So, What Do You Think the Markets Will Do?

People ask me what I think the market will do on a daily basis and many look at me in search of some hope. I tell them that I accidentally smashed my crystal ball on the way to the office and therefore I cannot tell the future, but that's not really the truth.


We as traders after so many years, have been on the roller coaster long enough to "know" by our experience how the ride feels, the speed, the wind, the turns, dips and highs are anticipated before they actually happen. Those of us who are tuned into it's music, move with it's rhythm, instantly notice the beat change. Therefore we have an advantage over the people who put their trust in someone else to manage their investments and therefore, when asked, I believe we have some obligation to answer truthfully and of course as you know that's not as easy as it sounds.


Truth is that although I called the market correctly for everyday last week, and I have a pretty good idea about the next couple of days, I don't really know what will be 6 months or a year or years from now. Given history, as we've known it, the markets are better at going up than down, so the likelihood of gain is far higher than a loss in the long run. I am still not answering their real question.. the one that they are really asking which is: "Will my investments come back to their former value (soon)?" Therefore, I propose that the truthful answer to their question will have to be: "The markets will probably not recoup their heights for a couple of years at least and it may never do well enough for them if they don't learn to participate in managing their own investments".


We who lived through the .com boom and bust know that companies like CSCO, MSFT, EBAY, SUN, were at prices that they have yet to even come close to again. They are still good, well run companies and they are still large players in the industry, but those investors who held on to their shares bought at $150 +/- are nowhere near in recouping their loss from them and they never will. Currently there are people holding on to GOOG from near $700 waiting for a comeback. Can it happen? I suppose so; but realistically? I doubt it. (apologies to Google lovers)


Add to the scenario that the current elected government has vastly changed the playing field already and given their current path, we are headed for regulations yet unheard and most likely to a very unfavorable atmosphere for companies. When the government decides which innovation is in favor and which is not, they in effect kill free markets, and kill the stock market as a result. So it could be that we've seen nothing yet, about this downturn.

On the other hand, Americans are (hope not just were) a resilient people and can stand up to fight when forced, so yes there's hope of a strong turnaround if we keep our resolve.

Regardless which, the truth is that the trillions that were lost in the past couple of years will never be returned. Therefore you can't spend too much time wishing it were different. It's a little bit like hanging on to the past... nice memories, but you'll never be there or look that way again, so you better enjoy the present and look to what you can make with it to grow your future.

Of course now that I've found another crystal ball at the flee market, I can safely predict the market movements again. The Gypsy who sold it to me looked honest; so I can say that the markets will continue their merry roller coaster rides no matter who the builders or the riders are. Remember to keep all limbs inside the car & safety harnesses on.

As you leave this lesson in trading and life, know that it's never old money that makes it; it's new money that will build new wealth. Remembering that in the cycle of things, this is an opportunity for a beginning.

Money Borrowed

Congress has been a master at making the other guy look bad.. but if you do some research you'll find that most of what they accuse the banks of doing, were regulated on them by the very same people asking for accountability. What's more, if you check a little more, you'll find that the those rules have not changed and that more of the same is to come especially if they continue to regulate what the companies have to do in order to "save" the economy. Of course if the banks and companies fail.. they, meaning, the Congress, cannot be held accountable. Pelosi told you that a couple of months ago and they count on you not to remember; unfortunately most don't.

Now your elected officials all demand that AIG "pay back" the taxpayer the earmarked bonuses; the same bonuses Congress knew about and approved within the original loan. Besides the outlandish lie that they even care for other reasons than their own image, you need to realize that there's no way of "paying back" the taxpayer. The money spent was tax revenue given to Congress by us so we can never reclaim it; Congress could for themselves to spend on something/someone else, but do you realistically believe that they will distribute it back to each taxpayer? That's why it's just a pompous show put on by your voted in politicians, for nothing else but your next vote.

Worse yet, however, is the reality that the money given was money from the future, because the money lent was borrowed money. In fact most of the budget spent is borrowed money and not taxpayer money, our money has long been spent in the past. Imagine living your own life that way.. oh I forgot.. we did for the past 2 decades. Is that why we let Congress get away with living off the future, for fear of facing ourselves in the mirror?

We've all done it, playing on margin, which is fine until you play it to the max, the markets turn and you find yourself in a margin call. When all is said and done, you had to divest your holdings unplanned and usually at the bottom, coupled by the realization that you paid interest for the "loan" and that you've lost serious capital. That's why margin's are dangerous, and should be used with extreme caution. Perhaps Congress has something to learn from Wall St. after all and perhaps the taxpayers should make a margin call on Congress. Ahhhhh dreaming, am I?
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Life Relates to Trading: A Lesson You Asked For

So how does this economic mess relate to trading and life you ask? The reasons are enumerated below.

This happens when:

• You think everyone else is getting more than you are
• You covet
• You let go of ethics and morality
• You allow extortion and thievery to go unpunished no matter how small
• You wish not to be bothered with decisions
• You want someone else to "do it" for you
• You think others know more than you and you don't study the question
• You think you know more than others and you don't have to study the question
• You think the solution is too complicated
• You are not willing to take charge of your own life
• You forget that all is connected

As I said before, we did not get here in a heartbeat; but what I didn't say before is that you asked for it. Maybe you didn't ask for it out loud, but you thought it, I bet. In other words, you, we, all of us created it.

When freedom is gone, it takes a long time to win it back again. It takes courage, fight and it takes blood. The blood is all over the stock markets today. The fight is on. It's not only in the markets but it's there intellectually in the streets. The fight for our freedom and country as we've known it is on whether you are ready or not. The markets reflect the future and it's showing everyday what's coming.

Those that will fight back and those that believe in free markets will pay dearly for quite a while. There is money to be made on the short side now and not many are willing to anti up for the longs. Yet companies that provide for your trading are sinking and contrary to modern math, zero is a zero and you can't borrow from government to make up for that. That is why corrections are difficult and the best way to avoid a mess is by realizing that all things have a cycle and panic or a bail-out does not fix anything.

Now, we're in this lesson which may take a long time to comprehend. Until then, the question will remain: What have we given up for the quick fix and at what cost of our freedom?

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