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Saturday, March 23, 2013

A HUMBLING WEEK


One of my problems which I don't really consider to be a problem, it that I care about others a great deal.

I am fairly sure a business advisor would tell me not to discuss what I am going to cover today but I don't care. It has been and always will be my goal to deal with the public and any clients I have honestly and in a straight forward manner. I think the following I do have albeit it not very large, is mostly comprised of people who find me different from the typical person on the web. I hope there will always be room for me.

We have had a lousy month thus far being down in both trading services. This is not lost upon me, I make the trades that are in there myself. The trades are directly from my personal trading log I write every night. The Bond system is a mechanical system so those are what they are. However, one thing I constantly do with it is to monitor certain portions of it to see how they are doing. If I see something in one of them that is out of line with what it should be doing I make changes to it in order to adapt to the current market conditions. It is rare that these types of things are necessary but about once a year they typically have to be done.

The way the system is designed, it has a multitude of entry combinations based on all sorts of things from our experience trading this market for so many years. There is a layer on top of that which is a filter designed to catch some of the entries that are not as good as others. I monitor this layer constantly to make sure it is catching bad trades and kicking them out and letting the good ones through. If there is one challenge with the system that is it. As I stated an adjustment to that is rarely needed, but there was one I write about in the web site that I made many years ago when we were transitioning from the pit to the electronic markets that was a life saver. This is what trading is all about, dealing with adversity. I remember words from my High School wrestling coach when he reviewed tournaments or matches going through each member of the team. I was the captain and a very accomplished wrestler, one of the best in the country my senior year. He said once I am not sure why Chris is the only one whoever wins once he gets behind? I did not get behind often but when I did there was hell to pay. I went months without losing a single match, but was behind in several of them at one point or another.

This is how I feel about the Bond system right now. Although we are still way ahead for those who started at the beginning, anyone who started last month has taken a hit this month. I started the auto trade stuff at Robbins this month, of course missing all the great trades we had in Jan and Feb, and the net results without those for the year suck. What I have done is re institute a filter that I had taken out because I did not think it was necessary. We went months without it doing anything at all, then all of the sudden we had that losing streak and this filter would have eliminated all but one of those trades. It will not filter many trades but there are certain situations when there is huge momentum in one direction and our system triggers trades against that momentum, that this  filter will help us eliminate. So far I am glad to report it kicked out two trades that were lousy and let the last two through which were both wins for us. There is nothing that is perfect, but this is pretty good and if you think about it, if you eliminate just one or two bad trades a year it can make a huge difference in draw downs. That is what this will do and has already done.

There is a trader far more accomplished than I am who is selling a bond system, and the most recent draw down in it was over $12,000! Ours has been $4200, so about one third of the other one. It is more expensive than ours as well. All in all I still feel good about this and I personally use it in multiple accounts as I have stated before. I even began trading it in one I had not used it in before because I felt it was a good time to start in with it since there had been a draw down. We also had a few people sign up at Robbins to trade it for that same reason, and they have been lucky enough to start and catch the last two wins as the first trades they got.

What I hope to do once the web site is done is have some explanations of what is behind some of these things which should help people understand how they work in general and possibly have more faith in the methods. I am going to list in the members section the markets each week that are setup in the direction we are looking to trade them. I am hopeful this may help people and perhaps you will be able to trade them better than we do. I just think having this back drop will be helpful so you understand why we are doing what. The site should be up within two weeks. here is how it will look.




How it looks does not matter, it is results that matter. One thing to keep in mind, we were on new equity highs in both services coming into this month. We are having a crappy month but it is not a disaster. For those who have left, thank you for giving us a shot if you are still reading here. Those of you who are hanging with us, thank you. It is amazing to me that you can't have one bad month, I always have a bad month here and there. Each month my trading techniques give me about 35 trades for the Swing Service. That is way too many trades and volatility for most people so I have to pare down the list some. This month I have done a poor job of narrowing down the list. I don't take all 35 of them either, I don't want to trade that much.

CYPRUS

I think what is getting lost here in those who cheer the trashing of rich people and possibly criminals for social justice as they call it, is that they are missing the bigger picture. If you think that once a precedent is set for this it won't grow and creep down to others you are fooling yourself. How many cocaine addicts can do just one line of it? There are 10,000 depositors it appears now are the target and there are numbers flying around as high as a 70% hit! I am sure they are going to lock the money so these people can't take the 30% they have left out. Is that something everyone who hates rich people really thinks is a good idea? When PFG happened and I needed a job to survive there was not a single poor person who offered me one, imagine that! That god an evil rich person came along and offered me one.

When the precedent is set for this type of thing the barn door is going to be open and anyone with a brain who has money is going to take it out of the system. This is going to cause a huge problem in Europe, HUGE! The next time they need money they will just start lowering the level of deposits the penalties apply to. I read in Spain they are levying a very small tax on all deposits now. This is the beginning of something very bad, now they governments can spend even more knowing they can always just take the money directly from bank depositers. Get your plan ready folks, you are a crazy if you don't think this is a big problem potentially in the making. Rich people are smart, that is why they are rich. They will figure out a way to protect themselves and in doing so will take money out of the economy and then everyone who wants to get back at them will wind up paying the price. The world has to have some better off than others, we cannot all be equal. It is not up to you to determine how much of some one else's money you will take. Look at what has happened with taxes. BO promised no new taxes on people under 200k yet he has done exactly what he said he would not do, raised taxes on them as well. Once they start taking the barn door is open. Now he wants to take more and more and more, and the level of income is going to continue to decline where they start penalizing you. Maybe douchefett will finally give up his years old fight with the IRS and pay them the billion dollars he has owed them in taxes for years, oh wait uh er... he wants to pay more? He could start by paying what he has already owed for years to get current. However, he would rather have you pay more he himself does not want to.

THE MARKETS

Michael mentioned to me yesterday that there were some Newsletter writers that were calling for monster stock market rallies right from this point almost immediately, and asked me what I thought. Everyone who reads the Newsletter knows that I have continued to tell everyone to stay long even though there are a couple of potential flies in the ointment. I don't really know if we will go up a huge amount straight from here or not. It is clear you should be long and should stay long. I always have a hard time personally pressing a bet with new money after a market has more than doubled. That does not mean it is not the right thing to do, it means I don't do it. We do know that there is a huge up bias in the stock market and that we want to be long most of the time. However, I like to buy dips so I don't personally feel it is prudent to add new longs right here.

I think once we get to the fall we have to get long and if that means adding to a current position at that time than that is what needs to be done. I would prefer it to be on a pull back but we will have to see what is going on at the time. We do know the sell in May and go away adage does in general work and we are getting close to that time of the year. One of these writers Michael mentioned that was bullish was very bearish on stocks at the beginning of the year and has changed his tune now that new highs have been made. Forecasting in advance is so difficult. What we are seeing now is many cyclical forecasts be way off calling for decline at the beginning of the year which did not happen since we have gone straight up. Now we have the potential inversion of cycles since many of them called for March low points. The next graphic shows the tendency for the first year of the second term of a president which has been a perfect road map so far this year. It is calling for a top to be made now or a week ago.





My short term Oscillators are showing some underlying weakness as I showed yesterday. One of the challenges of the stock market now is the unprecedented stimulus being provided to it by low interest rates. Since we don't think any significant posture changes by the FED are coming it is hard to imagine a big down turn coming. I think retracements are going to be buying opportunities for now. When I read all the stories at Zero Hedge which I can't help but do for some reason, there are some really bad things seemingly going on. However, what everyone needs to keep in mind is what drives stock prices: INTEREST RATES.

This is why we can have this huge disparity between the economy and the stock market that is going on right now and can continue believe it or not. If rates were to rise sharply, you would see the stock market come into line with the economy very quickly. For now enjoy the bull run who knows how far it could go.

My closing thought for this post is a quote or pseudo one since I may have this wrong, "In the end once a man has given something all he has there is nothing more he can do." I do give this all I have. Thanks for reading.

Good Trading




6 comments:

Vikas said...

Last few weeks have no not been easy for anyone Chris, I talk to a lot of people, and people who are using other services as well. Everyone's taken large losses, so you dont need to feel so bad about it. We'll bounce back :-)

John M said...

No problem with the bond service. You never said it was perfect, you always stressed there would be a bad month or so sometimes. People expect too much, maybe.

As for Cyprus, our discussion has been short-circuited by events--they're not doing the depositor tax, the Russian and Balkan 'oligarchs' (cough) are looking for somewhere else to go where they won't have potential problems like this. As for the old saw about poor people never giving anyone a job, it reminds me of an aunt of mine who I loved dearly. Her husband died in his early 30s of lung cancer, although he never smoked. To her dying day, my aunt didn't believe smoking causes lung cancer because he died without smoking. My point is, poor people can't give other people jobs but that doesn't mean that rich people always do. Ten years of tax breaks for the wealthy showed incredibly anemic job creation while the top few percent accumulated a larger and larger share of the country's wealth. And when taxes on the upper brackets were much higher, we had periods of great prosperity and job creation.

It's clear that rich people--or let's say the companies they may own--hire workers, but only when necessary. Once in a while they might give somebody a break when they don't really need another employee but see something interesting, usually someone they know or through people they know.

I think practically every bad precedent that can be set has already been set in the last 100 or so years, and I mean bad for any particular group and also for everyone as a whole. And if things get so terrible that they start coming after us in all the sneaky ways at their disposal, it won't matter if you're rich or poor. There won't be anyplace to hide in very short order. In fact, just trying to hide may be a punishable offense at some point.

For me, everything that's going on or may go on isn't really worth worrying about too much. The only alternative to anything extreme will be an extreme response and that always comes down to an armed uprising. Not sure if the cure is worse than the disease there, but hopefully I won't be alive to experience it and won't have to care.

Chris Johnston said...

John we agree for the most part here and we usually do. The only thing I would take issue with is that it appears there is going to be a haircut taken somewhere here that will be in violation of what has ever happened with banks. I think that precedent being set is very dangerous. My point was that what you stated, they are ultimately going to come after all of us, and this is going to be where we will look back and say was the beginning. This is not just some isolated incident that can't occur somewhere else in my opinion.

Kurt said...

My only take on this was that there is someone paying when the money is not there. Since the insurance was covered, but the haircut is for the uninsured, that seems fair. Keep in mind that taxpayers are then paying for the bailout. The equity holders are being wiped. It does not seem improper (unlike MFG and PFG - which should have people in jail!)

interesting discussion here:
http://detlevschlichter.com/2013/03/cyprus-and-the-reality-of-banking-deposit-haircuts-are-both-inevitable-and-the-right-thing-to-do/

Chris Johnston said...

This is all BS you people who have not been stolen from have no idea how it feels and the day it happens to you will be when you wake up and I hate to tell you how painful that will be. It was for me and I am forever changed and so will you be. I will feel sorry for you unlike the lack of sympathy you are showing because I know from personal experience how this dramatically changes your life. It is easy to say it is ok for someone else to have their money stolen and that is what this is outright theft. PERIOD

Kurt said...

That is true, it is easy to be clinical when it is not happening to you. I do sympathise with what happened to you and others, and fear it may only get worse.

Banks are not safe, nor are financial instruments as safe as we think they are. That is one reason physical (not paper) gold remains a valuable asset with no counter party risk.