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Found on Harvard Economics professor Greg Mankiw's blog.

Market Corruption
Look around. At work, observe your management, staff, and coworkers. Stand back and observe shoppers in the retail stores you visit. Observe traffic flows while you drive.
Each environment displays its own variety of chaos and discontent. Each is indicating the tenor of the rest of our so-called culture.
Our environment has become an ongoing Psychology Today comic strip, emotionalized, self-involved, lost in the chaos it realizes exists but cannot punch its way out of.
Many long-time trusted market indicators, including the seemingly irrelevant environments alluded to above, scream for wise people to exit stock markets, housing markets, and any environment where trust and rational behavior of counter parties is required to ensure rational, reasonable pricing and follow through without abrogation.
Every market is corrupted by emotionalized, confused, lost juveniles. Inexperience and short-term objectives reign as major decision forces.
Many astute analysts see the signs based upon their favored indicators. Some analysts use technical indicators, some use fundamental indicators, some use both, but asset deflation is the operative force... and a lack of trust is omnipresent.

Investing In Facebook?
http://www.dailymail.co.uk/news/article-2165543/Facebooks-Dark-Profiles-twisted-genius-Mark-Zuckerbergs-quest-total-domination.html

http://www.dailymail.co.uk/news/article-2165566/A-1950s-frat-house-meets-Mad-Men-The-sex-sleaze-secrets-social-network-Facebooks-little-emperor.html

 

Read Robert Prechter on the deflationary draft.

Excerpted from his book, Conquer The Crash


Easy Money Or Risk

As you deposit your paycheck, take a look at the entity that is handing you its money, that is, wrote this check to you. The source of your check has arranged for that money to become your money.
Is the source of your check one of those for-profit corporations? If so, you should be grateful that that corporation was started by an entrepreneur, developed into a successful business, tolerates your shenanigans, and pays you in spite of your shortcomings and lack of ability.

Or is your check written by a business that you started? If so, you should be grateful that you have been fortunate, skilled, had assistance from coworkers, and survived well enough to have money left over after expenses to pay to you.

Or is your check from a business that took risk? Did this business invest in another business, in a farm, in the stock or bond of a company? Did this business risk its capital -- money, that is -- in order to provide another business or an entrepreneur the opportunity to prove his skills, product ro service, and test its good fortune?

If risk was involved, this business deserves to pay a lower tax rate than you pay.
The risk that won a profit required wisdom to select a good risk, the fortitude to stick with a growing risk, and the knowledge of how to cash in on that risk with a profit. The risk of risk is that there may be no profit. There may never be any money returned to the risk taker. Every dollar invested could be lost. The risk taker can lose everything he put at risk.

Summary:  Some risk earns reward. Government played little to no role in ameliorating that risk. Government deserves -- has earned -- little to no reward.
On the other hand, no risk salaries and wages that are paid regardless of being risk free, are rightfully subject to higher rates of taxation.

 


 
Expectations
Today many people expect housing valuations to hit bottom, start to rise, and, not too long thereafter, surpass the record highs of 2007.

These people fail to perceive why housing valuations rose steadily without little pause starting after WWII on through 2007.

These people fail to understand that housing valuations were continuously artificially inflated starting in 1938 through the actions of Fannie (1938), Ginnie (1968), Freddie (1970), & the CRA (Community Reinvestment Act of 1977). Each served as government's artificial inflator of valuation. The first three of these institutions used cash recycling. The CRA used ownership mandates. All worked in concert to ignite housing valuations once the prosperity of the American Dream became reality in the 1950s.

Only a person blind to history, human psychology, and economic forces could expect housing valuations to return to the artificial highs of 2007, let alone to surpass those inflated valuations.


Even You Could Have If You Used His Approach
In the early 1950s Warren Buffett started buying stock in several American companies.
His investment philosophy was to select companies that had top-notch management and provided quality products to potentially large numbers of customers. He held the stock in these companies for decades, collecting dividends and reaping valuation gains unless the underlying company faltered.
Buffett rode the capitalistic US economy through the greatest expansion of business profitability in history. This expansion ran from approximately 1950 through 2005.
Over 50 years Buffett has accumulated a fortune because he implemented and held to this simple investment philosophy.
Buffett should thank the United States of America' capitalistic system and her millions of entrepreneurs and top-notch managers. Instead he revels in the adoration of many unthinking Americans who portray him as a sage. In recent years he has thanked the US and her people by pandering to the political elite, demanding that wealthy and somewhat-less-than wealthy people pay more taxes.
Buffett demonstrates that he is a simpleton rather than a genius when he makes such demands. If he were even just smart, he might understand that to take more from the wealthy -- that is, the investing class -- inhibits future investment in businesses.

Understand that if Buffett had been taxed more heavily over the years that he was investing, he would not have had as much money to invest and would therefore be less wealthy today.


Occupy This
The bottom line is that no matter what discomforts, tragedies, or inconvenience life hands you, you do not have the right or an excuse to impose upon the rights of others.
The 1st Amendment gives each of us the right to do anything just so long as what we do does not infringe upon anyone else's rights, comfort, possessions, or safety.
When an individual infringes upon another, he has implicitly repudiated his 1st Amendment right.

Recovery To Previous Valuations
Considering The Real Estate Market...
The real estate market had not experienced a major correction since the Depression era of the 1930s.
There is no market that has not experienced major corrections over the same period.
It is unhealthy for any free market to not self correct or to be forced into correction mode.  Failure to correct requires exogenous forces to artificially hold prices and present an appearance of stability or expansion.  That indicates that the specific market is not operating as a free market.
Read the analysis of valuation recovery here.

Deflation Is The Net Direction
The Federal Reserve has for several decades been ensuring that there will be definitive magnitudes of inflation.  Bernanke has defined his mandate by his words over several years and his actions over recent years. He believes in forcing and mandating inflation that inflation will reign supreme over any deflationary forces.  Note particularly his "Helicopter" speech of 2002.
Since the start of the current macroeconomic economic event, the economy has turned down.  That means that demand for products and services have decreased.  When lowered demand hits an economy, prices will tend to decline.
Declining prices are a measure of deflation.

Bernanke and Fed policy have worked to apply inflationary forces into the US and global economies.  They have applied massive forces specifically into the US, EU, Asian economies.  Literally trillions of dollars have been used since 2008 to pump inflation worldwide.  The banking systems of several nations have done all possible to pump inflation in their domains.
Commodity markets have accepted the notion of inflation hitting commodities.  Traders and industries have obliged by buying into this notion and going long all commodities.  This provided an overall inflationary view.  This notion was made credible by portraying commodities as the grease of the exploding globalization of all economic activities from food production to manufacturing.
The myth of ubiquitous inflation is deflating.
Commodity valuations are deflating.  Residential real estate valuations are deflating.  Commercial real estate valuations have experienced a rebound that may be due to speculators doing what they do during downturns -- speculate until they determine it is early, they lose enough, or cannot make gains.

Deflating asset valuations are everywhere.
The inflation / deflation valuation determination across the entire US economy is seen differently by those who look narrowly at specific asset classes.  The net inflation / deflation valuation is only inflationary when reviewing a minority of specific asset classes.
Considering all asset classes including real estate, commodities, financials, electronics, heavy industry, food, energy, and everything else results in the observation that deflation is the net force at hand.
Overall, deflation is of a greater magnitude than is inflation.
This net deflation is net even though nearly every command economic institution in the industrialized world has been applying all its available tools using the largest forces that they can muster.
The net valuation vector is pointing toward deflation.  Inflation will occur in specific sectors and with specific assets, but deflation is the operative valuation vector for the mid to long term.
Moreover, the institutions that have promoted inflation have now nearly exhausted their warehouses of tools and tricks.  They will attempt to implement tricks using currencies, gold, psychology, fear, immoral suasion, and more, however, the inflation that these institutions induced over nearly 100 years will reverse.  It was induced unnaturally.  Valuations will revert to natural levels.

How will you place yourself on the profitable side of this macroeconomic movement?

Imagine It Now, Live It Soon
The Dodd-Frank financial legislation is un-Constitutional, anti-capitalistic, and an America-hating means to undermine American capitalism. Dodd-Frank in conjunction with several other legislative forays, presidential executive orders, and regulatory mandates is designed to be destructive. The reconfiguring of elements and interrelated functions and operations within the financial system have been implemented by unabashedly demented and frustrated little minds. They are attempting to transform the US economy and financial system. Their actions cannot result in anything other than dysfunctional reconfiguration.

Imagine the imbalances and interrelationships being established and forcefully imposed, pasted over, and held in place directly by the three branches of governmental mandate and the supposedly independently operating Fed.
Imagine the internal forces operating within each bank and financial institution endeavoring to maximize self-centered positions and, perhaps, incidentally reconstitute institutional prowess.
Imagine the imbalances being established in order for the elements of the financial system and its dependent users that are being asserted in order to maintain an operational, functioning hobbled financial system.
Imagine the multiplicity of individual self-interested operatives and users of the financial system who are stymied, attempting to resist, and working to exploit the financial system for personal gain.

Imagine the regulations, legislation, cabinet level departmentally implemented mandates, and presidential executive orders that continue to be unleashed prior to the 2012 election.
Imagine the chaotic, unbounded, out of control, nasty, capitalism-hating executive mandates that will be unleashed upon America, Americans, and the US financial system and corresponding multinational financial institutions. These institutions will be twisted, taken over, and made unable to fulfill their missions within the vibrant, capitalistic, developing world economies.

Now recall how enamored and transfixed you were when BO repeatedly stated before his election that he planned to "fundamentally transform the United States of America".

They Fail Econ 101
The US economic recovery is faltering. It had been recovering because this is America, the home of freedom and capitalism. However, under the redistributionist, limited freedom, big government programs of BO, the potential US economic recovery will continue to falter.
Some Americans wonder why BO's programs are not producing economic growth and jobs. Other Americans understand why his programs are not producing economic growth and jobs.

The relevant fact is that to BO and his administration's operatives, the faltering US economic recovery indicates that their programs are working and will be successful. Success has a different definition for them than for most Americans.

In 2006, Bernardine Dohrn lectured in arrogant confidence to a group at Northwestern University. She stated that their goal is to take control of the nation and then work to "dismantle capitalism, that evil thing".
The people she was alluding to are led by her husband, Bill Ayers, and the billionaire, George Soros.
The election of BO brought both Ayers, Soros, unions operatives, and other dedicated anti-capitalists to power by directing the BO administration's actions.

Now, after more than two years of implementation of their programs by the BO administration, the Ayers-Soros regime is reaping results of their programs.
They have used the USA as their laboratory. The BO administration has been implementing their programs. The results are becoming clear. US economic faltering denotes -- to the Ayers-Soros group -- success of their theories.
The Ayers-Soros group fails to understand that the faltering US economy while operating under their policies actually denotes the failure of their programs, not the failure of capitalism. The USA became the world's largest and most successful economy and provided prosperity for more people than any other nation in history. It accomplished this feat using freedom and capitalism, not socialism, Marxism, or big government.
The US economy is now faltering because it has been forced to operate under the Ayers-Soros big government programs that follow Marxian Econ 101 principles. Its objective is not economic success for America. Its objective is control of people, industry, and all else through the use of big government.

Increasing Rates & Corrective Contraction
The only fact attracting capital to US treasuries today is safety -- the belief that it will be returned intact and on time.
The global risk/reward equilibrium is turning 180 degrees.
Rates around the world are increasing. Nations and investors are paying higher rates that offset a diminishing risk of failure to return capital.
Conversely, US treasuries are increasingly less likely [to be able] to return capital intact.
Grand changes are coming in models established in the early 20th century.
Therefore, US rates must rise at some point, either due to natural forces or a passive, succumbing Fed.
Read of the coming deflationary contraction here.

Derogatory
The most derogatory term that can be applied to person is "consumer".
A consumer consumes, uses up, creates waste, trash, and pollution. There is no direct implication that a consumer produces anything of value.
Today in America we have far too many consumers. Too many Americans simply consume.  They produce little to nothing of genuine value.  They too often derive their financial wherewithal from government, charitable handouts, and wages that have grown excessive.
What little these consumers produce is worth far less than what they receive for having produced it.
This is why America is failing.
America will continue to fail, decline, and lose relative to several genuine producing nations until Americans produce goods and services that are worth more than what they receive in wages, benefits, and bonuses.
Are you a consumer or a producer? What portion of each are you?

Socialism fails because consumers consume more than they produce. Capitalism can flourish because capitalists produce productivity.

The Debate Has Been Resolved In The Laboratory
In August, 1971, the US abandoned the gold standard. Overnight the US dollar was disconnected from the value of gold. The US dollar was no longer backed by, or convertible into gold.
At the moment the US disconnected its currency from gold's value, it initiated a grand experiment. The laboratory was the US economy. The experiment was to resolve the question which some who fail to understand the experimental nature of economics still rage over today. That experiment is denoted by the question, "Can a global economy operate and continue to grow when its currency is not backed by any more than the issuing government's credibility and the users' faith in that government's credit?".  Learn the facts here.

Sell Gold?
When the time comes, where, to whom, and in exchange for what?
We are told each and every day that smart investors are buying gold in order to be prepared for the coming crisis and the likely inflation.
Promoters of the buy-gold strategy apparently expect us to believe that, amidst a crisis possibly including inflation, they will simply give us a then-recent top dollar for our gold, thereby ensuring that we will survive the crisis. Why would they do that?

The Reckoning
For President Obama and Speaker Pelosi, the reckoning is near.
"It simply is not in Obama and Pelosi's DNA to believe ordinary people know what's good for them."
By Dr. Peter Morici, Smith School of Business, University of Maryland
Read Professor Morici's insight here.

The Ultimate Question
A stock was up today. A stock was down today. A stock was unchanged today.
Background:
Each day the market reports each stock's price has changed. It is either up, down, or unchanged. These reports are rarely if ever considered anything other than simply factual. These reports are accepted without question as absolute fact.  Learn the Ultimate Question here.

Alinsky's Failure
Alinsky failed to teach his followers how to assemble and govern after they took control.
The BO-ists are flailing and revealing themselves though repetitious nonsense blaming exogenous forces. All the while time passes and leaves them with no operational plan.
Only Asian nations composed of large masses of people can make Communism or socialism appear to work in the intermediate term. That is because only in Asia are there hard working, intelligent masses of obedient and subservient people, many of whom work as entrepreneurial capitalists.

Before The Beginning
In 2007, Bill Ayers' wife, Bernardine Dohrn, 1960s member of the terrorist Weather Underground group, now law professor at Northwestern University, announced that their goal is to take control of America and "dismantle capitalism, that evil thing".
BO's campaign for the US Presidency was officially kicked off in the Hyde Park home of Bill Ayers and Bernardine Dohrn.
Is it any wonder that capitalism is now under assault?

It's rocket science without the laws of physics.
Derivatives derive their floating and transitory valuations based upon human psychology and its imprecise perceptive valuations of underlying assets integrated into the value of the nominal derivative.

There is no underlying "Law Of Physics" to contain or facilitate derivative valuations. Therefore derivative valuations must necessarily move in ways as mysterious as human psychology.


Perspective
If you think the decline in the DJIA from the October, 2007 all-time high was severe, consider the following quantitative history of human psychology.
The DJIA's all-time high reached in October, 2007, faded throughout 2008 to the low reached in March, 2009.

September 3, 1929:  The DJIA  reached 381.17, the closing peak for the bull market of the 1920's.
October 28, 1929:  The DJIA lost 38.33 points to close at 260.64, losing 12.8% of it value.
October 29, 1929:  The DJIA lost 30.57 points to close at 230.07 losing 11.7%.
Over the two days October 28 and 29, the total DJIA loss was 24.5%.
October 30, 1929:  The DJIA rose 28.40 points to close at 258.47. That was 12.34%, the second largest percentage gain of the DJIA.
October 6, 1931:  The DJIA rose 12.86 points to close at 99.34, largest percentage gain of the DJIA, 14.87%.
July 8, 1932:  The DJIA fell .59 to close at 41.22.  The decline from September 3, 1929 to July 8, 1932 totaled 339.95 points, 89.19%.

It was not until 1954 that the DJIA returned to the all-time high it had reached on September 3, 1929.
Beware of false valuations that have been created through arrogant and ignorant market participants groping for bottoms.
This valuation process can apply upward and downward pricing pressures to financial assets, commodities, and real estate.


Through Ups & Downs

Having experienced frustrations while attempting to profit within market activities, I have determined that the best perspective is set by J. P. Morgan's off-hand comment when asked what he believes the stock market will do:

"They go up and they go down."
 It is a matter of having patience to wait for my price or find something else to gamble or invest in.



Capital Markets Understand
Why would capital markets participate in a radical restructuring of the society that afforded them the chance to prosper? Why would they be accessories to free-market homicide?

Now are you beginning to comprehend what socialism, Communism, and the Alinsky method are?
Capital gets it & is taking flight.

No, really Warren?
Berkshire Hathaway's Chairman Warren Buffett announced that the company experienced its worst year ever in 2008. Its per-share book value declined 9.6%.
So... let's see. It's hard to make money in a down market? Yes. Now people may learn that it's easier to profit in an up market such as America's capitalistic boom following WWII, especially when it was given a massive boost by President Ronald Reagan's policies which caused the 25-year-long Reagan bull market of 1982-2007.
Perhaps even Warren Buffett will be less god-like during the coming depression.


Quicksand
No rule, regulation, law, or contract will stand un-dirtied in the Age of BO.
The New York Stock Exchange always prided itself on maintaining the highest standards for all its listed companies.
The NYSE asked regulators for permission to suspend its $1 rule. No longer will companies be de-listed if their stock falls below $1. The limit was $5 in the before-time.
And you will sign a contract with whom?

Is This A Bottom?
Following 1929's stock market collapse, RCA stock declined from over 500 to under 5 within a few years. It did not return to 500 -- ever.


It matters less whether a man is born smart or dumb. What matters more is that he acquires the ability to act wisely.


Broken, Over, Done, Finished. The End.
Those who are under 50 years of age must read the history of markets to learn about the days when markets fluctuated based upon fundamentals and technicals. Only those over 50 experienced those days.
In October, 2007, we experienced the final, last, and harshest death scream of the Reagan bull market. Now we know exactly when it was born and how long that bull lived: Born: August, 1982 -- Died: October, 2007.

Self Defeat
In an ongoing, repetitious, unending stream, nearly all major economic indicators point to a continuing decline in available jobs, manufacturing activity, the housing market, investment and asset valuations. Prices for cars and homes are declining, but there is little credit available, so purchases are difficult and less likely than is required for economic growth.
Until investors believe they may invest with a reasonable opportunity to make a profit, they will not invest. Until confidence returns to markets, credit will remain in tight supply.

The reason why stock and other assets will likely trend downward over the longer term.
There is developing a diminished incentive and reduced ability to hold assets, along with an increasing desire to sell. This applies to stock and real estate.

Do you remember the stock market of 1974?

Actually, it was the stock market of the 1970s which finally ended in August, 1982.
Reminisce while reading here.


Straight

How & Why The World Went Bust

The global financial system has been broken by a deadbeat minority of the population that was given clear access borrow large sums without regard for credit history and with little to no documentation. Their credit unworthiness and unjustifiable borrowing was legitimatized by the US Congress through social legislation mandating suspension of traditional bank credit-worthiness standards of lending. The lending process was enabled by automation created by overly-empowered, computer-enabled financial and political operatives conniving while being monitored by inadequate dynamic oversight. The factual substance & time frame of today's global bankruptcy can be comprehended. It is described below.
Learn how & why the world is going bust.

Dow-n
How much longer will the one-time fastidious and trustworthy custodians of the Dow indices keep GM in the Dow Jones Industrial Average?
Manipulating the Dow has become a difficult endeavor even for today's manipulators. Propping up the DJIA in this market is difficult. They recently replaced AIG with KFT, anticipating that Warren Buffet's investment aura will provide credibility and keep KFT's price up.
Difficult is not going to become any less difficult as the US slips deeper into recession. And once the recession's indicators breach territory that is defined by economists as "depression", it will be more difficult.
Fear not for the Dow. Fear for the economy. Manipulators as effective as we have everywhere these days are very good at manipulating something as poorly understood as a stock index -- or any index.



Operation Head-Start

The inept, lazy, seemingly unconcerned Bush administration has accomplished a most difficult task just in time to hand the nation over to pres-elect 44's socialists.
Bush and Paulson, along with the ignorant-of-ramifications Federal Reserve, initiated nationalization of the US financial industry. Their tool is the ill-conceived $700 billion bailout bill that acquires ownership in financial organizations. Then, just weeks after that Operation Head-start, they began expanding their nationalization process to include industrial corporations and opened the nationalization door to other industries.
Bush -- passively, in ignorance and displaying unconcern -- and his minions have handed the incoming socialists their head-start. It usually requires demagogues and dictators years to achieve what 44's administration will walk into thanks to the Bush administration.
Hugo Chavez could learn much from his arch-enemy George Bush.

Proving The USA Was The World's Engine... Of Confidence
Certainly no one should wonder why, nor expect anything short of a continued sell-off, as long as the shadow of Barack Obama socialism looms. Around the world delusional, envious non-investing people hoping they might destroy the USA in an insular manner are wishing for the promotion of communist Obama to its highest position. Markets are falling because capitalist investors are removing capital ahead of Obama socialism.Any fear of recession is dwarfed by thoughts of economic depression. To steer through financial and real estate markets these days, we must view the world a using rational, experience-rich, historic perspective. Today's prognosis is one of unlimited global business decline.
This global decline will continue because global capitalism's engine -- The USA -- is being disabled by the president-elect's socialism, tax increases, and productivity-inhibiting policies. He and his policies inhibit personal productivity, motivation, and the positive spirit Americans have always embodied.

A Quiz
Name any nation where most people enjoy a high standard of living, whether qualified or not, can find a good job, receive near-free educations, have reasonably affordable housing, can start any business, have access to luxuries from cars to foods, and have a steady supply of consumer staples from toothpaste to toilet paper.
ONLY in America does that exist. It is due to the Constitution, free-enterprise capitalism, & guaranteed individual rights.
So who other than an egoistic, self-involved, narcissistic, angry, man-boy who, at age 50, has not yet come to terms with his identity, would want to convert America to a socialist command economy and remove individual rights by taking from the most successful to grow government larger?

Announcement      Announcement      Announcement

Stocks are declining and will continue downward for the foreseeable future because Obama is leading in the polls and it is October, November,... 2008.

As always, in all nations and all economic systems, stocks decline on the prospect of increased taxes -- even without a socialist takeover.

The day has arrived when the United States has no more to give. The USA has given all she had that might be extracted. There is no more that even the overly-empowered unworthy can take from her.


William Durant started GM 100 years ago and went through extremely difficult times for several years.

GM and the USA have been through tougher times than these.

There is a new world opening up to buy and sell everything. Global trade will save GM and America.

Tough times force companies to be more efficient. Tough times also force people to consider, re-evaluate, and shape up.
   

The Fed's Beige Book

This most-watched-for tome is often touted as being a very recent compilation of important judgments and opinions from serious economists and erudite thinkers from within the hallowed walls of the twelve Federal Reserve Branch Banks and some nearby laboratories.
In actuality, Bloomberg News reports that the Fed's Beige Book is:
"The Beige Book's regional anecdotes are gathered through hundreds of telephone calls, news clippings and personal contact by the staff of the 12 Fed banks, whose districts cover all 50 U.S. states. The anecdotes are designed to supplement quantitative forecasts of the Board of Governors staff."
It appears -- very plausibly -- that the Fed's Beige Book is merely more talk coupled with chatter smattered with anecdotes... likely talked-up between all those silly people driving SUVs while endlessly talking on their cell phones between slugs of bottled water.
And people thought they were making plans for lunch.

Financial Warfare

World War III is a financial war. The old-fashioned military wars being waged are distractions consisting of people doing what simply comes naturally.
The weaponry of WWIII includes commodities, corporate assets, and real estate often in the form of civilian national assets. Examples include commodities such as oil, corn, rice; corporate assets such as the Rolls-Royce automobile company, Lenovo Computer Corporation; real estate such as the Chrysler Building, Sears Tower, the Panama Canal, the New York Port Authority. There is a myriad of examples in all industries crossing all industrialized borders and several primitive nations.
The ammunition of WWIII is money, commodities, and financial instruments.
Today's form of war is a globalized manifestation of old-style nationalization of foreign assets on domestic soil.
The WWIII end objective is to disrupt enemy commerce, industry, domestic stability, & daily civilian life.

Continuation

There are several momentous changes taking place during the first decade of the 21st centuryThese changes are gaining momentum and developed as a result of the psychologically disruptive impact of the new millennium along with some attendant aspects. Even though it sounds silly, people are silly, psychologically frail, and fearful.
Today's stock market and financial asset correction is a continuation of the corrections that began in 2000. This may be the final down-leg of the correction. The meaningful question is of course, "Where and when will asset valuations come to rest?"

When To Buy & When Not

Stock buys are made in the immediate term. I do not need -- nor does my ego need -- to buy at the bottom.  I do need to make money.


No Experience
Never before in several recent decades has there been a market marked by such apparent desperation, ignorance,& arrogance. Such grand ignorance and arrogance are unbelievable.

Clear Vision Into Today's Market Pricing
Larger-than-functionally-tolerable market spreads with resultant lock-ups describe today's real estate markets. And they are the defining element in several of today's credit markets. This lack of operational price discovery potential also applies to commodity markets.
In commodity markets, product absolutely must be transferred from sellers to buyers. Therefore the spread is not the issue, but price unidirectionality forced upon prices. Many of these prices are not "discovered" in the markets, but are virtual-mandates of demand.
Observe long-term price / volume charts for oil, industrial & precious metals, softs, & grains.

How To Lose Money -- The Easy Way
Bottom fishing is an easy and nearly guaranteed method to lose money in today's markets.
This technique is also known as "catching a falling knife".
Check out the charts of most financial stocks over recent months.


Faith
Faith in this market and the moves made within it requires faith in the majority of the individual participants.
I do not have faith in the wisdom, financial backing, nor investment knowledge to trust today's majority.
Faith in today's market moves will likely damage my net worth.
Recall a guy named Lewis who repeatedly invested in BSC all the way down.

Bargains Are Relative
In 1929 stock markets crashed. Many former blue chip stocks declined over 90%. By 1932 many people thought they should buy those bargain-priced stocks.
It was not until 1954 that the Dow Jones Industrial Average of those blue chip stocks returned to its level of 1929.
So are today's stock prices representing values and bargains?
It is frequently wise to wait to buy stock -- and many investments -- at higher prices on their way up. Often buying on the way down results in holding it while losing potential yields from cash, living with a loss, and waiting for the stock to rise to above your purchase price. And then, when should it be sold after waiting all that time in a losing position?

Hedge -- To Limit Losses
In financial terms, the dictionary definition of "to hedge" is:  To initiate transactions that are protected to reasonable magnitudes against loss by using instruments that will make inverse price movements. Hedging is a means of preventing complete -- or at least large -- losses of a position through the use of a counterbalancing position.
If today's hedge funds have been using reasonable mechanisms and tools to hedge, why are so many hedge funds failing? And why are so many hedge funds failing to such a large extent as to force them into liquidation?
Logical answers include, 1.) They did not understand how to effectively hedge many positions, 2.) They failed to put hedges on many positions in order to cut costs, or 3.) They used the regulatory title of "hedge fund" so that they could take on extraordinary margin debt, thus executing highly leveraged positions.
In any case, many hedge funds held on too long out of arrogance and failure to envision the potential magnitude of today's credit clutch.

Understanding markets requires

...learning fundamental rules that have always been guided by psychology and economics. Today's markets function as the first open-air markets did thousands of years ago. The only thing new to markets are the participants new to gaining some share of understanding. Once they learn the fundamentals of a specific market, they must integrate the market participants' net psychology with its underlying economic fundamentals.

The mixes of experts and unskilled, winners and losers, speculators and investors change. Products, services, financial instruments, commodities, buyers, sellers, supply, demand, prices, and market operatives also change. Micro changes can be impossible to understand but fundamental rules guiding macro fluctuations do not change. Fundamental rules sometimes appear to be forsaken, but eventually return to control. Micro and macro variances are related and set the stage for each other.

Mechanical and technological tools also change, but these only impact the speed of application of fundamental rules.

Successful participants learn fundamentals, apply them to their activities in specific markets and enter the arena knowing they will win and lose many times. Success is earned by those who expect both in reasonable proportions and avoid being wiped out by a few consecutive mistakes.


Inter-connected Markets
Now You Compete With Your Car For Food
Pilgrim's Pride, the largest US chicken processor, announced that it is closing a North Carolina chicken processing facility. This move is another verification that farming, energy, and food are closely connected.

Credibility -- Rate & Liquidity
Insurers include MBIA, Ambac, Security Capital Assurance, Financial Guarantee Insurance:
The monoline bond insurance industry was created in 1971 by Ambac. Over recent decades the monoline insurers have grown through expansion into structured products.
Ratings agencies include Moody's, S&P, & Fitch:
Ratings agencies monitor insurers for adequate financial strength. Over recent years, the ratings agencies have broadened their monoline business to include the additional products being handled by the insurers.

Financial markets have lost confidence. Individuals have lost confidence. Investors and speculators are pulling back from risk. They no longer slough off the potential for risk. They no longer "know" that nearly any risk is worth the gain because gains have now turned into losses. Investors and speculators are rushing toward high quality.
Once lost, confidence is difficult to re-create. It is often more difficult and takes more time to re-build confidence than it took to build the bubble resulting from past arrogant over-confidence.
Consider your own personal relationships to understand financial markets.

Correlation Trading:  A Technique
Correlate price changes and patterns against corporate, geo-political, and economic news and fundamentals with constantly overlaying re-interpretive modifications.  Read More

Early 2008:  Markets around the world continue to ebb & flow but with inordinately large swings. Relief rallies are brief and transient. The trend is downward.  Read More

Around the world, financial institutions managed and operated by experts using computer models have built investment portfolios so intertwined that a relatively small group of delinquencies & defaults is bringing the global credit market to a standstill.  Read More

Regarding Today's Market Sell-offs:
The down move has not been finalized and encompassed enough stock market participants. Speculators continue to hold profits and maintain some certainty that the down move will end and soon reverse. Stock holders are waiting. They are confident that the down move will terminate and an up move will start. They are certain the up-trend will resume. They believe the recent months of selling are a pause in the up trend.
In 1929 RCA stock was over 520. Within two years, at its low, RCA had fallen to less than 5.
Interest rates are one of the powerful forces impacting financial markets. Even today's rapidly declining interest rates have not ameliorated equity price declines nor un-seized credit markets. Interest rates must be factored in to decisions and anticipated to have significant impact upon prices.  Read More

Economics is understood by only a few intelligent and contemplative people. Many people believe they understand economics. Many people believe economic realities can be obtained using complexly-derived quantified data and methods. True comprehension of economic realities and trends requires integration of macro and micro observations, understanding of phases and trends across cultural and technological periods, and quantification of observations that are often relative in time and to nationalities, industries and societies.

Employment Prognosis
Thousands Of Jobs Will Not Return In The Next Years
There is an irony. Improved efficiencies attained during the 1990's have decreased the need for labor. Instead of realizing the labor savings, many companies hired excessively in the fallacious belief that additional people would magically provide additional growth. These companies failed to understand that excess employees inhibit efficiency and ensure unwarranted costs.   Read More

Success in markets is measured by the accuracy of predicting the next price movement and then acting to profit from that movement.  Conceptually a market sets the next price using the following formula:

Next Price  =  (Net Market Participant Psychology  +  Active Economic Fundamentals)  X  (Current Price)



The investment axiom that is always valid: Caveat Emptor
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Always use caution before and after making an investment.  Always watch your investments and know who and what sources to trust and not trust.
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Always useful, mapped and paved with information.SM

UnderstandingMarkets.com is offered only to provide thoughts, observations, comments and opinions.  Visitors should understand that it is the wide variety of thoughts, observations, comments and opinions that "make a market."
Always use caution before and after making an investment.  Always watch your investments and know who and what sources to trust and not trust.
Again, UnderstandingMarkets.com is offered strictly to provide thoughts, observations, comments and opinions.  UnderstandingMarkets.com reserves the right to edit, reformat, modify and reject any submitted information to improve communication between users.  UnderstandingMarkets.com is intended to be used for general & professional observations.  UnderstandingMarkets.com will not post submissions of a personal or psychological nature.
Users of UnderstandingMarkets.com agree to hold harmless UnderstandingMarkets.com, all employees and affiliated individuals.  Neither UnderstandingMarkets.com, its employees, nor affiliated individuals makes nor implies any promise of reward to any user of this site.  Each user understands and agrees that no promises nor prizes will be awarded nor issued by UnderstandingMarkets.comAll submissions become the property of UnderstandingMarkets.com.
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