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How To Die Poor

Tyler Durden's picture




 

Submitted by Bill Bonner of Acting-Man blog,

No Respect for Capitalism

“The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance or the get-rich-quick adventurer. They will die poor.”

– Jesse Livermore, How to Trade in Stocks

 

CottonPlant-300x214

Cotton plant, Texas, 1996.

(Photo courtesy of USDA Natural Resources Conservation Service)

 

The trouble with capitalism’s guardians is that they have no respect for it. Markets have been around for at least 2,000 years. Since then they have evolved in many directions, with fancy and sophisticated techniques… and elaborate systems and complicated instruments that take a PhD to understand.

But despite all the brain power put into trying to figure them out, markets still surprise, confound and puzzle everyone. There is still no formula for predicting market movements. And even the smartest and most experienced traders often wash up.

You’d think Janet Yellen and other central bankers would take a step back and stand in awe. Like astronomers looking at the heavens, they should be studying its black holes and its exploding supernovae. Or at least looking for signs of intelligent life.

Instead, Yellen et al ignore the intricate mechanisms that balance supply and demand; they want to force people to demand more. They have no interest in discovering prices; they want to impose their own prices. And they could care less what Mr. Market has to say; they only hear their own voices.

More guards than guardians, they believe they can improve the markets… control them… whip them into shape… and force them to do their bidding. The gods must be rolling in the aisles.

 

 

blackholes_blackhole

Black hole, a well-known pitfall of the universe. Recommendation: avoid.

(Image by Ute Kraus / Wikimedia Commons)

 

Closer to Bubbledom

“No need to lift rates to curb risk, says Yellen” is how the Financial Times reported her position last week. Someone must have told her that prices of houses, art, bonds, stocks and other assets are all getting closer to bubbledom.

At the top end, mansions are once again setting records. Paintings of no obvious interest are fetching millions of dollars at auction. And US stocks are at levels never before seen. Meanwhile, debt levels are higher than in 2007, with US corporations borrowing record amounts – far in excess of profit growth.

For example, Bank of America has borrowed $7.6 billion this year. Oracle has borrowed $10 billion. And Cisco has borrowed $8 billion. And James Grant of Grant’s Interest Rate Observer reports that the iShares Nasdaq Biotechnology ETF, when accurately measured, trades at 2,000 times reported 12-month earnings.

Alan Greenspan claimed he wouldn’t know a bubble if it exploded in his face. Instead, once the damage was done, he and his colleagues would get to work performing their customary miracles.

Yellen is not even looking for bubbles. She thinks she and the other guards can implement some “macro-prudential policies” that will take the risk out of them. So bubbles won’t matter.

Come again?

This is the same woman who was on the job as president of the San Francisco Fed when the last bubble blew up six years ago. She saw nothing coming. She heard nothing. She learned nothing. She has no idea how markets operate. But she is sure she can manage them and make them more “resilient.”

 

Orange,_Red,_Yellow

“Orange, Red, Yellow”, by Mark Rothko (1961) – which sold for the everyday low price of  $86,882,500  in May 2012. We would like to inform the buyer that we have a very similar painting for sale, entitled “Blue, Green, Purple”, which would be available at half the price  (it also looks nicer).

 

A Crazy System

Heaven and hell are full of people who thought they could take the risk out of markets. Some went broke. Some blew their brains out. Some, such as Jesse Livermore, did both.

Livermore made fortunes… and lost them. He lost his first fortune to cotton trading in 1907. In 1929, he breezed through the panic, apparently without losses. Later, his money slipped through his hands, in a way that has never been fully understood.

Some lose their money because they are stupid. Some run into a ditch because they aren’t paying attention… or because they are paying too much attention. Some are too cautious. Others are too reckless. Some are arrogant. Some are ruined by timidity. Others by pride.

Whatever your weakness, Mr. Market will find it. He will encourage you to dig yourself in deeper and deeper… Then he will fill the hole! Investors will take the other side of your trade. They will find the frailty… the flaw… the fine little fracture in your theory.

Now, the Wall Street Journal reports that traders are doing well by trading Fed policy announcements. They buy stocks the day before an announcement and sell them a week later, buying them again the following week.

The system is crazy from a fundamentals point of view. Companies do not become more and less valuable because of Fed announcements. But it works! A portfolio managed this way would have returned 650% since 1994. The S&P 500 returned only about half that.

Investors still have confidence in Madam Yellen. They buy stocks and bonds, sure she will push them higher. But they will turn against her, sooner or later. They will begin selling her favorite assets… and, if she is still at her post, they will ruin her.

 

livermore_2

Jesse Livermore in his heyday.

 

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Tue, 07/08/2014 - 19:40 | 4937527 frankTHE COIN
frankTHE COIN's picture

The Boy Plunger !

Tue, 07/08/2014 - 19:44 | 4937549 TeamDepends
TeamDepends's picture

Without risk, life is like Seinfeld.

Tue, 07/08/2014 - 20:03 | 4937621 Gringo Viejo
Gringo Viejo's picture

Off Topic: White Men CAN Jump. Germany 7- Brazil 1.

Tue, 07/08/2014 - 20:36 | 4937746 The Big Ching-aso
The Big Ching-aso's picture

Shit. Dying poor is easy. Living poor is the real bitch.

Bitchez.

Tue, 07/08/2014 - 20:00 | 4937603 CrazyCooter
CrazyCooter's picture

Anyone on ZH who is trying to make sense of all this madness, and particularly if they are not from a financial background, should read Livermores autobiography (REMINISCENCES OF A STOCK OPERATOR).

It is both illustrative and insightful while also being narrative and easy to read.

http://astrocycle.net/PDF/Livermore.pdf

Google your own if the link goes bad:

http://lmgtfy.com/?q=filetype%3Apdf+jesse+livermore+autobiography

SPOILER: He died broke. Of suicide.

Regards,

Cooter

Tue, 07/08/2014 - 20:27 | 4937711 Dingleberry
Dingleberry's picture

I read a bio on him long ago.  The strange thing is that his wife at his time of death had 3 or 4 ex-husbands who all died of suicide, if I recall correctly.

He was a genius in the markets...with balls of steel....but he couldn't control his balls around the opposite sex, plus his family was completely wacked.  I seem to remember something about his son and a gun.

I wouldn't trade sanity for all the money ever made.  

Tue, 07/08/2014 - 21:14 | 4937874 bonin006
bonin006's picture

Sounds like too much to be a coincidence. she must have helped them.

Tue, 07/08/2014 - 21:02 | 4937830 DOGGONE
DOGGONE's picture

The main enabler of sizable asset price bubbles is keeping the real price histories out of sight. Look: http://www.showrealhist.com/RHandRD.html
The collective brainwashability of the people is repulsive.

Tue, 07/08/2014 - 20:01 | 4937613 Kirk2NCC1701
Kirk2NCC1701's picture

The guy likes like a human-alien hybrid.

Tue, 07/08/2014 - 22:01 | 4938094 CrazyCooter
CrazyCooter's picture

Old pictures have that quality. I have one I bought at an estate sale, years ago, from what had to be the man's daughter. I willl never forget the look in her eye as she sold me her fathers picture, in a gold painted wrought iron frame, whose yellow black and white tone fit beautifully, for 15 bucks cash.

It is the most amazing peice of art I own and I never get tired of looking at it. I don't know why, it's just got this "other worldly" just barely abstract quality to it.

I put it next to all my other family photos to remind me that one day, I too will be long gone and forgotten. I doubt my mug shot will fetch the same price, even then.

Regards,

Cooter

Tue, 07/08/2014 - 19:41 | 4937529 stant
stant's picture

Ask tesla, the man not the co. But that's coming as well

Tue, 07/08/2014 - 19:41 | 4937533 Atomizer
Atomizer's picture

Selling a SIV package and reselling the debt to another sucker is of the past 

 

Tue, 07/08/2014 - 19:47 | 4937556 Seasmoke
Seasmoke's picture

SIV ??? A package of Makers Mark. (Might have to be a bourbon drinker to get it )

Tue, 07/08/2014 - 20:15 | 4937670 Atomizer
Atomizer's picture

Sorry fucknob. Here is the mystery definition. 

 http://www.investopedia.com/terms/s/structured-investment-vehicle.asp 

Tue, 07/08/2014 - 19:43 | 4937541 DoChenRollingBearing
DoChenRollingBearing's picture

Since almost none of us at ZH can "control the markets" (LOL there, Uncle Janet), my advice would be to own some (physical) gold!

Why even Jim Cramer on tonight's show said to own some.  So, if gold comes down because of Cramer, consider buying more.

And be diversified.

Tue, 07/08/2014 - 19:53 | 4937574 Atomizer
Atomizer's picture

Uncle Janet refuses to watch CNBS. Sounds like Jimmy boy needs to throw a card table chair into the wall. His clown act is fading. 

Tue, 07/08/2014 - 21:10 | 4937857 BeerMe
BeerMe's picture

His clown act has been dead since 2008

Tue, 07/08/2014 - 19:45 | 4937543 NoDebt
NoDebt's picture

Why would anyone ever trust to makets when they could be at the helm of the control mechanisms calling the shots?

If you're the one in power, name for me one GOOD reason you would trust the fickle markets what you could simply rule by decree.  First person who says the word "unsustainable" gets it right in the neck.

Power is a drug.  People will pursue it through the gates of insanity and death.  People want what they want, and they're not going to listen to anyone telling them to stop.  That's it.  That's why it happens and will continue to happen.

Tue, 07/08/2014 - 20:02 | 4937615 NOTaREALmerican
NOTaREALmerican's picture

+10.  And, most "market" articles imply there's some sort of "requirement of fairness".     A fair market would be a fake market as it would be a market without the common manipulating assholes.   We've actually got a natural market now: it's not fair at all.   

Survival of the fittest, bitchezzz!!

Tue, 07/08/2014 - 21:55 | 4938066 swmnguy
swmnguy's picture

As an example, the mob wanted to open casinos.  They didn't intend to play at the games.

Tue, 07/08/2014 - 19:45 | 4937547 Peconic Bay
Peconic Bay's picture

I love Bill Bonner.

Tue, 07/08/2014 - 20:28 | 4937721 jez
jez's picture

One grows most frightfully weary of reading that somebody "could care less" about something, when what the writer means is "couldn't care less".

 

I mean, goshdarn, you might almost call them opposites.

 

Mr Bonner does it here. It's a clue that he is writing but not thinking.

 

If I "could care less" about something, then I do possess some level of care about it. If I don't give a damn about it, then I couldn't care less. My level of caring is at zero. Christ, it's not complicated.

Tue, 07/08/2014 - 21:57 | 4938069 swmnguy
swmnguy's picture

Yeah, when I read that my head literally exploded.

Tue, 07/08/2014 - 19:57 | 4937572 frankTHE COIN
frankTHE COIN's picture

I had a conversation with a high ranking executive from LockHeed Martin and they stated that " because of the new circuit breakers the markets can't crash "
I had to explain that 1) a crash doesn't have to happen all in one day. It just has to be a gigantic drop in price in a short amount of time. Thousands of points lost in months is a short amount of time.
2) the 1987 crash lost 22 percent in one day. If our mkt cracked in one day it would go like this. After a 7 pct loss the mkt would close for 15 mins and reopen. A further 13 pct loss level and the mkt would close for an hour and then reopen. If it fell to a total 20 pct loss it would close for the day.
Then I had to explain Locked Limit Down.
(The time halts could be different now, but you get my drift)

Tue, 07/08/2014 - 20:18 | 4937685 Dr. Engali
Dr. Engali's picture

Did you explain to him that this thing isn't going to crash? It's going to vaporize in nano-seconds and there isn't a damn thing any circuit breaker can do about it.

Wed, 07/09/2014 - 07:25 | 4938752 AdvancingTime
AdvancingTime's picture

We been lulled into complacency by the extraordinary actions taken by central banks and governments over the last six years. A key question we must face is have these actions really worked or merely masked over major flaws and problems?

For a long time I have been trying to develop a scenario for a market "super crash" and a reasonable map that would arrive at such a situation. Below is an article looking at how it could happen sooner rather than later.

http://brucewilds.blogspot.com/2013/01/flash-crash-on-steroids.html

Tue, 07/08/2014 - 19:56 | 4937588 Chief Wonder Bread
Chief Wonder Bread's picture

I've read different accounts, that Livermore lost his fortune, that he didn't lose it at the end but was just despondent. At some point, you have to check out of this craziness. So in a way, he controlled the outcome or at least the timing.

Tue, 07/08/2014 - 20:01 | 4937614 reTARD
reTARD's picture

Stupid - check

Mentally lazy - check

Inferior emotional balance (blind of the pineal gland) - check

Get-rich-quick (e-paper wealth, etc.) - check

Sounds ready to die poor soon...

Tue, 07/08/2014 - 20:04 | 4937624 Kirk2NCC1701
Kirk2NCC1701's picture

Another way to die poor:  Bet heavily that Brazil will NOT lose 7:1 to Germany.

How'd you do on your bet, GS?

Tue, 07/08/2014 - 20:07 | 4937632 buzzsaw99
buzzsaw99's picture

Livermore would not have been allowed to make money shorting stocks in today's market. He would have been poor, then poorer, then in debt up to his eyeballs.

The higher I go, the crookeder it gets. [/Michael Corleone]

Tue, 07/08/2014 - 20:53 | 4937803 Reaper
Reaper's picture

It's not how you die; it's how well you lived. Spent it all.

Tue, 07/08/2014 - 21:46 | 4938017 laomei
laomei's picture

Dying poor is winning at life.  Everyone dies in the end, and your wealth dies with you.  But debts also die with you.  Dying with nothing in your name and owing millions is definitely the way to go.

Tue, 07/08/2014 - 22:10 | 4938129 Livermore Legend
Livermore Legend's picture

It is not how a Man Dies, but rather The Life he lived that defines him....

 

Jesse Livermore was Legend in his own Time, is a Legend Today, and Long after these interlopers and charlatans are gone, 100 Years from now, Jesse will still be a Legend..... 

Rightfully so....

Reminiscenses is a work as Important and Timeless as Machiavelli and Sun Tzu.......The Ages will reflect this......

 

 

 

 

Wed, 07/09/2014 - 07:19 | 4938743 AdvancingTime
AdvancingTime's picture

 Those of us who have had the misfortune of losing a lot of money fast will tell you we never saw it coming or that it got far worse than we envisioned in even our worse case scenario. Sure they talk about diversifying but often even this recipe is not guaranteed to protect you. 

Way back in 2008 when the meltdown was just starting I found myself on a cruise ship in Greece where one of my fellow passengers who had embarked on this strategy was withering in pain. To lose it all with no hope of recovery is something we all face in life. This is when you pray for the good fortune that it will not happen to you. More on this subject in the article below.

http://brucewilds.blogspot.com/2014/03/losing-it-all-with-no-hope-of-rec...

Wed, 07/09/2014 - 09:53 | 4939223 D-liverSil-ver
D-liverSil-ver's picture

I don't care if the economy collapses.

I don't care if my portfolio collapses.

As long as the bridges don't collapse... a guy's gotta live somewhere.

Do NOT follow this link or you will be banned from the site!