Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

The Funnel of Excess (brendan burke)

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Yesterday I finished a model I'm building for an electric generator. My first attempt at building this small device failed because I tried to violate the laws of physics. I live in a small Norwegian salmon fishing shack on the grounds of the large hadron collider in Switzerland. The shack was built by a very distant relative of mine that goes beyond 2nd's and remove's, but somehow this thin trace of blood was enough for me to take over his legacy job as grounds keeper of the inner circle of the collider. 

I eat lunch in the cafeteria every day with all the other people from all over the world, luckily I have been able to get to know a few of them very well through a common interest in art. I asked them about violating laws of physics; if i just kept at it and worked hard enough would physics eventually cave in and give up. They said no. I laughed too, after all if these PHD's really knew anything they would be on Wall Street. That being said I described my invention and they proceeded to give me some simple solutions for proper use of magnetic fields. Hoek Vun! (means by the beard of the fermented shark in Norweigan) It worked! Now my generator is up and running and I can move to phase II on this alt energy project.

I have been trading since 2001 but I am working on a multitude of other projects so I can potentially cycle out of trading the markets. The end of the prosperity, the end of the semi fair game may be near for the US markets and all its players. As a result the end of value in your money and our society may also be near. With this risk plausible I don't want to be caught in the world with only the skills of a day/swing trader.

Careening:

It is not an easy task to accomplish, wrecking a globally powerful empire but history is full of examples. We may have entered not a Japanese style recession but rather an Italian one. Italy has been in a recession since the 400's, that's one thousand six hundred ten years, crappenshaft! So which is it, what recession are we in? Are we still in one? I guess so, things are a mixed bag of good and bad at the moment based on real world indicators. I am looking around me; the people I know whom have lost jobs, the foreclosure map on zillow, stores closed in otherwise prosperous places in my old neighborhood in Pasadena CA. 

The violation of laws that would make a free market work could lead to economic ambiguity. If the stock market is kept inflated and continues to move unabated to untold heights it will be like building a meth lab in your heart. Its going to feel awesome to pump it right into the epicenter but eventually when the long haired chemists with jr high educations get it wrong its going to explode and paste your heart on the ceiling of your trailer. How long can we pump the market up and why are we doing it? What is the outcome? In our awesome service based economy the stock market has almost become the largest passive service industry of all. So much of the power paradigm relies on it going up. Pensions, senators, billionaires, investment bank warlords (whom make up our government), companies with no profit (many US companies seem to follow this interesting strategy of no profit). We have really collectively gone all in on the US market. Perhaps its the market itself and not its components that is too big to fail. We drain our best brains to wall street and our dumbest to Washington. We manufacture a moderate amount and we consume a lot of distraction. Now we are at a cross roads. We can take the pain and go through a very ugly recession in which everyone loses a lot, or we can use artificial means to inflate our biggest oxygen tank piggy bank. We have chosen… it has been chosen for us as the latter.

So now what happens? When you artificially inflate assets at an epic scale how do you step off the accelerator? How do you wean off the tit thats full of rainbow juice? It is very very hard. The only way you can is when a bigger boobie emerges behind it thats full of the real stuff; an actual producing economy. How do we grow a new economy? I personally think it needs to be driven by science and technology, manufacturing as we know it from boom times in the 20th century isn't necessarily the solution. We have botched our old real economy by allowing a slow ruin of the middle class through several presidencies and the pull of great minds into finance. There is an enormous challenge in the asset inflate stop gap that we are on. This is why I am moving on to other skill sets, at least until the market normalizes, if it ever does.

By going all in on the stock markets at a national level from government to individuals we may seal our fate into a vicious crack of inflation/deflation/muttonation. I don't know, it doesn't matter one word or the next, that's up to real economists to predict. What matters is trusting the market which is based on primarily illusion with your entire intellectual and physical wealth will at this juncture in our capitalist history possibly lead to personal ruin.

If I Could Slay the Dragon (by oulous)

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Well there are many dragons right now from congress to Bernanke but lets just say for simplicity they are all orgy-fied into one master beast and we just slew it. I want to make this post group think. Post your idea(s) on what you would do to actually fix a broken economy unlike the people currently fixing it to oblivion. Maybe we can create an Internet snowball and throw it as Washington and flatten the place.

1. Let Goldman Sachs die free market style and debunk the myth of too big to fail. I think too big to fail is an unpopular myth and these companies are actually too big to succeed. The destruction of pure capital in my opinion is actually a good thing. What happens when you create years and years of fake wealth that keeps growing by eating magic expanding never ending gobstoppers? That money wants more money. To get more that money seeks increasingly exotic products in order to provide a return superior to savings. Eventually it collapses from its own exoticism and we get a financial meltdown. The financial system would have been well served to punish those whom produced epic failure, instead it rewarded them by giving them a re-load to their self destructive canon. We had one chance to destroy an excess of fake capital and instead we saved it.

If we had let Goldman, GM, AIG, and everyone else too big to succeed die their services and deposits would have redistributed to smaller more nimble companies whom would have had years of competitive growth ahead.

Investments banks – Boutiques could have sifted through the ashes and gained surviving deposits and provided services.

Banks – With government assistance we could have redistributed FDIC insured deposits to smaller smarter better run banks.

GM – Let all but one of the big three die and use it as a stop gap to a new era of American car manufacturing. Use some "bailout" money to fund small nimble start ups and get America to take the lead in manufacturing advanced technology vehicles.

Chapter II

Ahhh housing. Trying to re inflate over inflated assets will most likely end in failure. We will either get a second wave of a housing crash or just have this long drawn out zombie mash up where people keep tossing homes at each other like hot potatoes because they can't actually afford them. Lets talk solution, and yes I'm actually promoting a government bailout here, libertarians be damned.

I propose a 10 year tax deduction program be rewarded to anyone who agrees to sell their house at an assessed value from 1998. If you agree to sell your house at its 1998 value you then get a tax break equivalent to the difference in value from 1998 to now spread over 10 years. The buyer of the property agrees that for the same 10 year period their house is no longer part of the free market and can only rise in value by a very small fixed percentage. If they sell the house they can only sell for a price dictated by the annual percentage rise in value as determined by the number of years out 10 they have held the property.

The bank that gave the original mortgage also receives a tax break based on the difference between the 1998 assessed value and current assessed value.

Perhaps a plan like this could get the housing market moving again without causing individuals and regional banks massive losses. Yes you do lose something as you should but re pricing assets to match peoples salaries is what really matters and this is one possible way to do it.

I am not an economist, I am a twitchy fingered day trader that uses the profits to support other pursuits. I don't know if I am way off base I just know the solutions Government Goldman came up with amounted to a giant bank robbery and did nothing to strengthen the middle class which is essential for the survival of America..

So what say you? What are your ideas for a real fix, help me make a giant snow man of ideas for the Capital lawn this winter.

Hello My Name is Not Oulous (by Brendan Burke)

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Someone posted in the comments they were bothered by the appearance of new posters without an introduction. I am posting an interview from another site that explains my approach.

I am basically a maritime %ist. Any stock in a storm any direction, for me its all about the color (for deadwood fans). Beyond that the market has no meaning to me. It is a shell game that very infrequently gets me excited about an actual company.

For those bothered by the guest posts I suspect relief is coming. I am guessing that Senor Knight will do something like Zero Hedge with his content on the main page and guests on the side or header. In the mean time try and use nerf pitch forks and LED torches so we don't get too hurt.

Interview:

What is your primary background?

My primary background is painting/sculpting/scribbling, which means I am free to interpret the world without pressure from hierarchy or medium.   The disadvantage is no structure, funding, or consumers.  I spend some of my time trying to invent a self inflicting pyramid scheme of product.   I try to start with small idiot devices of little use in order to bankroll more complex useful devices.   I have yet to fully file a patent or sell a product.  I also work on theoretical ideas that are somewhere between crank/imagination and perhaps usefulness but with little math skill or presence in an academic environment I am just making anonymous noise.

How did you get into investing?

I am a gluttonous and perhaps degenerate gambler.   I enjoy numbers, randomness, and risk.  I was interested in casino gambling a long time ago but I recognized there was nothing about it that could be profitable unless you found a manufacturing flaw and exploited it.   If you ever meet a gambler who says he has a system and makes money with it,  hes lying.   There is only one casino game you can play in the world and make money on the game itself and not the secondary systems around it, and that’s the stock market.  The markets “odds” are exponential to your skill unlike casino gambling with the possible exception of poker.

Two events led me to investing many years ago.  One is the death of my granny and the other are magical invisible boots I used to sell on ebay called J-boots.  The boots made your metame run fast within the medium of Everquest.  I noticed an emerging shadow market of the already shadowy economy within the game Everquest, and I thought I would take a crack at finding an area to exploit that I could dominate in. There were too many sellers already so I had to get very specific and sell one particular item.  I chose the J-boot because everyone had to have them, and the major sellers were not bothering to sell it due to its complicated delivery procedure.   So in a fairly short period of time I had amassed a decent amount of money from death and magic virtual boots.   I then decided to take that money and push it into the markets.  I knew nothing about stock markets, and the year I made my first trade was 2001.  Both bad and good timing.  Lost more than I would have if I had started in a more prosperous time but learned a lot in the process.

“How often do you trade? Daily? Weekly? Or less frequently?”

It depends on the market behavior. For me the market has two modes of operation. Unsafe and slightly more unsafe.

When the market is plain old unsafe,  I will swing trade with hold times of a few days to a few weeks, to possibly but very infrequently, a few years.

If the market is even more unsafe I will day trade only with hold times of a few minutes to all day…. every once in a while I go overnight with something that has momentum.

“What is your investment style? Short-term? Long-term? Particular sector? Fundamental vs Technical?”

My trading style is illusion and momentum. Illusion is my basis for swing trading. Almost all value is an illusion, and I trade off people’s hopes as they relate to that illusion.

Momentum is for day trading, which is either behavioral in terms of pure price action or news driven.  In the end the two blend together into a messy giant sundae, and I just try and get a few bites before it becomes a sloppy disaster.

“What are some of the main tools you use for trading the right stocks?”

Any decent real time screener that will print stocks as they make new high of the day will do.  I prefer Trade Ideas Pro.  I use Think Or Swim, and it is far and away the best trading platform, but sadly they were bought out by TD Ameritrade so I hope AT doesn’t destroy what is otherwise a beautiful product.I have a lot of other methods that are minor but do their part:  message boards, a skype chat room that I am a part of, articles in any kind of magazine direct or abstract that might give a glimpse of future product or technology.

“What is the best and the worst trades you’ve had?”

Both of these trades happened in a period where I was purely reckless.  It is an era I plan on resurrecting with one of my accounts because I miss the high stakes and high bets.  I recently got a good chunk of money from selling a domain name so its free money that I am going to use for high risk trades.  I made 37k on a BIDU trade in about 7 minutes.  Relative to my portfolio size at the time it was a huge return. I used 4x margin.  It was an absolute thrill watching the cash part of the trade go up in real time.

The worst was MGAM, which I held years ago on a trade based around an article and the words of the CEO on a conference call.  It was also the most important trade I have ever made because its where I learned what a farce the stock market is.  I lost 17k in MGAM over a 3 week period.

“What would be your advice to the investors out there?”

1. First thing to learn is how to take a loss.  How do you react?  If you fall apart and its on your mind 100% of the time, then quit or change investing styles.  Once you learn to how to take a loss you are ready to try trading.

2. If you are 18 to 22 and considering becoming a financial professional you are making a huge mistake.  The world is divided up between creators and destroyers and those in the financial world are nothing but destroyers, myself included.  Luckily it is not my background nor does it consume 100% of my time.  The other half of my life is spent trying to create things.   I suggest you always keep something else in your back pocket if you choose to journey as a trader,  something that matters to human beings.

3. There is little or no truth and little or no value.  If the stock market were functioning properly, then stock prices woul
d not move very far and fast except in extreme cases and a public company would exist as an agreement between management and shareholders.  All companies would pay dividends as soon as they achieved profit as a way of paying back those that financed their company.  Sounds odd right?  Thats how it should work but it doesn’t, so remember that all values are an illusion, and its your job to be a magician and make trades that profit off the best illusions.

4.  Read Reminiscences of a Stock Operator.  Its a great story and will make you feel like trading is akin to swashbuckling and piracy.  It also lets you know who you are up against. Remember no one is on your side. Its you versus the world when you are trading for yourself.  Don’t bother with any other financial books;  just read novels, history, magazines, manga, cartoons, anything.  Maybe check out Naseem Taleb, but his “luck” of finding a black swan makes him era specific, so his current books won’t be as useful in a few years.   There is nothing worse than being a trader or a lawyer and going home only to talk about trading or the law. Fill your life with other things.

5. They always say don’t rely on luck, don’t hope, and use fact not intuition.  I thrive on Luck, Hope, and Intuition, in fact I am hoping my intuition can find me a lucky trade tomorrow.

Chemical Breakdown (oulous)

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Daspan. Forget gold. Forget oil. The most valuable commodity in the world right now is Daspan. Daspan was discovered somewhere between March 2009 and July 2009. No one person discovered it although I am tempted to name our very own Ben Bernanke as the lucky prospector but that's for historians to decide years from now.

The elements of Daspan have been around for over 100 years but they have rarely formed a stable material. Daspan has always been volatile and difficult to control, until recently. Several months ago it was discovered that a low value chemical called USD could be mixed with Daspan to create a new compound. When USD is mixed into Daspan the result is a fascinating reaction that creates an inflating cloud like mass that can be used to prop up weak foundations.

The problem with this compound is its temporary nature. Without additional funding to eventually fix the foundations they will crumble completely. So using this new compound is very risky if you are unable to get additional funding before the stop gap fails.

To understand the trade in Daspan one needs to first do a chemical break down of this commodity. D is one part Dow, and SP is one part S&P, and N is one part Nasdaq thus equaling the easy to remember DaSPaN (all a's = and).

The second part of understanding Daspan is knowing what it used to be before its recent evolution. Daspan used to be a chemical in three parts representing a complex system known as a stock market. This stock market quite simply was a group of capitalist companies that the public could speculate on by trading shares that represented the value of said companies.

I mentioned gold and oil earlier because those two commodities surpassed most peoples expectations of value. Gold couldn't go higher, it was over valued. Oil couldn't go higher it was over valued. I read this over and over in the news and yet both of these commodities surpassed expectations and indeed both can be argued as being under valued or over valued. The point is they were in the hands of traders and traders pushed those values higher. The reality of value as a related and tangible amount is difficult to model as an investment/trading strategy. Invariably a strange unforeseen event will always destroy this perception and leave those whom bet the wrong way with substantial losses.

Many people are excellent at making large bets on commodities and that's how bulls/bears should be treating this market, as a single commodity. It is a new paradigm made up of a flimsy compound and it will continue to surpass expectations until the foundations crumble or by some miracle we fix it. (aka economic recovery). The walls may crack, the windows might shake but until the pockets of investment banks are stuffed with government money transferred via the stock market, betting against the continued rise of this commodity will be like wrapping yourself in razor wire after a lemon bath. The viscous and brutal down draft will be difficult to time, it may be tomorrow or 3 months from now, it might not come at all. I will wait for it rather than time it.

There is no market, there is only a government supported commodity and this unstoppable force has turned the markets into a hyper movable object.

Evaporating Hope (by Brendan Burke)

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Verse I

I use price alerts across a wide spectrum of non index stocks to show me whats happening outside the manipulated or at least suspect dow naz and spy. Yesterday several of them tripped and the shadow world beneath the dow started to panic.

Lets look at a fine example of the non index backroom hopefuls.

BSDM – The story in a nutshell. They have some kind of awesome phaser that shoots a hot anti cancer death ray. Wow. What do they really do? Who cares. The point is they released a headline on September 22nd that states:

A Phase III study, which utilized the BSD-2000 Hyperthermia System, demonstrated that patients with high risk soft-tissue sarcomas were 30% more likely to be alive and cancer free almost three years after starting treatment if targeted heat therapy (hyperthermia) was added to their chemotherapy treatment.

Good enough for blind optimism to pile in. Never mind the fact that the company has been releasing the same headline since the 1980's. Lets look at what happened next:

Solid! Pretty exciting pop but look closer at the filing and what do you see? 3% institutional ownership. Dimensional Fund Advisors is the largest institutional owner with 466,864 shares. This safely identifies BSDM as a probable valueless stock (which i think comprises about 96% of the stock market but thats another post) and is therefore only good in a bullish era or in the unlikely event their technology becomes viable. 

The illusion of value is only sustainable when the market is absorbing optimism in the form of hopeful capital.

The stock pulled back as it should but what happened to it this week:

It fell off the line it had formed in the 2.50ish area and is now trading at its pre pop anti cancer headline share price. BSDM and all its ilk are probable canaries for the market at large and should warrant attention. 

Verse II

I am a closet admirer of the Bear Masters here as I do not short stocks. I always play long no matter what (except for extreme events) because I believe real value is a rarity, therefore stocks are kept high on an illusion and magic is far more powerful than reality. Reality is what sends stocks down and I am terrible with reality. 

Earnings gaps have been strong against market headwinds as of late and the first hour scalps have been superb. Look at NTRI and PEET yesterday. Most of the time I don't know what I am going to scalp until after the open when my screener data kicks in but today so far my pre open list has MOT (droid release) and AKAM (strong name post earnings play).