Mud Wrestling

That's another name for my metaphor of market action as a herd of elephants stomping in the mud, looking for a trend to head out to a new waterhole. The world is awash in metaphors and similes nowadays, and the typical babblevision pundit sounds like a modern day "Sancho Panza" spewing out mountains of metaphors instead of Sancho's proverbs which infuriated Don Quixote but delighted noble listeners.

Here is the legend for my metaphor of today:
Elephants = Beefers = Big, Evil Funds.
Mud = trendless, choppy market action
Stomping = trading
Waterhole = profits

I like animal metaphors. They capture the actions and psychology behind some individual and collective human activities. As well they should, since humans are a mentally advanced animal. Humans still have much primitive animal brain components and human behavior is not so different from animals. I guess paleo-antropologists say humans are about ten million years in evolutionary time from gorillas and spent most of the last two million years as hunter-gatherers in the wilderness. So we differ little from animals in our deepest mental functions.

Short term, perception rules the markets.
Long term, reality rules.

For months, the rich have been panicked as they think another 2001-2003 market collapse is imminent. You see, that's the "lesson" they learned and now they think preservation of capital is the most important goal now. In old days, that meant bonds. But they don't just buy some bonds now. The trendy thing to do which they have "learned" at the country or city club is to use hedge funds - an alternative "investment" to provide "stable" returns. Now they "invest" in hedge funds which are just trading pools. Notice the false precedent: how do you "invest" in a "trading" fund ? You are just hiring a manager to trade on your behalf, not investing. So as all marginal funds are just piled into trading funds, how can a new trend develop ?

Why the chop/yo-yo/ping-pong/mud stomping ? A trend in some groups starts, but after a bit a group of "smart" traders "decide" to short it, and the group stops going up, possibly generating selling from some longs and then the group declines as the stocks go down under that pressure as more longs liquidate. So it's back to the beginning and the cycle conintues. No net gains, just yo-yo/ping-pong/mud stomping action.

If all the world's a trade, how can a trend develop ?

Over time, reality will rule. the steady pressure of corporate profits, stock buybacks, and real buyers on the dips eventually will drive up prices, creating a series of higher lows. These higher lows over time will permit the herd of trading beefers to see a new water hole in the distance, and a good bullish trend will start.

Until then, all we can do is wait, watch the real data and corporate earnings and economic news and wait. But there is evidence this process is happening. Long term, big money investors like Warren Buffet are making huge purchases of good stocks they like.

Take advantage of the inane dips caused buy beefer liquidation to buy good stocks at low prices. For example, oils and miners were knocked way down a few weks ago. And in the great wisdom of the beefers, recently they have roared back. A patient dip buyer got good stocks at low prices and now has a fine gain.

Keep doing asset allocations as needed. I have more gold to sell to get asset group under 10% in the Krypto Fund. If silver goes over $18, I will sell some of it, too.

Reality will eventually rule.

Reality:
HP reported good earnings up 38% and revenues up 13% and raised its outlook for the year.

GM building in NYC to sell for a record price over $3 billion.

ING reports good earnings, small writedown.

PS: The Street is sure eating their rich customers ... like piranhas ;-) The latest is the auction rate preferred stocks sold to the rich as a liquid, higher yield short term investment [lolol]. I guess the rich learn that there's no such thing as a free lunch. I hope the rich start seeing their hedge fund investments as similar garbage "investments".

Words of the Day:
"Execration" - noun [$10]; also "Execrable" - adj. and "Execrate" - verb, transitive
"Execration" means 1. act of cursing; 2. a curse; 3. something that is cursed or loathed.
"Execrable" means 1. deserving of execration; 2. extremely inferior, very bad.
"Execrate" means 1. to declare to be hateful or abhorent; to denounce; 2. to feel loating for; abhor; 3. to invoke a curse upon.
Sentences: Bunkerman execrates beefers, as they perform little useful function but collect high fees from the stupid rich. Their execrable activities cause needless pain for the common man trying to invest his savings. Today's blog post tried to explain why beefer activities deserve execration from all thinking people.