Rally Time Items to Watch
By Barry Ritholtz - August 21st, 2009, 12:25PM
A few things to note about this rally:
• The volume is absurdly light– even for August;
•Today is an expiration day, with the bias to the upside;
• Professionals are fully invested; Individuals are mostly under-invested;
• Markets are now 53% up from the March lows;
Yesterday, I did an interview with Yahoo Tech Ticker going over why I thought this is now a dangerous rally — but one that can continue for some time. (Video Here)
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August 21st, 2009 at 12:34 pm
What did I miss here for the past two hours while driving out to the farm?
Oh…I see, a 140 point rally…
ZZZZZZZZZZZZZZZZZZZZZZ
• The volume is absurdly light– even for August;
•Today is an expiration day, with the bias to the upside;
• Professionals are fully invested; Individuals are mostly under-invested
Somebody wake me when one of those “indvividuals” you mention decides to step up and buy Lloyd Blankfeins portfolio…
This kinda trading reminds me of the last wave of house flippers…
August 21st, 2009 at 12:34 pm
5. This is held together by DUCT TAPE (Dollar Undermining Carry Trade: Toxic Asset Protection Exercises)
August 21st, 2009 at 12:37 pm
Yeah but the good news:
there’s now photographic evidence of green shoots in the shipping industry – Baltic Dry Indec to recover shortly, I imagine.
http://truthortalk.wordpress.com/2009/08/21/baltic-dry-index-now-set-to-spike-on-green-shoots/
August 21st, 2009 at 12:50 pm
did you guys checked the marketwatch – “Bernake saved world” article.
Only an hour passed and it already has over 1000 comments. ( 1098 to be precise ).
And for all you who doesn’t believe in The Market – it’s still going up, still strong…
why am i always end up with the “wrong” people ? I got to get closer to Ben…
August 21st, 2009 at 12:50 pm
Blew through the 38.2% retrace on the S&P. Bears are going to have a hard time corralling the bulls. Patience mis amigos.
August 21st, 2009 at 12:54 pm
But still the insider selling continues….hmmm?
August 21st, 2009 at 12:54 pm
It’s a rare day off from lecture writing for me, but I’m sorry to say I didn’t catch this move. I was expecting another triple digit down day earlier this week so I could spend my 2009 IRA contribution, but this market just won’t let me in. =(
August 21st, 2009 at 12:55 pm
zyzy
Indeed. You’d have been in much better shape having an “ignorance is bliss” perspective and existence over the last few months. The key is when to wake up from that reverie. I had no idea the psychology of this market (world?) was so broken. Or maybe it is all that liquidity dynamic that I just don’t fully understand (and few do, I believe).
August 21st, 2009 at 12:57 pm
“I was expecting another triple digit down day earlier this week so I could spend my 2009 IRA contribution”
5- and 10-year Treasuries are on sale today, franky boy. We are getting closer to a Wile E Coyote moment.
August 21st, 2009 at 1:00 pm
Did I mention “ignorance is bliss?” Exhibit A :)
August 21st, 2009 at 1:01 pm
@LB
In blocks of less than $10000? ;-)
August 21st, 2009 at 1:01 pm
@Onlooker: The liquidity dynamic is only part of the story. The other part is that everyone is feverishly trying to recoup all or some of their losses from last year. Panic buying and greed still running the show. It’s all part of the new bubble economy.
August 21st, 2009 at 1:03 pm
@f411
Be patriotic…Buy some dollars & some govvies!
August 21st, 2009 at 1:06 pm
Come-on Barry…. I need you to do a sentiment post!!! PLEASE!!!
We have made swing highs on the last 2 fridays!
August 21st, 2009 at 1:08 pm
TreasuryDirect.gov
August 21st, 2009 at 1:09 pm
Barry,
How can you possibly doubt the nature of this upturn when it appears that stocks have reached a permanently high plateau, prosperity is right around the corner, and subprime is contained and will not affect the broader economy?
Such Ben-Steinery!
August 21st, 2009 at 1:10 pm
Riding the market is easy
Hey look mom, no fundamentals!
August 21st, 2009 at 1:13 pm
@Andy T
So whadda ya say Andy?
I suppose the next stop is 1,044 (the high after the 10/10/08 meltdown, which, if I remember kotok himself described as the “capitulation low” point)…
1,044 is interesting…61.8 retrace back to 666 puts you on some interesting support down around 808…
1.618 (from 666 off of 1,044) takes you to 1,278 (which is where the waterfall started last September)…
August 21st, 2009 at 1:16 pm
Hell…1044 is only 2% more from where we are…
We could easily print it on Monday!
August 21st, 2009 at 1:20 pm
Seems as if the market needle is a bit stuck today. ZZZZZZZZZZZZZZZZ. Wake me during the final hour when we get the final, regularly scheduled pump into the close.
August 21st, 2009 at 1:23 pm
Watch the dollar… made a HIGHER low. The USO made a LOWER high. That’s technicals.
Think about sentiment for the dollar. Now think about the fundamentals for commodities.
3/3 tells me the turn is very very close now.
Australia are on the RACK at the Oval. C’mon, England.
August 21st, 2009 at 1:26 pm
It’s been a long time since I trusted “professionals” but I’d like to understand how they’re thinking: So why are the professionals fully invested? Do they think it’s real? Are they window dressing to prove they didn’t miss the rally? Other?
August 21st, 2009 at 1:28 pm
for all those betting on a $ resurgence-
UUP- seems to move very slow- from March to now- let’s say about a $3 drop or so- so roughly %11
if there is a rebound in the $- where will be the big upside come from- assuming you don’t to hold 6 months?
seems to me there would have to be better trade – no?
also- contrary indicator- everyone bashing the $ in the last few days-
the stock market is a collosal show @ the moment- always seems that when the schmo’s think something is a lock- that’s when the smart money heads for the exits
August 21st, 2009 at 1:29 pm
@ Joe Retail:
>Are they window dressing to prove they didn’t miss the rally? Other?
The pros are trying to sell the rally to the individual investors before the car drives off the cliff =)
HCF
August 21st, 2009 at 1:30 pm
Joe Retail,
it’s called career risk. there is your answer. When you charge people to follow your advice you can’t sit around and not do anything because you “know” the market “should” go down. Further, money managers of course are subject to herding. I think this is called: The Market.
@LB,
i was using 77.43 on the dollar index as the line that could not be broken or it derails the bullish case for the dollar temporarily. Not sure what you were using, but we didn’t go there, and have moved higher since. Re: sentiment, three prominent figures calling for major dollar problems, PIMPCO, Buffett, and Stiglitz, just this week. Add that to the Paulsen purchase of $3bil in the dollar on the long side and I agree that a turn in either direction is nearly here. As usual, I was several weeks early trying to make long dollar bets in various ways.
August 21st, 2009 at 1:31 pm
@Onlooker
Thanks for the link. I looked into it, though, and there seems to be no provision for IRAs.
August 21st, 2009 at 1:31 pm
ahab,
if you were really a dollar bull, and trying to make a lot of money on the turn, then you shouldn’t be in UUP, lol. Plenty of other ways to play that, remember, it’s one big trade.
August 21st, 2009 at 1:33 pm
I believe it was Barry who said that there are two parts to understand when investing: there is what is commonly believed to be true and then there is what is factual. (If wrongly stated, I apologize.)
What is being touted by the FCM (Fawning Corporate Media) is that the recession will soon end and we are on our way to an orgy of nursery-hothouse-green-shoots buying opportunities.
What is real is:
Continued unemployment at 9.4% with no job creation in sight.
Continued falling home prices.
Continued increases in mortgage deliquencies.
Continued tightening of consumer credit.
Continued lowered of consumer spending.
Massive public debt increases.
30% of all home mortgages under water
States in budget crises
And so on and so on….
The trick is determining when reality replaces illusion.
August 21st, 2009 at 1:33 pm
Will those of you who think that market prices are correlated with fundamentals, please stand up and bend over – silly bears. Its all about fear and gread, and at your age you should know better ;-)
August 21st, 2009 at 1:34 pm
Let us not forget that the single best year for stock returns was in 1933. A clear example of the disconnect between the stock market and the economy. I’ve had enough of these pundits using the recent stock market rally as a reason that the recession is over.
August 21st, 2009 at 1:34 pm
@DeDude: Fundamentals matter ONCE in a while and when they do, watch out below here.
August 21st, 2009 at 1:36 pm
The market always correlates with fundamentals in the long run.
In the short term the market acts like a voting machine. In the long term a weighing machine. — Ben Graham, the greatest investor of the twentieth century.
Bend over and take it silly bulls.
August 21st, 2009 at 1:36 pm
edit: continued lowering of consumer spending.
Sheesh. I have to stop drinking before noon.
August 21st, 2009 at 1:37 pm
b22-
no doubt-
i know you can short commodities, index funds- but if you were looking for a clean non-leveraged trade that goes up when the $ goes up- UUP just doesn’t seem to have much bang for the $
and no- I am not a Forex player
August 21st, 2009 at 1:37 pm
@ leftback
Not to belabor our conversation the other day re: deflation vs inflation. But I came across an article and thought of you immediately.
http://247wallst.com/2009/08/19/buffett-economy-may-mend-but-deficit-will-wound/
@ cvienne
The USD is a broken currency. It and Treasuries stay afloat due ONLY to risk aversion. Both show their true colors when markets are rallying. The only question is, will be an orderly decline or not?
@ f411
My opinion, best to stay away from both.
August 21st, 2009 at 1:37 pm
ahab:
A rebound in the $ would be self-sustaining, as a fall in commodity prices would drive more buying of $ and JPY, and the resulting unwinding of $ and yen carry trades would reverse the rallies that have taken place in risk assets.
If you look at the increase in stocks and commodities for the drop in the dollar since the winter, you will see that the carry trade associated with the bear market rally is highly leveraged (~10), so reversal could be extremely steep.
Think about the dynamics of Red October™ and imagine a repeat of the following movements in capital markets. High yield bonds to Treasuries, AUD and CAD to USD, EUR to JPY … and shares of C and GS to the bonus pool.
August 21st, 2009 at 1:38 pm
FXP flat today. Interesting…..
August 21st, 2009 at 1:39 pm
@f411: You might want to look at TIPS if you think inflation will be a problem long term. I have some of our “retirement” money there and they seem to be doing fine. Just a thought.
August 21st, 2009 at 1:40 pm
@lefty
Top Andrew Miller comment:
“I don’t run, I stroll urgently”… :-)
August 21st, 2009 at 1:45 pm
@ahab
“if there is a rebound in the $- where will be the big upside come from- assuming you don’t to hold 6 months?
seems to me there would have to be better trade – no?”
Depends on the SIZE of your book…The dollar is a very liquid market, remember?
It has the capacity to accept the flows stampeding out of a tighter equity market.
August 21st, 2009 at 1:48 pm
@ben22
(Vis-a-vis dollar)…
I’ve already got the long dollar trade on…Losing $$ at the moment, but I’m not particularly frightened by it at the moment…I’m still accumulating…
I’m surprised the ZSL hasn’t printed $7 yet again…If it does, I’m in there…
August 21st, 2009 at 1:49 pm
@dedude
“Will those of you who think that market prices are correlated with fundamentals, please stand up and bend over – silly bears. Its all about fear and gread, and at your age you should know better”
no no silly goose. we all know it’s dictated by the fibolaciously awesome divine ratio. :)
August 21st, 2009 at 1:52 pm
@ cvienne
Just curious. I believe that you’ve mentioned here before that you hold silver and gold. So why would you buy ZSL?
August 21st, 2009 at 1:54 pm
@Pat G
I agree that the dollar is a broken currency…That is not my point…
Instead, I believe that there is too much money piled in to commodities (across the board), and too many “short dollar” positions…A CROWDED TRADE…
Similarly, the S&P was at 666 in March…everyone was bearish…but look at the rally that has ensued…Are the fundamentals any better? NO (possibly worse)…
So my case for the dollar trade has to do with THAT more than anything…
And FYI (in case you didn’t know)…My dollar position (that I’m working on IS, IN FACT, A HEDGE)…I have 10x the amount allocated to gold bullion…Yet the last time I made a gold bullion purchase was 2004)…
So you have to understand things in perspective…
August 21st, 2009 at 1:55 pm
lb/cvienne-
do you have any postions in TLT or other treasury funds?
August 21st, 2009 at 1:56 pm
cvienne – I would like to converse with you about farming. Could we correspond via email?
August 21st, 2009 at 1:58 pm
@Pat G
My (1:54) comments juxtaposed your (1:52)…
Yes, I hold silver bullion as well…Again, this is a HEDGE for me…I own the bullion, I hedge the “paper” aspect of the trade…
Frankly, I think when the famous “hyperinflation” comes into effect (possibly 18 – 36 months in the future), the GLD & SLV will no longer exist, or be regulated in some weird way…
If & when “hyperinflation” occurs, the USG will find a way to confiscate those assets from people…
August 21st, 2009 at 2:00 pm
@hope
Sure hope…The big thing is, I’m not a farmer by trade…I’m making this stuff up as I go along…But I have established a lot of insights on how regular people can make good for themselves with a modest investment, and a modest parcel of land…
You have to be as practical in farming as you do in anything else…
August 21st, 2009 at 2:02 pm
Pat G Says:
“Both show their true colors when markets are rallying”
you’ve got it backwards I think, it’s the strength or weakness in the dollar determining stock/commodity moves, not the other way around.
@DeDude and bubba,
I’m curious, what were you guys doing back in March with your capital? What were you doing in 2008? I don’t ever remember either of you posting back then but could be wrong.
August 21st, 2009 at 2:04 pm
cvienne-
inconceivable – the USG would never seize someone’s hard assets-
er . . .well . . .except for gold . . . er . . .also that whole Indian thing where they sezied their land . . .but outside of that . . .hmm
August 21st, 2009 at 2:06 pm
@cvienne – that’s just the type of information I’m looking for. That’s my situation. Try cmagliozzi@yahoo.com and I will reply later this evening when I get home from work. This is a junk email alias. I’ll respond with the real one.
Apologize to the group and BR for the off topic post.
August 21st, 2009 at 2:06 pm
@ahab
I’ve owned TLT call options twice this summer…
I bought “out of the money” calls in June and caught a double…I closed that position and “re-upped” in July…I caught a TRIPLE on the recent rally…I sold half that position, and am letting the rest ride…
I’m NOT suggesting buying options here…I probably got lucky…
August 21st, 2009 at 2:07 pm
@CV
re: ZSL,
I had set up a trailing stop on that after rebuying and it’s been sold as a result. I’ll do the same trade over again and see if I can go three for three this time. Silver looks to be in a downtrend, and of course, this is another way to do the same as being long the dollar.
@bubba,
still steaming from the fibo thing? Get over it already.
August 21st, 2009 at 2:07 pm
@hope
OK hope…I’ll get back 2u…
August 21st, 2009 at 2:08 pm
@Pat G: We are actually in complete agreement about everything… except the timing and degree of the inflation.
@ahab: LB currently holds 5 and 10-year Treasuries as well as some 5-yr IG corporates, on the view that yields will decline into the end of 2009. Most of this position was acquired with 10-year yields close to 4%. This view is shared by David Rosenberg, Gary Shilling and Mish. LB held similar positions from July 2007 until November 2008. From time to time, LB hedges against this position by buying TBT. No gold, but LB does buy some TIPS here and there. LB owns a few modest longs in drug companies but otherwise no stocks or high yield bonds.
August 21st, 2009 at 2:08 pm
HopeImWrong – your last name is arguably more Italian sounding than mine! ;-)
August 21st, 2009 at 2:11 pm
@LB,
If I’m not mistaken, Rosenberg is looking for those yields to drop to the 2′s right? As Schilling said in response to someone that asked him “but you aren’t getting any yield over the long term on govt bonds”:
I’m not buying them for the yield.
August 21st, 2009 at 2:11 pm
@ben22
Re: FIBO
I know right?
I mean, I don’t have a room full of candles and red painted walls with fibonacci sequences drawn all over it or anything…It’s just a friggin guide (that has a high degree of accuracy)…
I don’t sit here criticizing the way other people trade…I mean, you could toss blades of grass in the air for all I care…
August 21st, 2009 at 2:16 pm
@ cvienne
Thanks for clearing that up for me, now I understand. I guess I just trade differently. When I think that the investment choices that I’ve made, from my perspective, are theoretically correct than I don’t see a need to hedge them or bet against them. If I discover that my theories were incorrect, then I just unload them. I guess you have more money than I do… :+} I don’t expect hyperinflation to occur. But I think inflation will start in earnest next year and begin to cause real problems in 2011. I’m not worried about the USG from a GLD or SLV position because I don’t hold any paper in either metal. Confiscation? Not going to happen.
August 21st, 2009 at 2:17 pm
Mannwich; I know fundamentals matter once in a while and can be used to guide long-term (years scale) investment. But people try to use them for trading or market timing, and get crushed all the time. Its almost as silly as using fibo (is it dis the fibots Friday yet?).
August 21st, 2009 at 2:20 pm
Isn’t this reason enough to make new highs for 2009? Jobless rate hits double digits in 14 states, D.C.
2:05 PM ET 8/21/09
SAN FRANCISCO (MarketWatch) — There were 14 states that had unemployment rates in double digits last month, with three including population heavyweight California setting all-time highs, the Labor Department reported Friday.
The report, which gives a regional breakdown of the national employment data released earlier this month, again put Michigan in the lead with the highest jobless rate — 15%.
The state, reeling from auto industry’s the shutdowns, registered a gain of 38,100 nonfarm payrolls since June but has lost 280,800 in the past year.
Rhode Island followed with a jobless rate of 12.7%. Nevada, at 12.5%, had the third-worst rate.
The District of Columbia also had a double-digit rate, of 10.6%.
Jobless rates in California, at 11.9%, as well as Nevada and Rhode Island set highs for the state surveys, which go back to 1976. Georgia’s rate of 10.3% was also a record high.
August 21st, 2009 at 2:22 pm
@ben22
steaming? huh??? i let you off easy last time my friend. and if you didn’t realized that, you’re a bigger dunce that i’d thought. no offense here man, you sound like a bright knowledgeable guy and all, but you need to think a little more and not swallow perceived “facts” so easily. look, i’m just having fun with all you TA guys…it just amuses me that you take fibonacci #s so seriously. i think he must be rolling in his graves. it’s a bummer for him he didn’t live in this century, he’d be making a killing.
August 21st, 2009 at 2:22 pm
I’m no Elliott Wave enthusiast (is Prechter still looking for Dow 41?), but don’t i see the start of a 3rd of the 3rd wave up this week from the March low?
August 21st, 2009 at 2:23 pm
@CV,
I agree, that was almost a month ago now, put the damn thing to rest.
@DeDude
Who do you know that uses fundamentals for day or swing trades? Did you used to trade and know people that did this, I thought you said you worked in healthcare? And as for the dissing of fibo use in determining trades, what do you use that works better? I’m always looking for new ideas.
August 21st, 2009 at 2:23 pm
@ ben22
Watch the market. When equities are cratering, news is bad, people are risk averse and moving into the USD. The tail is not wagging the dog.
@ leftback
Great! Then you agree with the comparison to the ’70s which was in the article and not to the ’30s?
August 21st, 2009 at 2:24 pm
that’s good news Karen- makes the companies more efficient to sell to those that do have jobs:-)
August 21st, 2009 at 2:25 pm
@Pat G
I’m glad you understand…
Ironically, I think YOU, lefty, and myself basically have the same ideas…
With regards to the precious metals…Again, I own the bullion and I don’t trade it because I believe there will be, perhaps, a 20 or so year cyclicality with respect to the value store…
So the dollar trade is just a PAPER TRADE…and it represents far less than the total net worth of bullion held…
In the short term (short term – meaning – 6 months)…I can’t see much more than a 10-15% correction in gold prices…But I’m hoping for about 20% upside to the dollar…
We’ll see…It really won’t hurt me either way…
BTW…I’d really, actually, like to buy some more gold…But it would have to get down to $840 for me to start looking seriously into that…
August 21st, 2009 at 2:25 pm
cvienne/lb-
thx for the feedbk
August 21st, 2009 at 2:25 pm
is Prechter still looking for Dow 41?
response:
To my knowledge he never was looking for Dow 41. He’s called for the dow below 1,000 in nominal terms between now and 2016. On his current most probably count we are in Primary Wave 2 and he has not called and end to it.
August 21st, 2009 at 2:25 pm
@karen: Just means more time to day trade worthless financial paper to one another! We’re all rich! Wheeeee!!
August 21st, 2009 at 2:28 pm
Pat G:
You said:
When equities are cratering, news is bad, people are risk averse and moving into the USD
Pat, have you looked at a chart of the dollar over the last year? You’ve got this wrong. And, the news doesn’t move markets. jmo. We’ll be able to put this debate to rest in 6 months. Sadly, that seems to be a lifetime to most of the readers here.
August 21st, 2009 at 2:29 pm
@ thor – It is Italian, from my Mother’s side.
August 21st, 2009 at 2:30 pm
Bernanke-
“One year ago “there was little to suggest that market participants saw the financial situation as about to take a sharp turn for the worse,” Ben Bernanke declared Friday in a speech at the Fed’s annual Jackson Hole confab.”
hahahahahahaha- colossal chumps and dumbasses
August 21st, 2009 at 2:33 pm
@ahab: Wow, just wow. Who exactly is he referring to by “market participants?” What a farce.
August 21st, 2009 at 2:33 pm
@ karen
Absolutely! As long as corporations continue to beat lowered expectations through cost cutting, the markets will continue to rally. That’s another dynamic of the disconnect between Wall St and Main St. Corporations, the USG and the MSM have made it clear with their actions or inactions that they could care less about the unemployment rate. Their rationale; there are still more people working than aren’t.
August 21st, 2009 at 2:33 pm
@bubba,
you assume much about me, I only use fibo as guidelines, have you ever even once seen me mention them here in reference to a trade strategy, the answer is NO, because I never have I was commenting on what someone else said about them. just the other day someone talked about our failed attempt at breaking a fibo resistance line and that it meant we were going down and I did not agree.
further I’m not a “TA guy” I use software that combines TA with fundamental analysis, much like what Fusion uses. it’s funny that from my posts, which disclose very little about what I’m actually doing, you were able to determine that I’m both a dunce but sound bright.
take care
August 21st, 2009 at 2:35 pm
@ahab: If I can try to parse that one, he’s not saying that there were no signs of coming problems, just that “market participants” weren’t paying attention to them.
August 21st, 2009 at 2:36 pm
@ben22
Ben…I’m going to say this…
…and this goes out with ZERO disrespect to either DeDude or bubba (who don’t buy into the notion of FIBO’s, which is their right to do)…
So to keep things civilized…personally, if I make a reference to a FIBO to ben (or Andy), or whoever, it’s simply cvienne conversing with another who basically speaks the same language…THAT’S IT…I’m not a preacher trying to convert souls…
If anyone wants to make any fun out of it at my expense, that’s perfectly fine, but I’ll leave it stand at that…
On that subject…ben…if you remember, yesterday I talked about the 23.18 level on the UUP…We actually hit 23.13, then rebounded to 23.30…So now…23.19 is FIBO support on todays move…Did you notice that?
lefty…you too?
Hell, who knows…maybe the whole thing breaks down…But I’m still not really worried about the position…
August 21st, 2009 at 2:36 pm
Pat G: This is NOT the 70s, or we would have a much easier set of trades ahead of us (Long Volcker, short TLT).
We will get there I suppose but there is all kinds of other nonsense that has to happen first. GS has to make profits by selling and SHORTING all the crap they have been pumping to Johnny Retail, because that’s how they make bank.
NOT the 30s, either, but a close facsimile of Japan, that’s where the currency decline comes in, but not just NOW. Agree completely with CV above and ben, we have not seen the last “flight-to-safety” trade to govies. Once you see the carry trade unwind get rolling you will be surprised how persistent it will be, just like last year.
As BR once said it’s not the CRASH that cost people money in the 30s or Japan, it was the RALLIES. BTW, a word to those who point out bullishness by insititutional investors: they are using OPM.
August 21st, 2009 at 2:36 pm
Of course neither were the economists or the politicians …
August 21st, 2009 at 2:37 pm
pat g Says-
“there are still more people working than aren’t.”
so . . . the glass is more than half full-
man I feel better- especially knowing that during the GD at its worst 65% of the populace was still working-
i guess those were much better times than people realize
August 21st, 2009 at 2:39 pm
Ben – I think bubba is just trying to yank your chain ;-)
August 21st, 2009 at 2:39 pm
Joe
Right, and it’s that faith that they have in the market’s wisdom that continues to lead them astray. Now they’re pointing to the market’s “strength” as a sign that the economy is improving despite all that underlying imbalances and weaknesses therein. These “esteemed economists” lose more credibility by the day.
August 21st, 2009 at 2:40 pm
@Manny
“market participants” (2008 version) = lazy fund managers enjoying their August in the Hamptons…& btw, I’m guessing the same lazy fund managers are enjoying the August of ’09 in the Hamptons…Let’s see how they enjoy September & October…
Note: this year it’s even easier because Llloyd & Jamie’s computers are doing all the work…
August 21st, 2009 at 2:40 pm
Life goes on at pessimism central. Is the market a bit oversold? maybe? but it’s very consistent around the world. Are we likely to see a leg down before the end of September? Probably? Will it be back at March bottoms? No way. The trend is upwards.
August 21st, 2009 at 2:40 pm
@ cvienne
If I’m in camp with you and lefty, that’s not bad company. I’ll admit to not having the patience or the sophistication with respect to trading as you two do. But that’s okay…
ben22
It’s not a lifetime to me but I still think risk aversion or lack thereof moves the USD one way or the other.
August 21st, 2009 at 2:45 pm
re OPM-
someone said something here the other day- can’t remeber who- about the C trader that was to make $100 million- and he said that he deserved it because he took all the risk-
my response was-
what risk? he had everything to gain and nothing to lose- except for maybe his job if he fucked it up too bad- but why not take the high risk bets?- only lines your pocket if you bet right- if you bet wrong- so what- you are personally out ZERO
August 21st, 2009 at 2:47 pm
@ahab: I wish I could take all that “risk” with OPM. What stress those people must be under. Don’t know how they deal with that.
August 21st, 2009 at 2:49 pm
@ Ahab
Absolutely.
That’s why when those bonuses start getting dished out during “Hand-Me-Down Christmas” you can bet that will initiate the “Pitchfork Signal” out into the Gotham sky.
August 21st, 2009 at 2:52 pm
no shit mannwich-
flame out and lose it all or rock everyone’s world with ungodly returns- two likely outcomes- but many of these “geniuses”- never seem to be able to repeat their past success- so much of it is just sheer luck
August 21st, 2009 at 2:52 pm
Guys, I don’t nec. disagree with the whole, OPM argument but dont’ think for a second that for all mm’s there isn’t an extremely high level of stress. There is.
August 21st, 2009 at 2:52 pm
@Pat G
For the record…I TALK about trading more than I actually pull the trigger…
I’ve been wasting a lot of electrons chattering up the dollar recently (because I feel it is at, or near, a 6 month or so turning point)…After the turn is confirmed, I probably won’t talk about it until, say, next March…
As for the SPX…I follow the technicals on that al lot, but I don’t trade it much…I’m starting to put a few bones on the “short side” here…I did at 1008, 1018, and even added a little at 1003…I had been thinking about setting stops (which I’d originally had at 1014, then moved down to 1008), but when the moment of truth arrived, I pulled off the stops, and am now riding a losing position…It’s not a significant enough position to cause pain, so I’m actually in the CURIOUS position of “rooting against” my own positions…
As for “other trades”…Once a month or so, I’ll jump on something that is clearly getting out of whack…(like last week with Macy’s, where I got in & got out)…
I’m dying to get in and buy some PUTS on COF…I’m hoping to see a move to $38-$40…I’ve had my eye on that for 2 months now…
August 21st, 2009 at 2:52 pm
@ leftback
Okay not now but we’ll get there. Please make sure to let me know. Works for me.
@ ben22
Perhaps I’m wrong about risk aversion moving the dollar but that’s okay too. I have no positions in it, long or short. I just see that when it is declining, PMs and the currency that I’m holding are rising. But in the short or long run it is going lower, much lower.
August 21st, 2009 at 2:55 pm
@ben22
what was it?
there are old traders, & there are bold traders, but there are no old & bold traders…
August 21st, 2009 at 2:55 pm
b22-
whoever said gambling wasn’t stressful- one of the most stressful things a person can do- even if it is not your money- you want to win-
but does not negate the fact that there is zero personal financial risk
August 21st, 2009 at 2:55 pm
@ben22: I don’t disagree with you, but I’d MUCH rather be trading OPM than my own money. Believe me.
August 21st, 2009 at 2:59 pm
@ben22: To add to that – I have much respect for people like you who do it the right way and seem to hold the clients’ best interests at heart, but Hall works for a firm that’s been bailed out by We The Sheeple so that he can speculated on commodities and theoretically drive up real world prices for those same Sheeple who helped keep he and his firm going? I’m sorry, but that’s beyond aburd or even obsence. The problem is the entire system that you work in is crooked and has been marred by other people who give it a bad name. It’s why I won’t allow anyone else to manage our money probably ever.
August 21st, 2009 at 2:59 pm
@Onlooker
Good exmaple of that was Leading Indicators from yesterday. More of the indicators were positive than negative, so the reading was positive but the main positive was increase in stock prices (this is a leading indicator?) and the biggest drag was consumer expectations.
August 21st, 2009 at 3:01 pm
I bought a mega-millions lottery ticket today for a buck…The service station cashier where I was filling up for gas conned me into it…The jackpot, I think, is $270m…
I don’t think I’ve bought a lottery ticket since the 1980′s…I’m going to give the ticket to my mom, but if she wins, she’d better buy me a new tractor, (& maybe a new boat)…
August 21st, 2009 at 3:03 pm
from Diane Swonk-
“The really disturbing part,” Swonk says, is “CEOs are still denying the degree to which they played a role in this situation and how their own actions compounded the crisis.”
Plus “we’re really not seeing the holding of accountability,” she says, suggesting we need a modern version of the Pecora Commission, which Congress gave subpoena powers to investigate the cause of the 1929 crash and featured public examinations of some of the biggest financiers of the age.”
why has this not happened?
August 21st, 2009 at 3:03 pm
Hey BR…
Where’s the Friday LINKS thread?
I had a great article on the “World Air Guitar Championships” that I was going to post!
August 21st, 2009 at 3:05 pm
@ahab (3:03)
why do you think?
BTW – “Pecora” means “sheep” in Italian…as in “We the sheeple”
August 21st, 2009 at 3:05 pm
@ahab: The CEO’s will admit guilt when they’re necks are on the guillotine.
August 21st, 2009 at 3:05 pm
Pat,
I could be wrong too man! I’m going against people in charge of way more money than me, it’s a contrarian view being long the dollar if there ever was one. I don’t think Barry is bullish on the dollar either. I don’t disagree about the dollar in the long run when you say it’s going lower above, just thinking that’s not a near term threat. Like I said, in 6 months we’ll be able to put it to rest.
@ahab,
you are talking about huge money managers but for most managers, at least the way I see it, there is huge personal financial risk in managing opm when thats how you are paid, if you do a bad job, and they take assets from you, you lost income or your job completely.
@manny,
I can tell you as someone that does it, managing opm is not always what it is preceived to be, when I lose my own money, I don’t have to answer to anyone, when it’s someone elses….
August 21st, 2009 at 3:07 pm
@Manny,
you are right, I can’t argue with that 2:59, I think I’m coming at this more for someone like me. I didn’t make $100 million in any year since I started doing this. lol.
August 21st, 2009 at 3:08 pm
@ben22: I hear you and know what you’re saying, but try answering to your wife when you lose your own money! ;-) I’m sure already have to do this, as I do! My frustration is aimed at those who’ve been bailed out and are playing with WTS (We The Sheeple) OPM, not the kind of OPM that you manage.
August 21st, 2009 at 3:10 pm
Ben22;
I am an investor not a trader. But I think you have to use the psychology of the market for anything short term. In March I handed in the paperwork to double the monthly contribution to my Roth401K. Its allocation is about 1/3 foreign stocks, 1/3 US stocks and the rest mostly bonds with a little bit in money market. It was a move to reduce my rate of accumulation of CD’s (currently about 25% of all my investments. In October 2008 I purchased a 6 acre plot of land (with utilities at the road) as a hedge against inflation (and a place to grow potatoes, need be ;-) I had lowered my contributions to the stock marked (401K accounts) in early 2007 and was a little uncomfortable with the amount of cash I had build up by late 2008.
August 21st, 2009 at 3:13 pm
@Mortimus: “That’s why when those bonuses start getting dished out during “Hand-Me-Down Christmas” you can bet that will initiate the “Pitchfork Signal” out into the Gotham sky.”
Indeed. That’s about right, very evocative. The more pitchforks are brandished, the less chance of further bailouts. Some time ahead of us the rubber is going to meet the road, and CV is going to be in the right place on the farm.
August 21st, 2009 at 3:16 pm
>> Their rationale; there are still more people working than aren’t.
Yes… and no. The picture gets muddy when you start to think in terms of households.
If a person is employed but their spouse is laid off, are they going to be spending freely?
Add to that everything that is happening with smaller/erratic hours, salaries, bonuses.
Now take those and multiply by connections between peoples… spouse, parent, children, sibling. Meaning, parents worried they’ll be bailing out their children, children worried they’ll be bailing out their parents, etc.
Oh yeah, extended family now includes strangers with an energy-inefficient car (fridge? washer? plasma tv?)…
Bottom line, imho, the impact of under/unemployment is not linear, it increases due to interconnectedness.
August 21st, 2009 at 3:16 pm
here comes the pump
August 21st, 2009 at 3:17 pm
Glad I woke up for the regularly scheduled final hour pump. Ho hum. Same thing every day for what, 5 straight months now?
August 21st, 2009 at 3:17 pm
@manny,
lol, lucky for me my wife works with me, we make the inv strategies together so we lose together too. Again though, I totally agree about firms that were bailed out, etc.
@DeDude,
Well, along with all the other posters here you completely avoided everything, you da man! Sold several months before the peak and bought in at the lows. You did even better than Barry and Kevin probably. You must really love your job because you have to know you could make a lot more money trading if you were always that good. And yes, pshychology, as I’ve posted a million times, is always something that needs to be monitored via DSI and others to make investment allocations.
I’m not trying to be rude man but I have to be suspect about the fact that almost everyone on here has that same story.
August 21st, 2009 at 3:18 pm
Looks like in the future I should just pay attention to the markets at the open and then at the close. Everything in between a waste of time.
August 21st, 2009 at 3:18 pm
As of the end of June the U-6 unemployment rate was 16.5%, more than twice the level it was at the end of the GD. You can spin the data all you want but the job market here sucks. Period.
August 21st, 2009 at 3:19 pm
@Lefty
Agreed. That’s why when Bernanke declares at 2010′s Jackson Hole confab that
“One year ago “there was little to suggest that market participants saw the financial situation as about to take a sharp turn for the worse”
I will shed a tear like that “Crying Indian PSA” while picking up the remains of ‘hope’ in this country….with my pitchfork
August 21st, 2009 at 3:21 pm
lb-
agreed- another bailout would be political suicide- I think there is extreme pent up anger over how this all played out- that now- the push is to get people to “believe” that it’s all patched up- no harm,no foul- it couldn’t be helped- etc,etc,etc-
that shit won’t fly for most
August 21st, 2009 at 3:21 pm
@beagle
Good points ALL beagle
August 21st, 2009 at 3:24 pm
@ben22
“You can spin the data all you want but the job market here sucks. Period”
Who needs a job when all you have to do is elect leaders whose intestinal fortitude is to mortgage the entire future, to extend your unemployment benefits?
August 21st, 2009 at 3:26 pm
@ Cvienne
I never buy lottery tickets but I’m going to follow you with your mega-millions lottery purchase.
For some reason, that now sounds like the smartest investment I can make
August 21st, 2009 at 3:27 pm
“no harm,no foul- it couldn’t be helped- ” Right. It’s not like the boyz ramped it up – then shorted it and got paid.
LB has joined the ZSL crowd for the weekend, also holding DZZ and some other “stronger dollar” trades. Take care all – apart from those people who were being d*cks today, and to those who never made a bad trade, LB salutes you.
August 21st, 2009 at 3:29 pm
@Mortimus
…on the “lottery ticket” subject…
The amusing thing to me (on rally days like this), is watching the one “lottery ticket” I own (a penny stock)…Fly up 80%…
It’s a joke…I didn’t expect those shares to pay out for 20 years…or pay ZERO…
August 21st, 2009 at 3:31 pm
@LB
Re: ZSL
I hope to be joing you Monday on ZSL…
I simply bought a few more dollar calls today, & otherwise enjoyed the conversation.
August 21st, 2009 at 3:31 pm
yeah dedude’s pretty cool- has it all figured out- and i am sure the ladies love his suave self- and that he never made a bad trade- well- why would he?- you either have it or you don’t
August 21st, 2009 at 3:32 pm
what!? it’s ok to call out bullshit on this board? who knew.
August 21st, 2009 at 3:33 pm
@ahab
I’m liking DeDude more than ever now…
My man bought 6 acres…All I can say is as a compadre on that end is…RESPECT ;-)
August 21st, 2009 at 3:34 pm
added a little short exposure…we’ll see what happens
August 21st, 2009 at 3:36 pm
I wish they would just pump this “glamour boy” [the market] to 1044-1054 into the close…
Then I could just “short” it there and go down and join the I-Man for some tasty waves…
August 21st, 2009 at 3:37 pm
that’d be too easy
August 21st, 2009 at 3:38 pm
@Cohen
…at this point, IMO, it’s not even painful to sit on losing “short” positions…
Back in May it was…not anymore…
August 21st, 2009 at 3:38 pm
speaking of lottery…
here’s a thought question (for the ben22′s out there, this means hypothetical): why is it that people flock to buy a lotto ticket when the prize goes up…the more it goes up the more people buy?
August 21st, 2009 at 3:39 pm
Wait people on this board are bullshitting now?
You mean I might have been the only one to load up on those AIG $25 August calls 3 weeks ago?
August 21st, 2009 at 3:41 pm
“the more it goes up the more people buy?”
sounds like the stock market
August 21st, 2009 at 3:41 pm
Personally, I have never made a bad trade (that I talked publicly about afterwards).
August 21st, 2009 at 3:43 pm
bubba-
as it goes up there is more hype- new stories, word of mouth, etc so it draws in the folks who do not generally buy lotto tickets
August 21st, 2009 at 3:44 pm
“but many of these “geniuses”- never seem to be able to repeat their past success- so much of it is just sheer luck”
However, if you can harvest 100 million on being lucky just one time, that would be enough to live comfortably for the rest of your life.
Ben22@ no actually because I am a long-term investor with regular contributions to my retirement account I did not do that great. To get the most out of it I have to increase the monthly investments during (or across) the low periods and decrease them during the high market periods. Because I have been making the changes at the inflexion point the results have not been much better than if I had put the same amounts in every month regardless of what happened in the economy. Only traders benefit from picking the absolut tops and bottoms.
August 21st, 2009 at 3:45 pm
joe retail-
funny stuff- many people on this board though have talked about a trade that bit them in the ass- myself included-
I wish i could be as perfect as my man dedude
August 21st, 2009 at 3:48 pm
@bubba
I’m not a lottery player…but…back to math…
Your odds of having a winning ticket off of “x” randomly selected numbers are the same…
So regardless of how many people participate, your odds remain the same…
The difference, is that you MAY have a different distribution if more than one person wins…
So for a dollar, WTF cares? You’re going to tell me that you WANT to win a 5 million jackpot BY YOURSELF, but you object to splitting a 50 million jackpot 5 ways?
August 21st, 2009 at 3:48 pm
dedude Says-
“However, if you can harvest 100 million on being lucky just one time, that would be enough to live comfortably for the rest of your life.”
that makes my point though- why not go all out for the big score- everything to gain and nothing to lose
August 21st, 2009 at 3:53 pm
@bubba
I’m wondering if you bet sports…(I’d love to be your bookie)…jk ;-)
August 21st, 2009 at 3:54 pm
My bet is that we will likely see 1100 (+or-) on S&P before we see 900. Selling will start when traders return from Hamptons in Sep. I will be looking to short AIG and oil at that point. Until then I am going to watch the market (aka circus show) from the sidelines.
August 21st, 2009 at 3:55 pm
i know nobody has asked, but getting short this late day pump.
this is ridiculous…
August 21st, 2009 at 3:56 pm
@ahab,
“as it goes up there is more hype- new stories, word of mouth, etc so it draws in the folks who do not generally buy lotto tickets”
i’m actually quite fascinated by this phenomenon. it says a lot about human psychology. particularly, it’s these folks who normally don’t buy that jump in, say when it reaches 100, 200 million that fascinates me. i’d like to know what there rationale is. i mean the odds of them winning haven’t changed. surely they know this?
August 21st, 2009 at 3:57 pm
@bubba
Bubba…knock, knock…(3:48)
August 21st, 2009 at 3:58 pm
@bubba: The number of people who actually understand basic probability is amazingly small. Drop by any casino for evidence.
August 21st, 2009 at 3:59 pm
I missed Bernanke’s comments today; did he say the economy is on the verge of a recovery, or on the verge of recovered? That old “the recovery is near” bit get’s them every time. I thought it was a little interesting how his comments hit the wire right before the real estate numbers. Bernanke’s version of a one-two punch for the bears. Sort of reminds me of last fall when they knew they didn’t have any good news, but if they could time it right the market reaction would make it look like good news.
Right at a fairly meaningful resistance level on the S&P’s this morning and BAM, “the recovery is near”. Fundamentals are a coin toss and technicals anger Washington. What a mess.
August 21st, 2009 at 4:01 pm
@cvienne,
sorry, just saw your 3:48 comment as I was typing mine. i’m not sure you answered my question though. so let me ask you, why was the gas station dude able to conned you into buying one this time?
August 21st, 2009 at 4:07 pm
Probably something along the lines of: “at least our winners aren’t the most connected people in the country”
August 21st, 2009 at 4:08 pm
the stock market is a manipulated scam- that the large players aren’t called out on it except in financial blogs just shows you that it is a complete set up-
just like when they did the inquiries into the oil speculation last year- congress should investigate- however- the oil specualtors were seen as bad guys driving up gas prices- there is zero impetus for anyone to look into the stock market charade-
even though it is a sham
August 21st, 2009 at 4:10 pm
@bubba
“why was the gas station dude able to conned you into buying one this time?”
I dunno…I suppose it was just one of those weird things…I seriously haven’t bought a lottery ticket since the 80′s…
I was driving to the pumps…and the pump that I came too had an OUT OR ORDER sign on it…I rolled my eyes, drove around two islands to get to the one that was free…It TOO had a sign on it (which was starting to get my blood to boil), but instead, this sign said “lottery MEGA MILLIONS jackpot, some odd x millions”…
I walked in to pay the cashier for a fillup…I really was only planning to do that, but the cashier said (in his Pakistani accent)…”Do you want to buy a mega millions ticket”…I pulled out my roll of 20′s (I was putting $40 in – my truck also runs on nat gas, but I have a switch that either goes nat gas, or gasoline, & my “gasoline” was empty)…I happened to have a loose $1 on that roll so I went for it…
That’s it…
August 21st, 2009 at 4:11 pm
@ cvienne; The other day the lotto was $174 million, I bought a ticket and that ticket own me $3, but like a fool I did not take out my original $1, I let the sucker ride I am all in the Mega millions for $3, so if I win I will buy you a tractor , but it has to be painted purple.
@bubba, I let the gas station dude con me because, the dude was a dudette and a cute one at that – The gas station person could careless and are not out pushing the sale of tickets and imho it is a cheap fantasy.
I know I will never win, but when it gets above $100 million a $1 purchase gives me 3-4 days of fantasy, heck you couldn’t get that kind of deal by going to the movies.
August 21st, 2009 at 4:12 pm
cvienne;
I am not as far with my plot of land as you are; but I may sign up for your next course on “The Little Farmer that Could” and heck if the S&P goes down below 700 again, I may even sign up for the “How to Build a Machinegun Perimeter” course.
PS: just yanking your chains with the dis fibo stuff ;-)
August 21st, 2009 at 4:20 pm
@franklin420d
Your dudette story sounds more interesting than mine…Hell, if it had been a “dudette”, I probably would have forgot about the $1 and gone all the way up to $20…or, gotten 3, and used the seventeen singles, for, um…well…
and as far as a PURPLE tractor is concerned…I’m a Baltimore Ravens fan, so purple is just fine with me!
@DeDude
Trust me, I’m fine with the fibo…
Do you have a well on that 6 acres? Everything starts with drilling that and getting it operational…
August 21st, 2009 at 4:21 pm
@bubba,
re: lotto tickests.
I know tons of people that only buy when it goes over $100 mil on the power ball.
As for why it happens, beats me, greed. People think it’s a better “value” to spend $1 to buy a ticket that can pay you $100 million than it is to spend $1 to win $5 million. Prechter wrote a paper about it but I doubt you’d be interested in anything he has to say about socionomcis and besides, I’m just a dunce. I’m sure as someone involved with science you could figure it out if you wanted to, you already know the answers to all of the Earth’s other mysteries.
August 21st, 2009 at 4:25 pm
@cvienne
but had the jackpot only been 5 million, you’d likely passed. no? the fact that it was 200 made you do it right?
@F420
“I let the gas station dude con me because, the dude was a dudette and a cute one at that”
bubba would have asked the cute dudette if she’d give him the same slutty wink if instead of wasting a $1 on a sure loser, he can buy a twix bar instead.:)
August 21st, 2009 at 4:26 pm
No well, but a small pond (and city water at the road).
PS: if it all comes down before I am ready, maybe I can man your machinegun perimeter – you can pay me in potatoes and eggs.
August 21st, 2009 at 4:36 pm
With a lottery ticket you are bying entertainment. For one buck, and wasting less than a minute of your time, you get to entertain yourself with the ideas of what you would do if you won millions. A daytrader has to spend a whole day, and often lose thousands, for the same entertainment. I would never daytrade (way to expensive for my budget), but I did buy a lottery ticket, once, back in 2005.
August 21st, 2009 at 5:01 pm
@ben22
psychology is not a science, ben. so i don’t even pretend to have answers.
@dedude
“With a lottery ticket you are bying entertainment. For one buck, and wasting less than a minute of your time, you get to entertain yourself with the ideas of what you would do if you won millions.”
ok, I agree it has entertainment value. how does this explain why someone who normally doesn’t buy a ticket, but would always seem to when the prize goes up. there doesn’t seem to be a rational explanation for this and yet people do it. i wonder if it has anything to do with guilt?
August 21st, 2009 at 5:02 pm
@bubba (4:25)
as always…your logic is way more profound than mine…
@DeDude
“No well, but a small pond (and city water at the road)”
You ought to seriously look into seeing what kind of well you can drill…If there’s a pond, there’s likely a well under your property somewhere…If you’re going to live on land it doesn’t do much good without water…If you’re going to grow food, or have animals, city water can’t be your source…The costs would outweight the benefits…
Back to bubba…Did you hear that? DeDude has a pond on his property…I have a pool & a pond…
—
Bill Murray (Carl Spackler): “You got a pool over there?”
Chevy Chase (Ty Webb): “We have a pond in the back. We have a pool and a pond. The pond would be good for you.”
CADDYSHACK
August 21st, 2009 at 5:25 pm
@bubba
You at 5:01pm in responce to DeDude
“ok, I agree it has entertainment value. how does this explain why someone who normally doesn’t buy a ticket, but would always seem to when the prize goes up. there doesn’t seem to be a rational explanation for this and yet people do it. i wonder if it has anything to do with guilt?”
You at 5:01pm in responce to Ben22
“psychology is not a science, ben. so i don’t even pretend to have answers. ”
Just wondering which way you want it?
August 21st, 2009 at 5:40 pm
Actually, I’m pretty sure it makes sense, if you’re going to buy a lottery ticket at all, to only buy it when the pot has reached some huge value.
Your odds of winning remain the same, but your expected value increases because the payout is larger. This is offset by the fact that more people are likely to behave the same as you, and thereby increases the odds that you’ll need to split the pot. So, if the actual behavior is that you are equally likely to win $10 million by yourself and to win $100 million split among 15 people, then I’m wrong on this front.
But when the pot is large, you are effectively benefitting from all the previous poor dumb ba—rds who already lost their money. So it seems to me you’re getting a little kicker in that area in your favor, in terms of the ultimate payout.
August 21st, 2009 at 5:45 pm
Actually, while we’re on the subject of lotteries, you can improve your odds of *not* splitting the pot by only picking numbers above 31 — that way you avoid everybody who picks their lucky birthdays, anniversaries, etc.
Also, pick things in sequence — “what are the odds that the powerball will go 1,2,3,4,5,6″???? Exactly the same as any other combo…… Better to pick 44,45,46,47,48,49 though, to my earlier point.
August 21st, 2009 at 5:56 pm
It is actually a lot more entertaining to imagine what you would do with 150 million than what you would do with 5 million (split 4 ways with my luck).
August 21st, 2009 at 6:05 pm
BR noted:
• Professionals are fully invested; Individuals are mostly under-invested;
reply:
——–
Damn right, buddy. I’ve got a big pile of cash under my mattress. It wont see a stock market until prices rightsize and, hopefully, Bernanke says goodbye to public service.
August 21st, 2009 at 6:13 pm
@dh
Unless, of course, the big “O”(rganizer) picks Larry Summers…
I frankly don’t know what to do then…I’m just glad I have farmland…
August 21st, 2009 at 6:44 pm
@cv, I can’t see Summers getting nominated, they’d need to go through that whole “women are bad at math” thing again……
I’d like to see Summers out of govt altogether, but no luck there.
August 21st, 2009 at 6:54 pm
if he somehow picked Volcker, that’d be better than the lottery
August 21st, 2009 at 6:57 pm
@Cohen
I agree…That would be GREAT…But please, just give me a day’s notice to get out of the half positions on TLT I still haven’t closed :-)
August 21st, 2009 at 7:02 pm
@Cohen
You know though…KNEE JERK would be to fade Treasuries…But think about it…What would that do to flow? And what would be the individual reactions by other central banks…chain reaction wise?
Instead of being a RUSH to devalue the currency…It might end up to be a RUSH to save the value of your own currency…
Therefore, the DOLLAR might be king (and I’ve just initiated long dollar positions)…
Boy…am I a lucky son of a gun, or what?
August 21st, 2009 at 7:07 pm
@f420
i’m not sure what you mean. where’s the inconsistency in my post?
@whammer
interesting analysis. i’m not a math guy, but i think the whole “expected value” is a fallacy when it comes to the lottery and especially if we’re just talking about an irregular player who only jumps in when the pot is huge. any math whiz here please school me if i’m talking out of my ass, but doesn’t expected value only apply to games where there’s repetition (ie black jack etc).
August 21st, 2009 at 7:12 pm
@whammer
btw, same argument applies to your point about avoiding splitting the pot.
August 21st, 2009 at 7:18 pm
@bubba
Let me simplify this…(in CAPS)…
I DOUB’T ANY LOTTERY PLAYERS FALL INTO THE MATH WHIZ CATEGORY…
There…itza WHIM…itza WTF moment of molecular chemistry in brainwaves…
August 21st, 2009 at 7:23 pm
here’s a nice one to sneak out after the close
http://finance.yahoo.com/news/AP-sources-2-trillion-higher-apf-2763511180.html?x=0&sec=topStories&pos=2&asset=&ccode=
August 21st, 2009 at 7:26 pm
touche, Cvienne. say, good luck with that lotto tix.
August 21st, 2009 at 7:41 pm
Lets say that there are 1 billion different combinations of numbers to chose from. Then each ticket gives you a 1 in a billion chance of winning the lotto. If the pool is 5 million you get a 1 in a billion chance of winning 5 million, if the pool is 150 million you get a 1 in a billion chance of winning 150 million, both for 1 $. I would consider the latter a “better value” simply because the 1 in a billion chance of 150 million is intuitively more attractive (if someone told me I could have either for free that is what I would choose).
August 21st, 2009 at 7:47 pm
@bubba
I’m telling you…
If I do win…I’m going to divvy up the profits in some way (TBP posters – you – included)…but don’t expect more than a thousand bucks or something…I’m not THAT generous…
It’s a joke…While I was walking out of the station, I was thinking more about the contribution I’d made to either someone’s fortune (or the tax structure for whoever reaps the taxes), than I was about winning…
Kind of like when I “short” equities…I think of the benevolent contribution I’m making to philanthropic souls like Lloyd Blankfein whose spiritual being exists to enrich the throes of humanity!
I feel sainted!
August 21st, 2009 at 8:06 pm
I’d like to slightly modify cvienne’s point about math whizzes and lotteries. You can be a math whiz and play the lottery, but you certainly don’t do it “because” you are a math whiz. And, one reason I don’t like lotteries is that I think they prey on people who don’t know better.
That being said, “expected value” is not limited to multiple transactions. If you can win a dollar on a coin flip, your expected value for that flip is 50 cents. Therefore, you should not pay 60 cents to play that game. If you can play that game for 40 cents, go for it.
In DeDude’s example above, a one in a billion chance to win $5 million has an expected value of $0.005. A one in a billion chance to win $150 million has an expected value of $0.15. In both of those cases it is “mathematically dumb” to pay a dollar to play each game. It is just less dumb to play the bigger payoff game.
You might be thinking about the “house advantage” in blackjack or roulette or whatever. That is somewhat different, but certainly related, because it talks to the long-term advantage that the house has for a large population of transactions. Essentially, casinos make money by not paying the true odds on any given bet. So do lotteries. Sports bookies try to set the line so that they will get 50% of bettors on either side of the line, and they take 10% “commission” in effect.
In lotteries, though, there is no chance, none whatsoever, of someone “getting hot” and winning more money than the lottery takes in. You get a better deal from most illegal gambling, frankly.
August 21st, 2009 at 8:48 pm
@dedude
intuitive, yes. but is it rational?
@cvienne
mrs bubba would like her cut too. :)
August 21st, 2009 at 8:57 pm
@Bubba,
Would you spend $1 to draw at an inside straight? Depends if the pot is $2 or $200, right?
- Okay, say you have 1 in 100,000,000 million chance to win lottery, starts at $20 million.
- Nah, wait a week.
- Nobody won, the pot grew, but you have same odds vs. $30 million jackpot (1/2 rollover).
- To keep it clean, let’s say the same number of people play this week, before any hype builds.
- Your $1 wins… $20 million last week or $30 million this week, same odds to win -and- split.
The key is the dead money.
(yeah, big pots are not so simple as more people play, buy more tickets per person, yadayada)
Not that this explains WHY anyone actually plays, because the lottery is still going to be -EV…
August 21st, 2009 at 9:31 pm
@Bubba, 7:07pm
“i’m not sure what you mean. where’s the inconsistency in my post?”
You are correct that psychology is not a science and you nor I nor anyone has the answer, we can only make wild ass guesses. But in your next sentence you are asking for someone to answer a psychological situations.
If there is no answer how can your question be answered?
Seems a little inconsistent to me.
@cvienne, ok if I win the mega millions you will get a purple tractor, but had I known you were a Baltimore fan, I would have said Black and Silver color tractor (0r the colors of whatever team you dislike the most.)
August 21st, 2009 at 10:27 pm
I’m a big fan of the lottery. Dumb man’s tax. It put me through college for free. Also, I have bought a ticket on a whim at a huge jackpot. The clerk asked me if i wanted to buy extra for 5 times the payout or something. I was like, dude, if i win 100 million, the extra 400 million ain’t gonna make a difference.
August 21st, 2009 at 10:55 pm
Ben,
This is what I was referring to about the “quality” of a bullish sentiment reading the other day
http://pragcap.com/bullish-sentiment-among-individual-investors-plummets
All it took was one sharp down day and everybody craps their pants – it doesn’t seem like they’ve fully believed in the rally yet…
On the other hand, if you measure bullishness by how willing people are to part with their money:
http://pragcap.com/record-mutual-fund-inflows-for-july
August 22nd, 2009 at 12:07 am
@beagle
here’s where i think the expected value argument breaks down when we’re dealing with the lottery or anything with astronomical odds. let’s assume the jackpot reaches to level where EV is actually positive, what would it take for you to realize this positive expected value…you would have to buy up all the possible combinations (it’s unlikey, but lets assume no pot splitting), your odds with one ticket haven’t changed. in other words, what does it matter if the EV increases if your chance of realizing it is negligible.
now, getting back to the poker analogy, betting on an inside straight with positive pot odds makes sense, not because your chances of winning that hand are somehow better than if it were with negative pot odds, but that on average with many hands played you would come out on top.
so getting back to my original point, i still don’t see a rational reason for people to play the lotto only when the jackpot goes up.
August 22nd, 2009 at 12:15 am
@f420
“You are correct that psychology is not a science and you nor I nor anyone has the answer, we can only make wild ass guesses. But in your next sentence you are asking for someone to answer a psychological situations.
If there is no answer how can your question be answered?”
I think we have a misunderstanding here. in my reply to ben22, i meant that i’m a scientist, and since i don’t think psychology to be a science, i don’t have answers to psychological questions….not that there aren’t psychological answers.
August 22nd, 2009 at 7:45 am
@bubba
I know where everyone is going with the poker argument, but even that has a lot of variables…
What GAME are you playing…
The reference with regards to the example seemed fitted to 5 card draw…
But instead, if it were NO LIMIT hold’ em, you’d be looking at other outs, the cash pile of your remaining opponent(s), your ability to bluff, your cash pile, the standings of the game (in terms of getting to the next table – if it were tournament), what was exposed, where you were related to the button…
…all kinds of things…
August 22nd, 2009 at 2:00 pm
DiggidyDan; I am aginst the lottery for the same reason you are for it – it’s a dumb man’s tax. I don’t think we should tax something that people are born with and cannot do much to change (red hair. big noses, green eyes, lack of intellect or hairy balls). On the other hand those lacy asses that “make a living” of other peoples hard work, we should taxed the hell our of them. We should start by making day trading very hard to profit from with a 90% tax on any gain from an asset that was held for less than 3 months. With commodities it should be a year.
bubba; what you are doing in your rationale is to make almost zero the same as zero. That is mathematically incorrect. As long as the chance of winning is above mathematical zero, EV does matter. So if cvienne had a ticket to the lottery from a week with a 5 million pot and a ticket to one from a week with a 150 million pot, and offered to give one of them to me for free – I would ask for the second ticket any time. Since he didn’t I will just ask that he put a well on my land if he wins.
August 22nd, 2009 at 3:44 pm
@dedude
“what you are doing in your rationale is to make almost zero the same as zero. That is mathematically incorrect. As long as the chance of winning is above mathematical zero, EV does matter. ”
let’s be clear, the statistical logic of EV is sound, i’m not denying that. i would argue there IS a point where we should realistically treat almost zero as zero. here’s an example, ask any quantum physicist and they will tell you there’s a non-zero probability that you can punch your way through a solid steel beam with your bare knuckles. if i give you positive EV, would you take the bet?
” So if cvienne had a ticket to the lottery from a week with a 5 million pot and a ticket to one from a week with a 150 million pot, and offered to give one of them to me for free – I would ask for the second ticket any time. ”
dude, look up false dilemma (or pascal’s wager).
August 22nd, 2009 at 5:23 pm
@bubba
You might be mixing the objective calculation of EV with your subjective ideas about particular propositions.
People will value the same (EV) proposition differently due to their unique circumstances, beliefs, math skills…
if you wanted to rationalize it:
people are willing to accept some level of negative EV for entertainment
a larger jackpot = higher entertainment value + smaller perceived -EV
pot increases $, crosses the threshold of perceived value for (x) people
tho’ the most accurate reason is probably… bigger the jackpot, people can imagine doing bigger/crazier things…
August 22nd, 2009 at 5:50 pm
bubba; it has nothing to do with Pascal’s wager or a false dilemma. I am simply taking the issue of “certain loss” out of the equation. If there is no loss of money involved (or if the entertainment value is presumed to completely cover the loss of money); what is then the most rational choice.