a believer

Friday Outlook: Commodities, Emerging Markets

These graphs indicate one thing strongly: Investors no longer trust financial data because it is now so opaque (with so many CDOs, CDS and derivative WMDs - and no honest accounting), thus investors know stock and commodities values need to be different, but noone knows how much lower or higher.

Keep your assets in cash, unless you are a successful day trader.

Nassim Taleb: Renegade Trader with Renegade Ideas - That Work

Excellent article - the only one I've seen yet at Seeking Alpha that gets close to describing how to make money in the markets, which is to have the discipline and cash to survive multiple small losses until the inevitable big win comes along.

The kicker is that this strategy only works because most traders are addicted to the the entertainment value of gambling in the markets - very entertaining but a sure loser long term. Look at Cramer, the biggest loser of them all, and the most entertaining.

If you look into the really serious research that has been done on mechanical trading systems, they all point to the same answer: the more boring the system, the more money it makes. The best mechanical systems lose money most of each year, but the few winning streaks that occur make up for all of the small losses.

The Real Unemployment Numbers

This article reads like a conspiracy theory piece aimed at those 'evil BLS staffers.' They have their models and you don't like what they say. Who cares?

It makes perfect sense that government and healthcare should add jobs, government due to the elections, healthcare a lagging indicator of the ageing Baby-Boomers. Both of these are virtually recession-proof industries.

As I read through these posts I sense alot of anger and depression. I suspect alot of people have lost money in stocks in the past year. Many have lost jobs.

But we still make alot of great stuff in this country, we are resource-rich, we have good crops, we are not in a famine or drought. People still need goods and services, and there is a large older generation that will soon need alot more goods and services from their youngsters. We have a government that responds to the people, based on a great Constitution. We don't have a million percent hyperinflation (think Zimbabwe). We have freedom of association and freedom of religion. We are having alot of pain right now with the credit crisis, and as a result people are being forced to save rather than spend, which is good. You're focusing on the negative when there is alot of good coming out of the current situation:

People are now being forced to offer real goods and services in return for money (good!)

People are learning to distrust banks and the financial services industry (good!)

People are seeing that the stock markets are still way over-valued (good!)

People are finally being forced to save their money (good!)

People are realizing that their houses are not banks (good!)

Alot of young people are living with their parents alot longer. This is good for families, and is also the way it has been throughout history.

Thursday Outlook: Commodities, Emerging Markets

I'm 100% invested in dollars, I guess you could say I'm 'long $USD.'

I like that $USD chart.

User 258021, since no back-tested data set could include the price movements we've seen, trading leveraged long ETFs is way too risky in this non-trending environment (unless you are day-trading).

Planned, Cautious Buying Amidst This Panicked Selling

Next stop for the SPX: 650

Good probability of getting there in the next dew days.

Next stop below that: 450

Cash is king for now, unless you have a trading strategy suited to this new, 'limit-down' market.

The Worst Year Ever: S&P 500's Worst Declines

We've not yet reached near-term support at 780, which would be a 50% retracement, typical for markets.

The next 2 support levels:

650 = 58% drop

450 = 71% drop

So, yes we can easily get worse from here.

Coming Soon: The $600 Trillion Derivatives Emergency Meeting

Consider-this,

The same thing happens to options sellers when the VIX increases from ~20 to 65, as just happened. It's a 'black swan' event that can force sellers into bankrupcy because the sellers' portfolio model did not anticipate such a swing. What will happen when one of the big clearing firms cannot meet the obligations of the options buyers?

I think a very real future scenario is that the coming hyperinflation in the U.S., caused by unsustainable governmnet obligations, will force counterparties in interest rate swaps to default.

Yes things look deflationary now, but this country looks to me alot more like Zimbabwe day by day.

Survival of the Longest

Only gold can save us now? I doubt it. You are assuming large numbers of people will start to value good as a medium of exchange, which to me is unlikely.

No, what will 'save us now' is providing REAL goods and services that other people want and need.

Right now, I would take Leveraged Debt off that list.

Options Trader: Outlook for Turnaround Tuesday

I smell Zimbabwe the world over...

Next up - hyperinflation!!

No matter what 'the collective' does, it will not be able resurrect the House of Cards called the Leveraged Debt Industry because that industry has been permanently destroyed. Who in their right mind would ever buy another CDMO?

That part of our economy - which grew way too big by tearing the ARMs of off poor people - is gone.

Three Reasons Not to Sell Indiscriminately

Good article, thanks.

There is a bigger difference between cash and stock value than most investors are willing to admit. Stock value is merely a collective confidence, whereas cash is a comparatively stable medium of exchange. Not only that, but the 'collective confidence' that creates stock value has evaporated recently as investors found out they have been lied to or severely misled by multiple large companies in the Leveraged Debt Industry (hence, the multiple bankrupcies and many more to come). Obviously, 'collective confidence' can evaporate before most investors can react, therefore a buy and hold strategy is MUCH more risky than brokerages let on.

That's why cash (and adding to it, SAVING it as you work hard at your REAL JOB) has so much more value. It should seriously be considered as a premium investment vehicle. Instead, it is much-maligned, normally by those who stand to profit from commissions and 'advice,' i.e., the entire financial services industry.

As painful as it is to many, I believe this market crash is one of the best things that can happen to our country right now, and was absolutely necessary. It has destroyed the Leveraged Debt Industry, and a whole army of foolish dreamers will be forced to find REAL WORK.

I took a shellacking in the 85% drop in the NAS 100 that occurred in 2000-2001, my first real financial bubble-pop. However, I did not have a trailing stop strategy then. I'm not sure such a strategy would have worked, nor do I think such a strategy can be profitable in the stock market. All of my liquid assets were in cash as of October 2007. I do not see any reason to get back into stocks. We are only down about 45% and will probably drop much lower. I don't see that the 'collective confidence' has returned, I only see that it will get worse.

Getting back in now would be a risky attempt at bottom-picking, it would NOT be following a trailing stop strategy, which likely would not be profitable anyway. Futures research has shown that trailing stop based systems don't normally work long-term in ultra-choppy markets like DJIA because black-swan events occur in these markets that a system cannot be designed to profit from. Choppy markets destroy the profitability of trailing stop based systems, and the stock market is the choppiest of all markets.

The next support level is about 1000 DJIA points lower than here. No-one knows for sure, but my odds say that we'll get there before coming back up for some air...

Playing the Market in Difficult Times

The local paper's October 10 front page news, ‘Nothing stops stock plunge,’ about the 679 point plunge in the stock market on Oct. 9, was juxtaposed with: ‘They all filled up for $20, and now they’re all wanted,’ and article about ‘possibly hundreds’ of criminals stealing from a local company by participating in a gas card scheme.

Both articles are actually about the same thing: how far we have fallen, and how much farther down we have to go.

In hindsight it is easy to see what has happened, but this chronology points clearly to what you should be doing next:

1) Someone decided that instead of providing goods and services with real value, they could Get Rich Without Much Effort by tricking financially uneducated people into mortgage obligations called ARMs.

2) This was so successful that many, many other people noticed these people Getting Rich Without Much Effort. They formed corporations that would buy, repackage, and sell these mortgages, Getting Rich By Not Really Doing Anything That Produced Value.

3) These corporations were so successful that top financial people in The Leveraged Debt Industry noticed. They devised ways to profit even more by creating and trading derivatives on the packaged debt, Getting Far Richer By Not Really Doing Anything That Produced Value.

4) This was so successful that nearly every 'bank' and many corporations devised schemes to buy and sell these derivatized instruments, Getting Even Richer By Not Really Doing Anything That Produced Value.

5) Fast-forward to January 2006, The Housing Music Stops, and sales and prices start a precipitous decline.

6) Over the next year, many poor people with ARMs experience at least one interest rate reset, and start missing payments.

7) Now, three things happen in quick succession in 2007/08: housing prices decline by 25 - 40%, poor people start losing their houses to foreclosure, and the real estate market essentially stops functioning.

8) This changes the whole game for the ARM persons Getting Rich By Not Really Doing Anything That Produces Value, which by now has grown to be the size of a small army and includes nearly every bank:

a) They are now seen by the populace as liars and thieves
b) They have NO MARKET into which to sell their products
c) There is NO MORE PROFIT from their existing mortgages because a hefty chunk of each package isn't even returning the prinicpal

9) The Dow 14,000 market, largely based on and supported by this army of ARM purveyors falls by 90% before slowly recovering (we are 40-45% of the way there, as of today). Don't believe it? Just look at the 85% drop in the NASD 100 in 2000-2001.

What to do next:

If you are in the army above, it is time for you to find a new profession. I am dead serious about this. If you insist on continuing to try to sucker poor people, you will now fail. Try something that uses your strengths to produce something with real value for someone; go back to school. Industry is STARVING for good workers, engineers, nurses, etc. And you will feel alot better about yourself.

Stay in cash if you have any - Cash Is King, as they say.

We are in for a good whipping, and we all deserve it, but we can come out stronger for it.

In his prophetic vision in the early 1990's regarding the world's financial future, Rick Joyner saw that "everyone...was going down on their knees." No one was spared. He saw an ocean full of two kinds of ships - the hospital ships (churches, missionaries, orphanages) that were helping the wounded, and the warships. The warships were the banks. The amazing thing about the warships was that one would pull up alongside another ship and fire point-blank at it, destroying it. The banks were destroying each other. However, "somehow the banks will survive." - From "A Prophetic Vision for the 21st Century," by Rick Joyner, 1999 (a great read by the way).

Ezekiel 22:12 NIV

'In you men accept bribes to shed blood; you take usury and excessive interest and make unjust gain from your neighbors by extortion. And you have forgotten me, declares the Sovereign LORD.'

Where We Go from Here: Best and Worst Cases

The local paper's October 10 front page news, ‘Nothing stops stock plunge,’ about the 679 point plunge in the stock market on Oct. 9, was juxtaposed with: ‘They all filled up for $20, and now they’re all wanted,’ and article about ‘possibly hundreds’ of criminals stealing from a local company by participating in a gas card scheme.

Both articles are actually about the same thing: how far we have fallen, and how much farther down we have to go.

In hindsight it is easy to see what has happened, but this chronology points clearly to what you should be doing next:

1) Someone decided that instead of providing goods and services with real value, they could Get Rich Without Much Effort by tricking financially uneducated people into mortgage obligations called ARMs.

2) This was so successful that many, many other people noticed these people Getting Rich Without Much Effort. They formed corporations that would buy, repackage, and sell these mortgages, Getting Rich By Not Really Doing Anything That Produced Value.

3) These corporations were so successful that top financial people in The Leveraged Debt Industry noticed. They devised ways to profit even more by creating and trading derivatives on the packaged debt, Getting Far Richer By Not Really Doing Anything That Produced Value.

4) This was so successful that nearly every 'bank' and many corporations devised schemes to buy and sell these derivatized instruments, Getting Even Richer By Not Really Doing Anything That Produced Value.

5) Fast-forward to January 2006, The Housing Music Stops, and sales and prices start a precipitous decline.

6) Over the next year, many poor people with ARMs experience at least one interest rate reset, and start missing payments.

7) Now, three things happen in quick succession in 2007/08: housing prices decline by 25 - 40%, poor people start losing their houses to foreclosure, and the real estate market essentially stops functioning.

8) This changes the whole game for the ARM persons Getting Rich By Not Really Doing Anything That Produces Value, which by now has grown to be the size of a small army and includes nearly every bank:

a) They are now seen by the populace as liars and thieves
b) They have NO MARKET into which to sell their products
c) There is NO MORE PROFIT from their existing mortgages because a hefty chunk of each package isn't even returning the prinicpal

9) The Dow 14,000 market, largely based on and supported by this army of ARM purveyors falls by 90% before slowly recovering (we are 40-45% of the way there, as of today). Don't believe it? Just look at the 85% drop in the NASD 100 in 2000-2001.

What to do next:

If you are in the army above, it is time for you to find a new profession. I am dead serious about this. If you insist on continuing to try to sucker poor people, you will now fail. Try something that uses your strengths to produce something with real value for someone; go back to school. Industry is STARVING for good workers, engineers, nurses, etc. And you will feel alot better about yourself.

Stay in cash if you have any - Cash Is King, as they say.

We are in for a good whipping, and we all deserve it, but we can come out stronger for it.

In his prophetic vision in the early 1990's regarding the world's financial future, Rick Joyner saw that "everyone...was going down on their knees." No one was spared. He saw an ocean full of two kinds of ships - the hospital ships (churches, missionaries, orphanages) that were helping the wounded, and the warships. The warships were the banks. The amazing thing about the warships was that one would pull up alongside another ship and fire point-blank at it, destroying it. The banks were destroying each other. However, "somehow the banks will survive." - From "A Prophetic Vision for the 21st Century," by Rick Joyner, 1999 (a great read by the way).

Ezekiel 22:12 NIV

'In you men accept bribes to shed blood; you take usury and excessive interest and make unjust gain from your neighbors by extortion. And you have forgotten me, declares the Sovereign LORD.'

The Coalition of the Ailing

Felix, these last 10 days have had an eerie feeling about them.

Its almost like SOMEONE just doesn't want the Leveraged Debt Industry to survive.

C'mon, is that really surprising to anyone? What is the Leveraged Debt Industry up to anyway? It has a business model something like Let Us Wealthy Individuals and Corporations Exploit Poor People for Every Dime.

Here's something else that's scary:

In our local pape the October 10 front page news, ‘Nothing stops stock plunge,’ about the 679 point plunge in the stock market on Oct. 9, was juxtaposed with ‘They all filled up for $20, and now they’re all wanted,’ and article about ‘possibly hundreds’ of criminals stealing from a local company by participating in a gas card scheme.

From my perspective, both articles are actually about the same thing: how far we have fallen, and how much farther down we have to go.

It looks more and more to me like the companies whose profitability depends on Leveraged Debt are doomed.

IBM: Lessons from the Great Depression

Whidbey, I have to second that.

In our local paper, the October 10 front page news, ‘Nothing stops stock plunge,’ about the 679 point plunge in the stock market on Oct. 9, was accompanied by ‘They all filled up for $20, and now they’re all wanted,’ and article about ‘possibly hundreds’ of criminals stealing from a local company by participating in a gas card scheme.

Both articles are actually about the same thing: how far we have fallen, and how much farther down we have to go.

Seeking the Fix That Will Finally Work

In our local paper, the October 10 front page news, ‘Nothing stops stock plunge,’ about the 679 point plunge in the stock market on Oct. 9, was accompanied by ‘They all filled up for $20, and now they’re all wanted,’ and article about ‘possibly hundreds’ of criminals stealing from a local company by participating in a gas card scheme.

Both articles are actually about the same thing: how far we have fallen, and how much farther down we have to go.