Monthly Archives: October 2008

The Race To The Bottom Continues

Another brutal selloff yesterday but we’re getting close to my target zone.  My daily timing model issued a few BUY signals last Friday and the volatility indicator breached 7.  Crazy. I’m curious to see what my weekly timing model says today when I reach the office and update it.

All this crazy volatility is due to forced selloff’s by funds and investors but its got to end sometime.  My simulations show that 800 is an important level on the S&P500 followed by a test of the 700 level.  I believe that the bottom is somewhere between that range.  If that analysis is correct, then we are looking at a 50% sell off!  That’s where I’m firing my last $$$ salvo into our 401K’s and sitting tight.

Governments Make You Poor

Argentina set up a national retirement system back in the 90′s and I’ve read numerous reports on how wonderful it is because it helps Juan six-pack not worry about the future.  The Government is looking out for those unfortunate people who don’t know how to manage money but want to retire one day.  I wonder what Juan is thinking about that now?

Argentine lawmakers will try to block the government’s use of $29 billion in nationalized pension assets to repay debt when they consider President Cristina Fernandez de Kirchner‘s plan to seize the funds from private money managers.[via Bloomberg]

I know that in the US we borrow from Social Security and other entitlements to pay for overspending but we don’t seize funds from private money managers, yet.  I wonder what would happen if Argentina’s financial system collapsed and Juan’s retirement account can’t be repaid? He’d be screwed.

Now Its Earnings

First it was the credit crisis, now its earnings.  When will it stop?

Tokyo’s Nikkei 225 tumbled 5.9% to 8,796.10 points in early afternoon trading, as investors nervously anticipated a season of modest to dismal earnings reports and outlooks. Earlier, the Dow Jones industrial average fell 231.77 points, or 2.5%, to 9,033.66, after blue-chip companies posted bleak earnings. [via Forbes]

It’ll stop when people throw in the towel.  I thought I saw that recently but people are still too optimistic.  Maybe I’m just a permabear.

Another Sell Signal?

This just in.  My timing model issued another SELL signal.  I think we’re setting the stage for another leg down.  I sure hope not but I follow my model religously.  My ultimate target is 700 on the S&P500 but we’ll probably hang at 900 for a bit.

Bailout Fading?

Trading Forex is a lot like watching Nature.  Its all about the survival of the fittest.  Often when banks intervene in a currency to halt its slide or stop its appreciation, the result is an outlier in the overall trend.  As money floods or leaves the system, the currency will be shocked into the opposite direction.  After a few days or hours, the same trend reasserts itself and the country would’ve wasted all that time, energy, and money.

Interventions in the stock market are a lot like Forex interventions.

The trillion-dollar infusions by the U.S. and European countries into their financial systems didn’t seem enough Wednesday to fuel more than a two-day rally. Major Asian markets fell on disappointing earnings and worries about a global recession.[via Forbes]

Why should this time be any different?  My targets for the S&P500 are still at 900 then 700.

An Introduction To Rapidminer Webcast

I’ve been thinking of holding a “Introduction to Rapidminer” webcast.  Can any of my readers suggest a good webcast tool (free or pay)?

I don’t have any date in mind but it will have to either be before my vacation in December or after.  I plan on going over the GUI, basic operators and experiment structure, and building a simple model from scratch.

Is there any interest out there for something like this?  Please drop me a comment.  Thanks.

Buying Jewerly With Only Paper

Lately I’ve been watching Youtube videos of Derren Brown, a UK mentalist.  He uses techniques of pyshcology, hypnosis, and I believe neuro-linguistic programming (NLP) to trick people’s minds.  His main goal is to show people how charlatans, psychics, and other tricksters can pull the wool over our eyes.  It’s a fascinating journey into malfunctions of our mind and it reminds me a lot of the Invisible Grip.

Goodbye Las Street

Or did I mean Wall Vegas?  Now that its after the fact, everyone wants to take the Las Vegas out of Wall Street and return to a kinder and more advisory role for clients. But to do so, you’ll have to make some harsh changes to allowable leverage and even get rid of some financial instruments.  Charlie Munger, Warren Buffet’s sidekick, suggests we ban all options!

To rid Wall Street of its Las Vegas tone, Munger suggests leveling the options exchanges in Chicago and New York, and banning completely all derivatives contracts, a rather impossible vision but one that’s true to his spirit. He’s also furious with the accountants, in particular for letting Wachovia (nyse: WB news people ) report actual profits on accrued interest from risky mortgages when, in fact, the interest wasn’t paid but added to the principal amount due on the mortgages.[via Forbes]

The idea to return to a more normal role for Wall Street institutions and sounder accounting methods is a great one and I welcome it, but I believe options have their place in the market. What are your thoughts?

The Road To Serfdom Continues

We took a big step toward nationalization this weekend as the Federal Reserve and Great Britain decided to inject taxpayer money into the banking system to stabilize things, emphasis mine.

Before markets opened in Europe, a statement from the Federal Reserve in Washington said that it, along with the Bank of England, the European Central Bank and the Swiss National Bank would provide funds at a fixed interest rate in advance of each operation “against the appropriate collateral in each jurisdiction.”

The Federal Reserve said it would increase its swap lines with those central banks “to accommodate whatever quantity of U.S. dollar funding” institutions demand. The Bank of Japan was considering joining the plan, the Federal Reserve said in a statement. [via NY Times]

This bailout plan is probably going to work but it will come at the expense of the US Dollar and a lot higher inflation.

Rapid-I Meeting

I had the pleasure of meeting Ralf Klinkenberg, founder of Rapid-I, this weekend in New York City.  He was in town finishing up the first set of Rapidminer training courses and he dropped me an email to see if I had some time to meet. We talked about the birth of Rapidminer (formerly Y.A,L.E.), why he started it, what’s the ultimate plan for Rapidminer, and their growing team in Dortmund.

We had a good long talk over Malaysian food and decided to strengthen ties between Rapid-I and Neural Market Trends.  We even talked about the possibility of me co-presenting one of their financial training courses next year.  I must say, I walked away rather excited about the possibilities and I look forward to growing our relationship in the future!

Oh BTW, Ralf will be back next week in NYC for more Rapidminer training courses.  The courses he’s presenting focus on an introduction to datamining and financial datamining and analysis.  I’ll post the exact list of courses and availability on here later, so check back!

Random Thoughts

After a week like this, I’m glad the weekend is here.  I need time to relax and not think about this imploding market.  Although things are really bad out there, and will likely get worse before its over, I’m pretty upbeat.  I’m upbeat because I believe we will see a once in a lifetime opportunity to buy some great, and surviving, companies.  The hard part is figuring out when to get long.

Just like countless others investors out there, my money is trapped in a 401K, and its painful to watch years of gains evaporate.  Although timing the market by averaging down, I’m still showing a big short term loss.  Many of my co-workers don’t have that luxury and are extremely stressed, especially those who planned on retiring in the next 5 years.

If things are stressing you out, I want to offer this piece of advice to you.  The most important thing you have in your life is not money, but your health and family.  It’s in these darkest hours that we need to support each other and invest in humanity.  Be calm and be at peace.