Posts filed under “Really, really bad calls”

Do You Wanna Be Right, or Do You Wanna Make Money?

My inbox is deluged with rants and demands from people who are insisting that This. Rally. Must. End. NOW!

A composite of their emails would read something like this: “How can you sit there so blithely while the Fed debases the world’s reserve currency? Why haven’t you commented on POMO?!? The entire game is rigged, and your just another @%$# salesman for Wall Street!”

Ahem.

My day job is working in an asset management firm. From that perch, I look at the world as a series of risks and opportunities. I am not a political analyst, nor a professional Fed critic. If through my research and analysis I come to a conclusion about a given issue — Bailouts, Fin Reform, Foreclosures, Stimulus — I am happy to share them.

But make sure you understand this much: I consider many other factors beyond the macro. This includes sentiment data, liquidity, market breadth, trend, volume, and valuation. And while liquidity can mean many things, this cycle its been pretty much all Fed all the time. That was what hedge fund manager David Tepper was referring to when he noted the Fed was pouring fuel on the fire. When the Fed sends their minions out to discuss the Bernanke Put, they add even more gasoline to the conflagration.

Some people rush for the fire hoses, but my job requires me to grab some marshmallows and sticks and head over to the boy scout jamboree campfire.

If you are constantly fighting the tape, if you missed the run up and are now whining about it, let me steer you to esteemed technician Ned Davis of NDR. In his 1991 book Being Right or Making Money, Davis tells the story of missing trades, investments and rallies because they did not fit some expectations of his regarding the economy or valuations or other factors. The title of his book and of this post comes from a  more senior trader, who simply asked him: “Do You Wanna Be Right, or Do You Wanna Make Money?”

As to the present rally, it will end (eventually). I cannot tell you if it ends with a 25% correction (thats my high probability bet) or a 55% 2008-09 like crash, or a Prectorian 90% end of civilization collapse. Regardless of how the rally concludes, the folks who missed an 85%  generational run up in equities will pound their chests and say “See, we told you so!” And they will have made absolutely no money in the process.

So for all of you Kremlin Fed watchers, politicos, policy experts and amateur economic wonks, I put Ned Davis’ question to you now: Would you rather be right, or make money?

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Category: Apprenticed Investor, Investing, Markets, Psychology, Really, really bad calls, Trading

Fed: We Can Support Asset Prices for the Public Good

Consider the following statement: “Nevertheless, balance sheet policy can still lower longer-term borrowing costs for many households and businesses, and it adds to household wealth by keeping asset prices higher than they otherwise would be.” So said Brian Sack, the head of the New York Fed’s markets group. Marketbeat responded with a post titled: Dear…Read More

Category: Federal Reserve, Really, really bad calls

Aerial Footage: Portrait of a Housing Bust

Fantastic set of aerial photos from Google Images (by way of Boston.com’s Big Picture), showing Florida’s developmental disaster.

The images of half finished (and barely started) developments are strangely beautiful, with a geometric symmetry that belies the state of human misery these developments represent: Lost deposits, bankruptcy, misallocated capital.

That an entire nation can be so innumerate as to believe in a mathematical fallacy is weirdly fascinating . . .

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Florida Housing Bust

More images after the jump . . .

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Category: Credit, Real Estate, Really, really bad calls

Tea & Crackers with Matt Taibbi

I’ve been meaning to post something this week on Matt Taibbi’s fantastic new piece on the Tea Party (Tea & Crackers) but I just hadn’t gotten around to it. My pal Paul Kedrosky did such a nice job setting it up that I am just going to crib it from him: > Agree or disagree…Read More

Category: Politics, Really, really bad calls

AIG Repaying Uncle Sam? Not By a Long Shot

Today’s AIG announcement has generated some surprisingly naive headlines. The company may have announced U.S. bailout exit plan, but that does not make it so. (Citi’s numbers don’t look any better). Let’s take a closer look at the numbers and separate the facts from fiction: Total Bailout: $182.3 billion dollars Amount Still Owed:  $132.1 billion…Read More

Category: Bailouts, Really, really bad calls

Black Ducks & EMH Origins

Two quick non MSM pieces worth reading this morning: • The Reformed Broker:  Sometimes It’s Just a Black Duck “The trouble with the Recency Effect is that everyone all of a sudden thought they were Nassim Taleb, orinthological experts on the spotting of Black Swans.  Every blip on the screen or blurb in the newspaper…Read More

Category: Contrary Indicators, Psychology, Really, really bad calls

Deregulation, Structural Flaws Caused the Flash Crash

“May 6 was clearly a market failure, and it brought to the fore concerns about our equity market structure.” -Speech by SEC Chairman Mary L. Schapiro > What a surprise! The SEC has acknowledged that the flash crash was a structural issue: As the Securities and Exchange Commission finalizes its report on the May 6…Read More

Category: Bailouts, Quantitative, Really, really bad calls, Regulation, Trading

Hirsch’s WTF Forecast: Dow 38,820

Last week, we noted Robert Prechter’s Dow 2,000 forecast. Today, we are going to the other end of the scale: A wild Dow 38k forecast from the usually sedate Jeff Hirsch of Stock Trader’s Almanac (UPDATE: Full report here) Bloomberg: “The Dow Jones Industrial Average will surge to 38,820 in an eight-year “super boom” beginning…Read More

Category: Really, really bad calls, Trading

Rating Agencies Ignored Proof of Unsafe Loans

As if we need further evidence of the gross and willful malfeasance of Moody’s S&P’s and Fitch: The latest evidence of their criminally irresponsible behavior comes to us via the Financial Crisis Inquiry Commission. This was not, as the narrative has been reconstructed, a case of good loans gone bad. Mere incompetence does not explain…Read More

Category: Bailouts, Credit, Really, really bad calls, Regulation

Volcker: Financial System Still at Risk

“Normal distribution curves — if I would submit to you — do not exist in financial markets. Its not that they are fat tails, they don’t exist. I keep hearing about fat tails, and Jesus, it’s only supposed to occur every 100 years, and it appears every 10 years.” -Former Federal Reserve Chairman Paul Volcker…Read More

Category: Bailouts, Federal Reserve, Really, really bad calls, Regulation