Thursday, August 5, 2010

The Feeling Never Ends

Don't take yesterday's Barron's Online column as a sign I suddenly flipped to the bull side. There was evidence that August would not be so bad and I reported it. Personally, I am not out there with cash at the ready to participate.

Earlier this week, I opined that the market felt wrong. Then today, I got a marketing spam-mail from a self proclaimed guru who sees the market crashing by month end. I took the bait and requested his "special report" which I knew would  be 10% report and 90% self touting of his stock picks. I had to see what his thinking was, especially since he uses technical analysis as part of his arsenal.  For what it's worth, I immediately unsubscribed from his mailing list.  My inbox is filled with enough crap, thank you very much.

Let me say that after reading the "report" I have not changed my views and it is coincidence that we are both essentially bears.  Here are some of his reasons:

  1. usual stuff about government overspending 
  2. US economy has come to a screeching halt (really? has he looked at earnings?)
  3. the euro is in serious danger of being dissolved (hey wait a minute, the euro has been rallying since June)
  4. the 50-day moving average is about to cross below the 200-day (OK, now I see, this was written in late May or early June)
But his prediction was end of August so we have to give him time, even if half of his reasons are invalid.

But is it any wonder why the public is out? How my scheisters put out this drivel anyway. A 10-page marketing piece with claim after claim. I really don't care if they are true because they do not disclose times when they were wrong, do they?

Here's a marketing trick from a bucket shop. Send out 10,000 mailings - 5000 say buy stock X and 5000 say sell stock X. Let's say X goes up.

Now take the list of 5000 mailings that said to buy and send 2500 with a buy on stock Y and 2500 with a sell on stock Y.  Let's say stock Y goes up, too.

Now take the 2500 winner names and send 1250 buys on stock Z and 1250 sells on stock Z. Let's say Z goes down.

You now have a list of 1250 people who think you are a genius with 3 picks in a row. Rake in the subscription money and let reality begin. Who cares? You just sold 1250 subscriptions to people who won't renew. Say $250 for an annual subscription times 1250 people and you made $300 grand. What if you started with a list of 100,000 names. Now you are making some serious coin.

This is the land of crushed hope and dreams that Wall Street has become. Honest purveyors of financial advice are swamped by the crooks. A good bear market thrashing is necessary to "drain the swamp" as Nancy Pelosi likes to say.

Conventional thinking says to let your money work for you with a good mix of stocks, bonds, cash and maybe a hint of gold. Who says so? People with vested interests in selling you either the stocks themselves or the advice on how to manage them? People who will manage them for you but are hog tied by government restrictions on what is "prudent" for people like you? 

Were stocks "prudent" in 2008? How have they done over the past 10 years? It seems that wheat would have been better for your health than stocks since June. And shouldn't we have owned gold for the past decade? I truly believe that the best investment these days is in yourself - education, your own business, etc..

Stocks and bonds have their place and I am not going away just yet. But let's take them for what they are - manipulated markets. There is still plenty of money to be made by small traders but let's reserve the term "investor" for something else.

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