Data interpretation

A lot of the analysts you hear express opinions act as if the data that exists is not impacted by actual people. I can look at a chart and draw a certain conclusion. If I am the only one who sees that particular data or the only one who understands its significance, I can proceed on the data with the outcome dependant upon my ability to correctly analyse it.

However, very little data is like that anymore. I see charts showing a drop in consumer demand and can extrapolate that this will mean retailers will lose money. However, if the retailers see the same data and take actions to slash costs and inventory, they manage to make money.

It doesn't mean the data I analysed was wrong, it was accurate, and if nothing else had changed, my analysis would have been correct, but there are real people involved who are trying to find ways to be successful.

So, when we predict housing prices will continue to fall, that assumes that people will be willing to sell houses at depressed prices. Yes, foreclosures are to some extent forced sales, but if I don't have to trade up and haven't lost my income source, it would be in my best interest to postpone selling my house. If you predict housing inventory based on foreclosures plus normal sales, you will be off because many of those "normal" sales will not happen.

Certainly some indicators are reasonably accurate, however, if any indicator is reliable enough to be useful, it will start to be gamed by people who want to play off the predictable behavior of those who use it.

So, when so many people expected September to be bad, we saw a significant sell of in the first few days of the month. In late August we saw a big increase in bearish behavior preparing for the September sell off. Now, only a couple of days into the month the question is will September live up to its historical trend. Those who speculated on September will want to book their gains on the first hint of an upturn. This could result in a classic short squeeze leading to a rally that makes September bullish this year. Will that happen? I think whenever a particular trend is so discussed and so believed in, that many will try to profit from it. Whenever that happens, the contrary trade becomes indicated.

Generally, I expect September to end up as a bullish month this year. In general this doesn't impact the way I invest very much but it is always fun to speculate.