I have a good friend named John who has a very poignant expression when things look bleak and markets rally, as soon as he gets short.  He will say to me, “Hey don’t worry.  It’s all good,” sardonically making light of those making money on the long side when he (and I) think the market is staring into the abyss.  The magic of Mr. Market’s discounting process can be extremely frustrating.

All you have to do to forecast markets is get inside the heads of every individual player and understand his rationale and irrational side…that’s all.  According to F.J. Chu, from his book, “Paradigm Lost,” he reveals how easy this game really is…

The unique and fascinating nature of the markets is due to the centrality of Being—the mind of the investor, many investors, and in its totality the mind of the market.  Its uniqueness has to do with the way the investor stands out within time an in relation to time.  In every trade (or every click of the mouse) the past, present, and future all converge in one instant in one physical space.  The unique character of each investor’s mind—in infinite variations of reason and emotion, fear and greed—finds its expression in the cascade of market prices. 

We know that Mr. Market, through the minds of all these individual players, is continuously discounting what we know:

– Japan disaster
– Libya civil war
– Egypt unknown
– Ireland banking problems
– Greece debt
– Portugal debt
– China growth deceleration 
– Emerging market inflation
– US money madness
– Somali pirates

…..read more HERE