By: fred gordon

fred gordon — Sat, 29 Sep 2007 15:19:15 +0000

E: i read your recent entries. i agree with most of what you assert. the issue of correlation and MPT is a topic i know very little about from a theoretical basis. i do know something about it from an experiential basis. historical correlations in the market work until they dont which means too many people doing the same thing at the same time and all thinking they are hedged. the Crash of 1987 was all about portfolio insurance and its ability or inability to protect you in a down market. this rally in september has been astonishing to me. we will see what the fourth qtr brings. in this recent qtr both commodites and US Treasurys had huge rallies. historically they moved in opposition. BRIC is trumping all of this say the commodity bulls. if we really have a slowdown in US from housing fallout, i dont see how industrial commodities will go higher. gold is simply reacting to weak $. oil at $80 is also completely unsustainable but oil market completely dominated by hedge fund speculation and Opec nations’ games so who knows when it will decline. wall street convinced that oil will trade at $100. i doubt it but if it does, it will haste our recession for sure. all markets now completely driven my Mo investing. as a trader before there were computers, i learned to sell strength and buy weakness. that is completely antiquated in todays’ market. however, the break we had in august is a portent of what happens when Mo investing stops working. f

Comments on: There’s correlation and then there’s correlation

By: fred gordon