DummySpots.com

For those of you just visiting the site for the first time, sorry I killed it. To you, and to others who may be looking for an old article, here are some of my favorites from over the years. There’s much more, of course, if you care to browse through the archives month by month.

Note the dates on some of these articles, and remember what “they” were telling us at the time, like “Don’t worry, the value of your house will keep going up forever!” It’s nice to look back and realize I wasn’t so crazy after all.

Well, at least not about that stuff.

Feel free to use the search box above to search the site for topics like “real estate”, “deflation”, “China”, “recession”, etc. You may be surprised at how unforeseen all this stuff really was (i.e. it’s pretty much been a sure thing, the Emperor was naked all along).

And if you’re looking for info about TDAmeritrade Strategydesk (turned out to be my most popular subject), here’s a search link for that stuff.

Thank you for visiting. If you’d like to contact me, you can email: dummyspots… at… gmail… dot… com (you know what to do).

• When Talking Heads Say “Never”: The Impending Real Estate Crisis (16 Dec 2005)
  (The one that started it all.)

• Epilogue: Farewell to DummySpots
  …As old Kurt would say, that was no musician. That was I. That was me.

• Trading and the Personal Journey
  …The Market can be the greatest sensei you’ll meet in your lifetime, if you’re open to learning about yourself. Most of the time, most of us aren’t.

• The American Dream (Jan 2006)
  …[another one from the early days]… These material possessions may be as absurd as a 6500lb SUV for a single grandmother or cookie-cutter houses built wall-to-wall in the middle of a cow pasture (pardon, a gated cow pasture) for young couples…

• Repurchase Agreements: The Fed As Pawn Broker (12 Aug 2007)
  …Bubba Has A Liquidity Crisis, and Banks Are Bubbas Too

• Mother
  …She also, as all mothers do, played a major role in the construction of my “Wall”.

• My “Fed Fade Trade” Deconstructed (31 Oct 2007)
  …this trade works maybe 60 percent of the time. Perhaps 5 or 6 “Fed days” each year. But when it does (like today, and big-time in June), it’s possible to make a serious gain in only a few minutes if traded correctly.

• Christmas Shopping Without Debt Enslavement: The New Layaway (29 Sep 2007)
  …someone, somewhere has gradually convinced us all that it’s perfectly fine for individuals and governments alike to spend money they don’t have. Illegitimate Spawn of The New Deal, perhaps.

• People Are Strange
  …They say your true character is who you are when no one is watching. As it turns out, your true character also shows when you give money anonymously.

• Refinancing Subprime Loans to Prevent Debt-Deflation (06 Sep 2007)
  …one of my core beliefs is that true adulthood and maturity are the result of learning to accept and deal with the consequences of our own decisions. More importantly, it’s learning to consider the consequences before we commit to a decision, not just whether “I want it.”

• Out Of Office Itinerary: I’ll Be Between the Notes (3 June 2007)
  (One of my favorite vacation notices)

• The Importance of Stops (13 July 2006)
  …Our success doesn’t depend so much on which method we use to enter positions (except for “they say”). It depends on what we do with those positions once entered.

• Asian Currency Manipulation: How they keep their products cheap and our bond yields low
  …Why do I think this is important? Because at any point the governments of China and Japan could decide to reduce the rate at which they purchase our Treasuries or, God forbid, actually start selling those Treasuries rather than accumulating them.

• Subprime With Good Credit, It’s Still Just Good Old-Fashioned Greed (04 Dec 2007)

• Let’s All Move To Jeff’s Neighborhood (28 Aug 2007)
  …As a matter of fact, I’d argue that those same credentials often insulate people from reality, leading the “experts” to ignore even flagrant evidence if it contradicts them. Thus catastrophe sometimes results as these people begin to think of themselves as infallible.

• Speaking of Deflation… (19 Aug 2007)
  …

• Some Macro Thoughts on Deflation and Recession (16 Aug 2007)
  (this is the one where I called the 8/16 reversal, and also said it was NOT the long-term bottom)
  …So Was This The Bottom? I don’t think so. The macroeconomic factors haven’t resolved in the least. In fact, I’ve continually made fun of the talking heads’ using euphemistic language like “housing slowdown,” “slump” and the ubiquitous “soft landing” … we’re not even close to the last shoe dropping on the housing bubble

• Other People’s Money (OPiuM) (01 Oct 2006)
  …The temptation is to try to rush the process by funding our account with borrowed money. We’d be much better served to take the time to get our personal lives in order first.

• Guess That Answers THAT (26 July 2007)
  (Note this is at the end of July ‘07, and the Big Dummy smelled something!)
  …I think stocks are being sold, bonds are being bought and yields are dropping precipitously in anticipation of something we “average” people don’t see yet; some economic news which eliminates any possibility of the Fed raising interest rates (not that there is such a possibility right now anyway), and in fact points to the possibility of lowered rates.

• “Tame” PPI not such good news (Sep 2006)
  …We are due a recession- overdue if you count the one the flood of new money a few years ago postponed. I think the inverted yield curve is telegraphing that fact. But remember, we need something to recede FROM.

• Inflation, Deflation, Real Estate, The Dollar and Their Effect On Equities (15 Mar 2007)
  …That is not where we are right now. We have an economy frothing with money, but no growth to speak of (compared to what should be expected). What we have is an economy that’s trying to stall in spite of all the excess money. What happened to all that money, and where’s the inflation? That money caused a vast inflation in home prices, in case you didn’t notice.

• The Fed Should Not Be The Hedge Funds’ Insurance Agency (4 Aug 2007)
  …I laugh when I hear silliness like, “Do you think the housing slowdown is over?”… it’s not a slowdown, it’s a drastic reversion to the mean, and at best, we’re at the “end of the beginning,” with the fun part yet to come.

• Dummy Wisdom (Sep 2006)
  …

• Anomalies (3 May 2007)
  (note that the S&P was over 1500 when I wrote this)
  …this type of extension happens about as often as that comet comes around. Is the rubber band about sixfold overdue to snap back?

• Moving Averages: Let’s Talk TA
  …when it comes to Technical Analysis, moving averages are the most-frequently used indicators around. This also makes them some of the most misused indicators around.

• Turbotax Warning for Ameritrade Users, or How I Discovered I Was Rich
  …That’s right. After TT eliminated most of my deductions (hey, that 2% threshold is pretty high for a millionaire), it announced that I owe $1,312,256 in Federal Taxes. And here I was fretting over balancing my checkbook.

• What Would You Do If… (26 Sep 2007)
  …I don’t think I’d like the person I’d become if I had that much money right now.

• Jon Stewart and Alan Greenspan: Best Interview Ever (19 Sep 2007)
  …The coup de gras is when Greenspan admits that even with all the complex mathematical models, neither he nor anyone else is any better at forecasting now than they were 50 years ago!

• The Real Lyrics to Yellow Ledbetter
  …

• Are You A Compulsive Trader? (19 Dec 2006)
  …

• The Most Talented Portfolio Manager
  …In fact, over time — when you factor in the fees, taxes and other costs — he says your odds of beating the market in an actively managed fund are less than one in 100.

• It Ain’t So Easy (06 Nov 2006)
  …You can never filter the stocks down to only the ones that are going to move in the right direction. There is always the chance they’ll go the wrong way. You can only select the ones which your experience tells you are probable setups, then manage your losses on the ones that don’t play nice.

• The Unlived Life (02 Dec 2007)
  …

• But I Don’t WANT To Be Like You (02 Nov 2006)
  …”one day when you grow up you too can start trading stocks and can be JUST LIKE ME.” Really? Just like you? You mean, with my head up my own ass and all?

• GMTA, And They’re Trying To Tell Us Something (11 Oct 2007)
  …

I’m re-doing the “DummySpots is now closed” announcement as a post instead of a standalone page.

It was late and I was tired last night when I redirected everything to that little HTML page. A friendly email today reminded me that I had made everything inaccessible to everyone. Which is what I thought I wanted, what with pulling the site down and all.

But that’s kind of crazy. There may be something in the archives someone wanted to check even after I stop writing. (Like my call on the big August 16th bottom; looking back, I think that guy was onto something!). Or maybe something to do with StrategyDesk, the RSI(4) thing, or the Fed Fade Trade.

But most of all, it’s because I didn’t get the most important quote in! I was so tired I completely forgot my little mental outline by the time I started writing.

Here, you may want to look at that page first, so this’ll make more sense.

The Vonnegut quotes were supposed to be in the middle, and the Jandek thing was supposed to be at the end. But the first quote was supposed to be from my favorite movie of the last couple of years, Planet Terror. It’s from when El Wray first runs into his little Palomita again at the barbeque place, and he asks her whether she ever became a doctor. It goes like this:

That’s the problem with goals. They become the thing you talk about instead of the thing you do.

It’s sort of like something another writer said. Alan Watts or Gary Zukov, maybe. About how saying you want something is the same as saying you lack it, which mentally can make it seem inaccessible, and so you live your life “wanting.”

And that will not be the story with me and trading.

Geez. I’m tired tonight, too.

Ok, that’s it. Unsubscribe in your feed readers, look for me to turn up on the web again in the future, and thank you for stopping by my little place for a visit.

Both my main man Barry Ritholtz and my Atlanta hero Trader Mike have linked to this Wall Street Journal Article about people with high credit scores getting into subprime loans.

The WSJ describes these Poor Victims as being “caught in the subprime trap.”

I call bullshit. These people are caught in the greedy yuppie peer pressure materialism, keep up with the Joneses, entitled but not responsible trap.

Easy credit opened the gap between what we could afford and what we could qualify for. Even easier credit expanded that gap. Zero interest for 60 months on that new car (go ahead and get the leather and navigation system now). Six percent for 360 months on the new house, or better yet, four percent interest-only with nothing down so you can get into a house you can’t afford. Whether someone takes the bait is their decision.

But the consequences are theirs also. Well, should be theirs. Actually, now they’re becoming mine. Those poor victims.

My credit score is over 800. The house I’m sitting in right now is cheap, and paid for. The house I bought in October cost less than I make in one year. I don’t have to rush as I remodel it. I plan to pay it off before most people would pay off a new car. And then, thanks to these “unforeseen” developments in real estate, I might just buy myself a larger house for half of what its previous owners mortgaged. Those poor victims.

I can grill ribeye steaks for my girls anytime they want, while my friends’ kids are home alone on MySpace chatting with a pedophile because their parents are working second jobs to make the note on the mansion, only to come home and eat Ramen noodles, or else eat out with the Joneses and put it all on the credit card. Those poor victims. (The kids, I mean).

A man is rich in proportion to the number of things he can let alone - HD Thoreau.

The American Dream has run amok. I wrote a post about that, and real estate, almost 2 years ago. But this is all a recent development, a surprise, right? Here’s that post.

We’re all grown up. People should make their grown-up decisions, and take the consequences. Or try to dump them on responsible dummies like me. Whatever. But Jesus, stop all this crying and whining- it’s pathetic.

And as for Alan Greenspan and John Maynard Keynes: Rappaccini! And is this the upshot of your experiment?

Below is a list of today’s Top 30 Stocks from a screen I developed based on the recommendations of a well-known trader. They are ordered by the screen’s ranking of their significance as good candidates (not necessarily as longs or shorts, but as tradable movers).

[And anyone know an XHTML-friendly way to split an ordered list into columns?]

1. SPWR
2. STP
3. BIDU
4. APOL
5. CF
6. AAPL
7. PBR
8. MA
9. POT
10. APA
11. RIMM
12. STT
13. SU
14. MBT
15. ICE
16. FSLR
17. WFR
18. MON
19. DRYS
20. CHL
21. UBB
22. CAM
23. DO
24. BHP
25. FCX
26. PCU
27. FWLT
28. FLR
29. MGM
30. WYNN

Doesn’t this look like an interesting and high quality list! Quite different than our normal daily gappers scan, although it contains some of the “usual suspects.”

Here’s the challenge: Anyone have a guess as to where this list came from, and who that famous trader is? Want a clue?

Thanks to Ugly, I had the opportunity to read this NYT article regarding swarming behavior. I’d highly recommend it, especially regarding the concept of “swarm intelligence” when each individual is so crude. And check out the differences in motives between locust swarms and Mormon cricket swarms (I didn’t even know there were religious, cannibalistic insects- maybe they should be called Donner crickets).

This all got me to thinking… that same swarm behavior the scientists are studying, wherein a group of insects, flock of birds, school of fish, etc are given the option between alternate “leaders” going in different directions, and somehow almost instantaneously make a collective decision to follow one and ignore the other, without any individual consciousness of the decision…

Is this not the same swarm behavior that emerges among traders?

Picture the market opening gap up, rising for 20 minutes, then dawdling sideways for 5 minutes on dropping volume. Suddenly we get three ticks up, then five ticks down, then five ticks back up… (my heart is beating faster just thinking about it), and then that sucker goes.

We love to attribute the surge to the ubiquitous “they” or “the big guys” or “those sons of bitches” depending on whether we’re on the right side of the move, but in reality we know it’s all of us, swarming.

If this guy would turn his computer models of ants and crickets (and interstate traffic) towards the behavior of market participants, he may be hot on the trail to the most successful computer trading system in history.

Well, except for those quants, those brilliant hedge fund guys, those Nobel prize winners… they’re all Ph.D.s and computer geniuses and have this all figured out already. That’s why nothing catches them or their 57-sigma models by surprise.

Jung said that the greatest burden of a child is that of carrying “the unlived life of the parent,” that is, the myths, the fantasies, and especially the regrets which the parents project, and which the child observes, and absorbs.

We obediently and unconsciously attempt to live out the myths and fantasies for those who placed them into us, and try to compensate for their regrets. We follow our programming. Likewise, our children are conditioned by us, by what they observe in the way we live our lives. What is important, what is acceptable, what we value, what we could have been, what we are missing out on, what we regret.

Would you be able to take out a sheet of paper and write about the “unlived lives” of your parents? Would you then be able to look over that paper and see how you, throughout your own life, have been repeating their patterns, or perhaps living in perpetual compensation for them, which, as James Hollis says, “though it may be productive for me and others, shackles me to the consequences of someone else’s life”?

If you do see these influences at work in your life, you may be at that stage where you begin to question all the dogma, all the “shoulds” and “oughts”, the “rights” and “wrongs” recorded in your Book of Rules throughout your upbringing (or your domestication, as Miguel Ruiz calls it). This awakening usually occurs somewhere between one’s late 20s and mid 50s, and is often associated with what is commonly called the “midlife crisis.”

It is during this period that we begin to see the life we’ve lived up to that point as having been guided by an unconscious script, and we become aware that Who We Really Are may in reality have little to do with the character who has been following that script. We begin to feel the tremors of our own unlived life.

The width of the gap between What You Portray and Who You Really Are is the distance to your own authenticity, and is what Jung would associate with the depth of your neurosis and depression. Neurosis, he said, is always a substitute for legitimate suffering. And to risk the known in order to explore the possible is to embrace the anxiety and suffering that such a decision is bound to bring.

When, or whether, one begins the journey to authenticity, to the They who They Really Are, is entirely personal, and optional. This is not a contest to be won. We may want to spend another year, or the rest of our lives, attempting to “make it work” as prescribed in our Book of Rules. And there’s no shame in that. We may “make it work” quite well indeed, and can go to sleep at night knowing that our parents would be proud.

Or else we may continue to hear the calling to strike out on that Personal Journey, that painful, terrifying, exciting journey, until whether our parents would be proud, or whether the world understands or approves matters very little any more.

Again, this is from Hollis (from the book Creating a Life):

Where is the unlived life which haunts, or summons, or intimidates you?

We have all been called to spiritual greatness. Not the greatness of worldly standard, but the largeness of individuation, the vocation to be who we are, in the peculiar fashion the psyche demands, at whatever cost may be exacted by the collective.

Somewhere, deep inside of each of us, is the knowing which knows us, that mystery which seeks us, desires realization through us. What a defilement of our calling it is to live the lesser life.

We may be frightened by the scope of such calling, but it is even more frightening to have stayed stuck in a life of no consequence.

Since he died, Kurt Vonnegut has become one of my favorite authors.

Tonight, I got home from the extra-long shift I had to work because someone else called in, and I’ve been drinking beer and reading Vonnegut.

Deadeye Dick, to be precise.

This book was written in 1982, and perhaps it was during a time when Vonnegut needed money for a new house, or something. Not his best work. Rides the coattails of Slaughterhouse Five and especially Breakfast of Champions with a little Cat’s Cradle thrown in. Its protagonist is a 50 year-old pharmacist.

I am a 40 year-old pharmacist.

There are some memorable lines. This one just caught my eye:

If a person survives an ordinary span of sixty years or more, there is every chance that his or her life as a shapely story has ended, and all that remains to be experienced is epilogue. Life is not over, but the story is.

Curiously enough, I was just explaining today to one of our newer employees, a young lady who is a twenty-something year-old pharmacist, that the song playing on the radio was by a man who was at the time known as “Johnny Cougar.”

I explained to her how the hand claps in that song were from a clap machine loaned to Johnny by some guys in the next studio who had more money and equipment than he did. Those were the Bee Gees. Barry, the musical genius of the group, thought the hand claps would sound good in Johnny’s song. And Jack and Diane as we know it was born.

Jack and Diane was a hit in 1982, the same year Vonnegut’s book was published and his pharmacist turned 50.

Its most memorable lyrics are as follows:

Oh yeah, life goes on
Long after the thrill of living is gone.
Oh yeah they say life goes on
Long after the thrill of living is gone.

Just a note, for the seven of you who follow my trading thoughts and miscellaneous ramblings (i.e. who didn’t find me by Googling Jim Cramer and Dan Dorfman — that’s pathetic, wrote a stupid little post in Feb ‘06 and it’s still the top search engine lead into my site).

The SPYders action the last three days has eerily duplicated the pattern they formed in August just before the final “drop to the bottom”:

Note the similarities:

• RSI(4) topping in the high 60s, RSI(2) in the mid-80s.
• Three higher highs engulfing the action of the prior 7 days.
• An indecisive spinning top candlestick on the third day (which was today).
• Declining Volume on each of the three days.

As the legendary trader Elmer Fudd used to say, “Be Vewwy Vewwy Careful!”