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  • Signs Of An Approaching Bear Market [View article]
    What I've learned over my lifetime-and I've seen the 'Nifty Fifty', the mini-skirts, the 73-74 recession, the Carter malaise and the double-digit interest rates during Reagan and Volker. I saw the testimony of Baker spook the market in 1987, and so on.
    The mere terms 'bull' and 'bear' are simply popular mythology. Just like the ancient Greeks and Romans believed in mythical characters, so it is that the public today is no wiser.
    I used to be no wiser-when I crawled around in a one-dimensional world. Now, as I've learned from the all-time greats, such as Jesse Livermore and many others-it simply doesn't register that one side of the market is to be preferred. In fact, some of my biggest gains have been on the short side. The more volatile the market, the more opportunity I see.
    If you're fearful of a so-called 'bear' market, you need to root out that fear through enhanced wisdom and understanding. As Willie nelson said...'you can't be a cowboy if your afraid of horses.'
    Aug 14 12:28 PM | 25 Likes Like |Link to Comment
  • This week's selloff looking like March's [View news story]
    What is the exact date and time of the pullback? I like to put these types of events on my calendar.
    Jul 8 01:03 PM | 21 Likes Like |Link to Comment
  • Perspectives On Friday's Sell Off [View article]
    Hi Eric-always enjoy your perspective. First, I think this little slide was telegraphed. In watching the vix, it just seemed to easy to keep shorting volatility. I stated a few days ago that I was clearing out of SVXY. I've never seen a trade so consistently easy. I went the other way, and immeditaely got hammered, but I doubled down. The market was just too predictable. Never before has so much liquidity been dumped on the system.
    This move could have been choreographed by some big shakers. If you think about it, novice traders were shorting the vix. Part of the evolution of the market rests with the quick dissemination of new ideas. If someone has a good idea, it's out there in short order. The most profitable move is for sufficient capital to layer in some long volatility trades, and hit the public panic button. The second day was simply a cascading impact where the standard retail trader began to second guess their positions.
    But, there's still a ton of cash that wants an extended 'no panic' zone. This is, I suspect, little more than a 'reshuffling of the deck.' At this juncture, I just don't see that the real issues are front and center.
    Jan 24 05:59 PM | 21 Likes Like |Link to Comment
  • Is The Middle Class On A Sinking Ship? No Economic Good Times For Them Or Their Retirement [View article]
    George, the very people that need to contemplate market strategies want nothing to do with the 'stock market.' They can't pay their bills-they truly live paycheck to paycheck. When they have time off, studies indicate they just sit around and watch the 'idiot box.' The lack of basic financial acumen is beyond credulity.
    Since 'retirement' I've worked with some school teachers to help them with financial planning. These people are among the more educated in our society. Yet, the crap they've been told by stock brokers and insurance peddlers will make you cry out in rage. The 'information' that the vast majority of people are exposed to is poisonous. The real problem is that the education level in general has declined-and continues to decline. You folks that are encapsulated in offices in lower Manhattan, Naples and San Francisco need to venture out to a WMT, or visit a public school. We don't have kids, and I spent most of my working life in high- rises, and entertaining clients at exclusive country clubs. You really can't grasp the destruction of small business, erosion of educational standards and the real unemployment rate until you get out and about. Merely reading about it just won't cut it.
    Aug 26 11:23 AM | 16 Likes Like |Link to Comment
  • Why A Stock Market Bubble Is Forming Right Now [View article]
    I think we're in the midst of a great socio-economic 'experiment.' I use the term 'experiment' in a pseudo-scientific sense, in that central planning institutions have a working hypothesis based on a set of assumptions. These assumptions reflect historical observation, refined by models.
    Of course, part of the analysis suggests that operating mistakes were made by allowing the previous morphine drip to become addictive. But more of the same-indeed much higher doses were needed- to sustain the patient.
    But, is this not an ephemeral and elusive discussion? Witness the daily and incessant preoccupation with the Fed, ECB, BOJ, etc. And, how many words are devoted to the utter ineffectiveness of elected officials to 'do something.' The central banks proclaim that they can't do all the lifting. Why is there no fiscal counter-balance to the equation?
    But I suppose the real point of substance is the utter abdication of elected officials to a vast array of regulatory agencies. We proudly laud the Bill of Rights, while we simultaneously surrender it's heart and soul to the most extraordinary and extensive regulation in the history of the human race. And we shackle our future with a debt burden that is unimaginable. Note that since 1960, the federal budget has been either balanced or in surplus a mere five times. (And, yes some of the early years were small deficits).
    The only inference to be derived from this statistic is simply that the correlation between economic or business cycles and fiscal integrity i.e.. rational balances, is lacking. A big part of the problem is simple: the immediate need is to deal with today's known misery, and the future is an imagined, ambiguous point where prosperity rules and happiness is assured. But, an increasing amount of liquidity and debt are shifted to the future. Thus, we don't 'invest for' the future, we "borrow from' the future.
    But to add to the author's point about the management of liquidity, we want to sharpen our focus just a bit. If we accept that government regulation has proliferated, and importantly, now forms a web (perhaps tangled) such that financial decisions are manifestly impacted, our next observation is to note the rather rapid integration of said regulation with debt-financed consumption. The evidence is clear that federal regulators insisted that FNMA support the mortgage securitization debacle. Most folks would stop at that observation, as if the riddle had been solved. No-it's more insidious in that private markets were diluted, and, as usual, clarity and basic accounting didn't apply.
    There has to be a point where managing liquidity is held hostage to more than an economic cycle. That point in time will be determined by a stubborn economic suppression, which defies the liquidity antidote. That suppression will be revealed by continued high unemployment and stagnant opportunity.
    May 3 09:45 AM | 13 Likes Like |Link to Comment
  • Just How Sick Is This Market? [View article]
    Rookie, in a way the divergence state by state is somewhat similar. Corporations seek right to work states, e.g BA. Most Asian auto-makers have selected Alabama, Georgia and South Carolina. Each state, or perhaps region, seems to have economic distinctions that are more pronouned than in the past. What does this portend for the future? How does the central planning agency deal with the enhanced distinctions?
    The problem with an academic analysis that encompasses only econometric models, is that the sociological and demographic issues are given scant weight. Economics is called the "dismal science" but its handful of "laws" are insufficient to allow any meaningful prediction.
    In a conversation with my 84 year-old mother the other day, she said "I don't know how a couple with children can stay above water." That tells me more than any of the fools that appear on CNBC,etc.
    I was in West Palm last March for a couple of days, and then drove across the state to Ft. Myers. In talking to people, they echo your comments. This will go down as a unique period of American history, and will likely defy the type of analysis that gets promulgated every hour.
    Jun 18 10:10 AM | 13 Likes Like |Link to Comment
  • Why "S&P 2000″ Is A Fed Manufactured Mirage: The "Buy The Dips" Chart That Says It All [View article]
    The stock market is nothing more than a manifestation of man's desire to have his hour upon the stage. It is a modern contrivance, a phenomenon whose gestation harkens back to the emergence of the industrial age. It has, of course, embraced technology and embellished/embraced the modern global economies. In many respects, its genesis was random-although it's formulation and subsequent function sing from the book of Adam Smith, and all subsequent tunes relative to the financing of war and peace.
    The jury is still out on the sum total of human efficacy. The majority of people pay no never mind to it's voice-for their concern and contentment rests not with stocks and bonds and such things-but more with the daily burden of buying a gallon of gas, a diaper or a loaf of bread.
    Casino? Not so much as it is constructed-yet one definitely employs the sharp-edged odds of the casino to grab a dollar. A non-stop perpetual show, complete with manipulation, dull sages and holy scribes entreating all those that would lend an ear. The carnival barker finds a more refined home here, and the hurly-gurly man calls at a distance. Brother Love seeks to embrace all, and save all, for salvation surely rests with those that tithe on a regular basis. It's the greatest show on Earth, and life under the big-top has proven sublimely seductive for both the gambler and true-believer.
    So, take it for what it is. After all, it's just another experiment-another random interlude. An advocate would note the benefits accruing to a society at large-and humanity cheers for the brave soul given a chance to better the lives of the planet's inhabitants. A more jaded perspective questions the cost side of the ledger.
    Today though, we just want to lay down one more bet. After all, I got it figured out now-don't confuse me with those Federal Reserve people. They're not playing with a marked deck-are they?
    Aug 25 02:12 PM | 11 Likes Like |Link to Comment
  • 4 More Years Of What? The Past As Prologue [View article]
    Despite one's political preference, it's worthwhile to think about underlying causes versus prima facie observations. I have yet to read any account that truly specifies some unique and specific act, or set of acts, within any significant historical context, that reflect and explain this moment in time.
    Yes, the cited authorities, as well as many others, have offered a post hoc perspective. But where is the voice of the armchair quaterback a priori? Greenspan, in Congressional testimony, raved about the trillions of dollars of home equity. Yet, the monolithic bastions of free enterprise were laying off thousands pursuant to "re-engineering."
    Instead of using 2000 as a defining point in time, why not 1988. At the moment the Berlin Wall came down, millions of new job-seekers cropped up overnight. It would take too long to review all the implications arising therefrom. At that same time, trade balances began to change (unfavorably for the US), as business schools sought to understand and teach Japanese management techniques.
    The role of the Fed became reactionary, and arrogant, by assuming a wisdom that remained elusive. The art of re-arranging the deck chairs became all the rage, as the chaos underneath remained a shadowy phantom. Superficial analysis passed for logic and rigor. The culture, and the resulting economy, were being transformed. Governmental policies dealt with the superficial, while natural forces operated with impunity.
    But it always happens that way. We want the illusion. And we will pursue that illusion, and we will insist that others share our illusion. Politicians will oblige the dominant illusion so that the people will praise their adroit leaders-and nod gently into a peaceful sleep.
    Nov 12 11:45 PM | 11 Likes Like |Link to Comment
  • Why This Is The Most Hated Bull Market Of All Time - Understanding The Folly Of Financial Engineering [View article]
    Joseph, the human animal has been manipulated from day one. As Machiavelli noted in "The Prince" men must be cajoled or annihilated. Over the past 100 years or so, this manipulation, or deliberate obfuscation, has grown exponentially. I certainly concur with you that we have refined the financial engineering and cloaked it with the myth of free enterprise, capitalism and even Friday night football. Our 'system' has violated so many implicit promises and representations that it's hard to imagine that a continuous charade can go unabated. The list is long: bailing out big banks, big car makers, big this, big that...etc. What of the small businessman who had his credit line taken by said TBTF lender? Where is the justice and fundamental fairness in so many examples over the past several years?
    This is why I come across so many bitter folks who reside at 101 Main Street. This disillusionment is not going away.
    Yet, as I retreat from my soap box, I'm left with Neil Gaiman's reminder in "American Gods."In Baton Rouge (1853), George Devol has pulled Canada Bill Jones aside to tell him he was being robbed blind in a crooked game of faro. Canada Bill sighed, and shrugged his shoulders, and said "I know, but it's the only game in town."
    Jul 24 03:45 PM | 10 Likes Like |Link to Comment
  • BP Is Having A Panic Attack Over Business Economic Loss Claims [View article]
    Entering into an uncapped settlement with a pack of trial lawyers is equivalent to standing at the gates of hell, pleading with Lucifer for leniency.
    Jun 28 06:43 AM | 10 Likes Like |Link to Comment
  • Taking Care Of Grandma's Money [View article]
    The first thing I would do is protect her assets from potential nursing home liens. If she owns real estate, as indicated, I see a tragedy waiting to happen. Rather than put a few dollars in the stock market, I suggest you visit a lawyer that specializes in trusts and protecting assets from creditors. Otherwise, the odds are that your efforts will benefit the Medicare/Medicaid system. OUCH!
    Jun 13 09:31 AM | 10 Likes Like |Link to Comment
  • Monday Market Momentum - Prices Go Parabolic [View article]
    There comes a time to short Rome and go long the barbarians. But, while in Rome....
    Feb 14 12:03 PM | 10 Likes Like |Link to Comment
  • The Major Bubble That Nobody Is Talking About [View article]
    With many pundits screaming that gold will fall to $500, it creates a self-fulfilling prophecy. I'm anything but a gold expert, but I do have a nose for panic. Panic presents extraordinary opportunities. It's like a surfer, waiting to catch just the right wave.
    Another apt analogy is herd behavior on the African plains. People are like wildebeests, stampeding first in one direction until exhaustion, then, after a rest, they are just as likely to turn around and run in the opposite direction. The crocodile and the lion wait pateiently for the right moment.
    May 21 07:53 AM | 9 Likes Like |Link to Comment
  • Dividends: A Case of Behavioral Heuristics? [View article]
    Briar, I greatly admire you for attempting to provide a mere snippet of a book destined as a landmark. Note this comment from Richard H. Thaler: "This book is a tour de force by an intellectual giant; it is readable, wise and deep...Read it slowly and repeatedly. It will change the way you think, on the job, about the world, and in your own life."
    The book is readable because Kahneman uses "System 1" and System 2" to make a distinction between heuristics and the type of reasoning required for more 'complicated' problems. Also, each chapter concludes with a "System 1" type perspective, which facilitates understanding of the material.
    As Kahneman states..."Much of the discussion in this book is about biases of intuition..." He quickly alerts the reader to the famous Muller-Lyer illusion (this is the one where the subject is asked to determine the length of a horizontal line among two choices where one line is framed with 'closed' angles, and the other with 'open' angles). The two lines are the same distance, but the illusion fools everyone-unless they have prior knowledge. Yet, prior knowledge will not remove the cognitive illusion.
    This is not a book about investing. Nonetheless, experiments conducted over 40 years clearly demonstrates an assortment of biases that doom rational choice. Perhaps the area of research most familiar is Prospect Theory- and within that area 'loss aversion' may be the most significant for investors. I particularly found the study of professional golfers interesting. To wit, pros will grind out a par putt, because making a bogey is perceived as a loss. The emotional content is similar to investing, in that a birdie merits a 'pat on the back' while a bogey is tantamount to a swift kick in the gut. Both golfers and investors can be led astray by loss aversion.
    The comments about the fund manager and Ford are detailed in the book-but the takeaway is not as simple as one might wish to believe. Two of the chapters with particular relevance are "The Illusion of Understanding" and "The Illusion of Validity."Documented studies prepared for investment firms were 'swept under the rug.' As indicated at p215: "...the evidence from more than fifty years of research is conclusive for a large majority of fund managers, the selection of stocks is more like rolling dice than playing poker. Typically, at least two out of three mutual funds underperformed the overall market in any given year."
    I think it critically important to understand the history of economic thought, and how the 'rational man' assumption came about-and how the body of knowledge has changed over the last 50 years or so. In that context, one of the more interesting chapters deals with 'Allais's Paradox." I won't take the time to detail, but the significance is found in the fact that the economic giants of the Twentieth Century-Paul Samuelson, Kenneth Arrow and Milton Friedman-all flew to Paris in 1952 to discuss the works of von Neumann and Morgenstern's theory of risk. At that meeting, Maurice Allais, a future Nobel recipient, posed a simple choice to the intellectual giants. The result shattered utility theory, but utility theorists classically ignored the result, while decision theorists took the results quite seriously. So, sixty years later, we now have the rudimentary tools by which to challenge our assumptions, and uncover our biases.
    I have previously studied the work of Kahneman and Tversky in great detail. So, a lot of the material was redundant. But, the synthesis and logical progression of forty years of ground-breaking research is extraordinary. And, the book closes with Part 5-which includes chapters entitled "Two selves," "Life As A Story," "Experienced Well-Being,"and "Thinking About Life." Only rarely has decisional research incorporated and explained the human spirit-Kahneman has advanced the works of Kant, Hume, Popper and other great philosophers-no small feat.
    Dec 29 11:06 AM | 9 Likes Like |Link to Comment
  • Just How Sick Is This Market? [View article]
    It's not just the economists-it's the analysts as well. I have a thick notebook from 2007, full of analysts reports/reviews/price targets, etc. Just to share a couple of them: NUE $88/ACI $82. NUE hovers around $40. ACI is an unmitigated disaster. These are just two examples.
    Often, people will say that earnings are the only thing that matter, and that "eventually" a share price must reflect fundamental value. "Eventually" the planet will be consumed by the sun. "Eventually" the universe will be ripped apart. I often wonder how these people go about constructing the "reality" in which they live. Of course, the answer is that they sing from the choir book of self-interest. The evidence is so overwhelming and so pervasive against these morons that any respectable weather prognosticator would be embarrassed to admit of such a record. They can only owe their sustainability to the short-term memories of their audience, and the general tendency of most folks to forgive and forget.
    Jun 18 08:48 AM | 9 Likes Like |Link to Comment
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