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| An excellent question.
In the old days, I was fortunate to have several trader friends, we swung big numbers & each traded a bit differently, we seldom agreed on much & would meet every few weeks somewhere and while our primary interest was in ag products a few of these fellows were expert in other areas & very well connected in the political arena.
We dealt in fundamentals with an occasional presentation by a technical consultant. The key to short term big moves in price was generally ‘the amount of weak longs or weak shorts’ accumulating in any market. When bulls get overextended, the market is vulnerable and vice-versa. We generally were pretty accurate with our “who is stuck and who is okay” intelligence.
I miss those meetings as these were boys on the firing line with hard money and pure BS speculation about the markets was never part of our discussions. We enjoyed secure communications if we desired some facts from some other part of the world. Two of these boys are now deceased, one who at one time was the largest in the business flits around the world & a recent email suggests he is entirely in treasury bills and plans to stay that way for awhile. Wants no part of these markets at this time. A couple of the others are at leisure somewhere in the world, unknown to me.
My trader friend in Manhattan retired for the second time; sez the financial district is so decimated it is too depressing to be a part of it & is trading from his home in CT. But, he is also long term in thinking, thinks there is too much risk in everything and is now spending his time at bridge tournaments. Therefore, with no one of market substance to exchange ideas beyond the spouse, my brain is busy with strategies most of the time and too often find myself mulling over the economy while I am supposed to be attentive to some other conversation. Obsessed, the spouse sez.
I have changed my thinking twice since July 4th.
Our genes have mapped most of our brains to want to buy declining markets and look for sell opportunities in periods of advancing prices. I have a bearish bias, have always had it, and have to fight that emotion.
As I view the available facts, with my intuitive senses we are going to spend more and more bail out money, I feel it is mathematically impossible to repay these debts through organic economic growth for a long, long time. When I look at unemployment and economic growth using the old fashioned methods before Greenspan doctored the formulae, I feel we have already entered a depression.
IF EVENTS DO NOT TURN THIS THING almost immediately, I fear a deflationary psychology will overwhelm the population with consumer spending falling further off the cliff. How many TV sets do you need? We have three DVD players in our house, we use one. I muddled through the sports car phase of my life, thankfully; we no longer trade vehicles every 3 years but keep them 5 years or more. One of our vehicles has not been driven for nearly a year.
Agriculture appears in an okay position, people need food, but can the world pay for it? Can the American consumer maintain an above average food budget?
There is an obvious sector of our economy that does require consumer purchases, but they have no money and their credit rating is in the tank.
When I see continued lay offs…several economic sectors are contracting and contracting fast, it is very worrisome.
For example, the facts suggest we could well enter a bull phase in livestock at some point; however, the cow kill has to shut off…still too many selects for the packer….processing meat is key as the price impact of retail cuts is zilch & has been for a long time.
There is a chance China can pull some of the world out of this mire, but things are changing fast over there.
Geopolitics is a big concern of mine. All were riding high on the wave of the boom, now as economies are in trouble; each country also must perform some internal fence mending and could give rise to protectionism in some form.
We are covered up with experts predicting an end to this mess and a turn around, but let’s face reality here. Wall Street earns money from commissions and fees….these experts’ livelihoods depend upon folks continuing to invest.
In the 1950’s and 1960’s few folks considered the market as an investment; the great deflation soured them. Will we enter the identical environment now? Few folks even knew a stock broker and hardly anyone knew a commodity broker.
Because of my bearish bias, I have become too bearish on a couple of occasions which cost me plenty of money; I underestimated the ingenuity of the American people. Therefore, I guard against my bearishness.
But, I think we are on a different horse.
Now, I find myself trying not to get too bearish. I am short equities, long the euro for a few days, and have become a short term trader & I dislike short term trading as I normally am not very good.
I fear we are in for the long haul. I wrack my brain in an attempt to identify possible bullish surprises; EXCEPT I THINK WE ARE IN A SWAMP WHERE I SHOULD NOW BE REALLY BEARISH; ...try to figure out that emotional dilemma!!
I am getting too old.
Right now, I am hoping aluminum prices firm in case I decide to begin a dumpster diving program.
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recovery-when will it come?
