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Saturday, February 28, 2009

Week in Review: The Economic Detriment Package of 2009

"He's got yesterdays values, living in tomorrows industry ..." - Dropkick Murphys "Tomorrows Industry" from the album 'The Meanest of Times'

When I review the facts of what is occurring? I have a proposal to make.

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



Click here to download this podcast.

I leave you with the lyrics to the Dropkick Murphys song: "Tomorrows Industry". Strangely appropriate as we are staring at another Depression, straight in the face.

Young Kids in Schools
Elderly Parents Living Under Your Roof
You Pay The Bills and You Pay The Price
You Don't Back Down and You Won't Play Nice
The Disgraced Values of the Company Man
Are Why you Fight And Sacrafice
Don't Bend or Break for Their One Way Rules
Or Run From Battles you Know You'll Lose

Chorus:
Greed is Blinding You
But We Can See
He's Got Yesterday's Values
Living In Tomorrow's Industry

They See Your Eyes, They see your face
But's it's your soul they wanna take
Yeah, welcome to the future it don't seem fair
But this is your struggle, the cross you bear
They know your pain, they don't think trwice
There's a dollar value on your life
You Don't comprimise and you don't break
Yeah, It's our principles at stake

Chorus:
Greed is Blinding You
But We Can See
He's Got Yesterday's Values
Living In Tomorrow's Industry

The Daily Outlook it's so bleak
Saving every dollar of every week
Living month to month, youv'e got to get ahead
but all the while falling deeper in debt

Chorus:
Greed is Blinding You
But We Can See
He's Got Yesterday's Values
Living In Tomorrow's Industry

The wright falls hard ib tge stabd up guy
The one you can count on you can rely
This is your future It don't seem right
But this is your battle, this is your fight
Something in this country has got to change
If wer'e ever gonna see those days again
Your Parents may have done it with just one job
But now we're working for less and twice as hard


And I have to tell you, I feel a very personal connection to the line: "He's got yesterday's values, living in tomorrow's industry" ...

Please. For the love of all that is holy. Stay safe ... and trade well.

* * *

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.

Friday, February 27, 2009

The Blog TV Show: 2009 Outlook and Some GOOD News ...

"When you see that trading is done, not by consent, but by compulsion - when you see that in order to produce, you need to obtain permission from men who produce nothing - when you see that money is flowing to those who deal, not in goods, but in favors - when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you - when you see corruption being rewarded and honesty becoming a self-sacrifice - you may know that your society is doomed" - Ayn Rand

Had a lot of fun during my return to BlogTV this Friday.

First, we talked about my outlook regarding 2009, with the new changes to the tax structure and the budget - and my reactions to these new 'incentives' (yeah, that's sarchasm) ...

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



And then the discussion turned once again to charities. It was also getting to be a bit of a downer discussing all the bad news, so I decided to have some GOOD news on the show ...



I'll try to have the instructions to getting connected to the Ventrilo Server up by tomorrow.

We'll see everyone later today with the the "Week in Review" podcast, and my vlog on the Challenge Project for 2009.

* * *

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.

Blog TV Show this Afternoon



Which is about 6 hours from the time of this writing, 5:00 pm, Eastern Standard Time (Detroit / New York) on my Blog TV Channel

Thursday, February 26, 2009

Money Management: Drawdown Kill Switch

"Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat." - Sun Tzu, The Art of War

To date in the money management series, we have explored the founding principles of money management. Risk Analysis, Reward Analysis, Trade Management, Drawdown, Accuracy Rates and Performance Analysis. We talked about Strategies and the need to find an edge to the market, or a bias, and to massage that bias. Those principles are the foundation.

There is much of those principles can be expanded upon, and there can be further discussion and explanations. These explanations will assist you to see more of the underlying strengths of the base principles. In this video, I discuss how Drawdown tolerance is affected by your Account Size, and the need to have a predetermined 'Drawdown "kill switch"'. I talk about that, in the following vlog entry which will be included in my "Money Management Playlist" ...


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



Don't forget, that the Blog TV Show is this Friday at 5:00 pm, Eastern Standard Time.

* * *

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.

Wednesday, February 25, 2009

Wednesday Recap Podcast: What we had ... was ....failure to communicate

"When the common soldiers are too strong and their officers too weak, the result is insubordination. When the officers are too strong and the common soldiers too weak, the result is collapse." - Sun Tzu, The Art of War

We discuss yesterdays rally in the DOW Jones ...

Chairman Ben Bernake's comments on Tuesday ...

And that oh so beautiful Gold short ...

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



Click here to download this podcast.

* * *

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.

Gold ...

I hope everyone caught that Twitter update.

For any short term short trade in Gold, a little bit ago was the time to take profits. For the short term.

For a position short trade? I still haven't initiated any sort of position trade to short Gold.

Yet.

Tuesday, February 24, 2009

Trade Management: Let's See if the Optimism Holds

Gold sank $31.00 on the April contract. The DOW Jones Industrial average rose about 236 points.

Much of the business of 'investing and trading' is about human psychology.

It's about avoiding getting sucked into the 'mob mentality' that pervades much of the market. Observing and noticing various 'phases' of that 'psychology of the mob', and what phases that the said 'herd' is going through, and will go through; and then taking advantage of those observations.

Do you remember the emotions in 'the mob' only a few days ago? I wouldn't even call it fear. Fear has an immediacy to it. It has a tangible panic at it's core that drives its victim to immediate action. A few days ago? The mob mentality of the market was sheer dejection. Hopelessness. Those are the signs that fear was exhausting itself. Learn to observe financial anchors on the television. Not for any insight. But because most of them are wrong. Watch their emotions. Watch the market. Watch what happens in the market shortly thereafter.

In addition, I think today's market movements, if nothing else, underscores the importance of transparency. I watched some of Mr. Bernake's comments to members of Congress. It was interesting in that he specifically mentioned ideas he had for avoiding complete dilution on further financial stocks, while at the same time, returning the banks to private ownership and control. What the exact plan of attack was. His ideas for reducing the Feds balance sheet.

That transparency and communication of action was what the market was waiting for.

But it's not over. There will be a tomorrow. For today? Let's see if the immediate optimism holds.

Monday, February 23, 2009

I Am a Derivatives Trader (VIDEO)

"And it came to pass, that when he was returned, having received the kingdom, then he commanded these servants to be called unto him, to whom he had given the money, that he might know how much every man had gained by trading." - Luke 19:15, KJV, The Bible

The term "Derivatives Trader" paints such a wide brush. You know. I find that my profession, my employment? Is being 'blamed for the ills of the economy'.

That's a little more than infuriating.

What do I do?

What do I provide the economy?

How can I hype this job, but remain honest and moral?

I talk about that, in the following vlog entry ...

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

E


Here is the link to the blip.tv version of this video.

What do they want? To destroy marketplace liquidity and to increase unemployment all in one shot?

* * *

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.

Sunday, February 22, 2009

Week in Review Podcast: Will the Real Derivative Traders Please Stand Up?

"Not only have individual financial institutions become less vulnerable to shocks from underlying risk factors, but also the financial system as a whole has become more resilient." - Alan Greenspan

This is the "Week in Review" on February the 22nd, for February 21st, 2009 (Wow, does that make any sense? I'll explain, trust me)

There is a lot to talk about this rather late edition of the "Week in Review". Derivatives and taxes. Wow, is it possible to find two more possibly boring subjects?

But really? What is a derivative? What makes a derivative trader? The fact is, that the term "derivatives trader" is to talk about a very, very wide group of people.

A man provides liquidity to the marketplace, liquidity between producers and commercial purchasers of Sugar #11, and this man trades the Sugar #11 contract successfully. Is he a derivatives trader? Absolutely. Did these sorts of derivative traders have anything to do with the global meltdown.

Absolutely not.

A collateralized debt obligations (CDO) is created and then sold around the world, but this sale does not take place on any exchange that can be viewed by the public. Is the person who sold this CDO and insured this CDO a derivatives trader? Absolutely. Did these sorts of derivative traders have anything to do with the global economic meltdown?

Absolutely.

But more of that, in the actual podcast ...

(Podcast Included. If you're seeing this entry elsewhere and cannot play the podcast? Click This Link ...)



Click here to download this podcast.

We'll see everyone on Monday.

* * *

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.

Jigsaw Puzzles

Have you ever worked on a jig-saw puzzle? Have you ever been sucked into the vortex of trying to solve that puzzle? You may even push back from table, as you're putting together this puzzle and exclaim, "This puzzle is absolute torture!". And yet, for some reason, you're drawn back into solving. To figuring out which piece fits into what other piece.

That was the situation I found myself in yesterday. It wasn't a jig-saw puzzle, solving for some horrendously torturous picture like 1001 gum-balls.

It was my 2008 Federal and State Income Taxes ...

Dividends ... Cost Basis ... Reinvested dividends ... Readjusted cost basis ... Interest income ... Sale of trades (well, the government calls them investments) ... Purchase of trades ... commissions on sales ... 1256 contracts for futures options ...

And I am proud to say, after reviewing it several times? After a solid week of work? I think I am finally finished.

So that being said, I want to apologize to ones, as I had wanted to get the 'Week in Review' Podcast out yesterday. However, I started working on the jig-saw puzzle that is my taxes, and was lost in that vortex of time until 1:30 am. I'll try to get a Week in Review podcast out by this afternoon.

Saturday, February 21, 2009

Did You Miss the Blog TV Show?

"A recession? That's when your neighbor is out of a job. A Depression? That's when you're out of a job"

Had a lot of fun during my return to BlogTV this Friday.

First, we talked about the difficulty in finding a trade last week in the stock market ...

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



And then the topic of China came up. I discussed the 'myth' that China is going to stop buying Treasuries ...



And then the discussion kept returning to that of $1,000 Gold. So I started talking about, not only shorting Gold, but how careful you need to be if considering such a move ...



We'll see everyone later today with the the "Week in Review" podcast

* * *

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.

Friday, February 20, 2009

Rick Santelli's "Revolution" and the Illusion of "Fixing" Problems

"It's not that I'm so smart, it's just that I stay with problems longer." - Albert Einstein

This is a "Traders" thoughts entry.

I caught "Ricks' Revolution" live yesterday on CNBC. God love him, the guy makes a ton of sense.

So how ... how do we 'fix' this problem?

I believe that question, belies the entire illusion of the true nature of the problem itself. We are here because someone tried to 'fix' a problem ...

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



Here is the link to the blip.tv version of that video.

* * *

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.

Thursday, February 19, 2009

Money Management: Strategies and Account Size

"People who don't take risks generally make about two big mistakes a year. People who do take risks generally make about two big mistakes a year" - Peter Drucker

To date in the money management series, we have explored the founding principles of money management. Risk Analysis, Reward Analysis, Trade Management, Drawdown, Accuracy Rates and Performance Analysis. We talked about Strategies and the need to find an edge to the market, or a bias, and to massage that bias. Those principles are the foundation.

Now let's switch gears a bit, and build on the foundation of money management when it comes to trading. We'll do that by focusing on your account size.

We discuss that in this vlog entry ...

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



Here is the link to the blip.tv version of this video.

* * *

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.

Wednesday, February 18, 2009

Wednesday Recap Podcast: The Sum of All Fears

"The art of war teaches us to rely not on the likelihood of the enemy's not coming, but on our own readiness to receive him; not on the chance of his not attacking, but rather on the fact that we have made our position unassailable." - Sun Tzu, The Art of War

"If you are right for long enough, they start paying attention" - Amory Lovins

Why is Gold moving up with the Dollar?

What about the stimulus package?

I talk about that and more, in this Wednesday Recap Podcast … ...

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



Click here to download this podcast.

As to the thoughts regarding shorting gold? I'm waiting for the 'fear' to begin to exhaust itself. But please keep in mind that the gold bugs will give up their positions very, very, very reluctantly.

* * *

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.

Tuesday, February 17, 2009

What Do I Do Today?

"He who is prudent and lies in wait for an enemy who is not, will be victorious." - Sun Tzu, The Art of War

This Blog entry will seem familiar to a few people. The reason for that, is that I've received a number of emails asking that very question. Now what? What do I do? What do I buy? So I figured it was time to answer that question in a blog entry, rather than in numerous private emails.

The answer is, I'm not sure. At the current moment? For myself, my own trading, and my own investing and trading? I'm waiting, and I'm watching. And yes, Dan has a plan.

So what am I watching? What is the plan?

I'm watching two markets that I believe are the 'end result' and the sum of all the fear, uncertainty, doubt and ill-liquidity that is the current economic disaster. I'm watching the U.S. Dollar. And I'm watching the stock market as represented by the DOW Jones.

1) If the US Dollar weakens (Say, 84.50 and below on DXM9) and the stock market starts to rally? I'm going to take another nibble into the stock market. 3% of available cash, towards a dividend, long term stock. Add to my PG or PEP positions. That's capital starting to move back towards the market. This eventuality would be a great thing for the economy over all.

2) If the US Dollar strengthens? Say, past 89 to 90 on DXM9? Then deflation is continuing (and worsening), and saving your cash is the best bet. In that scenario (if it came to pass) - you may even want to hold off on purchasing any metals. The main worry then is to make sure the balance sheet of the institution where you have the money? Is healthy and strong.

3) If the US Dollar weakens (say below 84), and the stock market goes below the Lowest Lows of November? Buy metals. Physical, real, metals, which would probably be rising in that situation.

The U.S. Dollar is really going into a very tight triangle. Myself? I watch? When I see it break one way or another? I'll probably make my decision at that time. That's the plan moving forward.

Which of those three eventualities am I currently seeing form and take shape? Well, as I sit and write this entry? I'm watching the Dollar move to new highs, and the stock market sink.

(Click to Enlarge)

Cash. Cash, as in the U.S. Dollar. I've said it for a while now, and for the time being it's still my song.

* * *

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, February 16, 2009

It's 11:52 pm. Do You Know Where Your Trader Is?

Yeah. Here I sit. It's right before midnight on Monday night.

I just enjoyed a nice evening watching the last episode of Battlestar Galactica with some friends of mine. We had some hors d'oeuvres and a very nice decanted wine.

Came home.

Looked at what the markets were doing overnight.

Yeup.

It's going to be a long night.

Monday Email Question Podcast for February 16, 2009: Mistakes in Trading and Capital Markets

"There are two types of markets. Capital markets and corrupt markets"

I’ve taken to the habit of answering a few questions from my email inbox that I’ve received during the week on Monday’s; via a podcast.

Well, this week I’m going to focus on two questions. The first has to do with initial losses as a trader, and the second question has to do with wealthy people trying to ‘push around’ a stocks price.

And please remember, I do not consider myself a 'capitalist' ...

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



Click here to download this podcast.

Warren Buffett bought millions worth of Bank of America (BAC). A billionare of extreme note in the worldwide economy.

And it couldn't stop free market forces.

* * *

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.

Friday, February 13, 2009

Predictions Fail ... yet again ...

I sit here at 3:55 pm.

The seconds are ticking away.

Several days ago, a poster named Reinhart claimed the U.S. Dollar would 'collapse' and the stock market would 'collapse' this week. Or some such nonsense. Quite frankly? I was too busy working to pay it 'too' much mind.

And here we sit. The U.S. Dollar is still higher than it's been in years. The DOW Jones Industrial average is only about 66 points for the day.

But didn't he get three calls right in a row earlier in the year? To the exact day? I understand that some folks are new to the markets. When someone is correct for a period of time, it may lead one to believe that 'someone' has 'discovered something'.

I've had 4 trades in a row, correct. To the exact day. It doesn't make me a prophet. It means I found a bias in the market, massaged it, and took some prophets. Er ... excuse me. I mean profits.

Well, he's gained some notoriety if nothing else.

Leave the predicting to God.

Blog TV Show ... Is Coming

I won't be having a Blog TV show today. I'm leaving the cats, the house-guests behind. I'll be out of town for today, and much of tomorrow.

However, at the present time, I do plan on having a show on Friday, February 20th, at 5:00 pm eastern standard time (Detroit / New York)

Hope to see you there!!

Thursday, February 12, 2009

Cynics (VIDEO)

"There is nothing so pitiful as a young cynic because he has gone from knowing nothing to believing nothing." - Maya Angelou

It seems every time I try to help out other traders? A cynic wants to pop in and try to disuade anyone from becoming involved in a career in trading.

I discuss that in the following vlog entry ...

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



Here is the link to the blip.tv version of that video

I've shown pictures of completed trades from my broker platform like this one

(Click to Enlarge)

As well as the Broker snapshots from the $500 Low Funded Challenge Project such as these that I showed in a vlog not too long ago:

(Click to Enlarge)

(Click to Englarge)
I've simply come to the conclusion that some people cannot be convinced. For them to admit that some people trade successfully? Is to admit that it's something they can't do. Some people are humble enough to admit what they cannot do. Others cannot do so.

* * *

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.

Wednesday, February 11, 2009

Free Markets or Manipulation? (VIDEO)

Please note that today, February 11, 2009 has two blog entries.

* * *

"Just living is not enough... One must have sunshine, freedom, and a little flower." - Hans Christian Anderson

Oh no! The banks and institutions have a majority position in the markets! They're opposite my position!

But you want a free market? Would it be ok if the banks and institutions had a majority position that agreed with yours?

Do you really want a free market? Or don't you?

I discuss that in the following vlog entry ...

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



Here is the link to the blip.tv version of this video.

Here is the link in which bank analysts were telling the public - not to follow the U.S. Dollar surge on August 13th, 2008.

* * *

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.

Wednesday Recap for February 11, 2009: Trading for a Living (PODCAST)

"... I've broken it down into kind of an overall view. Because I don't think it's just enough to give people a bunch of numbers, and things, and here's a system. Because my sense is you get a system, or some parameters to trade with ... and you think you're a great trader. And you're not. And I'm not. Because really being a great trader takes more than just having something mechanical to follow. Being a great trader, means that you have to understand what's going on. Because whatever is going on now, will be different than anything the past. And anything in the future, will not be exactly like now." - Larry Williams

This is my Wednesday Recap Podcast for February 11, 2009.

I discuss the market action, and the flexibility needed - when it comes to trading for a living …

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



Click here to download this podcast.

Here is the link to Larry TV. This morning? I was watching the Tab that reads: "Live Presentations: Futures Presentation". Priceless stuff. I've been trading 13 years? And this is still just priceless stuff.

I have a few pre-recorded vlogs on the way ...

* * *

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.

Tuesday, February 10, 2009

Regulation (VIDEO)

Please note that today, February 10, 2009 has two blog entries.

* * *

"A great wave of oppressive tyranny isn't going to strike, but rather a slow seepage of oppressive laws and regulations from within will sink the American dream of liberty" - George Baumler

A few folks have asked me about my thoughts, regarding regulation and the markets.

I discuss that in the following vlog entry ...

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



Here is the link to the blip.tv version of this video.

I want to be protected from corrupt, or incompetent people who do not understand the importance of transparency and honestly. I want to be protected from fools who do not understand the damage that over-leverage can cause. I want to be protected from people who do not perform due diligence and commit outright fraud, such as Bernard Madoff.

Is that so much to ask?

* * *

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 DOW Drops ... Like a Lead Balloon

It started with the opening bell. Actually, it started overnight in the DOW Futures markets. And the DOW Jones Industrial average continued to fall all day long. At the time of this writing? The DOW Jones Industrial Average is down 400 points.

Equities are deflating. Home prices are deflating. Food prices are deflating. Oil prices are deflating. The Dollar is rising. Unemployment is rising.

We are already within a liquidity trap. Liquidity has been provided to the system, and that liquidity was used to de-leverage and accumulate troubled assets (therefore, the money is gone) and people have begun to save any cash they have for themselves, to prepare for what they feel is going to be a worsening recession, or possible Depression.

It's Lucas' works all over again. Robert Lucas provided the basis for an explanation of what is occurring about 35 years ago. I simply feel that Lucas did not go far enough. You cannot direct an economy from the top down. It will not work. An economy works from the bottom up. This is not new information.

But you have lawyers, pretending to be economists; who feel they can fix the problem, as if they were economists. You have these lawyers and politicians listening to one camp of economists (Keynes and his massive infrastructure spending theory) and if anyone argues against this idea? Then the lawyers simply claim that such people have 'ideological blockage'. Never mind the fact that they are absolutely stuck within a neo-Mercantlist, Keynesian mindset. And plenty of other solutions have been offered. Karl "the Ticker Guy" Denninger all but begged for over the counter derivatives to be put on an exchange.

What's worse? Is I heard a reporter ask the lawyers who are drafting a stimulus plan ask: "Should it be part of the bill (and therefore law) that the banks have to lend credit?"

So ... in other words, should the government tell private corporations how to profitably run their business? Does the government know more about profitability, than the companies themselves?

When are people going to understand that this eventuality cannot be stopped? I've said it for a long, long time. Free market forces are too powerful. This cannot be stopped. It is deflation and a liquidity trap. Risk must be priced into the system. It must. People will price risk, one way or the other. You could turn the entire economy into a communism tomorrow and you know what will arise on Thursday? A black market.

Free market forces are too powerful. Personal preferences on the micro-economic level will price that risk one way or another.

And since for years we have been told that over-the-counter derivatives do not need an exchange? That the rest of us suckers do not need the ability to properly value those derivatives? We were left to guess as to what that risk should be. The trigger was pulled. We are dealing with the effects.

Let me tell you right now. Until everything that a corporation holds is transparent? The market will price that risk as severely as possible. It has no choice. And until that happens? Consumers will continue to hoard cash. Consumers have always held all of the power. They will continue to spend less. Which means earnings will continue to drop.

A deflationary trap.

Hoard cash. That's what the market is doing. As I pointed out in August in September, it's where the market would run.

Myself? I'm just waiting for the scapegoating to begin.

Monday, February 9, 2009

Invest and Save: The Detroit Scenario

"The function of socialism is to raise suffering to a higher level." - Norman Mailer

Here's a little riddle ... Where do you live if you have to pay:

Taxes simply because you work (but not live) inside the city?

Taxes on living in the city?

Higher sales taxes because of your state?

Your standard of living is in the toilet?

Crime is through the roof?

Your mayor is a slick talking, eloquent criminal who contantly refuses to admit his extreme guilt for his numerous crimes; but somehow manages to get re-elected by a populace that wants their ears tickled, rather than substance?

Businesses want nothing to do with you?

So where do you live? Detroit!

So what does this mean for those in the low funded position? For those who are attempting to invest their money and they dont have $100,000.00?

I discuss that in the following vlog entry ...

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



My thesis moving forward is that the United States is going to move into what Dan is calling: The Detroit Scenario!


Therefore, save and invest accordingly. Welcome to your brand new toilet economy.

When it comes to that investing account? You could build the cash position in the investing account, so that you're more than 2/3's cash.

In my own opinion? With investing, you want to be a bit more cash heavy ... ... at the moment. That could change. But at the moment, if I was low funded? If my positions were, say: $200 big? I'd want $425.00 saved in the account, before you look to buy $200.00 worth of stock. Then save another $425.00 - before the next $200 purchase. This guarantees your cash position is growing, even if it's by a little bit. And if there isn't a good dividend stock to buy? Then don't buy one. Keep that cash position that is outpacing the S&P right now by 40%, and save another $425, before looking again for only a $200.00 purchase.

Of course that could change. All depends on market conditions.

Remember, cash is a position, and with Sharebuilder, is giving you about 40% more on your cash than what the stock market has given you over the last year.

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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.

Email Question Podcast for February 9, 2009: Emotional Trading Discipline

"The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading." - Victor Sperandeo

I’ve taken to the habit of cleaning out my email inbox of questions that I’ve received during the week on Monday’s; via a podcast.

Well, this week I’m going to focus on one email that I received, that dealt with some of the emotional discipline of trading. Of the challenges of being both an investor, and a trader. And how money management principles can assist you in those challenges …

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



Click here to download this podcast.

I have a few pre-recorded vlogs on the way ...

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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.

Sunday, February 8, 2009

Deleveraging is Asset Control, not Supply Inflation (Illustrated)

"As a small businessperson, you have no greater leverage than the truth." - Paul Keating

I understand that leveraging and de-leveraging can be a bit difficult to understand. Seriously. So I figured that it might help if I illustrate what exactly is occurring during the de-leveraging process; and why this entire mess is about over-leveraged items.

I discuss that in the following vlog entry ...

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



Here is the link to the blip.tv version of this video.

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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.

Saturday, February 7, 2009

Week in Review for February 7th, 2009

"Did you ever think that making a speech on economics is a lot like pissing down your leg? It seems hot to you, but it never does to anyone else." - Lyndon B. Johnson, President of the United States

This is the week in Review for February 7th, 2009.

I discuss both market action, as well as the vlog that I released earlier today entitled: "Monetarism is Still Dead". I discuss a little further what occurs when you apply capital to an over-leveraged derivative.

(Podcast Included. If you're seeing this entry elsewhere and cannot play the podcast? Click This Link ...)



Click here to download this podcast.

We'll see everyone on Monday. I have a lot more vlog entries on the way ...

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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.

Monetarism is Still Dead

"Peter Schiff Was Wrong" - Mish

That's right, I'm still with Mish on this one, and Peter Schiff, even after his 'defensive video' and explanation? He's still wrong. Because Monetarism is dead. And it has been, for a long time.

Usually, I try to steer clear of the math surrounding economic theory. Because I'm trying to make economics simple to understand. And if it's one thing that I know? That as soon as pull out the following equation ...

... everyone's eyes start glazing over.

But stick with me for a moment. I really will try to break this down, and make it simple to understand.

For those not familiar with it, this is an equation dealing with the ol' Quantity Theory of Money. As it relates to the current discussion, look at the second set in this equation: V and T. This describes the velocity of money. In other words, how fast is money circulating in a given time frame? And this changes. This is an accepted truth. But there is more to our economy, than the speed of money, whether it's "hot" or "cold". Not only does it change, but in the last thirty years, complex leveraged instruments have come into existence that money leaks towards. That's what you have to keep in mind. And those leveraged instruments are trumping any Monetarist view regarding the velocity of money. Monetarists believe that somehow, all of this bailout money will leak out into the economy, and cause hyperinflation. That's what this is all about, and let me explain why.

Well, at this point, one usually hears:

"But look at the money supply!", many neo-Monetarists will cry! (You like that one? Neo-Monetarists?)

Let's do that.

First of all, I hope everyone understands just how difficult it is to track the real money supply. Some of those difficulties I will discuss later on in the vlog entry that accompanies this blog entry. But I will admit, yes ... the money supply has increased. But what has happened to the velocity of money? It's slowed to a crawl.

I know right now, that many of these new Monetarists will simple say: "Ah yes, but wait until that velocity once again changes! All that money will flood the system" (Sorry, I'm just sort of smiling at that thought), "and wham! Hyper-inflation!"

Really? Seriously?

And no doubt, at this point, the Monetarists will cry:

"We look at 'Velocity of Money' more than any other factor! It's the basis of Monetarism!" True. But ironically? Monetarists ignore all of the factors that affect the velocity of money such as a government that is ready to put the largest Keynesian infrastructure expense into play. They ignore factors having to do with taxation.

Good grief, those two factors alone are the two biggest issues facing the economy at the current time!

So while we are looking at the money supply? I would ask you to apply Lucas' contributions, (ironically) and I would ask you this simple question:

"What happens to created money when it is applied to over-leveraged derivative losses?"

I discuss that in the following vlog entry ...

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



Here is the link to the blip.tv version to this video.

And yes, I have read and watched "Peter Schiff's" defensive video, as well as the article. And I couldn't help but think one thing: Every position trade has to have two connected things (though I'm no position trader). An end. An end of the position; and thus an exit strategy to control and manage risk if you're wrong. Peter has no risk control mechanisms! That's violating the very first rule of money management principles.

So what's Peter's defense to this charge? If you can believe it?

"There's no chance I'm wrong". That's the battle cry of the loser trader. Seriously, listening to him sounds like listening to a losing trader, who doesn't want to admit he's wrong and take the loss on the trade, so he sticks with it, and losses everything. I know. I used to be that guy.

I'll have the "Week in Review" podcast up here in a little bit ...

Edit: I've been getting a few questions on this one, so let me emphasize that if a position is leveraged? It's speculation for money that doesn't exist, using a small portion of money as good faith deposit.

So let's say you put down $2.00 for leverage on something that costs $30.00. If it goes up in value to $40.00? Awesome. You put down $2.00, and you gained $10.00 in value, and the entity is worth $40.00.

But what happens if it goes down $10.00? You put down $2.00. In essence? You're in the hole. There's no money on the table, and you owe. That's basically what happened. So in essence, it's like when I was sending money to my account? But I wasn't exiting the trade.

In essence? The money was neither created, nor destroyed. To maintain the positions, the books need balanced. But the leverage has gone nowhere, since it's a derivative, and is based on the underlying. It's as if a rich uncle is trying to cover his nephew's gambling losses. The money is leaving the rich uncle (the government), but the losses are still overleveraged losses.

It's an attempt to simply 'maintain' what once was, or the illusion of what once was.

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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.

Friday, February 6, 2009

The Invisible Hand (VIDEO)

"The uniform, constant and uninterrupted effort of every man to better his condition, the principle from which public and national, as well as private opulence is originally derived, is frequently powerful enough to maintain the natural progress of things toward improvement, in spite both of the extravagance of government, and of the greatest errors of administration. Like the unknown principle of animal life, it frequently restores health and vigour to the constitution, in spite, not only of the disease, but of the absurd prescriptions of the doctor." - Adam Smith, an Inquiry into the Nature and Causes of the Wealth of Nations, Book 2, Chapter 2.

This vlog entry is a bit of a follow up, to yesterdays "outlook video" that I had for February 2009, in which I discussed deflation and depressions ...

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



Here is the link to the blip.tv version of this video.

* * *

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.

Look Mr. Frodo! It's Mr. Bilbo's Trolls!

"The irrational in the human has something about it altogether repulsive and terrible, as we see in the maniac, the miser, the drunkard or the ape." - George Santayana

It seems, I've picked up a troll I forgot all about from some forums I frequented last year. Be aware ... ...

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



Here is the link to the blip.tv version of this video.

I'm going to be uploading another video here in a bit, that's a follow up to the video that I had yesterday regarding deflation and depression ...

* * *

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.

Thursday, February 5, 2009

Airelon's Investing and Trading Thoughts: February 2009 (Deflation and Depression)

Challenge Project Accounts:

Investing Account Balance: $405.72
Stock / Futures Trading Balance: $1,074.62
Online Savings Balance: $153.51


It's a few days late, but here it is. My "outlook" vlog entry for the month.

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. So here are my thoughts, as they stand today ...


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




Here is the link to the blip.tv version of this video

* * *

Challenge Project Accounts:

Investing Account Balance: $405.72
Stock / Futures Trading Balance: $1,074.62
Online Savings Balance: $153.51

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.

Wednesday, February 4, 2009

Trading Thoughts: Silver, Currencies and Liquidity

"Those things that hurt, instruct." - Benjamin Franklin

I'm coming back. Really. I am.

A few of the investing and trading thoughts that have been going through my mind, a little before, and during my hiatus. And I do have some thoughts for entries that are upcoming. I discuss all of this in following vlog entry ...

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



The next vlog entry will be my "February Thoughts" vlog entry ...

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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.

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