Avoid US Mainstream Media at All Costs

"And if all others accepted the lie which the Party imposed—if all records told the same tale—then the lie passed into history and became truth. 'Who controls the past' ran the Party slogan, 'controls the future: who controls the present controls the past." - George Orwell, 1984

I sometimes advise new traders and investors: "Whatever you do, stop listening to the U.S. mainstream media."

Why?

Well, I ran across this little "gem" today from the Washington Post, written by a Mr. Zachary A. Goldfarb that perfectly illustrates why I believe it's time to stop listening to U.S. mainstream media. The title of the article was, of all things: "CFTC Floats Rules Aimed at Speculation"

That title, by the way, is incorrect. That is not what the CFTC is doing, and therefore, the Washington Post has engaged in a bit of sloppy journalism. But what do we expect from the U.S. mainstream media? But more on that later.

The article starts, right out of the gate, by stating:

"The Commodity Futures Trading Commission will consider new measures to curb speculation in the markets for energy and other commodities, the agency is set to announce today."

Wrong.

Wrong wrong wrong wrong.

Here, let me fix that for you Mr. Goldfarb, since you are obviously writing about a subject you know NOTHING of ...

"The Commodity Futures Trading Commission will consider new measures to curb manipulation of future energy contract prices by limiting the sizes of the positions that hedge funds and other investment banks are allowed to hold, the agency is set to announce today." - - Corrections mine

There. Fixed. First of all, it is impossible to speculate in the spot energy market. It can't be done. That was the first mistake by this article, and a mistake that was in the opening paragraph I might add. Speculators are engaged in the futures market. Futures. As in, 'hasn't-been-delivered-yet-and-wont-be-for-months'. The spot market is what is being agreed upon, right now, today, by buyers and sellers of crude oil. And there are no speculators there.

The CFTC cannot 'limit speculation' in the futures market. To do so, would be to destroy those free markets, and the benefit they provide to the commercial interests that are trying to hedge their operating costs. Which, ironically, this very article goes on to admit in later paragraphs! More on that later.

It's already obvious, and we've progressed only a few paragraphs into the article, that the Washington Post wants a scapegoat. And they have decided to land on speculators. The problem there, is that their insinuations do not match the facts (Gee, remember the times when a journalist was a noble truth seeker?) The mainstream media acts as if speculators are actually determining the price of today's barrel of oil. They aren't.

Those guys you see on your television screen in bright colored jackets waving around pieces of paper? The aren't even participating in the futures energy markets. They are in a secondary markets of the options market, that is based on the futures energy markets, which is removed from the spot market. But isn't it interesting when someone from the mainstream media want to talk about blaming speculators? They flash that image on the screen? As if options traders in the energy pits are the guys actually trading the cost of today's barrel of oil?

The article continues:

"Concern over such deal-making reached a fever pitch last summer, when oil prices were sky high and people were feeling pain at the gas pump. CFTC data showed last year that a significant amount of trading in oil was concentrated in the hands of just a few speculators."

Ahhhh, now we come to the rub.

First of all, since I did the Washington Post the favor of fixing their first paragraph, I should probably also fix this one.

"Concern over such deal-making reached a fever pitch last summer, when oil prices were sky high and people were feeling pain at the gas pump. Much of this weakness was due to the fact that the Federal Reserve began cutting the Fed Fund Prime Rate at an ever quickening pace in an attempt to support and re-inflate market valuations. The negative side to this action is that it can be inflationary. This is because it leads to a weaker U.S. dollar. A weaker dollar translates into weaker purchasing power. In fact, the Federal Reserve was engaged in this action at a time of the year when Crude Oil usually comes under seasonal buying pressure. This means that the dollar could not purchase as much crude oil, and therefore high spot oil prices were the result, at the same time Crude Oil was already facing seasonal demand." - corrections mine.

Since I have never, ever seen any data by the CFTC to purport the claim that a "a significant amount of trading in oil was concentrated in the hands of just a few speculators." I will leave that sentence out completely. I'm not saying it's false. But I've never seen any data to that effect. Trust me, if I had, I would be screaming about it. The CFTC always shows which group, holds what positions, in the COT (Commitment of Traders) report that is released each week. Now, admittedly, that report does not report who is holding what position. And I will agree that if the size of a position is concentrated in the hand of one or two firms, that this could adversely affect the future contract price of oil for a very short time. At times, the spot market may take notice of what the futures market is doing, only if it can be demonstrated that the premium spread on future contract months dissapates.

But even if this were the case, that could in no way affect the spot markets price of oil for any length of time. The spot market flying sky high last year, was the direct result of the Federal Reserve cutting rates, and cutting rates, and cutting rates and .... oh ... let's cut the rate some more; at the exact same time that crude oil comes under seasonal buying pressure. There were no speculators in the spot market, as the dollar was falling. So how are speculators to blame? So if we're going to have an article that throws mud and tries to seek out blame? Let's throw that mud in the correct direction shall we?

"Mr" Goldfarb continues:

"Financial firms can affect the price of commodities such as oil and wheat by buying and selling futures, which are financial instruments traded on exchanges."

Prove it. You explain to me how that happens. I would love to hear an explanation of that statement.

"A future is a contract between two parties which agree to buy and sell a commodity at a certain price."

Again, wrong. Wrong wrong wrong. Again, let me fix that for you:

"A futures contract is a contract between two parties which agree to buy and sell a commodity at a certain price at a set time in the future; usually, two to four months in the future." - Corrections mine.

Come on! You can't even get a simple definition correct! And you write for a supposedly reputable newspaper in the United States of America? Or, is it that by providing an accurate definition, you just might, possibly show the truth of the matter, and may not be able to throw your mud at futures speculators?

What makes this even better, is that the next few sentences in this article actually demonstrates the need for speculators !

"For example, an airline that is worried about being hurt by rising fuel prices might try to lock in costs by buying oil futures. If the price of oil does rise, the futures the airline owns would also rise in value, offsetting the increased cost for fuel."

What you left out, Mr. Goldfarb, is the fact that the airline will not be able to make that deal, unless the speculator is willing to pick up the risk for the airline ! For every contract sold by the commercial interest, there MUST BE A BUYER! Otherwise, no one will pick it up, and the airline cannot hedge themselves. The speculator is critical to the both the liquidity, and the function of the futures contract markets. Has the last year taught you nothing as to what happens to a market when the liquidity disappears?

The article continues:

"The CFTC already has established position limits for some commodities, such as wheat. But it has also granted exemptions to these limits"

Ohh! Ohh! Now we come to it! In other words, the rules on the books, that were working just fine? And those rules were removed? Why? THERE is your story! This reminds me of other rules on the books that were removed. Rules regarding leverage that a Mr. Hank Paulson asked to have removed years ago. Those rules were removed as well. And here we are.

I'm a futures speculator, and I am sick to death of mud-flinging articles like the one above.

My solution?

Quit listening to the U.S. 'old-school' media. Period. I'm not saying you shouldn't turn on the television, or read what these clowns are saying. That's not what I mean. What I'm saying, is stop listening to the ideas they are trying to put inside your mind. The mainstream U.S. media simply fills peoples heads with ideas that are far removed from this little concept we call: reality. When you don't understand what's truly happening, it can lead to all sorts of financial problems for you as an individual.

You're going to get a heck of a lot more truth from guys like Karl Denninger, than you ever will by reading the Washington Post.

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Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 13 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

Monday Challenge Project Summary: July 6, 2009

Previous Challenge Project Balances:

Investing Account Balance: $524.86
Stock / Futures Trading Balance: $1,464.14
Online Savings Balance: $25.06

The original video explanation of the Challenge Project is to be found here.

Some time ago I stated that I may split up Rule No. 2, into weekly segments; or, $25.00 a week. Rule No. 2 states that each month, we can divy up $100.00 as we wish ...

(Video Included. If you're seeing this entry elsewhere and cannot play the video? Click this link to go to the exact blogged vlog entry ...)

Update: Sold off the FAZ in the personal accounts today at $5.23, and in the Challenge Project, around $5.25

Challenge Project Balances After Rule No. 2 Deposit:

Investing Account Balance: $524.86
Stock / Futures Trading Balance: $1,464.14
Online Savings Balance: $50.06

We'll be back to the Challenge Project, next Monday ...

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Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 13 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

Week in Review: The Day of Economic Reckoning Is Still Coming (PODCAST)

"What I say to you, I say to all. Keep on the Watch" - Jesus, the Christ, Mark 13:37

Welcome to the 'Week in Review'.

The job, or employment numbers came out. And they were beyond dismal.

What is interesting to me? Is that the U.S. Media seems to examine the unemployment and jobless numbers? As if they are complete stand alone numbers. As if people being out of work, which is horrendous, is the extent of tragedy of those numbers.

They are not.

Taxes, affect employment numbers.

When unemployment increases? That affects the governments ability to gather taxes. People aren't working. People who aren't working, don't pay a heck of a lot of taxes. The higher the unemployment goes, the less money the government gathers to pay back the massive debt that it has taken on in recent months.

This is an economic law. You cannot raise taxes to increase tax revenues. Especially on business. It cannot happen. It has never worked. Ever.

I discuss this, and the implications of the employment numbers, on what is coming down the road to this economy, in the following podcast. Just press play!

(Podcast Included. If you're seeing this entry elsewhere and cannot play the podcast? Click this link to go to the exact podcast entry ...)

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This is a chart of the current "DOW Jones" Industrial Average, demonstrating the "Head and Shoulders" pattern:


The above is what is known as a "Head and Shoulders Pattern". In this pattern, the straight line at the bottom is known as the "Neckline". Or, on the DOW Jones, with consistent trading below the 8170 region. When these breaks occur? Then the market usually pulls back up to the neckline, before they continue further down.

Here's a picture of the Bond Curve, as it existed a few weeks ago:


Here's a picture of the Bond Curve, as it exists now:


It is ever so slightening, right before what is seasonally a huge bond rally. Cheaper rates can't delay what's coming. But it might possibly 'delay' it.

Update: You know, it's funny. I had those comments within the podcast on Saturday regarding the Chinese. And what comes out today in the news? This. Please, remember that in the system that we live in? Business is an adversarial game.

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Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 13 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

Airelon's Investing and Trading Thoughts: July 2009 (Chop, Chop, Chop) (VIDEO)

Challenge Project Accounts:

Investing Account Balance: $520.81
Stock / Futures Trading Balance: $1,464.14
Online Savings Balance: $25.06

Here it is. My "outlook" vlog entry for the month of July

Near the beginning of every month, I have an "outlook" entry in which I discuss what I have my eye on for the upcoming month. We're waiting for the moves. But when you're waiting for a move? You have a lot of chop. While you're waiting for the down move, we seem to be just chopping up ...

(Video Included. If you're seeing this entry elsewhere and cannot see the Video? Click this link to view the entry ...)

Some time ago I said you should be ready for the buying opportunity of a lifetime. When will you know it's time? Well, that's the trick isn't it?

At the moment, the Treasury is trying to hide many of their toxic assets with what I call a 'fake' market. You can't 'fake' a market. When they realize they can't create a 'fake' market, and the banks truly start shedding those OTC derivatives? That's one way to know that the event is approaching.

Another, would be huge policy shifts. Such as the Fed reversing all previous models and policies when reality stares at them in the face. When the bailouts stop. When your CNBC clowns realize that there is no recovery, there never was any recovery. When people everywhere, will do anything to get away from the stock market. When you see them accepting huge tax losses, and completely liquidating their 401k's.

Then, wait. Wait, and watch all of the assets be puked up on the street for next to nothing. That's when I'll be buying.

Edit Update: With due credit to Karl Denninger for catching the overnight lending action at the Fed? I'm not going to be shorting any metals (the metals, in this environment = fear), and I may be picking up some puts on equities.

Could be a lot of fear getting ready to hit the market.

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Challenge Project Accounts:

Investing Account Balance: $520.81
Stock / Futures Trading Balance: $1,464.14
Online Savings Balance: $25.06

NOTE: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 13 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

Monday Challenge Project Summary: June 29, 2009

Today's Challenge Project Balances:

Investing Account Balance: $514.74
Stock / Futures Trading Balance: $1,464.14
Online Savings Balance: $25.00

The original video explanation of the Challenge Project is to be found here.

Some time ago I stated that I may split up Rule No. 2, into weekly segments; or, $25.00 a week.

This recap the first of the Weekly segments.

(Video Included. If you're seeing this entry elsewhere and cannot play the video? Click this link to go to the exact blogged vlog entry ...)

Since we are not yet into July, there will be no implementation of Rule No. 2. We'll discuss that next week.

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Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 13 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

Week In Review: Duck n' Weave from the Looters

"Evil requires the sanction of the victim." - Ayn Rand

Welcome to the 'Week in Review'.

After a review of the markets, I discuss trading 'pay service's as well as the lessons that I have learned throughout this economic crisis ...

(Podcast Included. If you're seeing this entry elsewhere and cannot play the podcast? Click this link to go to the exact podcast entry ...)

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Click here to download this podcast.

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Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 13 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

The Davian Letter (VIDEO)

"He helps others most, who shows them how to help themselves." - A. P. Gouthey

Within a video response that I received at YouTube, I became introduced the Davian Letter. I took a look through their service, and my first reaction?

Relief.

As time passes, I'm finding more and more honest people, like David Warings "Informed Trades", that trade and invest the markets who are not here to scam you. We're here to help.

In the following vlog, as a video response to Anthony Davian of the Davian Letter, we discuss the philosophy of 'grass roots' education for new investors and traders ...

(Video Included. If you're seeing this entry elsewhere and cannot see the Video? Click here to view the entry ...)

Paying it forward, volunteering, or whatever you want to call it. I'm convinced that honesty in this time period, and during this crisis will pay dividends for a long time to come.

Here is the link to the Davian Letter, and here's the video response that I received this morning from Anthony Davian ...

Check em' out. You may like what you find. Myself? I'm buying one of their beer glasses. :)

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Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 13 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.