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Wednesday, September 25, 2013

Internal Indicators

Being completely lost, as far as market direction is concerned, and invested at 50% - I want to review some key market indicators.



Volume Oscillator T's continue to be unreliable in 2013. T4 and T6 missed the tops, and T8 is doing something wacky. Admittedly,  I couldn't recognize T8 bottom as it happened.
VO T April-September 2013
 Risk-on /Risk-off ratios, aka Confidence indicator (FAGIX:VUSTX  LQD:HYG $SPX:$USB)


$SUPADP   $SUPUDP      S&P 1500 is a great index for breadth indicators because it combines the S&P 500, the S&P Midcap 400 and the S&P SmallCap 600

Here is a new idea (UPDATE 12/15/2013)
 $SPX:$GOLD used not as a ratio, but as SPX priced in Gold, aka Bullshit Indicator.
If its rising - all is good in the land of stocks.
If its falling - stocks are Bullshit!
also trying to look at following ratios without referring to S&P (plot not included in this study)
$SPX:EFA   $SPX:EEM   EFA:EEM seems to produce at-least 2-3 months trends
It is not necessary to invest in under-performing areas of the World


Daily  http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=6&dy=0&id=p71533435672
Weekly   http://stockcharts.com/h-sc/ui?s=$SPX&p=W&yr=3&mn=0&dy=0&id=p41109488212
Volume Profile  http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=9&dy=0&id=p89183620435

...................In The News..........................
All about gov. shutdown and debt ceiling. General opinion is that its much ado about nothing. They shut government down before, causing some turbulence, but then market quickly recovered. Debt ceiling debacle caused August 2011 collapse. I remember it well - debt-ceiling was lifted at the last moment, but market crashed anyway. So basically we are conditioned for a 'recovery' after....hold on, after what?

Here is ConvictScott:  (from here http://evilspeculator.com/?p=38564)
 Given that we have the money honeys and affiliated news clowns yabbering about the gubmint shutdown, the odds favor uncertainty with a strong chance of an epic short squeeze.
Just the same fucking circus as September 18 "No Taper" announcement. Everybody kinda agreed that 10-15bil taper of fed purchases would probably be good, and thats what fed was talking about all this time. I don't think they know what to do. I think there is a problem we are not aware of. Why? Market topped on that announcement, with general consensus that softness is temporary and recovery after... is most assured.

We have been going thru this nonsense for few years now. I am not sure if its always been like this. I can't learn all I need from history. My problem is that I have been investing during period after 2000, and don't have my own experience of secular bull market. Was it like this? An endless climb of wall of worry?

Wednesday, September 11, 2013

The Wonder of Dow Paradox

Its a well publicized and known fact that Dow Jones Industrial Average changes  composition of its 30 stocks every so often. These changes are made by commission of editors of Wall Street Journal. Yes. Journalists - not economists, writers - not businessmen, 'opinion heads' - not 'movers and shakers'. The 30 components of Industrial index suppose to represent some kind of slice of economy, but its a muddy picture at best - most of stocks are not 'industrial' at all.

Yesterday the news came out about upcoming changes. This is not a common event,  Index goes without any changes for years and years, and then one of companies merges or sold, or dropped. Now they are changing three! Goldman Sachs, Visa and Nike will be added to the Dow Jones Industrial Average. Out: Hewlett-Packard, Bank of America and Alcoa.

I wrote here: http://evilspeculator.com/?p=38292#comment-1037098392 :            
              When shoe maker and payment processor replaces aluminum and computers in INDUSTRIAL average - makes me wonder about state of american industries. Lest not forget about replacing a branch bank with gambling casino.
             Thou methinks it will be good for index, as new addition are active issues, so kudos to Wall Street Journal editors for running DJIA like a top-notch ponzi scheme

 This is an essence of Dow Paradox.
What is a point of doing long term technical analysis on a price chart of $INDU or DIA, or SPX, or many other so called 'indexes' ,when composition changes so much - its not the same index, not even close. Companies dropped from major index suffer massive outflows, sometimes for years, and often even go bankrupt (remember Kodak). The purposeful manipulation of index components is designed to produce positive outcome, thus creating an upward equity slope - an illusion of increasing wealth and prosperity - The Dow Paradox!

This Ponzi Scheme is meant to be gamed by buy-and-hold approach, especially so by buying the dip. The bigger the dip, the more you buy, and then hold. Selling is really not necessary if time horizon is 10 years or more - your favorite index will be rebalanced by then, and off we go. Its been working just like this for over 100 years, and may work for a 100 more, or may break down tomorrow. There is no way to know for the outsider, besides very few people are asking any questions. Such is the nature of Dow Paradox.

Dow Paradox is thoroughly exploited by Scammers - Wall Street'ers, money managers, brokers, pension funds, insurance companies etc. For as long as Ponzi Scheme is running, there are fees to be collected, salaries and bonuses to be made - good life - money for nothing. Its beautiful! All paid for by willing Victims - sheep led to slaughter. There are millions of them, all unaware of Dow Paradox, ignorant to mathematical impossibility of pyramid scheme. Don't be sad. Its meant to be this way. Reality

The Wonder of Dow Paradox is ME! There are not alot of people like me, may be few thousand in the whole round blue World. I know about Dow Paradox, I use it fully realizing pitfalls and challenges, trying to fleece the Victims and rip-off the Scammers. Using money to make money on a money. Moving and shaking. The ultimate cog in a machine - The SUCKER !!!

Sunday, September 8, 2013

In Search for Darvas Stocks - 3D Printing

One of main principles of  my System 9 is "Theme Investing". There has to be a main idea, some kind of common sense reason for investing/trading the stock of a company. Afterall, somebody has to pay more for this stock at a later date... Why that "greater fool" doesn't do it now? May be I am a greater fool?

Successful speculating in financial markets requires some kind of variant perception of prevailing and expected trends. Even more importantly - there are many ways to skin that cat. One of the most obvious to use is a set of conditions when there are discounted expectations for future prospects of company. Just recently I had this experience with Tesla.

Most people on blogs and message board where skeptical that Elon Musk's company can actually produce damn cars and in quality and quantity promised. Price performance was lousy, earnings releases was a nightmare (thanks to their moron CFO), I was stopped out several times - a very frustrating experience indeed. Eventually this discrepancy was corrected in a very violent manner, as stock exploded higher, fueled by short covering and exceptional publicity blitz, rendering me a mind-blowing profit of 400%. Secondary offering was bought with vigor, and while TSLA is 50% higher than my last sale price, I am happily out of stock, as I am convinced that pendulum just swing to another extreme.

Herein lies the genius of iBergamot, greatest value investor ever lived... He-He
Variant perception is just that. It doesn't have to be right, infact just like everything else its 50/50. When its wrong, when "Investing Theme" holds water (influenced by media, or news hype, or biased personal experience), or when conditions change, on maybe it was just stupid fucking idea... - only then comes the realization of imperfection of individual variant perception. For every "Tesla campaign" I have a "Rare Earth's campaign". Same premise that worked on TSLA between 2012 and 2013, failed miserably on LYSDY and MCP just a couple of years ago. And the craziest thing - I still think that Lynas should be a $100 stock, not Tesla. ...disturbing... Lynas LYSDY last $0.36 (yep, 36c); Tesla TSLA last $166.97...  Some genius...lol

Nicolas Darvas in 1950's used another "obvious" approach to variant perception of financial markets: investing in
"stocks which were tied up with the future and where I could expect that revolutionary new products would sharply improve the company's earnings"..."I was constantly searching for stocks that would climb into a stratosphere because of the vision of their future"..."I made up my mind to buy high and sell higher".... "While the fashion persists, the forward-looking investor gets in and stay in."   Nicolas Darvas, 1960
 These stocks typically will exhibit a strong price move, in an environment of complete media black-out. There is no news, nobody follows these stocks, nothing on blogs and Yahoo message board is dead. Yet there is a huge change afoot, and smart money are buying stock that will soon become "fashionable" investment, with massive following and Tee-Vee coverage. Then (maybe years later) smart money will exit and move on to next "Theme". Rinse and repeat. Darvas Stocks are hard to find, especially for me - I only have few hours a day, and I already run several strategies which take most of that time to manage. It doesn't mean I will stop trying.

3D Printing.

The word is: this is a Third Industrial Revolution. Umm...
I can buy 3D Printer for as little as 500$. What am I going to do with it to make money? Its a toy. Fine. I suppose somebody else can figure out how to turn profit from this new technology. There are big(er) industrial models with no prices quoted from DDD. Interestingly that graphene - a real world-changing break-thru technology can't get off the mat, while plastic toys of ugly colors are all the rage. Follow the money:

Wednesday, September 4, 2013

Red Pill


         "The answer is to stay the fuck out of foreign countries and get our own affairs in order. Of course the 'end-game' scenario completely removes that option - at this point the banksters implicitly run the West and parts of Asia.

The United States remains in a constant state of war for decades now - it's become a routine for the American people. The incurred and implicit cost are the implications that are becoming increasingly more apparent every day. Failing school systems, failing government, failing infrastructure, failing economy, failing currency system, failing morals, failing social services, failing empathy, failing families, should I continue?
The best thing we can do is to detach ourselves from the day to day drama and solely focus on becoming independent economically and personally so that we are able to seek shelter and peace in an increasingly hostile and dangerous world.

Between my wife and I we speak four languages which gives us access to large parts of the planet. We own almost nothing and we rent - in theory we can break up tent in a matter of days and be gone. My business is online and I can run it from almost anywhere in the world (Australia/Asia being the most difficult). If I decide to move to some island in the mid Pacific then all I need is access to a satellite and I'm good to go.
Possessions and debt is what drags you down - the game has changed completely and ultimate freedom is being able to choose and not being dependent on anyone. Which is also why I chose to become a trader - it is one of the few trades you can do from anywhere and nobody cares who you are and where you come from. All you need is a trading account and your smarts.

 Evil Speculator was founded on that very premise. To help others gain the ability to embrace independence and detach themselves from the 'machine' - or 'the system'. Evil Speculator inherently is 'red pill' - we don't waste our time with lofty discussions or debates on what makes the market tick or fundamental issues. We have no means to affect the outcome of what lies ahead - which has been in the works for decades now. What we CAN do is to adjust, focus on the change we can effect for ourselves, and thus secure peace, liberty, freedom, and prosperity for ourselves and our loved ones."
 Molecool of   evilspeculator.com

I wanted to add couple of my own thoughts on this matter, but really he put it so well, I would be just repeating. My views about life in general had changed alot over past couple of years. Molecool had a significant influence, and also works of Ayn Rand, Nassim Taleb, Michael Lewis, Daniel Kahneman and others. It was a quest to find answers to some important, but vague questions. A very frustrating experience until I realized that I was asking wrong questions.

Objectivism, by Ayn Rand holds that:

  1. Reality exists as an objective absolute—facts are facts, independent of man’s feelings, wishes, hopes or fears.
  2. Reason (the faculty which identifies and integrates the material provided by man’s senses) is man’s only means of perceiving reality, his only source of knowledge, his only guide to action, and his basic means of survival.
  3. Man—every man—is an end in himself, not the means to the ends of others. He must exist for his own sake, neither sacrificing himself to others nor sacrificing others to himself. The pursuit of his own rational self-interest and of his own happiness is the highest moral purpose of his life.
  4. The ideal political-economic system is laissez-faire capitalism. It is a system where men deal with one another, not as victims and executioners, nor as masters and slaves, but as traders, by free, voluntary exchange to mutual benefit. It is a system where no man may obtain any values from others by resorting to physical force, and no man may initiate the use of physical force against others. The government acts only as a policeman that protects man’s rights; it uses physical force only in retaliation and only against those who initiate its use, such as criminals or foreign invaders. In a system of full capitalism, there should be (but, historically, has not yet been) a complete separation of state and economics, in the same way and for the same reasons as the separation of state and church.
From Ayn Rand Institute http://www.aynrand.org