Thursday, December 06, 2012


Please do what is indicated above when the NFP report is released


The above is a link to a Zero Hedge article that explains some of the shenanigans that are going on. I love his articles other than they are often slanted to the negative side of things. There is every reason to have that view at the moment because things are not as they are being portrayed as most of us know.

I tend to be a conservative in most ways with some exceptions but my frustration with all of this is just all the lying. How in the world did we get so far off the reservation where we have to be lied to all day long every day just to attempt to further certain agendas. I have no doubt if the shoe were on the other foot the lies would still be forth coming. I do think the plan to socialize us that is now in over drive is going to wreck this place and I have to be on record now on this topic. Sometimes I just get a terrible gut feeling that just keeps coming back to me over and over and no matter how hard I try to over ride it with logic I cannot do so. This is one of those times.

I see the world through the prism of my own life which of course has it's advantages and disadvantages. Often when trying to determine where I stand on things I try to seek out the opposite viewpoint. I do this to try and see if I think there is any merit to it. Most of us gravitate to those who share our views because it serves to reinforce them. I do not think that is productive. I don't need someone else to tell me what I already believe. I want someone else to tell me why what I believe is wrong. This forces me to really think about what I believe and that is healthy. At times in my life I have changed some of my views by going through this exercise and at other times I have not.

When it comes to politics it is almost impossible to find someone who agrees with everything you do and it seems when you find them they are not candidates. I recall one of the final exam questions during my senior year in college in an economics class was "Why will a really intelligent person never become president?" The correct answer was that someone that bright would see the no win scenario that job brought with it and would be wise enough to avoid getting caught in such a situation. I am not sure being super bright is a good requisite for that job anyway. That premise seems to have held pretty true.

After considering in great detail what is going on now I feel I need to be on the record just one time here on my views on this. The main reason I am doing this is because it does relate to what our opportunities as traders are going to be.

After stating this I will move on and not dwell on this again. I think what is being lost in all of the debate about the fiscal cliff and which side is right or wrong, is something far more important that is incredibly dangerous and ought to scare just about everyone. We are a collection of people with very diverse views on how things as a whole should be handled. The whole spirit of democracy is that the collective will of the people determines a fair and evenly balanced way of going about running things. This should never go so far in one direction where one agenda controls the country. We have seen how wrong things go in other countries when this has happened. We have checks and balances built in so that this does not happen and that was due to the brilliance of the founding fathers. Their insights into basic human psyche were amazing if you think about how long ago they had them and how accurate some of the now chilling quotes are.

If we set aside all the basic little squabbles about class warfare, taxes, social services etc what we have left is a basic philosophy of what should happen. If you think about basic strategy in wars, one of the best tactics is to create a diversion that occupies the enemy while you are executing your real plan to win behind the opponents back. This is what is happening right now which is very worrisome to me. On the surface you have all of this bickering over the fiscal cliff/debt situation while in the back ground a couple of much more important things are going on.

First, the move in the US Senate to eliminate the filibuster and change things to a mere majority vote to pass legislation. Second, the push to usurp from Congress their constitutionally mandated control over expenditures. Both of these are incredibly dangerous and if both take place we will on some level have what is almost a dictatorship in place. Regardless of what side you are on this is incredibly dangerous. It will result in whatever party happens to have control at any given time just doing whatever they want, regardless of what the will of the people is. You may be thrilled right now if you are left leaning because it will result in you getting all of the things you want. How would you feel if it were reversed? It will be at some point in the future and you will not want the other party to be able to completely change everything without any say in it. Be careful what you wish for.

Neither of those situations is going to be any good for this country that is one thing I am absolutely sure of. All the power they are trying to get into just one persons hands is so incredibly dangerous no matter who that one person is. I can assure you that it is not just rhetoric that people are going to cut back on hiring due to Obamacare. In my business I have purposely done a couple of things as a direct result of the tax increases and the health care stuff. First, I formed my company in a state other than where I live and did it legitimately with a partner who was always going to be in my business with me. California lost some revenue due to this, screw them. If they are going to penalize me I won't argue I will just leave and direct the revenue somewhere else. OF COURSE! Any prudent business person would do this and will do this. They are going to lose a lot of the people they are going to try and tax to death and then where are they going to be? Are they going to raise taxes on the DMV workers at that point?

Second, I will always have any additional staff be done in a way that has it out sourced where I don't have to cover these smothering expenses that will jeopardize my business and it's viability. OF COURSE! Any prudent business person would do this. People that run successful businesses did not become successful by allowing others to dictate to them what they will do. They are successful because they know what to do in order to make profits. If costs rise they don't expand they contract. No spin from any arm chair quarterback who is an analyst and has never run a business of any kind will change that. Oh wait lets get another higher ed teacher to come on and explain how all of this will help us. Ughh!

I don't think anyone regardless of political party is really excited about having their taxes go way up and everyone will be scrambling to find write offs to avoid paying more. The question will soon become, who will ultimately pay for all of this? The answer is all of us. There is talk in California of raising the state income tax to 14%. Who will stay here that does not have to? I think what is missed in all of this is that people will just blindly accept poor decisions imposed upon them. I for one do not just blindly accept bad things, I fight with all I have to get through tough times. When PFG stole so much of my money I was determined not to let that ruin my life and found ways to survive, barely. This is what good business people do, find ways to survive. That will rarely wind up being them following what a politician tells them they should do.

There is no way that continuing to spend without any limitations on the increasing debt will have a good outcome. I am sure at this point we are going to have another substantial economic melt down as a result of this and it will provide a huge opportunity to make money if we can position ourselves on the short side at the right time. I wrote about the general environment that I think we are operating in and what it will mean in my newsletter last month, so I am going to leave that out of this post. 

In summary I just wanted to be on the record as predicting that the current over haul of our whole way of life here in the US is going to cause huge problems in the not too distant future, so be on the lookout for things to change and be ready. Raising all of these costs on businesses is not going to result in a booming economy or even one that is going to recover in any meaningful way. Business people are smarter than politicians and in the end will not allow themselves to be forced into bankruptcy just to pander to some political agenda. They will move their businesses to places that are friendly to them and away from places that are not.This will not result in job growth no matter what goofy third rate metric they apply to the data in the NFP report to show how everything is getting so much better. IT IS NOT.

The NFP report Friday will be a completely bogus number adjusted in some insulting way to show something that it is not true. I would suggest completely ignoring it for both trading and economic analysis. It has been rendered meaningless. Regardless of which way it moves it is not worth paying attention to anymore. It may move the markets but there is no way to guess what will happen on these types of things so I don't try.


I am getting the sense of restlessness right now from emails and phone calls and I need to make a couple of points.

First, I have stated over and over and over and it needs to be understood. The Bond System is going to have periods where it loses money. There is no system that will ever be created that will never take losses. If there is one that never loses whether it be from me or someone else, you will never get access to it. If you happen to either skip some of the trades, miss some due to work, miss some due to waiting for the perfect time to start etc.. you are going to under perform the system. That is on you if you do that. If you happen to choose a time to start after watching for a while you may choose a time when losses take place. That is on you if you do that. If you choose to trade multiple contracts on some trades and not on others and pick the wrong ones to load up on and take a loss, that is on you.

A trading system mechanically indicates trades and some are good and others are not. We are going through a period where we are taking some losses now, but still have not had a month that has lost money. People this is absolutely phenomenal. I know we have a different level of environment in here that is very open and that is the way it will always be. However, I can't help taking losses. I have periods where I lose money trading just like everyone else does. We use a moving average of equity to determine when a system has passed into a period where it needs to be given a time out.This will be what we use to determine if and when the system has had a draw down that is out of the norm. How many services out there can say that? I would wager NONE!

I take these trades also so when you lose so do I and I always feel worse when a client takes a loss than when I do. We have had some learning curve issues on my end with the Swing Trades in what can and cannot be done with them, the most recent being the stop change that not everyone got in time which caused a change in the orders going forward. I think we are now where we need to be with using limit orders to protect bad fills and the modification for outside bars that is now in the orders each day.

The markets are very choppy right now and in spite of that and some of these issues we are still making money so please keep that in mind.

I hope this does not come across as being too defensive it is not meant to be.

If we get an up close tomorrow we could have a good sell setup for next week in the Bernanke's as long as it is not a runaway up close in which case that trade would be off.


There was an auction yesterday to sell a lot of the things from chairs to computers to cars to you name it from the PFG/Wasendorf estate. There is no tally yet from the sales but by the time they take out all the Corleone's for everyone I doubt much will be left for us. I could not bring myself to try and buy anything from that process, even though there might have been a good deal or two to be had. Hopefully they get some money from his house and condo and that office building but I don't think any of this is going to add up to much if anything for us. Net we are looking at between 50% and 60% back in the end over time and anything beyond that is going to be a miracle. If you are forex I am afraid you are going to have a 100% loss which is what I have felt all along. The judge can always ignore the law and legal precedent, but if she does not that is what is going to happen.

Good Trading and take a deep breath!


Anonymous said...

Hi, Chris. I am interested to know this,

"We use a moving average of equity to determine when a system has passed into a period where it needs to be given a time out.".

If you don't mind, teach us how to do it. It will definitely helps many traders out there.

Marcus from Taiwan

John M said...

"You may be thrilled right now if you are left leaning because it will result in you getting all of the things you want. How would you feel if it were reversed?"

Interesting you make this point, Chris, because as one of those people I have to tell you that no, I am not going to get all the things I want. In fact, this country has moved so far to the right during my lifetime that moderates are now branded as socialists. So any real so-called 'progressive' agenda is simply off the table, or 90% so.

Second, I know exactly how it would feel if things were reversed because I lived through about 20 years of conservative rule out of the past 30, and the GW Bush terms were so bizarre, in terms of trampling on the Constitution, individual rights, and callous disregard for anyone but the wealthiest people in the country, that my head is still reeling. I especially enjoyed how Bush shafted veterans and slashed their support system while sending middle aged reservists off to get killed for the benefit of administration-connected profiteers in Iraq.

So yeah, I know exactly how you feel in that sense. But from my point of view, if we survived that--albeit with an incredible mess left behind that by all rights should have brought us to our knees by now--we'll survive anything dreamed up by a middle of the road guy like Obama and the current wimpy crop of Dems in Congress.

By the way, there's an op-ed in the NY Times today that I'm not sure I buy completely, but is an interesting take on the economy and the reality brought about by many millions of retirement age boomers. Food for thought, there seems to be at least something there: http://tinyurl.com/d9jaq2e

And I'm sorry about the complaints or whatever they are about the bond system. It's an amazing system. I suppose it's inevitable that, no matter how much and how often you kept saying that all systems have losers or even losing streaks, less sophisticated traders will demand flawlessness. Much as with politics, regardless of where you stand, there's really no winning.

Vikas said...

Well said Chris. Everyone needs to remember losses are a normal part of training, and as you pointed out, we're continuing to make money with your system.

Chris Johnston said...

Marcus sorry this is a topic I am going to cover in the newsletter and is beyond the scope of this forum here.

Chris Johnston said...

John you are making my point all the games that go on with politics and the reality is it is all about power and control. We are going to see what the other extreme brings because I am pretty sure the tide has turned for a very long time now. Maybe it will be better than I think but my gut is telling me otherwise and I can't shake the very bad feeling I have about where all of this is going. The stuff about giving any president all the power he is trying to get now should scare everyone. No one man should be able to do what he is trying to do without some type of check and balance on it regardless of right or left.

That stuff about soldiers I don't know anything about but sounds terrible. I do know currently a kid in IRAQ and he has had to buy his own guns because the military is not providing them to him and his unit. When he told me this I could not believe it. He told me it is accepted and not too many people complain about it. Can you imagine that?

PD Quig said...


I'm guessing that, as a progressive, you are incredibly disturbed by Obama's expansion and continuation of Bush's policies? Illegal rendition of prisoners to places like Yemen, Jordan, Saudi Arabia? Gitmo remaining open? Drone warfare--especially the killing of thousands of Muslim innocents and the assassination of an American citizen by Hellfire missile (without so much as an indictment) on the say-so of the president alone? Entering a war in Libya without even asking Congress, let alone getting authorization? 50,000 warrantless wiretaps of American citizens for which the ACLU has formally protested? The recently-passed NDAA that indefinite detention at the president's will. Legislation signing statements that Obama has added to legislation?

You really should not treat your political opponents like the cartoon character buffoons that your NYT, WaPo, NPR, etc., would have you do. Your 'fact' are selective--if not outright lies--but that is exactly what I would expect to read from a progressive in a comments forum.

It has been said that the difference between liberals and conservative is that liberals think conservatives are evil, while conservatives just think liberals are fools. I used to believe that, but in the past four years I have become increasingly convinced that liberals are foolish and evil. The next four years are bound to reinforce this belief.

Chris Johnston said...

ok well things are heating up on the political front in here so let's just calm down. I published comments from both sides that are equally heart felt by each poster. I will keep my bias out of this I think readers know what it is by now.

This is my fault I suppose but I wanted to be on the record in here for what I felt about all of this.