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  • Here's How This Week Could Unfold [View article]
    There once was a trader named Annie,
    Whose hunches were simply uncanny,
    She risked all her pay,
    Margined long Fannie Mae,
    And now she must live with her Granny.
    Oct 27, 2008. 04:06 PM | Likes Like |Link to Comment
  • Here's How This Week Could Unfold [View article]

    It all depends on how you look at things:

    Optimist: The glass is half full.
    Pessimist: The glass is half empty.
    Engineer: The glass has a 100% margin of error.
    Oct 27, 2008. 04:02 PM | Likes Like |Link to Comment
  • Ten Reasons Why Gold Isn't Above $1,000 [View article]
    Seems to me the main reason the price of gold is going down is because somebody is selling the stuff. Don't know who, don't know why, just know that they are 'for some reason' right now.

    Eventually that will change. Fundamental case is for higher prices in the future as the dollar is devalued from massive dilution. When that happens is anyone's guess.

    Oct 27, 2008. 03:13 PM | Likes Like |Link to Comment
  • Here's How This Week Could Unfold [View article]
    Good chance that the markets will be rather subdued until the FED decides what they will do with interest rates, then all heck will break lose through the end of the week.

    Some stocks might go up, others might go down. That's my prediction, and I'm sticking to it.
    Oct 27, 2008. 03:05 PM | Likes Like |Link to Comment
  • Advice for Renters: Wait Until 2010 to Buy [View article]
    On the plus side, banks will have so many foreclosure properties on their books that they will eventually be willing to lend at very good terms just to get rid of them. Odds are that the FED will start some program to enable this easier credit to clear the foreclosed logjam.

    Get to know your local bankers now. They will be good to count as friends soon enough.
    Oct 27, 2008. 02:46 PM | Likes Like |Link to Comment
  • The Fed's Policy May Be Responsible for Interbank Lending Seize-Up [View article]
    "The Fed's Policy"

    The answer to every financial problem is to create more money.
    Oct 27, 2008. 12:01 PM | Likes Like |Link to Comment
  • Can We Rely on Stock Prices Going Back Up? [View article]
    "The other initial reaction is a reminder that how we define retirement will have to change"

    This statement glosses over one unspoken impact to come.

    People will stay in the workforce longer, if possible, to compensate for decimated portfolios and a worthless social security system. The older workers who stay longer will continue to occupy management slots that younger workers will not be able to move into. This will block advancement for younger workers who will find it increasingly more difficult to get ahead in their career fields.

    Not only will 'retirement' change, that change will also spill over into career impediments for younger workers too.
    Oct 27, 2008. 11:45 AM | Likes Like |Link to Comment
  • 7 Steps To Restore Functioning Markets [View article]
    "Mark to Market should be terminated permanently." - petyaczar

    Yes. Who needs transparency? Much better to have all those trillions of dollars of leveraged paper (whose value is based on management assumptions or expectations) and their losses hidden in level 3 assets so that the firm's financial status goes from AOK to bankrupt over the weekend ala Bear Stearns.

    Just the ticket to give a potential shareholder a nice warm fuzzy feeling when considering a stock in the financial sector.

    Does anyone actually think that non-disclosure of all that leveraged risk would improve market performance of financial stocks without the gub'mint stepping in? Who in their right mind would keep, much less buy, a financial if you didn't know how deep the doo-doo was on their balance sheet?

    Right. Ignorance is bliss. Bury your head in the sand, everything will be just fine once we get through bankruptcy proceedings. We'll send you a check for your shares if we have anything left over after paying our creditors off. Sorry about that.
    Oct 27, 2008. 11:04 AM | Likes Like |Link to Comment
  • What the TICK Is Telling Us Today [View article]
    Isn't this divergence somewhat misleading? TICK does not take into account volume, only up or down moves.

    If the entire day was made up of alternating buys and sells where each buy was for 100 shares and each sale was for 10,000 shares then the net TICK for the day would be zero, but the closing price would very likely be lower than the opening price.

    The vast difference in the volume on the sell side would burn through bids all day long and push prices lower while the meager buys would hardly manage to support the ask much less move it upward.

    The conclusion that increasing upticks should lead to increasing prices is uncertain at best.
    Oct 27, 2008. 10:18 AM | Likes Like |Link to Comment
  • Global Recession Is an Economic Reality [View article]
    Nice summary of the Keynesian viewpoint of the economy. As your chart of US consumer credit shows, the US economy has been running on borrowed money for some time. The past four years of "growth" have been paid for by borrowing nearly $500 Billion to spend.

    At what point did going further into debt become the same as "growth"?

    Are we to believe that those loans need never be repaid? Eventually the piper must be paid and Joe Sixpack's income won't support even the minimum payment on any more debt (oops, sorry, I meant "growth"), and the borrowing must stop or Joe files for bankruptcy.

    The recession/depression will continue until the economy is once again based on spending within our means and not on the wide-spread idea of borrowing to "get ahead".
    Oct 27, 2008. 09:51 AM | Likes Like |Link to Comment
  • Currencies Have Run Amok [View article]
    "The United States has plundered global wealth by exploiting the dollar's dominance, and the world urgently needs other currencies to take its place"

    Front-page commentary in the People's Daily, the official newspaper of China's ruling Communist Party

    Uh oh. That can't be a good thing.
    Oct 27, 2008. 09:20 AM | Likes Like |Link to Comment
  • 7 Steps To Restore Functioning Markets [View article]
    Far better to do nothing and let people suffer the consequences of their poor decisions instead of letting them off the hook with taxpayer money.

    The problem we face is misallocation of investment, too much money 'invested' in areas where there is an insufficient amount of actual ability to sustain the investment. The only valid way to correct the problem is to sell the illiquid assets for whatever price can be had and move along.

    If that means all of Wall Street goes under then c'est la vie. The ones who take their place will have a object lesson fresh in their minds to guide their business decisions in the future.

    Rewarding poor business practices by politically connected cronies is a recipe for disaster. We will end up regretting it.
    Oct 27, 2008. 07:54 AM | Likes Like |Link to Comment
  • An Opportunity for Patient Investors - Barron's [View article]
    "The prudent investor would be wise to start allocating money to equities." - otbricki and wyosteven

    If you are comfortable with the risk that entails then by all means go ahead and buy. I will stay comfortably in the camp where the primary concern is to avoid losing money until such time as I see signs that the bear market is ending and a bull market begins. I may miss the exact bottom, but experience has taught me that waiting is the better choice.

    Until that time I will only consider short term plays where I believe the odds of success are very much in my favor and I will exit those positions when I feel the odds have changed sufficiently against me.

    I wish you good fortune in your purchases.
    Oct 26, 2008. 11:38 PM | Likes Like |Link to Comment
  • Short Selling Levels Down. Is This a Surprise? [View article]
    The market is a non-linear and chaotic system. Attempting to make sense of it via control systems is wishful thinking at best.

    The markets are a price discovery mechanism. Everyone that participates has their own idea on what the "proper" price for any stock should be. If they can buy below that price they will have 'profited' by trading their money for something they believe is worth more. Those who believe the price is higher than true value will have incentive to sell and 'profit' in that manner.

    As news is discovered regarding a particular stock the individual values will change, which drives the market price to a new level of equilibrium between the sellers and buyers.

    Why does short selling change this equilibrium? In fact it doesn't. If there are enough participants who believe the price is "too low" they will gladly buy the shares which are sold short. If those shares are borrowed or naked really doesn't matter. If someone tries to 'drive' the price far down via naked shorting they will need a huge pile of money to do so, and when that money is gone they will need still more to maintain it.

    The short seller must pay all the dividends for those shares as long as he is still short. The buyer can sell any time he wants to exit his position provided there is an offer (on the NYSE there will always be an offer from the market maker).

    My personal opinion is that naked short selling will have no noticeable impact on the market but to drive it toward a consensus price equilibrium. Others may disagree.

    The claim usually made by the anti-short selling crowd is that short selling somehow puts the business under by artificially driving the share price down.

    How exactly does this mechanism work? I can never figure it out.

    The business sold the shares to the public long ago and already have received the money. The price of their shares has absolutely no impact on sales, costs, or profits. They don't get any of the money that changes hands when shares are traded in the market. How does it impact operations? It doesn't.

    If the business is soundly run and profitable, it won't matter if the share price is "driven" down to 1 cent. The business will continue to operate profitably and anyone with change in their pocket can buy the shares at bargain basement prices and even a modest dividend payment will make them well off.

    If the business if not profitable and is losing money hand over fist, they will eventually fail regardless of how high the price is driven by stock touters (think of the 10 cent mining juniors with no cash and no operating mine, just a deed to a "possible" claim).

    The business performance is independent of the share price.

    The market is simply a way to determine that share price for those who wish to own a piece of the company, for whatever reason. If Bill Gates decides to drive shares for Apple to 1 cent by naked shorting, I'm ready to buy as many shares as I can afford in hopes that my future dividends will support me in luxury. Short away!

    If large numbers of market participants believe that company earnings (and therefore value) will decline sharply in the future, the share price will go down whether anyone is shorting or not. Allowing shorting simply gets the market to an equilibrium faster or earlier, and that's not a bad thing IMHO.
    Oct 26, 2008. 09:50 PM | Likes Like |Link to Comment
  • An Opportunity for Patient Investors - Barron's [View article]
    "The good news, Barron's says, is that governments recognize the threat and are responding with unprecedented force"

    This is good news? Applying the Law of Unintended Consequences to the gub'mint's attempt to 'help' leads one to believe that things are more likely to get worse instead of better.

    "U.S. stocks, at 10x earnings and a 3% dividend yield, look reasonable."

    Let's look at the entire big picture. Those earnings have yet to be revised down as a result of the recession/depression, ditto for the dividends. Cash strapped businesses will be pressured to cut dividends when future profits decline and P/Es will be much higher when the earnings are slashed.

    Just remember that the market rallied in 1930 for roughly 6 months only to turn and drop even further than the initial plunge in 1929.

    There is plenty of time to wait and see who the survivors are before plunging back into the fray headlong.

    Oct 26, 2008. 09:15 PM | Likes Like |Link to Comment