Generational Dynamics Forum - New Site

I can boil the financial history of the last several decades down to a sentence. It was all due to constants attempts to blur property lines and the difference between paper holdings and real property. So many scandals yet to break. PIL.

with yesterday's FED decision, I decided to go WAY SHORT, and now John says, "What he does say is that stocks will go up, and that may well be the principal effect of quantitative easing."....HELP!....did I make a mistake?...Higginbotham, help me out here!

Here are my thoughts on QE and stock prices:
http://howfiatdies.blogspot.com/2010/11 ... arket.html

shoshin wrote:with yesterday's FED decision, I decided to go WAY SHORT, and now John says, "What he does say is that stocks will go up, and that may well be the principal effect of quantitative easing."....HELP!....did I make a mistake?...Higginbotham, help me out here!

To me it made sense to take a short position prior to the announcement as the possibility of a disappointment was great. I used a very tight stop and luckily got stopped out before the close on Wednesday.

The best traders makes wrong trades all the time but they manage them wisely and that is the best thing I have learned about trading and continue to learn about trading. The best character trait, IMO, is patience.

This market will almost certainly crash and burn at some point not too far in the future so make sure you have something left to trade when that opportunity arises, and don't ever let your emotions, or someone elses, convince you that the facts are not the facts. The primary trend is not Bernanke's friend; he will lose out sooner or later.

Fred

Yes, the market will certainly crash. But "the market can remain irrational longer than you can remain solvent." (Galbraith, I think). Of course Dutch tulip bulbs weren't worth $100,000, but that's where they went in the 1600s from a nickle. Shorts at anything over $1 would have made sense, and wiped you out. There is no logic in insanity. As long as people think they can sell tomorrow for more than they can buy for today, they'll buy today, no matter where the price is. So stock investing requires very little analysis. It's being able to determine when insane people will become sane. I don't know how to do that.

I do know one thing that hurts us, and that's reading people like John and Richard Russell every day. While everything they say is undoubtedly true and will happen, reading them every day makes the crash seem imminent, and lures us into shorts and puts that lose money.

Just a few thoughts.

Steve

shoshin wrote:with yesterday's FED decision, I decided to go WAY SHORT, and now John says, "What he does say is that stocks will go up, and that may well be the principal effect of quantitative easing."....HELP!....did I make a mistake?...Higginbotham, help me out here!

I want to be fully short here and am fully short. Two caveats though.

A few weeks back, I guessed here that 1190 would likely be as high as the S&P could be pushed. I based that on the idea that April was the peak in the mania. It appears that Bernanke has induced an even greater mania, which I didn't believe would happen. At the same time, I'm noticing that prominent investors and foreign government officials are beginning to sharply criticize Bernanke. I had expected something like that to start about August 2009 and have been really surprised that there hasn't been any kind of uprising until now and that his approval numbers remain solid.

If you went short for the first time, you are doing better than me. The average entry on my shorts is 1140 on the S&P cash, so I've been able to bring it up quite a bit with all the volatility we've had this year. Even if we crash from here, I'll consider myself lucky that I didn't get wiped out before it happened and not really a great trader. Still, 1140 isn't too bad all things considered. The way I look at shorting is what percentage of points from the low were avoided. In my case, I have avoided about 85% of the rise from the March 2009 low. Most speculators want to think they can avoid 100% but that's not realistic.

If the market continues higher, I'm thinking the 1302 area might be seen next year.

A poster on Krugman's blog put this up, seems apt and right in line with GD.

***********
The markets want money for cocaine and prostitutes. I am deadly serious.

Most people don’t realize that “the markets” are in reality 22-27 year old business school graduates, furiously concocting chaotic trading strategies on excel sheets and reporting to bosses perhaps 5 years senior to them. In addition, they generally possess the mentality and probably intelligence of junior cycle secondary school students. Without knowledge of these basic facts, nothing about the markets makes any sense—and with knowledge, everything does.
**********

He goes on to point out that this is why five year plans don't impress the markets, because none of these young turks will be trading in five years, and they know it. They want their money and they want it now. A quick "feel good" does much better than a long term fix that actually fixes the problem.

And that's why logic does not rule in the markets.

Banks offer loans for all types. They differ mainly in the interest rates. A friend of mine usually borrows from banks and he is happy to have it in a low rated interest.

I suppose this relates to finance since it's on Bloomberg and dissects tax claims. Anyhow, I found it most amusing. Apparently the new definition of "small" is "not multinational".

http://www.bloomberg.com/news/2010-09-2 ... althy.html

steveA wrote: I do know one thing that hurts us, and that's reading people like John and Richard Russell every day. While everything they say is undoubtedly true and will happen, reading them every day makes the crash seem imminent, and lures us into shorts and puts that lose money.
Steve

Yes, Steve, you are dead on. I have had to seriously scale back my reading of many well informed people because it was negatively affecting my trading. I do continue to read John's GD blog because I feel that his perspective is so meaningful and unique but I am also able to put it in the longer term perspective that it deserves.

You sound like a trader who has developed the skills needed to trade successfully. I have mostly been an investor over the course of my life and I'm finding out that an objective mind is not enough to trade well in a secular bear market so I am really working on honing my trading skills...it's quite exhilarating to break free of the bear trap and realize the opportunities on both sides in a secular bear.

Fred