Opium Wars in Afghanistan

Many people believe the War in Afghanistan is to Defeat the Taliban, Win the War on Terror, Find Osama Bin Laden and Train Afghanistan Security Forces.

President Obama is going to address the nation tonight and talk about the need for more troops and our new strategy in Afghanistan. What you will not hear about on TV tonight is the $50-65 Billion Dollar per Year Market for Afghan Opium.

This is the real reason we are interested in Afghanistan.




If I was President, I would let the American people know everything is going well in Afghanistan. We need more troops to secure our drug trafficking buddies. Don't Worry Opium Production is up 2000% since the US invasion.



http://www.bbc.co.uk/blogs/thereporters/markeaston/2008/10/map_of_the_week_the_mystery_of.html




NY Times Reports: the CIA pays the President Hamid Karzai's brother (A Known Drug Lord) for a variety of services, including helping to recruit an Afghan paramilitary force that operates at the C.I.A.’s direction in and around the southern city of Kandahar.

http://www.nytimes.com/2009/10/28/world/asia/28intel.html?_r=1




Here is link from MSNBC with Marines ordered to allow Opium Production and protect Farmers. Even though the Taliban Makes Hundreds of Millions of Dollars per year from the end product. This is how they fund "Terrorism".

http://www.msnbc.msn.com/id/24489703/







The cost of war is small compared to the $50-60 Billion Dollar yearly opium market. We are actually about doubling our money here every year. The war costs about $2.5 Billion per month. The US tax payers are left to pick up the tab for the War on Terror and training the new Afghan security forces. The profits are off the books black market money for a select few interests, then laundered back into legitimacy.

If we really wanted to stop the Taliban we would eradicate all of the opium Fields. The official explanation is Afghan Farmers they don't have any other economic options but to grow poppies. Do people really believe we need to let them grow opium so they can have money to feed their families? Now That's funny.



Then the icing on the cake. The Millions of Russian Heroin Addicts thanks to plentiful, powerful and cheap Afghan Opium. Precise figures are not available, but it is estimated that there are somewhere between 1.5 million and 6 million heroin addicts in Russia.This keeps many Russians under our control. No need for Cold War Weapons. http://news.bbc.co.uk/2/hi/south_asia/8319585.stm



People Wake Up the strategy is working! President Obama you have my Support. Send 100,000 More Troops. Let's Keep that World Wide War on Terror Dope Flowing!!!

A Practical Solution for an Effective American Government

It seems today more and more Americans are realizing that Government at all levels (Federal, State and Local) is NOT working for them.

The Disconnection and Divide between the Political Class and the average person has never been wider. The concerns of the average politician are much different than that of the average American citizen.

The current system of Government we now have is ineffective and does not meet the needs and challenges of the time and place where we are living. The career politicians, corporate lobbying, and special interests have created a one party system of government. Republicans and Democrats are all taking money and doing favors for the same people.

The contributions of a few hundred thousand or a few million dollars usually turns out to be money very well spent, when hundreds of millions to billions of dollars in tax breaks, direct money, and other government programs are established exclusively to benefit these very few large donors.

The problem with our system of politics and government is corruption. No person can be put in the places of such huge responsibility and immense power. All Human beings have needs and wants which must be satisfied. These include basic needs all the way up to gold t shirts and Ferrari's. There is no one who can be put into these situations and make decisions without the influence of these special interests. When money is received, we all feel like we owe something to someone.

To make the decision that is best for the majority of Americans politicians need to have a special shield from the influence and interests of lobbying groups. There are not many (if any) politicians who don't need the support from Big Money donors to campaign, and throw swanky fundraisers on the path to getting reelected.

The traditional sources of political funding is what keeps the wheels of crony capitalism and government hand outs turning.

There exists to me only two alternative solutions here:

(1) overthrow the government
(2) start a public funding campaign to pay the politicians to do work for the "average" person because no one works for free.

Lets look at option 1. Overthrowing the current government seems impossible to do because of the scope of the military. Any resistance would be met with deadly force. No matter how many weapons the resistance movement could amass it would still not be enough to compete with the Billions of Dollars we have all contributed for National Defense.

Lets say we did overthrow the US government today. Then the problem we face is Anarchy. Lets say we started clean and wanted to establish a new government, as our founding fathers had instructed us to do if the government became too powerful. That sounds simple enough. Except....

Now Anyone and Everyone would have an opinion on how to run the New Government. Since there would be no government, and no perceived Authority people would not know what to do with themselves. They may or may not follow the new government, and with its lack of history it would be hard not to overthrow it again whenever something did go your way. Overthrowing the current government seems impossible. It is a system that predates and supersedes many individuals and social institutions existence. It is also impractical. Lets consider option 2.


The Practical Solution for an Effective Government is for the Public to Fund a Lobbying Organization that contributes money directly to Politicians. Now when Politicians are making legislationthey are working elclusively for special interests groups and NOT their constituents.

If you agree that all Politicians are corrupt, then the only solution is to pay these people directly and have some type of voice in what they do. Now the general public does not have a voice or a vote on the majority of legislation produced by the very politicians they voted for. The American people seemed to forget that no one works for free. Why would they except their elected Representatives to be any different?

For a remarkably small sum of money, the Citizens of the United States could fund a general public lobbying organization to stand up for their interests. At this time I am unaware of any such organization that exists. The organization would vote on pertinent issues and craft their own legislation for matters it deemed important enough. The main purpose is to give the general people a real voice backed with real dollars behind it to compete against the special interests groups narrow agenda.

The Math:

If 50 Million people or about 16% of the 300 Million Americans gave $20 dollars per year to this Lobbying Organization we would have around $1 Billion Dollars to buy the influence and votes from our Politicians. With 435 Congress members and 100 Senators we would have over $1.8 Million Dollars to pay each of them! If anyone was too greedy to take our money and not vote our way they would be abolished from Politics in an orderly fashion.

We would be getting a tremendous bang for our buck in buying influence directly. The Amount of Corporate Contributions is tiny in relation to the benefits they receive. Giving away a couple Million Dollars to access Billions of Dollars in "Free" Government money that comes from tax payers and favorable policy is no brainier.

If you could pay $20 dollars today and eliminate government waste that would end up costing you thousands of dollars 3 years from now would you do it?

To Vote according to the wishes of this new organization is simple, fair and easy. The organization would have online votes where the majority opinion could be represented through our politicians actions. Now the politicians would be forced to be accountable to the average person.

There is no such thing as an honest politician. The nature of the game forces people to do favors for those who contribute the most money to them. We acknowledge these cold hard facts and do not believe they can be changed. Anyone who thinks otherwise is either a fool, ignorant or is fooling themselves.

People brought President Obama into the White House on his platform of Change. What Change can you expect when you dig around and see that the same Big Donors are funding Both Sides?

What change can you expect when no changes are made?

Monavie Music Parody

For anyone who does not know what the back story here.....Someone tried recruiting me to this "multi-level marketing business opportunity" aka a Legalized Pyramid Scheme. I tried explaining it was all BS. These people did not listen. This company had a music contest with people who think this is a real "opportunity". This is Hilarious to me. I Love Pyramid Schemes, Never Been in one, but they are fascinating to me. They play on peoples emotions, and hold the carrot in front these people to keep them charging ahead. In the end if you look at the facts they all end bad except for the top people. The more I found out the more upset I got. But you gotta believe!!!!! Ha. Enjoy the little video.

What is Facebook really worth? How can I make money while giving away my product/service/content for free?

The frequency of my blogging has decreased in the recent months due to my Facebook addiction. Instead of picking topics and analyzing them intensely I have instead chosen to read Facebook status updates, view photos, and make comments on my friends Facebook pages.

All of my friends are pretty much on Facebook with only select few opting out of participating only to seem cooler than everyone else. But how cool can you be if you when you don't know that Alex took a quiz and if he was a 1980's rock star he would have been Billy Idol. A girl I know even announced she was pregnant on Facebook.

I wonder how can Facebook use the information of its unique users to generate more revenues and eventually become profitable?

This got me to thinking, What is Facebook worth? Everyone knows Facebook founder Mark Zuckerburg was said to be worth around 2 Billion Dollars (before the market correction). The Investments from Microsoft and a few other private companies have been placed for only a very small percentage of ownership in the company.

Currently as of July 30th 2009 Facebook is in the Red. They are not making any money. Their model of generating income from the "cool" idea of social networking has not produced any edible fruit. Now they host a variety of Advertisements and target users by the specific information in their profiles. For me they are pushing hot single girls via dating services, penny stock ads and brokerage firms. Not Bad. But I have not bought anything from a Facebook Ad yet.

How they turn nickels and dimes into Millions and Billions of Dollars? Could Facebook become more Googlish and start making more money from some type of Search? And/or Linking fess to partner sites. I bet they are working on something like this right now. The Key is to match users up with Relevant Content and provide value that cannot get anywhere else through exclusive deals to the community.


Can a social networking site actually charge money to use it?"

Well sure they could try, but how much could they charge? Would anyone actually pay now for something they expect to get for Free? According what we have seen in the past the majority of people would probably move to the next new free site.

How can I make money while giving away my product/service/content for free?

I don't know the answer to this question or else I would not be writing this Blog. Maybe the awnser is simply Google. They are the Obvious Winner in this space so far. There are many sites giving "stuff" away for free then trying to figure out how to make money off it later. In any "normal" business model this seems ass backwards, abusud and insane.

When Time Warner acquired Myspace last year they thought they were buying into the next hot thing. They actually were buying the last hot thing. This is when Facebook really started heating up. The features and format of Facebook for social networking are second to none. People started leaving myspace en mass due to phishing, privacy and over advertising on the site. I actually get emails now from Myspace telling me to log in to see what my friends are up to. Rupert Murdoch must be a little sour buying in at the top of the Myspace Bubble from Tom and his 300 million Friends.

The Challenge with any Internet business model these days is: How can I make lots of money while giving away my product/service/content for free?

Multilevel Marketing Oraganizations ARE Pyramid Schemes

I have been solicited several times for various different MLM schemes, fortunately I have not wasted too much time or energy in realizing these claims and this whole business model was absurd. After getting sold on a $25 dollar ticket to go the rally by a friend, something did not feel right. I politely declined to join or any further involvement. It seemed to me the existing distributors exaggerated the income actually made from their efforts and the potential for success in "the business". That time my gut made the decision for me.

Why all multilevel, network or referral marketing business models are really pyramid schemes, and Why all Pyramid Schemes eventually fail.

Mathematically Multilevel Marketing Does not Make any sense, and never makes Dollars-This is my favorite example why any Multilevel Marketing, Network Marketing or referral Marketing “Business Opportunity” ultimately eventually turns into a “Pyramid scheme”. Lets assume for a second you have recruited me to join your new business selling the next miracle juice beverage products, this product has many glowing celebrity endorsements and positive media coverage. We are both pretty excited, the guy who recruited you into the business knows a guy who is making $100,000 a year, and that guy knows a guy who is making $200,000 a year. Here comes the math. Lets say you recruit 2 friends, they recruit 2, then each person recruits 2 more friends. The law of compounding says that eventually these numbers become very large and unable to duplicate. So if you get 2 friends, they get 2 friends, and those 2 friends get 2 friends.

Here it goes: 1...2...4...16...256...65,536...4,294,967,296

The Pyramid eventually falls apart because there are not enough new recruits too keep it going.

The six degrees of separation explains why most pyramid schemes fall apart at the 4th or 5th level. This is because there is simply no one left to buy into the idea of a “business opportunity”. If everyone in the world is interconnected by 6 or so people the connections are simply exhausted and there are no more ready, willing and able investors who have not been pitched yet.


The Federal Trade Comission makes vague distinctions between such MLM marketing organizations and official "Pyramid Schemes". They need After much inquiry, I believe that all MLM's are indeed glorified "Pyramid Schemes" in one way or another. The FTC advises that multi-level marketing organizations with greater incentives for recruitment than product sales are to be viewed skeptically. The FTC also warns that the practice of getting commissions from recruiting new members is outlawed in most states as "pyramiding". I'm not knocking the FTC, they are doing what they can.

Another "Business Opportunity" was brought to my attention recently, hence the Blog.

I don't want to name the names of any companies involved or persons involved because the people know who they are, and the companies will sue you. I have read the lawsuits.

The product is never the problem with Multilevel Marketing Schemes. The products are often good. At times even extraordinary. This is what creates the devotion and hope down the line of “independent business owners” to keep pushing forward when the going gets tough. No matter how useful, revolutionary or necessary the product or service sold, the flaws with the multilevel marketing business model are inherent, and eventually the inflated artificial demand for the business opportunity falls significantly.


Confusing/Unfair Compensation Plans The Compensation Plans of these Network Marketing business models can be very confusing and misleading. After taking a look at the compensation plan for a business opportunity I was told about, I decided that it would be difficult to build an organization on the backs of my least successful and profitable “leg” of new business owners I recruited. Why not giving profits based on the average of all people you have recruited? That seems a bit more fair.

Taking in too much Overpriced Inventory-This seems to be a common trait of MLM and Pyramid schemes getting the recruits to commit to taking in a certain amount of inventory at prices that are highly favorable to the distributor. There are many legal tests used on MLMs by the FTC such as the 70% use test for products purchased by the independent distributors. The Distributors in many cases have no margin to make money off from actually reselling the products. In fact many organizations discourage distributors from becoming retailers and instead encourage them to focus on recruiting more and more distributors. They say things like “your not selling products, your sharing the plan.” Lets assume thats true. Who eventually fills the void in demand for these products? The answer is no one. The product supply outweighs the product demand. If there is not sufficient consumer demand back up the purchases. Remember Boiler Room? For some of the more diversified MLM companies the distributors can survive, but on one or limited products it becomes more difficult.

Why sell products through a traditional retail channel and force the market to decide your prices when you can sell direct with no advertising costs, and for a higher price? When retailers get a product they have the Manufactures suggested retail price MSRP to go off, but they are free to charge their own price on most items. Some charge higher prices some lower, these different prices create different values and choices for consumers regarding where they choose to shop. When any retailer buys a product they are looking for at least 50% mark up or more. If your margins are not at least 30% you are probably being scammed and its going to be very hard for you to make any money "retailing" items.

I bet they told by cutting out the "retail middle man" you will be getting paid for bringing products directly to the people.


The Real market price for these “exclusive products” can be found on 3rd party retailing Internet sites where the real laws of supply and demand rule. Some people selling on these sites are likely trying to unload their excess inventory and cut their losses.

Don't ever purchase your inventory for more money than on other internet sites or else your never going to make any money. This is one little tip to let you know you may be getting ripped off.

Who is really making money here? My favorite thing about the Pyramid scheme is the “success stories”. These are the everyday people who are turned into larger than life inspirational tales for the masses of recruits to follow. They are usually a couple who were once bankrupt, destitute and starving on the mean cold streets. Now these people are living in a tropical paradise, spending endless amounts of quality time with their family, and have more money than they know what to do with. They talk about the perks of big houses, sports cars, fancy clothes, the lifestyle someone can achieve if they just follow the plan. These people are the exception to the rule, they are on the near top of the Pyramid, your opportunity by default is not as good as theirs because you have less people to recruit into the scam and less time before it collapses. You can bet anyone higher in the pyramid than you is making more money than you are. How many people are really making the kind of money that is promised? And how are they making this money? Is it from selling products, recruiting or getting paid for speaking engagements?

For a select few this is a great business-If you can invent, market and effectively run a “successful” pyramid scheme or if you can get yourself to the top of the pyramid you can make lots of money. Imagine if you could convince people to order more of your product than could ever be consumed, at a price you control? Who would not want to be in this business? Without considering the legal, ethical or moral consequences of such actions, it sounds good to me. Let's assume you know that new product XYZ is a multilevel marketing/pyramid scheme, but you think the products are great, and believe you can make some serious money. You think a fool and his money were lucky enough to be together in the first place. As PT Barnum says “a sucker is born every minute”. For you seeing a sucker parted from his hard earned dollars is the simply the universe doling out justice. It is survival of the fittest. The lazy, dumb and clueless should be left to soup line while you eat sushi, shrimp and steak.

Getting in early matters-Even if you have the best idea for a product, with the fastest growing network marketing company in the world, getting in early is what really matters. The sooner you are able to get into the pyramid the greater your chances of “success”. The more people you have above you, the less people you have available to recruit. If you get in the next great pyramid scam early enough you could be one of their success stories. However the longer down the line you are, the less able new people you have available to recruit . Think about if you were the last man down the line, How are you supposed to make any money? All Multilevel Marketing is eventually a game of musical chairs where there is not enough seats to for everyone to sit down. The hard part is determining when the scheme is its incline of membership and when the numbers start going south. Getting in at the right time ensures less risk on the part of the distributor. The more people who are already involved the riskier the opportunity is. The later you get in to the game, the more risk you assume.

Unless your Inside your Outside with this one. If you not at the top of the pyramid you have no idea how far you are from the bottom.

Its been a Long Time.

Its been a long time since I have blogged it. I'm back in action.

Someone Needs to Stop President Obama. Washington has Gone Wild.

Obama, Obama, Obama! What more can I say.... You tricked me into voting for you. You promised to Change the old ways of Washington. You inspired the faithful during your historic campaign to the White House. You made the hairs stand up on my skin with your words "Yes we can". You spoke so eloquently. You looked so strong and confident. You promised to go through the Federal Budget line by line and eliminate wasteful earmarks and pork barrel spending. You energized and put into action people who had never voted before. You brought the message of a fresh start, hope for tomorrow, and new beginnings for the Great Nation of America.

What happened? You have proposed spending more tax payer money in your first 6 weeks than in the entire history of the United States Government. You bring no Change. Instead your rush to "stimulate" the economy has encouraged an avalanche of wasteful spending. Every piece of pork sitting on the shelf was shoved into these bills by representatives on both sides of the aisle. A True Bipartisan cooperation!

Your haste and hurry has encouraged your fellow Politicians to push the limit on more useless projects and wasteful spending. The recklessness with which our government is spending our money is unbelievable. Is this a Bad Dream?

This is outrageous. This is unacceptable.

Mr. President, How could you let this happen?

Washington has gone Wild under your watch. Everyone in the government is taking this opportunity to get all they can. Washington is looting the American taxpayer and leveraging the future of our nation to do favors for their cronies and pals.

Please someone tell me what the Washington outsiders can do about this?

Dick Bove is a Moron. If you see him in person punch him in the face.

Analyst Dick Bove came out in March of 2008 claiming the bottom was in for financial stocks after the collapse of Bear Sterns. He called the bottom, and decided it was time to buy the financial stocks. Putting out the call on CNBC, Bloomberg and other financial news networks. I hope no one listened to him. We all know what happened next.

This guy has got the golden touch. What ever he recommends goes to isht. You could have made a killing fading his long calls. Go to www.briefing.com and look up his calls for yourself. They are terrible and well documented. If you want to waste some money and entertain yourself go purchase some of his official reports and read them.


This leaves many questions for investors such as:

How does Bove even have the nerve to show his Dick face in public?
Why are these news networks even letting him speak on Television?
Who exactly is paying this guy to go on Television? (gee I wonder)
Does he actually believe his own reports, reasoning and price targets?

If you can't answer these questions do not follow his advice.

The Obama Administration has the Wild Card on all Financial Markets, Rules and Regulations

The new administration is supposed to unveil more information in the coming the weeks on the financial markets with President Obama putting together more fellows of his tax dodging dream team. Fresh off signing the $800 Billion Dollar Economic Stimulus Package this guy is just getting started.

The Obama Administration has the Wild Card on all Financial Markets, Rules and Regulations. With "Main Street" folks upset and legislators campaigning for 2010 they are ready to attempt solving our past problems through new rules. No one in the industry really knows for sure what is going to the regulatory landscape post this financial crisis. When Executive salary for TARP money recipients was cut to 500k this was obviously getting too crazy.

Goldman Sachs Group (GS) even had a special Private meeting with all of their best clients to brainstorm ideas on what to do, and how to move forward from here.

Basically no one knows what type of regulations are going to be in the future.

Imagine playing poker with 6 friends a standard 52 deck of cards. Lets say that who ever has the queen of diamonds wins no matter what the other players have. How much would you bet if you did not have the card?

Then imagine if they changed the rules again, after you thought you had the wild card, slipped an ace from their sleeve, brought in new (printed) chips-depleting the value of your existing chips, and gave other players chips if they need to be bailed out due to making bad bets.

How much would you bet if you had a Royal Flush?

Treasury Secretary Timothy Franz Geithner stumbled at his coming out party last week to announce his intentions to create a plan to bring in private capital to solve the crisis in the credit markets. Aside from offering no real clarity or any actionable initiatives, Geithner showed the market no one really knows how to solve the problem of valuing these assets.

The administration needs to make sensible regulations that promote the United States Capital Markets as the world's best place to do business. The Private Capital needs to be sure of the rules of the game, and then they will begin to place their bets. The Financial Industry needs regulations that verify the custody of assets with third, fourth, and fifth parties. Many of the problems that happened with Madoff and Standford could have been avoided by simply verifying custody of the funds.

Could the Dow Go Down to 4,000?

Could the Dow Go Down to 4,000? Dow 4,000 would mean another 50% market correction. This may seem impossible to think the Dow could lose another half of its value. How could the market go down so much? How can the market cause investors so much pain? It even seems cruel to contemplate.

My friend and fellow Trader Clay suggested to me it could. At first I scoffed, and then I thought. To truly know the answer you would need to look into the capitalization structures of every component and analyze the Debt and Equity used to finance the company's operations. You need to look at the cost of the debt, how much equity they have, how much money they are currently earning or losing, ect. You would surely need to make many assumptions about future business, economic and stock market conditions. These assumptions can be many varying degrees of right, wrong, true and false. You would also need to account for how much each components market cap "weighs in" to the index as a whole to see if those prices could fall to those levels based on the "fundamental" analysis.

Fortune Magazine Interviewed Commodities Legend Jim Rogers and he said this:

"In my view, U.S. stocks are still not attractive. Historically, you buy stocks when they're yielding 6% and selling at eight times earnings. You sell them when they're at 22 times earnings and yielding 2%. Right now U.S. stocks are down a lot, but they're still very expensive by that historical valuation method. The U.S. market is yielding 3% today. For stocks to go to a 6% yield without big dividend increases, the Dow will need to go below 4000. I'm not saying it will fall that far, but it could very well happen. And if it gets that low and I'm still solvent, I hope I'm smart enough to buy a lot. The key in times like these is to stay solvent so you can load up when opportunity comes."

I debated looking at the fundamental financial data to extrapolate an elaborate valuation theory to justify a Print of Dow 4000, I then decided to leave that to someone else. After looking at the Charts of the Dow Stocks the market is already speaking loudly about how much value it believes each component of the index is worth. Closing a few points above or below the 8,000 mark Friday its investors are skating on thin ice

After some thinking I do believe the Dow Jones Industrial Average could go to 4,000.

Are Obama Shirts going to be the New Ed Hardy?

You have all seen people on Television wearing the colorful animal print Ed Hardy clothes. Particularity the Reality TV programs on VH1. The line is by a guy named Christian Audigier. This guy has mailed his clothes out to virtually every celebrity in this galaxy and many who have been photographed on planet Earth have been happily sporting his threads. I even own 1 Ed Hardy tiger t shirts myself and another of from Audigier's Smet Line. If you ever see me wearing these clothes in person feel free to punch me in the gut.

These Ed Hardy T shirts are getting a bit played out. Now that so many people are wearing this gear it dilutes the brands exclusivity. Remember those Von Dutch line of trucker caps and clothing? Who is rocking that stuff now? Not any big name Retailers like Macy's, Nordstrom's, or Sach's, are carrying Von Dutch. Now they are all equipped with the Ed Hardy Clothing Displays.

In this economic crisis who wants to spend $80.00 for a T-Shirt? Why not support our new President and the United States of America with a similar flashy sense of fashion using President Obama as the Image of inspiration? Surely the inspiration and idea of Obama is a more positive role model for young children than Ed Hardy Tattoo inspired clothing designs.

The Obama T-Shirts are made locally by local people, and they support the local economy. They put the fate in the hands of the people. They are a new business created out of no where. This is exactly what the country needs. Kinda of.

Some people are saying Obama should get a piece of this mass merchandising using his image and likeness, yet if he actually enforced this no one would be buying anymore Obama T-Shirts. The demand would then shift for Obama Toilet Paper.

The question still remains, for 2009 and Beyond are Obama Shirts going to be the New Ed Hardy?

The Inauguration of Obama

I drove down to Washington DC this weekend for the Inauguration festivities for our 44th president Barack Hussein Obama. The spirit was flying high in the air as the crowd sang and danced during the "We are One" concert live from the Lincoln Memorial presented by HBO. Featuring celebrities like Denzel Washington, Tiger Woods, Ashley Judd, Samuel L. Jackson, Tom Hanks and music from U2, Stevie Wonder, Usher, Shakira, Beyonce, Garth Brooks, Bruce Springsteen and many many more.

When the massive display screens around the National Mall showed President Obama clapping, grooving and singing everyone in the crowd went wild. Little Kids jumped up on top of the hundreds of porta poties for a better view and had be to asked to leave by a squad of 30 MPs and a 12 police on horseback. Even when people were being helped off the potties, they did so in good spirit.

My second favorite part of the Inauguration was the street entrepreneurs selling Obama Merchandise. Something tells me that if John McCain had won the election people would not have been selling rhinestone hats and t-shirts.

The Downtown Washington DC scene over the weekend was packed with many inauguration events and star studded, in the midst of the parties, the glitz and the glamor everyone felt history being was made. Less than 60 years ago schools and public areas were segregated by race and now America has elected its first African American President. This is the American Dream.

Obama's first address to the nation acknowledged the many problems we are facing and the long road ahead, and inspired hope that we will eventually overcome these challenges. The Honeymoon period is officially over. History has already been made. We all know the significance of his election as the leader of the free world.

Now President Obama is accountable for delivering on the promise of "change" that he built his campaign on.

Who Even Reads this Blog?

An odd question to ask. But Who really reads this? I write so infrequently who reads my words? Just thinking out loud here.

Short Funds Need to Blow Up before the Market Bottoms

I could only begin chuckle as I think about how many Long Only and Long Bias funds Blew up and closed their doors within the past 12 months. This has obviously created some forced selling from firms who need to liquidate their positions. For the Market to truly turn around and be in the next "Bull Market", Ultra Bearish Funds need to blow up as well. When you burrow stock to short, your broker locates the stock and then "lends" it too you. To cover your short you need to actually buy back the stock in the market, hopefully for a lower price.

The situation too keep an eye on is a short selling fund blowing up due to a rally in the market that forces huge amounts of forced buying. It may sound a bit strange to hear the words "Forced Buying". For the market to truly turn Bears who shorted too much stock at the lower price levels need to feel some real pain.


For a true "Market Bottom" we need to clearly see the other side of the coin. The scramble to buy stocks needs to be as intense as the broad based selling that has occurred over the past 12 months. Until then the Bears will continue to sell Rallies and maintain control of the markets.

But would this short blow up even make the news? I highly doubt it. No one really complains when stocks go up.

When will these Government and Stimulus Packages End?

What the Hell is going on here? When will these government Bailouts and Stimulus Packages end?

The Fed has expanded their Balance sheet from 800 Billion Dollars less a year ago to 2.2 Trillion Dollars today. The Fed has slashed interest rates to a new target of 0% to .25 % the lowest in its history. The talk of systemic risk and avoiding the collapse of the entire financial system is the justification used for government intervention. That sounds reasonable enough. Who wants to see the entire financial system and economy collapse to bring about "The Great Depression 2".

The economic situation is calling for every industry to reach out and seek government help in what has become a race to convince the government why they need money, and exactly how much.

President Elect Barack Obama has called for a massive new stimulus ranging from 700 Billion to even up to a staggering 1 Trillion Dollars. The Strategy of racking up debt to stimulate businesses, consumers, credit and the housing market is what the government is relying on.

This leaves many questions unanswered. First will this actually work? What are the long term consequences of such a monetary policy? How will hitting the printing press and creating new money affect the value of the US dollar? What are the real costs of this monetary and stimulus to the American Tax Payers? For every Dollar of this Stimulus how much actually goes towards the intended purpose? How are the government agencies going to be held accountable for the use of this money? How is the Government going to promote entrepreneurship, innovation and prosperity by giving money away?

Finally the question no one wants to ask is: What happens if this does not work?

Trading Range

I really don't have much to say about the current market. The Trading Range seems to be firmly established at 800 to 900 ish on the S&P 500 Index futures and 8,000 and 9,000 ish on the dow jones.

I am not really suited that well to these types of markets thought I try my best and I am always getting better. In the mean time I get chopped around make a little money and lose a little less trading options.

Trending markets tend to allow my profits to run a bit further. My inclination is that we start towards S and P 1000 and Dow 10,000 into the last days of 2008. We shall see what happens.

If these indexes fail resistance I will look for shorting opps. If they keep moving up I am going to stay "cautiously bullish".

Credit Default Swaps. Too Big To Fail. Too Big To Bail Out.

The Credit Default Swap Market is estimated at $60 Trillion Dollars to $75 Trillion Dollars. The Current US Stock Market Capitalization is between $7 and $10 Trillion Dollars now. The Credit Default Swap Market is enormous and posses many unknown risks to the global financial system.

60 Minutes did a great piece about how this market compared with the old "Bucket Shops" that allowed customers to place large leveraged bets on stocks without much capital. Many people think this is the reason for the stock market crash of 1929. The States drafted legislation to prohibit these Bucket Shops. Then came of Commodity Futures and Modernization act of 2000.

This eliminated the old bucket shop laws and allowed the Credit Default Swap Market to flourish. The New Act Eliminated the enforcement of these "Bucket Shop" Laws. The Regulators created these laws after the 1929 financial crisis to prevent another crisis. The Regulators of our time undid these regulations to allow the markets to be free. They reasoned in our modern advanced financial society, large institutions had the intelligence and economic incentive to effectively manage risk, and they did not need outdated, burdensome government regulations to inhibit the flow of capital and compromise the sanctity and prosperity of the free markets.

A Credit Default Swap is an insurance policy to speculate on the default of a company. Since these are legally classified as "swap" contracts, and not actual "insurance" contracts, none of the collateral and minimum capital reserve rules of the insurance industry apply. This was intentional on the part of those who lobbied for this legislation. No one in a swap transaction is required to post much of any collateral to cover the risk of a credit event actually happening.

We know now that many of the people who wrote these contracts do not have the ability to actually pay on these claims. These Contracts were all sold by the Largest Financial Institutions, they were the cause of death for Bear Sterns, Lehman Brothers, and the cost of Billions of Dollars in write downs for too many companies to name.

Because of tricky accounting laws these swaps were written using special investment vehicles and other "off balance sheet" type of stuff. The words Off Balance Sheet even to the layest of lay people sound dubiously suspicious. It is so obvious this tactic was mean to deceive and cloud what should be clear black and white accounting rules, standards, and practices it is blatantly insulting.

The Markets are adjusting constantly with each new piece of data and information to reprice the risks and effect of these mysterious credit default swaps, special investment vehicles, mortgage backed securities, and other opaque, illiquid, hard to value, and even harder to sell securities.

It is going to be necessary for a central clearing house to stand behind the credit default swap market. The Chicago Mercantile Exchange (CME) and The Intercontinental Futures Exchange (ICE) are both licking their chops in anticipation of a new government regulated market for the swaps, and have both made proposals. Increased transparency and accountability in this market is essential for the survival and evolution of capitalism. The Obama Economic Team is going to have to handle this sticky task when they take office this January.

The Credit Default Swap Market is both Too Big To Fail and Too Big To Bail out.

Yes you read that last sentence properly. There is not enough money available for any government anywhere on earth to "inject capital", "provide liquidity" or really help ease these markets. Adding more money is not an option. These markets need to work themselves out on their own, for better or for worse. No one really knows for sure how everything is going to play out.

In 5 years from now you could be buying your girlfriend the newest designer purse as a surprise luxury treat, or stealing an old ladies purse to quiet your stomach rumblings to eat. Only time will tell.

A Girl I used to Love

I had to get this out of my system. This blog is used for mostly me posting trading tips and lessons I want to enforce within myself. But It's official Title is "Trading and Beyond". So Here is some Beyond.

If she reads this she will surely know these words are meant for her.

"Yesterday she was the one I pushed away. Today I can't find any words to say.
It hurts too much to think of her anymore. When I saw her last night my heart dropped to the floor.

And now I don't even know what I can do.
The hurt I caused her I know I can never undo.
I will probably never ever find another love so true.

I had with you everything I could ever want or need, I ask again and again god why couldn't I see?

She gave everything of her self to me. How Naive, blind and selfish could one man be?

Was I too young? Was I just too Dumb?
Was she the girl for me?
Was she the one?

It's now so clear to me that she was. Because no one else I've ever met does it like she does. She's Sassy, So Funny and Very Sexy too. But Now there is not anything that I can do.

I want her back so bad and it hurts, but what I did to her was so much worse.
I know she'll never be able to forgive me. And I know she will never ever forget.

But on the real...she is the most beautiful, funny, and interesting girl I have ever met."

Get Long. Lows Retested and Held.

Covered Shorts today at 1:30 PM EST. I Had such a small amount of options day trade buying power in my account I did not get long.

I enjoyed good shorts from S and P 1000 down to 838.

My Bias is to Long Side here for the near term.

I suspect this Rally will provide an easy trade on the long side. The Dow and S and P 500 both broke through, retested, and then ripped up well past the October Lows to cap off big swings. The market is now looking worthy of buying. Wait for a Pull Back and start grabbinwg some long bias positions on companies that are not broken. I will obviously short again if need be.

Always Leave em feeling Upset about what they Did, or Didn't Do.

There seems to be a natural tendency of the Financial Markets to preoccupy investors with the regret of past investment decisions. The Market will Always Leave many people feeling Upset about what they Did or Didn't Do. This Psychological burden is powerful if you let it trap you.

The Hindsight Bias and being able to see exactly what happened to your investment ideas you did not go through with, or actual investments you did not cut losses or take profits on, can create tremendous problems for traders.

Using the gift and curse of Hindsight I now realize The Market does not preoccupy investors and traders. Investors and Traders preoccupy themselves with these regrets. I was not being completely objective, and speaking from my own subjective view. Warren Buffett says "The Market is there to serve you, not to instruct you". The market is a 24-7 all you can eat Vegas Buffet. It is not your drill Sergent, dictator and decision maker. The market is a mirror of your mind, and what you are feeling inside. Its not a scary market. You are Scared.

If you allow the market to upset you about what you DID DO or DID NOT DO you cannot objectively observe the market in the present tense. Allowing feelings of past mistakes, losses, frustration, and failures into the present tense creates negative energy and a downward spiral of doom. Don't go there.

Letting Go of Fear

If we cannot trust ourselves to do the what is in our best interests and take action then we will always trade based on Fear. If we trade based on the Fear of Loss or the Fear of Missing out we will lose our money.

The only way to not be scared and be able to do what is necessary is to have the right set of beliefs. The beliefs we have about ourselves and the market determines our market experience. The right belief structure is key to getting what you want out of the market. Our beliefs about reality shape our own unique experience of the market. We need a belief structure that is effective in the market environment. For example: We believe when a trade goes against us, it makes more sense to sell it than come up for reasons on why it is not doing what we wanted to, hoping it does, and allowing ourselves to lose money.

We are forced to move towards evaluating ourselves and our own ineffective thoughts, beliefs, behaviors, and results. People do not always do what they intend to do, what is in their best interests and what makes just plain common sense.

It all Comes down to the choosing to create the conditions that allow you to trade without the negative constraints of Fear. The choice is yours. If we can see the person we want to be in our mind, and have the courage to step into the present and act accordingly we will be rewarded.

No Business is "Too Big to Fail". The Auto Industry Should NOT Be Bailed out.

The Titanic was not too Big to Sink. No Business can become "Too Big To Fail".

The Government has taken stakes in Banks and Insurance Companies using the Federal Balance Sheet to supply Private Interests with Capital and Liquidity. The Government is now getting called on from everyone for a "Bailout".

Now the Automotive Industry wants to be bailed out. How much tax payer money should we risk? And how safe is this Money? Who really knows? General Motors, Ford and Chrysler all want to be next in line to receive a government Bail Out.

A Bail out may be justified in dire circumstances to prevent a systemic global financial collapse by providing emergency relief and intervention to markets, but not in the case of supporting an obsolete industry such as the automotive business.

Back 50 years ago it was very hard to break into the car business. That is not the case any more. Technology and telecommunications has enabled manufactures to survey suppliers around the globe to find the best value on components. It is relatively easy to outsource the manufacture and production of vehicles. I could start my own car company for a sum of money significantly less than 10,20,30,40,or 50 years ago. Every year the process is likely becoming cheaper and cheaper. There are now literally thousands of car manufactures competing for your business all across the globe.

This is Good News for consumers who are ultimately going to get more value per every dollar they spend. And it is Bad News for companies in the business, more competition puts pressure on Margins. The car business is no longer a high margin specialty business. Technology and increased access to "turn key" design, fabrication, and production processes has changed the playing field.

In our New Global Economy it does not make any sense to subsidize and put on Life support business models of companies that are doomed to fail.

If the car companies wanted federal money they should need to do something that benefits all the members of our society such as electric cars, hybrids, solar, compressed natural gas, improved fuel economy, ect. They money should not be put into failing enterprises. The problem with the car companies is rooted in a failed business model. The last thing it needs is more money.

Money should be allocated to research, and development for companies that can create new industries, products, and sustainable jobs. Money should not be put into failing businesses and business models just for the sake of sustaining a business that is not profitable, and cannot be profitable at any time in the future without government support.

Please Get the Election Over With

Please Get this over with. We have 10 days left.

If you are a Black Man and you make less than 250k per year and you are voting for Mccain/Palin I have got absolutely no Respect for you. You need be voting Obama.

John Mccain is a War Hero. He says we are all his friends. I don't know anyone who really has that many friends. John Mccain is 72 and is the oldest man running for President ever. He's a Republican and so was George W. Bush who has one of the lowest approval rating ever. Making it nearly impossible for another White Man to be president for at least 4 years. John Mccain picked Alaska Governor Sara Palin as his VP. Palin looks very nice, but I can't believe that she is ready to be the President should something happen to Mccain. What exactly does the vice President do Mrs. Palin? Mccain is throwing the kitchen sink at Obama campaigning and nothing seems to be sticking. This campaign is still believes that Roe v. Wade should be overturned, Invade Iran, put more money into Iraq, help special needs kids, and "Drill baby Drill" to solve our energy problems. We use 25% of the Worlds oil and only have 4% in our reserves, that's not going to help much. And no one is gonna be drilling now for oil under $70 a barrel. At $145 it almost seemed smart.

The Economic Crisis, Trillions of Dollars of National Debt, Housing Meltdown, Various Government Bail Outs, Stock Market Declines, and Bitter People will fuel Obama to Victory. If you look at the polls you can see Obama will be the next president of the USA. The return to Populous Politics is bigger than either candidate.

Both Candidates have suggested we need to find alternative energy solutions with wind, solar, clean coal, nuclear, bio fuels, compressed natural gas, and improved fuel economy for existing sources of fossil fuels. Over History Candidates have spoke Large and Delivered small on actually solving our energy issues.

Barack Obama speaks well, Oprah Winfrey, Warren Buffett and Colin Powell have got his back. He is charismatic, energized and a master of rhetoric. He says he is ready Increase Taxes on Income, Dividends, and Capital Gains. Which is surely not going to help the struggling stock market. Obama does have some good energy and I think he could be a strong agent of change, but who really knows? I am used to seeing former Detroit Mayor Kwame Kilpatrick on local TV being arrested. But he was the Hip Hop Mayor. Is Obama going to show up in the White House with a grill, rolling on 24s, blowing kush, and sipping on Colt 45 fighting off lawsuits from some hood rat Babys Momma? I don't think so. He is actually whiter than me. Barack Obama wants to tax the "Rich." Thats sounds ok with me today, but what exactly is Rich? It is a slippery slope. Once Obama starts taxing, when will he stop? Who knows? That's the drawback. He may tax and Spend like wild.

Get Ready for President Obama in 2008.

Back on Track

Thanks to doing what I know to work, I have recovered about 10% from my large draw down. Thanks to some nimble trading in AAPL computer Put Options I am clawing my way back. Having the confidence in your ability to do the right thing is key.

After my draw down I was losing that confidence. I took a break and did some sleeping in during a few days. I then came to the market refreshed, objective and ready.

Working Harder through a draw down is NOT the way to go. This is the path to Disaster. I have been down that road before, and its not where you want to go. Put some distance between yourself and the market. Obviously what you are doing is NOT working.

Negative Emotions such as Fear, Anger, Greed and Frustration projected from your Brain that shapes your observation of the market is not going to return anything positive into your account. These Emotions are carried around by losing traders. I allowed myself to be influenced by them to my own demise before realizing an effective way to operate in the market environment.

Positive Emotions such as Happiness, Confidence, Peace, and Acceptance are projected from your Brain to the Universe will allow you to see the market more clearly and honestly. These are the Emotions that equip the attitudes of Winning Traders.

If your Trading Charged with the Negative Emotions I would bet you are going to losing money and your mind. If you are Trading Charged with the Positive Emotions you are ready to succeed, get laid and get paid.

Burned Out

After Over Trading Dow Jones Index Futures for approximately 16 hours per day over the the last 10 Wild Trading Days I have made then Lost Thousands of Dollars. Notice that no new updates were made to the blog during this time. I literally could not take my eyes off the screen.

I am taking a minute off until I feel refreshed and ready to trade again.
After talking with one of my friends I realized that I can be 100% and alert for 8 or 9 hours hours no problem, but as for 16 I am not a machine.

Today I lost a thousand dollars by putting in an order to short and not realizing the order came back marked "Too Late too Cancel" and that the order was indeed filled. I did not have my usual audio alerts on and missed the sounds of the notice and the order. I placed the order, realized it sucked and then clicked on cancel order. I went back to staring at screens looking at graphs. When I glanced over at my account balance I noticed it was moving (I was flat) and lower than before. It took me a while to realize that I was filled Short Dow Jones Index Futures as the market was Ripping up and Rallying. After I came to my senses I covered. I did what anyone would do then, I called my Broker to complain.

I spent so much emotional, physical and financial energy lately trying to force trades and make more and more money as fast as I could. I had no litmus test for when to cut myself off. I did not recognize and consider my physical performance or personal happiness. I suffered a draw down over the last 10 days of Negative -27.35% from my accounts peak and all time futures trading high balance. Money Which I had in my possession and did not take proper profits on.

During this time I broke my own rules on Risk Management and Position Sizing. I neglected The Mathematics of Trading, and I did not keep detailed records of my trades.

Don't feel bad for me. This was my fault. I take full responsibility.
Don't worry about me. I know what needs to be done. Happy Trading.

NAV now $323.06

This is sadly the last NAV post I will make on this Blog. Due to varying investment terms with each individual share holders it is no longer be applicable. I may continue to post my personal Net Asset Value price after speaking with my legal counsel.


I hit $354.29, and stabilized at $323.06. The reason is because I have only been going Long and Short on Options only for the fund. These past weeks the implied volatility on the options purchased was so expensive on some of my losing trades I could not get back all of the gains. My draw down from my accounts peak was 8.8%. This is a bit embarrassing for me. I bought some Spy calls and got smashed on the High implied volatility prices I paid. My Trading is always more profitable in the second end of the month because I go Net Long or Short Delta using puts and calls in front months contracts. Options prices will be coming down slightly due to a lower time value component. I am looking forward to the end of this expiration cycle.

The Thin Line Between Success and Failure

In Life there seems to be a thin line between Love and Hate. Anyone who has been in a relationship can testify to this fact. One minute you and your girl are kissing, cuddling and pledging your undying love for each other. The next minute she is screaming at you, slapping you across the face, and saying how much she hates you.

As Winthrop says to Valentine in the movie Trading Places "In the Pits you make No Friends and Take No Prisoners. One minute your Up half a Million in soybeans, the Next they are repossessing your Bentley and your Kids aren't Going to College".

In Trading there is a very thin between Success and Failure. The reason for this is because a Trader can choose to take a position size that is too large just one time, and this will undo months and even years of good decisions.

This is similar to the saying that reputations can take a life time to build and only minutes to destroy. Lets say you did everything right in your life, then one Sunday you are at church and decide to drop your pants in front of the congregation and put your testicles on the shoulder of some nice old lady. One bad decision like this and everything good you have done will be long forgotten. You will forever be seen differently by everyone due this extreme act of perversion.

When Traders are Trading at home by themselves they have nothing but their own rules and discipline as their safety net. All it takes is one time not following these rules to lose everything you have worked so hard for. At Professional Trading Firms the Risk Manager will make sure you don't lose too much money, and will cut off your trading before you lose too much of your allotted equity. At Home Traders Do Not have anyone else to prevent us from Self Destruction.

The thin line between Success and Failure comes down to what you choose to focus on. The people who fail focus on how much money they can make, and how fast. The Traders who succeed focus on Managing Risks, and Following their plan.

The Profits, Winnings and Money Making will care of themselves if you focus on just managing the Risks in Trading. This approach seems backwards to people who have not developed the right Trading Psychology. They feel that if they don't primarily focus on Making Money they will miss it. This is exactly why most Traders lose their money.

The Successful Traders always welcome more and more idiots to the Game who are drawn by the lure of Big, Fast, and Easy Money.


In the End all we can do is take responsibility for ourselves and our own actions. In Trading we are all Lone Wolves and we do not really have any "friends" in the traditional sense of the word.

Many Firms and Friends Disappear due to the Wild Markets

Bear Sterns, Lehman Brothers, Indy Mac Bank are Gone. Merrill Lynch was merged with Bank of America by the Federal Government. AIG was taken over by the Federal Government. Goldman Sachs and Morgan Stanley are now Commercial Banks.

If such drastic changes can happen to the largest financial companies the damage it can do to individual investors and traders can be far worse.

My friend AL the "investor" had build a great stock portfolio made up of stocks like FCX, RIO, TRA, TNP, VIP, CSCO, EMC, STP, GE, BYD, TIE, DSX, ABX, NEM, ect. He told me these were "Good" companies. He believed he owned "good" companies because the Media may cover or mention such names more frequently. He has never read the financial statements of these companies. He was emotionally attached to the idea of these companies, and would say things like "they have good assets". When we first met he told me he used both fundamental and technical analysis. After many meetings with AL trying to convince him to invest money with me, it was clear that AL had fallen in love with his portfolio. He thought he had put too much work into his stock portfolio to sell some of his holdings. Every time I suggested to sell a stock based on Technical Analysis he would argue with me the selling was overdone, and it should be supported around a certain level. I was not convinced. Anything Bearish that I would say about the markets he would refuse to believe. Being Wrong was too uncomfortable for him to confront. He had no risk management. He let large percentages of his stock portfolio move against him. During the Bull Market his portfolio performed very well.

My other friends who considered themselves "Traders" suffered far more traumatic and larger losses than AL in this volatile market. These Traders have lost virtually all of their funds, and perhaps even more if they were operating using burrowed money. The mistake these Traders made was not using effective risk management methods. They made a prediction that the markets would bounce, got long, added to their losing positions, and watched their accounts deplete themselves. I went long around the same time as some of these Traders, recognized I was wrong, and covered my positions after my max loss limit was hit. I was obviously concerned for the financial fate of my friends, and gave the best advice I could. Ultimately people make their own decisions, and these Traders chose their fate. My Phone calls and text messages to these Traders have not been returned.

Buffett Buys stake in Goldman Sachs

Warren Buffett the Richest man in the World, and Greatest Investor ever bought $5 billion of perpetual preferred stock with a 10 percent dividend. Berkshire also gets warrants to buy $5 billion of common stock at $115 a share at any time in the next five years.

Goldman is offering 2.5 Billion NEW Shares of Common Stock. This is dillutive to the current float of Goldman Sachs and Effectively makes each current common share worth less. This was a less talked about in many of the Goldman/Buffett Headlines.

Buffett did not get to be the richest man in the world by investing in businesses and giving the existing owners and shareholders the best deal.

How far can the Government Go? and Will this actually help the Markets?

Here are the facts:

The Government has vowed to bail out any financial institution that is "too big too fail". Many Financial Institutions of all shapes and sizes are in serious trouble. The numbers they are trying to run are crippled. Global equities markets have been on a percipitious decline for the last 10 months. Credit is becoming harder and harder to come by. Banks are no longer lending each other money with open arms. Extension of Credit and the ability to pay back a loan is key to our economy functioning. Housing prices have been falling, due to the massive over building and speculation due to very low interest rates and cheap money for years and years. The Government can literally cover the 1 trillion dollar tab of all of the bad mortgage paper.

Here is what I think will happen......

The Gov will put all of the garbage loans into one company and funds its money losing operations attempting to help stabilize the mortgage finance and credit markets.

Will this Help the Markets? Sure. The Government is going the distance and is committed to solving the problems. They are doing what they can to prevent a total immediate collapse.

However, the process for stocks to be richly valued as an asset class again is going to take some time. As Traders we must recognize when any financial instrument is attracting more excited and emotional Sellers than Buyers, or vice versa.

The Government is here to do the ugly job of assisting the market, how ever they can. If it happens to burden tax payers to fend off a "systematic collapse", then that is just the price we must pay. We Don't have a Choice.

Free Markets are not Free. The Rewards are Privatized and the Risks are Socialized. This is how it is, and we can't do much about.

Little Kids with AK 47's

Why are little foriegn kids with AK 47's so funny to me?

NAV from $100 to $240 from August 1st to September 17th 2008

The Net Asset Value of Modad Derivatives LLC from August 1st 2008 to September 17th 2008 increased from $100.00 per share to $240.00 dollars per share. That is a 140% return in less than two months.

If $100,000 was Invested on August 1st 2008 that is $240,000 today.

This was thanks to effective Risk Management, consistent use of my equity curve, and buying puts on Research in Motion RIMM, Apple Computers AAPL, and The S&P 500 Index SPY.

How does the stock chart of your Broker Dealer Look?

Teaching Nigerian Kids to Trade Options and Futures

I am going to Africa one day to set up a Proprietary Trading Firm to tech Nigerians how to Trade Options and Futures. We will seed these Traders and give them equity as they deserve it. This could be something that alters the entire socioeconomic alchemy of the World as we know it. People have always been giving to a charities and it has not solved their host of problems. Perhaps giving them the skills to to something useful is the key. Maybe these Kids are the next Goldman Sachs?

Thoughts on CNBC

CNBC is easily the most popular cable financial news network in the world. The exciting, entertaining and cutting edge format of the network is second to none. With Market Coverage 24 hours per day during the trading session and many well known on air personalities and commentators, and with shows like Mad Money and Fast Money CNBC is truly "Where Business Turns First".

CNBC is like a water. All Humans need water to survive, but if they are thrown into a pool of water and can't swim then they will drown. Investors and Traders need to know what is going on. CNBC is a great place for such information. CNBC is a never ending flow of information, opinions and commentary. If we actually followed the recommendations of the people on CNBC we are always going to be late to the party, on the other side of the trade with someone else who knows more than us, and having too many diluted low quality ideas. How can anyone make sense of all this information?

Many Investor types end up buying stock in the so called "Leading Companies" after hearing about them some how from some one on CNBC. If the Stock price declines, they hold because their investment is in a "Solid Company" with great Assets, Products, ect. This makes the Investor feel comfortable, well informed and savvy.

The purpose of CNBC for public companies is to promote their stock, and tell the investing community their story.

The Good News: These Public Relations campaigns can turn people on to some great investments they would other wise not know about.

The Bad News: These are Public Relations campaigns. They are designed to highlight the "Good" in the businesses. The Annual Report is for the Risk Disclosures and all of the not so fun things to talk about.

CNBC makes Traders and Investors into Celebrities. They glamorize the life style of Trading, Wall Street and Money Management. CNBC simply provides Entertainment in the form of Financial Information. Many people think this is what it's all about. The good life is what they want, so CNBC is what they focus on. CNBC becomes their primary source of strategies and information.

The primary focus of Traders should be Risk Management and Money Management, not CNBC. Shows on CNBC such as Mad Money and Fast Money occupy parking space in the minds of helpless Traders.

Steak Dinners and Crappy Returns

If any Financial Sales person ever offers to take you out for dinner/and or Lunch at a fancy Steak Restaurant do 3 things.

1) Take advantage of their generous offer. It is a fact that food tastes better when you don't pay for it.

2) Order the most expensive item on the menu. Never order Chicken, Burgers or just a Salad. Remember you are not paying. Go for the Big Ticket Items. Casually Order a $60 dollar steak, appetizers and alcoholic beverages like its a $5 dollar foot long from Subway with chips and coca cola.

3) Beware of crappy returns if you actually follow their "Investment" advice and buy into what they are selling. Listen to their pitch and run the numbers yourself.

Did you really think that because some guy called to tell you that you and 5 friends have won a free lunch, that he is capable managing millions of dollars?

A new study found, The more often Series 7 Registered Reps take prospects out for lunches/dinners, the more likely the returns will be lower than those of the major market averages.

The Top Investment Managers don't need to impress people with Fillet Mignon, Prime Rib, and Lamb Chops.

Executive Order 12631--Working Group on Financial Markets

The Government manipulates stock and futures market prices to maintain investor confidence in times of market stress. The Group was established explicitly in response to events in the financial markets surrounding October 19, 1987 ("Black Monday") to give recommendations for legislative and private sector solutions for "enhancing the integrity, efficiency, orderliness, and competitiveness of [United States] financial markets and maintaining investor confidence"

Read on for yourself. Here is the proof.


Executive Order 12631--Working Group on Financial Markets

Source: The provisions of Executive Order 12631 of Mar. 18, 1988, appear at 53 FR 9421, 3 CFR, 1988 Comp., p. 559, unless otherwise noted.

By virtue of the authority vested in me as President by the Constitution and laws of the United States of America, and in order to establish a Working Group on Financial Markets, it is hereby ordered as follows:

Section 1. Establishment. (a) There is hereby established a Working Group on Financial Markets (Working Group). The Working Group shall be composed of:
(1) the Secretary of the Treasury, or his designee;
(2) the Chairman of the Board of Governors of the Federal Reserve System, or his designee;
(3) the Chairman of the Securities and Exchange Commission, or his designee; and
(4) the Chairman of the Commodity Futures Trading Commission, or her designee.
(b) The Secretary of the Treasury, or his designee, shall be the Chairman of the Working Group.
Sec. 2. Purposes and Functions. (a) Recognizing the goals of enhancing the integrity, efficiency, orderliness, and competitiveness of our Nation's financial markets and maintaining investor confidence, the Working Group shall identify and consider:
(1) the major issues raised by the numerous studies on the events in the financial markets surrounding October 19, 1987, and any of those recommendations that have the potential to achieve the goals noted above; and
(2) the actions, including governmental actions under existing laws and regulations (such as policy coordination and contingency planning), that are appropriate to carry out these recommendations.
(b) The Working Group shall consult, as appropriate, with representatives of the various exchanges, clearinghouses, self-regulatory bodies, and with major market participants to determine private sector solutions wherever possible.
(c) The Working Group shall report to the President initially within 60 days (and periodically thereafter) on its progress and, if appropriate, its views on any recommended legislative changes.
Sec. 3. Administration. (a) The heads of Executive departments, agencies, and independent instrumentalities shall, to the extent permitted by law, provide the Working Group such information as it may require for the purpose of carrying out this Order.
(b) Members of the Working Group shall serve without additional compensation for their work on the Working Group.
(c) To the extent permitted by law and subject to the availability of funds therefore, the Department of the Treasury shall provide the Working Group with such administrative and support services as may be necessary for the performance of its functions.

Account Blow Ups

The Account Blow Up is a dramatic and devastating event that most likely every trader will experience before they develop an effective strategy for success.

The Account Blow Up on an equity curve Looks Similar to a stock chart of a Stock in decline like Fannie, Freddie, or Lehman. I am willing to bet most Traders who have Blow ups do not actively use equity curves. I blew up before I used an equity curve.

The Pressure of Trying to Make Returns can be too much for some Traders. They always feel pressured to work hard and they end up trading too often. They feel the need to trade all of the time. Traders will always develop elaborate reasons on why the market should move their way. They will also likely look for guidance from the Media such as CNBC and Bloomberg. They trade without a plan. Their attempts at success become more desperate and hopeless. They do not take any time off from losing money. They Take on Too Many low quality positions. They only focus on How they need to make money, and How much money they can make. They Hold onto Losing Trades and Add more money into them. They Sell Winners too soon, over and over again. They look back at all of the Trades they missed, and the money they lost and feel sorry for themselves.

They literally cannot stop themselves from account destruction. The Reason is because they do not follow any type of Risk Management.

Who knows what to Believe? Lehman Files for Bankruptcy. Bank of America for Merrill Lynch? What about AIG and Washington Mutual?

Lehman Brothers officially declared on Sunday that they will seek Bankruptcy protection. After Bank of America, and Barclays decided they were not interested.

Bank of America for Merrill? "people inside the company" from Merrill Lynch are allegedly in talks with Bank of America for a $25 to $30 per share buyout offer. This seems crazy to me with what we know about the prices of other similar money losing portfolios. How can these news sources even report such speculation?

AIG is trying to stave off credit downgrades that would force it to post more than $13 billion in collateral. They are seeking capital from buyout firms Kohlberg Kravis Roberts & Co, J.C. Flowers & Co, and China Investment Bank said "a person familiar with the situation"

No one seems to be talking about Washington Mutual, at least for now. Who is going to bail them out?

This sitution is getting worse before it gets better. The Night is Always the Darkest before the Dawn.

From Bail Out Hopes to Bankruptcy Court, Lehman Brothers is Running out of Time

The most powerful financial decision makers in the World gathered at the New York Federal Reserve Bank in New York over the weekend and could not reach a deal to save Lehman Brothers.

Here are some key points of the deal that almost was:

(1) A consortium of Major Financial Institutions throw in $3 Billion Dollars each to help absorb the losses of the $85 Billion Real Estate portfolio of Lehman Brothers, to help stabilize the market is those securities.
(2) For $5 Billion Dollars some one could buy just the Investment Bank and Asset Management Business.
(3) No Federal Funding or assistance of any kind is available.

The Banks could not agree on who was going to get the "Good" Lehman Assets, and who would be responsible for losses on the toxic mortgage assets.

Financial firms have started ``netting'' Lehman trades on credit, equity, interest-rate, foreign exchange, and commodity derivatives, according to a statement from the International Swaps and Derivatives Association e-mailed to Bloomberg News.

``ISDA confirms a netting trading session will take place between 2 p.m. and 4 p.m. New York time for over-the-counter derivatives,'' the ISDA said. ``Trades are contingent on a bankruptcy filing at or before 11:59 p.m. New York time, Sunday, Sept. 14, 2008. If there is no filing, the trades cease to exist.''

Barclays Plc, the U.K.'s third- biggest bank, said it abandoned talks to buy Lehman, contending it couldn't obtain guarantees to protect against potential losses at the U.S. securities firm.

Lehman may be the First Big Well Known Investment Bank that is actually allowed to fail. If the Brokers and Banks can work together to essentially take the other sides of the Over the counter trades they had with Lehman, the damage can be mitigated as much as possible. This is not going to be a pretty solution, however it is practical, necessary, and the only viable option to prevent a serious market meltdown.

Expect Monday to be an interesting day in the markets.

Meredith Whitney-The Bears Goldilocks Goddess of Doom and Gloom

Obviously not all Financial Analysts give investors bad information. Some Large Brokerage Firm Analysts make bold market calls that are unpopular, shockingly accurate, and exceptionally profitable for the people who listen.

Meredith Whitney is one such analyst. Whitney, Managing Director of Oppenheimer & Co appears regularly on CNBC, Bloomberg and Fox News. She correctly called the Credit Crisis and warned of Billions of Dollars in Write Downs in the pipeline from the Largest Banks and Broker Dealers. She was Bearish and accurate on the fall of Citigroup in Oct of 2007. She cooly defeneded her opinions on Television in the face of the Dog and Pony show of the Wall Street Promotion Machine hundreds of times.

If you have ever shorted a financial stock or purchased puts hoping the stock would go to zero in a few weeks, then she is your kinda gal.

The Question now is whether Whitney will be able to successfuly call a Bottom in the Macro Economy and the Equity Markets. When she does call a bottom take notice because it will likley move the markets.

Lehman Brothers-Take Over or Take Under?

Today the Wall Street Journal reported that Bank of America is in talks with Lehman Brothers about buying the Investment Bank.

Is the equity going to "Taken Over" for a Higher price than the $4 dollar stock?

Is the common stock going to be "Taken Under" to virtually zero to do the deal?

The Market is waiting to see how the people in the know are valuing the equity portion and stock capitalization of the largest broker dealers. High leverage, and illiquid money losing mortgage backed securities could actually deplete all of the firms equity, driving the value of the common stock to zero.

The terms of this deal will shine light on the portfolio's current pricing. The market is looking to Lehman Brothers to gauge demand for these hard to value, and even harder to liquidate mortgage backed securities.

It should be a Fun weekend for all involved. The Deadline is Monday September 15th 2008 before Asia opens.



It seems Some type of deal will be done to ensure the markets remain orderly no matter how ugly it is for Lehman Brothers common stock holders.

How Analysts and the Media Screwed "Investors" with Lehman Brothers

This is How Analysts and the Media trick people into buying stocks when the institutions are selling and exiting from their positions. Many Analysts Firms go through this process of Writing Reports, Changing Price Targets, Upgrades and Downgrades and Appearing on TV to promote their clients interests. They are getting out when you are getting in. Here is just one such story.

The talk on and off the street is none other than Lehman Brothers. LEH has dropped over 80% from last year. The Stock has been on tailspin due to Ultra Leverage from a Massive portfolio of Mort age Backed and Real Estate Securities that are all but Illiquid.

Dick Bove, Analyst with Ladenburg Thalmann made a Brilliant call telling people to Buy LEH around $20 on the rumor that a South Korean Bank may want to "Buy out" the stock. He notoriously and wrongly called the bottom of financials on every business news channel (CNBC, Bloomberg, who actually watches Fox?)at the Beginning of the real financial calamity. This was months Before the Government was Bailing out Fannie and Freddie, taking over Indy Mac, and Lehman Brothers troubles today.

Bove's job is to help the institutions get out of their LEH shares and get dumb people into them. It is NOT to help the Public Make money by doing what he advises.

Bove's ratings on the stocks he covers is actually designed to encourage people to invest more and more money into their losing trades.

This guy literally has people selling the lows and buying the highs.

How does this Happen?

Step 1. This nice Looking old man who looks like Santa Claus in a Business Suit Comes on CNBC.



Step 2. He Tells you why the Financials should bottom now as they are rallying. Bove says the financials will lead a turn around in the economy of 6 months down the line, so buy now. This no time to sit on the sidelines. The Rally is BIG. But the Rally is NOT Based on Fundamentals. You Buy, the stocks go up for a few days, then it starts going down and fast.

Step 3. Bove says buy more. He publishes antoher glowing report. He Does even more TV interviews. He liked it at $80. He loves it at $40. And At $20 its a steal. Now LEH is at $7. Who knew Making money was so easy.

Here are Boves calls on LEH. From Punk Ziegel to Landburg Thalmann he was always wrong for anyone actually following his calls. Source: www.Briefing.com

29-Aug-06 Punk, Ziegel & Co Down Buy/Mrkt Perform $117/127
12-Jan-07 Punk, Ziegel & Co Reiterated Accumulate $84 $91
05-Mar-07 Punk, Ziegel & Co Down Accumulate/Market Perform
14-Mar-07 Punk, Ziegel & Co Reiterated Market Perform $91 $81
12-Jun-07 Punk, Ziegel & Co Reiterated Market Perform $81 $86
18-Jul-07 Punk, Ziegel & Co Downgraded Market Perform Sell
07-Aug-07 Punk, Ziegel & Co Reiterated Sell $86 $59
15-Nov-07 Punk, Ziegel & Co Upgraded Sell Market Perform
04-Dec-07 Punk, Ziegel & Co Downgraded Market Perform Sell
14-Dec-07 Punk, Ziegel & Co Reiterated Sell $68 $61
04-Feb-08 Punk, Ziegel & Co Upgraded Market Perform Buy
08-Feb-08 Punk, Ziegel & Co Reiterated Buy $61 $71
29-Feb-08 Punk, Ziegel & Co Reiterated Buy $71 $65
19-Mar-08 Punk, Ziegel & Co Reiterated Buy $53 $51
01-Apr-08 Punk, Ziegel & Co Reiterated Buy $51 $46
21-May-08 Ladenburg Thalmann Reiterated Neutral $48 $38
22-May-08 Ladenburg Thalmann Downgraded Neutral Sell $38 $35
06-Aug-08 Ladenburg Thalmann Reiterated Neutral $27 $23
21-Aug-08 Ladenburg Thalmann Upgraded Neutral Buy $23 $20

LEH Chart-1 year.



By listening to Bove you would have never made any money and lost virtually ever thing you had invested. By using simple risk Management guidelines you would have been out of any losing trades far before they would cost you so much money.

Don't Ever tell me you lost a lot of Money

If you are Trading according to proper Risk/Reward Management Strategies you should never Lose a lot of money, At least at any one time.

If your losing over a long series (15-20) of Trades and Bad judgments, and told me that you "lost a lot of money" I may even feel bad for you.

But when its over 1 day, and you say utter those words, its clear you are not using an equity curve or following any real risk management plan.

Holding a Trade for "a lot" of money losing negative equity movement will drain all of your money eventually.
You should only Hold Winning Trades for Large amounts of time, or for "a lot" of Gains. This is why your Trading.


This Message was Brought to you by the Fine People of Risk Management, Inc.


Remember Friends Don't Let Friends Hold onto Losing Trades and Sell Winners To Soon.

The Mathematics of Trading

When I first started Trading I did not calculate much of anything regarding my system into Mathematical terms. As a kid I never liked math class. I could care less when two trains are on separate tracks when they will pass each other if they are 240 miles apart, and Train A is going 100 miles per hour and Train B is going 80 Miles per hour.

Maybe I should have paid more attention in math class. Good Trading is all about the Mathematics of your System, and specifically your Risk Management Rules. When I first started Trading I did not have a Mathematical Plan or a Risk Management System. I focused on Fundamental analysis, by reading books on Warren Buffett. Then Technical with charts, moving averages,software, and data. Then I read books on the Psychology of Trading. This all did for me all of nothing in the practical trading.

After coming across a book called Way of the Turtle by Curtis Faith I decided to calculate the mathematics of my Trading. For more specific advice please consult the book. I don't enjoy math enough to break it all down here on the web, even for too many detailed examples.

When getting into the Trading World I did not even consider math relevant to trading except to calculate my business expenses and trading profits. I thought that if I Traded according to my "system", then the math would "work itself out". I was wrong. I learned about the Mathematics of Trading the Expensive Way.

The Key is not to Expose too large of a percentage of your account to negative equity price movements.

You don't need to figure out the different risks that are in the market for your different positions, and over think what is happening in the market. You Don't need to over complicate the Situation. Simplicity is your friend.

You only Need to know 3 things

What % of Capital to Risk in any Trade
How to exit if the trade becomes Unprofitable
How to exit if the trade becomes Profitable

1. What % of your Capital to risk per Trade

First and by far the most important. At Risk means exposed positions to closed markets, and maximum loss of total account on a percentage basis. If Trader A lets his net account balance decline by 20% before exiting trades, then his account will be completely wiped out after only 4 more losing Trades. Trader B risks only 2% of his account on any Trade. Trader A has 5 Shots to figure out Trading. Trader B has 50 Chances to catch a big winner. You need to figure how much you can risk, and lose at least 10 times in a row. The self insurance policy of adequate capital reserves is your key to future profits, so it must be protected at all costs. You need to figure out exactly how many shares, contracts, ect that you can buy or sell at any time.

2. How to exit if the trade becomes Unprofitable

The main problem for the majority of Traders, and it can be the most devastating to your financial Statements. After you have followed Step 1, move on towards step 2. If you skip step 1 you could have losing trades with so much % of your account you won't need step 2. Step 2 is Simple. If any Trade decreases a percentage of your entire account equity to your max risk limit always exit immediately.

3. How to exit if the trade becomes Profitable

This is what we call a "High Quality" Problem. We all Trade to find the Winners. Mathematically how much reward can you expect based on how far the stock has moved in the past? How much extra Financial risk is in the Trade now that its winning? The Problem for most Traders is they get into winning Trades, and end up getting out too soon. Many Traders take a Large position size, and try to grab a few points. Essentially Risking more for Less. This also affects the way they trade. They are more prone to make Trading Errors.

The Mathematics of Profit Taking

If you are holding onto your losing Trades longer than your winning Trades it is going to be impossible for you to make any money. Setting Price Percentage upward Targets can work. You need to do the math yourself and the work.

You need to know what % of your net account are you going to take profits on. If you set a 2% stop Loss per trade, and booked profits after winning 8% moves, then you could have 3 for 1 losing Trades, and still be up 2% overall. If you could do this every day, compound interest would reward you handsomely.

If your taking 20% or more losses and cutting winners after 10%, that math clearly does not work out in your favor. You need twice as many winners as losers just to break even. The math will not work for you regardless of your method of analysis. Or your execution.

The Art of Profit Taking

After you understand the basic math on profit taking for your "system" you can always fine tune your process and presence in an the trading environment to Maximize your profits. This is can offer as much of a challenge as you would like. There are markets Trading anything and eveything 24 hours a day. The possibilities are endless.

Treasury Bails out Fannie and Freddie. Equity races to Zero

It was obvious from the a brief glance at the financial statements of Fannie and Freddie that the "common stock" was basically worth nothing. Barrons almost killed Fannie And Freddie with the article declaring to the reading Public they have negative equity values of about (-$50) Billion Dollars a peice. All Hopes of getting private capital to invest was done. These people had lost enough money already. The Stocks bounced and rallied hard to over 100% in a week on the annocements the government was "working on a resuce plan".

Treasury Secretary Henry Paulson and Federal Housing Finance Agency Director James Lockhart yesterday placed the two firms in a government-operated conservatorship, ousting their chief executives and eliminating their dividends. The Treasury may purchase up to $200 billion of stock in the firms to keep them solvent. Paulson even said the equity holders would likley not likely make their money back. Who ever is not out of these stocks now will likely just watch these babies drift to around zero Dollars soon, as I suggested in a previous Blog Post.




The Traders figured the Gov was going to save the stocks. They Bought Large Amounts of the Cheap Shares. Uh oh. The government guarantees the debt obligations of the company. The Key is so these companies can continue to buy mortgages and housing market does not collapse any further. The government needed to do something to Protect Fannie and Fannie bondholders, which include many pension funds, foreign central banks and mutual funds.

``This action should lead to an increased availability of mortgage financing, which will help achieve stability in housing,'' Bank of America Corp. Chief Executive Officer Kenneth Lewis.

Only time will tell if this is a Band Aid or a Long Term Solution to the Housing Market Melt Down. Happy Trading.

When are House Prices Gonna Bottom?

Today someone asked me "When do I think the Housing Market Will Turn Around"?
The answer is so simple it is easy to miss. When Houses are affordable again, then the Housing Market will turn around. When a people are able to buy houses in their desired area according to the general level of welfare.

It is hard to value a house as an asset. Your Bank calls it is an Asset, But it does not produce any income. It is actually a "Liability".

The Pyramid of Multiple Layers of Massive Leverage, Inflated Prices and Illiquid Nature of the Housing Market is a process that needs to play out. Perhaps 5 Years.

If house Prices dropped including forecloses and bank sales by 50% I would buy a house. That's how cheap I think houses are now. That's My opinion, I could be wrong. If we watch the signs of the Housing Market we should be able to see it turn.

The housing market is not like Trading Forex with massive Leverage after US government data with no stop loss. The Destruction happens slower.

I would not buy a House In New Orleans. I would love to visit. But to own property there serves no purpose for me, or joy because I would not want it to get flooded. Perhaps there are areas of the world inhabitable by our changing weather patters.

To Stimulate our economy we need something BIG to happen like T. Boone Picken's Plan for Wind Farms and Comp Natural Gas. Energy Independence and Boom in building the new infrastructure for Gas Stations.

Cheap Gasonline and Alternative Energy Do not go Hand in Hand-At Least not at First

Cheap Gasoline and Alternative Energy Do not go Hand in Hand-At Least not at First.

Everyone seems to be complaining these days about high gas prices, the need simultaneously lower gas prices and develop new, clean, alternative sources of energy. Both Political Candidates in this Election are promising lower Gas Prices, Development of Alternative Energies, and a "Solution to America's Energy Crisis".

Let's explore why this will not work. When gasoline and Oil Prices are high it creates the incentive to develop new energy sources. With Oil well over $100 dollars per barrel, and gasoline well over $3.50 per gallon, we seem to want to have our cake and eat it too.

If we were in Venezuela with gas at around 12 cents per gallon, what incentive do people have to invest money into developing new sources of Energy? None! It is too cost prohibitive. To make the Investments in developing new sources of Energy the Investors are going to want to know they are going to make their money back, and have a return on their investment. If gas was $1.00 per gallon in America we would not care about conserving energy at all.

Proponents of more oil drilling to lower prices and develop clean, alternative energy sources, are not consistent. There is no economic incentive to invest the Trillions of Dollars in Alternative fuels if the costs will not be recouped.

The High Oil and Gas prices are good for Americans! It encourages innovation, and spurs investments, and new ideas. As Oil Prices go higher, MORE incentive is created to develop alternatives, as oil prices go lower there LESS incentive. The term "Alternative Energy" is what it sounds like, and Alternative to conventional energy (Oil). The Alternative needs to be competitive in price. It is more difficult for it to be competitive with Lower Oil Prices, rather than Higher.

Since the World Oil Supply is running out anyways, and other fuels like Compressed Natural Gas are Clean Burning and abundant in America we obviously need to explore other options.

Lets assume that Oil Companies have invested profits from high oil into new energy Alternatives, and formed a viable new energy solution, such as Compressed Natural Gas, electric power, or solar, complete with new cars, and refueling/charging stations. If the fuel was truly an "Alternative" to oil, then even with a finite supply of oil, the price would have much less demand side pressure. This scenario is a long way off. So for now Higher Oil prices are going to be the only thing that spurs investment in Alternative Fuels, ironically Higher Oil Prices will be the catalyst that leads to the development of new Fuels.

*Note that I did not include any Environmental incentive in this argument. Currently I am assuming this is an economic argument only, since we do not have clear environmental regulations and mandates for development of Alternative Energy. Obviously there is always clear Environmental incentive to develop Alternative Energy. In Reality economic factors drive investment more than Environmental*

Traders Prepare for Gustav

Hurricane Gustav has been the talk of the News wires this entire Labor Day Weekend. The New York Mercantile Exchange (NYMEX) opened up trading for a special session today to allow Traders to adjust positions pre-Gustov. Oil gained 1.67 for October Devilry to $117.13 a Barrel, Gasoline gained 6.58 cents or 2.3% to $2.92, and Natural Gas fell 6.1 cents or 0.8% to 7.882 per million British Thermal Units.

I am Long VLO SEP 34 Calls in preparation for Gustav. I except that the refining sector, among the worst performers of the last 12 months will receive a huge boost from the storm. When the refining capacity drops, the refiners can operate with much better margins. Even if oil prices rise, the refiners margins will increase substantially.

Look at stocks like VLO, TSO, and WNR. If the stocks behave as I anticipate, I will start buying more calls come next week Tuesday.

Why Trading is NOT like Gambling. Why Gambling is NOT like Trading.

It gets me very upset when Someone wrongly draws an Analogy from Investments/Trading into the World of Gambling, saying "they are the same thing". They conclude this because both are events where money is wagered and money can be gained or lost. But that is where the similarities end.

I was recently making small talk with a fellow at the Airport when waiting to hop aboard a plane. He inquired about what I do for living. I told him I was an Options Trader. He scuffed at me, look at me as if I was lower than scum and proceeded to explain to me how "Trading was Gambling". I brought up numerous well known Investors and Traders such as: Warren Buffett, George Soros, Bill Gross, Eddie Lampert, John Paulson, Bill Ackman, ect. He replied those people were "Lucky".

In a vain attempt to explain to him Why and How the two were different (for my own amusement, to change his mind, and because I had an hour to kill) I proceeded to argue.

(1)Gambling creates a new financial risk, when no previous risk existed merely for the sake of that risk. If we decide to bet on a coin flip which has a 50% chance of coming up Heads or Tails we are creating a new risk.

(2)In Trading, one party assumes a financial risk that already exists for the purpose of a financial gain. If I buy a stock from you that you want to sell, I am taking on risk that was already in the market place. You may say its a new risk to me, which it is, however the risk would have been taken on by someone your broker matches up on the other end of the trade. The risk is constant in Trading and waiting to be assumed by someone.

(3)In Gambling the odds are fixed and calculated. That is why Casinos exist. They Systematically know the odds on every single game over a series of wagers. For Example: The house edge on a bet on a random number of an American Roulette Wheel (a game I would never play) is 5.3%. You will lose an average of 5.3 cents on every dollar bet. This is a non debatable fact.

(4)In Trading no precise odds of one event happening can be calculated. People may say they can use historical volatility models and other data sets to predict odds, perhaps they can come somewhat close. Long Term Capital Management tried to calculate such odds, and it did not work out too well for them. Trading odds are not exact. Trading odds are based on variety of factors and variables that occur outside of the game such as breaking news, government data, interest rate decisions, analyst reports, market sentiment, insider activity, natural disasters, order flow, ect. These variables cannot be accounted for, and therefore cannot be calculated.

(5)Gambling Events are one time occurrences, and are non-continuous. After the flip of the coin, roll or the dice or spin of the wheel, the game is over. The player must make a conscious decision to wager new money and begin playing a new game. He must become an active loser, and decide to play again, and again.

(6)Trading Events are continuous and Never ending. The Market is always in motion. Even when the Market is closed, news is happening and being priced into the market. When in a Trade, the market participant decides when to enter, how long to stay in, and when to exit. In gambling these rules are very clearly defined. The Trader does not have to choose to do anything. He can lose money for doing nothing. The market can take all of this money and more if he stays in a losing position for too long.



While this post may serve as a good argument as to Why Trading is NOT like Gambling and Why Gambling is NOT like Trading, many people just cannot understand it. The fellow in the airport surely could not. In fact, He did not offer any other counter arguments except using circular reasoning to restate his conclusion.

In the future I would advise just agreeing with the person and not wasting time debating them. Just tell them they are right, and you are wrong, and go back to doing something useful.

Risk Control, Money Management-The Keys to Success

The two key concepts to trading success are Risk Control and Money Management. It is a fact that about 95% of all Traders do not make money in the markets, in fact they lose money. The remaining 5% of Traders happily take the money from the losing Traders accounts and are among the wealthiest people on the planet.

The reason that most Traders fail is because they do not have any type of Risk Control and Do Not Follow a system of Money Management.

Many Traders decide to arbitrarily Risk more less of their Capital Based on how they feel about a trade, Whether they have been winning or losing lately, and How much money they want to Make, instead of carefully considering the mathematics of their actions and following a Trading Plan.

Mark Douglass in his Book Trading in The Zone identifies the essential word to best describe Trading as "Contradiction". The reason is because in the Trading Environment events are unlimited and continuous, there are no formal rules or regulations that govern our behavior. We must make our own rules. Then we must follow all of these rules ourselves. The Rules in the "Trading World" are directly contrary to all of the rules we learn in the "Real World" and to our own human emotions.

Most people are attracted to Trading because of this "Freedom" from having to work for a someone else, to be Creative, to work when and how they want, and to have the potential for eye popping income. However, These Freedoms do not Translate into how one must conduct themselves to operate a Successful Trading Business.

To be successful the Trader must develop a Mathematical system of allocating capital, controlling risks, and managing his account to generate a consistent stream of profits. This means you can't just make up your own rules as you go along, and decide to break your own rules when ever you want.

If the Trader does not have a Trading Plan and Specific Risk Control and Money Management Guidelines, it is only a matter of time before they lose all of their money.

Mccain losses the election by picking Palin

Just when it looked like the Democrats were losing strength leave it to John Mccain to blow the chances for the Republicans with one Pick. By Picking Sara Palin for his Vice President I believe blew the chances for the Republicans.

The Average age for White Men in America is 75.29 years. John Mccain turned 72 years old today. So according to the Average, Mccain would die within his first term in office. If this did happen he would leave the reins to former Alaska Governor Sara Palin.

Just when all the Republicans had to do what pick a credible VP Mccain drops the ball by picking Palin. I now favor the Democrats hands down. Despite the Obama/Biden and Obasa/Binladen post the Republicans now dealt the fatal blow to themselves.

Obama/Biden looks like Osama Bin Laden

Yet another blow has been dealt to the Democratic Party with the name on the party ticket. Quite possibly the most hated and hunted man in America, Osama Bin Laden is just 4 letters away from "Obama/Biden" right inside your voting both.

On the Obama/Biden Ticket all you need to do is subtract a "B" add an "S" to get "Osama". On Biden's name you need to add "N" "L" "A" to get "Bin Laden".

Why is this a problem? Because of the way our brains read and interpret information.
We do not read every letter in a word, or in a straight line, but rather in a sequence of movements (jumps). Our brains scan information an quickly make connections, and associations.

When we see "Obama/Biden" it looks a lot to our brains subconsciously like "Osama Bin Laden". We would obviously not vote for "Osama Bin Laden" for President. I think the "Obama/Biden" ticket becomes increasingly more difficult to get into the oval office due to this fact. "Obama/Clinton" sounds less evasive and more Presidential.

To vote for "Mccain/(any name)" sounds a lot less risky and familiar than "Obama/Biden". The problem is that most people will not even know why they fear "Obama/Biden". It is on a subconscious level, and is not something they will have the time to logically consider.

The Opposite of What to Do

I made these rules because sometimes following the "Traditional Trading Rules" is hard to do. People are rebellious and don't like to be told what to do. So this is list of the exact opposite things to do. Just read over them to see how ridiculous they are, and maybe it will motivate you to "Do the Right thing".

(1)Don't have a Trading Plan. Trade haphazardly and without a clear purpose. That way if something goes wrong, its not clearly defined, and the fore its not really your responsibility.

(2)Don't Set Limits or Use Stops. Enter the Market without the Slightest Clue as to when you are going to Exit. Just get in. Have no idea where the market is likely to go. Just do what feels right.

(3)Ride your Losers and Hope they will come back. When you are in a losing Trade, Just hope that it comes back. If that does not work Pray. Pray to your God. If that does not work Pray to a new god. Keep trying to pray to new gods until the market starts coming your way. If that does not work try Scientology.

(4)Add money to your losing trades. Throw Good money after bad. If your trade is going against you, what better way to lower your cost then to add more money. If the Trade Comes back again, then you make that much more money. If it keeps losing you money, add more money until the trade starts working. If it does not work Repeat step 3.

(5)Sell your Winning Trades too Soon. As soon as you have a Winning Trade book your Profits immediately. Even though the market is rewarding you by putting money into your account, take those profits and be fearful that you are wrong. It is much better to sell Winners fast and Ride Losers Long.

Always Hope your Losing Trades will come back, and be Fearful your Winning Trades will reverse on you. This is a Crucial Step. The Good news is that your natural human instincts and emotions will guide you in this direction anyways.

(6)Focus on what you want to happen, Not What is most likely to happen. Don't worry about what the market is likely to do. Just keep focusing on what you want to happen. If you are long find all of the ways why the market should be going up. If you are short find all of the ways why the market should be going down. If you try very hard to visualize the market doing what you want, it will happen. Don't listen to anyone who has a different opinion than you. Remember they are always wrong and you are always right.

(7)Find someone or something to Blame if the Market does not go your Way. Get Angry. Throw your Furniture at the Walls, Blame the news, Kick your Dog, Scream, get emotional, get upset. Blame your Broker, Blame your Spouse, Blame your friends, Blame your Computer, Blame your Parents, Blame the weather. Just do not ever take responsibility for anything yourself.

(8)Keep doing what is not working. If something is not working, keep hoping that it will work. Then proceed to Repeat these steps until something changes.

(9)Watch CNBC and Bloomberg all day long. Who better to give you trading advice than from people who never trade on their own? Or from guest contributors who have a vested interest in promoting their positions? These people are obviously experts or else they would not be on Television. Glue yourself to the Television and Soak up the infinite Wisdom of these financial Geniuses.

Learn To Love to Take Losses

To be successful in Trading you need to learn to love to take losses. This sounds ridiculous to any non-trader or respectable member of society. In our culture we are taught to win. We even have clever slogans like "Winning is not everything, it's the only thing". People love to win and they hate to lose. To be a "loser" is certainly not a desirable trait.

Our Socialization and self preservation instincts have created an aversion to taking losses. In Trading taking manageable losses is the name of the game. The Hallmark of a Great Trader is not how he wins, but how he handles his losing Trades. Winning Trades can take care of themselves.

In the "Real World" people are paid and encouraged to come up with creative solutions to problems. This is why we recieve years of specialized education, degrees, and certifications. In the Movie "Fight Club" Brad Pitt says to Edward Norton: "Being Clever, How is that working out for you?" Clever In Trading will get you no where. It will cost you. You don't get paid any money for being clever. The law of Parsimoney is a scientific law that says "Let the Simplest Explanation Suffice". Less is More. The More complicated you need to make a trade exit, the more you think about it, The more I would bet you are losing more and more money.

In trading when we try to come up with elaborate solutions to our losing trades (telling ourselves it will comeback, adding to losers, hoping, waiting too long too exit, ect) We are selling ourselves on the outcome we would like to happen and not the likely outcome. We are still trying to win over ourselves subconsciously.

Everything in Trading is contrary to The Real World. If there is one word that best best describes Trading it is: Contradiction. It is so easy to look at past prices to think about buying at a lows and selling the highs. This is an illusion designed to again seek out a way to win.

Take the loss. Being able to accept and admit your loss is by far the hardest part. There should be a warning over every stock chart that says "Trading-Much Easier Said than Done". Good Traders know there are plenty of great trades coming our way. They don't waste energy, time or capital on losing trades. Being a "Winner" in the Trading World means admitting when you are losing, and cutting your losers quick.

If you can do that-Then You Can't Lose.

Market Rallies Off Bernanke, Lower Crude and Lehman Brothers Buyout Rumor

The Stock Market rallied lightly on Friday off Warren Buffett's interview on Squawk Box on CNBC where he said "today the market is priced more attractive than last year", Ben Bernankes comments on the economy were not that bad, and Most off all Lehman Brothers Buyout rumor got the market excited and allowed the financials to rally modestly. I except a modest rally for the S&P 500 to go up to around the 1300 level again.

The Trend of chop, chop and more chop is likely to continue. Sell the Rips and Buy dips as Jeff Macke says will probably continue to work until a fundamental shift occurs in the economy or the market has some reason to rally. The Market will not likely move Up or Down appreciably until after the US Presidential elections in November. The market needs to know for sure who is going to be in office.

In regard to Lehman Brothers, and the Buyout Rumor.....It is funny that people can falsify rumors to raise the price of stocks, but can not say anything untrue and negative to press down the price of stocks. The reason is simple enough, not as many people complain when stocks go up.

The only Trade that I am in right now is BAC calls. I increased the size of my account last week by 11 percent overall by purchasing some Bank Of America calls on Wednesday at $2.30 cents, They are now priced at around $3.30.

My trading has been going exceptionally well. I have not been updating the Blog with real time trades. No one seems to trade off of my ideas in real time. However if requested I will then update the blog per trade on a timely basis.

Market Ready to Hang on Every Word Bernanke Says, Crude and Gold Gain

Tomorrow Fed Chairman Ben Bernanke will give a speech at a Kansas City Fed conference. The Market is expecting him to touch on the current debate over mortgage lenders Fannie Mae (FNM)and Freddie Mac (FRE). Investors are unsure if Treasury Secretary Paulson and U.S. Treasury Department will backstop the firms, and exactly how. I believe any "Bailout" will wipe out the existing shareholders equity.

Crude gained more than $5 to hit $121 Thursday, on a weaker dollar,supply concerns and the uncertainly of the Geo Politics between the US and the Soviet Union. The CRB Commodity Index also made a strong advance, climbing 3.7% for the session. Commodities. The dollar shed 1.1% against a basket of major foreign currencies. While the U.S. economy continues to slog along, data is not at recession-like levels. Initial jobless claims for the week ending Aug. 16 fell 13,000 to 432,000, which is below the 440,000 claims economists forecast. The 4-week moving average for jobless claims remains elevated, advancing to 445,750 from 438,500.

Oil, Commodity, Natural Gas, Coal and Solar Stocks ripped back from their recent downfall. Financial shares held steady, allowing the broad market to advance. The nasdaq fell 8.7 points, The Dow and S&P were up less than a quarter percent each. The Market is wating on the Bernanke testimony to clear the fog over the fate of FRE and FNM. And comment once again in the US economy.

Speculation abound from Market Observers and many Financial Press have declaring these GSE basically insovlent, and have bascially said the Government is clueless and cannot really solve these problems.

Those are the Charges, Now Big Bad Ben Bernanke will have his chance to counter these allegations and shed some light on how and what the Federal Reserve sees over the near and far Horizon.

Fannie and Freddie race to Zero, Bill Miller should just Kill Himself.

With Barron's coming out this weekend and concluding that Both government sponsored darlings FRE and FNM have a negative equity valuation of around -$50 Billion a piece, it seems these stocks are racing rapidly towards zero. With many people invested in the stocks, and much belief that they can recover stocks do not go to zero overnight. Kinda of like how everyone knows some day, they will die. This is a fact. Most of us can say within 100 years from our birth will be our death. But we can't determine exactly when, unless we have a specific illness. With Fannie and Freddie the death of the equity is rapidly approaching. Within a month or two these stocks will both be trading under a dollar.

I think its funny that Fund Managers like Bill "I could not pick a crappier portfolio if I tried" Miller's Legg Mason Value Fund just keep holding the bag and buying more of these losers on the way down. He now owns 12% of the worthless equity in Freddie Mac. Someone should tell this guy about technical analysis. Did this guy forget that companies are comprised of equity and debt holdings? Did he bother to look at the Balance sheets? Shares of FNM and FRE are down 95% and 96%, did someone ever tell Miller to cut losses after say losing a certain portion of capital? I think not. When a manager thinks he is right and the market is wrong, this is very dangerous.

Fannie Mae CEO Daniel Mudd proclaimed Fannie Mae has more capital than it has ever had in its history. Yeah, more capital and more liabilities. So if you lent me a million dollars yesterday, and I was losing 200 thousand a day, I could also make the claim that I "had more capital than ever in my history". But at this rate it would only last about 5 days. Kids this is why you can't always trust the fundamentals, and why you never try to "catch a falling Knife". Let someone else like Mr. Miller put the floor on stocks, its far too expensive and frustrating for me. By the way, I hope Bill Miller does himself and his "investors" a favor and leaps head first off a tall building. But If he actually did it I would be surprised, because he would actually be cutting his losses.

No matter how successful I will ever become in this businesses, I pray that I can stay humble, objective and continue to respect the universal truth that "The Market is Always Right". No matter what my personal opinion is, or what I want or think the market should do, staying objective is the most important Investment and Trading virtue. Amen. Happy Trading.

The Dollar Rips, Taking the Appeal out of Commodites, The Volatility is Here to Stay, Sorry.

The Drop in Oil Prices for now is fueling the Bulls on Wall Street, Blue chips close positive in session with good news about bond insurers and lower oil, but indexes are mixed for the week. The rising dollar is taking the appeal out of Commodities and Commodity related stocks, and the Intense Gut Wrenching Market Volatility is Here to Stay.

FROM OUR FRIENDS AT TRADERS AUDIO, THE AUGUST NEWSLETTER TO INVESTORS......

Volatility and wide daily ranges continue to be the main topic of conversation still as we continue to see increased speculation due to fallout from the housing/mortgage environment and inflated energy prices. We expect to see continued volatility during the summer months this year due to increased levels of uncertainty in investors minds. Considering that prior negative economic and market conditions still exist I don't anticipate any dramatic change and do expect to see continued volatility into the fall trading session.

S&P Futures managed a strong rally off the 1201.00 level as fear selling failed to develop into panic selling. The sell off was a high energy trade driven primarily by the lack of presence of any real aggressive bargain hunting type buying. Stories in the news about continued bank write downs and slow if any GDP had kept the buying to a minimum as the bears had their way for the most part of July. But equally important is the huge rejection we've seen from the extreme low levels of 1201.00 sp and 10800 Dow. The SP's have enjoyed a huge run up to 1300.00 as oil retreats and holds a sustained trade below $120.


Pit population continues to be at levels as we would expect for this time of year. We have been seeing some good size orders, market movers as we call them, coming off our large desks providing good information for our listeners. Remember this is still summer trading session and while the ranges haven't really been tight the market at times has. By that I mean that during the mid day trade we have seen slow local to local type trade, typical for this time of year.

With the fundamentals essentially still what they were or have been for the last year plus now we do not anticipate any major change for the trends we've been experiencing. We think the market still has a full steam ahead type mentality and wants to test some of the key technical levels set last month. A couple big downside numbers traders are watching in the SP Futures are 1255 and 1200 in the Dow Futures the level is 10800 then 9500 if things get extreme to the downside. Above many traders are watching 1320 in the SP and 12000 Dow.

Happy Trading

Commodities Stocks Decimated

Commodities Stocks Decimated. What would you expect with oil currently below $115 per Barrel and Gold Dipping Below $830 per ounce? The Technology sector seems to be taking the money that was previously in the Oil, Nat Gas, Agriculture, Coal and Metal Names. The Airline Stocks are loving the decline in oil prices and as a "Trading Vehicle" have worked out exceptionally well. With the Fear of a Global Recession the The US Ten Year note yield pushed over 4% today.


The companies that need to purchase these raw materials should benefit from the lower costs. Think Airlines, Retailers, Transports, Industrial, ect. The Financial Stocks have held up relatively well but still have yet to break out and show significant leadership. Since they are no longer moving down the broad market indexes have the chance to advance. The money is moving fast and furiously from the winners to the Losers. Happy Trading.

Will CNBC ever stop asking "When Will the Housing Market Bottom or Have we hit the Bottom?"

Will CNBC ever stop asking "When will the Housing Market Bottom?" "Have we hit Bottom in the Housing Market?" and my favorite "Is it time Now to Buy Financials?".

We will know when the market bottoms. After the inventories start to decrease, foreclosures dramatically reduce and Bank reposessions dramatically reduce. The most imoportant sign of a bottom will be very simple: Affordability. When house prices become affordable again, and credit becomes more available, then the market will bottom.

It is not time to buy and hold any equity in any financials. Most equity is worth nothing. It is going to be a process for the equity capital to go to zero. There are too many hopers, traders and too many investors with too much money to see this happen overnight. It wil be a process of the equity being reduced to zero, this will take a while to play out. But it will happen.

After CNBC asked these questions over and over again, with no useful information being drawn out of the talking heads, I decided to smash my TV. Ok, well I did not actually smash my TV (I wanted to) I no longer listen all day. I have the TV on mute, glace at headlines, and turn the volume back on for useful, interesting, or entertaining informnation.

Coals, Minerals, Natural Gas, Oil Drillers and Commodities remind us why they are the leading sectors. Crude Bounces Hard and Financials Add to gains

The Bulls took the market indexes higher with the S&P 500 gaining 22 pts to close at 1284, the Dow up another 200 points even to 11,569 and The NASDAQ reversing earlier losses to close at 1856. The rally was led the Coals, Miners, Agriculture, and Oil Drillers. The "Good Stuff" went up strong, along with the beaten down financials stocks holding their own and adding slightly to gains from yesterday.

The only trade I am sitting on is the USO August 99 calls, which are now trading at $5.60, 64% higher than my open price of $3.60. With Crude Retreating and breaking the trend line everyone (including myself) was calling for $100 a Barrel oil, and lower in the near future.

Ask yourself: Does my vehicle run on gasoline? I'm going to answer that one for your with a "Yes". I don't think the trend of decreased US Demand over the past few weeks is going to have that much of an impact on global prices. Many countries have no incentive to conserve Gas because it is dirt cheap and subsidized by their governments. With Gas in Venezuela at 12 cents per gallon, they have probably not cut back.

Here is a link from CNN to Global Gas Prices: http://money.cnn.com/pf/features/lists/global_gasprices/


RIDE YOUR WINNERS: I was tempted to cash these calls with the quick profit literally burning a hole in my pocket. However, I believe that Oil has more to rally, with crude closing strong at $127 a Barrel in Electronic Trading. I kept telling myself to be patient and let the market tell me when to exit. It takes courage to be a pig to ride your winners. Oink Oink. Happy Trading.

Long USO (United States Oil ETF) August 99 Calls, Open at $3.60

I Went Long USO (United States Oil ETF) August 99 Calls after today's oil inventory data. Government data showed that crude and gasoline supplies fell and gasoline demand improved from last week. This bit of Bullish news was enough for Crude to Bounce from $120.80 all the way up to $126.12 in NYMEX Trading, as of 1:43 pm EST.

Goldman Sachs came out today with a note to clients saying they expect crude to march towards $150 a barrel sooner than later.

As usual I will post a full update and entry at the end of the days trading.

I appreciate all of the feedback from people who have been reading my blog.

The Bulls Charge back with Fury. Who will win? We don't know, What we can say for sure is the Volatiltiy is Back.

The Fight continues between the Bulls and the Bears. With The Market still officially in "Bear" Territory. No winner has been declared yet, but we know for sure the Volatility is back. If you take a look at 2 day chart on any broad index, it looks like a letter V. Down all day yesterday, then back up just as fast. The Volatility is back. The S&P Ripped up 28 points, The Dow popped 263 points, and The Nasdaq soared 55 points. Erasing Yesterdays losses and putting the Averages into the Black for the Week.


I did not have any open trades coming into today, nor did I put on any new trades. I did missed the opportunity to get long the Financials early in the day, so I just sat on my hands. The shoulda, coulda, woulda's can't get to me any longer, because I know they always end with the words "But you Didn't". With my Trading Philosophy I do not enter the markets unless I have a conviction. I missed the boat today, and it is tempting to cry on the shore. I would rather preserve my capital that try to jump in chasing every market move. You can't get them all.

The Markets rallied strongly on the back of Merrill Lynch raising 8.55 Billion Dollars as CEO John Thain unloaded a batch of money losing CDO's. we are seeing some signs that people are buying up the once unsalable CDO's. This is huge. As you have known I have been Bearish on the Markets for a long time (Since October 2007). While I have traded many bounces long, I still maintained a strict short bias. Now I am forced to reexamine my outlook. Commodities are clearly breaking down, the dollar is rallying, and stocks as an asset class look more attractive. The Hedge Fund King John Paulson who made $3.7 Billion Dollars in 2007 with his bets against the CDO's is starting up a new fund to offer capital to some of these distressed financial companies. If Paulson is covering his short bets and fishing around to get long by offering up money to the very industry he made a fortune betting against, any intelligent investor must take notice.

The US Dollar gained about 2 cents or 200 pips against the Euro. Oil Prices shed over $3 Dollars a Barrel to around $122.5 in the Floor Trading Session.

In M&A activity Teck Comico agreed to acquire Fording Canadian Coal for $14.1 Billion dollars. Coal Prices have doubled in the past year and many companies are out shopping to pick up coals on the lows.

After tomorrow the SEC's Temporary Ban and enhanced enforcement of Naked Short Selling is removed. It is going to be interesting to see how markets react. Happy Trading.

Mark Up another Victory for the Bears

Today was another painful day for the Bulls or anyone holding stocks "Long and Wrong". It was another great victory for the Bears (I am unapologetic and a proud member of the camp) A Truly Awesome day with the S&P 500 Losing 23 points and the Dow dropping 239. What a great day! How would you like to say that after a day like today? I am warning you its not for everyone.

The International Monetary Fund got things back to reality with their comments on the worsening housing market situation, Treasury Secretary Henry Paulson issued guidelines to create a covered Bond Market in the US, which decimated the Equity Shares of Government Sponsored darlings Fannie Mae and Freddie Mac. The US announced a record Budget Deficit of $482 Billion Dollars, Damn I guess the war on Terror and Invasion of Iraq is expensive. All this is great news for my investors, as it confirms our short bias, and puts money into our pockets.

Financial stocks led the declines with AIG plummeting over 12%. Merrill Lynch (MER) Fell over 11%, Lehman Brothers (LEH) over 10%. Please refer to my previous post entitled "The Equity of Many Banks are worthless" for more color as to why this is all happening. Amgen (AMGN)was one bright spot after hours beating analyst forecasts. However it is going to take much more that one Biotech company beating numbers to rally this market. Its going to take the US Housing market (the Cause of the problems) turning around.

The Financial Advisors and Long Only Money managers are crying. I guess Hope still Springs eternal, even in the face of repeated evidence to the contrary. I am heartily laughing at them all the way to the bank.

However, I still feel bad for the people who I have pleaded with to manage their funds who refuse to see the situation as it is. I understand Change is uncomfortable. I also understand that I sometimes come off as a crude, fast talking, insensitive, know-it-all ass hole. I get that. But I truly have your best interests in mind. My only intention to speak frankly and be objective.

I have tried as hard as I could. And I give up. They say you can take a Horse to water but you can't make him drink, I see many thirsty malnourished horses, who are in need of water, but stubbornly refuse to sip. This Cowboy has no choice but to leave them to fend for themselves, and ride off into the sunset.

Objectivity is a tough pill to swallow, but once you get her down you will have an uncommon insight and more clarity into market operations, and much more money in your retirement accounts. Happy Trading.

Covering Shorts-Going to Work on My golf Swing

I opened WFC puts at 1.5, Closed at 2.3. This was over 2 days and it was the only trade that I made. I did good. The Market is offering a good time to cover shorts here and then reevaluate. I can't gauge the Markets direction right now. Perhaps I will jump in before the days end, if I am alerted.

The Market has suffered a large drop yesterday on New Homes Inventories, and Today got a bit of optimism from a better than expected Durable Goods Report.

However my golf game is still not where I would like it to be.

Your Financial Advisor is a F&*#^ing Idiot-Tell them to Stop Smoking Hopium

In the Last Bear Market the S&P 500 lost about 50% of its value. Yes this can happen again. Your Financial Advisor will probably say things like "we are invested for the long term", "The Market over time always goes up", "It's not timing the market, it is time in the market", and he will throw around terms like "Dollar Cost Averaging".

Ask yourself this one question: Do you feel comfortable watching your Stock Portfolio decline by another 25-30%? If so, then stop reading this, pour yourself a cocktail and just relax. You may also want to avoid opening up those monthly statements.

Anyone who holds too many stocks during a Bear Market has only one thing to cling to: Hope. They hope the market goes up. They hope everything is going to be alright. The reason for this eternal hope is because their portfolios are only positioned to increase in value if the Market rises. 99.9% of Investors can only make money when Markets rise. The Dirty little secret is that Markets don't always rise, they move up, down and sideways. Uh oh.

I personally don't care what the market does. It could go up to the Heavens or drop straight to Hell, the Dow could go to 20,000 or to 2,000, and I would not lose a wink of sleep. On the Wall Street there is saying that goes "The Unsuccessful Investor is Best Friends with Hope". Rest Assured that Hope is not part of my equation.

I have endured massive pain and frustration through my own trading, this eventually created a "Moment of Clarity" where I could no longer afford to hope for what I wanted to happen. I was forced to look into the mirror and admit exactly what I saw, even if it was ugly.

My ultimate aim in Trading is to be objective. Specifically to be realistic with the circumstances that are actually happening in the Markets. Happy Trading.

Please Don't Everybody Line Up at once to Give me Money

Greetings Friends,

As you probably know I have been soliciting funds for my Investment Fund: Modad Derivatives LLC. The Fund is still not capitalized with the amount of money I would like. I feel that with my continuous successful calls on the Direction of the General Market, Specific Sectors, and Trade Recommendations, I would be doing a fantastic job running an adequately capitalized fund. During my 1 year of trading I have learned much. I continue learning more about myself everyday and how I react to the events of the market. I am open to any suggestions and inputs from my friends and investors to better run the fund. With the accountability of my non-managing members, I know that I will be better than I could ever be alone.

This is what I do. I have taken a serious study to the markets, and I feel that I deserve the chance to really show what I can do.

People have still been reluctant to take me seriously and transfer funds to my custody. While It may seem like I enjoy being right on the calls I make on this blog, or in phone conversations to everyone, I really am in this game for one reason: To Make Money.

I look forward to speaking with you all soon. Happy Trading.

Time to Take Profits on the Long Side. And Short.

Yes I Did call getting Long about 1 week ago. For any who listened to me they made money. Now I am saying it is time to sell into this rally. I have recently purchased puts on WFC. Time to Start Shorting again.

Wow What a Rally!-This is NOT the Bottom

We knew the rally was coming. We covered up our short positions yesterday. But who could have predicted the magnitude of this bounce? Wells Fargo Corporation with better than expected earnings sent a jolt of rocket fuel to the market. The Market should enjoy a nice rally here over the coming weeks. This is totally normal in the context of a longer term Bear Market. The Testimony from the Senate Banking Committee laid out some new proposals for regulating naked short selling, Oil Drops on a much larger than expected build in inventories, and Financials stocks rallied very hard. The Bottom of the Market will be called by many market pundits here. We are by no means out of the woods, as fundamental economic conditions have not changed. However with the government talk of surveying short sellers, possibly eliminating the uptick rule and the Massive amount of short positions, this was a great time to take profits. Commodities, Oil, Coal, and Natural Gas stocks sold off hard, and people moved money into the Financial Stocks that have been so beaten down. I am switching my short term bias to being long for now. I trade what the market gives me, not what I want to happen.

All I really have to say about today is "Wow-What a Rally! But This is Not the Bottom." For Nimble Traders the market is providing a good opportunity to get long here, just do not get married to your positions. For Long Term Investors this is the time to hold and then sell some stocks off into the next rally. The Bulls won the most recent battle but the War is Far from over.

The Equity of many Banks are Worthless

Today the FDIC issued a list of Banks it believes are going to fail. This is not suprising to me. First let us examine what a these "Banks" have become. The Banking model of the typical commercial bank makes money by the spread of deposits taken in, versus the money it Lends out. The Bank Burrows money at a lower rate and lends it out a higher rate. However if we examine what these banks loan money for, and what they lend the money against it is one asset, Real Estate. These Banks are ultra over leveraged to the exposure of Homes amd House Prices. They lend money based on The value of Homes in the Form of Mortages and made more loans based on the value of these homes with home equity loans. The Balance Sheets of these Banks is a joke. When the Shareholders find out their equity is worthless they are suprised. Should they be suprised? Not in the slightest bit. If they took the time to look at the Balance Sheets of these Banks they could easily see the amount of debt the Bank has taken on, and the small amount of equity capital they keep on hand.

The Market seems to be telling us that the Banking System of The United States is going to Change as we know it. The equity of most of The Banks are worth nothing. They are not even going to be able to meet their debt obligations. As you know the Debt Holders, and Creditors of the Banks are going to be the ones who are first in line in the event of a Bankruptcy. The equity holders are basically giving up their money to feed the hungry debt holders.

In the Last Bear Market the S and P 500 Lost about half of it's value, in this Bear Market I see it losing no less than 50%, in most cases the market will lose much more of its value due to the Housing Bubble that has been built up over years and years of Lending ontop of increased prices. History has shown that in times of increased credit, and additional lending based on incresing asset values (house prices) will create both substantial booms, and subsequent busts. Once the Real Economy in Main Street feels the effects of this bust the market will only fall further. Happy Trading.

Over Trading will kill your Account

In the past my biggest fault as a trader was trading too often. As Tom Petty said "The Waiting is the Hardest Part". To sit on your hands and do nothing makes most traders very uncomfortable. They always want to have a stake in the game. There seems to be a psychological and social pressure on Traders to always do something when they are "working". In our society we are conditioned from a very young age to value a hard days work. Not working leaves many people feeling guilty. If a Trader is harboring such feelings within himself he will have a very difficult time deciding when to be in the market and when to be out. In addition to being in the market when he should not be, and taking risks where he does not have an edge, he will often have difficulty exiting the market when he should.

The great stock speculator Jesse Livermore said "even after you develop an opinion on the direction of the market, wait until the market action itself confirms your opinion before backing your commitment with your money". To sit on your hands and wait around for the market is the most important trait of a good trader, and the most difficult to develop. Unfortunately this skill is usually not present in Traders until they have lost much of their capital in the markets, and have witnessed first hand the devastating effects of Over Trading.

Taking the Money and Running

Taking the Money and running is sometimes the best course of action. When you see signs the market is turning do not delay and wait to take your profits. Book them when you have them. Then reevaluate the market. Not having skin in the game will keep you more objective.

Trading Blog

Enter C July 20 puts at 1.50.

Closed at 2.01.