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Leading headlines in today's Wall Struck Journal.

 

 

?Stocks Left for Dead Get A Second Look?

 

?There has been a tremendous benefit in owning speculative stocks?, says Chuck Royce, president and chief investment officer of Royce & Associates, LLC. ?Investors have become more comfortable with riskier smaller capitalization stocks, many are up 70% in the past 14 months, such as XM Satellite Radio which began the year with a puny market cap of $300 million, and is now valued at almost $4 billion.?

 

?Hedge Funds Post Solid Returns?

 

?Money flooded into hedge funds during the year, $45.4 billion in the first 9 months, compared to $16.3 billion for the entire year of 2002. Hedge funds benefited in 2003 in part because there was a dramatic compression in spreads between corporates and Treasuries, enabling the use of borrowing and leverage. Emerging market hedge funds soared 24.3% for the first 11 months, followed closely by funds specializing in distressed debt, which were up an average of 23%.?

 

?The Year of the Shrugged Off Scandal?

 

?Major blowups slammed the markets, but investors stayed in. Freddie Mac became embroiled in what would turn out to be a $5 billion accounting scandal. Investors largely shrugged it off. Freddie?s stock fell this year, but is up about 25% from the lows. Freddie Mac bonds stabilized, and the mortgage market boomed to record levels. That, in a microcosm, describes 2003 as a whole.?

 

?Stocks, High-Risk Bonds Beat Out Treasuries in Race for Profits?

 

A graph is posted ranking the performance of 18 different bond classes. The absolute worst class was 10-year T-Bones, posting a 1.3% return. Some 15 other classes of Structured Exotica, EuroBonds, Munis, etc. posted returns between 2.5% and 8.3%.

 

The two winning classes blew away every other class by a factor of 3 times:

 

Junk Bonds up 28.1%, and Emerging Market Exotica up 27.6%.

 

Now we can understand the mechanics of the SpreadTrade which Doug Noland has been writing about. Borrow at 1.3%, Invest at 28.1%. A no brainer.

 

?Program Trading Rose to New Heights Last Year?

 

?Program trading only accounted for 9.9% of big board volume during the entire year in 1989. For the latest week available, program trading accounted for 49.3% of the NYSE average daily volume. So far for the year, 39.6% of all trading for the year through December 19 was made by computer-aided trading strategies.?

 

?Margin Debt Levels Rise Along With Stocks?

 

?Margin debt climbed 28% during the first 11 months of 2003, as a rising stock market encouraged investors to go into debt to buy stocks.?

 

.....................

 

Once again, the riskiest bets paid off the best in 2003, while the safest asset classes performed the worst, except for gold.

 

Al Green has successfully forced the Speculative Sphere into gaming the most Exotic securities available, gunning the Fumble Managers and HedgeHog Managers into a series of Hail Mary passes.

 

After all, what did you expect?

 

Until summer returns to the Hamptons, there is a finite supply of Perfect 10 Models available in Manhattan, all of which are anxious to land the guy with the highest bonus of the year.

 

With such a large group of men at risk of losing wives, girlfriends, escorts, and other significant others, to wealthier Iranian Plastic Surgeons, it was Do or Die time.

 

We'll see if the Fumble Managers can continue their gains into 2004.

 

Even larger bonuses will be required.

 

The Perfect 10 Models have very high "maintenance margins".

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wndy,

 

Yesterday and today's M-to-M is classic!

 

I'm going to print out yesterday's opener to remind me of the painful lesson learned again in Market Univ this year.

Steep tuition for a subject I already studied.

 

I recall our March-Market-Musings-in-Maui.

 

We surely didn't predict the upcoming gunning by the matrix.

 

Unbelievably year. Like 1999 all over again. I think Clike Droke has it nailed.

http://www.safehaven.com/showarticle.cfm?id=1206

 

"Considering the great variety of bull markets in most commodity and stock market sectors, I believe it's safe to say that 2003 was propitious for just about everyone who had a bullish inclination."

 

"The dominant theme in 2003, especially the last nine months of the year, was inflation. Not inflation in the economic sense but inflation in the sense of rising prices across-the-board for equities, commodities, and real estate due to massive injections of liquidity into the U.S. financial system. While we may decry this obvious rescue attempt on the part of the Congress and the Fed from a macroscopic standpoint, it is not ours to criticize as actors in the investing realm -- ours is merely to take advantage of the infusion of liquidity and try to ride the waves. Traders and investors who understood this truism did extremely well in 2003.

 

In many ways, 2003 was a banner year. Not in a long time was it so easy to make money in the financial markets. In some ways it was like those heady days of the late 1990s when all one had to do was throw a dart at the stock quote section of the Wall Street Journal in order to pick a winner. Beginning in March of 2003 a great number of turnaround candidates began showing up in the charts with the common trait of the 10-week moving average coming up and over the 30-week MA -- a classic turnaround indicator. Thus, chart-based traders (including my subscribers) did quite well by simply following the graphs. Even fundamentally-based traders should have done fairly well simply by taking measure of the monetary "winds of change" (i.e., the billions of dollars in Congressional spending and Fed pumping obviously was destined to have a positive impact on stock and commodity prices). "

 

Al Green and the matrix carnies barking out to the masses;

"Step right up. Just close your eyes. Throw a dart long. Everyones a winner."

 

Cliff also had a few words for the bears.

 

"About the only ones who didn't make out like bandits in 2003 were the die-hard bears of the "crash now!" mentality. Yet despite this blunder on their part, I believe they will have a chance to at least partially redeem themselves in 2004 if I am reading the market correctly."

 

I don't know if he will be right.

 

One thing for sure, 2003 goes down as the year that any and every wild a$$ trick play in the book worked for a score.

 

Live and learn.

 

SEH

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SEH and I were sitting in an Internet Cafe in Maui last March 24, staring in awe at the huge, white, giant volume candles on GE and MMM.

 

We both sat around and wondered. What does this mean? Should we fade this sign of strength?

 

We did.

 

The next day, the Dow had one of its largest percentage declines in recent history, off something like 350 points. The next 4 days, SEH and I were high fiving each other, thinking we had just nailed another March Madness Top.

 

Another huge gap up on high volume which reversed into a bearish engulfing occurred in early April. That opening stab reached even higher than the March highs, and took out that critical 924 number on the S & P.

 

Again, the market sold off.

 

Unfortunately, those large, high volume moves in GE and MMM were dire warning signals for the short sellers.

 

Next time you see something like this happen again off of a bottom, you can bet that the market is on the verge of an epic rally.

 

Various high volume pokes to new highs should tip you off that the market is going up big time. Luckily, when those early April highs were taken out again at the end of April, I knew we were in for a monster move, and I closed all shorts and threw everything I had into the gold stocks.

 

Many lessons were learned in 2003.

 

I will post more of them tomorrow, with some trading tips which I will never again violate.

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Last Night on M To M...

 

I said...

 

"First off you have to accept the fact that what you know as money is just debt owed to someone else...It is not money..."

 

Major Crapper said...

 

"Wrong.

 

If you want to look at it that way it is a debt owed by somebody else, but this is entirely proper if you think about it.

 

Money is supposed to serve 2 main purposes; as a store of value and a medium of exchange. Under a pure barter system a simultaneous buy and sell is for value at the point of the transaction.

 

However, all the way back in neolithic times the severe drawbacks of pure barter gave way to token money and futures transactions due to the inconvenience of arranging delivery for larger transactions and the need for farmers to sell crops prior to the harvest.

 

So farmer A ?sells? a portion of his un-harvested crop to merchant B and receives goods for immediate delivery in return, and issues token money to the merchant in exchange who can redeem it against goods at some point in future.

 

The token money is a debt owed by the farmer but it quite properly acts as a medium of exchange and a store of value that can be further traded because its value is based on the farmer?s good faith intent to settle this debt. Let me repeat that; this debt represented by token money.

 

The reason I am sceptical about Hypertiger?s elaborate construct is not because I fear the future but because it is silly.

 

Happy New Year, Stoolies"

 

I've stated and will state again that I don't Trade, Daytrade, or Riverboat...

 

That is Doc's, Mark's, and Piledriver's Bag...

 

One reason is that I only have been staring at this depraved mess for only 2 years...Although I've studied the mechanics of banking, economics, and politics for 16 years I only suspected how depraved this mess was...I had no idea how truely sick and depraved the market actually turned out to be...

 

Now "The floating exchange rate debt backed by debt fractional reserve banking system" (The Matrix) Is not my "construct" it is a construct which sprung into existance officially in 1971 but started operation around 1958...The previous system was the Bretton Woods gold (Money) backing debt (Fiat) Fractional reserve banking system...Untill of course 1971 when the US ran out of money...

 

Now it is debt backing debt...The only way to pay a debt is with debt...Inflate debt or die...

 

It is not wrong or silly it is the unfortunate truth...and we already had this fight months ago and it appears that enough time has passed that a refresher is needed...Forget it...It took 10 years to comprehend how silly it is...and there is maybe a year left until it starts to implode...I figure 4 months until it starts again but even if it runs like clockwork it will disintagrate by 2005...

 

The longer this silly system is in operation the more silly it gets until the maximum potential sillyness is reached...then it implodes...

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Something rang a bell reading last nights M2M and HyperTigers nightmare of debt deflation....

 

Q: Whats wrong with debt deflation?

A: Same affect as falling earnings

 

huh....

well, both lead to diminishing capacity of population to procure ==> Demand dry up. Lack of demand leads to excess of exisiting capacity, pricing pressure, squeeze of margin => lower earnings for business and layoff of workers.

 

So, what's the solution?

 

Q: Didn't England face a similar situation with Power Looms?

A: Yes

 

Solution: Need a captive population that will buy the goods. Colonize a semi-prosperous nation and bleed it dry.

 

Colonize Iraq - make Iraqi's buy and pay with Oil and ofcourse, push them on with a little debt.

 

hmmm.. doesn't that tie up nicely with NCEN story, extending debt to HAL employees....

 

UK did it before and its doing it again... didn't they just say that its troops will be there for the long haul - despite Iraqi (purported) self-rule this summer?

 

I guess Dubya does know his history. Didnt he major in History from Yale?

 

I shudder to even think .... :unsure: :unsure: :unsure:

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The Dynamically Hedged Economy continues to grow. Paper speculations now the leading job growth area on the planet.

 

Hedge fund assets expected to grow 20%

By Deborah Brewster in New York

Published: January 1 2004 19:00 | Last Updated: January 1 2004 19:00

 

Hedge fund assets are expected to grow by 20 per cent to almost $700bn in 2004, fuelled by US and Japanese institutional investment, in spite of growing regulatory scrutiny.

 

Last year institutional investors had for the first time more money in hedge funds than retail investors, as big pension funds began to allocate more money to the sector. Virginia Parker, founder and chief investment officer of Parker Global Strategies, a fund of funds, said she expected hedge funds to grow assets by about 20 per cent in the coming year.

 

More.....

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Something rang a bell reading last nights M2M and HyperTigers nightmare of debt deflation....

 

Q: Whats wrong with debt deflation?

A: Same affect as falling earnings

 

huh....

well, both lead to diminishing capacity of population to procure ==> Demand dry up. Lack of demand leads to excess of exisiting capacity, pricing pressure, squeeze of margin => lower earnings for business and layoff of workers.

 

So, what's the solution?

 

Q: Didn't England face a similar situation with Power Looms?

A: Yes

 

Solution: Need a captive population that will buy the goods. Colonize a semi-prosperous nation and bleed it dry.

 

Colonize Iraq - make Iraqi's buy and pay with Oil and ofcourse, push them on with a little debt.

 

hmmm.. doesn't that tie up nicely with NCEN story, extending debt to HAL employees....

 

UK did it before and its doing it again... didn't they just say that its troops will be there for the long haul - despite Iraqi (purported) self-rule this summer?

 

I guess Dubya does know his history. Didnt he major in History from Yale?

 

I shudder to even think .... :unsure: :unsure: :unsure:

I believe he calls it "bringing democracy to Iraq."

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Made a little trip over to Southern Coins today:

 

Do you have any silver Eagles?

"We're so sorry but we've sold out of all silver Eagles"

When do you expect more in?

"We've ordered more but that order is already sold out"

oh

"We've placed a second order but were told that there were a lot of orders in front of us"

 

They had boxes of silver maples on the floor so I bought one (200 oz). $1.50 over Wednesdays close. Their cost is $0.85 over spot. I think silver Eagles are $2.00 over spot.

 

 

Regarding the Patronizing act:

Basically, they cannot give cash for gold or silver - has to be a check.

When they trade scrap gold and silver with jewelers and pawn shops, both buy and sell transactions must be with check - no cash. Also, a affidavit has to be prepared.

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I believe he calls it "bringing democracy to Iraq."

so someday they can have a free press too:

U.S. Holds Reuters Staff Near Chopper Crash in Iraq

 

No rest for the wicked:

Greenspan, Top Fed Officials to Offer Their Outlook

In timely fashion, Greenspan is slated to address the meeting on the subject of "risk and uncertainty in monetary policy" at 1:15 p.m. EST (1815 GMT) on Saturday.

 

Even more aptly -- given Greenspan's renown as a master of difficult-to-decipher pronouncements -- Bernanke is to follow him at 3:15 p.m. EST (2015 GMT) with remarks on "Fedspeak," according to an agenda issued by the Fed.

 

The director of the Fed's division of monetary affairs, Vincent Reinhart, is to offer comments on Saturday on a paper that he and Bernanke jointly authored, on the subject of "monetary policy in a low-interest rate environment."

 

Bernanke is scheduled to speak again on Sunday on "monetary policy and the economic outlook," while Ferguson takes on the topic of lessons from past periods of high productivity, or hourly output per worker, such as the U.S. economy currently is enjoying. Both are due to speak at 5:30 p.m. EST (2230 GMT).

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Magnitude...

 

Last year in a speech (I wish I saved it) Ben Bernanke after 70+ years admitted it was the Federal Reserve's fault for the great depression...Wall Street asked for more liquidity/debt (Further easing) but at the time the FED said no...the Stockmarket crashed...Ben Bernanke said that was a mistake and don't worry, we won't do that again... Well 70 years ago the maximum potential was "imposed" by the FEDERAL RESERVE which caused the hyperdeflationary implosion of debt...According to Ben Bernanke this time they will run the system to it's maximum potential to support debt inflation...

 

Disclamer...The system could blow at any time...But looking at my own charts the system could make it to early 2005 before the theoretical maximum potential is reached or where infinite debt inflationary potential (Exponential Hyperinflation forever) is needed to support the required amount of debt inflation to prevent implosion...which could only happen by dumptrucks dumping money on street corners faster and faster untill in a matter of months a postage stamp costs 1 trillion dollars...

 

Magnitude increases over time, the run in the 20's is invisible in todays terms...

 

Past...

 

post-1-1073078488.gif

 

What could happen if they have lashed the steering wheel and thrown a cinderbrick on the gas peddle...

 

post-1-1073078269.gif

 

At some point soon, I assure you your sense of humor will disapper when you realize the true gravity of the situation...In the world of today the system is more dependant on debt inflation then in 1929 by many orders of greater magnitude...and the economy itself is a pathetic shadow of what existed in the US 70 years ago...

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