My New Year's Resolutions

1. Learn to say "no."
2. Think more/do less.
3. Take Polonius' advice.

Hubris

2011, it turns out, was 'the year to fade the mavens.' Like a good running back, the financial markets juked the leading experts right out of their shoes:

• Bill Gross, perhaps the most respected fixed income manager in the world, famously went short the long bond early in the year before watching it have its best year in fifteen.
• Meredith Whitney, the analyst celebrated for calling the banking crisis, loudly derided municipal bonds, warning of massive defaults during the year. They never materialized and the bonds saw double-digit gains.
• In the equity world, John Paulson, hedge fund guru of Goldman Sachs' Abacus fame, boldly flipped bullish on the banks and his funds were presently crushed during the euro crisis.

What's the moral of this story? In the words of Will Rogers, "never miss a chance to shut up."

Our human nature already makes it very difficult for us to admit when we're wrong. But when we own a widely esteemed reputation and publicly declare a contrary position, it seemingly becomes infinitely more difficult to do so.

The Greeks didn't have the best of years in 2011 but they got one thing right a long time ago: the hazards of hubris are commonly underrated.

Boycott Versus Occupy

My friend, Collin, tweeted yesterday that he had paid down another credit card balance to zero. He was clearly elated by the experience, as he should be. Getting out of debt is an accomplishment to be proud of.

But he should feel good about it for another reason: eliminating the source of profit for the bank, even though it is only a drop in the bucket from their perspective, is a truly effective way to boycott the institutions that the public are currently so irate with (and rightly so).

In the end, wouldn't it be more effective if all the folks 'occupying wall street' were to simply boycott the antagonist institutions by doing exactly what Collin did and pay down their credit cards?

Are The Banks Getting Ready To Breakout?

I recently wrote about an interesting pattern forming in the Russell 2000 Index and thought I'd draw your attention to another index forming a similar pattern.

The banks have now formed a choppy head and shoulders pattern below a neckline at the 40 level. The downtrend that began in early in the year is also coming into focus again a current levels.

A breakthrough above these key levels would be a very bullish development for the stock market.

Porsche Cayman: Mid-Engine Magic

Just in case anyone needs a last-minute gift idea for me...

via youtube.com

The Most Important Chart You Will Ever See

I'm pretty sure I've posted this chart before but it's worth posting again. In fact, I should just set it to automatically repost on a regular basis - it's that important.

Nearly every major mistake I've seen folks make (or made myself) can be attributed to either not understanding or not heeding this cycle. Burning this chart into your brain then may be the biggest step you can take towards becoming a successful investor.

via ritholtz.com

Smart Stock-Market Investing

• Invest everything in Morton Salt, then run around screaming, "The Slug-men are coming! The Slug-men are coming!"
• Before choosing a brokerage firm, carefully study the TV commercials of several firms. Go with the one with the most impressive ads.
• When your stock begins to drop, gesticulate wildly to coax it back in the right direction. (Note: Also works in bowling.)
• Instead of investing in stocks, why not invest your time and energy in your community? You will reap dividends far more precious than wealth.
• Stock-market losses are only losses on paper. Use Wite-Out to your advantage.
• Keep a close eye on Dan Aykroyd and Eddie Murphy. They may try to outfox you and your cold-hearted brother.
• Diversify your portfolio with some colored yarn or pictures clipped from magazines.
• Many small, privately held companies are now issuing IPOs, often with incredible success. Among those rumored to be going public: The West End Valu-Shopper, The Marzipan Bunny Sweet Shoppe, and www.geocities.com/chadspage/favekornpics.html.
• Wait until stocks are just about to soar in value, then buy lots of them. When they've gone as high as they're going to go, sell them all.
• Take your screeching trophy wife's advice: Invest all your money in designer handbags.
• If at all possible, start out with $80 million. This will reduce both the pressure on you and the risks involved.
• Ask your company if it offers an employee stock plan. If it doesn't, consider working for a different gas station.
• Go to a financial advisor and act as if you understand and are carefully weighing what they say, then blindly do whatever they tell you.
• Invest in your friends' band. They rock.
• When examining the balance sheet of a corporation, a good sign of health is an assets-to-liabilities ratio of two to one. Then again, if you understand that, you're probably a rich prick who doesn't need any more money.

via The Onion
hat tip, Eddy

Dilbert on Google

via dilbert.com

Uber-Long-Term Look at Long-Term Yields

The 10-year Treasury bond yield has been trending down now for nearly 30 years. It's got to bottom out sometime but betting against it means violating two classic, trading maxims: "don't fight the fed" and "the trend is your friend." So for now I'll just keep watching.

via chartoftheday.com

The Power of The Cloud

via assets1.csc.com

The Science of Social Media Timing

via blog.blueleaf.com

Why The Customers Have No Yachts

This is a very important distinction that many people overlook: a commission-based salesperson's interests are not aligned with those of their customer. This is also why the 'Customers Have No Yachts.'

via thereformedbroker.com

Russell Reflections

I've been watching and annotating the chart above for months. The first head and shoulders pattern that began with the new year and broke down midsummer (mirrored in the S&P 500) gave me pause and forced me to turn more conservative in terms of equity exposure.

Now, however, the chart is suggesting that a bottom may be forming in nearly identical fashion. A new head and shoulders pattern can be seen forming recently only this time it's inverted. This should give hope to equity bulls for if (big "IF") the pattern is validated (breaks above 780ish) a strong move to new highs should be coming.

And after a year of treacherous trading that would be a very beautiful thing.

The Only Reason The Euro's Down Today Is Because It's Down

Every trader on the planet is watching this chart right now of the Euro and looking for a reason for it to be down. Truth is the only reason it's down is because it's down. 

In other words, traders intentionally pushed the currency's price down below the late September/early October lows in order to precipitate more selling (trigger stops). This is a game institutional traders love to play.

It looks to me, however, like a decent setup for a whipsaw. I'm not trading it; just calling it as I see it.

Headline of the Year

I saw this headline late last night and just couldn't resist sharing it here. I don't read the NY Post unless it comes up in my Google News feed. Fortunately, this story did.

First of all, you've gotta love the fact that the writer gives the MF Global execs the title, "MFers," because after losing all that client money they deserve to be cursed (among other things).

Secondly, the Pink Floyd reference is both very cool and, once again, fittingly insulting.

But my favorite part is it almost seems like they published the story solely for the sake of the headline. There's really not much that's newsworthy in the body of the article. 

Writing a story just to bash these bastards in the headline is just plain bad ass.

Is Gold Losing Its Luster?

With the breakdown of the pennant pattern today in the chart above, traders should, at the very least, be wary of further downside over the short-term. Longer-term, the probability of a major top being formed is rising.

I Read the News Today, Oh Boy: "Is This Enough to Save The Eurozone?"

• Is this enough to save the eurozone? 
• Distressed debt investors eye Europe 
• Soros buys MF Global's Euro debt positions 
• Twitter Says We’re Sadder Than When Lehman Failed 
• Guess Who's Got The "Best Housing Market For The Next Five Years" 
• Buffett's Solar Deal Appears Opportunistic, Not Bullish On The Industry 
• Tom DeMark sees the strongest short-term buy signal he's recorded in 40 years  
• QQQ Forms Island Reversal with Big Move - I wrote about this last week
• Wall Street = Fruad 
• The Sickest Stock Market Scam Going
• Don’t get mad at Wall Street, get even
• The man who is seeking to eliminate email from his company 
• 8 Steps to Winning Friends, Influencing People, and Getting Any Damn Thing You Want 
• 'How Doctors Die' 
• Cheeseburgers are awesome 

Guess Who's Got The "Best Housing Market For The Next Five Years"

via Business Insider

All Together Now

Stocks are more correlated today than they were during the stock market crash of 1987. The only concrete thing I can really glean from this is that each of these spikes over the past 25 years were good times to be a buyer of stocks:

via ritholtz.com

Reference: All Together Now

Wall Street = Fruad

From the looks of this graphic from the NY Times it seems "Wall Street" and "Fraud" are inseparable and maybe even synonymous.

via nytimes.com

Pendulum Waves

For all you Elliott Wave fans out there:

via Aspen Trading

See also: The Fibonacci in Lateralus

The Fed: "The World's Dumbest Loan Shark"

The Daily Show
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Islands in the Stream

Islands in the stream,

That is what we are.

No one in-between,

How can we be wrong?

Traders have to be humming this Kenny Rogers/Dolly Parton classic after the past few trading days. The S&P is now working higher above two, overlapping island reversals, an unequivocally bullish development.

UPDATE: Arthur Hill of StockCharts.com, a much more accomplished technician than I, wrote about this same formation in the QQQ. He concludes, " In general, a gap up is considered bullish as long as it holds. The gap zone turns into the first support zone to watch. A bullish gap should hold. Failure to hold this gap would be bearish."