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  • eqtytdr eqtytdr Jun 5, 2008 12:36 PM Flag

    Worth a read

    What follows (below) is a tad esoteric, but I respect this author's perspective. Those of you who struggle to understand basic market and business cycle concepts (I'm not naming any names) may have a problem grasping the main message here, but for those who do, I hope you'll appreciate the realities of the situation. Oh and make no mistake, this author is an extremely talented and astute trader. Ironically, this article fits very well with the bubble subject I addressed earlier.

    We often say that trading, in its purest form, is capturing the disconnect between perception and reality. That’s a fluid, multi-linear and ever-changing enigma, which is why the brightest minds on the planet continually attempt to solve the puzzle. It’s the very definition of risk vs. reward.

    At the heart of our chat was the recent speech by Ben Bernanke. We’ve long mused that the Fed would opt for the devil we know (inflation) over the devil we don’t (deflation) despite the latter matter steadily forcing itself into the housing scene. Even still, they let the dollar trade steadily lower as they were in too deep to shift course.

    We suspect that Big Ben likely got the call. You know the call that enough IS enough. You can’t lean on globalization as an upside catalyst and then ignore it when it doesn’t fit your plans. From the tech bubble to real estate to China to commodities and finally,
    the mother of all bubbles, debt, the margin for error is thinning and, as Mr. P is apt to say, risk is high.

    Yesterday, while speaking to an esteemed audience, I offered some of the above thoughts through the lens that in order to understand where we are, we must appreciate how we got here. At the end of that somewhat somber discussion, someone asked if I ever worried about sounding too bearish.

    My response was that the answer lies in whether you’re taking a snapshot or watching a movie. It’s an incredibly important context, both in terms of perception and risk management. Indeed, while I’m conscious of the macro crosscurrents, I trade the tape both ways. Sometimes, as I did into yesterdays close, I even step to the sidelines to catch my breath.

    What I can say is this: While the deleveraging process will be painful, it will ultimately lead to a sustainable rebirthing of the business cycle. If we were allowed to take our medicine (rather than being injected with artificial drugs) on the back of the tech bubble, we would have already been on the path to recovery.

    I’m not smart enough to know whether this process self-corrects through cancer or a car crash but until it does—one way or the other—the underlying risk to the system will persist. That doesn’t mean we won’t see rallies and runs, it simply means that risk management trumps reward chasing and our three core tenets of capital preservation, debt reduction and financial intelligence remain in place.

    As the check came and we finished up, we mused that finding our way through this financial fray is akin to sucking air through a straw while swimming in a perfect storm. That imagery stuck with me as I enjoyed the fresh summer air on my walk home.

    The storm will eventually pass. I just hope there are enough straws to go around.

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    • Mike - this guy is a bonafide nut job. He has been going around to other boards posting this same BS. What's in it for him? I haven't a clue. Maybe here and there he picks up a fan - I don't know.

      Imagine a guy trying to win respect on msg boards by posting pseudo-intellectual columns from a blog. God, he must be hurting for friends and respect is all I can figure.

    • See, now there you go making assumptions. Maybe you should have read my next post before replying.

      If you had you would have known - I already had seen this whole line of crap and knew the answer.

      But NOOO, Mr "Knew Yorker" has to act so so intellectual and tell us poor dumb yokels how amart and important he is and how he hob nobs with people that matters.

      You are pitiful.

    • Yes mikey as I knew you would, you proved again just how dim you really are. Most ignorant people are uncomfortable with their ignorance and in defense they act just like you.

      You're a sad joke, but just so you know just how stupid you really are, he was talking about the Treasury Sec. ever heard of Paulson you moron? If you had three functioning brain cells the jist of the conversation would have led you to the correct answer.....I see you flunked high school, if not, you should have.....what a loser!

      I also noticed that you all spent the day picking your nose instead of dealing with this market. Ok, loser, be sure and take care of your 100 shares of BBT, that's about all you can afford.

    • >>Mikey, You care who P. is? Is it keeping you up nites not knowing?<<

      That's the whole point, which again proves that neither you or mikey actually were sophisticated enough to follow Todd's message.

      You both spewed your nonsense, your bigger idiot buddy claimed that even a high school student could understand it and yet NEITHER of you could figure it out.

      You see dork, with all your bombast and boring crap about your trading abilities you're not able to follow a conversation and derive what's actually being said. If you actually understood, the subject matter would have lead you to who Mr. P is.....

      Too funny, you guys are even dimmer than I imagined.

    • Hold on, let me go get my boots because the crap is getting pretty deep in here.
      Be right back after i look at my picture book and count my money in the back yard. Sometimes simple really is rich.

    • This is supposed to be "a tad esoteric?" It sounds like a day trader pretending to literary heights. There's not a single concept in there that a high school honors student couldn't grasp in thirty seconds.

      • 1 Reply to j123mikes
      • >>This is supposed to be "a tad esoteric?" It sounds like a day trader pretending to literary heights. There's not a single concept in there that a high school honors student couldn't grasp in thirty seconds.<<

        Oh really, well so far not a single one of you understood the subject matter let alone the message. One of you thinks it has something to do with trading.

        Another is so lost that the only response he had was a single word (now that's certainly intellectually enlightening and insightful).

        And you are the funniest yet. From you I get this puffery nonsense that like the single word guy says absolutely nothing. Nonsense like high school honors student drivel is both disingenious and sophmoric besides being completely inaccurate.

        Bottom line, is that none of you seems to understand either the primary issues or the message being imparted and so you attack it with hollow and obviously lacking insight.

        Nice try there mikey, but like the others, you fell painfully short. I especially liked that lonely "day trader" comment. It's obvious that you haven't a clue about either the author or his reputation, otherwise you'd realize just how pathetic your comments really are.

        Look dude, looking for a disagreement (with me) has to come from more than the ridiculously pathetic stuff you've come up with so far. Instead of looking to disagree with me, regardless of whether you understand the subject matter, why don't you take off your dunce hat and instead try to learn a little something along the way?.......you've got a long way to go.

        But cheers anyway ;>)

        LOLROTF

    • Different people have different styles. Knew this old man bought Marriot hotels when it was a startup in the DC area. He knew some of the parties involved. Bought stock in a restruant chain in that area called "Hot Shoppes" (don't know if they still exist under than name may have been bought out - another startup where he knew some of the parties). Friendlies ice cream shoppes same deal.

      He died still owning the stocks. He told me in the early 70s that dividends on these stocks paid him $50 a day 365 days a year.

      Yet with the Internet and our computers we check every few minutes and most of us will never achieve this man's level of success.

      He absolutely did not worry about daily price fluctuations (doubt he even checked the prices more than once or twice a month). Now IMO he was a successful investor.

      Point is there is not just one road to success, but many in this game called investing. I have been known to hold a position for years and do well with it. I have also been known to flip a position in minutes and do well.

      Basically though if we do what Peter Lynch (former Magellan Fund manager) told us and buy what we know and understand we will do well. If you have personal knowledge of BBT (and believe in them) then for you it is probably a good investment. Who knows better than you? The analyst in NY who has never been in a BBT branch or had a loan from them or you? My guess is you know better.

      So we can read esoteric essays and still be a lousy investor, or we can buy what we know and understand and be a good investor and get rich. Of course the opposite could happen also.

      Yall, I am just a simple country boy doing the best I can. I have a personal knowledge of BBT (they bought out the bank I was with) and I have found them to be helpful and easy to deal with. That brings a level of trust you don't get reading some financial report about a company.

      Good luck to yall - I gotta go figure out if I get a chance to flip some VIX calls again today and make a $. Hehehe

 
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