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Friday, December 17, 2010

Hindenburg Omen

I've seen a lot of discussion of the "Hindenburg Omen". It's complete nonsense.

The Hindenburg Omen says "If X happens, then there's a crash." The fallacy is that there have only been a few severe crashes. Using "Da Vinci Code" style reasoning, you may see patterns that aren't there. Correlation doesn't imply causation.

If pattern X was a lousy predictor, nobody would mention it. If X happened to work in the past, then people tout it heavily. That's no guarantee that X will be a predictor in the future. There's selection bias.

If you do a historic back-test, there's bias. In 2004, a 20 year historic back-test would have concluded "Housing prices always rise." A historic back-test does not include "The US dollar collapses in hyperinflation." Hyperinflation seems practically guaranteed in 15-20 years. A historic back-test misses "black swan" events.

The Federal Reserve is inflating desperately, to bail out the banksters. They will push up the stock market and create the illusion of economic growth. Suppose there's 30% true inflation, 3% CPI, and the stock market goes up 15%. State comedians say "Hooray for the stock market!", while the stock market underperforms true inflation.

I predict that the stock market, measured in FRNs, will rise. High inflation will push up the stock market eventually. The stock market, measured in gold, will continue to crash. Over the past 10 years, the S&P 500, quoted in gold, has declined by nearly 1% per month! That trend is accelerating.

The Hindenburg Omen is nonsense. State comedians are promoting it to scare people. Over the past 10 years, gold has been a *MUCH* better investment than stocks. It's a severe discrepancy that State comedians/communists ignore. I predict that gold/silver will continue to be a much better investment than the stock market.

When comedians say "The Hindenburg Omen is a good stock market predictor.", they're using sampling bias. It isn't valid reasoning.


Anonymous said...

Maybe if you choose your stocks carefully, your pick of stocks may actually beat inflation.

Diversification is good as you are protected if one company does badly, but too much diversification means you only get "average", smoothed out returns.

Anonymous said...

I'm sure a smart boy could pick a set of stocks giving 30% returns.

Anonymous said...

There must be no indicators to what is coming, therefore there can be no Hindenburg Omen observed.

I believe this is because:
1. The government cannot afford to allow any consistent long term statistics. Such data would necessarily show that the value is extracted from the people and goes to the state insiders.

2. Assuming that there is a private company that has absolute access to data and desires to collect it, it is still impossible to have any OMEN, because the government constantly changes the rules of the game.

To work out a reliable omen you'd need to observe a few cycles of the game played by the same rules.

Opposed to this, the government is interested in changing the rules on every cycle, because their purpose is the extraction of wealth, and therefore, no learning must be allowed.

Such omens, I believe, are certainly possible to find and to use with respect to long-term direction a society will take.

This is because the long term metrics:
1). are not possible to change, 2). are consistently written in our psycho by past events, and
3). available to anyone who pays attention and learns history to know possible focal points that were used by societies previously.

To this end, one might ask: how come then people keep running themselves into trouble time after time, even though, supposedly they can see the omens of coming events.

And this is my answer precisely:
an ability to see the omen has nothing to do with an ability or even a desire to change what's coming. We are talking only about knowing of what is coming.

Anonymous said...

Have you heard about Martin Armstrong's pi-cycle financial model?


I think the CIA wanted him to hand it over, but he refused.

Martin Armstrong was jailed for seven years on contempt of court!

Nice way to jail someone without evidence or charges or anything!

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