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The only people I've heard saying that are members of/spokepeople for the NAR.
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I said:
The only people I've heard

Kahuna said:
I am sorry; you are wrong.


Um, no, I said the only people *I've* heard say it. I think I know what I've heard, unless you care to correct me on that.

I didn't say you were wrong. I didn't say that Greenspan didn't say it.

It was a joke at the expense of the NAR, that's all (and also an accurate description of what I've heard). Lighten up :-P
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Kahuna, I also read an abridged version of his speech, wherein he stated he felt the housing bust was slowing. However, most of us do not believe that. Here, in Columbia, SC, it has taken longer to hit us, but I am noticing more and more inventory of unsold homes.

Best wishes,

Donna
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Thank you Donna. I am interested in the Local (Kansas City Metro area) housing market because Number 1, and only son, is getting married in February 2007. He is looking at Housing options now.

Kahuna,CFA


No citation.

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Home building stocks (TOL, PHM, KBH, DHI, CTX) appear to have bottomed in July and have been recovering since mid November. Analysts are beginning to recommend them again.

http://finance.yahoo.com/q/bc?t=1y&s=CTX&l=on&z=m&q=l&c=tol%2Cphm%2Ckbh%2Cdhi&c=%5EGSPC

Inventory is slowly going away, and they will be able to survive by working with suppliers and subcontractors to reduce their prices--usually by stripping out features usually included and making them options and by negotiating deals with those who otherwise would be unemployed.

That does not mean selling prices are rising yet for sellers. It does mean the worst is over for builders. (And may anticipate that the Fed will reduce interest rates by the Spring selling season.)
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That does not mean selling prices are rising yet for sellers. It does mean the worst is over for builders. (And may anticipate that the Fed will reduce interest rates by the Spring selling season.)

Hmmm.... now WHERE, WHEN, FROM WHOM, have I heard that before..... hmmmm.....

Sure sounds familiar........... ;~)
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Yep, and I got caught holding TOL in the last "correction."

But then stocks have to go one direction or the other. The odds are eventually these too will go up. :)
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Go to the Mishedo board. There is a cite there.

Donna
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Go to the Mishedo board. There is a cite there.

Donna


I wasn't asking for the citation to the article. I was just pointing out that kahunacfa did not cite the post he was replying to. He has done this numerous times to other posters in the past.

IF
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That does not mean selling prices are rising yet for sellers. It does mean the worst is over for builders. (And may anticipate that the Fed will reduce interest rates by the Spring selling season.)

Hmmm.... now WHERE, WHEN, FROM WHOM, have I heard that before..... hmmmm.....

Sure sounds familiar........... ;~)


I think you heard it from you, about 2 years ago ;).

Montecfo

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Hi Monte,

Another said;
(And may anticipate that the Fed will reduce interest rates by the Spring selling season.)
I said;
Hmmm.... now WHERE, WHEN, FROM WHOM, have I heard that before..... hmmmm.....
Sure sounds familiar........... ;~)


You;
I think you heard it from you, about 2 years ago ;).

Alas... while I may have better skills than some at reading the facts of the markets, and what they preceed, I cannot claim to have called for the increasingly anticipated Spring/Summer 2007 Fed rate reductions back in Autumn/Winter 2004. THAT would have been quite Wizard-like indeed!

I've only been pointing the reality of the current Fed market manipulations approaching/reaching 'topping out' out for about a year now... maybe a little shy of that perhaps. I HAVE been correctly proving the continuation of the overall uncontested DOWNWARD trend in long term rates for longer than that, to be sure.

You are overcomplimentary, but I do thank you!

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner
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Alas... while I may have better skills than some at reading the facts of the markets, and what they preceed, I cannot claim to have called for the increasingly anticipated Spring/Summer 2007 Fed rate reductions back in Autumn/Winter 2004. THAT would have been quite Wizard-like indeed!

I've only been pointing the reality of the current Fed market manipulations approaching/reaching 'topping out' out for about a year now... maybe a little shy of that perhaps. I HAVE been correctly proving the continuation of the overall uncontested DOWNWARD trend in long term rates for longer than that, to be sure.


Dave,

I once accurately predicted what I would have for breakfast the next morning!

xtn
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Hi xtn,

I once accurately predicted what I would have for breakfast the next morning!

Well... that's a nice parlor trick now & then... but consistency is KEY! Make that kind of prediction accurately day in and day out, and you have a track record for life!!! ;~)

Dave
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In the DC area, there was just an article yesterday about condo developers lowering their selling prices since they've exhausted all the other freebies they could give:

http://www.washingtonpost.com/wp-dyn/content/article/2006/12/01/AR2006120100017.html

And the current issue of Money magazine predicts the DC area won't bottom from the current decline until end of Q2 2008.

Obviously where other people live might be different, since not every part of the country saw 100%+ home price increases over the past couple years. But IMO an easy way to figure "when's it going to pick up" is to see if people in your area are talking about BUYING. In my area I just don't hear people talking about buying in day-to-day conversation, especially not among people like myself who have money saved for a downpayment and don't currently have a home they would want to sell (thus not helping the inventory build up).

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And the current issue of Money magazine predicts the DC area won't bottom from the current decline until end of Q2 2008.

That soon? Don't hold your breath.

Obviously where other people live might be different, since not every part of the country saw 100%+ home price increases over the past couple years. But IMO an easy way to figure "when's it going to pick up" is to see if people in your area are talking about BUYING.

Is there any reason why house price inflation should return, and prices 'pick up'? Not until affordability of prices is restored, which could take a few years, in many areas. There is a range of reasons depressing prices, but I don't see a reason why they should actually rise, generally.

And why should the typical home-owner actually want prices to rise, unless they own multiple houses? Inflation, including house price inflation, is bad for the economy. The largely unquestioned assumption that house price inflation is good for home-owners is one that I cannot understand. Clearly, though, a reasonable level of buyer activity is desirable at the time one wants to sell.
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Alas... while I may have better skills than some at reading the facts of the markets, and what they preceed, I cannot claim to have called for the increasingly anticipated Spring/Summer 2007 Fed rate reductions back in Autumn/Winter 2004. THAT would have been quite Wizard-like indeed!

Well, Dave, you have been predicting lower interest rates for about that long. I know you hate to admit it but its true.

I HAVE been correctly proving the continuation of the overall uncontested DOWNWARD trend in long term rates for longer than that, to be sure.

You are going to have to stop the silliness, or I will have to start calling you Pinocchio. :) And by the way, you must be looking at the graph upside down...


Montecfo

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Hi Monte,

I HAVE been correctly proving the continuation of the overall uncontested DOWNWARD trend in long term rates for longer than that, to be sure.

You are going to have to stop the silliness, or I will have to start calling you Pinocchio. :) And by the way, you must be looking at the graph upside down...

Pinocchio huh? Let's have you show us how that is done.

Let's have a link for the graph you see showing long term interest rates in a long term upward trend (or mid-term trend, or even a weekly trend.)

Indeed!!!

Dave Donhoff
Strategic Equity & Mortgage Planner
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Monte,
Here's a little primer on how to post links to trend-revealing charts on long term rates;

http://www.nobullmortgage.com/cgi-bin/cblog/index.php?/archives/40-Rates-CONTINUE-Their-Downward-Trend.html

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner
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I HAVE been correctly proving the continuation of the overall uncontested DOWNWARD trend in long term rates for longer than that, to be sure.

You are going to have to stop the silliness, or I will have to start calling you Pinocchio. :) And by the way, you must be looking at the graph upside down...

Pinocchio huh? Let's have you show us how that is done.

Happy to. I stated that you had been predicting lower rates for about 2 years.

In June of 2005 you "bragged" that you had been predicting lower interest rates for "over a year now". That means you have been predicting them since at least June of 2004. You are still predicting that, and you have been wrong and have been wrong for 2 and a half years. On June 1, 3005 you said:

"I've been saying for over a year now (a very very lonely voice in the crowd, only recently joined by Mish, who's managed to also turn a few heads) that we're looking at an interest rate market trying to find another run to a new low..."

http://boards.fool.com/Message.asp?mid=22562164&sort=username

In March of 2005 (and subsequently in similar statements) you said Greenspan had "reached maximum altitude" on rates. This was also wrong.

"Looks like Greenspan's reached maximum altitude" at present, with no oxygen to climb much higher (though you know he'd really like to get "more space underneath" his Prime.) This is why the bond traders aren't buying the Fed moves as having any longterm significance, and are trading the long bonds right where they are."

http://boards.fool.com/Message.asp?mid=22157574

When you made that statement, the Fed Funds target was 2.5%. Today the target is 5.25%, yes, more than double. The Fed raised rates eleven (yes 11) times since you made that statement, and other similar statements. In fact, the Fed has raised more times AFTER your prediction of lower rates than it did in this cycle BEFORE you made it.

For some reason, I am not placing a lot of stake in your interest rate prognostications.

Montecfo


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Monte,
Here's a little primer on how to post links to trend-revealing charts on long term rates;


Your chart shows the 30 year bond reached an all-time high (and its interest rate an all-time low) about 18 months ago. Now, it could eventually go higher, but it is coming off a 40 year high. Now, how have rates "continued their downward trend" while rising? Even your own chart clearly shows the increase.

And by the way, you might try a different security for tracking interest rate "trends" since the 30 year bond was not even auctioned for 4 years during the time horizon that you chart.

Montecfo
(I think you best stay clear of open flames...)
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Your chart shows the 30 year bond reached an all-time high (and its interest rate an all-time low) about 18 months ago. Now, it could eventually go higher, but it is coming off a 40 year high. Now, how have rates "continued their downward trend" while rising? Even your own chart clearly shows the increase.

Uhhhh.... no. Nice try though.

The chart shown clearly has limited backward looking data... just the nature of the data provider. If you wished to have any credibility to your dispute, you would do yourself a little research before making such statements.

HAD you bothered to do such research, you would see that the most recent interest rate low was in Aug/Sept 2003, quite further back than just 18 months. Further, while the rates (opposing the bonds) DID bounce up off the low, they have NOT penetrated the downward trend line, which (as you can plainly see in the charts I published) shows the rates continuing down (at least currently) without reversal.

And by the way, you might try a different security for tracking interest rate "trends" since the 30 year bond was not even auctioned for 4 years during the time horizon that you chart.

OK... pick your chart preference of long-term rate-illustrative markets, and post the link to whichever chart you think supports your imagined long-term trend upwards.

Post it here. I'm looking forward to this.

Dave
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HAD you bothered to do such research, you would see that the most recent interest rate low was in Aug/Sept 2003, quite further back than just 18 months. Further, while the rates (opposing the bonds) DID bounce up off the low, they have NOT penetrated the downward trend line, which (as you can plainly see in the charts I published) shows the rates continuing down (at least currently) without reversal.

Dave, I still want to understand how rates rise from an all-time low while still falling (according to you).

OK... pick your chart preference of long-term rate-illustrative markets, and post the link to whichever chart you think supports your imagined long-term trend upwards.

Post it here. I'm looking forward to this.


I would pick the 10-year bond. Has its interest rate also declined while rising?

And, what about the Fed rates, I guess you prefer not to talk about that.

Montecfo
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Dave, I still want to understand how rates rise from an all-time low while still falling (according to you).

I've got to assume your aren't just playing dumb now, but actually have no idea what is being referred to when we in the financial world speak of "Trends."

It's not really complicated, and I've gone over it here before (in threads you played in, so I know you've been exposed.) I recommend some review, and perhaps some Googling may be helpful.

OK... pick your chart preference of long-term rate-illustrative markets, and post the link to whichever chart you think supports your imagined long-term trend upwards.

I would pick the 10-year bond. Has its interest rate also declined while rising?

If you bother to post your chosen chart, you will see the trend for yourself (assuming you've learned about trend measurement by that time.)

And, what about the Fed rates, I guess you prefer not to talk about that.

What about 'em. They're artificially manipulated, have little to no effects on long-term rate trends, and are currently at all-time median highs. I expected them to be managed more conservatively, but it seems the markets strongly expect Bernanke to take that line shortly.

Further, "Rates Are Relative." They have roughly the same simultaneous effect on return-producing markets as interest-carry markets. In other words, when short term interest increases, short term savings/returns often mirror the increase... and vice versa in reverse.

With the long bond yield curve well submerged BELOW the short-term curve, the Fed knows quite well (as do the aggregate wisdom of the participants of the markets) that the artificially managed rates cannot afford to "play chicken" for much longer without the risks of severe economic trouble.

I have misjudged the Fed before, and may again... but that is not meaningful anyway. The Fed is exponentially less significant than the naturally managed markets... which take very little "guesswork" to forecast, if you know how to read financial trends (according to the time/price numbers, not drama/fundamentals.)

Where's your link?

Dave Donhoff
Strategic Equity & Mortgage Planner
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I've got to assume your aren't just playing dumb now, but actually have no idea what is being referred to when we in the financial world speak of "Trends."

What do you mean "we"? When YOU talk about trends, you call rates that are rising "part of the downward trend". If YOU think that is meaningful to ANYONE, you are quite lost my friend. ANYONE who has casually read the newspaer since 2004 KNOWS interest rates are RISING. However, to YOU rising rates are "part of the downward trend"

And, what about the Fed rates, I guess you prefer not to talk about that.

What about 'em. They're artificially manipulated...

Beg your pardon, but manipulating rates is EXACTLY what central banks do among other things. THAT is a key tool of central banks. SO yes, by definition, they are manipulated (though not "artificially").

, have little to no effects on long-term rate trends,

So why did you bring them up?? Could it be because you primarily sell short-term mortgages whose rates are VERY MUCH impacted by the FED?

and are currently at all-time median highs. I expected them to be managed more conservatively, but it seems the markets strongly expect Bernanke to take that line shortly.

Will you ever take the high road and simply admit you were spectacualrly and unambiguously WRONG in your predictions of FED actions? It would impress me if you had that much courage. Predicting Fed action is dumb. For someone who does not understand the FED to do it is industrial strength dumb.

I have misjudged the Fed before, and may again... but that is not meaningful anyway.

Nor is it surprising. But it is common for you. In fact, when I began this topic, it was because you were trying to do it AGAIN. People need to know not to rely on your silliness, if they ever dared.

Montecfo
(I note this "downward trend" in interest rates has inexplicably caused Dave's clients to pay much higher mortgage payments)


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Monte,
Where's the link to the chart you claim shows an upward long-term trend?

What do you mean "we"?

"We" means the financial professionals that understand statistical trends.

When YOU talk about trends, you call rates that are rising "part of the downward trend".

When you learn how to measure trends (it really isn't terribly difficult, you could possibly learn in not too long of time with some focus) you will learn that all trends INCLUDE data in both directions. It is the overriding prevelance over a time period that makes up the... 'trend.'

If YOU think that is meaningful to ANYONE, you are quite lost my friend. ANYONE who has casually read the newspaer since 2004 KNOWS interest rates are RISING. However, to YOU rising rates are "part of the downward trend"

LOL....

Where's the link to the chart you claim shows an upward long-term trend?

Will you ever take the high road and simply admit you were spectacualrly and unambiguously WRONG in your predictions of FED actions? It would impress me if you had that much courage.

LOL... did you even bother to completely read the post (precisely prior to this post you wrote... you know, the one you are responding to)?

I said;
I have misjudged the Fed before, and may again... but that is not meaningful anyway. The Fed is exponentially less significant than the naturally managed markets... which take very little "guesswork" to forecast, if you know how to read financial trends (according to the time/price numbers, not drama/fundamentals.)

Predicting Fed action is dumb. For someone who does not understand the FED to do it is industrial strength dumb.

C'mon monte, be kinder to yourself. Next thing we know you'll be trotting out links to the posts where YOU either made Fed predictions, hailed others', or attempted to refute others' (refuting a prediction IS, after all, merely a counter-prediction.)

(I note this "downward trend" in interest rates has inexplicably caused Dave's clients to pay much higher mortgage payments)

I note that you're losing your logic again (or whatever there was of it in the 1st place.)

Exactly ZERO of ANY of my clients (inclusive of any ARM users) have payments "higher" (let alone "much higher") than they would have acquired from any competitor originator at the time of their closing.


Where's the link to the chart you claim shows an upward long-term trend?
(You don't think you're actually going to skate by from this claim, do you?)

PS. you have at least one lover to your posts... why not ask for help? If they really love you, they'll spend some time searching along with you for this unicorn of a current chart showing a "rising long term rate trend." Maybe you'll find Elvis along the way! ;~)

Good luck on this... "enjoy the journey!"

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner
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I have to say, Dave has been quite accurate the past 2 years on where the mortgage rate would go (not what the FED rate is, which in my op is less important to us - anyone here borrowing money directly from the fed).

I personally asked Dave where he sees the rates last year and he said not that much higher and really long term trend shows declining rates. Almost all articles were predicting rates to be above 7% by now and that has not happened (it came close, but now its back to the low 6%).

Let me ask again, Dave, for 2007 would rates be back up or move lower below 6%?

ibarz
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I have to say, Dave has been quite accurate the past 2 years on where the mortgage rate would go (not what the FED rate is, which in my op is less important to us - anyone here borrowing money directly from the fed).

Ibarz-

Fair enough. However, his comments in the current thread, and the ones I refer to, regard his Fed prognostications, which have been notoriously and consistently incorrect.

Fed rate movements ARE important to borrowers as many mortgages are tied to the cost of short-term money. Mortgage brokers flogged these products for several years. At that time they did not bellyache that the interest rates were being "artifically manipulated". Certainly your statement that no one is "borrowing money directly from the Fed" understates the Fed's power and impact on both mortgage rates and the economy in general.

Montecfo



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C'mon monte, be kinder to yourself. Next thing we know you'll be trotting out links to the posts where YOU either made Fed predictions, hailed others', or attempted to refute others' (refuting a prediction IS, after all, merely a counter-prediction.)

Candidly, I do not think there is much interest in this board witnessing a debate on the latest topic you wish to introduce, which is whether refuting a prediction is a prediction.

Suffice it to say that you should be more honest about what you said and when you said it. Otherwise, your attempts at self-congratulation will continue to be followed a dessert of stale crow.

Montecfo


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Hi ibarz,

Let me ask again, Dave, for 2007 would rates be back up or move lower below 6%?

Par 30 FRM rates on conforming loans (full doc, no subordinate seconds,) are already currently below 6% (woohoo.) They are just now 2 days above a "bounce" off the current lows (and still below 6%,) though that bounce is failing today, which means it's a weak retracement, at best.

Since we are at the leading edge of the trend, it is completely expectable to see a "reversion to the mean" within the trend itself. Of course, SOME here who've yet to be taught how to read financial time & price data will declare "rates are rising, rates are rising," but all that will be happening is the markets 'digestion' to prepare for further extension of the trend.

SOME DAY this trend will reverse. We will know when this happens by an observation of a rising rate penetrating the trailing extension of the last previous high in the timeframe observed. Currently this hasn't happened in a long time for any timeframe longer than 1 day data (review my previously linked BLOG illustration for clarity in pictures.)

I do not anticipate a reversal of this trend in 2007... and we may very well see the market looking to penetrate the 2003 lows.

I believe I see sufficient market resistance in place to keep the average par 30 FRM rate below 6.5% through the decade (and I think a ceiling of 7% is a lazy man's guarantee.)

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner
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Frankly Dave, the only problem I really take with your posts (which isn't to say I agree 100%) is that you seem to believe that there is 'one right way' to define what a trend is. The fact is that industry experts, financial columnists, etc regularly disagree with each other on what will happen, what something means, or where its going.

I find the "if you knew how to read trends" comment no more believable than something telling me that BRK was a bad investment 6 months ago because it had traded sideways for a long time, and I would know that "if I knew how to read trends".

Which brings me to my last point, that trends are one thing and one thing only - they are what was already happened. They bare no necessary relationship to what will happen in the future. Trends can and do change, or else they would be facts, not trends.

So while you're entitled to your points, your rationale, and your argument, please don't pretend that you are the holder of the truth about the future, when what you are really discussing is which reasonable interpretation of the past is better.
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Hi D1,

Frankly Dave, the only problem I really take with your posts (which isn't to say I agree 100%) is that you seem to believe that there is 'one right way' to define what a trend is.

Mathematically, there *IS* only one way to define a trend. It is as cut & dried as defining a square, rectangle, or any other linearly measurable formation.

Really... in a very friendly voice; reading a trend is quite simple.
1st you must define the specific timeframe of reference.
2nd you must have sufficient variable data on the time continuum to draw the high & low constraints (the "channel") over that time,
3rd, merely observe, within the chosen timeframe, whether the highs of the channel are breaking earlier highs (NOT a downward trend,) meeting the previous highs (NOT a downward trend CANCELLATION,) or recording at subsequent LOWER highs (a downward trend CONFIRMATION.)

If you find an observation reverse of #3, you'll discover the effects of a RISING TREND.

There is no subjectivity to it. It's as cut & dried (albeit only very slightly more complex) than 1+1.

The fact is that industry experts, financial columnists, etc regularly disagree with each other on what will happen, what something means, or where its going.

What you are describing is FUNDAMENTALISM, which IS totally subjective (and often arbitrary.) Trend measurement is as cold, boring, and objective as you can find.

There are no pundits anywhere talking about whether a particular channel is IN, or OUT of a trend. You WILL find market tech-geek pundits arguing whether a REVERSAL is in play... but not a trend.

I find the "if you knew how to read trends" comment no more believable than something telling me that BRK was a bad investment 6 months ago because it had traded sideways for a long time, and I would know that "if I knew how to read trends".

Uhh... yes, I agree. If anyone told you a trade was bad, relating to a trend (that wasn't observable in either direction,) that would be a meaningless comment.

Which brings me to my last point, that trends are one thing and one thing only - they are what was already happened.

THIS is ABSOLUTELY TRUE!

They bare no necessary relationship to what will happen in the future. Trends can and do change, or else they would be facts, not trends.

Trends ARE facts. I've got to assume you meant some other word here. A trend is not a mushy opinion anymore than a triangle is an opinion. Both are simply a mathematical shape.

ALSO, trends TEND to remain in place, statistically. The markets are "in an established trend" on average approximately 65-70% of the time measured (regardless of observed time period,) with the MAJORITY of the rest of the time wavering without a directional trend. The amount of time spent in a "reversal pivot" is 1-2%, max.

So while you're entitled to your points, your rationale, and your argument, please don't pretend that you are the holder of the truth about the future, when what you are really discussing is which reasonable interpretation of the past is better.

"The holder of the truth about the future"... LOL!!!! That's nice... definitely got a chuckle.

The future is less uncertain than you apparently fear. There are still no guarantees, however there ARE degrees of certainty that are not beyond your use.

It is becoming more & more obvious to me that my 'ass-u-m'ption' about the common understanding about trend determination (mathematical, not whimsical) among those here has been greatly exaggerated. I've apparently struck a chord...

I HOPE it drives some educational exploration. It will be well worthwhile, I guarantee it (and you can take THAT to the BANK! ;~)

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner
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Dwdonhoff:

<<<Frankly Dave, the only problem I really take with your posts (which isn't to say I agree 100%) is that you seem to believe that there is 'one right way' to define what a trend is.>>>

"Mathematically, there *IS* only one way to define a trend. It is as cut & dried as defining a square, rectangle, or any other linearly measurable formation."

It is all about the definitions. GIGO.

And while I generally like you and respect your posts, sometimes reading your "trend" posts reminds of when I read posts about the Elliott Wave.

http://www.acrotec.com/ewt.htm

Is it the second down wave of an upcycle or is it th first down wave of a new down cycle??? Yada-yada-yada.

"All we have to do is to identify which wave form is going to unfold in order to predict future market actions."

Exactly, IOW, my crystal ball is broken and and when not broken, it is cloudy at best.

Regards, JAFO
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Hi JAFO,

... while I generally like you and respect your posts, sometimes reading your "trend" posts reminds of when I read posts about the Elliott Wave.

hmm... so I take it Elliot Wavers frustrate you? Join the club!!! LOL!

http://www.acrotec.com/ewt.htm
Is it the second down wave of an upcycle or is it th first down wave of a new down cycle??? Yada-yada-yada.
"All we have to do is to identify which wave form is going to unfold in order to predict future market actions."


Right... once again, the subjectivity of reversals (which is what determines the EW definitions of a qualified "Wave") is the endless drama argued among that crew.

Exactly, IOW, my crystal ball is broken and and when not broken, it is cloudy at best.

Fair enough... but I bet your rear-view mirror is exceptionally clear, no? THAT is where trends are observed.

Knowing that you are in a 'vehicle' (a trend) that tends to stay on course... even if only knowing this by observing immediate past history... gives you a huge advantage in knowing with degrees of certainty where you are heading in the immediate future.

Kind of like looking backwards and discovering you are heading due West on a Carnival Cruiseliner. It doesn't take a genius to be quite certain that the liner will not be heading due East for a good period of time (merely due to the resistance of that sized ship in changing course...) and even if it shifts course, it will remain LESS THAN 50% PROBABLE of heading East until it crosses due North or South.

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner
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1st you must define the specific timeframe of reference.

This is the piece that I often find missing from trend analysis on this board - most people do not define their trend timeframe. For instance, if your starting point is the early to mid-80's to now, the mortgage interest trend is definitely down. However, if the starting point is early 2000's, the trend is definitely up. Same base data (mortgage interst rates), but different time frames. So two different people, say dwdonhoff and montecfo, can be looking at interest rate trends and one says down, the other says up, and they're both right.

AJ
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Hi AJ,

This is the piece that I often find missing from trend analysis on this board - most people do not define their trend timeframe. For instance, if your starting point is the early to mid-80's to now, the mortgage interest trend is definitely down. However, if the starting point is early 2000's, the trend is definitely up.

Noooo.... this is not correct. I invite you to actually whip out the data itself and look! There has been NO reversal of the existing downward trend.

You cannot declare "a confirmed trend in place" without being able to look backward far enough to objectively identify the previous reversal. If, for example, you are blind to prior to Summer 2003 it may APPEAR that there is an upward trend, but you cannot be certain without the data further back to confirm.

Same base data (mortgage interst rates), but different time frames. So two different people, say dwdonhoff and montecfo, can be looking at interest rate trends and one says down, the other says up, and they're both right.

Impossible if the mathematical rules are observed. There is no subjectivity to it... and it really isn't complicated either.

REMEMBER, it is the TRAILING extremes that determine a trend. The decreasing periodic highs determine whether a trend is downward... and the increasing periodic lows determine if a trend is upward.

Trying to declare an upward trend by the channel highs is a mistake that costs many novices a great deal of money. (Up trends determined by rising lows... down trends determined by dropping highs.)

Easy to confuse... until you look at the charts. Pictures more easily tell the story.

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner
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I have more to say, but I don't have a ton of time this instant, so I'm just gonna say this for now...


Really... in a very friendly voice; reading a trend is quite simple.
1st you must define the specific timeframe of reference.


This is the difference between you and monte here - yet as far as I can tell (not gonna check back) neither of you defined a time frame.

Monte is talking about a several years long upswing trend - you are talking about a several months long downswing trend (phrased in terms of rates).

You are both correct, on different time frames. You may argue that the short term is more important, but if you look at those graphs, they show several shorter downswings that gave way to the overall longer up pattern. Will it happen again? I have no idea, and neither do you.
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Noooo.... this is not correct. I invite you to actually whip out the data itself and look! There has been NO reversal of the existing downward trend.

<rant>What is your timeframe?</rant>

Dave - if you want me to look at the data - you need to give me a time frame. If I start in 2004 and trend monthly to 2006, I see an upward trend. If I start in 1984 and trend monthly to 2006, I see a downward trend. That's my point. Same data - different timeframes. Here is a link to some pictures for you: http://mortgage-x.com/trends.htm

AJ

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This is the piece that I often find missing from trend analysis on this board - most people do not define their trend timeframe. For instance, if your starting point is the early to mid-80's to now, the mortgage interest trend is definitely down. However, if the starting point is early 2000's, the trend is definitely up. Same base data (mortgage interst rates), but different time frames. So two different people, say dwdonhoff and montecfo, can be looking at interest rate trends and one says down, the other says up, and they're both right.

AJ,

You make an excellent point. Let me explain that when I use the term "trend" I mean the widely accepted use of the term, which I would paraphrase as the "general direction or tendency".

Most of the folks here are smart people, but most are not "chartists" as Dave apparently is. By "chartists" I mean financial people who believe they can divine security price movements by determining patterns in historical graphs or charts which utilize certain rules. Now, even among "chartists" there is no single way of determining "trends" or even agreement on which "charts" are the best such predictors. So even if we were all "chartists", many of us would disagree with Dave.

Having said that, most interest rates in the US hit 40 year lows during the period from mid-2003 through mid-2004. The 10-year bond, which is the most widely published bellwether of long-term rates in the US, bottomed at a price to yield 3.1% in June, 2003, for example. That also coincided with the time when the Fed's rate targets were at their lows. At today's close, the 10-year bond is priced to yield 4.52%, or 45% higher than at its low. Historically, interest rate cycles are notoriously long, and US rates have generally declined during the period from the early 1980's until hitting the lows described above, or over 20 years. Rates have risen since hitting their lows and we appear to be in an interest rate up cycle, in my opinion. Clearly, rates are not continuing to fall as Dave's comments would suggest he believes.

Thanks for the opportunity to clarify.

Best,

Montecfo
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Hi D1,

This is the difference between you and monte here - yet as far as I can tell (not gonna check back) neither of you defined a time frame.

Nope... I have defined the timeframes... several times.
A) Historical-Longest term since the early 1980's (which was the human historical high,)
Since THEN,
B) Annually,
C) Quarterly,
D) Monthly,
E) Weekly,
F) Daily.

You can apply the quite-simple mathematical trend definition rules to the pricing of the 30 FRM (or near-relative bond markets) for ANY and ALL of those timeframes, and in ALL cases (except for the daily data for the last 3 days) we are in a continuation of a DOWNWARD trend.

Monte is talking about a several years long upswing trend - you are talking about a several months long downswing trend (phrased in terms of rates).

If Monte is doing as you claim, he would have to be blinding himself to the available prior data in the same timeframe. This would eliminate the ability to declare (or deny) any trend, up or down, which requires the previous reversal as a basis point of confirmation.

You are both correct, on different time frames.

There is NO current timeframe longer than 3 days that shows a confirmed upward trend in long-term interest rates.

NOTE: While I've learned to walk carefully in the declaration of absolutes... THIS point is quite clear & bright. There is NO UPWARD LONGTERM INTEREST RATE TREND IN ANY TIMEFRAME (except the daily data the last 3 days.)

You may argue that the short term is more important, but if you look at those graphs, they show several shorter downswings that gave way to the overall longer up pattern. Will it happen again? I have no idea, and neither do you.

Short term is LEAST important... but no matter, ALL the timeframe terms are in the re-confirmed continuation of their downward trend (except the last 3 days.)

Will you PLEASE "help" Monte by finding & posting these charts you believe support an upward trend in 30 FRM rates? (Of course, if he learns the math rules of trend definition quickly enough, he'll quickly wave you off the search.)

Dave Donhoff
Strategic Equity & Mortgage Planner
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Hi AJ,

Dave - if you want me to look at the data - you need to give me a time frame. If I start in 2004 and trend monthly to 2006, I see an upward trend. If I start in 1984 and trend monthly to 2006, I see a downward trend. That's my point. Same data - different timeframes. Here is a link to some pictures for you: http://mortgage-x.com/trends.htm

Aj, you cannot arbitrarily blind yourself to data history and also declare a confirmed trend.

If you choose a monthly timeframe, you can only declare a trend from the furthest back non-penetrated opposing extreme data point. (Oy... without charts to point you to, this begins getting verbose & complicated. In pictures it is actually extremely simple.)

Bottom line; If you are only starting in 2004 with monthly data, you have no basis to BEGIN determining a trend until 2006 when you get a confirmed reversal from that point. The apparent "trend in process" from the 2004 starting point is NOT CONFIRMED because you are blind to the previous data points.

[edit addition]
I see a misunderstanding here... and you are certainly NOT alone in this.

When we speak of "Data timeframe" it means the MODE, not the duration.

Mode = daily, weekly, monthly, quarterly, etc.
Duration = since last week... 2 years... 5 years... etc.

In some cases a trend cannot be identified until a great period (duration) of time has already passed, in order to accrue sufficient data points to meet the rule requirements.

We have PLENTY of data for longterm interest rates.

Hope that helps.
Dave Donhoff
Strategic Equity & Mortgage Planner
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Monte,

Now, even among "chartists" there is no single way of determining "trends" or even agreement on which "charts" are the best such predictors. So even if we were all "chartists", many of us would disagree with Dave.

HERE is where your understanding is amiss.

Trends are NOT predictive... they are strictly backward looking objective calculations. There is no disagreement among chartists regarding how to apply themathematical rules to recognize a trend from historical data.

Chartists CAN AND DO argue incessantly about a great deal of subjective issues... especially the MEANINGS of trends, anticipated lengths of trends, and indicators of future reversals.

The actual historical trend itself is not something of dispute.

When I illustrate a trend, I am not predicting anything, nor am I offering any opinions.

When I DO predict something, I usually clearly state it as opinion.

The two are seperate issues.

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner
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Will you PLEASE "help" Monte by finding & posting these charts you believe support an upward trend in 30 FRM rates? (Of course, if he learns the math rules of trend definition quickly enough, he'll quickly wave you off the search.)

Gladly... it might even help you too.

I need search no further than the pictures you posted in your original link to 'nobullmortgage'.

First, lets establish that down on the graphs (i.e. down in price) is *up* in interest rates. We're agreed on that, right?

Second, lets look at the 2nd one - the 'monthly' one. A simple line of best fit, by eye, seems to indicate an overall trend of about down $10 over a time frame of 6 years, for a slope of around -1.67. So over the last 6 years the price has decline about $1.67 (per $100 of face value) each year.


If you care to tell me where I can pull data into Excel, I'd be glad to run more official 'line of best bit' analysis.
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Hi D1,

Gladly... it might even help you too.
I need search no further than the pictures you posted in your original link to 'nobullmortgage'.


OK, that is here;
http://www.nobullmortgage.com/cgi-bin/cblog/index.php?/archives/40-Rates-CONTINUE-Their-Downward-Trend.html

First, lets establish that down on the graphs (i.e. down in price) is *up* in interest rates. We're agreed on that, right?

No, you are thinking of the 30 year bond futures. This is a graph of the underlying treasury bonds themselves, which is the reverse of the futures... which is to say; it parallels (roughly) the moves of the 30 yr FRM rates.

Second, lets look at the 2nd one - the 'monthly' one. A simple line of best fit, by eye, seems to indicate an overall trend of about down $10 over a time frame of 6 years, for a slope of around -1.67. So over the last 6 years the price has decline about $1.67 (per $100 of face value) each year.

Precisely... you are nailing it. See how simple it is?

Think you'll have any better luck explaining this to Monte? Lord knows he's got a mental block from learning from me ;~)

If you care to tell me where I can pull data into Excel, I'd be glad to run more official 'line of best bit' analysis.

Buggers!!! The data feed here USED to be free!!!! When I followed the path just now to map the download process for you, I've discovered they are now restricting it to subscription only.

SO... with apologies, I have no immediate awareness of an alternative free data source. If you are TRULY interested in pursuing further, I'd suggest popping in at Rat's board & asking where you might be provided free data. It is definitely available.

Thanks for the "eyeballing" example!

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner
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By the way, D1...

We're on a roll here. Let's continue. Maybe together we can open some eyes even further!!!

If possible... open two browsers & arrange side by side so you can see this narrative while referencing the charts at the same time. Look again at the Monthly timeframe.

The furthest back we can see is mid-2000... so we have to look at the Quarterly chart above it to go further back... and even that doesn't show us a confirmed pivot (a high from which there are no previous higher highs.) To find that we'd have to go all the way to THIS chart;
http://www.briefing.com/morningstar/mtgdata/t30.htm
(But looking at this chart is cheating... you'll instantly "get it" and the lessons will be over ;~)

So... IGNORE the chart above for now... and strictly focus on the monthly chart here;
http://www.nobullmortgage.com/cgi-bin/cblog/index.php?/archives/40-Rates-CONTINUE-Their-Downward-Trend.html

See the high in 2001? Right about at 59-ish? Note how it is LOWER than the apparent high of 2000, at 62-ish? THIS is a current confirmation of a DOWNWARD trend.

See the high in 2002, at 58-ish? Note how it is LOWER than the 59-ish high of 2001. THIS is a current confirmation of a DOWNWARD trend.

See the high in 2003, at 55-ish? Note how it is LOWER than the 58-ish high of 2002. THIS is a current confirmation of a DOWNWARD trend.

See the HIGHER high in 2004, at 56-ish... higher than the 2003 high of 55-ish? See ALSO the Higher-Low of 2004 around 46-ish... HIGHER than the 2003 low of 42-ish? THIS BROKE the continuum of consecutive lower annual highs, and was the first teasing of a POTENTIAL REVERSAL OF TREND! Can you see this now?

Unfortunately (for fans of higher yields,) 2004 ended at an EVEN LOWER LOW, blowing out all hopes for a bonafide reversal.

See the high in early 2005, at 49-ish? Note how it is LOWER than the 56-ish high of 2004. THIS is a current RE-confirmation of an EXISTING DOWNWARD trend.

2006 is what we call an "Inside Period." The 2006 high has slightly penetrated the straight-eye trendlline, but has not broken above the previous significant periodic high of 2004. Further, the 2006 low has penetrated the monthly intra-term 18-month upward trend to the downside, but has yet to break below the 45-level "confluence point" (where there has been previous trading congestion... "bloody bear-vs-bull battles") nor the next major significant point... the "double bottom" lows of 2003 and 2005.

These are, however, the ONLY remaining historical support levels on the low side for the treasuries.

SO... helpful?
Dave Donhoff
Strategic Equity & Mortgage Planner
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No, you are thinking of the 30 year bond futures. This is a graph of the underlying treasury bonds themselves, which is the reverse of the futures... which is to say; it parallels (roughly) the moves of the 30 yr FRM rates.

I think this is out only issue. Prices are inverse to yields. If a $100 bond sells for $100, its a yield of 0%.

If it was to trade at $50, that means in 30 years, a $50 investment yields you $100 - that's a double. 2^(1/30) = 1.023 = 2.3%. Then again, that's lower than recent numbers would have me expert, so I'd welcome as explanation as to what those 'prices' represent, and how you turn them into yields.


P.S. I still don't buy that a recent downwards trend says a darn thing about what will happen tomorrow.
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Hi D1,

I think this is out only issue.

"The heavens part, and the Angels SING!!!!!!" You are FINALLY on board... EXCELLENT!

I'll leave the bond yields explanation to WendyBG http://boards.fool.com/Profile.asp?uid=2112754
who is the Bond QUEEN over at Mishedlo.
http://boards.fool.com/Messages.asp?bid=114903

P.S. I still don't buy that a recent downwards trend says a darn thing about what will happen tomorrow.

Do you understand the mathematics of probabilities? Do you understand how you ARRIVE at probabilities?

A coin is generally assumed "fair" and that it's probability of ocming up heads OVER MANY ITERATIONS is approximately 50%.

If you flipped that coin 100 times and it came up heads 70 times... that's odd. If you flipped it 1,000 times, and it came up heads 700 times, that is perplexing, and challenging the assumptions. If you flip the coin 10 million times, and it comes up heads 7 million times, you can have a justifiable expectation that THIS coin has some imbalance that causes it to have a PROBABILITY BEYOND 50% of a specific outcome.

It's the same with trends.

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner
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In some cases a trend cannot be identified until a great period (duration) of time has already passed, in order to accrue sufficient data points to meet the rule requirements.

And this is where real life steps in. In practical matters, waiting 3 or more years to declare a 'trend' has reversed is ridiculous to the person who is trying to figure out what type of mortgage to get when their closing is next month.

And, whether you intend it or not, when you continually declare in bold that the trend in interest rates is downward, you are implying that it will continue downward, especially when you give no time reference points. (And even though I have asked for it several times, you still have not given me a starting point for your timeframe.)

I agree, since the 1980's the trend is downward. However, do I think it will continue downward? No, as a practical matter, it has to flatten out somewhere. Mortgage companies can't make money loaning out 30 year funds at less than 3.5% - 4% or so, because they have to have some spread, even at a 0.5% real cost of funds to them.

I also believe, that since 2003/2004, the trend is upwards. Now, it may not be a 'confirmed' trend mathematically, and it may flatten out or go back down, but from a practical standpoint, it's still an upward trend.

I know the 'technical' mathematical arguments - I've had more than enough math classes to get a minor in math at most schools (Partial Diff Eq, anyone?), and I got assistantships in grad school for helping with Stats classes. But I also know the practical applications of data, and arguing that the mortgage rates are continuing to trend down when people have seen them go mostly up since 3 years ago is impractical at best and misleading at worst, especially since there isn't much down to go past where the rates were 3 years ago.

AJ
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AJ,

In practical matters, waiting 3 or more years to declare a 'trend' has reversed is ridiculous to the person who is trying to figure out what type of mortgage to get when their closing is next month.

Nobody has to wait at all to see any trends in mortgage rates. We have a RICH set of historical data available for over 200 years, and it is robust the last 50.

If you'll look at the posts directly above you, they illustrate quite plainly in visual format all that anyone really needs to know about where rates have come from. How much further they go is certainly anyone's guess... but it is pointless to say that they are trending up... It's simply not there, as they eye can easily see.

And, whether you intend it or not, when you continually declare in bold that the trend in interest rates is downward, you are implying that it will continue downward, especially when you give no time reference points. (And even though I have asked for it several times, you still have not given me a starting point for your timeframe.)

UNTIL the trend is broken, it remains.

If you click the "whole Thread" link above this post, you can then scroll through the entire thread. I have specified the timeframes (both Mode and Duration) extensively.

I agree, since the 1980's the trend is downward. However, do I think it will continue downward? No, as a practical matter, it has to flatten out somewhere. Mortgage companies can't make money loaning out 30 year funds at less than 3.5% - 4% or so, because they have to have some spread, even at a 0.5% real cost of funds to them.

That's what "everyone said" in Japan too... ;~P

I also believe, that since 2003/2004, the trend is upwards. Now, it may not be a 'confirmed' trend mathematically, and it may flatten out or go back down, but from a practical standpoint, it's still an upward trend.

The bond low in 2005 was almost perfectly as low, and far more participated in. How can this coincide with an "upward trend"?

I know the 'technical' mathematical arguments - I've had more than enough math classes to get a minor in math at most schools (Partial Diff Eq, anyone?), and I got assistantships in grad school for helping with Stats classes.

You speak of technical math as though you despise it...

I say: TOSS IT ASIDE! Just use your eyeballs... they are all you need... HOWEVER, don't cup your hands around your eyes as blinders... see the ENTIRE historical plotting in development.

It's really not at all so complicated.

But I also know the practical applications of data, and arguing that the mortgage rates are continuing to trend down when people have seen them go mostly up since 3 years ago is impractical at best and misleading at worst, especially since there isn't much down to go past where the rates were 3 years ago.

Reality is simply what it is... nothing more, nor less. The existing downward trend has NOT been broken. Might it be? eventually, of course. How soon, or how long might that take? Nobody knows... but again, we DO have an example in Japan to look to as one possibility.

If the future of our economy and investment markets are as dour as SOME will have you believe, then zero interest rates are just as equivalent of an ugly potentiality.

Significantly HIGHER interest rates are certainly also possible... but in the realm of all potentialities, they are very IMPROBABLE in any near-term duration.

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner
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Chartists CAN AND DO argue incessantly about a great deal of subjective issues... especially the MEANINGS of trends, anticipated lengths of trends, and indicators of future reversals.

I see. How long have you been a chartist?
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I'll leave the bond yields explanation to WendyBG

Can I take this to mean you don't know the answer? Just asking...


If you flipped that coin 100 times and it came up heads 70 times... that's odd. If you flipped it 1,000 times, and it came up heads 700 times, that is perplexing, and challenging the assumptions. If you flip the coin 10 million times, and it comes up heads 7 million times, you can have a justifiable expectation that THIS coin has some imbalance that causes it to have a PROBABILITY BEYOND 50% of a specific outcome.

Do I take this as an extended metaphor to mean that you believe that a trend shows a bias chance of the next move being in the same direction also?

If so, I'll ask you, do you have any studies that show that this is the case? That any of it means anything substantial? How often is one day's or week's or month's move followed by the same in the next? *is* there really a correlation?

The problem is that the human mind works by recognizing patterns. It is extremely extremely good at it. That's how we recognize things, by forming patterns. Unfortunately, we also recognize patterns when they're not there. Be it seeing the virgin mary in a piece of burnt toast, or a face on the moon or on a picture of the surface of Mars, of a kid seeing a monster in the shadows of their room. They're all examples of the human mind doing what it does best, and producing false results in the process.

I find it unfortunate that many people invest and claim to be able to predict what will happen financial based on the same kind of logic. "Fooled by randomness".
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Do I take this as an extended metaphor to mean that you believe that a trend shows a bias chance of the next move being in the same direction also?

Delta-

Dave has already informed us that "trends are not predictive".

"Trends are NOT predictive... they are strictly backward looking objective calculations."

http://boards.fool.com/Post.asp?mid=24921833&bid=100144&reply=true#reply

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Delta-

Dave has already informed us that "trends are not predictive".



Then I have no idea what that coin thing was about.
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Dave has already informed us that "trends are not predictive".


Then I have no idea what that coin thing was about.

He will soon attempt to explain why these statements do not contradict, at least in his mind. The ability to rationalize contradictory statements is a key element of his charm.

Montecfo

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Hi Monte,

How long have you been a chartist?

I don't know about the "ist" label, but I began learning to read financials in college, and have learned much more when I was managing investments later. Charts are nothing more than financials illustrated on a graph, allowing human analysis in a more convenient manner.

I guess, to answer your actual question... I began learning the effective use of business financials about 25 years ago.

D1,
I said;
I'll leave the bond yields explanation to WendyBG
Your Q;
Can I take this to mean you don't know the answer? Just asking...

Not at all.

Do I take this as an extended metaphor to mean that you believe that a trend shows a bias chance of the next move being in the same direction also?

Given that statistically the markets remain in-trend about 70% of the time... your understanding would be correct. The trend itself is a trail in time. The fact that we know that the trail TENDS to remain un-redirected about 70% of the time provides us with forecastability by deduction.

If so, I'll ask you, do you have any studies that show that this is the case? That any of it means anything substantial? How often is one day's or week's or month's move followed by the same in the next? *is* there really a correlation?

Yes, there have been quite extensive studies on this, and if you do a little digging you'll find extensive market statistics in this area.

The problem is that the human mind works by recognizing patterns. It is extremely extremely good at it. That's how we recognize things, by forming patterns. Unfortunately, we also recognize patterns when they're not there. Be it seeing the virgin mary in a piece of burnt toast, or a face on the moon or on a picture of the surface of Mars, of a kid seeing a monster in the shadows of their room. They're all examples of the human mind doing what it does best, and producing false results in the process.

This is exactly true, which is why learning the mathematical, objective rules of probability is so critical to success in the markets... along with ongoing emotional work to counter the tendencies we have to skew our own objective observations.

I find it unfortunate that many people invest and claim to be able to predict what will happen financial based on the same kind of logic. "Fooled by randomness".

I don't find it fortunate nor unfortunate. It is simply reality. You'll find exponentially more of these that you describe that live in the Fundamentalist world... the imagined justification of the markets according to subjective drama.

In the end, I like this quote;
"Money is always there but the pockets change; it is not in the same pockets after a change, and that is all there is to say about money."
Gertrude Stein

Those who address money subjectively TEND to release it to the pockets of those who treat it objectively.

Hi Monte,
He will soon attempt to explain why these statements do not contradict, at least in his mind.

Speaking of contradiction... now that D1 has learned and illustrated how to easily identify a trend himself, are you willing to learn and acknowledge the same?

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner
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Can I take this to mean you don't know the answer? Just asking...

Not at all.


Could you please explain it then? I am asking nicely. I am quite mathematically adept, so don't worry about that. I just need to know the concept of what the graph is illustrating (if its not really bond price), and a quick summary of how that would turn into yield.


Given that statistically the markets remain in-trend about 70% of the time... your understanding would be correct. The trend itself is a trail in time. The fact that we know that the trail TENDS to remain un-redirected about 70% of the time provides us with forecastability by deduction.

...

Yes, there have been quite extensive studies on this, and if you do a little digging you'll find extensive market statistics in this area.


Funny, cause I've read studies that say that the correlation between the last change and the new change borders on irrelevant, basically 50%.

Here's one such study I just found:
http://www.financialplanauditors.com/ruminations/DoMarketsTrend.pdf

It says that a positive year in the market is followed by another positive one 74% of the time. But that a negative year is followed by a positive one 70% of the time. There is no statistically meaningful difference there.

I have found several more summaries of studies that conclude the same thing, but they do not provide hard numbers - and typically require pay or purchase of a book to see more.

Anyway, you claim the studies justifying trends are all around, so provide a few.

And finally, I note that despite the "trend", bankrate says mortgage rates are up 3 beeps in the last week. Anecdotal I realize, but there ya have it.
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Hi D1,

Regarding bond yields,
Could you please explain it then? I am asking nicely. I am quite mathematically adept, so don't worry about that.

You've displayed math and finance savvy sufficiently enough, I have no worries of your ability to understand financials.

I just need to know the concept of what the graph is illustrating (if its not really bond price), and a quick summary of how that would turn into yield.

The graph is illustrating the market's RELATIVE periodic valuations through time. You don't have to worry about what the metrics on the Y-axis represent... money units (euro, mark, dollars, etc) or points, or ticks, or anything else. That is all the realm of the Fundies who tend to ignore the objective realities of the markets, and focus on the drama.

Different markets use different metrics on the Y-axis... but the X-axis is the standard (time) that is universal. (OK, the exception being point-and-figure charts... which is a whole different world and process.)

The long bond charts fairly perfectly mirror the naked 30 FRM rate charts... so you can easily see that what defines the Y-axis is irrelative.

You've already illustrated your ability to properly analyze market historical trends simply by visual observation. You already "understand" at last 50% of what it takes to analyze market behaviours.


Funny, cause I've read studies that say that the correlation between the last change and the new change borders on irrelevant, basically 50%.
Here's one such study I just found:
http://www.financialplanauditors.com/ruminations/DoMarketsTrend.pdf
It says that a positive year in the market is followed by another positive one 74% of the time. But that a negative year is followed by a positive one 70% of the time. There is no statistically meaningful difference there.


You've chosen a study analyzing the probability of a single-progression, with no relevance at all to the historical trend itself (which you have now displayed an understanding of.)

If you are completely blind to the history earlier than yesterday, then tomorrow's results will always be close to a 50% probability of today's results. There's simply not enough known to tell otherwise.

(This probably explains why some participants in this thread are so dischuffed; Market Myopia.)

I have found several more summaries of studies that conclude the same thing, but they do not provide hard numbers - and typically require pay or purchase of a book to see more.
Anyway, you claim the studies justifying trends are all around, so provide a few.


A very wise lurker to this thread emailed me offline & said; "Dave... are you REALLY having that much fun trying to open the eyes of the blind & have them change their religion?" (He said it... not me.)

He may have a point.

I COULD bother digging up the cites for what I am explaining, and it would doubtlessly consume a decent amount of time... but I know it's there. The question is what benefits will I be providing you? (The busy-work of the research won't add anything to MY day.)

To answer this question, I would ismply ask you, D1, this;
Have you learned anything from this thread, that I have brought to you, that you did not know and accept before?

If so, what?

The answer will tell me whether I am getting any traction in my contributions.
(I hope for the best.)

And finally, I note that despite the "trend", bankrate says mortgage rates are up 3 beeps in the last week. Anecdotal I realize, but there ya have it.

If you'll click "whole thread" and review myposts, you'll read that I have referred to an uptick in the last 3 days several times. Today it is cancelled out by a dropping of rates again.

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner
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The graph is illustrating the market's RELATIVE periodic valuations through time. You don't have to worry about what the metrics on the Y-axis represent... money units (euro, mark, dollars, etc) or points, or ticks, or anything else. That is all the realm of the Fundies who tend to ignore the objective realities of the markets, and focus on the drama.

Ah, so you're saying its a graph of interest rates with no particular value meaning to the Y axis? Strange, but I guess I can accept it. :)


I COULD bother digging up the cites for what I am explaining, and it would doubtlessly consume a decent amount of time... but I know it's there. The question is what benefits will I be providing you? (The busy-work of the research won't add anything to MY day.)

Eh, fair enough. You're not going to convince me (well, I'd never say never, but its quite unlikely), that 'trendlines' and 'patterns' and 'breakthrough' and 'resistance' are anything other than people trying to find false meaning in randomness.


To answer this question, I would ismply ask you, D1, this;
Have you learned anything from this thread, that I have brought to you, that you did not know and accept before?


The look at long term interest rates was interesting. I certainly see that the Fed has been doing their job by keeping rates under control and the economy fairly stable despite the ups and downs.

Frankly I don't know what you want them to lower the Fed funds rate. It has minimal effect on long term rates, and a lowered fed funds rate means inflation is more likely. As we can see from looking at the 70s, inflation's no friend of interest rates.
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Hi D1,

Eh, fair enough. You're not going to convince me (well, I'd never say never, but its quite unlikely), that 'trendlines' and 'patterns' and 'breakthrough' and 'resistance' are anything other than people trying to find false meaning in randomness.

Wow... thanks for the honesty! Wish I'd asked that about 10 post back ;~)

I'll plug that into the memory banks as an explore-point before another attempt at detailed explanations.

Frankly I don't know what you want them to lower the Fed funds rate. It has minimal effect on long term rates, and a lowered fed funds rate means inflation is more likely. As we can see from looking at the 70s, inflation's no friend of interest rates.

I don't 'want' the Fed to do anything one way or another. Regardless which way they go, the effects are uniform to both the liability and asset side of the economy... the opportunities merely slide along the continuum. Greater interest costs provide greater lending/bond yields, lower interest costs provide greater leverage opportunity and growth.

I have fun using what I know to present a "head's up" when I can see it. That's it. (Realize that my commodity-schlepping brethren in the mortgage industry have pretty much a one-line parrot screech "rates are rising, rates are rising... better hurry up and refi/buy/lock today (with me) cuz rates are rising!!!) Calling the market as dropping releases all selling urgency from the conversation... a quite counter-productive issue, according to the sales monkeys.

My outcome is to be as objective as possible, with an orientation aligned with the safe growth of family net worth. Let the rest of the chips fall as they may.

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner
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