Quote of the Day

"There is only one side of the market and it is not the bull side or the bear side, but the right
side." - Jesse Livermore
>>>>>>>>>>>>>>>>>>>

The market speaks the truth, others offer opinions. Therefore, the scare
tactics used by the media, pundits, experts and analysts should mostly be
ignored. This is the noise that will get you in trouble. Turn down the
volume, focus on the trends, momentum and signals in front of you. The
market will tell you what direction to move, technical analysis is the great
equalizer on the spectrum of fear and greed

>>>>>>>>>>>>>>>>>>>>>>>>>>
When he was asked what people would learn from the whole financial
crisis, Jeremy [Grantham] said, In the short term a lot, in the medium
term a little, in the long term, nothing at all. That would be historical
precedent.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Perhaps my number one rule is: Don't try to make a profit on a bad trade,
just try to find the best way to get out."

- Linda Bradford Raschke

When its obvious to the public, its obviously wrong.

Granville

The public is a wild animal. Its better not to feed them too well.

"The main obstacle lies in not distancing ourselves from our emotions."

You can solve all financial math equations with one simple answer.
ANYTHING can go to zero."
Judd Brody

"Ours is not to say what should be, but to analyze and exploit what is".

Mike Epstein, Visitng Scholar, MIT Lab for Finanicial Engineering

One of the few sane voices in the desert has left the (Merrill Lynch)
building. David Rosenberg, on his way out, leaves everyone with an
economist's dozen of rules to remember.

David, so long, and thanks for all the fish.

Rosie's rules to remember:

1) In order for an economic forecast to be relevant, it must be combined

with a market call.

2) Never be a slave to the data they are no substitute for astute

observation of the big picture.

3) The consensus rarely gets it right and almost always errs on the side of
optimism except at the bottom.

4) Fall in love with your partner, not your forecast.

5) No two cycles are ever the same.

6) Never hide behind your model.

7) Always seek out corroborating evidence.

8) Have respect for what the markets are telling you.

9) Be constantly aware with your forecast horizon many clients live in the
short run.

10) Of all the market forecasters, Mr. Bond gets it right most often.

11) Highlight the risks to your forecasts.

12) Get the US consumer right and everything else will take care of itself.

13) Expansions are more fun than recessions (straight from Bob Farrell's
quiver!).

announced Monday the hiring of Rolfe Winkler, who will join Reuters
commentary team as a columnist, effective immediately. Based in New
York City, Rolfe will report into Jeffrey Cane, U.S. editor, commentary.

For the past two years, Winkler has been blogging about the financial
crisis at OptionARMageddon.com. His commentary has been featured on
the Mortgage Lender Implode-o-Meter, Naked Capitalism, RGE Monitor and
Seeking Alpha. Previously, he was chief revenue analyst at Fotolog, the
leading social media network in Latin America, and an analyst with the
hedge fund Matador Capital Management.

Winkler is a CFA Charterholder and an honors graduate of the University of

Chicago, where he majored in economics.

Primarily based in London and New York, the commentary team will also
have a presence in the main emerging economies. Reuters commentators
will produce a blog, and the company has hired the well-known financial
blogger Felix Salmon to lead that effort. Commentators will also produce
short opinionated columns every day on the top stories from around the
globe as well as longer columns written both by in-house commentators
and external experts and thought leaders.

Rolfe brings a set of sophisticated financial skills and a fresh analytical

approach that will enliven our columns and blogs, Cane said in a
statemen

Pay for Play

Imagination is the preview of life's coming attractions. -Einstein

Some people want it to happen, some wish it would happen, others make
it happen." mj

If you dont know where you want to go, how can you get there?

When everyone is getting kind of giddy, it is time to worry (Jim Jubak)

Sometimes your best investments are the ones you dont make. Donald
Trump (1946-)

Heres wishing you a magnificent 2010! May you have a wonderful year
full of fun, laughter and joy, and may the performance of your investment
portfolio exceed all your expectations.

Dream big dreams and think tall. Very few people set goals too high. A
man becomes what he thinks about all day long." - Raschke's Trading
Rules

Thanks to all who helped make 2009 a year to remember. I couldn't have
dreamed of working with such a great group of entrepreneurs and coinvestors at the beginning of what was shaping up to be a dismal year.
Notwithstanding the inevitable macroeconomic challenges of 2010, I am
confident and early-stage investment will continue to provide attractive
opportunities for those with the vision - and the guts - to take advantage

Too many elephants in too many rooms

The ancient Romans had a proverb: Money is like sea water. The more
you drink, the thirstier you become.

"First, you decide what you want specifically; and second, you decide if
you're willing to pay the price to make it happen, and then pay that price."
- Nelson Bunker Hunt, Texas Oil Billionaire

Every once in a while you must go to cash, take a break, take a vacation.
Don't try to play the market all the time. It can't be done, too tough on the
emotions." - Jesse Livermore

I learned at least one thing in the last fourteen years on the street. In
every game, there is deception - there's always an opponent. Always a
victim. The trick is to know when you're the latter, so you can become the
former" Michael Warren, Gryphon Daily Partner
"The greatest enemy will hide in the last place you would ever look."
Julius Caesar (75 BC)
"This is a game. I throw out the charts, the 10k's the 10Q's. You either
know how to play the game, or you don't...we not only know how to play
the game, we came up with it." Jeanne Grecco, "The 10"

Their investment postures are even more varied. I can oversimplify them
into one of five buckets:

1) All in: They caught the bottom, or jumped in not much after it. They
have been long and strong the whole run. They see no end in sight. Some
are leveraged, some used options. My estimate: About 10% of pros fall
into this camp.

2) Not too late: They joined the party later in the rally, and are still
carrying some cash (10-20%) but not excessive amounts. They are not
sure why we have been going higher, but feel they must participate.
(About 20% of pros.)

3) Reluctantly, partially invested: The group that originally fought the

rally, but honored their stop-loss discipline to flip from short to long around
June of last year (after the pullback reversed). They are a combination of
global macro traders and long/short funds who hate this environment,
along with trend followers who dont want to fight the tape. They are
carrying too much cash - from 20% to as much as 50%. Many are looking
for the next opportunity to get short. (About 30%.)

4) Bought it, sold it, waiting for clarity: This group had a very good 2009,
but did not want to overstay their welcome. They hit the bid near year
end, and took huge performance fees. They moved aggressively to cash 50%+ - and have dabbled on the short side. They are waiting for the next
inflection point to redeploy capital in either direction. (~20%.)

5) Missed it totally, waiting for vindication: The structural economic

problems and Unconscionable Federal Reserve actions have kept this
group out of the markets. They are awaiting the next leg down, a retest of
the lows, and then a break even lower. They are well stocked with puts,
bottled water, and MREs. This was a bigger cohort, but investor pressure
and stress have reduced their numbers. (Down to less than 5% of hedge
funds.)

Thats about 85%, as there are others who simply dont fall neatly into
one of these buckets

An exchange between the writer and financially-savvy Senator Ted

Kaufman:

We have a 300-pound gorilla in the room, and were saying that were
going to keep it in a cage somewhere, he told me. This thing will be 600
pounds.

But isnt part of the problem that there are 300 gorillas? I asked,
referring to the fact that an estimated 200 to 400 firms do high frequency
trading.

Good point, he replied. We have all these gorillas, and guess what? We
put them in zoos where the people running the zoos dont have enough
information and authority to take care of them.

Seth Merrin of LiquidNet, a block trading marketplace:

The institutions are the equivalent of the British army, walking down the
battlefield wearing bright red. The high frequency traders are the
Americans hiding in the woods in camouflage, picking them off. If the
British army hadnt changed its tactics, they would have lost every
subsequent war.

Every morning in Africa a gazelle wakes up and knows it must run faster
than the fastest lion or it will be eaten.
Every morning in Africa a lion wakes up and knows it must run faster than
the slowest gazelle in order to get something to eat.
It doesnt matter whether you are the lion or the gazelle - when the sun
comes up, youd better be running!

Steve
. Apple
design ,
.

.
.

side note: If you are trading the stock market, follow these four solid rules
that will protect you from your emotions:

1. Use stop losses on all day trading positions and take your gain when the
position reaches your target. Dont overreach.

2. If you are day trading, take a position for no more than two days.

3. Dont be afraid to take small losses they protect you from the big
ones.

4. Finally, dont risk more than you can afford to lose

Winning is not a sometime thing; it's an all time thing. You don't win once
in a while, you don't do things right once in a while, you do them right all
the time. Winning is habit. Unfortunately, so is losing." - Vince Lombardi

The trader respected the discipline of honoring stop losses. Good traders
know that opportunistic speculation is a process. Ignore any one single
outcome, focus on the methodology that can consistently avoid
catastrophic losses, manage risk, preserve capital. A good process can be
replicated, a random spin of the wheel cannot.
The fund manager, who was having a decent year being long high vol
names (at least before Wednesday), was having none of it. Stops are for
losers is a quote I shall long remember (and email him after he blows up).
Apparently, real men have the courage of their convictions.

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Recently I had the pleasure to read an in-depth interview with legendary

commodities and futures trader William Eckhardt. William is perhaps best
known for the big bet he lost with Richard Dennis of Turtles fame in which
he argued that successful trading cannot be taught.
In that old interview, William shared the following observations that are
helpful for all of us to remember
If a betting game among a certain number of participants is played long
enough, eventually one player will have all the money. If there is any skill
involved, it will accelerate the process of concentrating all the stakes in a
few hands. Something like this happens in the market. There is a
persistent overall tendency for equity to flow from the many to the few. In
the long run, the majority loses. The implication for the trader is that to
win you have to act like the minority. If you bring normal human habits
and tendencies to trading, youll gravitate toward the majority and
inevitably lose. William Eckhardt

Its much easier to learn what you should do in trading than to do it. Good
systems tend to violate normal human tendencies. William Eckhardt

One common adage on this subject that is completely wrongheaded is:

you cant go broke taking profits. Thats precisely how many traders do go
broke. While amateurs go broke by taking large losses, professionals go
broke by taking small profits. The problem in a nutshell is that human
nature does not operate to maximize gain but rather to maximize the
chance of gain. The desire to maximize the number of winning trades (or
minimize the number of losing trades) works against the trader. The
success rate of trades is the least important performance statistic and
may even be inversely related to performance. William Eckhardt

The people who survive avoid snowball scenarios in which bad trades
cause them to become emotionally destabilized and make more bad
trades. They are also able to feel the pain of losing. If you dont feel the
pain of a loss, then youre in the same position as those unfortunate
people who have no pain sensors. If they leave their hand on a hot stove,
it will burn off. There is no way to survive in the world without pain.
Similarly, in the markets, if the losses dont hurt, your financial survival is
tenuous. William Eckhardt

I know of a few multimillionaires who started trading with inherited

wealth. In each case, they lost it all because they didnt feel the pain when
they were losing. In those formative first few years of trading, they felt
they could afford to lose. Youre much better off going into the market on a
shoestring, feeling that you cant afford to lose. Id rather bet on
somebody starting out with a few thousand dollars than on somebody who
came in with millions. William Eckhardt

In many ways, large profits are even more insidious than large losses in
terms of emotional destabilization. I think its important not to be
emotionally attached to large profits. Ive certainly made some of my
worst trades after long periods of winning. When youre on a big winning
streak, theres a temptation to think that youre doing something special,
which will allow you to continue to propel yourself upward. You start to
think that you can afford to make shoddy decisions. You can imagine what
happens next. As a general rule, losses make you strong and profits make
you weak. William Eckhardt

If youre playing for emotional satisfaction, youre bound to lose, because

what feels good is often the wrong thing to do. Richard Dennis used to say,
somewhat facetiously, If it feels good, dont do it. In fact, one rule we
taught the Turtles was: When all the criteria are in balance, do the thing
you least want to do. You have to decide early on whether youre playing
for the fun or for the success. Whether you measure it in money or in
some other way, to win at trading you have to be playing for the success.
William Eckhardt

Trading is also highly addictive. When behavioral psychologists have

compared the relative addictiveness of various reinforcement schedules,
they found that intermittent reinforcement positive and negative
dispensed randomly (for example, the rat doesnt know whether it will get
pleasure or pain when it hits the bar) is the most addictive alternative of
all, more addictive than positive reinforcement only. Intermittent

reinforcement describes the experience of the compulsive gambler as well

as the future trader. The difference is that, just perhaps, the trader can
make money. However, as with most affective aspects of trading, its
addictiveness constantly threatens ruin. Addictiveness is the reason why
so many players who make fortunes leave the game broke. William
Eckhardt

Dont think about what the markets going to do; you have absolutely no
control over that. Think about what youre going to do if it gets there. In
particular, you should spend no time at all thinking about those rosy
scenarios in which the market goes your way, since in those situations,
theres nothing more for you to do. Focus instead on those things you want
least to happen and on what your response will be. William Eckhardt

If you dont think these principles are true, you havent been trading very
long. Print these out and refer to them often!

quote by Albert Ellis:

The best years of your life are the ones in which you decide your
problems are your own. You dont blame them on your mother, the
ecology, or the President. You realize that you control your own destiny.

"If you dont create change, change will create you. Mahatma Ghandi

One of the greatest pieces of economic wisdom is to know what you do not
know. John Kenneth Galbraith

The best time to buy something is when everyone ignores the sector.

"Nowadays, people know the price of everything and the value of

nothing." - Oscar Wilde

Ride the horse in the direction it's going." - Werner Erhard

"I don't set trends. I just find out what they are and exploit them." - Dick
Clark

A country is bust when the markets decide.

Albert Edwards, Societe Generale Cross Asset Research

Quote of the Day

"I like players to be married and in debt. That's the way you motivate
them." - Ernie Banks

"We are not makers of history. We are made by history." - Martin Luther
King, Jr.

The secret to trading success is having the "conviction" to play what you
see, but the "discipline" to admit a mistake before it gets too costly.

Some traders are always looking to be right, to justify every trade by

showing a profit. They won't let go of the losers and admit they're wrong.
The best traders, however, know how to balance the enthusiam of the
start of every trade with the key elements of risk management. You should
never lose sight of the risk you're taking. This not only applies to the types
of stocks or ETFs that you're trading, but also the macro environment in
which you're trading.