investing Archives - TheTranscendenceDiaries

The Current State Of the U.S. Financial Markets – A Few Thoughts

October 25, 2023

Hey brother, I obviously can’t cover it all, and lest we forget, this is a 55/45 game at best. Despite our best Fundamental AND Technical analysis, there is still no better way to make and more importantly save money than forgetting the short term and just adding in and keeping it in LONGterm. Because NObody gets it right all or even most of the time.

But here are Some Notes as of today…. Bearing in mind this is of course all due to change.

The problem we have here today is multi-fold:

In this kind of sell it all environment we have today, it doesn’t really matter what earnings are compared to normal. A Beat could still be met with a lukewarm reception. Which would fry the shit out of all those overpriced High IV Calls people bought.
Look at MSFT as a perfect example. A BIG beat. But it’s DOWN 7 from the days high and down 6-7 from its Open. I.E. all the action was in extended hours. Options holders got screwed.
META. It’s been in and still is an admitted restructuring phase where it warned shareholders they’d be spending a lot more to build and grow over the next 4-6 quarters as it fully transitions into META from FB. If they Miss in any way, it’s going to drag this market down tomorrow in a way that makes today look like a day at the beach.
If it Beats, it could really help bring some life back to the DAQ. But a 2%+ reversal from today? No way. AMZN is next tomorrow. No one is expecting much. Because AMZN earnings are always a wash. A traditionally notoriously unprofitable company except for its AWS cloud services. BUT if GOOG’s massive Cloud services Miss was any indication, and businesses are truly moving away from Cloud, AWS could also decline, pushing AMZN down. And Putting even more downward pressure on the NAZ. And then there's AAPL the most heavily weighted stock on the 3 Indices. Where AAPL goes so goes the NAZ. And this is why we've seen such ugly action in what's usually a great month, October. No one is expecting a Beat from AAPL this time. Too many problems. Too few new products that excite. Declining sales in China and the US advance notice already given. And a fully over-saturated market. (Hence perhaps todays announcement they're raising the price of AppleTV+. The one saving grace for AAPL and us all... It's burgeoning Services dept. If they can continue to show growing demand and revenue from Services, it might squeak by and save the day. My prediction: Services will show good steady growth. But it won't be enough to rally the stock. I am praying I am wrong on this and that AAPL absolutely blows the roof off of its release. Truly. Nobody wants a losing 4th quarter in the mkts. Except the hardcore Shorts. Markets in general. All four indices are now in clear downtrends. The Russell is actually down -5.7% on the year. This normally is a bearish indicator. The DJIA is only up 6% on the year. Ouch! For "the Index of Indexes" that ostensibly holds only the strongest healthiest and profitable 30 companies money can buy of all Sectors, this does not bode well. The S&P is still holding a decent 11%+. But it's sitting right on top of both it's 50 and 100 Day MAs. That needs to change. Fast. And then there's the beloved NASDAQ. Still up a whopping 26%! It has now almost transcended being an index of stocks and is more akin to a roulette wheel, with more and more mkt participants, and algos, trading solely off the NAZ itself with no knowledge or concern for what actual stocks comprise it. The 10 Day has now dipped below the 20, and the price is now below both. But it's got a LONG way to go to reach the 50 or 100 Day. So it's still far from worrisome. In fact a 26% return in a year is downright mouth watering. Of course META AMZN and AAPL could and will impact the index considerably. We just aren't sure which way.... One bright spot to note: although the VIX is up over 25% in the last month, it's still hovering around $20. That’s elevated to be sure, but it doesn't show massive protection buying going on. Not yet at least. We'll know more tonight. And next week. Inflation and Rates Simply put, Inflation is still too hot. Ask consumers. Ask Hedge Fund managers. Or Big Company CEOs (privately). As investors, fund managers and CEOs, of course we all want rates to come down. But nobody is kidding themselves. The Fed made a mistake by pausing too soon. Maybe it was the pressure from markets. Maybe it's an honest mistake. But the bond mkt -- some say THE leading indicator, is flashing rates need to go higher still if we're ever going to get inflation truly under control again. Sure it'll hurt. Again. Even more. But what we have here is just prolonged pain caused by this never ending feeling of indecision and distrust that inflation isn't going to come rallying back in 3-6 months. One might say that, frustrated with the Pollyanna style of the current Fed, the Bond Market is doing the Federal Reserve's job at the moment.

The Most Important Thing To Know When It Comes To Trading and Investing Markets

September 21, 2023

When it comes to trading and investing markets, I’ll tell you a secret. The most important piece of data you’ll ever hear about it.

As traders we go long and short. But markets, and the instruments that compose them i.e. stocks and ETFs, trade Long 90% of the time. (Meaning Calls) Because institutions, who do 99% of the investing in markets, always go long, i.e. they are always buying. Not selling or shorting. (Puts)

Think about it: young people go to their local institution and say we’d like to invest our small savings. Meaning BUY. Meaning LONG. Meaning Calls. They don’t go in and say we’d like to take our small savings and go short. Hah! So shorting is a precise skill. Because it can only succeed a mere 10% or less of the time in terms of general markets and their activities.

Of course one can become an expert in shorting (Puts) looking for opportunities to only short (puts) markets and stocks and ETFS. And they can do just as well. But this involves precision and daily attention and activity. Because markets traditionally and in general are always going up.

More later.

Progress Is a Relative Term

September 4, 2016

I recently watched a brief speech given by Elon Musk on a social media platform where he was speaking about climate change in regards to carbon emissions and our need for sustained energy. But healthy sustained energy. Everyone knows by now that big oil and coal are the enemies of a healthy planetary environment. At least that’s the meme subscribed to by the majority of the human population. Solar power, hydro, nuclear and wind are the most popular solutions being offered. Musk has the most to profit if solar becomes the energy provider du jour. But I personally wouldn’t permit my mind to believe that this plays too much of a role in his business ventures nor in the ideals he proposes. He’s made his money.

In his speech he speaks of all the doom and gloom we can look forward to if we stay on our present course of burning fossil fuels and producing such high levels of carbon emissions. How at least 5% of the world’s coastal cities will soon be swallowed up and wiped away by the oceans.

There’s a moment where it becomes quite moving…. As moving as a speech by Musk can be at least. What will we say when our children and grandchildren ask us “if we knew what we were doing? We will have to tell them that yes we knew what we were doing…”

I’ll share something here that I’ve hinted at before, touched on… It’s taken a while to really get it under my skin in a way where I could speak cogently about it.

As most people know, I spent the better part of the first 40 years of my life on the outer OUTER fringes of society… Never watched TV or played sports or went camping or any of the other things that most Americans spend their time doing. All my free time was spent deeply immersed in a world of music, art, learning and spirituality. Consciousness exploration. Searching for God and truth. Learning studying praying meditating traveling marching protesting & activisting mainly. I was hopeful. Idealistic. Rise and shine.

A few years ago when I hit this age and income bracket that compels some of us to become active investors it was a real wake up call to me. Still is almost on a daily basis… Many of these men and women are my friends now. Powerhouse names in the investing community, but names that most everyday people have never heard of.

And the truth of it is that you just wouldn’t believe how utterly entirely uninterested and uncaring the majority of the people in this particular world are in these matters that people like me spent their entire lives battling. The causes and issues we march and fight and petition and protest for. Big oil is to be prized. We’re talking 7% dividends on some of these bad boys! Drill baby drill! They think the whole global warming issue is a foolish hoax.

Big Pharma may be the people’s enemy. But it’s the investor’s best friend. We need to get government out of our way and raise those drug prices even higher to get that share price moving. Monsanto may be public enemy #1… But forget all that silly talk about them being “bad or evil”; they’re just ONE of the many in that sector and frankly they’re a damn good profit making machine who also pay a great dividend. They’re not going anywhere.

See… “progress” is a relative term. What one group sees as progress, i.e. generating bigger profits and creating more wealth, another group may see as absolutely devastating. To the public good or to the environment for example. And in turn, what this group may consider “progress”, i.e. more regulations, labor laws, higher wage obligations, another group may see as absolutely devastating. To the financial bottom line in this case.

Of course I’m used to this now. This strange dichotomy between these different groups of people…. both of whom I sincerely like and respect. But the much larger group in influence — in terms of access control resources friends in the mainstream political and media influence — is this investor class; and they literally have absolutely no clue about any of the things that this other activist group fight for on a daily basis. It’s mind boggling how clueless they are about the harm or dangers inflicted on the earth or its people by major industries.

In order to save you a lot of time and energy of your own, I will reveal some of the revelations I had while exploring this world and explain the reason why we haven’t and won’t make any progress in these “big arenas” of our lives until it’s way too late –something I myself wondered for years as an idealistic activist.

It is actually very simple to understand if you do what I did and jump full bodied into the business/trading/investing world to soak it all in and learn. THAT little world, though small, literally controls the entire world. It’s the “great wheel” that moves every other little wheel of every industry and aspect of human life on earth. (And in space).

From currencies to commodities (stop now and look up wherever you are…everything you are seeing is a commodity), from every business and industry to every government and political leader or civil servant…they are all controlled and governed by, hell it would be better put to say they are all literally created and put in place BY, this small group — the investor/business class….

People still think that “they’re in the way of our progress as enlightened citizens and activists…..” What they don’t realize is that THEY are literally the car we’re all driving in. They’re not just driving the car. As some might interject. They create the car, decide on whether the car should continue to exist or not, decide on what color it should be –capitalist or communist…the entire system we live and breathe in is created and sustained by this small group.

Headed up and controlled from the top down by Central Banks at the very top, investment banks and the wealthiest individuals who own and control them just below that, and on down….the “people” are way way way down at the bottom of this pyramidic structure. I’m sure you’ve seen this pictorial before.

Money….because of the (perhaps sad and) simple fact that we human beings have created it as THE MOST ESSENTIAL IMPORTANT & NECESSARY OBJECT TO HUMAN SURVIVAL… is the prime mechanism that drives this industry, and this industry in turn controls all that money, which translates to them literally controlling every action and reaction we’ve ever heard of or read about, every invention or intervention, every government and politician, every monarch product service law rule political party idea you name it…the gate of whether “it” is allowed to exist or not AND how “it” is perceived lies squarely in the center of this tiny little world. Controlled by such a small percentage of the human population.

It’s actually quite fascinating. Objectively. If you can find a way to leave your emotions at the door for a while. Really gets the cerebral blood flowing and the heart pounding. Because we are speaking about nothing less than how an entire race of people, an entire species of beings, is governed. What they think, how they think, what they do and how they do it. All of it.

Because “long term survival of others” is not an idea that pops up on anybody’s radar in this group, the ideas and actions that are motivated by that idea are completely ignored. Ignored is the wrong word. They’d have to be thought of or heard to be ignored. And they’re not even thought of, so they’re not even considered. Because it’s simply not a motivating idea in that world.

Short term and even long term profit IS. But survival of “all of us as a group” is not. In case you reach that point in your contemplation of “well what do they plan on doing once 5% of the earth is swallowed up by the ocean?” The answer is they know THEY won’t be THERE being swallowed up by the ocean is what they’re planning. It’s really that simple.

“But what about their children and grandchildren?” you ask… “Don’t they care about them?” Yes, of course they do. But they will be completely shielded and protected from any of the tragic fallout from present day actions just as these people are today. Because they too will have the same money and hence access resources power control and connections that their parents and grandparents have today.

I too am bothered by leaving you here…in such a sullen place… surely there’s more to it, more that can be done… Yes I believe that too. In fact I believe that the more of us from this “other group” who deliberately jump into the world of investing and business the better. Our “strange ideas” of health wealth liberty happiness and prosperity for all will slowly rub off and catch on. For there is great joy–and benefit– in groups. In being part of a group. And in helping others. We just need to keep sharing and vibrating that.

As always, more later.

– Posted by The Ambassador using BlogPress on an iPhone

The Problem With Social

April 30, 2015

A caveat: for those more accustomed to, and more interested in, the usually more philosophical, theological or sociological nature of The Diaries, you may want to skip this post. It’s about finance and economics and more technical than usual. Just a heads up. If you do decide to venture in, I will clarify a bit more than usual regarding the economy and investing world to give context — so another caveat, this one for those who are already well versed in all things finance and investing: you may find the first few paragraphs a bit elementary… feel free to skip ahead, but hang on and stay in. This one’s for you and there are worthy takeaways to be had.

The investing world is abuzz with Silicon Valley again and it has been for a number of years now. It feels like 1999 all over again. Both the American and European stock markets have been on a tear — in what is commonly called a “secular bull market” — for almost six straight years. People who are active or even passive investors in “the markets” have been making money hand over fist from doing absolutely nothing but just staying invested. It’s an odd paradoxical dichotomy — and it truly is — that as the American economy continues to drag and sputter, making financial abundance, or even stability, seem increasingly unreachable for the majority of Americans still, the top 1% have been doing incredibly well in “the markets”. This paradox is well known amongst the wealthiest in the country. It’s not a mystery or an unknown. It’s very well known, sad as it is, amongst the people who are making all the money. It’s a given. And there are very specific reasons for it.

One might remember investment guru Warren Buffet commenting a few year ago how ridiculous he thought it was that he pays less tax annually than his secretary does. This surprising statistic is simply due to the fact that the common bread earner in the United States pays a much higher tax on their “income” i.e. the money they earn from their job, than an investor does on the profits he or she makes in any kind of investment. That tax — known as the Capital Gains Tax — is capped at 15%. What this means is that whether you made $100 from your stock market investments last year or $1,000,000, you’re still only required to pay 15% tax on it. With the right kind of finagling — owning a few corporations that make big money — enough to fund even the most lavish lifestyles — but somehow mange to “not make a profit” but instead make a loss (and this is more common than the average person realizes…) and you can even reduce that measly 15% capital gains tax further down and come out paying Uncle Sam next to nothing, as in ZERO. You just have to know the game and how it’s played.

But this post isn’t about that. Perhaps one day we’ll go into further details about this sad but true paradox, because I must admit I do receive a fair share of requests from folks begging me to explain to them how on earth one is capable of making hundreds of thousands of dollars a year and paying next to no tax on it. It’s not as hard as most people think. In fact it’s quite easy. Again, you just have to understand how the system works. So yes… perhaps we will get into it one day… But today is not that day.

Another reason for this strange upside down economy is due to Federal Reserve policy. “The Fed” as it is commonly referred to is a large private cabal of banking cartels who control the monetary policy and the money supply of the United States. The funny thing is that the Federal reserve is NOT “federal”; they are not a branch of the U.S. government. They don’t work for the U.S. government. They answer to no one. But they make all the rules. (This is truly a whole book unto itself, let alone too much for even a series of posts — so one is encouraged to take some time to research this incredibly vexing scam…) In a nutshell this organization that controls all things monetary — think the economy — is the primary entity that loans the United States the money it needs to continue to operate. When you hear terms like the national debt or national deficit, this debt is owed to this company known as The Federal Reserve; they being a private bank who exist solely to make money charges the U.S. interest on the money it lends the country, just as any bank does; thus in a way one could say that the Fed has a vested interest in seeing the United States economy do well — at the moment the U.S. owes a staggering amount of money to this organization, something to the tune of 17 TRILLION dollars.

In exchange for all the money The Fed loans the United States to stay “in business” so to speak, the United States government allows the Fed to do just about anything it wants to — including for example keeping it’s books private and sealed. One might have a recollection of a few years ago when then-presidential candidate Ron Paul (remember him?) tried to pass a Bill in Congress to force The Fed to allow the U.S. government to see it’s books — as in take a look at its accounting records. This would seem to be rather a no-brainer, right? All public companies are obligated to make their accounting records open and available to the public — how much money they have, how much debt they have, how much money they are making in gross revenues and net profits, etc. etc. But The Fed is no regular “public company”. It’s ironic if not downright terrifying that 99% of Americans do not even realize that The Federal Reserve is not only NOT part of the federal government, but they are so private that no one in the United States government is even allowed to look at it’s books. The word shocking comes to mind. But terrifying fits the bill even more appropriately considering how much power this private group of banks has over the health and wealth of the whole country.

So how much power DOES this private group of banks have over the United States? Put it this way: The Fed has the ability to say yes or no to the United States government regarding how much money it loans them or doesn’t — as in any day they can collapse the American economy or continue to allow it to wrack up more debt. It’s all in THEIR hands and truly no one else’s. They also of course have the power to set monetary policy in general — this is why it is a fool-hearty idea to ever blame a good or bad economy on any American president, for they simply don’t have much power in regards to the economy, but that doesn’t stop most people from still doing this. The primary thing the Fed does in regards to “setting monetary policy” is they decide what the lending rate is at any given time in the American economy. At the moment it is set roughly around -0-. This is the rate of interest that banks can charge each other to borrow money from one another. This “prime lending rate” has a great influence on all the other interest rates in a healthy first-world society such as mortgage rates or car loan financing interest rates or the interest one receives from investing bonds or savings accounts or bank CDs.

You might have heard the term QE bandied about over the last few years. QE stands for Quantitative Easing, which was the Fed’s fancy term for lowering the prime lending rate down to a record low AND at the same time temporarily loaning the U.S. billions of dollars by buying various bonds from the United States and various other banks — they did this in order to “stimulate the economy”, as a means to get people spending again and to get banks loaning money to people again. So far it hasn’t worked out as well as many hoped it would. BUT to be fair it did at least according to general agreement amongst most experts save the country from sinking into another Great Depression from our recent Great Recession (the recent economic crisis we experienced in 2007 and 2008).

What this policy did do though was stimulate the hell out of the American stock markets. By lowering interest rates down to near -0-, people with money had no other choice but to invest their money in the stock markets — simply because they couldn’t make any money with their money from investing in anything else. Savings accounts, bonds and CDs offered zero to almost zero return, i.e. interest. If you add in even a small amount of inflation — the price of goods increasing compared to the value of the Dollar, and one would actually LOSE money if they had invested their money in a savings account, bond or bank CD due to how low the interest received was. So people with money jumped into the stock market.

This is what has created one of the strongest and longest running bull markets in American history. More and more money has poured into the markets and as long as this mysterious organization called The Fed continues to keep interest rates LOW, then people assume that the stock market will continue to go up. From the outside, from the view of the average American who doesn’t bother to pay attention to monthly and quarterly economic data, things still seem rather bleak to be sure. Unemployment has supposedly declined, though many doubt this claim. Jobs still seem few and far between and raise and promotions seem a fantasy of days long gone by for most.

Except in the world of finance that is. You see, every time we have economic data — the investing world holds its breath: if the data is GOOD, the markets tank, as an improving economy would compel the Fed to start raising rates again which could signal the end of the bull market. So instead people who are heavily invested hope that the data is BAD. In the world of investing this is known as the “bad news is good news” paradigm and without fail every time any economic data comes in that is “bad” for the average American, you can hear and see high fives flying around Wall Street like wild fire. It’s an upside down situation to be sure. Instead of the stock markets flying high due to a healthy economy, it continues to fly high due to hopes that the economy stays bad. This will keep rates low and insure that more and more money will continue to flow into the markets. Again this may sound shocking to the average person, but it’s not exactly “news” to those who invest their money for a living rather than work a regular salaried job. Frankly yes it’s easy to see why anyone first learning of this closely guarded bit of data would claim that it’s fucked up. It is.

In a nutshell there’s your lesson in finance and econ for the day. Now on to the main point of this post.

Today we are going to focus our attention on the Social Media sector of the investment world. [Again just for those who may not know this: the investment world is divided into sectors FYI. There are many of them and savvy investors are familiar with them all. For example there’s the Semi-Conductor sector (what we refer to as “the Semis”), the Consumer Discretionary sector (Tiffany, Coach, Whirlpool — basically anything that is not essential to the consumer but is purchased when the consumer has discretionary money laying around…), there’s the Oil sector — which is further split between the Refiners and the Oil Services companies, and on and on it goes. Believe it or not, once you enter this world — as with any — it becomes very easy to memorize all the various data points, statistics and acronyms.]

Two sectors that have been red-hot over the last few years have been the Technology sector (usually referred to as “Tech”) and the Social Media sector (often just referred to as simply “Social”). Companies like Facebook (FB), Google (GOOG), Twitter (TWTR) and Yelp (YELP) are all part of the Social Media sector and even the most distanced individuals have surely heard the stories over the years about the ridiculous amount of cash people have been making from investing in these “hot companies”. Silicon Valley is on fire at the moment, with venture capital spending reaching all time highs once more pouring money into the latest start-ups hoping that they can eventually turn them into the next Facebook or YouTube.

The word on the street for these companies is Unicorn. You may have even heard the word bouncing around lately as it is one of the many newest trending in the social media world. A Unicorn is any super hot start up company that is raising a ton of investment capital — usually to the tune of one billion or more — in the Valley with the intention of eventually going “public” — all long before the company starts actually making money. The companies just have to show growth in their user base and their “potential” to make money and people will throw millions upon millions of dollars at them. A few of the hottest Unicorns at the moment are Uber, AirBNB, and Pinterest. Yes from the inside it all appears just as blatantly stupid as it does from the outside. But this is just how the markets work. They are completely irrational, as they always have been.

At this very moment analysts and traders on CNBC’s midday show Halftime Report are all discussing the Social Media sector. Primarily because during this latest earnings season social media companies have been getting clobbered. After running up to more than $85 a share Facebook is now trading below $79. Twitter dropped from $55 a share to $38 in one day — you have to imagine having say a million dollars of your clients’ money invested TWTR and having that figure lose almost half of it in less than 24 hours to really understand the ramifications of such a dramatic drop. YELP not to be left behind performed the worst out of all of them so far, dropping from a high of $85 earlier this year to a measly $39 as of today’s trading session — losing 22% of it’s value in just one day and more than 50% from its highs of the year. When you contemplate the insane amount of money invested in these companies by hedge funds, money managers and investment banks — in the case of YELP, a smaller player, we’re talking billions of dollars invested, you begin to fathom just how much money that is to lose in such a short period of time. LinkedIn was the latest social player to kick the bucket: In one day their stock fell from $250 to $203, a 20% loss in less than an hour.

But why? WHY are social media companies taking such a beating? All the talking puppets on CNBC, Bloomberg and FOX Business News continue to talk about these companies with big smiles on their faces as if they are viable investment vehicles — no one ever saying what would be clearly obvious to even the least educated in business and finance: the American consumer is sick and tired of being advertised to, and social media companies make their money, or at least they’re supposed to, from collecting advertising revenue. You see, once upon a time Facebook made mention that it might start charging for it’s services — charging the everyday user to have a Facebook profile and communicate with their friends and family on a regular basis. The backlash could be heard in places as remote as the Himalayas! The week they made this announcement, as ironic as it may seem, the FB newsfeed was filled with posts advertising that the BAN FACEBOOK DAY was soon upon us as everyone and their brother announced that they would not stand to pay a single penny to use Facebook and they would immediately jump ship if such a fee was ever initiated. And that was the end of that idea. Facebook learned a valuable lesson from that stunt — people may love you if you’re free, but that doesn’t mean they have any intention of giving you any of their hard earned money. They don’t love you like THAT.

It turned out that Facebook was not as essential as it thought it might have been and thus they had to go back to the drawing board to figure out just how they were going to actually generate MONEY. See, Facebook WAS hugely successful in terms of it’s popularity amongst users. At one point it reached one BILLION users globally. That’s a phenomenal figure when you consider it for a moment: it translates to almost 20% of every single person on planet earth having a Facebook account of some kind. But the company didn’t make any money. The average person on the street, struggling to just pay their monthly bills always has a tough time understanding concepts like this: how can a company be as big as Facebook (or Amazon or Yelp or Twitter for that matter…) but not actually make any money?!? It seems illogical. And in reality it is. The truth is that these companies BORROW the money they have from what you commonly hear referred to as “angel investors” or venture capitalists. They then use that money to grow their business with the hope that one day they WILL make money… Some do. Many never make it. Amazon — one of the largest companies in the free world still operates at a loss every year. Yep. It’s true. They bring in billions of dollars a year in revenue. But every year they report not a profit but a LOSS, meaning that they spent more than they made. How is this even possible? Simple. They borrow more money and go further into debt based on the idea that one day they actually will make a profit. It’s a funny business. One that just about any average American would love to be able to take advantage of in their own personal finances to be sure. Problem is, banks and venture capitalists aren’t interested in you or me and our ability to pay our bills or even have enough money to eat for that matter. Instead they are interested in future profit potential. That’s life in a nutshell. As unfair as it is, that’s just how it is. You’d have a better chance at borrowing money from a bank — millions even — if you presented them with some dumb idea that showed that you could have half a million “users” by year end 2016 than you would just asking them for money to put food on the table or pay your mortgage. It’s capitalism.

So where were we? Ah yes, Facebook. So here’s Facebook, a simple idea, a dumb idea, at best a rip off of MySpace (remember them?) who was a rip off of Friendster (remember THEM?) showing tremendous growth in “users” but no way to make money from these users. So how to monetize all these users? That was the question…. This was back in the days when Facebook had swept Wall Street by storm by going public and seeing it’s stock price go from $16 to $45 in one day and then having it quickly fall back to $17 where it stayed for a few years, leaving many investors sorry they ever heard of the name. Imagine that kind of a loss in your retirement portfolio. Eventually Facebook got smart and created a very simple advertising vehicle for any and every one to use — a way for users to advertise to each other. “Here’s my Page. Like it!” It didn’t cost that much, you could set the amount you wanted to spend each day, and you could actually see your little ads pop up on the side bar of your Facebook screen now and then. It felt good. And it seemed to generate actual results. It was similar to buying an ad from Google to get more traffic to your website. And we all know how well Google had done… Facebook is presently worth about $178 BILLION dollars. Google is worth roughly TWICE that.

So began the great social media company frenzy. It was 1999 all over again. All a company had to do was show that it could grow its user base, forget about making money or generating a profit, and the investment dollars poured in. Twitter soon leaped onto the scene and ran up to $55 on it’s first day going public from a starting price of around $16. This valued Twitter at about 35 billion dollars overnight. For a company that wasn’t even making a billion dollars a year, nor anything close to it. But it was all about the user growth. Twitter still operates at a loss — meaning that it loses money every year rather than makes it. How would you like that kind of job? TO get paid for losing money? But the pundits had valid points: Twitter WAS popular. People did seem to have a valid interest in and excitement about it. The problem was and still is that that excitement is fleeting. Today’s Twitter is tomorrow’s Snapchat or Tumblr. Remember them? Yahoo purchased Tumblr — and what exactly was Tumblr in the first place? a blog for kids? — for some FIVE BILLION dollars. There’s money they’ll never get back. And Tomorrow’s Snapchat or Tumblr is next week’s Meercat or Periscope. The landscape is constantly changing in the hands of the ever-fickle American consumer. The truth is that they really just don’t CARE.

And that’s the big disconnect between Wall Street and Main Street. The average person on Main Street has a life. Family problems, car problems, job worries, relationship woes… They could care less about Facebook or Twitter or Snapchat or Tumblr in the grand scheme of things. When’s the last time you heard anyone even mention Tumblr? But the folks on Wall Street don’t recognize this simple fact of life. These are minor trivialities in the hearts and minds of the average consumer, these “fancy websites” they call social media. They don’t put food on the table. They don’t even offer anything relatively substantial or of value that cannot be had elsewhere. NEW is much more exciting to the consumer than been there done that. It doesn’t mean that mom still won’t keep trying to Message you on Facebook this year. She probably will. But are you really even paying attention anymore?

Environments like Facebook and Twitter have continued to remain semi-entertaining and even useful at times when one has nothing better to do or when there’s big news we want instant access to… But when we’re in the mood for big news, we are NOT interested in ads clogging up our newsfeed. Nor are we interested in ads when we have nothing better to do than scroll through old friends’ attempts at wit or their latest selfie or cat photograph. Let’s face it, social media is fraught with meaningless drivel. Hence the shift back towards more meaningful content platforms like blogs or even texting.

Every social media company is reporting user growth increasing but revenues and profits shrinking. And the simple reason for it is because nobody likes being advertised to. The television world and Wall Street already recognizes this fact as more and more people shift away from traditional TV towards digital alternatives like Netflix or Hulu or flat out stealing online. This is the time of the great peregrination of the consumer away from advertising — why? Because we can. And in an environment like this, you better not have advertising revenue as your main means of generating cashflow or you’re going to be screwed. YELP is the perfect example. Yelp is actually a great tool. Nearly everyone has it loaded on their phone and loves it. The problem is that no one is willing to pay for it. (The music industry is going through a similar shift…) Yelp wants to generate revenue from selling advertising. But the users who use Yelp the most absolutely REFUSE to use Yelp if they believe that any of the data they are reading such as reviews are being influenced in any way by advertising dollars — in other words, people want to believe what they read on Yelp. They want to read ALL the reviews, not just the ones that some company has paid to place there, and they certainly don’t want to find out that companies are able to pay to have negative reviews removed from Yelp. What’s the point of the app then? See the problem? Yelp is basically fucked. A valuable tool with no viable way to make money.

Twitter god love it is in a similar position. I personally use Twitter all day as a means to receive notifications about subjects I am interested in ON MY PHONE. In other words, I set up notifications to come directly to my phone from Twitter about various different subjects or different individuals or even tweets that may mention me — the president of Iran will shoot out an interesting tweet now and then, and where else can one access such data but Twitter? But that doesn’t mean I ever scroll through the Twitter newsfeed or what they call their “Timeline”. The truth is I never do. The notifications come to my phone. I scroll through them. Get the basic gist of what was said. And I move on. All on Twitter’s dime. Or better put on the billions of dollars invested in Twitter by their investors. All without ever paying for Twitter and all without ever seeing an ad. Hell, like most people I’m downright annoyed and pissed off when I see an ad on Twitter. How dare they?!? And yet THIS is precisely how they intend on making their money! From advertising. It’s farcical when you really start thinking about it.

We have to begin to realize and acknowledge that we’ve reached a crossroads in the global economy. We’ve raised a whole generation on free usage based on the idea that we’d make our money from advertising — while at the same time weening them off of advertising on every other platform. There are hundreds of apps now on the market that REMOVE ads from Twitter and Facebook. And one would be right to believe that very soon there will be apps to somehow remove the ads from Pandora and Spotify as well — which is how those companies make the majority of their money as well since they’ve programmed whole generations to believe that music should be free — just about the dumbest thing one could think to do if MUSIC was the one and only product that you wanted to sell in your business. Again, we’re at this major crossroads where at some point soon, something has to give. Investors are going to learn sooner than later — just as they did in the dot com crash of 2000 — that they can’t keep pouring money into businesses who don’t actually make money. And businesses are going to eventually learn that you can’t run a business offering the main product you sell for zero dollars. It’s an illogical business model. And all it’s done is destroy more than one industry, the music business just being one of them. TV is next. Social media never really was in reality. And people are just starting to see that now as these once high flying stocks crash and burn.

As a sidenote with a potential solution, look at the companies who actually DO have a chance at making money. Out of the three Unicorns mentioned above, Pinterest is another Yelp waiting to happen. They’ll garner billions of dollars in investment capital and blow through it all in the hopes of turning all those bored moms and housewives into advertising clicking robots, only to realize that those bored moms and housewives aren’t any more interested in clicking on ads as the rest of us, and they’ll go belly up a year or two after going public IF Wall Street is dumb enough to take them there. But Uber and AIRBnB are different. Both of them actually SELL something besides advertising. Sure there’s a social aspect to both companies. That’s just the new normal — there has to be a social aspect to EVERYthing now. Eventually we’ll have apps where people post their latest and greatest bowel movements for others to see and rate. (If those already don’t exist, which I can’t with certainty…).

But the key is that the social aspect to both Uber and Air BnB is NOT the product itself. It’s a byproduct of the actual product. And that really is the key to this new environment. Social is key. But it can’t be THE key. There has to be an underlying product to be sold. And “to be sold” means to CHARGE MONEY FOR IT. Just as PayPal charges a few pennies on the dollar for every transaction, they’re offering a very valuable product — the ability to exchange money with freinds, family and business associates without ever leaving your home or office, or even your couch for that matter. All from the comfort and ease of your smart phone. That’s smart. Uber and Air BnB are doing the same thing. Small fees. Nothing fancy. But they’re actually making money. And isn’t that the reason to start and run a business in the first place? What companies like Yelp and Twitter are going to do is a mystery. They’ve screwed themselves from the outset with a faulty business model. As have companies like Spotify. The next few months and years are going to be ugly as this grand experiment fails and falls to pieces in rubble all around the feet of Wall Street and Main Street investors. People are already asking “are we in a bubble” everyday now… and truth be told, in the bigger picture of the investing world, no, not quite yet. But in the social media sector we’re beyond bubble territory. We’re in the sloppy frothy messy slime and sludge of a bubble already burst. Most just don’t see it yet. If you’re into shorting, now would be the time…

Check Your Morals at the Door of the Trading Floor

December 13, 2013

Deep uncover still, exploring the world of investing and trading. Six months now. Don’t get me wrong, It isn’t just research; it’s also a way to make money. But it isn’t as easy as it once was. Those days are long gone. Yes, with the right amount of capital it isn’t difficult to make anywhere between $500 to $2000 a day actively trading. But it’s intense and stressful. And always a risk. You’re on the edge of your seat the whole time. Every minute seems like an hour when you’re in the middle of a trade. When you win, it’s exhilarating. When you lose, it can happen in an instant and there’s nothing that feels worse.

This is our third exploration into the world of active trading. The first was the period between ’97 to 2004, when I was still a kid, wet behind the ears and green as a newborn. Then 2005 to 2007. By that time I’d already made my fortune and investing was just a way to have fun with money. And now, once again we’ve jumped into the pool with the sharks. But this time it’s different. There are motives here much bigger than just to have fun or make a little extra money. And things have changed in this world. A lot. For everyday readers of the Transcendence Diaries, this isn’t going to be as transcendent as usual, but give it a chance. There is learning here. Just a very different world than what you’re more accustomed to here.

Yes, indeed, things have changed tremendously in the world of trading and investing. And yet things are seeming more and more like the old days. More on that in a few. For one thing HFT (High Frequency Trading) has been invented and is solidly embedded into the system; hell it is the system now. It makes trading operate at a rapid fire speeds. Mili-seconds matter. Pico-seconds in fact. [Many of the things I make note of will need to be Googled if not understood. For the purpose here is to post observations and lessons, not define terminology.] When I first started actively investing it was in the mid-nineties as already established here in The Diaries numerous times. We were in the process of a giant economic recovery in America which many mistakenly believe to be the effect of the Clinton White House or Alan Greenspan, when in reality it had a lot more to do with Silicon Valley and the advent of the internet age and modern technology becoming a regular part of the everyday man’s everyday life. Not only that, something amazing was invented, something truly revolutionary. eTrade. The ability of the average citizen to invest their own money their own way, in real time, without the need of a middle man or a broker.

eTrade was the first such system. Trust me when I say it was truly revolutionary. Up until that point you really did have to call a broker to buy or sell any kind of investment vehicle such as a stock or a bond or an ETF. Hell, ETFs barely existed back then. I was one of the first eTrade clients, coming on board in the beta stage as an early adaptor the same way I did with PayPal and eBay. Elon was still with PayPal back then. eBay was still a home based business. You became friends with the people you bought from and sold to. It was a small community. eTrade too. I still use the same eTrade, ebay and PayPal accounts from 1997 and 98. People are amazed when they see the date attached to my accounts. As if these are relatively new inventions. But to many people they are. That’s something that we always have to remember. The reason why companies like eBay and Netflix are still so valuable is because they’re nowhere near mainstream market saturation. Most people still don’t have a PayPal account; just as most people still don’t have Netflix accounts in their home. So there’s plenty of room for them to grow.

But back to the real meat of the story. Now eTrade is considered the old guard. The old dog that can’t learn new tricks. Try as they might they are having difficulty keeping everyone on board, though they’re still the most used platform out there overall. There’s something about being the first and the oldest that can backfire on you, whether product or service. The same way that Facebook ate MySpace who ate Friendster. Only time will tell if Tumblr will eat Facebook. I’m going to say no. But hey, they made their billion so at this point, who really cares. (Herein lay one of the main points of this post, along with a few dozen more, i.e. how similar today is to the dotcom crash of 2001. But that’s for later.) There are a hundred of these types of electronic home trading platforms out there. Scott Trade, Cool Trade, Ameritrade. Think Or Swim or TOS for short seems to be the popular kid in school these days, the current flavor of the month. Especially with the career traders, the ones who wake up every morning in their bathrobe and actively invest for a living all day. I’ve been there. I know what it’s like. I’m doing it now, though more for research and learning than for a living obviously.

Something has definitely changed though. Now everyone and their brother has access to a computerized home trading platform. And everyone who does fashions themselves an expert. I’ve joined about two dozen investing services over the last few months in order to get a real feel for what’s going on behind the scenes with these retail investors, the average Joes, versus the big dogs. Whereas the big fund managers that we smoke cigars with every day at Barkley Rex or De La Concha are trading huge amounts of cash in the hundreds of millions and billions, the owners and members of many of these trading services are small players. One thing I’ve noticed is this: the big guys, the ones worth seven figures or more who have taught me much of what I know about wealth and finance are quiet, humble, and careful with their words. They volunteer at their church on the weekends. They do their best to keep a low profile. The smaller guys are the exact opposite. They talk a BIG game. They really believe they’re “the shit”. Or at least they talk like they believe it. Totally the opposite of the guys that manage at the big houses that I’m friends with. These smaller guys prey on small fish through seedy posts on social media like Twitter and Facebook and StockTwits. They claim to be able to make you “a fortune overnight”. Obviously this kind of attitude and activity is not new. It’s been around forever. Back in the day our friends at Agora Financial were the masters of it. They’ve turned it into a gigantic business now. Almost to the point where one could call them, dare I say, viable or nearly reputable. El Infinito is working there now. Learning a lot. Some decent minds are now contributing to their content. Very different than the small team that once was back in ’04 and ’05 when it was just Bill and Addison.

But I’ll tell you, this new breed, see they don’t manage money for any big firms. They’re traders. Pirates. But many of them are also professional hucksters. They need the money brought in through monthly subscription fees from small mom and pop investors to make their living. Whereas the guys we hang with over the weekend wouldn’t sell a subscription to their investment advice if you paid them to. And I’ve offered. They’ll talk to you free. But they would never sell you any advice. Why? Because it’s a very closed and private environment number one. And number two, they know how risky it is and how lucky they are to be in the position they’re in, so they’re humbled by that. And three, they don’t need or want that kind of money. They’re in the game for entirely different reasons. It’s more a professional sport to them. They’re in it for the Superbowl Ring. Not for a monthly subscription fee. Obviously we can’t name names here and I never have; we wouldn’t have any friends left if we did. But I have always been amazed at how cool and humble most of these guys are at the Big Ten. I’ve spent ten years smoking and drinking with them and they’re some of the nicest guys you’d ever want to meet. They’re not what you think, the way it’s portrayed in Hollywood movies. I’ve been to their homes, been to their vacation houses in the Hamptons, been on work trips with them, building houses with Habitat for Humanity or with church, and you wouldn’t believe the kind of effort they put in. You can tell they’re fighting some inner demons of guilt for making the kind of money they make when most everyone else is struggling just to get by. So they work their butts off on these work trips. You have to admire this.

Then there’s this whole new breed of guys out there now. Hundreds of them. Maybe thousands. They sell subscriptions to their “expert advice” to anyone and everyone who is willing to cough up 20 to 99 bucks a month for it. Some of them are as high as $5,000 a year. It’s an amazing market. For who doesn’t want to make it rich over night? These guys, they fight with each other over Twitter about who’s the better investor, who made the right call on the right stock. Verbally pounding their chest like apes, bragging about their latest great call. Things like that. Constant bragging. It’s silly kid stuff. One thing I’ve noticed is that they are more concerned with being right than they are with being smart. This is definitely a lose-lose way of operating in the world. And this is where it gets really concerning. You’ll notice that their real teeth in the game is in feeling “right”, as opposed to making money. I’ve heard some say “I’d do that trade a hundred times and even if I was wrong about it 100 times I’d do it again.” That’s actually a favorite tag line of this lot. It’s the “asserting identity” gone wild. The ego seems to take over for the being and runs on auto pilot, while the being itself is only God knows where. Very different than the large fund managers who will spend an hour with you explaining how often they are wrong and how careful we all have to be because “no one can time the markets”. This is experience and maturity speaking. They don’t have to brag because their title does the bragging for them.

[It actually reminds me a lot of the music business. When we’re kids, we swear we’re the greatest thing since the Beatles or Dylan. Then we get a few years under our belt and a few Billboard hits and before you know it, we’re taking three years to finish an album because we’re so damn aware of how average it most likely sounds. Our maturity informs our humility. We take on a humility that is more rooted in the reality of being in the business rather than wanting to be in the business. I assume most industries are probably like this.]

Another trend I’ve noticed now is that social media has really taken a prominent stake in the world of small time investing. People go into various social media outlets and tag the name of companies with a dollar sign. Such as this: $AAPL, when referring to Apple Computer. You see no end to the kind of treachery that one will partake in to make a buck. They pump up a stock the first half the day to trick average investors into believing it’s a great investment and right when it reaches the top of the day, they turn around and dump it — it’s called the Pump and Dump — leaving the average investor holding the bag with a giant loss for the day. Very sad.

Today one such slimy character Tweeted out “$GOGO stock rallying up after FAA approves cell phone usage on flights”. Of course no such announcement had been made. He just wanted to see if he could get a few more suckers to buy some Gogo stock so his shares would go up and he could sell it. Very heinous. The worst kind of pariah. Unfortunately it’s all too common. Lying is about as regular stuff as it gets with this crowd. This is NOT the world of the Avatar or Wayne Dyer or Abraham Hicks. It’s not about being a good person or taking responsibility or helping make the world a better place. It’s about making money. And that’s about all it’s about. Plain and simple. In a post earlier this week, I talked about how the world of investing is destroying the world we live in in the name of making money. Whether it’s the destruction of the environment for fossil fuels or promoting slave labor to improve shareholder dividends, it’s just a very seedy heartless business.

I’ve had a tough time fitting in. But at the same time, it’s the only way we will truly learn all there is to learn about the world of investing in order to better harness the power of Compassionate Capitalism in our quest to create an Enlightened Planet, which is the goal here. Compassionate Capitalism is a growing trend around the world of the wealthy, though very few are as of yet participating. For it takes a lot of self restraint and well, compassion. It also takes a lot of compromise when it comes to foregoing profits in favor of helping. But we’re getting there. More and more are jumping on board. And that’s where we’re headed as a society. It’s just going to take showing everyone else that it’s possible to make a fortune AND be cautious with our investment dollars to avoid contributing to the problems; AND even being pro-active, with a focus on making the world a better place. This might mean investing more in solar and alternative energy rather than oil, fracking and coal. This of course has the potential to lose you a lot of big money. Very true. And I have already experienced the conflict that sets in when trying to stop yourself from jumping into a company that you just know is ravaging the earth while making its fortune. It’s difficult.

A case in point that hits closer to home is that of Pandora. Yes the online radio company. What most people don’t realize is that Pandora has gone public. You can buy and sell shares of the company. And potentially make money doing so. The problem is that Pandora has slowly eroded the very lifeblood of the music industry. The initial deal they structured with the record labels and publishers was for 7 cents a play for each song — try splitting that up ten ways — it was already ridiculously low for as artists. A huge sacrifice. But we were told it was temporary, just until they got their foot in the door, that they were “new and experimental” so we all said yes just to see what would happen; on a temporary basis. Flash forward three years and they are logging tens of millions of listens a day; so they’re no longer “new and experimental”. What was planned was that they would up the ante for us artists once they established themselves and started gaining a bigger listenership. Instead what they’ve done is file a law suit against all the record labels and publishers in the world to ask the courts to allow them to cut that royalty rate in HALF. Yes they now want to only pay about 3 cents per song per spin. That way they can keep the cost down for the listener — it’s already primarily free — AND increase the amount of bonuses they pay to the directors of the company and the dividends they pay to the shareholders.

What’s really heinous is that their primary method of generating revenue — this is classic — is advertising. And who is their main advertising client? Yep. Music business companies. Turning around and selling advertising to US: record companies and publishers in order to promote new albums and singles by the artists. But if WE aren’t making any money from sales anymore, nor from online spins, then what incentive do we have to advertise on their platform? The music business is headed for complete implosion at this point. Not just “gone are the good old days”, but total annihilation. As in no one makes any money at all and everyone just does it for fun IF they can find someone to support them financially. Pandora is one of the reasons why. And what will this lead to ultimately for the average music fan? No good music. Just a lot of random shit gets released — as in whoever can afford to release music of some kind will. No gate keepers. No purveyors. We’ll see. This might be a good thing. But so far all it’s done is muddy the playing field so much that even the most open minded listeners are beginning to recognize that “there just seems to be a lot of really bad music being released these days.” Well now you know why.

[PS — for the record iTunes is not part of the problem. Unfortunately many people are operating under the misconception that iTunes ruined the music business through the distribution of online music and MP3s. But that isn’t the case. iTunes pays one of the best royalty rates out there for artists. And it doesn’t matter who you are or how big or small you are. If people are buying your music, you’re being paid handsomely from iTunes. Kudos to them for this.]

But Pandora, that’s just one example of the kind of conflict I’m talking about. So, let’s say we have a feeling that Pandora is going to rally on Monday, maybe it’ll go up a buck or two. We have a good chance of making some easy money if we invest a large sum. Jump in Friday. Ride it up till Wednesday or so and sell. Easy. But are we contributing to the problem by investing in the company in order to make a profit? I suppose if we turn around and use that same money to fund the counter-suit against them and spread awareness through PSAs about what a wretched organization they are, which is what just about every musical artist in America is doing at the moment — jumping on board this anti-Pandora train, then I guess it’s alright. Especially if we don’t invest for the long haul but only for a few days, to make some money. Why not? But that’s just one example. What about fracking? We know it’s the fastest way towards creating the great zombie apocalypse and destroying the world as we know it, but there’s BIG money to be made in natural gas. I made thousands trading it this week alone. And I KNOW what it is. I KNOW how it is made. And yet… I couldn’t resist the temptation. Again, if it’s just jumping in and out then is it really contributing to the problem?

Unfortunately I would say yes it is. For if NO ONE invested in these companies then they wouldn’t have any access to capital. They wouldn’t be able to keep going. They’d be forced to shut down. There’d be no more fracking. And there’s the problem. The only people fighting the good fight, against the frackers and the GMO monsters and Big Pharma and Big Oil, are the poor and middle class. They’re the ones out in the streets protesting and demonstrating and occupying. Everyone else is trying to figure out which of the big drug companies is going to be the next one that doubles in price next month and investing in it. Along with all the others. It’s a crazy scene. Trust me. For people like us, it’s just an absolutely insane scene. You check your morals and ethics at the door when you step onto the trading floor. You have to if you want to make big money. At least that’s the vibration that emanates from the room as you enter. Very few people speak of changing the world or taking responsibility or faith or peace or love or anything like that.

It’s a strange world full of animal consciousness. A cut-throat world. Ruthless. You hear phrases such as “chop those bears into little pieces” or “major bull trap” or “we’re going to eat these grizzly bears for breakfast once this stock hits $50″. On and on. Most of it I wouldn’t repeat here. Like I said, it’s cut throat. But remember, we’re here to learn. I do my best to keep the peace and stay true to myself, try to offer some civility into the game while I’m learning.

Another thing I’ve learned is this: no one can time the market. Everyone is guessing, analyzing in hindsight. No matter what kind of analyzing they’re doing, whether it’s technical or fundamental or chart reading, it’s all just made up formulae. Everyone and their brother has a special system that they’ve developed or have adopted from someone else, and they all think it’s “the best system out there”. They speak about proprietary systems and all these rules of the market. But no such rules exist. Every time one of the so-called rules is broken, they’ll come up with a different rule to explain why that other rule was broken. It’s hilarious. But it’s also sad because you can see what a vicious cycle it is of ignorance. A company can be worth a veritable fortune and be ridiculously profitable and still have a stock that is poorly valued. Another company can not even be profitable — they actually LOSE money every quarter — and their stock price can be selling at a price that is in the hundreds. It’s a completely illogical game. Twitter, the little company, is about one-tenth the size of Facebook for instance and yet today it traded for about ten dollars more per share than Facebook. No logic. No reason. Just hype and excitement. This is what makes the world of investing so dangerous. No one is using intelligence or rational thinking anymore.

It’s exactly like 1999 to 2001, right before what we call the dotcom crash. We all know what that was like. Most people weren’t actually investing back then. But they’re familiar with the story. I was smack dab in the middle of it. Though I didn’t do it for a living. It was just fun. But I swear we’d make a few thousand dollars in a day just from jumping into a new company’s IPO at the start of the day and jumping out by the end of the day. Things like that. No one even bothered to check out the fundamental financial health of the company. The fact that it was going public through IPO was enough. It had gotten crazy. Which led to a giant melt down. As I’ve already written here, twelve years ago when it happened, I was one of the lucky ones. I was advised by some friends who managed at Goldmans to get out. So I took everything we had out of the market and put it all into Berkshire Hathaway B shares. At the time these were selling for $3,200 per share. I couldn’t believe that one stock could be so expensive. But after the crash, when everyone around me lost a fortune and my shares stayed relatively the same price, I had a lot more appreciation for quality and value when it comes to investing.

We’re in a similar place now. You can feel the rabid nature of the whole thing crashing in around everyone. And yet all they want is for the markets to keep going up. It’s a fascinating study of human behavior. All the sell signals are there right in front of us that we are headed towards a major correction — for a variety of reasons, not just one — and yet everyday in all these public forums and chat rooms and even on TV, you’ll hear the majority of the people still speak very bullish about the markets. Only the very few, the currently unpopular, speak logically and reasonably about the possibility of a coming crash. And yet the smart money simply wants to make money. And with the system as advanced as it is now, the way it’s been designed, making money in a down market is just as easy as making money in an up market. So being bullish about the markets being bullish is just, well, being bull-headed. Smart money feeds on making money. Not on being right. There’s nothing more rewarding than leaving “being right” at the door in order to make some money. But you’d be surprised how many people are ignoring the signs right in front of us all.

Another thing I’ve noticed about the game in general, the industry, the business, is that there is this very prominent “us versus them” attitude that is very prevalent. You’ll hear people constantly referring to “they” as if there is this mysterious malevolent force out there lurking in the shadows whose sole mission in life is to defeat them. They believe it to be an us versus them game, with them being the heroic underdogs of the story and “they” being the wicked apparition or monster out to get them. In reality, it’s nothing of the kind. There is no “they”. There are just millions of people putting money in and taking money out of various different investment vehicles. No real rhyme or reason. But the conspiracy theories are legend and there are many.

I’ve read hundreds of books about investing over the last 18 years and studied hundreds of different systems; attended all the big courses and bought into all the secret societies. Each and every one thinks that it alone holds the secret key to how the market works and how to “always win and never lose”. But I’ve never seen one person do it. The closer you get, the more losses you see. People tend to only advertise their wins. So you have to actually buy in in order to get behind the scenes enough to see what’s really going on. And once you do, you see just as many losses in the most expensive proprietary formulas as you do from the average investor. One thing that does seem to help though are the guys who strictly do Options trading. They do tend to understand the market better than anyone else. And they also know how to minimize losses better than most. This has been the primary focus of my research over the last few months. Learning about Options trading. It’s complex stuff. It’s calculated risk because it’s limited risk. Though the timing has to be even better; and because no one can time the market, the losses seem to be more frequent compared to the wins. But at least they are limiting them. Last week I made a small fortune with my first two options trades, both with Apple. This week unfortunately I lost an entire premium — luckily only about $1500 — with another options trade. I’m telling you, it’s potluck. Damn close to gambling it seems sometimes.

But not if you’re smart. And that’s one of the things that I’ve learned from the guys at the big houses. They don’t gamble. Everything they do is very calculated. They keep risk to a minimum. And they pay a lot of attention to fundamentals. If a company isn’t worth a shit, they don’t go there. The average investor speculates. They’ll invest in anything if someone tells them that they might make some money from it. They truly believe that “fundamental analysis is old fashioned; that it’s for the old mom and pops who don’t understand the new game”. But they consistently lose trading these highly speculative companies that are pure “trader’s plays”. Those are stocks for companies that aren’t yet profitable or haven’t yet proven themselves. Smaller companies. It’s become a huge trend. Just as it had in 2000. And just as it had in 2007 with Credit Default Swaps and the rest of it. Personally, I smell a major correction coming. So I almost always sell out of everything at the end of each day. This week every index lost money. It was a bloodbath. And December is supposed to be “most profitable month of the year in the stock market”. Go figure. Like I said, there are no rules. And anyone who believes there are is kidding themselves. There are only rules AFTER. Not before. That’s one of the most important lessons I’ve learned on this most recent venture into this world.

What I’d like to accomplish from this little adventure is two-fold: besides just mastery over all the knowledge of the investing world and global economics — which is what really juices me about all this, I’d also like to be able to understand it all well enough to where I can really help contribute to the advent of Compassionate Capitalism going mainstream. Making money while making the world a better place. We’re a long way from that right now. But we are ON the way. Many have already started. Many more will come on board as older generations die off and the younger ones enter the game. Right now when someone comes on a financial news show who is proposing a business model that helps AND makes money you should see the way that people look at them; it’s as if they’re from a different planet. They are met immediately with suspicion that their business model is no good or is faulty in some way. Just because it has an ulterior motive of doing the world some good. That’s something that needs to change. Together we can do that. We need to continue to spread the meme though mass consciousness that making money and making the world a better place are not mutually exclusive missions. They can easily work together, in harmony and synergistically. It’s the only way we are going to create a world that lasts for a long time to come and is fair and just and friendly to all its citizens. This is the goal. More later.

Making a Fortune Destroying the World

December 3, 2013

When I’m not making music or out trying to save the world I’m neck deep into studying the world of investing, finance and economics. Perhaps it’s an age thing. Many are the storied legends of Mick Jagger who spent the first half of his life in the fast lane of sex drugs and rock’n’roll only to transform into a proper English gentleman, knighthood and all, who was just as comfortable sipping tea on his private jet reading The Economist and other finance publications as he used to be onstage. I remember reading these articles about him as a kid and as weird and incongruent as it sounded it still appealed to me, made me think “Hhhmmm…. that seems like a cool way to go… Live life wild crazy and free when you’re young and then transition into an aristocratic Bruce Wayne type of character when you get older.” I logged the memory of the article I read and those thoughts and continued about my life in fast lane for years.

It didn’t take long for the entrepreneurial bug to grab a hold of me. Since that aspect of my life is already well known and written about, as well as not the specific impetus for this particular post, the only thing I’ll add here is that yes I did start my first company when I was 20 (a rehearsal and recording studio facility) and proceeded to transition into a variety of different industries as an entrepreneur and businessman simultaneously throughout my career as a recording artist. Once entrepreneurism gets you, it’s hard to shake it. I still own 3 corporations and have been developing several more new ones this year. Besides the fact that being in business helps bring in an unlimited and more than usual amount of money — which is essential if you want to make music for a living in this day and age (there’s just no money in it anymore), it also feels good to be able to provide jobs to people. That’s one of the aspects of being in business that I like the most. That and the freedom of not having to punch a clock everyday for someone else’s financial gain.

For the last two years, yes two years — i know how insane that sounds — we’ve been working on these two new Ed Hale albums. Same crew. Me and the guys in Transcendence and various other friends and cohorts. What started out as a relatively simple idea, let’s hurry up and get the follow-up to Ballad On Third Avenue and All Your Heroes Become Villains out while we’re hot, as usual turned into a big long laborious and expensive adventure. We shouldn’t even be surprised anymore I suppose. I’ve been doing this for decades now. We start an album and before we know it my mind gets so filled with ideas and concepts and ambitions to innovate that it ends up taking years. The guys hate it. I hate it. Don’t ask why I do it. Can’t help myself really.

These two new ones are no exception. Just the fact that it started out as ONE new album and quickly morphed into 34 songs split up between two albums speaks volumes about what the other guys in the band have to deal with. But if you’re a freind or fan and are feeling more than tired of waiting, I promise you it’ll be worth it. It’s not like we’re doing anything revolutionary or totally out of this world like with All Your Heroes… But we are aiming high and trying a lot of new things we’ve never done before. That’s what’s taking so long. We’ve never created an album with this many musicians on it before. Nor with this kind of build-up and anticipation. Both are contributing to the extended amount of time being invested in the project.

Since the albums have been taking so long, I started to dive into actively learning about investing and finance again. Hardcore. Yes, while it’s true that I began trading fifteen years ago, it was primarily as a hobby. I was a kid. It was fun and games. I had a lot of money to burn. I won some and lost some. I didn’t realize how much there was to learn… I just rode the coat tails of various bull markets. Learned as much as I could and then being a recording artist and general ambassador took over. It became impossible to find any free time to invest in anything but me. Besides the fact that in 2007 we hit this major economic collapse, what is now called “the Great Recession”, and so investing of any kind really lost it’s appeal for me.

Earlier this year that changed. I’m not sure what it was exactly. Precious Metals had always appealed to me. Bought my first 10 ounce bar of silver for $40. They’re now worth $200. And my first 1 ounce gold coin for $345. Those are now worth $1200. That’s incredible to contemplate. Earlier this year a buddy who knew that I used to love precious metals (Zeke Zaskin in fact) informed me how high they had risen over the last few years. So I jumped into investing in them again. First buying them physically. Bullion, bars and coins. And then exploring more advanced techniques for investing in them. ETFs, ETNs, leveraged plays, inverse plays. It’s all gotten quite advanced. Much more so than one could ever imagine from the outside. That got me back into the investing game full time. Pretty soon I was investing in other things, anything and everything. Whatever made money.

And therein we begin to explore the real point of this post. For about six months now I have been actively and passionately waking up at 4:30am everyday to participate in very active investing. This is the reason why it seems as though I “disappeared”. Because I did for all intents and purposes. But I’m still here. I’ve just been buried in this other world. And when I’m not doing this, I’m running our other companies or in the recording studio trying to finish the albums. Now you know.

With finance and economics there’s a big learning curve to it all. I spend about 50% of my time studying and learning and the other 50% behind a computer hardcore investing. Buying, selling, trading, hedging. It’s an insane world to thrust one’s self into. In all honesty I can say unequivocally that I wouldn’t recommend it to anyone. There’s got to be better things one can do with their life and time. I’ve just become slightly obsessed with it for various reasons. There’s the money making aspect to it sure. That can’t be denied. But then there’s also something else there, something more powerful and profound. The learning.

See, when we’re out there in the regular world, living our day to day lives on Main Street, going about our business, we normally have no idea what the mechanics are behind the world that we live in. We may try to keep up with the latest news from the radio or TV or water cooler or online media… But it’s rare that we learn the actual “WHY” behind what goes on in the world. Things just are. And we adjust accordingly. Sure pundits try to break things down after the fact. But we never get a peek behind the curtain to see what the primal force underlying the initial development of most events is. Instead we attempt to assess and integrate the incoming data and then act based on it and what we’re told. What I have slowly begun to see from diving so deeply into the world of finance and investing is that nearly everything that touches our world, everything that shapes it, has it’s start in the world of economics and finance. Investing. Money making.

It’s a fascinating game. In our world, meaning YOU and ME — people like us, we take it for granted that burning coal is bad for the planet, or that fossil fuels like oil and fracking are bad for the environment and eroding the atmosphere and poisoning our water supply. But what we almost never think about or hear about — especially not on a level that we can relate to — is how much money is being made from these activities. Not just for rich old cigar chomping white men, but for pretty much everyone. We’re talking about trillions of dollars. Governments are completely indebted to certain entities. Hell, governments are nothing but organized systems of employees who work for large multi-national corporations comprised of a select group of very wealthy individuals who pretty much control everything. The money obtained through taxing a country’s citizens is nothing compared to the money needed to really run a thriving economy, or at least appear as if you’re running a thriving economy.

The United States for instance is completely indebted to this very private corporation made up of various European banking cartels called “The Federal Reserve” — there’s nothing “federal” about them; they’re not a part of the American government — who at the moment are loaning our banks and government 85 billion dollars a month. $85,000,000,000. BILLION. Per month. It’s a figure so staggeringly large that it’s beyond our comprehension. Without this money, our economy would have collapsed long ago. In return our government does whatever this private entity tells it to. So too do our banks. We as citizens are indebted to our government — as in we do what they say when they say it as they instruct us to or we risk being arrested and having our rights taken away and/or being thrown in prison etc. As well we are indebted to the banks of the world. It’s’ how we finance our lives. It’s how we buy our cars, pay for college, buy our homes, pay for our health care, etc. It’s all one big system wrapped in on itself.

Yes everyone needs everyone else to survive — and I elaborate on the potentially beneficial implications of this a lot more in the We Are the Revolution book I have been working on for the last few years that explores the Personal Expression Age, but for the most part just because WE are an integral part of this large system does NOT imply that we have any say or control in it, nor in how it is run. Because for the most part we don’t. [Here I am speaking specifically about physical action that could affect change or results as opposed to actions in consciousness, which is another matter entirely.]

Now that’s the bigger picture. The classic “wealthiest one percent control the world made up of the other 99%” viewpoint. It’s a well-run, well-known and fully explored and taken for granted viewpoint. Always has been since humanity first appeared on earth and started making note of it. That’s the background of our day to day lives. And from what I can tell from all this research and work I’ve done for the last six months into economics and finance, things haven’t shifted at all away from this direction. If anything they’ve become more linearly constricted and compacted, i.e. the 1% have and control even more and the 99% have and control even less, making them more dependent on the 1%.

But that isn’t new, and it isn’t the main crux of this post or what I’ve discovered. What’s more interesting if we zoom in a bit is just how totally controlled the world we live in is by finance. We can call it economics. Most do. But i believe that’s a misleading label. A misnomer. Because since time began we could all say that “the world we live in is largely controlled by economics” and who’s going to argue with that? It’s a given. But it’s not really economics per se as much as it is the world of finance and investing, ie making money. That’s really what’s pulling the strings. That’s what fuels economics, or “the economy”. Like this: economics may seem to control the world we live in, but in actuality it is more a result of and an indicator of what is happening in the world of finance and investing. There’s a difference.

The reason we won’t stop fracking until half the wildlife and water of the United States is destroyed and most everyone we know is dead or dying from unnatural causes is because there is HUGE money being made from natural gas. It’s the same reason why China and India won’t stop burning coal even though they’ve been warned for decades about it’s harmful effects. Just to be clear, the United States still has at least thirty-something percent of it’s electricity being powered from coal as well. So we’re no angels. twenty-something percent is from natural gas. The rest from oil. A very small part is from solar. A very very small part. Solar hasn’t turned into a cash cow yet for anyone. Therefore it will never see the kind of love that oil or coal or natural gas has through the years.

What it really all comes down to is where the money is. You and I don’t have the money to invest in a large energy exploration company or a mining company. No Main Streeter does. So we leave that kind of thing to the big dogs who do. What we commonly call Wall Street. (it’s really industry itself, industrialists; but Wall Street is it’s vehicle so to speak… Wall Street is how industry gets its investment capital.) They’ve got systems in place already that make them a ton of money, these industrialists. God love ‘em. Whether it’s oil or gas or coal or iron ore or steel or even uranium or platinum. In the last six months I’ve invested in things I didn’t even know existed a few months ago. It’s a big world out there. Much larger and more entangled than we can ever imagine. And I cannot think of a better arena to learn about it than the finance and investing world. These industries are where the HUGE money is. Without these things we don’t have a “civilized world” to live in. At least not from our current viewpoint or past reference points.

Thus even we take these things for granted. Take a look around you. The giant industrial machine that surrounds us is astounding when you stop and look at it. What’s more fascinating is that every single one of these things that we see use touch smell operate work in and live in is created by someone, usually “someone else”, by a company. A company made up of others. A company made up of others who are making money from creating these things. Whether it’s our car or our house or our heating and air conditioning or our electricity or our roads… on and on… They’re all businesses, i.e. mechanisms for making money for someone. If they didn’t make money from doing it, they wouldn’t do it. And in return we wouldn’t have these things that we’ve become so used to and take for granted.

We’ve all heard of that movie from a few years ago “Who Killed The Electric Car”; it does an excellent job of explaining how the electric car was an idea whose time had come two decades ago — the technology had arrived — but the big oil companies literally stopped it in its tracks because it threatened their money generating ability. That’s an astounding thing when you stop and think about it. Truly astounding, that kind of power. But that’s the point of all this. There is no end to what kind of effect, no matter how bad wrong unjust or harmful, a powerful industry (collection of “other people”) can create in the world we live in if they want to because they feel that they’re money making potential is being threatened. THAT is the real crux of this.

It’s why so-called big pharma releases drugs they know may not be that safe for human consumption. And why large countries invade smaller ones. It’s why the United States claims to be fighting for freedom and liberty and yet supports the largest communist country in the world (China) and the largest dictatorship (Saudi-controlled Arabia). When we wonder why bad things happen in the world, what we’re really doing is pretending we don’t already know that at the heart of all things is the quest to make money.

In the last six months I have had two primary goals in the realm of what we have been discussing: to make money and to learn as much as I can about investing, economics and finance as possible. At times I have found it amazingly easy to make money. I have seen how powerful a small change in price of just a few cents can make if you’re leveraging a large amount of money in an equity. You can make a fortune with just a small move of twenty cents. You can also just as easily lose it. But more than that, what I’ve discovered that is far more profound is the need to make money and for that money to make money and how in the world of investing all morals values ethics and scruples stay home with the dogs and kids. They just don’t enter the picture. Not even a little bit.

All the big money in the world seeks a place to rest safely (protect itself) AND a place where it can generate MORE money. That’s it’s job. So it travels the world looking for new places to rest or do its job. This money, where it lands and what it does while there, is what not only feeds the world around us but builds and creates it. We’ll never get rid of war or weapons of war as long as building and using weapons of war remains such a profitable business. And that’s just another example. The same can be said for just about anything else around us good or bad.

One of the things that people ask me the most is “Don’t people realize that if they destroy the whole world just to make money that they too won’t have a world to live in and neither will their children?” I believe the answer to that question is that the big money already has that taken care of. I think we’d be fooling ourselves if we didn’t assume that they’ve already got contingency plans in place for those scenarios and they’ve got the money to implement them. I cannot help but be reminded of the underground living places and tunnels that connect them that have already been built all over (or under) the U.S. for our president and other “important people”. That’s enough to make you go postal, thinking about that. And also a recent movie entitled Elysium where all the wealthy people live on a space station a few thousand miles away from earth while all the middle class people live on a desolate polluted and over-populated earth. It’s a ghastly dystopian vision of the future. One which I hope we never have a chance to see. But it is a viable vision of the future we are currently creating if we continue on the path we are on.

There are innumerable ramifications to all of this. I believe we are only at the beginning of our learning. At least for me anyway. I was able to only touch upon a few aspects of it here. Just wanted to touch base. Much more later.

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May 26, 2003

Worked every day this weekend. Most days till 9 or 9:03 at night. No day off yet. But in the end, it will be worth it. Momentum trails all around me. Just huge leaps and bounds. That book peak evolution should be mandatory reading for everyone. Before you get your driver’s license or something. Like a bible, but better.

As soon as I start thinking of something, I see it start to manifest around me. Getting good at noticing optimizers, blocks and flows. Investment bank contacted us about buying or investing in AF. This could be a great thing, an amazing thing. Cleopatra and I have worked together for too long. Time to let go completely. Big sighs of relief and cries of release the last two weeks realizing it and letting it all go—you can literally feel chunks of reality lift off of your body when you discreate or let go of things—you feel lighter, more free—this is how we explain miraculous healings of physical ailments or sickness or disease when someone heals something mentally or emotionally. You can actually feel it physically. Spent the last week cleaning and organizing my office and my hard drives. Deleting entire folders filled with years’ worth of files. Just letting this whole aspect of my life go. Filling garbage bags with years worth of folders and documents. Jumping up and down–celebrating the end of an era. And the beginning of a new one.

On the smoking front. The worst part is over. But there is something worse than the worst part when it comes to not smoking. The weight gain. You just tend to eat more. Its fucking crazy. I’ve gained 4.5 pounds. I swear to God I would rather die at 40 skinny than live till 70 fat.

Last Movie: Secretary. O.k. so what was that? Francis recommended it. now I’m worried about Francis .

Current Spin: Travis, the man who. What an amazing album. amazing. this is like a Beatles album. every song is as good as the next. Its just beautiful.

Tag: investing

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