Yesterday I was just looking at some of my earlier posts and came across this one. My how the world has changed since I penned this special report.
First posted on June 25th, 2007
There used to be a time when investing was simple.
You know what I mean? You buy at 10 and sell at 15 and make 50% on your money. I can understand that, and so can most investors.
I have to admit that some of these off book derivatives that banks and hedge funds are creating and trading are just not that simple to understand.
When the time comes and it will, you will see the you know what hit the fan. Some of these hedge fund managers will see that a lot of stuff that looked good in computer simulations, may not look or work as well in the real world (see the sub-prime melt down).
Just look at what happened to this hedge fund, Amarath Advisors who lost 6 BILLION and how they thought they where more smart that the markets.
And now the Blackstone Group has gone public with great fanfare. Now that's going to be an interesting one to watch. I am going to be watching this one closely, if it drops below its initial public offering at price of $31.00, it could spell problems for the whole market. If this stock trades below 30 you are going to see a lot of press, finger pointing and speculating that we are seeing a top in the markets.
The only way to consistently be successful in the market is to learn how the market works, have a game plan and have two other key elements necessary for success.
Here they are:
Once you understand how the markets work, have a game plan and master discipline and diversification, you are on your way to success.
Every success in the future,
4 thoughts on “Looking back did we call the market top? Can we now call a market bottom??”
Surprisingly, India, with 1.20 billion people, [always shown as poor country, viz. in the movie, "Slumdogs Millioniare", is showing, least 6% growth in GDP. Its 350 million middle class, having enough money in their pockets, to buy imported goods and services, are quite comfortable in present economic meltdown. Wholesale index is almost zero, and inflation is below 5% of GDP. Will anybody say something. Indian mind, and American systems, can save the world from financial turmoil. It is the socialims [50-50 partnership between Government, and Private sector], which India has tried, and have succeeded. India is having a last laught on world economy situation. No wonder Obama has confirmed India`s present development, and wish to keep India, as a friend, for future growth in USA.
Your views, suggestions, or comments are most welcome.
Sunder Thadani [From Mumbai, India]
Having spent the last 3.5 years trading emini ES, YM and TF and also now commodities, I know I'm a better trader than 95% on Wall Street. And I never hurt or cheated/lied destroyed anyone's livelihood.
All they ( CEO's, investment bankers, traders on Wall Street) have is academic qualifications ( MBA, CFA etc) but no trading experience- with their own money. They no nothing about patterns, price, time, geometry, cycles etc. They no nothing.
They may have algorithms ( this is all nonsense) and 100 million to trade with...and they make $10 million profit one year only to lose $150 million the next. They keep their $1-2 million salary when they make a profit, but when they lose $150 million...they never have to give it back....$2 million they made the previous year..they ask the shareholders to suck it or get the Feds to bail them out...
The requirements to have a job on Wall Street have always been ( at least since 1987 onwards) MBA from a prestigious school, NO ETHICS, GOOD LIAR, CHEAT, ROBBER, SCAM ARTIST, RIP OFF ARTIST and make sure YOU STEAL ALL THE MONEY. All of it.....leave NOTHING FOR THE HARD WORKING PERSON WHO IS TRYING TO FEED HIS FAMILy.
Personally, I think you have to round up all the CEO's and their cabal going back to 1996 and anybody who made over $10 million give it back or else just SHOOT THEM LIKE IN CHINA. We need some Chinese justice in America...for all these HOODLUMS and Scumbags who have destroyed the lives of the average and most American people and the economy.
Pretty soon when 50 million Americans will be starving and no place to go to rest their weary minds and no job...then they should go and loot, pillage the homes of all the Wall Street crooks. Put them all out on the street and live in their homes.
As a matter of fact, those fools( previous employees) at Lehman and Bear Stearns should start a revolutionary guard and oust Fuld and the other scammers from their homes..put them out on the street.
Time you wake up people.....We've been hosed too long. While AIG is taking $165 million in bonuses after getting $180 billion to stay afloat and YOU DON'T HAVE A HOME, ITS FORCLOSED, NO JOB, NO MONEY AND SOON NO FOOD!!!
The American Dream...ha ha ha.........
Don't even get me started on derivative markets. Certainly options markets are reasonable and easy enough to understand, but other derivative markets are difficult to understand is because they're bogus.
Let's take a look at Credit Defaul Swaps.
A credit default swap (CDS) is a swap contract in which the buyer of the CDS makes a series of payments to the seller and, in exchange, receives a payoff if a credit instrument - typically a bond or loan - goes into default (fails to pay).
Now it doesn't take much genius to read how a CDS work to understand the risk taken on by the CDS seller.
If a loan is made to an unqualified buyer, or if that buyer becomes financially distressed, the CDS buyer must payoff the debt.
Again, it seems pretty simlply, the buyers risk per CDS is the payoff amount if he underlying credit defaults.
Just like any disciplined investor, the CDS buyer SHOULD only risk a small percentage of their assets on CDSs. Sadly, the idiots at Lehman and Bear got greedy, and over extended their use of CDSs.
While the CDS balance sheet continued growing unabashedly, a silent assasin was taking control of one of the most common CDS markets, mortgages. The name of this silent assasin is the CRA, or Community Reinvestment Act, which forced banks to make loans to unqualified buyers.
Thus, the subprime market began to grow. In fact, it grew from a scant $3 billion of the market in 1988 to $529 billion in 2004, to $1.3 trillion as of March 2007. I don't know the totals of CDSs based on these mortgages, but you can clearly see the risks that were taken.
I say let AIG, Citi, Lehman, and all of the rest of them go bankrupt. The government is just prolonging this nightmare which they created with their "regulations" in the first place.
Anyone thinking crude will go to $80 is NOT a student of history. The last time we saw prices like last year, it took 15 years for U.S. oil consumption to recover to pre-spike levels. Look at the curve and ANY curve with a point like we just have come off. Does anyone see another one coming anytime soon? It hasn't happened yet in any market. Usually you see prices bouncing around directionless at somewhat higher than when the spike began. Here we are $35-$45, higher than the $15-20 we began at and still near what were record highs just four or five years ago. Given our governments current thinking, do you think we will be promoting more oil consumption? The Dow goes up 3 days and oil jumps $4 and now it's time to buy? What did P.T. Barnum say?
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