I have become a day trader in the last three years of necessity. I have long been an “investor.” Bought my first stock in 1959, doubled my money, and was hooked. Long term holding of equities works for those with the proper time horizons. Dollar ciost averaging works even better over long periods. However, when you are retired, need income, with risk free rates very low, and preservation of principal required – it turns out that day trading can get you there. But not aggressive day trading. I was out of the market from April until last week. I am half way in right now and do not know when I will run for cover, but today augers very well for the next month and maybe all the way to January. After that all bets are off.
Looking back, I wish I had known during those early years what I know now. That said, there is so much more information available today than there was thirty years ago. Of course much of the information is worthless, but you learn that through experience. The hardest lesson I have had to learn is that the equity market often does not reflect the realties of the economy. Two major things have changed in the last 15 years. Hedge funds and computer program trading have made the markets far more volatile and far more irrational. (Although irrationality has always been a feature of the equities markets.)
The market started down at the end of April because of oil prices and inflation. That was exacerbated later in August by the European debt problems. There has been quite a lot of pent up demand waiting for some good news. The European band aid on the debt problem has provided the good news. Now people who have been sitting on the sidelines are going to get in and we could have a market melt up for a while. Or not! Oil and commodity prices are edging up and the specter of inflation those prices provide may dampen the animal spirits. We’ll see.
Repeat after me. The market in the short term does not necessarily reflect the truth about the economy. The market can be equated to an acute manic depressive person. Sometimes irrationally exuberant and others irrationally pessimistic. Amid all this hyper mania it pays to be as calm as possible.
Thanks JJ, for your description of the market for a layman was quite useful, especially the part comparing it to a mental illness.
J.J. raises an important point about retirees and income. The Fed policy of driving down interest rates makes it very difficult for savers to earn interest anywhere. You are forced to go into the market to get 5% returns. Just remember Wachovia, GM, and BP. Many old people used to survive on CD’s.
Considering the number of outright meltdowns that have occured in October (the big one in 1929, Black Monday in 1987, Friday the 13th two years later, and a repeat on Oct 27, 1997), ‘the best October on record’ is sort of like coming in second place in an ugly tie contest.
Neo, your mistake is believing that this isn’t true for everyone.
;-D
P.S., My biggest concern is that the Great Big 0 is going to take credit for this and claim it was all his doing.
Worse, he’s going to claim that, if people had only supported his Jobs Bill#2, that it would be better yet, or, if it turns back down, it was because of the failure to do so.
The way i see it…
the dollar is devalued, and better to spend your money when its worth 75 cents than when its worth a quarter. gold is too high for them, and so what asset can you get into, and is liquid enough to get out of? (and if you hedge too, then even better)
this morning i was looking at headlines about the dollars value vs the yuan… then those headlines disappeared, and voila the rally and everyone celebrating as if it goes up fast its always a good thing…
go here and change the start date to before 2004 to current and see if it looks interesting
remember its going to come up with 2009
change that first to 2004, and look
and for another interesting eye opener change it to 1990
then search for
…monetary base chart
take your pick of any honest place
even dishonest ones
almost all have variations of the same graph
Source(s): Federal Reserve Bank of St. Louis
research.stlouisfed.org/fred2/series/BASE
those that have an idea what all that means… they KNOW whats going to happen, they just dont know when…
if they think that today headlines give them an idea that when is now.. then they are going to fly into assets and things to get away before the purchase power goes poof!
[i wont go into the demographics of 30 million EXTRA men of fighting age and what the traditional fix for it is, and how the one with the problem has initiated before (and who may be peeved that the dollars they are being paid back in are not worth anywhere near as much as when they entered into the agreements)]
10 hours ago…
Dollar Falls as Europe Debt Deal Curbs Safety Bid; Aussie Climbs
The dollar weakened against most major peers after European leaders expanded a rescue fund for indebted nations and reached an accord with lenders on writedowns for Greek debt.
-==-=-=-==-=-=-=-=-==—=-=-=-==-
The yen rose toward a post-World War II high against the greenback even after the Bank of Japan expanded monetary easing. The Australian dollar reached an almost seven-week high as stocks jumped.
Fed Bank of New York President William C. Dudley said this week “it’s possible that we could do another round of quantitative easing.” The central bank decided last month to replace $400 billion of short-term Treasuries in its portfolio with longer-term bonds.
“The market theme is shifting from Europe to the U.S. with a focus on the possibility of quantitative easing,” said Tokyo- Mitsubishi UFJ’s Ino.
what does that mean?
well, when you see that graph of monetary and that long high peak… he wants to make that peak HIGHER… which means the value of the dollar in your pocket goes LOWER, but he gets to spend it before it does that.
kind of like taking dollars from your pocket and replacing them with dollars that have much less value.
look at the graph… that’s what they did
your dollar is worth less than 25% of what it was before hope and change…
when does that catch up?
when the banks let go of the money they are sitting on that the state wants them to… but they dont want to as that would make whatever they hold that’s left, worth what?
so this is going to take some serious repositioning by the in crowd before they can let the chips fall and all those academic pensions will be worth pennies on the dollar…
here is what forex said
The dollar slipped 0.25 percent vs the euro (EUR)
0.03 percent vs the Japanese yen (JPY)
1.02 percent vs the Australian dollar (AUD)
1.58 percent vs the Canadian dollar (CAD)
and no one knows where or what will be manufactured or if people will buy it… so commodity money has to go somewhere…
this is something i have tried to explain to young dunderheads… that getting all that money (big deep pockets), is just the first step… they think you get it, and you get to be happy… no no no mon ami… you get it, then your job is to hold on to it, and to figure out whose hand in your pocket takes out the least (you have no choice, someones hand will be there, but you can choose whose – usually your accountant wins over the irs)
and dollar value games and asset values change… so whatever you have dont stay the same (and thats not even taking in depreciation).
so thats why they buy those fancy expensive things… as a way to hold on to value, not dollars… a Rolls Royce silver cloud in mint condition appreciates, a Prius went down the second it touched the highway….
well…
right now, they are trying to retain the value of what they have, and whether you do that or not it costs you…
anyone know what kinds of stocks they went into? or was it an across the board thing?
anyway.
that’s my take…
i could be way off, or not…
in this case, its unfalsifiable as most others
dont mean its wrong, but it dont mean its right either – it just is
Also, neo, one thing to be doing is paying attention to the news coming out of North Dakota, as well as western Pensylvania. There is a marked increase in the output of fossil fuels in the very near future. Also, one of the hotter topics of late is “reshoring” — the steady 16%/year increase in wages in China is making American robotic-driven factories a better investment than they were 5-10 years ago, leading to more home-grown manufacturing. Not a lot more jobs, but what wealth there is to be had there is coming home.
If you’re not reading Carpe Diem regularly, you should be. He’s been calling for a resurgence for a couple months now.
JJ says, “The hardest lesson I have had to learn is that the equity market often does not reflect the realties of the economy. Two major things have changed in the last 15 years. Hedge funds and computer program trading have made the markets far more volatile and far more irrational. (Although irrationality has always been a feature of the equities markets.)”
The kick the can down the road for another 6 months charade in Europe causes the DJIA to rise 300+ points. Up or down does not matter to the big players (and savvy small time traders) for money can be made on the way up and the way down. However, irrationality and pop-psychology play an ever increasing role in the markets and this is a source of instability.
“Repeat after me. The market in the short term does not necessarily reflect the truth about the economy. The market can be equated to an acute manic depressive person. Sometimes irrationally exuberant and others irrationally pessimistic. Amid all this hyper mania it pays to be as calm as possible.”
Sage advice.
The Fortune 500 make big profits in Europe. A strong Euro causes these returns to bloat their earnings statements.
Right now just about HALF of all Fortune 1000 profits are due to Financial Repression.
Google the term and read the top ticks.
It will be quite an education.
—–
The strong Euro is due to the French unwind: her mega-banks are compelled to take profits on their US Treasuries during Bernanke’s operation twist — and convert them to Euros for remission back to Paris. These profits then boost Tier 1 Capital.
This is well and good for these banks must shortly take a profound haircut on their Greek exposure. Giving these institutions free profits on their long bonds is Bernanke’s way of eating a piece of the Greek tragedy — while hiding it in plain sight. Cute, no?
The HFT algos correlate a strong Euro with a ‘risk-on’ environment. Hence, they are digitally in.
The problem is that the correlation has broken down. The Euro is strong because the Euro Zone is WEAK — so weak that the French have to shed assets — in grand style.
Naturally they start with the most liquid, profitable positions.
Their disasters can’t be unloaded in any way shape or form.
—-
The big picture: Bernanke is eating a big piece of the Greek gyro — don’t look inside — via operation twist. At the end the losses from op twist will end up on the US Federal balance sheet — as legislation has already been passed that shifts interest rate risk off of the Federal Reserve’s balance sheet and on to the whole government!
What could go wrong?
I’d assumed the runup resulted from Europeans trying to find a safe haven from the maelstrom brewing there, and coming to Wall Street.
Yeah, I find that a scary reflection on the EU too.
Think J J is right. The current stock market exhuberance does not reflect the real state of the economy and will not last much longer. When it goes south again in the not too distant future, it will retest the 2009 lows. Till then, it is a trader’s market but not a time to invest for the long term as in buy and hold. It’s far too tricky and volatile for that now.
Europe’s problems are merely being kicked a little further down the road for the eventual and inevitable global day of reckoning.
Dr. Pippa Malmgren, a former economic advisor to George W. Bush and a former advisor to Deutsche Bank (DB). According to Malmgren, Germany has already ordered the printing of Deutsche Marks in anticipation of a possible withdrawal from the EU.
-=-=-=-=-
In a dark blue jacket reflecting the mood in and about the eurozone, Merkel abandoned her usual cautious rhetoric warned outright of a war.
“Nobody should take for granted another 50 years of peace and prosperity in Europe. They are not for granted. That’s why I say: If the euro fails, Europe fails,” Merkel said, followed by a long applause from all political groups.
In these crazy topsy turvy times, who is to know what’s right and what’s wrong. I say it’s time to bleed Grandpa dry. Raid that stock and pension portfolio.
1. The stock market…
…is a complete mystery to me: “Dow headed for best October ever.
It’s also a complete mystery to not a few of those, professional and amateur, who pontificate about it.
2. On this day when the market rose sharply, the Intrade chances of Obama’s reelection moved above 50%, barely. I code too laboriously to check whether there is a long-term correlation.
Artfldgr says, “your dollar is worth less than 25% of what it was before hope and change… when does that catch up?”
Right now at the grocery store, gas station, or commodity market near you.
Mr. Frank says, “A friend is always suggesting I invest in gold, silver, canned goods and ammo.”
Not sure about the wisdom of gold; but food & water stores are a form of insurance, and there is no such thing as too much ammo.
I agree with most commenters. The stock market can be driven by short-term interests. It doesn’t reflect the overall health of the economy.
The world stock markets have all gone wildly up in the last day or two because of the EU deal. Even though that deal simply avoids the immediate catastrophe, and gives the EU time and does nothing else. They still have immense differences between various countries that they “promise” they will deal with; the banks now have a little time to raise capital to cover their grotesque over-leveraged situation; though Merkel promised “monitors” for Greece, there’s no agreement in place to prevent Greece from continuing the policies that have gotten them into dire straits. Even if they accomplished their goals, Greece in 2020 would still have debt at 120% of GDP. But Italy, Spain, Portugal, Ireland, and even Great Britain are headed the same way as Greece. But the fact that catastrophe was averted for merely awhile was enough to send markets soaring.
Don’t assume they will still be even at their current heights three or six months from now. A short-term gains game is being played, and trying to play that short-term game with the experts is usually a losing proposition for the day trader.
Many people consider Jesse Livermore one of the gutsiest, most fearless, traders ever. He had a knack for “reading the tape”, which enabled him to be what we’d call a momentum trader today. Some basic axioms like “cut your losers and let you winners run” can be traced back to Livermore. Unfortunately, he often ignored his own trading rules as he made and lost many multi-million dollar fortunes during his life.
He made several million dollars being short stock during the “Panic of 1907”, only to lose it all on a bad cotton trade a few months later which forced him to file for bankruptcy. When he got back on his feet again, he paid back every penny he owed his creditors at the time of his bankruptcy even though he had been legally discharged from the debts. This reputation for always honoring his debts enabled him to find financiers willing to stake him to get back in the game whenever he went broke on bad trades.
He made another huge fortune during the crash of ’29. Once again he was short stock using a massive amount of leverage (there was no Reg T back then and some brokerages allowed him to borrow up to 10x his equity). He supposedly made over $100 million on that trade. But he was flat broke again by the mid 1930s. Ironically, he despised being called a gambler.
During one of his big upswings, he was smart enough to establish irrevocable trusts for his wife and kids. At the time of his death (by suicide), he was penniless except for those trusts which were worth about $5 million.
Someone created a PDF version of the popular book about his life, “Reminiscences of a Stock Operator”, and put it on the internet. It has a few typos but it’s still a fascinating read.
I have become a day trader in the last three years of necessity. I have long been an “investor.” Bought my first stock in 1959, doubled my money, and was hooked. Long term holding of equities works for those with the proper time horizons. Dollar ciost averaging works even better over long periods. However, when you are retired, need income, with risk free rates very low, and preservation of principal required – it turns out that day trading can get you there. But not aggressive day trading. I was out of the market from April until last week. I am half way in right now and do not know when I will run for cover, but today augers very well for the next month and maybe all the way to January. After that all bets are off.
Looking back, I wish I had known during those early years what I know now. That said, there is so much more information available today than there was thirty years ago. Of course much of the information is worthless, but you learn that through experience. The hardest lesson I have had to learn is that the equity market often does not reflect the realties of the economy. Two major things have changed in the last 15 years. Hedge funds and computer program trading have made the markets far more volatile and far more irrational. (Although irrationality has always been a feature of the equities markets.)
The market started down at the end of April because of oil prices and inflation. That was exacerbated later in August by the European debt problems. There has been quite a lot of pent up demand waiting for some good news. The European band aid on the debt problem has provided the good news. Now people who have been sitting on the sidelines are going to get in and we could have a market melt up for a while. Or not! Oil and commodity prices are edging up and the specter of inflation those prices provide may dampen the animal spirits. We’ll see.
Repeat after me. The market in the short term does not necessarily reflect the truth about the economy. The market can be equated to an acute manic depressive person. Sometimes irrationally exuberant and others irrationally pessimistic. Amid all this hyper mania it pays to be as calm as possible.
http://www.amazon.com/Money-Game-Adam-Smith/dp/0394721039/ref=sr_1_1?s=books&ie=UTF8&qid=1319749718&sr=1-1
Thanks JJ, for your description of the market for a layman was quite useful, especially the part comparing it to a mental illness.
J.J. raises an important point about retirees and income. The Fed policy of driving down interest rates makes it very difficult for savers to earn interest anywhere. You are forced to go into the market to get 5% returns. Just remember Wachovia, GM, and BP. Many old people used to survive on CD’s.
Considering the number of outright meltdowns that have occured in October (the big one in 1929, Black Monday in 1987, Friday the 13th two years later, and a repeat on Oct 27, 1997), ‘the best October on record’ is sort of like coming in second place in an ugly tie contest.
Shades of hyperinflation?
Monetizing the debt:
http://www.canadafreepress.com/index.php/article/26436
P.S., My biggest concern is that the Great Big 0 is going to take credit for this and claim it was all his doing.
Worse, he’s going to claim that, if people had only supported his Jobs Bill#2, that it would be better yet, or, if it turns back down, it was because of the failure to do so.
The way i see it…
the dollar is devalued, and better to spend your money when its worth 75 cents than when its worth a quarter. gold is too high for them, and so what asset can you get into, and is liquid enough to get out of? (and if you hedge too, then even better)
this morning i was looking at headlines about the dollars value vs the yuan… then those headlines disappeared, and voila the rally and everyone celebrating as if it goes up fast its always a good thing…
go here and change the start date to before 2004 to current and see if it looks interesting
http://www.tradingeconomics.com/china/currency
remember its going to come up with 2009
change that first to 2004, and look
and for another interesting eye opener change it to 1990
then search for
…monetary base chart
take your pick of any honest place
even dishonest ones
almost all have variations of the same graph
Source(s): Federal Reserve Bank of St. Louis
research.stlouisfed.org/fred2/series/BASE
those that have an idea what all that means… they KNOW whats going to happen, they just dont know when…
if they think that today headlines give them an idea that when is now.. then they are going to fly into assets and things to get away before the purchase power goes poof!
[i wont go into the demographics of 30 million EXTRA men of fighting age and what the traditional fix for it is, and how the one with the problem has initiated before (and who may be peeved that the dollars they are being paid back in are not worth anywhere near as much as when they entered into the agreements)]
10 hours ago…
Dollar Falls as Europe Debt Deal Curbs Safety Bid; Aussie Climbs
http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/10/27/bloomberg_articlesLTPP5X6JIJUR.DTL
The dollar weakened against most major peers after European leaders expanded a rescue fund for indebted nations and reached an accord with lenders on writedowns for Greek debt.
-==-=-=-==-=-=-=-=-==—=-=-=-==-
The yen rose toward a post-World War II high against the greenback even after the Bank of Japan expanded monetary easing. The Australian dollar reached an almost seven-week high as stocks jumped.
Fed Bank of New York President William C. Dudley said this week “it’s possible that we could do another round of quantitative easing.” The central bank decided last month to replace $400 billion of short-term Treasuries in its portfolio with longer-term bonds.
“The market theme is shifting from Europe to the U.S. with a focus on the possibility of quantitative easing,” said Tokyo- Mitsubishi UFJ’s Ino.
what does that mean?
well, when you see that graph of monetary and that long high peak… he wants to make that peak HIGHER… which means the value of the dollar in your pocket goes LOWER, but he gets to spend it before it does that.
kind of like taking dollars from your pocket and replacing them with dollars that have much less value.
look at the graph… that’s what they did
your dollar is worth less than 25% of what it was before hope and change…
when does that catch up?
when the banks let go of the money they are sitting on that the state wants them to… but they dont want to as that would make whatever they hold that’s left, worth what?
so this is going to take some serious repositioning by the in crowd before they can let the chips fall and all those academic pensions will be worth pennies on the dollar…
here is what forex said
The dollar slipped 0.25 percent vs the euro (EUR)
0.03 percent vs the Japanese yen (JPY)
1.02 percent vs the Australian dollar (AUD)
1.58 percent vs the Canadian dollar (CAD)
and no one knows where or what will be manufactured or if people will buy it… so commodity money has to go somewhere…
this is something i have tried to explain to young dunderheads… that getting all that money (big deep pockets), is just the first step… they think you get it, and you get to be happy… no no no mon ami… you get it, then your job is to hold on to it, and to figure out whose hand in your pocket takes out the least (you have no choice, someones hand will be there, but you can choose whose – usually your accountant wins over the irs)
and dollar value games and asset values change… so whatever you have dont stay the same (and thats not even taking in depreciation).
so thats why they buy those fancy expensive things… as a way to hold on to value, not dollars… a Rolls Royce silver cloud in mint condition appreciates, a Prius went down the second it touched the highway….
well…
right now, they are trying to retain the value of what they have, and whether you do that or not it costs you…
anyone know what kinds of stocks they went into? or was it an across the board thing?
anyway.
that’s my take…
i could be way off, or not…
in this case, its unfalsifiable as most others
dont mean its wrong, but it dont mean its right either – it just is
Also, neo, one thing to be doing is paying attention to the news coming out of North Dakota, as well as western Pensylvania. There is a marked increase in the output of fossil fuels in the very near future. Also, one of the hotter topics of late is “reshoring” — the steady 16%/year increase in wages in China is making American robotic-driven factories a better investment than they were 5-10 years ago, leading to more home-grown manufacturing. Not a lot more jobs, but what wealth there is to be had there is coming home.
If you’re not reading Carpe Diem regularly, you should be. He’s been calling for a resurgence for a couple months now.
JJ says, “The hardest lesson I have had to learn is that the equity market often does not reflect the realties of the economy. Two major things have changed in the last 15 years. Hedge funds and computer program trading have made the markets far more volatile and far more irrational. (Although irrationality has always been a feature of the equities markets.)”
The kick the can down the road for another 6 months charade in Europe causes the DJIA to rise 300+ points. Up or down does not matter to the big players (and savvy small time traders) for money can be made on the way up and the way down. However, irrationality and pop-psychology play an ever increasing role in the markets and this is a source of instability.
“Repeat after me. The market in the short term does not necessarily reflect the truth about the economy. The market can be equated to an acute manic depressive person. Sometimes irrationally exuberant and others irrationally pessimistic. Amid all this hyper mania it pays to be as calm as possible.”
Sage advice.
The Fortune 500 make big profits in Europe. A strong Euro causes these returns to bloat their earnings statements.
Right now just about HALF of all Fortune 1000 profits are due to Financial Repression.
Google the term and read the top ticks.
It will be quite an education.
—–
The strong Euro is due to the French unwind: her mega-banks are compelled to take profits on their US Treasuries during Bernanke’s operation twist — and convert them to Euros for remission back to Paris. These profits then boost Tier 1 Capital.
This is well and good for these banks must shortly take a profound haircut on their Greek exposure. Giving these institutions free profits on their long bonds is Bernanke’s way of eating a piece of the Greek tragedy — while hiding it in plain sight. Cute, no?
The HFT algos correlate a strong Euro with a ‘risk-on’ environment. Hence, they are digitally in.
The problem is that the correlation has broken down. The Euro is strong because the Euro Zone is WEAK — so weak that the French have to shed assets — in grand style.
Naturally they start with the most liquid, profitable positions.
Their disasters can’t be unloaded in any way shape or form.
—-
The big picture: Bernanke is eating a big piece of the Greek gyro — don’t look inside — via operation twist. At the end the losses from op twist will end up on the US Federal balance sheet — as legislation has already been passed that shifts interest rate risk off of the Federal Reserve’s balance sheet and on to the whole government!
What could go wrong?
I’d assumed the runup resulted from Europeans trying to find a safe haven from the maelstrom brewing there, and coming to Wall Street.
Yeah, I find that a scary reflection on the EU too.
Think J J is right. The current stock market exhuberance does not reflect the real state of the economy and will not last much longer. When it goes south again in the not too distant future, it will retest the 2009 lows. Till then, it is a trader’s market but not a time to invest for the long term as in buy and hold. It’s far too tricky and volatile for that now.
Europe’s problems are merely being kicked a little further down the road for the eventual and inevitable global day of reckoning.
Dr. Pippa Malmgren, a former economic advisor to George W. Bush and a former advisor to Deutsche Bank (DB). According to Malmgren, Germany has already ordered the printing of Deutsche Marks in anticipation of a possible withdrawal from the EU.
-=-=-=-=-
In a dark blue jacket reflecting the mood in and about the eurozone, Merkel abandoned her usual cautious rhetoric warned outright of a war.
“Nobody should take for granted another 50 years of peace and prosperity in Europe. They are not for granted. That’s why I say: If the euro fails, Europe fails,” Merkel said, followed by a long applause from all political groups.
China could play key role in EU rescue
http://www.ft.com/intl/cms/s/0/7505d210-00ba-11e1-8590-00144feabdc0.html
A friend is always suggesting I invest in gold, silver, canned goods and ammo.
Price earnings ratio.
http://www.multpl.com/
In these crazy topsy turvy times, who is to know what’s right and what’s wrong. I say it’s time to bleed Grandpa dry. Raid that stock and pension portfolio.
1. The stock market…
…is a complete mystery to me: “Dow headed for best October ever.
It’s also a complete mystery to not a few of those, professional and amateur, who pontificate about it.
2. On this day when the market rose sharply, the Intrade chances of Obama’s reelection moved above 50%, barely. I code too laboriously to check whether there is a long-term correlation.
Artfldgr says, “your dollar is worth less than 25% of what it was before hope and change… when does that catch up?”
Right now at the grocery store, gas station, or commodity market near you.
Mr. Frank says, “A friend is always suggesting I invest in gold, silver, canned goods and ammo.”
Not sure about the wisdom of gold; but food & water stores are a form of insurance, and there is no such thing as too much ammo.
I agree with most commenters. The stock market can be driven by short-term interests. It doesn’t reflect the overall health of the economy.
The world stock markets have all gone wildly up in the last day or two because of the EU deal. Even though that deal simply avoids the immediate catastrophe, and gives the EU time and does nothing else. They still have immense differences between various countries that they “promise” they will deal with; the banks now have a little time to raise capital to cover their grotesque over-leveraged situation; though Merkel promised “monitors” for Greece, there’s no agreement in place to prevent Greece from continuing the policies that have gotten them into dire straits. Even if they accomplished their goals, Greece in 2020 would still have debt at 120% of GDP. But Italy, Spain, Portugal, Ireland, and even Great Britain are headed the same way as Greece. But the fact that catastrophe was averted for merely awhile was enough to send markets soaring.
Don’t assume they will still be even at their current heights three or six months from now. A short-term gains game is being played, and trying to play that short-term game with the experts is usually a losing proposition for the day trader.
Many people consider Jesse Livermore one of the gutsiest, most fearless, traders ever. He had a knack for “reading the tape”, which enabled him to be what we’d call a momentum trader today. Some basic axioms like “cut your losers and let you winners run” can be traced back to Livermore. Unfortunately, he often ignored his own trading rules as he made and lost many multi-million dollar fortunes during his life.
He made several million dollars being short stock during the “Panic of 1907”, only to lose it all on a bad cotton trade a few months later which forced him to file for bankruptcy. When he got back on his feet again, he paid back every penny he owed his creditors at the time of his bankruptcy even though he had been legally discharged from the debts. This reputation for always honoring his debts enabled him to find financiers willing to stake him to get back in the game whenever he went broke on bad trades.
He made another huge fortune during the crash of ’29. Once again he was short stock using a massive amount of leverage (there was no Reg T back then and some brokerages allowed him to borrow up to 10x his equity). He supposedly made over $100 million on that trade. But he was flat broke again by the mid 1930s. Ironically, he despised being called a gambler.
During one of his big upswings, he was smart enough to establish irrevocable trusts for his wife and kids. At the time of his death (by suicide), he was penniless except for those trusts which were worth about $5 million.
Someone created a PDF version of the popular book about his life, “Reminiscences of a Stock Operator”, and put it on the internet. It has a few typos but it’s still a fascinating read.
http://www.trading-naked.com/library/jesse_livermore.pdf
today
Dollar Decline in Full Swing in Risk-On Environment
http://www.cnbc.com/id/45070916
The U.S. dollar’s thrashing on Thursday after a last-minute European deal to contain the debt crisis may have sealed the currency’s fate.