Monday, October 3, 2011

Globalized Idea Based Economics and Implications





The new economic reality consists of a Globalized World. With Trade barriers removed and Technology advancing all countries are now interconnected. Consumers will benefit from increased competition, better quality products and lower prices. Product Manufacturing Businesses will find it increasingly difficult to compete in this new economic environment. Firms that fail to innovate may be replaced by new technologies and breakthroughs. Every country in the World must now compete against each other to develop the Best Products

Free Will, Free Speech and Free Markets were once only available to few of the World's leading Nations. Previously "Industrialized" Nations such as the United States, Europe and Japan once exclusively enjoyed the Competitive Free Market advantages brought by Democracy. Now these Values are rapidly expanding to every corner of Globe. This increases the ability of any Nation to compete on a Global Scale. Economic Disruption will occur more frequently now than ever.

In today's economy Ideas and Intellectual Capital can be worth more than Natural Resources. Would you rather have all of the Intellectual Property of Microsoft Corporation or all of the Copper in a Mine? Copper is a finite resource. Relevant Patents, Trade secrets and Intellectual Capital have nearly infinite applications and commercial potential.

This presents a unique dynamic. A Game Changing Disruptive Idea can be worth far more than all of the Gold in a Mine. However outdated and irrelevant ideas are worth nothing. Yet Physical Assets and Natural Resources are not likely to be rendered useless overnight.

In 2005, Social Networking Site MySpace sold for $580 Million to New Corporation. In 2011 Myspace was sold for a mere $35 Million. That is around 94% lower. Facebook during those 6 short years established itself as THE Social Networking Site. A better idea and platform came around, and users migrated away from MySpace.

Breakthrough advances in Alternative Energy and Huge discoveries of new Natural Resources would NEVER depress the price of Oil down 94% over 5 years’ time. I cannot see $100 oil trading for $4 Dollars per Barrel in 5 Years under any such conditions.

In the Globalized Idea Based economy companies need to constantly evaluate their prevailing assumptions and strategic plans. We all now compete in a Global Marketplace. Ideas from around the globe are being cooked up right now with the intention of putting your company out of business.

"How do I get my company in position to take advantage of this new market?"

That is the Billion Dollar Question. Both Challenges and Opportunities are greater today than ever before. An experienced Business Consultant can provide insightful solutions on how to navigate through uncertainty into prosperity.

Call Ray Modad today for more information at 586-453-9430.

Thursday, March 4, 2010

Ants



Some amazing facts about my favorite insect.

Ants....
can lift up to 20x their body weight
have 2 stomachs. 1 for themselves 1 for sharing food with other ants
largest brain size relative to any other insect
over 12,000 species
all the ants on earth weigh more than all of the humans
use pheromones to communicate food sources and what tunnels to dig
vote amongst the colony using these chemical trails
do not have lungs
they absorb oxygen through their skin

Tuesday, December 1, 2009

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!!!

Tuesday, September 8, 2009

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?

Thursday, August 13, 2009

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.

Monday, June 8, 2009

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?

Monday, June 1, 2009

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.

Friday, March 6, 2009

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.

Tuesday, February 3, 2009

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.

Sunday, February 1, 2009

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.

Thursday, January 29, 2009

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?

Thursday, January 22, 2009

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.

Friday, January 2, 2009

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.

Thursday, December 18, 2008

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".

Thursday, November 27, 2008

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."

Thursday, November 13, 2008

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.

Tuesday, October 28, 2008

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.

Sunday, October 26, 2008

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.

Saturday, October 25, 2008

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.

Thursday, October 23, 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.

Thursday, October 16, 2008

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.

Saturday, October 4, 2008

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.

Friday, October 3, 2008

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.

Wednesday, September 24, 2008

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.

Tuesday, September 23, 2008

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.

Thursday, September 18, 2008

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?

Wednesday, September 17, 2008

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.

Tuesday, September 16, 2008

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.

Monday, September 15, 2008

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.

Sunday, September 14, 2008

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.