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I call them like I see them.
While I see magnificent opportunities in this once in a lifetime bubble
burst, I also despise the fact that tens of millions are likely to suffer
because of it. They have (are) been misled about the state of the economy
(don't know the extreme imbalances and unholy levels of debt the US Govt
has put this country under). The nonsense that I hear & read about
Greenspan being this genius and righteous person absolutely insenses me.
It can't be farther from the truth.
Unfortunately it will take the collapse of the US economy for other to take
the time to see how we got on this perch to begin with. Reagan appointed
Greenspan back in 1991, and as expected, Greenspan has been the most
abiding (lackey) of all prior Fed chairmans before him. His lax monetary
policy has debased the US dollar, caused great imbalances in the asset
markets, caused millions to get into debt far beyond their means to repay,
and set this country up for a big, nasty fall. The arguments that we are a
better nation, and more prosperous one because of it are not founded. Look
at the record levels of bankruptcies, record levels of personal, corporate,
and government debt, and it is clear how this economy has been moving along
-- on borrowed (literally) time.
The Fed Chairman's job is to keep the economy in check, maintain a strong
currency, which serves to protect the US citizens. He has failed, and I
believe maliciously so. That doesn't mean that traders can't take
advantage of the opportunity. I just hope that folks keep in mind that
they are the fortunate ones and there are tens of millions not so
fortunate, unsuspecting, that will pay for these crimes.
James
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At 06:26 PM 1/12/00 +0100, Gwenael Gautier wrote:
>Hey James,
>
>I like your posts, always good contrarian pieces which are thought
provoking, but
>why so much hatred for Greenspan?
>
>Rule number 1 of psychology states that the fear of things is helping
generating
>precisely the things one is afraid of. That is true on an individual level
as well
>as on a collective level.
>
>Trashing Greenspan won't lead you anywhere, except in the pitfall of your own
>fears. He is what he is, with his perfections and imperfections. If he is
a wicked
>mind, well so be it, just let go. But then there must be quite a few then.
As you
>may have noticed the best way to alienate someone and prompt him to do the
very
>things you dread is by leaving him no choice but to do otherwise, that is by
>expecting him to behave like this. Your anger projects fear onto others which
>downs their mood, and pushes them into fear mode themselves. And as you
well know,
>in fear mode we freeze, unable to think, and just react on primal survival
>instincts. More oftern than not we later regret the words and acts
produced then.
>
>That is due to the fact that thoughts are the building stones of future
events,
>molded according to your expectations. Set them negatively, you get negative
>outcomes, set them positively and let go, you get the best possible
outcomes for
>you at this stage.
>
>Sounds weird? Try with your kids: Teach them to play basket by expecting
them to
>be the most stupid and unable kids around, or try to do so by expecting
them to be
>truly concerned and desiring to do their best. See the difference for
yourself.
>note also their mood, and its impact on yours.
>
>Millions of individual expectations add up and sometimes cancel each other
out to
>generate a collective expecatation which is very powerful. That is how
wars are
>created, as well as prosperity or depressions.
>
>Hence it is of utmost importance that we not only watch our words but also
our
>thoughts, so as to not help build the very outcomes we dread through our own
>fears. Bashing Greenspan is such an example. Suppose you succeed in spreading
>mistrust, now many people stop trusting Greenspan and change their investing
>behaviors. In no time we have a market crash, which precisely you were
afraid of,
>but which in fact was based on the sudden withdrawal of trust .
>
>Now do the opposite, spread the notion that Greenspan is a concerned prudent
>driver, make this notion very clear. Public expectation is now on
Greenspan to be
>as cautious as possible. Under what circumstances do you think Greenspan
would
>make the most mistakes?
>
>So if you really wish to help the world, try first to control your own
fears and
>envision thoughts of Greenspan being highly receptive to things, which will
>improve your chances of getting him to realize your concerns. Or keep your
anger
>and give up any chance of him ever considering your points.
>
>Anger makes you only strong in the short term. It only contributes to your
>opponent becoming even more hostile, which in the end will depresses you
further
>because you did not succeed in eliminating your worst fears.
>Unless unsollicited but specific warning insights of dangerous upcoming
>situations, fears are only help cries from a scared ego.
>
>I am sure you are only wishing the best, just water your best plants,
ignore your
>fears.
>
>Gwenn
>
>
>James Taylor wrote:
>
>> Several points:
>> 1) Human nature hasn't changed, and the psychology of mass greed will turn
>> to mass fear when folks realize that stocks don't just go up.
>>
>> 2) Most 'investors' mutual funds are directed by money managers who have
>> never witnessed a substantial bear market. These managers will make for
>> exits, the owners of the fund will know nothing about it until after it is
>> over.
>>
>> 3) Derivatives are widespread, and as we have seen by LTCM, the risks of
>> their default are real, and the losses staggering. LTCM leverages a few
>> billion to control approx $100 billion; approx 90+% leverage. I believe the
>> likelihood of mass derivative failure is high.
>>
>> 4) The nonsense you hear daily on 'buy and hold for the longterm', and that
>> 'stocks always go up over long periods of time' will change when these
>> gamblers see a 30% drop in prices. Folks have been rewarded for buying the
>> dips, especially in the big name index darlings. This mentality will die
>> hard, and cause folks to throw good money after bad as they start to
>> decline and never look back. The smart money will love it, as they sell
>> their shares to the unsophistocated new era believers.
>>
>> 5) The business cycle has not been repealed due to the advent of the
internet.
>> If anything, it has weakened the profit potential of brick and mortar
>> business' sales, since internet companies are cutting prices to the bone,
>> consumers can comparison shop for the best price on-line. Not to mention
>> the present favorable sales tax advantages internet companies enjoy. Just
>> look at the net revenue figure for the e-tailers -- most are losing tens of
>> millions each quarter with no end in sight.
>>
>> 6) Certainly the man most singly responsible for this massive asset bubble,
>> Mr. irresponsible himself, Alan Greenspan, will do everything in his power
>> to keep the drunken party going -- by cutting rates to zero, manipulating
>> the markets. The US administration will offer tax cuts and incentive
>> packages as Japan has (with no help).
>> This fiscal mismanagement ($5.6 trillion debt + $8+ trillion in squandered
>> social security trust fund money) will come home to roost, as all extreme
>> debtors have to face the music.
>>
>> My bet is that there will be tens of millions of very disappointed
>> 'boomers', and blind-sided retirees when this massive bubble (and
>> government perpetrated fiscal & monetary mismanagement) comes to its
>> destined end.
>> I expect that the drive-thru windows of America will be staffed with very
>> old, and very bitter people trying to survive/make ends meet, and in the
end,
>> the fascination with stocks by bag-boys, grandmothers, and cab drivers will
>> end.
>>
>> Excerpt from today's Contrarian, at siliconinvestor.com:
>> Signs of the times... I want to share three emails I received yesterday
>> from readers about some of the kooky things that different folks have
>> observed.
>> Here's the first one: "A friend of mine told me that
>> his son, who loads bags for a certain airline at a certain airport (names
>> withheld to protect the
>> innocent), and who previously had no money or interest
>> in the stock market, has just borrowed all the money in his 401K plan and
>> put it in the
>> Janus Internet fund. He had been hearing stories from
>> some co-workers who have told him stories of vast returns in high tech, as
>> opposed to
>> the S&P 500 index fund that they are offered in the
>> 401K plan. He cannot be convinced that he may not make as much as thinks. I
>> wonder how
>> many other people around the country are using this
>> strategy too well."
>>
>> In the second email, a reader said: "I was in a long
>> line in a Palo Alto grocery store and I overhead a clerk giving stock
>> advice to a customer in
>> the check-out line."
>>
>> The final email described an article in the Palm Beach
>> Post. Reporter Jeff Ostrowski said that the House of Kahn Jewelers in Palm
>> Beach had
>> purchased $100,000 in jewelry in the past few weeks
>> from customers who "didn't want to miss out on the technology-driven bull
>> market" since
>> the owners only wear this beautiful works of art a few
>> times a year. "What else could you do with the money?"
>>
>> So, there you have it, just a few anecdotes to go with
>> the pawn shop story we had and Dennis Gartman's story from the banks.
When one
>> looks at the consumer debt figures and other debt
>> figures, we know there is a massive amount of leverage being employed to
>> buy speculative
>> stocks at absurd prices. We don't know when this will
>> end, but we can say with certainty it will end very badly.
>>
>> >>> That's my optimistic view for the end of this mania. You don't want to
>> hear the pessimistic one.
>>
>> James
>> TechTrading.com
>>
>> -----------------
>> At 10:38 PM 1/11/00 -0600, you wrote:
>> >I wasn't there in 1929 and students of 1929 all have very differing views.
>> 1987
>> >was VERY MUCH a derivative related event and accordingly was very short
>> lived.
>> >It also occurred just after an expiration and the rolling of hedges
wasn't a
>> >very common factor back then. In 1987 most of the "insurance' was
>> underwritten
>> >by individual investors with very low margin requirements and this
>> resulted in a
>> >market "in temporary distress" which again didn't last long.
>> >
>> >The good news today is that risk management is better ...... this
>> doesn't mean
>> >a market can't go down ... but it does mean that a massive repricing
>> may be
>> >less likely. NDX trades over a 30% vol. which means daily moves of
>> almost 2%
>> >are to be expected and in fact should be commonplace ..... sometimes it
>> trades
>> >40 - 50 vol. which magnifies the issue.
>> >
>> >The other big issue in the US marketplace is that, for domestic investors,
>> there
>> >are choices. I can trade Yahoo for Disney ... which happened in the
last few
>> >days. I can trade eBay for 10 year notes. If you buy the demographics
>> argument
>> >(Dent, etc.) ... great demographics exist until about 2007 or 2008.
Look
>> >around you ... everyone is working .. in my industry Wall Street
can't fill
>> >all the derivative jobs ... just look at the listing son Bloomberg.
>> >Additionally the world economy... which was on the brink last year... has
>> had a
>> >pretty impressive comeback.
>> >
>> >Things that would worry me .... obviously very large changes in interest
>> rates.
>> >A dramatic change is implied volatiltiy....but again I'm a derivatives
person
>> >and I think volatility tells 90% of the story. The economy drops dead
...
>> >again probably not an overnight occurrence.
>> >
>> >the big unforeseen news event.... even this would need to knock the
>> economy out
>> >of growth mode.
>> >
>> >Gitanshu Buch wrote:
>> >
>> >> Thank you, doctor, for the excellent Japan perspective, it brings out
the
>> >> core systemic differences between 1989 there and 1999 here.
>> >>
>> >> >From the institutional standpoint, one thought keeps striking me,
courtesy
>> >> the exisitence of the relatively smooth big-picture risk transfer
mechanism
>> >> here in the US...
>> >>
>> >> How much sudden damage (as in 1987, 1929) can be done in the US market
>> >> anyway?
>> >>
>> >> Even in 1987, the market fell 15% from its peak over a 2 week period
before
>> >> Black Monday... that, for a market used to growing 15% per year must
have
>> >> set off alarms somewhere before the Monday happened.
>> >>
>> >> Since then, everybody macro level is presumably hedged, or can get
hedged
>> >> with lightning speed.
>> >>
>> >> Everybody that is not hedged, loses money and has their investment
assets
>> >> taken away.
>> >>
>> >> If everyone flows from protection to protection - the way the risk
transfer
>> >> mechanism works between the mechanism's intermediaries, seems to me it
>> >> creates its own natural checks and balances re velocity of one way moves
>> and
>> >> the extent that they can impact the market adversely at a macro level.
>> >>
>> >> If anything changes the fundamental premise of a long term directional
>> move,
>> >> the whole institutional investing world recognizes it, and adapts.
>> >>
>> >> Like you say, money has to find a home somewhere.
>> >>
>> >> Conceptually, this tendency ot checks and balances would seem to explain
>> the
>> >> stairstep market we've been seeing for the past 4-5 years - where
economics
>> >> and demographics set aside, the risk transfer mechanism played a
major role
>> >> in containment.
>> >>
>> >> The fat tails of recent years came from individual trades gone wrong and
>> >> herd mentality riding that entity's misfortune, not systemic problems as
>> >> evidenced in Japan.
>> >>
>> >> 1994 was a mass exodus due to fixed income - but the party was over in a
>> >> brief couple of months.
>> >> 1996 was a mass exodus due to tech rotation - but that party was over
in a
>> >> month.
>> >> 1997 was a piggy back on Mr Neiderhoffer, and that was over in 2 months.
>> >> 1998 - ditto LTCM, again over in 3 months.
>> >> 1999 - whatever the reason (I honestly forget) but it was a smooth down
>> >> move, some cages rattled, and game over.
>> >>
>> >> The point of the above data - is that the velocity was contained, and
the
>> >> extent of damage was contained.
>> >>
>> >> Big-picture trends (eg investor preferences into Europe-Asia over
USA, into
>> >> tech out of fixed income, of demographic investment trends etc)
>> >> notwithstanding - can 1987 happen??
>> >>
>> >> Sure, chinks develop in the system every now and then - where volatility
>> >> goes north of 100% and the Specialist Function ceases to exist as a
stopper
>> >> in the velocity of one way moves or the occasional rogue trade gets done
>> >> that has market-wide impact.
>> >>
>> >> Seems to me these sharp narrow "small time" 10%-20% "corrections"
would get
>> >> more prevalent, as opposed to any sustained bear market - since the
system
>> >> gets too expensive for anything more to happen, and the world leans
on the
>> >> wrong side too much, and we over-correct in the opposite direction,
>> swiftly.
>> >>
>> >> Opinions, Doctor?
>> >>
>> >> Gitanshu
>> >
>> >
>> >
>> >
>
>
>
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