Monday, October 27, 2008

Greenspan Sells Out and we go limit down....

No wonder the market continues its sell off even the former FED Chair Allen Greenspan has raised the white or should i say red flag and joined the communist socialist big government party. Oh how the mighty have fallen once a clear voice now humbled by this huge financial crisis. Sometimes I wonder why these guys hold on when it’s clearly time to retire and manage in moment of weakness to decimate an entire lifetime of work.

Given the preponderance of 70’s generation types who operate under the philosophy that governments know better than markets and people its no wonder the market continues to fall and chaos reigns. The Elliot wave suggest this is the final leg of the 5th wave down

The current misconception being propagated is that hands off lazy fair left us with this mess, and big government is here to save us. Unfortunately in the world of Sarbanes Oxley it very hard to argue that there is not enough financial regulation, if the truth be told regulation it seems was applied unevenly with generous dispensations given to political friends and patrons.

Contrary to the current view that the government didn’t do enough in the 1930’s the reality is that it did plenty just not the right thing .In the 1930’s Government activism virtually created and prolonged the great depression, then like now the market was wrung by scandal creating a movement for greater regulation. This led to a very activist government ever searching for more revenue too feed their schemes. Interest rates and Taxes were raised, and world trade was halted with the passage of Smoot Hartley. There were efforts to over regulate everything and with price fixing of commodities were used guarantying shortages.

The positives yes they do exist are more than you think, inflation remains benign, the FED has stated buying commercial paper from qualified companies reinvigorating that market and perhaps saving consumer money markets,banks are beginning to merge clearing out the dead wood, the FED is buying up bad debt, interest rates are declining ,the dollar is strengthening and municipals bonds are firming up and once again looking to be the haven of widows and orphans.

Tuesday, October 21, 2008

The French turn to McDonalds

As unlikely as the French turning to McDonalds for sustenance: much has been made of the extreme levels of volatility in recent trading. As I warned in the past the push to remove the human element from the trading process was untested during a time of market breakdown or market crisis like 1987. Prior to the recent increased market volatility this past decade has been characterized most notably by a complete lack of volatility. I had reflected that in a crisis fully computerized systems may not be up to the task and run a greater risk of systematic break down.

Now it seems that one of the prime factors contributing to increased volatility is the removal of that very human element. Even with all its cost effectiveness it seems technology has exacerbated market volatility. The fact of the matter is that computers don’t think and technology is not a replacement for experience. Therefore they don’t have the “feel” necessary to assure orderly markets in a time of crisis. The “feel” as I describe it is the difference between Science and Art, mathematics and music. Traders for years have known that there is a zone between stimulus and response. Some have called it a nose for trading but it boils down to the ability to factor in an enormous amount variables under the watchful eye of wisdom, knowledge and experience. A machine simply can not take into account all the variables be they know or unknown to weigh the proportionate risk. “Black Boxes”, don’t think they respond and often in a “Black Swan” type event are left with little or no resources to accurately evaluate and act on the introduction of new variables.

I do a lot of investment seminars if you have any connections with organizations large or small that use public speakers and would be interested in some kind of a seminar on current market conditions and there long term implications contact me!!!

Monday, October 20, 2008

Yes I do Investment Seminars

I do a lot of investment seminars if you have any connections with organizations large or small that use public speakers and would be interested in some kind of a seminar on current market conditions and there long term implications?

Contact me :

Monday, October 13, 2008

2008 Market Performance

2008 Market Performance

12/31/2007 10/15/2008 2008
Close Close % Change

DJIA ^DJI 13,264.82 8,577.91 -35.33%

S&P 500 ^GSPC 1,468.36 907.84 -38.17%

NASDAQ ^IXIC 2,652.28 1,628.33 -38.61%

Russell 2000 ^RUT 766.75 502.17 -34.51%


a “Black Swan Event” ?

While investors are busy trying to find there way, and Europe is forced to take its medicine by getting served a round of bank failures, Washington plays the blame game without realizing Identity politics and affirmative action have destroyed our credit markets.

What we had is a “Black Swan Event”, the worst week in 75 years a 9.5 standard deviation move .In English this means you have a greater chance of getting hit by an asteroid or winning the lottery twice in one week than you have the stock market get as clobbered as it did last week .Like 9/11 these so called “Black Swan Events” are as devastating as they are improbable

Investors are left wondering if this is the worse case scenario, the beginning of the end or the end of the beginning. My feeling toward this market calamity is simple, its important to remember that even though there have been a significant technical break down unlike past calamities such as 1929 ,1987 and 2000 the market was up huge in the preceding period while in the last 8 years the market has barely kept us even after adjusting for inflation . So I guess what i am getting at is that unlike other market observers I am of the view that as they say you can’t fall off the floor, which leads me to favor the ‘this is the buying opportunity of a life time” scenario. I will also go out on a limb and say this is October and in the past the seeds of many significant turnarounds have been planted during this month.

I don’t think despite the sirens of doom that we are heading into the next great depression. The government for all its failings during this crisis does not seem to be nearly as inept as the government actions were during the early 1930’s such as raising taxes, price fixing ,stopping foreign trade ,and raising interest rates . The financial rescue plan if anything seems to be a reorganization of the need for global liquidity .The closest thing to the stupidity of the early 1930’s seems to be this silly attempt to stem “Global Warming” though the regulation and taxation of carbon which is scientifically totally bogus.

The Elliot wave however is telling me that we are due a short term rally which will then followed by a significant bottom. It may come at us hard and fast so I would play it safe and look toward any relief rally to sell and move into more dividend paying stocks.

Friday, October 10, 2008

Friday, October 03, 2008

Is Wall Street Broken Part 4 : the Community Reinvestment Act

Another problem is the Community Reinvestment Act; this appears to be at the crux of the entire sub prime problem. The Community Reinvestment Act, was pushed under the guise of making home owners out of everyone. The problem comes when many were not prepared to be homeowners .Lending standards were thrown out the window to meet this noble goal and lending institutions were basically forced to throw money out the window, by luring weak buyers with no money down and enormous mortgages thus creating the sub-prime lending mess.

From my under standing this act has not been addressed by the bail out bill and if anything could be perceived to encourage more bad behavior,with the "foxes watching the hen house nature of this bill"

My view would be to modify the act and make it more realistic by encouraging and rewarding saving and investment instead of paying off political constituencies with irresponsible lending practices.

Wednesday, October 01, 2008

Is Wall Street Broken Part 3: Down with “Mark to Market”

A simply way to improve bank solvency at little or no cost to tax payers would be a revision in the “Mark to Market Rule” For the laymen all financial institutions and investment funds must at the close of business price all the assets on the books at the bid price for that day’s business. So in simply terms if your house is on the market and you received no offers on that particular day your house received no bids, and according to “Mark to Market” your house is worth nothing. Yes that’s right nothing, zero. I think a light modification in this accounting rule is in order. Perhaps a moving average or a longer term bid period. It’s simple, it’s sensible and I dare say it cost far less than $700 billion.

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