iBankCoin
Read Scott here on iBankCoin and also at http://www.createcapital.com/
Joined Jan 19, 2010
717 Blog Posts

Lottery Ticket Market

So, the crap rises to the top.  It shows just how counter-intuitive the market has become. The “Royal Scam” of “saving the markets” has brought the most extreme kind of speculator to the fore–the ones who daytrade bankrupt companies because they are moving. This is a subset of almost every market boomlet.  They all say, “it doesn’t matter what they do or earn, I’m trading it”. And then it works.

This phase is great for the day trader and we have an enviroment where risk has been eliminated for the moment. So make hay because you all know how this will end. I’m not saying to stop buying lottery tickets because they are fun and exciting. I’m just saying that the lottery ends and you’ll be left holding a worthless ticket. Nobody wants that, do they?

The continued “rumors” of deals and takeovers are helping fuel the fire. Remember back in 1988-1989, after the crash of 87? (I’m at least 47). There was a massive takeover-related boom that continued for a year–until the UAL deal fell apart and the market corrected–sending us into the recession that should have happened after the crash–but was forestalled by the Greenspan Easy Money policy ver 1.0.

There continue to be a million and one reasons for this market to give back at least half of what it made in the last ten weeks. In fact, reality points to a market that should do worse. Technically, fundamentally, and valuation-wise, the market is past the point of extremes to almost any historical comparison. 10500 will be tested, maybe just for a second or two. But it will be tested soon. I wish I could tell you the day–perhaps one day next week…

Obviously the FED is basking in the glory of complete market domination and control. Don’t expect them to reliquish it quickly or easily. The egos there rival the egos of those on TV. Maybe bigger because the numbers are much, much bigger. The latest is that they will be “allowing” markups in MBS paper. That may be why banks have rallied. And since they bought $1.25 trillion in MBS, it may have been the plan all along. Let banks mark-em up and so can Uncle Sam.

In the meantime, markets did a good slug of volume to the downside today. But the volume has dissapated and buy programs are again ruling the roost. Dips are still not allowed. But look at the encluded monthly chart of the SPX. Do you want to allocate much new money into a pattern that looks like this? Unless of course you think this says we are going back to test our highs. Anything is possible in the “engineered” marketplace. In the meantime we continue to hold our longs and look for low-risk ways to participate in order to play this levitated and extended market.

 

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14 comments

  1. pharkle

    nm

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    • scott

      Oh no. I’m over 47…The scuttled UAL deal killed the 1990 market.

      There was also a boom in 1999 too, but it looked different than the one today…

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  2. mrkcbill

    Stellar commentary
    Thanks

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  3. TA

    Reality has never had anything to do with the market, it operates in the future not the present. What makes no sense today, often makes sense later on.

    Focus on the price action, ignore everything else as it’s a waste of time.

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  4. John

    “Focus on price action…”

    This type of reasoning is why Warrent Buffet is a billionaire and we’re pikers posting replies on a blog.

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    • TA

      Jesse Livermore made a fortune for himself based on doing nothing but that.

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      • scott

        Ahhh. What a debate…

        JL died penniless and broken. Trading works under certain market conditions, there is no doubt. So does long-term value investing.

        In the right hands, both work under different time frames…

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        • TA

          JL lost his money several times only because self admittedly, he didn’t follow his own rules on those occasions.

          He was ahead of his time and didn’t have other examples to follow, he had to make each mistake and learn from them first hand. His rules are still winners and followed today.

          The problem with Buy and Hold value investing is that it only works on select occasions like in early 2009 when you had every reason to run screaming.

          Like most, I don’t have the balls to do that based on value(especially in a deflationary environment). I needed to see all the divergences going on between Sept 2008 and Mar 2009 before I sold as many puts(very expensive puts back then) as I could.

          Cheap stocks are cheap for a reason.

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  5. chessnwine

    Scotty–I have been pumping the $KLIC chart recently and I am long. But I know you were on it long before I was a few months ago. Congrats, buddy on today’s after hours win.

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  6. TraderCaddy

    Yes, I recall the UAUA merger rumors.
    I seem to recall it hitting about $200 a share after it was on the cover of Barrons in December.
    I kind of remember this specifically because I thought it made no sense and because I was flying on United from Denver while reading the article.

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    • scott

      Actually, the deal was at $300 and the stock was at 295. Then the deal fell apart. It fell about 60 pts. in a minute and settled down at 150. Then Marvin Davis got skinny. for about 2 weeks…

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      • TraderCaddy

        Beginnings of Alzheimers.
        Sorry.
        I do remember Marvin Davis- had something to do with Marc Rich, Clinton buddy.

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