QuoteBelow is my column in the New York Post on the sharp decline in millionaires in New York, costing the state billions as many flee. The exodus has been building for years but may now be accelerating. As Mayor Mamdani holds another press conference promising to end the "violence of evictions," businesses are reading the writing on the wall. Rather than work to make the state more attractive to wealthy residents and businesses, Democrats are seeking to diminish the appeal of two-tax states. They want to tap into a long-barred area of taxation: the wealth rather than just the income of citizens. By passing a national wealth tax, Democrats will reduce the benefit of fleeing high-tax states like California and New York.
QuoteThe blowback against data centers escalated this morning, when New York became first state in the nation to enact a moratorium on data centers, pausing construction on new facilities for one year.
QuoteThis week, SpaceX filed the prospectus for what is expected to be the largest IPO in history. The document is extraordinary — part financial disclosure, part science fiction, and part governance structure that a corporate law professor has described as offering shareholders "no votes, no sales, and no suits." We look at the numbers, the products that don't yet exist, the AI business that SpaceX's own engineers won't use, the related-party transactions, the compensation package tied to a Mars colony the company admits is "improbable," and the one rocket that everything depends on. Everything I am about to tell you comes directly from the filing.
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- The market is stable when it consists of investors covering a large number of investment horizons. This ensures that there is ample liquidity for traders.
- The information set is more related to market sentiment and technical factors in the short term then the longer term. As investment horizons increase, longer-term fundamental information dominates. Thus, price changes may reflect information important only to that investment horizon.
- If an event occurs that makes the validity of the information fundamental information questionable, long-term investors either stop participating in the market or begin trading based on the short-term in formation set. When the overall investment horizon of the market shrinks to a uniform level, the market becomes unstable. There are no long-term investors to stabilize the market by offering liquidity to short-term investors.
- Prices reflect a combination of short-term technical and long-term fundamental valuation. Thus, short-term price changes are likely to be more volatile, or "noisier", than long-term trades. The underlying trend in the market is reflective of changes in expected earning, based on the changing economic environment. Short-term trends are more likely the result of crowd behavior. There is no reason to believe that the length of the short-term trends is related to the long-term economic trend.
- If a security has no tie to the economic cycle, then there will be no long-term trend. Trading, liquidity, and short-term information will dominate.
QuotePreface
In 1991, I finished writing a book entitled, Chaos and Order in the Capital Markets. It was published in the Fall of that year (Peters, q99qa). My goal was to write a conceptual introduction, for the investment community, to chaos theory and fractal statistics. I also wanted to present some preliminary evidence that, contrary to accepted theory, markets are not well-described by the random walk model, and the widely taught Efficient Market Hypothesis (EMH) is not well-supported by empirical evidence.
I have received, in general, a very positive response to that book. Many readers have communicated their approval – and some, their disapproval – and have asked detailed questions. The questions fell into two categories: (1) technical, and (2) conceptual. In the technical category were the requests for more detail about the analysis. My book has not been intended to be a textbook, and I had glossed over many technical details involved in the analysis. This approach improved the readability of the book, but it left many readers wondering how to proceed.
In the second category were questions concerned with conceptual issues. If the EMH is flawed, how can we fix it? Or better still, what is a viable replacement? How do chaos theory and fractals fit with trading strategies and with the dichotomy between technical and fundamental analysis? Can these seemingly disparate theories be united? Can traditional theory become nonlinear?
In this book, Iam addressing both categories of questions. This book is different from the previous one, but it reflects many similar features. Fractal Market Analysis is an attempt to generalize Capital Market Theory (CMT) and to account for the diversity of the investment community. One of the failings of traditional theory is its attempt to simplify "the market" into an average prototypical to the discussion, are interspersed in the text. Each part builds on the previous parts, but the book can be read nonsequentially by those familiar with the concepts of the first book.