Financial topics

[Higgenbotham]

** 16-Feb-2021 World View: Commodities futures trading

> The idea there is that 2872 was the euphoric blowout on the tax
> cuts and this second hit on the channel is the euphoric blowout
> based on the now universal belief that the Fed can keep the market
> propped up forever and prevent recessions forever.

> Having said that, I have no doubt whatsoever that this channel can
> be exceeded and the blowout can continue. But I will stay short
> for now and the point at which I will get wiped out (my suicide
> level) has risen to S&P 4000.

> Had I stayed short from the time of this post, I would be close to
> getting wiped out (what we've called Maximum Ruin), as the S&P
> closed at 3935 Friday and the futures are up 20 points so far this
> week.

You know, Higgie, I've been watching you for years, as you've gone
through these periodic crises, and you've almost made me a nervous
wreck just watching you, though probably not as bad as you've gone
through yourself. Still, I could never do anything remotely like you
do, and it's not for lack of skill but for lack of guts.

I have an interesting side story. Perhaps you recall the forum member
JCS, who occasionally used to post something. In July 2019, he sent
me an e-mail message asking me to implement a commodities trading
algorithm he had devised. I wrote back that I was interested, but I
never heard from him after that. Then, three months ago, he contacted
me and paid me a small amount of money to write a prototype for his
commodities trading algorithm.

The algorithm was reasonably confusing and required several phone
calls with him and several e-mail exchanges for me to wrap my head
around how it worked, but after a few days and a false start I did get
a working prototype. At that point, he ended all contact with me. He
hasn't returned phone calls or e-mails. I don't know whether he died
of Covid, or I said something to insult him, or whether he simply
changed his mind.

Anyway, the prototype is only a partial implementation of his
algorithm, since we were going to have to have more phone
conversations to describe the additional steps.

Nonetheless, I've set up my prototype so that it can simulate trading
over a period of time, and I've tried running the algorithm starting
on January 1, 2020, and running to the present time. The commodities
I've tested it with in the simulations include futures for corn,
silver, gold, platinum, copper, heating oil, natural gas, oats, rice,
soybean cocoa, coffee, cotton, lumber, orange juice, sugar, and
others.

Well, so I run the algorithm for over a year from 1/1/20 to the
present. It has its ups and downs during the year. At some points
during the year, it loses money, usually because of losing money on a
short after hitting a stop. But at the end of the year, the algorithm
makes money net on every commodity. This is absolutely astonishing to
me.

I mention all this because if I had anything like the guts you have,
then I would use the algorithm to make investments. But I don't, and
when you and Richard post messages saying that you're almost wiped
out, the reasons become clear. And that's the difference (or one of
the many differences) between you and me.

The dilemma at this time in history is whether what has been happening will continue or whether there will be a discontinuity. If you believe the former, you follow a system based on history. I'm gambling that a discontinuity will happen before I run out of money. In simple terms, maybe the stock market will top today.

I've repeatedly harped on the idea that it's all gambling because the Fed and others have turned the safe store of value (the dollar) into just another gamble. Holding US dollars is now gambling. There is no way to get away from gambling even if you want to.

The old advice was to work and save. An alternative to gambling might be to work and hope you don't lose your job. The save part is no longer possible for the vast majority. The work part is becoming more and more difficult.

There's no solution to all that except to place your bets and realize you will probably be wiped out.

[richard5za]

** 16-Feb-2021 World View: Commodities futures trading


I mention all this because if I had anything like the guts you have,
then I would use the algorithm to make investments. But I don't, and
when you and Richard post messages saying that you're almost wiped
out, the reasons become clear. And that's the difference (or one of
the many differences) between you and me.

Interesting subject, John. But you have left out discipline and gambling. Allow me to to elaborate.
My trading strategy in theory is to select trades where I will win 60% or more of the time. 6 out of 10 is a reasonable target if you are careful. I then set a stop loss on the trade to a determined amount of capital, say 3%. So in this example if my capital is 100 000 my stop loss ensures that I don't lose more than 3000 if it goes wrong. Since I win more often than I lose and beacuse I usually make more than 3% on the trades my capital increases over a reasonable period. There's more trading and math skill than this simple outline but this is a strategy that works. There are others of course.
It goes wrong when one throws the stop loss strategy to the wind as I did when S&P arrived at 3900; "knowing the "top had been reached took over and discipline failed again and I fell into gamble mode. Useful because it teaches me to stick to stop the loss strategy.

[aeden]

https://www.technocracy.news/
https://suspicious0bservers.org/

[Higgenbotham]

I went a little more short this morning. My account is now 90% short the S&P on an unleveraged basis.

I'll add one more thing to the discussion about gambling. I'm a lot less nervous than I was at S&P 1000, 2000, 3000. The reason is that I'm still alive and the S&P is at record valuations. When I was short at 1000 and 2000 I was very nervous. The higher the S&P goes and the further it is from reality, the less nervous I get being short.

[aeden]

Fabian Communist will not allow you.
The cult of Xiden is in control.
Only one by one will they regain their sanity.
Those who deny later will ask for the mountain's to fall on them.
Eight of ten markers appear to be seen that remove sovereignty as Americans
languish in denial.

And said to the mountains and rocks, Fall on us, and hide us from the face of him that sitteth on the throne,
and from the wrath of the Lamb

But as Jared died, tears streamed down his face by reason of his great sorrow, for the children of Seth, who had fallen in his days.
Then Enoch, Methuselah, Lamech and Noah, these four, wept over him; embalmed him carefully, and then laid him in the Cave of Treasures.
Then they rose and mourned for him forty days.

https://www.youtube.com/watch?v=ODwZzMLv7zU

[Higgenbotham]

It's probably a good time to recycle this hash. 13 years too early now.

January 16, 2018. Everyone quoted below was 10 years too early but I believe will all be correct in the big picture. Everything said applies now, but even more so.

Re these representative quotes from the Financial Topics thread (this thread), all within a week of the March 2009 stock market low:

I truly believe we might have the clearest case of a bear market going forward as anytime I have experienced or studied, and that includes the Great Depression Era.

STRONGLY AGREE, THIS IS THE STATEMENT I AGREE WITH MOST

It seems to me that if I were long in the stock market I would
immediately sell, in order to beat the rush to 5000.

As I've said several times in the web log, this continues to be a
time of "maximum danger" for investors, as a panic selloff may occur
at any time.

STRONGLY AGREE, AND WE WILL SEE 5000

Now they are retiring and there is a structural outflow which will continue until more people are forced to invest than are forced to withdraw. The boomer population is so large that this won't happen for 20 years or so.

STRONGLY AGREE THOUGH NOW IT IS 10 YEARS DEMOGRAPHICALLY SPEAKING WHICH MAKES THE EXIT HARDER TO FIT THROUGH

Boomers have lived in a reality where the stock market and real estate were the best investments and the stock market always recovered from declines that were temporary. It’s very hard to accept that we are in a new reality – a new depression where stocks and real estate will not come back for decades.

STRONGLY AGREE

Funny how the estimates always seems to be better than reality. Until this changes I see no reason to expect a turn-around in stocks.

STRONGLY AGREE, THOUGH SUBSTITUTE FURTHER UPSIDE FOR TURNAROUND

One interpretation is that The Great Pump-Up, which lasted over thirty years, is finished and the Age of De-Leverage is fast upon us.

Until the current administration shows a willingness to lead equities simply aren't a buy yet based on fundamentals based on information provided by John also.

STRONGLY AGREE AND NOW IT HAS BEEN OVER 40 YEARS AND IS FAR WORSE

[Higgenbotham]

No trading today for me except to increase shorts. This market is too far gone on every measure I can think of to attempt a long.

I know a guy who was unabashedly, unapologetically and relentlessly pounding the table every day for days before the March 2009 low that the market was a buy. He was the only one I know of. For weeks now he has been pounding the table equally vociferously that the market is a sell. He's the only one I know of. He had been bullish for years. I thought he was nuts to be bullish.

[aeden]

agree
no leverage

"But tonight-right now- is about human and animal survival."

btc implodes ~ 150k to 300k to 3k
gold <1000 wake us up
they are not democrats

tyler the tribe
https://www.youtube.com/watch?v=cj3U0z64_m4

[Higgenbotham]

The dilemma at this time in history is whether what has been happening will continue or whether there will be a discontinuity.

People often use fancy terms to sound erudite. Or fancy words like erudite to sound erudite. What discontinuity means in practical terms is all of this stuff that has been going up together since 1971 (ah, there's that 1971 popping up again) turns around and goes down. It doesn't go straight down or all down together (which is the basis of the Harry Browne permanent portfolio in reverse - that it doesn't all go up together either), but the trend of everything reverses to down.

That means the only safe haven is to be short everything. The dollar will not save you.




Imagine the reverse of the post 1971 world.

Stocks are topping, maybe even today.

Treasuries topped in March.

The dollar deflates for awhile, but then it starts to lose value after that while short term interest rates are still pegged near zero. It loses value because it becomes less important as a medium of exchange or loses reserve currency status, or both.

All inflation hedges crash.

[aeden]

https://www.zerohedge.com/technology/parler-returns

The Permanent Portfolio was a concept popularized by the late Harry Browne,
a writer, investment adviser and two-time Libertarian presidential candidate.
The portfolio is simple yet elegant.

Browne divided his Permanent Portfolio into four equal parts: stocks, long-term bonds, cash and gold,
and he rebalanced it annually with the idea that there’s always a bull market in something.

Harry Browne came to the conclusion that a "permanent portfolio" of 25% stocks,
bonds, cash, and gold with yearly rebalancing is the best way to maintain your capital.

We are under that note as you forwarded. We just happen to be unallocated cash. The only sane measure is term limits.
viewtopic.php?f=14&t=2&p=4892&hilit=browne#p4892

As we provided numerous times the experts are the bottom of the information pyramid.
The models are chasing grants,
and are dead wrong.

100% Cash - Using this terminology, cash on deposit at a bank is technically "Unallocated Cash".

As the Professor indicated they are dead wrong and dead ass deluded.
We will hold until chunks fall of the edifice of these deluded pricks and seek return
on what works. That is not them.

Wed Mar 03, 2010 3:02 pm
Deeper context's applies to aversion processes and social acrimony of the times. Mises reminded the consumer is sovereign
and was flatly ignored to the logical conclusion. I agree with Higgy on so many facets to there logical conclusion's.
To be perfectly clear the tipping points is what wealth seeks to balance unto margin, the point of the matter
is still decided by the consumers and the allocation of scarce resources to best means of innovation available.
Now mix in ethos and lesson's learned to class and we will never agree as we see every day. Do we see recovery
or aversion in the current context this predicated business cycle since the incompotent are replaced by the compotent.
Washington can kick the can as long as the bayonet will pierce, or is it we reap what we sow to order? Gauging the Generational
Dynamics is really a rinse and repeat process some can attain but not regard given the apathy and regard I assume since we
all understand politics is local is it not? I went to a meeting of local issues and really is was a method for metering out
scarce capital provided by whom? I choose the course labor and capital have responsibilities we have watched erode.