Cheers, and best wishes to you.

• When Talking Heads Say “Never”: The Impending Real Estate Crisis (16 Dec 2005)…The one that started it all- I was a real estate bear when real estate bears weren’t cool.

• 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.

• 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.

• Kurt Vonnegut and Johnny Cougar

• 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.

• The Unlived Life (02 Dec 2007)…

• 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)

• 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.

• “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.

• 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!

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

• 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)…

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?

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.

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.

I was thinking of a friend of mine who’s a musician. He lives in a constant dilemma.

You see, he wants to play his own, original music for others, but they don’t show up to hear his music. They show up to hear the old familiar tunes, the ones they know and can sing along with.

He knows exactly how to bring in the crowds- he can play the cover songs like ringin’ a bell, as they say. He can drive the traffic if he wants to.

Here’s his dilemma: Does he ignore his own music, his passion, and cater to the crowds? Does he play his own songs for whoever drops by, and hope that one day the crowds come to him? Does he stop playing in public altogether?

Or does he continue to play covers, strategically inserting an original of his own now and then once the audience is in the house, so that they have to listen (much like throwing green leaves on a fire once it’s started, hoping it will be hot enough that they will ignite)?

If you gotta play at garden parties, I wish you a lotta luck
But if memories were all I sang, I’d rather drive a truck
But it’s all right now, I’ve learned my lesson well
You see, you can’t please everyone, so you got to please yourself
(Ricky Nelson, “Garden Party”, 1972)

There is- watch the commodities, they react first.

Keep an eye on the charts of Oil and Gold for a top, see the dollar find a bottom against… everything, and when you’re comfortable we’ve rolled over into the spiral, plan your trades accordingly. What worked brilliantly the last year or so may suddenly stop working, and you’ll find your trades hitting stops instead of profit targets.

That will mean it’s time to get out the old playbook and mix things up, because we’ll be on the field with an entirely different opponent.

Related Links

• Refinancing Subprime Loans to Prevent Debt-Deflation
• Dollar Stronger against the Euro?
• The Fed Should Not Be The Hedge Funds’ Insurance Agency
• Speaking of Deflation…

Here are some excerpts:

When I am old I’ll drink whiskey in the morning
And coffee at night
And laugh and spit and swear wherever I want.
When I am old I’ll help Girl Scouts across the street
Even if they don’t want to go
And I won’t have a car
And I won’t have a bike
And I’ll walk everywhere.
…
When I am old I’ll tell people exactly what I think of them
And surprisingly, most of the time it really will be good stuff.
When I am old I won’t have a TV
And I won’t have a radio
And I won’t have a computer or a clock or a phone in the house.
I won’t read books and I won’t read magazines
And I won’t read newspapers and maybe, finally
I’ll learn something just watching the birds and the weather.

If we can get a light down day on SPY today then a positive close tomorrow, I’m in (grade of B). A gap down and reversal this morning (grade of A), or light drop today and OGRe tomorrow (grade of A+) and I’m in. Spike down to new lows, then positive close (A). Or just a plain positive close today (B-).

Well, we did get one of those, and I’m in:

The alternative to developing a method and then strictly sticking to it would be to enter and exit “by the seat of my pants,” and I still have a full-time job (which I’m ICK! about to leave for) to prove how well that works.

Coffee Pot Crisis

A little entertainment for this Thanksgiving Eve. My coffee maker is about a decade old, was maybe $20 new, but makes (made) the best-tasting coffee on earth. I’ve even bought newer, more expensive ones, then reverted back to Old Faithful.

Yesterday morning I shattered the decanter. Is it me, or do they make those things out of the most brittle, breaks- into- fatal- shards kind of glass on earth? Anyway, I don’t usually have panic attacks (often), but I did then. Mister, I have GOT to have my coffee!.

Here’s my rather inelegant, but amazingly functional solution (had to tear the no-drip valve out of the basket, but it’s one big coaster anyway now):

“Coffee Pot”

Parasites still pursuing their lawsuit, but it’s being delayed due to some “bigger money” cases, which I take to be good news.

Have had multiple awesome job offers in a short period of time, may yet find the perfect combo of pay, schedule and autonomy and finally leave The Hospital.

Right now, I’m sipping my favorite Hot Drink for a Cold Night (it dropped over 40 degrees in just a few hours last night). Unfortunately I can’t reveal the super-secret family recipe.

(Note this is not the famous cider promoted on the Bob and Tom show by the Dickens company…)

One of these and a bit of reading Vonnegut or Watts or Pirsig, and a crappy day becomes a very relaxing and pleasant evening.

Oh, and the market-

As I wrote last month, I took what was left of my account (mostly drained due to legal and home-buying circumstances) and loaded up on PUTS. The RSI(4) method I developed last Spring and Summer was screaming “short,” and I was just ready to get on with it, one way or the other. As mentioned, on October 5-10, I bought PUTS on QQQQ

I bought PUTS on GE

And, of course, I had to buy PUTS on AAPL

After time decay, the AAPLs ended up in the red, but the GEs and the Qs did ok. I did not manage to blow up.

Which brings me to my newly discovered rule of how the market works: The Market does not want you to lose money; it simply wants to foil any plan you have, which just coincidentally usually is a plan to MAKE money.

Monday afternoon (I have witnesses who hate my guts), I had had all I could take, the RSI was screaming again, and I flipped out of all the PUTS and fully into CALLS on the Qs. I actually entered very near the bottom of that candle:

I fought the overwhelming urge to sell those CALLS Tuesday on that Long White Candle, staying with the odds that after such a run the market would gap up Wednesday morning. It did, and I sold almost immediately. Nearly 200% in a day and a half.

I actually was so “in the groove” that I flipped again and bought a half position of PUTS Wednesday morning, but I had to go lay ceramic tile (see new home reference above), and sold them before lunch for a small gain, 20% I think. Guess if I had held them you’d be seeing the Snoopy picture again.

Anyway, I discovered, or rather remembered, why the different jobs and a few thousand more dollars working for someone else still doesn’t appeal to me…. because my time with my daughters is paramount, and as for income, this is my passion, this is where I want to make my living. As a guy I love dearly said in a trading interview last year,

The autonomy. It’s all on you. No one else to take the blame when you mess up, no one to steal the glory when you shine. YOU are the rate-limiting step, or to paraphrase Seinfeld, the master of your domain. I think trading attracts doggedly-independent individuals for that reason.

Potential Wolfe Wave-type reversal mentioned in previous post has failed spectacularly.

Are we headed for $150 oil, $1200 gold and $2.00/euro? I don’t believe so. Note that a falling dollar would be the market’s natural method of correcting the ills of a massive trade deficit and a spendthrift government. (Here’s where I get to link to my diagram from over a year ago).

I still think the impending debt-deflation from an imploding mortgage market will outstrip the Fed’s ability to inflate us out of this crisis by once again rapidly expanding the money supply.

I would like to point out that, equity-wise, neither a catastrophically falling dollar nor a catastrophically rising dollar is a positive thing. We are on a tightrope here.

Even though I’ve discussed the potential for a falling dollar for years, I currently lean in the direction of a dollar bottom and rise because that’s now the extreme contrarian viewpoint, and I’m, well… me.