Wednesday, May 19, 2010

How Stupid Do They Think We Are?

The other day I noted the fact that Goldman Sach's, who according to it's CEO Lloyd Blankfein "does God's work", did not have a losing day trading in the latest quarter. Yes you read it correctly, they did not have a losing day trading in the entire quarter!

The next day I came across this article 4 Big Banks Score Perfect 61 Day Run out of the NY Times.

Then, as noted in my piece yesterday on high frequency trading, I alluded to a firm the NY Times reported on, and you can read about here which, according to it's founder, has not had a losing trading day in 4 years.

After considering this for a few days I simply must chime in on this. It's not enough that 1 firm, is savvy enough, bright enough and with a little luck able to turn in a quarter with no losses but 4 other firms as well? And now a high frequency outfit going 4 years without a loss!

Who the hell do they think I am? Lloyd Christmas from Dumb and Dumber? Is one supposed to even dignify bullshit like this with a comment? Now, I am no statistics major and many consider me a short bus rider but I know enough to know bullshit, insider trading, a ponzi scheme or a mish mash of all 3 when I see it.

As for the Goldman shareholders along with shareholders of those other perfect shops with perfect trading records this quarter I wish you luck when the music stops because it will and when it does it will not be pretty. I know you're long and strong and could care less "how they do it". My guess is you most certainly will care in due time and if you believe this horseshit of no losing days, and I would expect scores more out there do than don't, well then the earth must still be flat too.

Actually why shouldn't we expect a prozac'd public out there to believe bullshit like this perfect trading quarter. Past experience shows they should eat it up since history has shown that vast numbers believed:

Bernie Madoff's investment returns.
the unemployment numbers.
that home prices would rise indefinitely
that internet stocks with no sales were worth billions
that letting Lehman fail was a mistake
that bailing out banks prevents martial law

But just try and tell the public Dancing with the Stars is unavailable. Tell them that Survivor, Idol or Amazing Race are off the air and dollars to doughnuts says the pitchforks and the boiled rope would appear in a heartbeat for sure.

So to answer my initial question of how stupid do they think we are? Maybe plenty stupid.

Deflation and Gold

The facts convince me we are in the grips of a deflation many cannot comprehend let alone manage money in, which leads me to a confession. Regular readers know I own physical gold an silver, even thought it has not appeared below in 'open positions' functioning as insurance for me as it is no one's obligation and never defaults on its obligations.

Well, I did something last week I may well regret but after much discussion we (my wife and I) sold our physical gold and silver. As usual my timing was lousy as I did before Gold made its rocket shot. To say it was extraordinarily tough decision to make is putting it mildly. But it seems I heard somewhere prior that the hardest trade is the correct one?

Regardless, I believe that the deflation we are facing will result in lower prices for everything across the board and this will include gold. I also believe that the one asset that will never go "no bid" is gold (one could probably throw crude in here as well), can you say the same about AAPL or GOOG?

I also acknowledge the allegations of manipulation in the gold and silver markets as still being out there. I read a piece recently from an interesting blog I stumbled across recently called Jubilee Prosperity. The writer, who goes by the pseudonym? Rick Cash, seems very, very, astute. He caught my eye with an old Templeton quote he used where the old man said:

"assets always correct the amount they are financed"

Anyway Mr. Cash mentioned the circumstance with the precious metals, their manipulation and whether there is gold to back the paper promises in a piece entitled "In God not gold, We Trust - Counterfeiting II" where he remarked;

"If you found out your gold is counterfeit, what would you do?
Sell it or buy more?!

The record of every default was lower prices.

I offer his comments simply as something for your consideration. I can assure you that I HAVE !

Now before the gold cats go off on me I fully recognize that gold can defy this and I fully expect gold to lose the least in this deflation ,sometimes he who loses the least is the winner. You must remember that the global mother-of-all credit bubbles has burst and the globe faces a massive, never seen before in any one's lifetime, de-leveraging or if you prefer garage sale as MOST EVERYONE fights to raise cash.

The phrase cash is king truly needs to be ones' mantra.

Now you can forget about Wall St. embracing this (cash) because cash pays no fees and hence no country club memberships, no Botox, no trophy wife , no Porsche lease payments and no alimony installments hence the stay invested 100% of the time fee generation mentality.

Find me a fund pension or fund manager who is bearish and is in cash (fat chance) and I will show you someone (A) of significant character and one who understands fiduciary duty but I will also show you (B) someone who now has the employment longevity of an ice cube in the mid day sun.

Sorry, but that is how Wall St. operates. Bring in the fees and commissions and the keys to the kingdom are yours, but God help you if you don't. It simply means you're on the 60 day achieve or leave program champ! Best of Luck to ya!

Housekeeping notes;

Fittingly I was stopped out of CRM yesterday at $87.35 for a flat trade only to watch it tank. should have had a market on close stop. Doesn't matter as da boyz would find a way to jam one on that as well.

Good speculating to you all and please remember to never forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 1 unit Direxion Large Cap 3X Bear ticker BGZ @ $19.34
Long 2 units Direxion Small Cap 3X Bear ticker TZA @ $12.06
Long 1 unit Direxion Emerging Mkts 3X Bear ticker EDZ @ $60.50
Long 2 units Direxion Financial 3X Bear ticker FAZ @ $19.65
Long 2 units Ultrashort Xinhua China ticker FXP @ $42.45
Long 1 unit Ultrashort Real Estate ticker SRS @ $49.10
Long 2 units Direxion Tech 3X Bear ticker TYP @ $10.52
Long 1 unit US Dollar Bull ticker UUP @ $22.52 stop @ $22.52
Long 1 unit ishares Barclays 20yr Treas ticker TLT @ 92.15 stop @ $92.15
Long 1 unit ishares Barclays 20yr Treas ticker TLT @ 93.48 stop @93.48

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