Joined Jan 1, 1970
509 Blog Posts

I Have a Clean Shiny Car

The market is gay. But, what else is new?

Today, I basically watched movies and washed my car. I was also up 1.37% on the day. Not bad for not trying.

Tomorrow, I think I’ll go hunting for elk and then come back in the afternoon and take a nap.

This is a good time to be hedged and doing some observation and research, instead of worrying about putting on your next trade. Being careful not to overtrade is crucial here. There is such a thing as trying too hard to figure this all out.

Relax. Have a glass of wine. Enjoy life.

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What’s It Going to Take?

What will it take for me to emerge from my cave, ready to make double-barreled buys back into the long side of this market?

For one, I’d need to see some stabilization and relief of the financial stress in the markets, in a sustained way. All the news about government guarantees, backstops and capital injections dont’ mean squat if these actions don’t take hold. Show me. I’m from Missouri (not really, just figuratively speaking).

Another milestone that must happen would be for the fundamental underpinnings in the economy to stabilize. And probably not just the U.S., but other developed nations, like Japan, Germany, France and the UK. Also leading economic indicators (LEIs) to begin to turn up.

These all have been absent in the last two rallies of early April and mid-July.

I simply would watch:

1. The ISM mfg index

2. The Conference Boards Leading Index rate of change, y-o-y, and

3. The NFIB Small Business Optimism index

When I see these improving, that is one sign. There are others like the NYSE Bullish Percent index and even more simple ones like the 50- and 200 – DMAs.

Look at a number of signs, don’t just focus on one or two. The more, the merrier.

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Market Gay, Stay Away

Don’t fight the Fed.”

“The trend is your friend.”

“Bulls and bears make money. Pigs get slaughtered.”

I’m sure you can think of many other of these market aphorisms. I’ve got another:

“Market gay, stay away.”

This market is not your typical bear market. It’s worse. I made the recent mistake of trying to bottom fish last week with part of my equity allocation, and got spanked for it. Fortunately, it was with a fraction of my money.

It seems that dip buyers are now chomping at the bit to buy stocks that are at “bargain prices”, due to some scheduled “massive rally” that is apparently going to happen any minute now. This is a mistake in thinking.

Hope is not a strategy.

Warren Buffett isn’t always right, either. Neither is T Boone Pickens, Bill Miller, Jim Rogers, Aubrey McClendon (an insider), and a host of other investors. Witness the recent buys by investors stepping in to scoop up shares on the cheap only to see value evaporation.

The typical asshat dip buyer compares the current price to recent prices and if the stock price is now much lower, he/she concludes that the stock is more attractive today than it was recently when it fetched a higher price. This simple evaluation is a nice way to buy stocks with developing problems, not necessarily a way to bank coin.

As Clay Allen pointed out in a recent Market Dynamics newsletter, “A stock is not a consumer good that has an intrinsic value based on its ability to satisfy a need or serve a useful purpose. Consumers often shop for bargain prices among consumer goods and this behavior is often exploited by merchants through the use of loss leader merchandise and the promotion of sales. A stock is an intangible asset that primarily produces value for the buyer when it rises in price. It is the increase in price that the investor desires. It seems that there is confusion between the behaviors of a consumer looking for bargains and the behavior of an investor seeking a bargain price for a stock.”

In other words, the mindset that leads to being a good consumer does not necessarily lead to being a good investor or trader.

There is no need to be buying stocks here. I’d rather hide in my cave for now.

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Earthquake Friday

Welcome to “the Big One”.

The carry trade is unwinding, governments are panicking and the bond market is on fire.

We may be down 1,000 points or more on the Dow. Let’s review the rules on trading curbs or “circuit breakers”.

At the start of each quarter, the NYSE sets three circuit breaker levels at levels of 10%, 20%, and 30% of the average closing price of the DJIA for the month preceding the start of the quarter, rounded to the nearest 50-point interval. As of the fourth quarter of 2008, these levels are 1,100 points, 2,200 points, and 3,350 points respectively. Depending on the point drop that happens and the time of day when it happens, different actions occur automatically:

10% drop —- 1 hr halt 930am – 200 pm; 1/2 hr halt 200 pm to 230 pm; after 230 pm NO HALT.

20% drop —- 2 hr halt 930 am to 100 pm; 1 hr halt 100 pm to 200 pm; after 200 pm MARKET CLOSE

30% drop —- MARKET CLOSES

Trading curbs on Dow futures contracts traded on the CBOE are based on NYSE levels, with the exception that only the 10% threshold is in effect outside of regular NYSE trading hours, and is relative to the previous daily settlement price.

“A prudent man sees danger and takes refuge, but the simple keep going and suffer for it.” –Jewish Proverb

Forget about calling today the bottom, or loading up for a “massive rally” on Monday. Go hide in a cave and don’t come out until it’s safe. Remember, earthquakes have aftershocks.

Be well.                 


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Life’s Truths

Hey, the Dow and the Nikkei are approaching parity. Now they’re easy to track together. Cool. Let’s see which one ends up higher at the end of the year.

There are certain things in life that are true…..

–All that is needed for evil to persist, is for good men to do nothing.

–Growth in the monetary base is inflationary.

–The Japanese stock market always goes down. 

–Hank Paulson is actually Lex Luther in disguise.

–Blondes have more fun (especially if they’re stacked)

–War is hell

–Stocks are for asshats in 2008

Feel free to speak the truth….

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Fuck You Bear Market

With what’s at stake, and given the current state of affairs, I just had to get that off my chest.

America and American business is being sold short. So are retirement accounts, 401ks, pensions, and Joe the Plumber’s IRA.

I hope you asshole bearshitters are happy with your returns. Be careful not to choke on your ribeyes.

There, I feel better now.

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