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Lack Of Capitulation By Shorts, As NYSE Short Interest Remains Near Record, Explains Parabolic September "Flush" Ramp
A week ago, when we pointed out that the NYSE short interest had surged to nearly its highest levels in over a year at 14.4 billion shares, we speculated that as the market surge appeared to be moderating, that the 600+ million in new incremental shorts had covered. This, of course, happened before the most recent parabolic ramp in stocks (which was spun by CNBC as "validated" by Tepper's "buy stocks no matter what" comments). Friday's NYSE SI update now explains the seemingly ceaseless surge in stocks despite constantly deteriorating economic news. The reason: the gross short interest between August 31 and September 15 was completely unchanged! It appears that just as retail investors refuse to allocate capital to stocks regardless of how artificially high the market goes, so shorts completely ignored the ramp in the market from ~ 1050 On August 30 to around 1125 on September 15: short remained dead even at 14.4 billion. So what happens? State Street/BoNY gets the daily short report, passes it on the the repo desks, and tells them to pull the borrow in the most shorted stocks, as apparently the message to the shorts just isn't getting through. And what better way to force a short ramp than to keep shorts massively squeezed. But because the stubborn shorts don't buy the ramp in stocks, they keep putting on new replacement shorts, which has led the market to keep recycling the weakest hands, endless retail outflows be damned. Which means that the squeeze could easily continue for so long as the State Streets of the world believe that the shorts will finally capitulate, and make the rally self-sustaining. So far it is not working.
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What is POMO? POMO is Permanent Orgasm/Orgy Maintenance Operation. If it is not stopped, the stock market can never become a place of price discovery once again.
But that is the point. The Fed outright admitted they will do hatever it takes to keep this Wall Street bubble fully inflated to maximum pressure. And yes, Bernanke said "whatever it takes".
Wall Street to infinity and dollar value to Zimbabwe damn it all, full warp speed QE2/3/4/5/6 drive ahead Scotty. Shorting stock is foolish, you need to be shorting the US dollar.
thanks eigenvalue i thought that is what POMO stood for, but was afraid to ask.
Tyler, do you need any new interns? cause your site sure has a lot of banner ads. you are getting a lot bigger and more popular. i would work for free of course. fall is here and i need a change. would love to learn more about the financial world from ZeroHedge. i can file pretty well. i could get you coffee though don't know how to make it very well. i could maybe conduct yoga classes or private if you like. relieve stress for your contributors. maybe some of your interns had to return to college or moved. give it some thought. my working resume isn't so good. but my athletic resume is pretty impressive. maybe we could add a different spin to the h e d g e †
I'm calling their bluff, cause I'm not bluffing. Staying short as the economy gets worse. Stocks will eventually capitulate downwards.
You will be forced to cover when we get it above 1300 on the S&P. Didn't you learn anything from March 09 - April 10. The same is happening this time its from Sep. 10 - Infinity.
NO PULLBACKS EVER.
DOW 36,000!!!!!!!!!!!!!!1!!!!1!!!!1!1!one11!1!!!11one1!!!!
If you think that I use margin, then that means that you probably do.
You will be the one trying to sell during the next flash crash when banks start to fail again.
Most of us wouldn't touch this market with a 1000 ft pole, either long or short-side. Shorting the market in terms of dollars is a fool's errand with Zimbabwe Ben and the POMOs in town.
If you don't believe in the market, just go long physical gold. That withdraws all support from the system, and it doesn't have a carrying cost, save the cost of a small safe.
And I take it you must have some special insight? Get of your high horse.
Have some brains and balls and do the right thing, and make some money.
Special insight? I know how to read, and I have been reading for years.
Hey, if you want to bet that the dollar will be strong in the future, be my guest (that is what you are doing when you short in terms of dollars). Just don't be surprised when you wake up penniless as Zimbabwe Ben embarks on QE 87.
I've done the short game, and got burned by the first QE. This is either your first time, or you're one of those people that gets burned over and over again because you just can't seem to understand that fire is hot, and maybe you shouldn't stick the appendage of the week in it.
TM. The fact that the currency goes down will insure that the stock market follows eventually. You got your short term game, and I got my long term short game.
Talk to you in 2 years, and we will see if the stock market still rides inversely to the currency.
Enjoy the ride, and let it be :>}
there is very little separating the nuts at zero hedge and the general retail public. Both are equally bearish whether economy is good or bad.
You see the economy is bad. But you must understand ultimately markets work on coporate earnings and those earnings look super strong. Yes those earnings may not reflect the US economy as its coming from BRIC countries but the markets will reflect those earnings. If you get caught up in unemployment numbers, you will never make money and always look for the bearish indicators.
That is why retail will never make money.
And frankly if you can read a pattern, then you do not even need to look at earnings.
Physical Gold is the dumbest idea ever esp when Gold is direct reflection of M3 and inflation in system. If Gold had to reflect safe haven, it would already have reached $20,000. But it hasnt and it will never as fiat currencies are here to stay. But there will be churn between currencies but gold has no role in trade. That is the bottomline.
Many people discuss like they have some special knowledge, and that they are making oogles of money. No one knows what is going to happen. The ecomomy and the stock market are unpredictable, especially in the short term.
It is far less disconcerting and calming to take a position , short in my case, with money I can afford to lose, and just wait for my bet to pay off. I have plenty of time, and I expect to hold for a coupl;e of years; unless I get lucky.
I disagree with "no one knows what is going to happen". The good old boys at GS do. They after all, are the market, they have the power of several other players like JPM, MS, the Paulsons, and the best being the FED. They always win.
The GS equation seems simple enough. Place the trade against the most money applied. They are privy to this info.
Gs didn't know what hit them back in 2008 with the CDS scandal. Their stock got nailed big time. There will be another crisis soon that wiil show no forewarning, and that they can do nothing about.
In addition, it will definitely have to do with debt and financing; from a banking crisis, to a liquidity crisis, and the finale currency crisis which will make the others seem like hors d'oeuvres.
lol, technical traders. Enjoy your central economic planning, you towering buffoon.
I'm staying short. I was early for 1987 and the tech bubble, but eventually it's useless to resist us.
Why aren't they getting wiped out? Then again, this is gross shorts. Are the banks playing both sides of the table? Say, for drama and appearances' sake? Does it actually net out positive (could it even be structured that way)? Is it just providing cover/plausible deniability for the known day when the plug is pulled?
What's up with this? Insider selling is, what, 500:1?
I'm not getting it.
It's not that there ARE shorts, the question is WHO are the shorts?
Knowing that would help explain the conundrum.
Precisely, RR; who are they? Are "they" the relentless gold/silver buyers that are challenging the bullion bank cartel? Is this a continuation of the short stocks/long gold-silver trade?
Perhaps at this point "they" smell the blood in the water of the desperation in TPTB. One other factor would be the next impending blow up of US banks. With BoA in trouble last July, "they" know another 2008 crash is in the cards for the US financial system. The game is changing ever so slowly as the Bernanke & his grizzly gang is slipping away fighting a war they cannot win with the last wars methods. Moreover, obama is left without a financial team which leaves him open & vulnerable to any black swan event.
Enjoy the rally, but sell immediately on any sign of weakness after the election. Watch the banks closely for another mortgage crisis....
I'm short a lot$ and I'm no one. I started shorting the market in April at the peak. I've closed some postions and opened others since then. I am still massively short. I know the market is a joke and I know they've made the market highly voliatile. I think the people who were doing value investing based on fundamentals are gone. The only people left are people who are frontrunning the Fed. I don't believe those kind of speculators have any faith in the prices they are seeing/paying for stocks and they can be easily spooked. I also really thought TPTB would let this market tank to scare everyone into QE2.
That's why I have stayed short..however, I am starting to lose my faith and just about ready to quit this game.
Keynes has been maligned lately but he had one thing right:
Markets can remain irrational longer than you can remain solvent.
Right now I'm learning a valuable (painful) lesson in trailing stop position entry. :D Robotrader said it right: don't fight the tape.
We've all been there - my 1st internship at a desk i brought forth a trade idea to my MD who surprisingly liked it (well, he said it *wasn't* a POS). So i was able to put the trade on with looser limits than they normally allow interns to have ($.05 limit normally, so the b/a kills you unless you time it precisely). Anyway, trade went against me and i lost a nice chunk of money for them. Couldnt look at my MD for the next week I was so embarassed...
Sooooo happy im not a trader anymore.
I know what you're thinking. "Did he fire six shots or only five?"
Well, to tell you the truth, in all this excitement I kind of lost track myself. But being as this is the FED, with the most powerful printing press in the world, and would blow your fiat currency's value clean off, you've got to ask yourself one question: Do I feel lucky? Well, do ya, shorts?
Dirty Benny! Yikes! I'm crapping in my shorts.
Speaking of shorts... equally funny.
http://www.youtube.com/watch?v=sNOX7RbpTe0
Luckily for Ben, that particular gun doesn't run out of bullets. They just get less and less effective the more he uses them.
I've just been hedging with way out of the money OCT and NOV calls on SPY. Simple enough. I'll just go apeshit on buying more of my short positions when the black swan calls and reduce my cost basis for the way back down. Why drop a smart position when you have options?
Besides, who besides the Fed would go long this fat ass rising wedge anyway? Lets face it, where would the markets be minus intervention? Are actual people really on board this train of shit?
(We are short from 1130 SnP so we just started losing anyway)
Hey, we are long a few things though...VXX, SRS, and SPXU and PHYS!
1140 here.........fuck it. I wan't to see Ben burn.
Long SRS?
Im sorry for you. That trade hasn't worked since the REITs decided to not follow fundamentals (not that others follow them that much better..)
My guess is that moist shorts are not zero hedged. The naked retail shorters already got their ballz burned off back in '09 and won't be back unless they can get another heloc.
Fuck it, I got money to burn and time to wait. Seems to me stock market crashes , volatility and black swans happen as much as ten baggers. It's my new world 401 k philosophy. Buy and hold, only in reverse.
Risk capital is lottery tickets material anyway, I already resigned myself to losing it, so winning is just a bonus.
The profit velocity on the down side appears to be much greater than on the way up. :)
Definitely in your camp with my no-margined insurance plan. The house will burn down.
The question I have is: What if a black swan does come and the market crashes. Would the shorts be allowed to pull their money out, or would the TPTB declare some kind of investigation to market manipulation, errors, emergency powers or any other shit?
That may explain the curious flash crashes here and there in both directions, so that there is precedence of crashes and they can hang their hats on that. They will close the exchanges for a few days and burn the shorts that are not in the loop and cancel their trades.
"Everything happens for a reason."
I like that attitude...we are waaay overdue for a black swan event....Ben and his NYC cohorts appear to be running right along the railroad tracks with POMO taking the market ever higher....looks inevitble....about time for an outside event to throw the swith on their Midnight Express to Ramp City.
What it is, people realize that eventually the ass hats will make a mistake. We're going to get a data set.....or something as insignificant as perhaps a shit earnings release. The thought is, you can't go parabolic forever. Obviously many charts are showing blow offs. ZH often pokes at APPL, which is a fine example of one that could crash the market....
There are stocks besides aapl nowadays? who knew.
"It's only when the tide goes out that you learn who's been swimming naked."
Most "pros" who are still looking at fundamentals are short huge.
Tom O'Brien, Larry Pesavento, Bud Rolfs, David White, etc. at TFNN.com are all short.
http://www.tigeruniversity.com/mp3/TOS092410.mp3
I think these guys are over analyzing and making things too complicated.
All I see are more sectors turning around, like the SOX on Friday, the CRB going through the roof, the dollar down, etc.
The market seems to be getting stronger, not weaker, and no negative divergences to speak of.
Maybe the market will keep grinding up until all these short-sellers cave in.
For now, most are hanging on to losing positions, or pyramiding on losing positions using margin.
Who knows??
The market has a habit of blowing out a lot of guys bucking the tape.
Tom, Larry, and Bud are all smart guys who are not always right short-term but bigger picture they are usually correct as I have been following them for a while. Since you mention no divergences to speak of may I present a composition on treasury yields:
http://market-ticker.org/akcs-www?post=167162
In my opinion the current state of the equity market is that of the proverbial "greater fool" belief. The only aspect keeping the broad indices afloat is currency debasement and hope of continued bureaucratic interventions.
...and it appears that there is an unlimited supply of well heeled fools...
Robo, think about that for a moment... "people still looking at fundamentals..... are making things too complicated"
I will assume you've been around the market a long time. You should be able to see this for what it is: a pump job. If you are thinking for one minute that the actual ECONOMY is reflecting what's happening in the market, you have to be nuts. Small business people are suffering right now. I went out this week to a decent restaurant for lunch with a customer and the place was EMPTY at 12:30. We stayed for and hour and a half and no change. I could rattle off a million other examples. You want to know the trend i see taking off? Money is EVAPORATING for small business. (and I would bet your average Joe.) Liquidity everywhere and yet none can be used by the people who need it most.
This can't be sustained. Sure, you can financially engineer more and more cost savings, sell bonds into a gullible and stupid market to buy back shares so earnings move higher. Where's the top line? Where is real growth and real progress? It's all BS. The last thing we had going for us was reserve currency status, and the Fed seems to be doing everything they can to kill that too.
BTW- look at a 4 year on SOX and you see it is running up to overhead resistance.
+ 1
Sorry Robo...
...Main Street is broke IMHO. Watched some NASCAR and some MLB today. The stadiums are empty! I've never seen anything like this in my life. America's favourite pass times have been put on ice...There's not enough "dumb money" left, especially to put back into the stock markets. BTW what's the symbol for "Kraft Dinner"?
KFT... hit a new 52 week high on Friday.
Gracias...
Only canadians call it kraft dinner. Americans call it Mac and Cheese.
You wanna know what we call a 1/4 pounder?
Poutine
Grits.
i called kraft last spring on one of chopshops articles. they had KFT charts up. i had just finished watching the LPGA Kraft championship tournament and had 4 days of velveeta cheese ads up the wazoo? so i also said i would buy the stock if i were still buying stocks.
so i called it first, you guyz.
Fast Twitch..
There is a restaurant a block away from us inexpensive and okay food. There used to be lines on weekends for years. Lately, you can walk in at 7pm on a Saturday night and get your choice table. And yes, we checked. The chef and the management are still the same.
So sad, sorry to hear... Honest citizens screwed over by a short sighted self serving mono political machine. Most people don't even know what happened to them...
lot's of short sellers are a sign of a healthy market, too. Bulls and bears make money. The story is still "yields." I'm not convinced "the problem is in the equity space" but if we get a "singularity" in the treasury market (Dollar Heavy--Marc Chandler) then who the fuck knows.
I'm starting to see that Robo has a very simple and effective trading style: long term trend up, above 20 day EMA: buy. Sell when below. I've been checking this out on a lot of charts and it seems to be a winning method for the pure swing trader.
"The pros"? " Over analyzing "? "most are hanging on to losing positions"?
How do you know what their position is? The market has been going sideways for 12 years, how do you buck that tape?
If you shorted or went long the SPY 12 years ago you are flat, who is bucking who Robo?
"the market is getting stronger" oh sure!
i am getting younger and better looking as i age. lol
fundamentals indicate huge weakness, in fact a bubble of weakness since so much wealth in US dollars is illusionary. The fact that its merely paper and losing its credibility is a strong fundamental , so is the fact we cant pay our debts.
What happened to shorting with tight stops? If you banged a girl you'd want to use a tight vagina, if you invest in the stock market should't you want to do the same thing?
Tight stops are what the makers want so they squeeze the bullshit rally higher. Why pay a pimp for a piece of shit whore on the market?
If they know when you'll say uncle. They'll squeeze just that hard.
The Shorts that are talking here sound like they have already capitulated and are walking wounded. Bernanke shot their asses off yet they still straggle along, hoping, praying for an exogenous event to provide the market equalizer to vindicate them. Hope is not a strategy and hoping for collapse is a pitiful existence. We all feel for them and realize that life is not fair and that they have been unjustly brutalized by the Fed. However, shorting Financials (or whatever, as everything seems correlated) and owning a heavier weighted Precious Metals position seems to be a decent and logical hedge and one that may allow those to withstand the volatility.
Capitulate? Oh yeah, thats what you'll be doing when you realize that the biggest "Exogenous " event is that this is a sucker's rally.
What are you going to do when the Fed, the algos, and the US government between them own 99% of all shares on the markets? Why do you think they are going to fall nominally? You haven't been paying attention, and it's going to make you lose your investment.
If you want to short, buy bullion, and take possession. Anything else is looting a burning building that may or may not be surrounded by the national guard with orders to shoot looters on sight.
Already own gold. Fundamentals eventually make a difference. Why do you think that there is a bull market that has marathon capabilities? I never pay attention to what I consider bullshit. More people should pay attention to reality.
I've studied the runner, his system is collapsing; even the prosthetic bionic HFT algos, the fed. and the gov. can't help him. I have a long time line, and I'm patient. I'm enjoying the fight.
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Retail flows! Retail flows!!
My god, man... is that all you've got?
Time to shut down the site, "Tyler," and stop trying to goose people's actions for your own personal financial gain.
No Mas has a new name.. and now he's trying to stop people from visiting ZH. OH MY GOD PLEASE STOP ME FROM VISITING OH PLEASE OH PLEASE OH PLEASE HELP ME FROM VISITING ZH! YOUR INTELLIGENCE IS JUST OVERWHELMING I MUST STOP VISITING ZH AND VISIT YOUR SITE.. I can increase your website count from two clicks a day to three if you can persuade me oh guru of financial wisdom... Please show me the Bernanke way of investing my uber-sheepgod! We ZH readers await your POMO activity..
I can't help it. It's Turnpike Lane all over again....
My dear Mr. Simpson.
No Mas has no new name, he is still here, having humbly admitted to his failure at sarcasm and humor.
I encourage all to visit ZH. I only recommend that one realize the ZH theme of collapse and disaster must be considered within the trading timeframe of each individual.
Loyal ZH'ers see the world and this market for what it is; a pumped up ponzi scheme of epic porportions. But there is money to be made from this ponzi scheme. If the fed has a goal to inflate equities, ride the tape. The world will not end before one can realize those gains.
My inclination is to short, and a lot of that inclination is derived from the information found on this very site. But to act on that inclination too early cost me in real terms and in opportunity cost. So I decided not to fight the fed, but to run with the bulls and capture gains.
Now what value has those gains? My guess is less and less every day that this same fed creates new money out of thin air. But if I have no gains to lose their value, then I am worse off if I sit on the sidelines waiting for the end.
Good day to you Mr. Simpson. Please tell Marge I'd do her in a Mississippi minute.
Hey Trimmed, why don't you go piss off back to where you came from.
Thank you, Johnny Bravo!
Trimmed Hedge:
There is no big money to be made in blogging.
BTW: It is a well known fact that Tyler is posting from his yacht which is berthed in St. Barths at the moment. I can't reveal the name however.
Hey Robot, I agree with you in part. I wont buck the tape and I'll happily hedge for break even or a small profit while the market pumps instead of going calls to the walls and selling my heart off for what is likely a rally built on sand. But, I wont ignore the fundamentals either.
What hasn't shocked this system yet is some really really bad news. Been awhile. No major crisis that we haven't already baked in.Change is as sure as the sky is blue, things aren't better off on Main, the outlook is too rosy for the reality. I might be right early, especially in the face of the fed, but the fed can't change mother nature and she demands volatility after a period of calm.
Can the fed hold up pricing even in the face of a major negative event? "In today's news Iran/Isreal/China/Luxembourg started some major shit, and the Dow is up 700 points" Back to you Bob. Bob...we can hear bombs going off where you are are you ok??? Can man somehow avoid not causing or being the victim of some calamity for much longer in this pie we're cookin??
You want to see some fundamentals and disconnect from Main and Wall? Go check out my old home town of Baltimore. It's a slow steady decay in a town that defines the lower to middle class on the East Coast. It's accelerating. Good families are worse off, and poor families are robbing the "less worse off" to survive. The attitude towards employment is becoming one of indifference. "Why work" is becoming a motto in the city...Schools...ah never mind, it's getting embarrassing now.
People are tired of the system now that it has stopped working like it used to. Unless that returns along with the stock prices, ain't shit gonna change down here in Balmore, hon. I haven't hired anyone or given a raise since Oct 08 and these are low paying jobs. I am however getting applications from over-skilled and basically mismatched professions. So, the poor are becoming more and more unemployed and the middle class is becoming the next poor.
Like I said, I'm on the bandwagon as a hedge ONLY til it cracks due to stress and then I'm outtie on the cheerleading for stocks tip unless I see some true sign of data matching what I see on the street of my poor old town and in my own small business. Ill stay neutral overall and look for income in other trades.
Thank you for your comment. There is nothing like stories from the people who see this thing evolving (devolving?) on a daily basis.
OK Racoon... I used to work in the Valley in 96-2000. I used to go out patrick Henry Drive and it would piss me off as it was like a bee hive. You could hardly drive down the steet due to all the people pulling out of those parking lots. Lots of big name companies, csco, AMAT, etc.... anyway, every year I go back and I use that street as my gauge. In 2002-03 it was about half empty. Half the buildings were DARK. Those w/ cars were only 25-35% full. It looked about the same 04-08 or so. I just went back 3 weeks ago. MORE buildings are empty and one had a fence around it and had spray paint tags all over the upper section. It looks like the 3rd F'king world. This country is not coming back any time soon. Oh and FORD just opened up a new motor plant in China. That should help.
This report is true. (Cupertino resident here)
~Misstrial
I used to live in Cupertino until 2000 - how much has it changed.
No big deal. One of the brightest bank analysts in the business, Chris Whelan, feels at least a few major banks are destined to fail. From King World:
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/9/24_Chris_Whalen.html
Implicit,
They already failed. They are being bailed out and held up just like US economy, the Grand illusion of recovery as QE 1,2,3,4 "fixes"all that is broken and bankrupt.
I hear you, but it can't be an illusion/delussion after enough people recognise it for what it is.
Did you hear the end of the discussion about how the title/deeds were mishandled in the cds rampage, and how the ability of many more people to walk away from their mortgages is coming to fruition in much larger numbers.
CDS and CDS squared were pumping things through so quickly, they didn't even do the required paperwork, There will be a lot of lawsuits from investors, a lot of foreclosures going back to the original home dwellers, and a lot of bank losses.
my business is shut till the criminals are in jail , law and justice are returned along with honest money.
+1 But somehow non-predatory people have to find a way to produce and share, create wealth, and avoid the predators at the same time. Zero sustenance to the criminals, we must find a way, otherwise millions, maybe billions are going to face the ultimate test.
Well this is strange. Here we are a few hours away from options expiration and gold is but 5 tiny little bucks away from a brutal savage expiration in the wrong zone.
I am an entrepreneur who sold a business in Aug 2008 (one of the last good exits). In a normal world, I would be out with a business plan, raising money, trying to build the next big thing.
Instead, I am hiding under the proverbial rock. I have precious metals, I am short (but the rule is don't trade your lunch money, trade your beer money only!) I am not starting a business, hiring people, or deploying capital. I am hoarding metal and speculating in the markets...
This is my personal Atlas Shrugged moment. I bet there are a lotta guys like me in the same position doing the same thing.
True that. I was a C-corp, now a sole prop..
Use to do more of a lot of things , now jusy do high margin custom jobs.
Use to have 4 people working with my company, now just me.
Also, "short my beer money" & own gold.
Have become more frugal.
Work hard when I want and or must, but take a lot of time to enjoy life.
Yep, that's ZIRP for ya... No capital formation just credit $peculation...
Please find a way to be productive, but also absolutely prevent one penny flowing to the predators. Please start to network with your fellow decent human being. Know who you can trust and get genuine free but totally opaque markets going. Start organic gardens in every nook and cranny that you can. There has to be a way, otherwise when atlas finally does shrug it will be a huge holocaust. Say yes to freedom and no to tyranny today! We are all trying to play it safe. WE must all learn to confrant what we know in our hearts MUST be confronted. The longer we wait, the worse it will be.
No no - please retire to your mountain cabin in a fit of narcissistic pique.
Sorry to inform you that the most probable outcome will be - the world will go on without you. I guarantee that some enterprising young kid ( maybe from china or india ) - WILL be starting a business, will be taking risks - because he is not yet a Roman. Has not yet become disgusted by the cycle of feasting and then visiting the vomitorium. Just wants to make a buck - and has no illusions or utopian requirements of his fellow human beings. You pay cash - I give you my stuff - ya know like your grandparents used to be?
But - its much more fun - to play the wounded warrior/desrted by fate - surrounded by morons - especially if you have a good stock of scotch ... and Mahler.
Go deep inside and ask yourself if that really is more fun? Will if be as fun when those you love around you are in pain? If you are surrounded by morons, are you content to let them remain this way?
The issue is not what's "fun" (and if that was your take-home from Atlas Shrugged, you didn't get it).
The issue: productivity has some basic requirements. If they are not met, it's not possible to be productive on a large scale. You can be productive growing a few heads of lettuce, but not in a business that hires people, sells to customers, pays (ever-rising) taxes, is subject to (ever more) regulators enforcing (unpredictable, but growing and mutually contradictory) regulations.
This is not a personal emotional issue, but a calculation of risks and cost-benefit analysis.
For example, under the old regime, if you successfully sold the business you were subject to 15% long term capital gains tax rate at the federal level and, on average, probably 5% at the state level (some states like CA and NY would be worse, obviously). So the rules of the game are: if you lose, you lose 100%, but if you win you keep 80%.
Since the basic model is expected payout * probability = your gross. If your gross is greater than your capital requirements, you might have a viable business. Now take off 20% from the gross, guess what. That pushes many business ideas into non-viability.
But it gets worse. In 2011, the capital gains tax rate goes up. Instead of 20% penalty for success, it may be 33% or 25% (I am unclear and it's in flux right now).
But it gets worse. Some proposals to change the tax code call for eliminating special treatment for capital gains, and would tax at ordinary income tax rates. So this puts it at over 40% punishment for daring to start and sell a business.
But it gets worse. Some proposals want to extend FICA and SS taxes to encompass all income (currently those are capped around $100K). So this would increase the govt take of your business to well over 50%. And there are even proposals to increase these taxes, so the government's take might be as high as 60%.
Now add healthcare costs, which make each employee more expensive. Add new 1099 rules which make it more expensive and time-consuming to deal with vendors, even really small vendors.
But it gets worse. It is not possible to know what other regulations are coming, what other taxes are coming, or what other labor rules are coming. Perhaps the biggest item of all, it is not possible to know in advance what they do to interest rates, credit availability, capital markets, or any other market that affects you or your customers. Capital markets is an interest problem. When an entrepreneur has an exit today, the most likely possibility is acquisition by either a major corporation or private equity or other financial investor. In both cases, the acquirer is dependent on the public capital markets even if you are not. Suffice to say, you won't get a good exit (if you get one at all) in an environment like fall 2008 through spring 2009.
Anyone who calls me "narcissistic" for the above analysis can plow every penny he owns into starting a business, and pledge his personal credit rating and house, cars, etc. to borrow money to start a business. If he is successful, great, I will congratulate him. If not, then he will understand the point I am trying to make. Starting a business in the best of times is a high-risk proposition. Today, one would have to either have such a compelling opportunity, or one would have to be ignorant of the economy and markets.
Ex-restauranteur here and there is nothing narcissistic about your post, just
painfully true.
Entrepreneurship has become a fool's game in the good ol' USSA.
ADBE is a very good example of a short game. Last friday they already showed that they'll soon need to cover once the 28 resistancve is broken.
And there are many more.
Shorters who aren't fast enough in selling have always been smoked these last 36 months. If you want to make big money in that way, you have to have trigger vingers. I've been smoke to many times myself shorting the most evident. But going long has almost always been profitable.
Short-sellers are definitely being mutilated these days. Just look at the prices of industrial metals. Not far from 2008 highs. But the fundamentals are utterly shit. Crude oil is over-supplied seriously but the price is still around $75.
"[T]he stubborn shorts don't buy the ramp in stocks, they keep putting on new replacement shorts..." Bingo. There are likely to be many investors who felt they were being screwed (by their broker, their financial advisor, their accountant...their government) so they said "Fuck this shit," grabbed a pencil and ruler and started drawing their own charts. Okay...stocks or bonds?
ZB: http://99ercharts.blogspot.com/2010/09/es-and-zb_8237.html
ES: http://99ercharts.blogspot.com/2010/09/es_8416.html
NQ: http://99ercharts.blogspot.com/2010/09/nq-weekly.html
Whether bull or bear, the little guy has had it with anything sounding like advice and has gone back to basics. I'm still learning so I don't care if I'm immediately wrong or right; it feels better to wait and see. Good luck all.
That Tepper's a smug prick but it's hard to argue with him. When the government's giving away money you want to have your snout in that trough. Like he said, sometimes it really is that easy. Until suddenly it isn't.
You have to fight and beat the tape when you know it's wrong if you want to outperform. But you can't beat liquidity. QE is going to spur asset price inflation, no doubt about it. But it won't lift all boats forever, and some won't get lifted at all. It's likely the market will overdo its front-running of QE2 in some assets and sell them off when the real deal arrives. I'd say precious metals are still the surest bet. And, maybe it's still early, but there's a lot of shite bonds out there begging to be shorted.
http://keynesianfailure.wordpress.com/2010/09/24/why-this-time-qe-really-will-spur-inflation/
The argument that QE will force up asset prices seems a bit like the "Underwear Business Model" of the gnomes on South Park:
1) steal all the underwear
2) ???
3) Profit$
In this case it is:
1) buy bonds off banks and investors
2) ???
3) investors and banks will bid up stocks because they have no choice(!)
Guess what. There are choices. They could pay down debts, they could buy precious metals, they could sit in cash, etc.
Maybe they will bid up stocks some more. Maybe. But belief in this ponzi is the only thing levitating stocks, and there is a LOT of room to the downside.
Oh, the shit's worse than you can imagine: threre's no alternative to the reserve currency- so when the dollar becomes an embarrassment it's going to take down the world economy.. then US coprations, wherever their earnings, are also going to flop... bah!..it's like Bernanke is playing poker, except we know what is hand is, he's just raising the ante.
Don't get me wrong, I completely agree with you. The crash will come as soon as enough people convince themselves it will never come.
Yes, people have choices, but the buyers who are currently steadily accumulating Treasuries are mainly foreign central banks, domestic pension funds and other conservative investors of household long-term savings. Those guys end up bidding against each other over the smaller pool of net issuance of Treasuries. The winning bids take home ridiculously overpriced Treasuries, the losing bids figure out what else to do. They must buy something else, and most of the central banks will keep buying some kind of dollar assets, because after all what else is out there in big enough quantities, euro or yen assets?
That sets off a chain reaction of displacement of financial flows up the risk curve, until somebody refuses to buy anything and instead accumulates cash, or somebody buys assets newly created through an expansion of credit and commercial bank money. Those are the only two ways QE can go: greater accumulation of cash, or creation of new assets through credit expansion. When QE buys existing assets, the money and the decision what to do with it just get passed along to the seller. It all adds up to a collective market decision on what portion of QE to turn into more cash on balance sheets, and what portion to turn into credit expansion.
QE1 went about 90% cash, 10% credit expansion, but that was during the mad dash for cash of late 2008 and early 2009. QE2 will not meet the same desperation for cash, so it will cause more credit expansion.
http://keynesianfailure.wordpress.com/2010/09/24/why-this-time-qe-really-will-spur-inflation/
Robo,
Stock stop won't help you when it collapses. On Friday you net gain after currency was ZERO.
As the latest article on currency points out.... the end game in FX is coming.
Gold won't save either
Prepare for sell off. For the last 30 days Skynet has been bullish. Time for a mega downturn, i.e. below 1032.00.
Resistances at 1020, 1000, and then the plunge...personal guesstimate: high 800s.
I'm a strategic bear. I have a two-tiered OEX Put position on, and if my time premium gets burned through, I have no problem putting another one on in November. I'm only taking the sell side you see, because when this sucker busts open - it will be a day where you won't be able to get any 'protection' because the gap down and subsequent failed bid orgy will leave heads spinning and accounts smoking.
I consider the premium I pay just a small part of the 'risk', as the payoff will greatly overwhelm several smaller losses in scale. Of course, you may certainly disagree with my stance, and that is what makes markets - but I believe we are in for a big break, and it will come at a time where everyone is *convinced* the market can do nothing but go much, much higher.
A patient bear is a wealthy bear, but the other side of the trade has some deeeeeep pockets.
who are the shorts...i think its the big boys themselves...
Massive Put Options Bought on the S&P 500 Index Indicating Another Stock Market Crash 2010...http://www.youtube.com/watch?v=Jc6xUj7ujYg