Oct

15

VNStocks are at a several week maximum and bonds at a several week minimum as of the close today. This has happened with a rather amazing regularity on six occasions this year but not on the day before expiration in 2 1/2 years. How wonderful it is that hope spring eternal in the hearts of traders and man.

Everything that didn't work last year is working this year. And the Gannian adage that the best thing to do at the beginning of the year is to stand on your head and read the charts of last year, to be in the right framework for reversing goes. Of course, if you did that with leverage you would have been stopped out early on. But that's the whole point. Who would have had the fortitude to stay whole last year when buying the dips led to disaster and still be able to profit handsomely this year. What sagacity would have been required. Everything statistical that didn't work last year, worked in spades this year. But in a completely different locus with maximum after maximum and runs of up days upon up days, with nary an intervening decline of more than a gnat's eyelash in between.

It is interesting to reflect on how even in the heart of the tornado, the bankers knew enough never to "leave a trail" with their emails so that they would be able to deny any quid pro quo and harsh threats made on bicycles. Everything that my kind of people thought about markets that was wrong this year was right this year. I can hear Jim Lorie saying " the drift is up " and it's always best to buy and hold because if you sell , you have to know when to buy back and you miss the drift. I can hear him saying that he got a call from this or that Nobel winner from the faculty club in the middle of one of his board meetings in October 2008 or April 2009, demanding to know whether they should capitulate with their last 20% of their holdings and he told them not to panic.

The POMO adding 15 billion of reserves through direct purchases of treasuries, agencies or what have you every other day has had an amazingly consistent impact . However the expectations have not been that good in following it, because the form is always ready to change when the public gets onto it. And some of those rare but grievous declines have come amidst the orgy of liquidity created.

One wonders if there are direct payments allowed to economic advisers for speaking engagements the way they were available when one was formerly president of this or that institution or whether it's the usual Chinese Wall stuff like the bankers cry of "no trail".

Jeff Watson adds:

Being the self-admitted worst stock picker on the planet, I followed Henry Clews's advice during the panic, and the rest is history. As far as I can tell. In Chapter 2 of his book, Clews recounted the best, most certain way of making money in the markets. As a sidenote, I found a cane during that week of peril and, after many attempts, managed to throw it up on a high tree branch outside my house. That cane has stayed up there on the branch for months and months, and as long as it stays up, all is well. It's OK to be a little superstitious.

Jeff Watson, commodities speculator and art connoisseur, blogs as MasterOfTheUniverse.


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