When MF Global declared bankruptcy it was discovered that 1.2 billion in customers money was missing. No one who was with MF Global knows what happened to the money at least thats what they say. No one seems to know the truth, but waterboarding has not been tried. Since waterboarding is not torture maybe waterbording should be used on MF Global executives. 1.2 billion is a lot of money to steal.
It is popular to criticize the “Military Industrial Complex.” The true villain is the Government-Media Complex. Both are terrified that your opinions and behaviors will not be properly managed. Have you ever wondered why the chaos in Iraq is never mentioned on the news or Ron Paul is left out of so many media political discussions?
The Republican Party is terrified that Ron Paul will defect and run as a third party candidate. The Republican Party establishment is actively trying to sabotage his participation as an honest candidate in the primaries. Why would Ron Paul not run as an independent when his own party is trying to cause him to lose in the primaries?
If you are confused as to why GOP would do this it’s because you don’t know Republicans. Republicans love a scoundrel. They have found a true scoundrel in Mitt Romney. Don’t be surprised that they want to crown him king.
Mitt Romney is a lifetime recipient of corporate welfare, or a corporate welfare bum as he is called by the American Spectator. http://spectator.org/blog/2012/01/13/romney-corporate-welfare-bum
So Republicans, here he is, Mitt Romney a scoundrel, and he is all yours.
The market is in very strong hands right now. Unlike the rest of us, the black boxes are never governed by the law of large numbers. Their funding is unlimited. You, mutual funds and everyone else can sell and the market will still go up until some exogenous event rocks the market for a while or until the capital markets are finally destroyed. With black boxes in control, the principles of technical analysis work almost in reverse. A rally like we are currently experiencing, with very poor internals, won’t end as so many expect. As long as volume remains moderate to light it will be squeeze, squeeze, and squeeze indefinitely. Sentiment can be bearish or bullish and it won’t matter. As far as market direction is concerned traders don’t matter, nor do most hedge funds. Supply will never exceed demand until the entire system breaks down. Why? The black boxes have unlimited funds. The more traders there are short, the fewer funds the black boxes have to use anyway.
The black boxes have an additional advantage in knowing that you the technician will place stops and follow established theory. That is all part of the algorithms the black boxes use to exploit the market.
The world is not coming to an end. It is only changing. Markets always clear but government interference makes the process difficult.
Currently there is a huge supply of houses hanging over the real estate market. Without government interference the housing market would clear in a month or two. Even on local levels every effort is made to make sure foreclosures trickle onto the market. Information relevant to buyers is horded. Every asset will sell at the right price. Houses are no exception. An economic recovery will end only when markets are cleared of excesses. Real estate prices still have a long way to fall.
Over the past several decades the financial sector gained enormous political power. As a result, government policy has promoted the growth of large banks, hedge funds, brokerage houses and anything else related to assets and money. The financial sector became so powerful that government became a tool to be used to enhancing the value of financial assets beyond any levels that would occur in a free market setting.
Like any sector that has had government assistance, the blotted financial sector has become is an inefficient use of resources. In a free market setting such a situation would never occur. Wall Street is so blotted that it is self destructive. The financial sector must be cleared of excesses before an economic recovery can begin.
Economic recessions occur naturally as resources are shifted out of poor performing areas into more productive uses. Economic depressions occur because government intervenes and tries to prolong the status quo. Every effort is made to keep markets from clearing. Nothing good happens until the old is allowed to disappear and the new takes over.
In a free market, the good outweighs the bad but only the bad is easily visible. Hence there is a natural tendency to see failing industries without seeing emerging growth opportunities. In the 70s and 80s, it was easy enough to see the declines in the rust belt and labor intensive industries. The emerging opportunities in the computer industry were not all that visible. There is a natural tendency to try to save what is failing but the efforts always prolong economic hard ships.
To experience an economic turnaround markets must clear. Government is prolonging the process.
Here are the basics of my short selling. This very simple system has served me well since I started rolling out of longs and into shorts back in late 2010.
For this to work, it is necessary to shake off some natural biases.
1.) Stocks are not like projectiles that get shot out of a cannon. They don’t necessarily reach a maximum altitude and then drop.
2.) There is no floor a stock in a downtrend will ever hit and cause it to bounce or reverse its trend.
Newton’s laws don’t apply to the stock market.
Stocks like AAPL are always a bad bet to short. If there is as expected huge bear market in the offing, AAPL might very well drop 50% but chances are that it will be among the last stocks to get hit. If the downturn doesn’t come, you are cooked shorting strong stocks. No stock has gone as high as it can possibly go.
Stocks like MDIC look like they have gone down as far as it is possible to go, but the opposite is actually true. Stocks in these kinds of downtrends frequently don’t recover at all. When a severe downtrend starts, the rate of decline in the “super weak stock” category is likely to increase. If the bear market doesn’t materialize as expected the dogs are likely to keep going down anyway.
How many stocks should be shorted? Always more than one and hopefully no less than five. Any time a stock breaks its long term downtrend line, cover it and rotate the money into something weaker. I look at diversification differently than most others. I diversify to make certain I participate in a move rather than to limit risk.
In the current stock market setting, very few investors trade in individual stocks. Exchange traded funds and derivatives have replaced stocks as the trading vehicle of choice. The investor who does trade stocks is at a distinct because he outside of the majority and can game what others are doing. When all of the world’s financial markets have cleared, I will reverse and start going long. Right now there are no asset classes that are not totally vulnurable to collapse, including gold. I well selected portfolio of short positions makes sense. This is the opposite of owning assets.
I have made a point of making it known that I use traditional technical analysis only or the purpose of identifying stocks in established downtrends. I am currently short 56 stocks which are listed below. This list changes over time because I regularly replace the strongest of these stocks with issues that show greater weakness. Timing does not play a role in this system. The world is in such a sorry predicament that there is no class of assets that has much of a chance of increasing in value of even holding value over the next ten years. The solution is to practice what amounts to the opposite of ownership. That is selling everything one owns and then selling what one doesn’t own.
In today’s market, traditional technical analysis is useless. Back in the early days of trading, very few traders studied charts. Those who did were studying the behavior of the majority who were using traditional methods such as fundamental analysis. Long term investors were a large part of the market. Today, traders who relying technical analysis have no chance because they are part of group think and are simply studying themselves.
Further, technical analysis was developed to for use in democratic markets. Today’s market is corrupted by constant government intervention, organized crime and well connected proprietary trading firms, the rules of traditional technical analysis only work accidently occasionally.
The chart below is of the Standard & Poors 500 Index. According to traditional technical analysis the blue lines represent support and resistance. Logically, one would buy if the red line on top was broken and sell if the redline on the bottom was broken.
In the old days, that line of reasoning worked pretty good. Today, if you are using traditional chart analysis, you are not gaming anyone. It is more likely you are being gamed by others who have figured out your reasoning. There is probably an algorithm being used to sell when people think they are doing the smart thing by buying on a price break out. They buy when technitions get stopped out when the trade goes in the wrong direction. For chart analysis to work, you have to be part of the minority, gaming the behavior of the majority. If you are a technician you are part of the majority.
The reasoning behind managing a portfolio of already weak stock is based on a few simple realities. The most important of these is the fact that corrupt markets destroy themselves. The bottom will in fact fall out of the stock market. Stocks which are in their own private bear markets now will probably continue to decline anyway, ahead of the eventual bear market.
My current short portfolio includes the following stocks. and is ahead 38% for the year.
AIXG ANR APKT AUXL AVP BK BRCM BTU BWS CCH CETV CHKE CPLA CRK CSC DCO DGIT DRIV EXH FCS FII FRO FST HUN IDT ITRI KND LAZ LM MAN MCP MDT MS MTW NIHD NUVA OVTI PBI PGR PTNR QUAD RIMM RRD SAI SKM SKX SPLS STRA SUP TRI TWGP UPL VECO VMC X
Despite the fact that I absolutely loathe the Republican Party, I am actively supporting two Republican candidates in their primaries. When I say support, I mean that I make a financial contribution to their campaigns.
I am convinced that Chris Younts, of district 11 is honest. Also, I feel confident that Chris would have a hard time voting for a bill that the majority of his constituents opposed.
As far as I know, Ron Paul is the only true conservative who is currently serving in congress. The Republican establishment has done everything possible to dismiss Paul. Fox does everything possible to diminish him, because he actually is a conservative. Make no mistake. Fox News is a statist news organization. When the big government, group think mindset gets seriously threatened, Fox News is the first to circle the wagon.
There is great fear that Paul will eventually run as a 3rd party candidate. I think he has a good shot at the nomination but if he doesn’t get it, I hope he does run as an independent. There is nothing in the Republican Party as it is that is worth saving. Phony conservatives are far more dangerous than regular liberals.
I have become convinced that individuals who harangue against discussions about market manipulation are losers who have a narrow view of how trading should be done. There is a certain mindset that says, “Practice good technical analysis and it doesn’t matter if the market is being manipulated or not.” These people are court holders, judgers of ideas and lifetime losers in the market. The truth is that practitioners of pure technical analysis lose money close to 100% of the time. It is a good bet that the ones who object to discussions of ideas that irritate them are somewhere close to the bottom with respect to trading results.
The awareness of the presence of market manipulation is relevant to trading securities for the same reason knowing that a set of dice is loaded is meaningful when playing craps. In either game, if one can determine that some kind of affirmative action is causing a certain outcome, it makes sense to use that knowledge in the decision making process.
There are certain parties for whom the knowledge of market manipulation really doesn’t matter. Those who practice mechanical systems really don’t need to worry with it. To others with a broader perspective it makes a world of difference.
1.) People with retirement accounts that are equity based.
2.) Equity mutual fund investors
3.) Any trader who works broad market moves.
4.) Anyone who trades long term
5.) People who want to game the manipulation
6.) People who want to try and profit from the eventual damage the manipulation will cause.
One of the things I learned early in my trading career is that anything that makes a difference can’t be proven. In 2005, when I first conjectured that there was an unofficial government sanctioned asset enhancement initiative in operation I was labeled a tin horned conspiracy theorist and dismissed. Doubt at that point was understandable. More recently the chairman of the Federal Reserve makes statements clearly implying that everything possible is being done to increase asset prices. So, am I sure stock prices are being controlled? I am sure enough to be short a portfolio of stocks, waiting for the destruction of the world’s financial markets to occur.
The relevance of all of this is that controlled markets face destruction. It is often argued that if markets are being enhanced higher, it makes sense to stay long and be happy with it. The problem with that is that the system such as it is, is prone to sudden collapse. Some argue that there has always been corruption in the market and always will be, so why worry about it? Frankly I wouldn’t worry about it if all it was, was organized crime skimming off a little illegal profit. This is the first time in history when stock prices have been managed with the cooperation of government agencies. I would agrgue that corruption, like radioactivity is in fact harmless until it reaches a critical level.
Sometimes I come across as a moral crusader but nothing could be further from the truth. When something is wrong I might point it out, but my motivations here are highly mercenary. This is an opportunity to profit from a coming disaster and I plan on doing just that.
Monetary and fiscal policy work perfectly in theory. On paper, Communism is by far the best economic system. On paper, a chain letter is a flawless business model. All of these ideas are flawed because, in terms of economics, people act in their own self interest no matter what.
Currently the Federal Reserve is “solving” the world’s economic predicament. Federal Reserve Chairman, Ben Bernanke is popularly assumed to be a brilliant economist. He is not near as smart as others in the financial sector who quickly learn to game Federal Reserve policy.
Where the U.S economy is concerned the “solution” is the problem. Relying on the Federal Reserve to right the economy over the years has caused a grossly inefficient allocation of resources that will be corrected one way or another. Loose monetary policy has allowed organized crime to infiltrate the financial sector and manipulate prices in all of the financial markets. Dishonest markets always collapse. U.S financial markets will not be an exeption.
Since its inception in 1913, the Federal Reserve has caused one economic problem after another. How can an organization that is staffed with some of the world’s most credentialed economists perform so miserably? The answer is rooted in an inconvenient fact that dooms all attempts at central economic planning to failure. Governments are not capable of making economic decisions. Governments only make political decisions. Despite claims that it is otherwise, all decisions by the Federal Reserve are political decisions.
Greece Default Or Write Down?
Whether Greece defaults or writes down debt, the difference is in to whom the loss gets transferred. The established order as I understand prefers the debt write down. The real meaning of a Greek default is that it would weaken the control the established order has over the world financial arena. A change in the world’s economic order could effect financial markets more longer term. I am guessing a default would be bearish and a write down would be bullish. The battle is over transfering the loss and what group bears the burden.
Every financial crisis the world has ever known has resulted in political activity being initiated with the goal of managing and passing losses. The burden is lightened on those with political clout and transferred to parties with little or no political clout. This is what happened in 2008 in the US. This is what is happening in Europe today. The European rank and file don’t mind just as the American public didn’t mind in 2008. People are hard wired to take on the role of whipping boys to absorb punishment that their betters would otherwise be subject too. All people need is an explanation and they are happy with it. And, one explanation is really just as good as another.