Monday, March 02, 2009


You guys and gals remember that documentary/show they had years ago where they took at-risk kids (kids who were headed down the road of crime), and they exposed them to real convicts/real tough guys/gals who literally scared them straight. They went in thinking they were tough and untouchable and many of them walked out changed and "scared straight". This format has now been copied on a bunch of reality TV shows, anything from Murray Povich, to some bootcamp episodes on some other shows.

What does any of this have to do with the market, or frankly anything else? Well, I'm using it as a metaphor for what's going on not just here in the US, but perhaps around the world.

I've been thinking alot about who is to blame, what companies, what executives, what politicians for the crisis the entire world now is stuck in for potentially years (many) to come. And, while I can point to a lot of things, and people, and corporations, and systems and other(s), I've come up with only one answer that I feel binds them all.

Now, before I get a bit into it, some of you will find this ridiculous, or offensive, and in my mind that's part of the problem. Not that anyone is "wrong" and I'm "right" but that part of the problem, a large part of it is cultural and spiritual in nature.

We are a culture of consumption. From the day we are born we are force fed at first, and then choose (many of us) to indulge in consumption. Comsumption of games and toys and stuffed animals when we are babies, and then candy, fast food, more games/toys, dolls, designer clothes, fast cars, SUV's, etc, etc, you get the point as we get older. We were and still are fed the idea that the stock market is meant to be consumed. Not eaten, mind you, but bid up into infinity, despite what logic and reality would dictate.

And, all the while we grow fat as a nation while others starve around the world, and amongst us. Now, mind you, I am not excluding myself from any of this, it's my job to help you guys and gals be gluttons for profits. I try to teach and sneak some other, perhaps self=helpy "stuff" in there, but mainly that's my goal, to make you all fat-cats.

We can spend trillions of dollars on wars where we probably don't even belong fighting them, but even if one argues we do and needed to, it doesn't change the fact that we can spend trillions on that, and yet people starve here and abroad. Much of the world doesn't have clean water, nor proper health care. And, many of us, myself at times included, complain about not having a nice enough car, or house, or retirement plan. We consume to make us feel better about our lives, or for ego purposes, but ultimately there is one real truth, we all bleed the same, most of us are born from wombs and ultimately we all die the same.

This problem was borne of consumption, and the feeling that we all needed MORE. That what we have and have had isn't good enough. It's borne of the need to CONSUME as much as we can for as long as we can, to bid up stocks higher and higher, spitting in the face of all logic, and reality.

It is, to me, a spiritual problem. It is an INSIDE JOB, it's not any group of people or corporations. Its not Wall Street vs. Main Street, its the world against itself, its China and Japan, and India and Germany and the UK, and Iceland, and Russia and its US, and others. It's an unwillingness to deal in reality.

I get accused, at times, of being the grim reaper. Most know I deal in reality and we've called and nailed this market for a long time. Many know part of my story, in a way my story is aligned with the theme of tonights blog entry. In brief I was saving to make an indie film from a script I wrote that was a finalist for the Sundance Writer/Director labs, and that was optioned by Dennis Hopper. Making films has always been my dream, still is, and I had put away over $100,000. I had a goal in mind of saving $200,000 and funding the film myself. A friend of mine got a job at a very small brokerage firm and said I should give him some money rather then just let my money sit in a bank account earning interest. So, I did, I gave him part of what I had and in a short period he made me a very large % on my money. In fact, I probably could then have made my film, and fulfilled one of my dreams. Instead, thinking that it was easy money, I gave him almost all my money. In short, the market tanked, I lost most of my money and had to move from a very nice Tribeca apartment to a 5 floor walkup. From a 2000+ sf apt to a 350 sf one. Of course, that episode, while painful at that point, ended up being the impetus to starting, but the point is that I had what I wanted in my hands and I got greedy. What do we say to you all the time? GREED = DEATH. People who bought houses that they couldn't afford because they wanted the American dream, they were entitled.

Companies that were highly profitable developed derivatives and kept leveraging more and more in order to pump up stock prices. Sports figures, actors, union officials who pushed the car makers to the brink of self-destruction, and hence their own constituency in the process. We have not thought long term, for the most part, only short term and at times instant gratification.

Our savings rate was NEGATIVE until all this crisis started. NEGATIVE. As credit cards extended more and more credit to unworthy parties simply to drive up share prices and bolster potential profits.

So, here is where all this ties in for me for today, right now, right here;

The government continues to make EVERY WRONG MOVE possible in my opinion. Instead of praising Americans for pushing their savings accounts to 5+% rate and rising, everything they are doing is meant to try to get us to spend, and spend more. Instead of allowing home owners who shouldn't own right now due to lack of finances, we are taking taxpayer monies to keep those people in their houses. Instead of being prudent, they have given the banks and others billions and trillions, rewarding them for their horrible efforts.

And now, every day, pundits trek onto CNBC calling bottoms for the last 4000 points. I guess the idea is that at some point one of them will be right! Hey, even a blind squirrel finds a nut once in a while.

There isn't a prayer in hell this is a "buy of a lifetime" and yet I've heard this nonsense all the way down.

We need to take a step back and reflect. We are headed to setting up more bubbles, perhaps the same ones we just got out of. Is this the answer?

Is the market bottomed? To both, I say NO. We should get a very nice rally shortly, if not Tuesday. We may even get a bigger extended up move, but it'll end badly unfortunately.

Until there is a change of policy, we are basically doomed to darkness and until these pundits let the market fall to its proper place, we will continue to ulimately just chop around and be sloppy.

Even now as I am falling asleep, the market is bounced up future wise. FYI, I am bearish on GOLD now.


mauiman said...

Your absoluletly 120% right. I have nothing else to say. You said it all!

Markus said...

You're right about what you wrote, Waxie - I just think the metaphor doesn't fit. It rather describes the attitude of investment-bankers until 2007 when they thought of themselves as masters of universe. But then they went into a dark room to have a look at the balance sheets - and since then they trying to get out of this room again. But however loud they cry and yell: the door is locked. And we're all at their sides. Scared. Nowhere to run, nowhere to hide. That's our reality. We are - again - making history. What a (great) challenge...

Jim Murphy said...

Thanks Waxie. Good to hear from you. Your point is well taken. Sounds like it may be wise just to come out of shorts for a few days before re-entering. Appreciate your guideance. "murf"

Glenjammin said...

I couldn't agree more. I have thought for years we are on an unsustainable debt spiral. We borrow money from China and Japan so we can buy the trinkets they make then we are broke so we have to borrow more to buy more. Our current account deficeit keeps getting bigger and bigger. It is not economically healthy for either party.

And you nailed the cause, consumption! Something is fundamentally wrong with a system where people have to spend more than they make or the economy goes into recession. It all starts with the tax system. When something is taxed it discourages people from doing it. By taxing income and capital gains we are discouraging people from working and saving. Low sales tax encourages people to spend and consume. We should get rid of income and capital gains tax and have a consumption tax instead. If you want to work hard and send your kids to college you won't be taxed, if you want to spend your money on trinkets then you pay tax.

Derek future said...


I just finished reading your book and I wanted to Thank you. I have been following your program and visiting your blog often. you have been on the money with this market. CNBC should have you on Fast Money.

I have followed your recommendations and I have been up over 22% in month. I am still trying to learn GAP trading and understand how it works.

I wish I could order one of your programs but money is tight. My goal is raise enough capital so I could subscribe to one.

You stated your bearish on gold. How far down do you see it going. Not to sure if I am late to the party.


Mike said...

How can our president be advising people to buy stocks??? Is he crazy? Is he the new Jim Cramer? CAn we sue him if the market tanks after he recommends a stock?

katleninc said...

You are right.We can call it as a spiritual or ethical problem based on greed and ignorance. The reality is that, we are humans and we have a relationship with God. In the absence of that equation in our life, our actions are bound to fail.