) Tesla, Facebook, Netflix, and LinkedIn, among others all received more “thumbs down” votes than “thumbs up” votes. 5) Yet, among sectors, tech received most votes for “best” performer in the next six to 12 months, at 32%.
Norway does not like high-frequency trading. In a new report, the world’s largest sovereign wealth fund says much more research is needed to determine whether they are a net benefit to markets: “The jury is still out. Given the significant changes in market microstructure in recent years, more empirical and theoretical work on effective measures10 of market quality is needed. There is little consensus yet on what constitutes an appropriate framework for assessing market quality and on a precise definition of HFTs by type of activity. This in our view has led to differing conclusions from the empirical and theoretical work on the impact that HFTs have had on market quality.”
Earnings Beats Are Levelling Off (Bespoke)
It’s still somewhat early in Q3 2013, but the latest figures from Bespoke show 60% of the 190 companies that have reported earnings — about where we’ve been since Q4 2010:
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