Thursday, February 09, 2012


For those who are frustrated by this market condition, join the crowd. There are absolutely no edges in either direction when something like this happens. You just don't see these types of moves typically other than in a mania like the Internet bubble. The NAZ above has just gone ballistic here. During periods like this oscillators can kill you because they will start flashing divergences all over the place. If you are tempted to short this take a step back and just ask yourself the age old question. If I were a 5 year old and was asked which way you thought this would go, what would you say? I am pretty sure most would say up.

All of us geniuses who know better would say something different and put some fancy line with wiggles in it to support our argument. If we showed that line with wiggles to a 5 year old I suspect he would laugh at us, and he would be right. I would suggest not making this too complicated. What if this is going to become the greatest bubble of all time? If that were true it could go like Gold did for months at this rate. There is no account big enough to hold on that long. This is not a prediction by me that we will double from here or triple, but the point is there is absolutely no reason to try and short this thing, NONE.

The flip side to this is that you don't want to buy pullbacks in individual stocks right here. If something is lagging a move of this magnitude there is a reason it is lagging, don't touch it. There is just absolutely nothing to do unless you are a buy and holder. This is a time when they get over on all of us short term traders big time. Deal with it, this does not happen often. There are times when there is just not any opportunity in a market, this is one of them in stocks.

I have been following the mortgage reform that Barry and Co are trying to get passed. I see that if approved we are going to send a $2000 check to those who had homes foreclosed. Why not make it a million dollars? Better yet have a national survey done to dial in the exact amount their vote will cost, then send them that amount. At the same time we have the comments by Politician ( excuse me Justice)
Ginsberg, that the US Constitution is inferior to that of South Africa! Net net, we are paying off voters for votes, and don't think the whole basis for our laws and system of government that our founders drafted, has any value any more!

How in the hell does it make any sense to pay someone for buying a home they could not afford? This is wealth redistribution folks front line and center. We the taxpayers have to fund these things. Not only are we giving people who did the wrong thing mortgage modifications, that good honest folks don't get. We are now going to pay them for their pain and suffering for buying a home they could not afford. They are taking money from those who have some and giving it to people who don't essentially to get re-elected. I think there is absolutely no doubt at all that this is all going to end in domestic violence on a significant scale. I don't know when, but I do know this is like dealing with a bully. You sort of ask him to stop being a bully. However, in the end you have to kick his ass to stop him. 

Here is a real life story from my younger years. My family moved when I was entering high school, so I had to change schools. The new school I went to had a shared lockers situation, and I had to share one with this big kid, a tad pudgy, but tall. He had quite a tude, and he pushed me and pushed me. At that time he had a significant size advantage over me, and I think he just assumed he could do whatever he pleased and I would do nothing. Very similar to what our government is doing to us now. What he did not realize was that I was on my way to becoming one of the best wrestlers in the country, and was already quite accomplished. I had been undefeated the prior season at my old school. I was also a hockey player, not a bad combination to be able to hold your own. 

One day he slammed my arm into the locker and looked at me laughing, and I went to work immediately. When it was finally broken up I was about 3/4 of the way into forcing him into the locker against his will. I was pulled away by a few people unfortunately because my goal was to lock him in there and listen to him cry to get out.  I walked away then and the sea parted. At that point people realized this new kid was not someone to mess with. As I got older everyone knew who I was due to my accomplishments so I never had anyone ever challenge me again for the rest of my schooling. I did get into quite a bit of trouble with the principal and was suspended from school for a week because I did mess the kid up pretty good from what I recall. However, it was worth it and my parents were not mad at me when I told them what happened. This is just human nature and it is what most people will do when they are pushed too far. Trust me if you find yourself in a situation where you are screwing with a good wrestler think twice about it. I saw some of my buddies mess up some pretty big guys pretty bad who did not get it.

Even people that are nice law abiding citizens are going to reach a breaking point, and this is not going to be pretty when that happens. It will cause unrest in our markets when this happens, I just have no idea when this will occur. I think we will be able to see it coming once it starts. You just can't screw 49.9% in hopes that the 50.1% will vote you in, in either direction right or left. You are still talking about 160 million people that won't be happy. Neither party can hope to govern effectively by using the attitude of F you I won like Barry has done. If Romney were to win and adapt that same attitude, it won't work for him either.

For now though the Fed is in control and we have a raging bull market. Do not fight it. The next chart is that of Gold. I have mapped out what would be a pretty aggressive short entry that I am contemplating. At press time I have not decided if I will play this or not. It is for tomorrow anyway so I have time to look more at this.

You can see the commercials are now heavily short, but I don't think that stand alone means that much. They almost always sell rallies and buy dips. The big small spec long is what I think is the bigger problem here. Small specs are notoriously wrong. Price has to support fundamentals, and we have had no break of any kind yet, but I am going to start playing the breaks.

Good Trading


Anonymous said...

Thanks for telling your story! Something similar happened to me in school... Part of the human condition...

John M said...

I'm actually in agreement with you that the mortgage thing is a dumb idea, but for different reasons...of course. The giveaway has nothing to do with wealth redistribution, but we all have the prism through which we see the world. This is an attempt to 'cure' the housing market by staving off more foreclosed properties so prices can drift upwards--which is something that most all homeowners want, since that's most people's retirement package that they're living in. So, if you see this ideologically, you'd expect a lot of people to get pissed off. But if you see it in practical terms, a huge chunk of homeowning Americans are gonna love it and the people doing it. It may surprise you how many people out there sympathize with folks on the brink of foreclosure, there's a lot of 'coulda been me' floating around. Especially since most of the folks in trouble aren't in trouble because they bought houses they couldn't afford (I think I hear an echo chamber to my right), but rather because they've lost jobs, or had to take jobs pretty far below their skill level, education and previous pay grade. A small percentage probably are going broke paying ridiculous medical bills, which would never happen in any other Western country, but I guess we shouldn't go there.

Me, I'm just against the mortgage bailout because I think the housing market needs to find its 'real' level, not easy when Benny is keeping rates at zero. It won't really recover until that happens. Spend money on the honest people who need help, but not to stay in their houses. Cripes, even I know that when times get tough, you have to scale way back and bite the bullet. Life isn't fair, plain and simple, and sometimes your standard of living is gonna take a hit. But I'm a weird, practical kind of lefty....

Chris Johnston said...

again John, kinda why I find myself liking a liberal!

I am upside down probably 200k on my ranch from where I bought it. I bought it to live in for the rest of my life so that is not a problem. However, it does bother me that some jerk off who bought something for the same price ( 1 Million)I paid for this place who had no business doing so, will have money given to him and taken from me. That to me is redistribution. I don't know what else you could call it?

Maybe the law should just put those who they want to take from against those they want to give to, into the Octagon and let us fight it out one on one. Whoever wins gets the daniero? If I win I keep mine, if I lose I give it to some freeloader. Think about the money that could be made on the pay per views on this? That would allow liberals to give teachers and UAW members million dollar bonuses!

I know several people who bought houses they had no business buying based on their incomes, that can't be blamed on a broker. You can't buy a million dollar house if you make less than 250k per year, regardless of what some frickin broker tells you. It is on you if you have done so whether you lost a job or not.

The biggest issue with all of this is that even a person who runs his own business owning a taco stand is more qualified to be president than who we currently have, so you just get all these dumb ass decisions.

This kid has never hit a ball out of the infield. I think the power these offices have must have such an engulfing influence, that even the people who start off with the best of intentions, get seduced by it.