Thursday, September 28, 2006

Playing With A Top

Not the kids toy that you spin across the floor, the specialist's toy that they spin on the media.

It is at times like this that I miss Richard Ney, the author of a best selling book, The Wall Street Jungle, and many following tomes. Mr Ney had both a sharp wit and an insightful view of what he called "merchandising operations" by the specialists on the floor of the New York Stock Exchange, (NYSE).

As we play around with new highs and round numbers, Mr. Ney would have been watching the volume moves in the few key stocks of the Dow Jones Industrials. His primary argument was that while exchange spokesmen will say "it takes someone selling their stock and someone moving their stock to make a market," in reality it may be someone selling short. M.r Ney pointed out that frequently that someone selling short was a market making specialist.

Mr Ney was not against short selling - he knew its value to markets. He was against the hidden actions of specialists that have enormous power to set the price of any issue. His contention was that they used the emotional greed and fear generated by price moves to move their merchandise in a profitable fashion.

Regarding price and volume, he analyzed it far differently then you will see in the financial press. The NYSE will provide press releases during and after the day highlighting how new highs were accompanied by huge volume. The financial media will repeat this "news" with the implication that volume drove the price higher.

Observation will show what Mr. Ney continually pointed out, prices are moved on low volume - they reach extremes on high volume. He presented evidence that at the lows the specialists and market insiders were buying strongly as the public sells in panics. He then would follow the progression as the prices were moved up on lower volume to an emotional trigger point where high volume was once again used for those insiders to first sell the stock they had purchased, and then sell much more stock short into that topping volume. The prices would then be dropped again on low volume to where the shorts could be profitably covered and long positions re-established.

Richard Ney's books give far more depth and insight than I can apply to his well substantiated theories. That is one of the reason's I miss him today.

I also miss his elegant presentations of reality, his obvious concern for the truth, and many other reasons. You should miss him because he would have written this journal article much better than myself.

Find one of his books in a used book store - and read it.


Monday, September 25, 2006

The Elliott Wave International Bookstore

This journal entry is only incidentally touting the Elliott Wave International Bookstore.

Yes, if you love to read, and you love to read a good financial book in particular, you should go take a look right now.

I have been contacted by someone - for someone - that would like to put one of the Elliott Wave International's bookstore graphics in their blogspot blog. I could offer to host it on one of my sites, Elliott Wave International could host it on their site, or the guy could put it on something that allows picture and graphics hosting.

I wanted to see if I can drop it in here and get blogspot to host the Elliott Wave bookstore graphic. Yeppers - it just dropped into the top of this entry.

My next step is to drop it into the sidebar by referencing this particular bookstore graphic. If that works I'll send the information back through the six degrees of separation to the original requester.

We will now return to our normal financial journal programing, if there had been a real Internet or financial issue you would have been directed to our rant blog - A Sovereign Speculator.

If you can't wait for the next installment of this journal - go visit that (by now) highly touted Elliott Wave International bookstore.

If you just want to explore things Elliott, including a wonderful free Elliott Wave tutorial, there is a lot of information on the main Elliott Wave International site.


Friday, September 22, 2006

Entrepreneurship Is To Business What Speculation Is To Investment

You have a great idea, you research it thoughtfully, you invest yourself in pursuing success.

Is that being an entrepreneur -- or a speculator?

Yes it is. ;-}

Huge corporations are like huge investment firms. Its their way or the highway - they have no room or appetite for creativity. No one can say you made a bone headed mistake if you do what everyone else is doing. You compare yourself to other professionals in huge bureaucracies - and you did ok -- even if you failed.

A bureaucrat will understand "the operation was a success - unfortunately the patient died."

An entrepreneur embraces risk as a reality - and then tries to control it by flexibility, character, and creativity. So does a speculator.

If you have an entrepreneur's mindset you will not do well in a bloated organization - they tend to promote folks that are not threatening, average easy to get along with slugs with executive hair.

If you have a speculator's vision, you will be attacked and ridiculed by investment professors that want everyone to follow their instructions - just as they are following along with the rest of the sheep.

Speculation comes from the Latin Speculari - the basis of the word for eyeglasses - spectacle. It means to investigate, in this case with the realization that you will never, even after the fact, have conclusive evidence.

Speculation is to follow a system of reasoning trying to discover opportunity from within inconclusive evidence -- and then acting upon that reasoning.

Another factor is flexibility. As more evidence is revealed - acting quickly to change course if a change is indicated.

Your investment adviser assures you everything is ok, and you are stuck too long in a fixed venture.

Instead bring an entrepreneurial mind set to your investing - make strong well reasoned moves - and stay flexible. Listen to sound advice from many advisers, but make your own decisions - and change them as necessary.

Speculators and Entrepreneurs are cut from the same cloth - and both deserve honor as risk takers and producers that positively contribute to society.


Monday, September 18, 2006

A Great Speculator Reveals Some Tools

Read the following report:

A Case Study In Political Risk And How To Profit From It
- by Doug Casey.

This is well worth the read.

Those that would tell you investments are safe and speculations are dangerous are trying to sell you something. Both investment and speculations are dangerous.

The real difference is that an investment is sold to you - and someone else says they will manage it for you. A speculation is sought out, analyzed, and as much as possible understood. Your investment market entry and exit strategy is your own - based on reason not emotion.

With an investment you trustingly turn over your money and wait - watching passively as it raises and falls, waiting for your adviser to tell you to unload so they can sell you something else.

With a speculation you watch not only your money, but you follow guidelines you have established to protect your wealth. Guidelines such as:

  • No one cares more about your money than you do - unless they plan on stealing your money.
  • Let your profits run
  • cut your losses short while they are still small
  • start with a small investment and phase in as you win

Manage your own money - make your own decisions - develop, or borrow others speculation guidelines.

It's your money - you want to be in charge.


Saturday, September 16, 2006

Quoting Dr. Kurt Richebcher Quoting the IMF

From A Daily Reckoning article:

"Most housing price busts clustered
around 1980-82 and 1989-92, while equity price busts
were more evenly distributed across time..."

"Housing price crashes differ from equity price busts
also in other three important dimensions. First, the
price corrections during house price busts averaged 30%,
reflecting the lower volatility of housing prices and
the lower liquidity in housing markets. Second, housing
price crashes lasted about four years, about 11/2 years
longer than equity price busts. Third, the association
between booms and busts was stronger for housing than
for equity prices."”

Read the full article.

I seldom count on others work - but I often find myself agreeing with much of what Dr. Richebcher says. He is an economist from another era - one that valued reality over political and personal gain.

Read his peace and see if you don't agree.

There is also a fourth difference between equity and housing busts given in the IMF report and expounded upon by the good doctor - it is worth your serious consideration.


Thursday, September 07, 2006

Pop Goes The House Bubble

For a long time, a lot of people have been saying the housing bubble will pop - I'm just one of many.

The problem is that all of the money the governments of the world created to stop the collapse of equities and deflation flowed into real estate.
The housing collapse is like the feared end of a huge Ponzi scheme. Real estate is such a huge market, there is no next market I can see that will allow a new even larger bubble to replace this one.

Commodities may benefit if economies manage to keep growing, an unlikely prospect.

The money may flow into the one huge market left - currencies. Precious metals may increase relative to fiat currencies - at least holding their value while dollars, yen, and euros drop.

The flood of money may be offset by the loss of value in real estate - but there will probably still be way too much cash slopping around the world.

When you read that next article about inflation being caused by business or workers - don't believe it. Inflation is too much money - created by politicians and their appointees.

The battle is on.

The war between collapsing economies and real estate fighting against governments eager to keep spending money they don't have will not end well.

What will happen when the inflating hurricane surge of loose cash hits the flood waters of selective deflation is not yet apparent. However this is probably not good news for the stock market.

A time to increase hedges may be at hand.


Friday, September 01, 2006

Making Money With An Online Business

Making money business ideas does not sound like investment information.

Not surprisingly I see similarities.

The hype you get from money making online business sites is not unlike the hype you get from financial advisers.

Both sound so simple and so easy. Send in your money - make more money. The more you send, the bigger your profits will be. Do it today - tomorrow may be too late.

The advisers and scam artists have a great deal in common with the economists listed in the prior blog entry. To believe their money making projections you must suspend rational limitations.

you have to surrender to greed.

There are learning curves to investing and to running an online business. Like most such curves they travel through three major stages.

1) You know you don't know.
This is where we all start. We can learn for ourselves, or we can rely on experts. If all we do is rely on experts, we run into risks we can not understand. To grow and increase the safety of our money we must gain knowledge and experience - do it yourself.

2) You know but are unsure of how to apply your knowledge.
If you grew a bit in the first phase you can now scale up your investment size. Learn about new techniques and classes of money making. Dig in to uncover the knowledge of how the markets work, learn those realities that will never make the front page - start small - scale slowly.

3) You know and are sure of your knowledge and yourself.
You have explored a lot of areas and found just a few that fit you very well. You have developed your own winning style. Money is no longer the object, it is a product of your passionate understanding - keep learning.

These points are of course simplistic - but it is not yet time to write the book.

If you are looking to make money in any venue, from investing and speculating to harvesting money making business ideas, there are but three starting rules.

Do it yourself.

Start small - scale up slowly.

Keep learning.