so by now those who are reading my ramblings are wondering: where am I going with this? Why even bother?
After years of studying the markets I've come to the conclusion that sometimes company-specific fundamentals are in play, other times technicals. Sometimes the market is backwards-looking, other times forward-looking. Sometimes diversification is key, other times market-timing or day trading. Sometimes it's micro based, other times market focuses on macro data like what the Fed will do or the state of the economy. Sometimes regulations or news coming out of Washington are vital, other times it's non-political. Sometimes asset classes are perfectly correlated or perfectly inverse-correlated, other times they are not. Sometimes liquidity is important, other times valuations. Sometimes it's a stock picking strategy that makes the difference, other times it is sectors, other times geography or currency plays!
So how do you make sense of all this? This is not the early 1980's when the Zurich Axioms were written, this is the 2010's. This is a new reality we are experiencing and the only way to make sense of all of this is through the newer study: Behavioral Finance!
You have to study where the average person's focus is at all times! Is it fundamental-technical, backward-forward, micro-macro, political-non political, diversified-non diversified, liquidity-valuations?
I feel it's impossible for one person or even a group of 10 or 20 people to be able to gauge market participant's sentiment. This is why I post at a financial firm's message board. I believe that only these firms can do the analysis necessary, at the scale that is appropriate to be successful at it. If only these financial firms would spend more resources on Behavioral Finance, they would surely be ahead of the curve.....