Ricks Picks

Has Wall Street No Decency?

EST

Watching the Dow Industrial Average cavort in the thin air above 12000 while the world goes to hell, we’re reminded of the famous exchange between Senator Joseph McCarthy and U.S. Army counsel Joseph Welch during the Army-McCarthy hearings:  “Have you no decency, sir?” asked Welch after the Commie-baiting McCarthy had smeared a junior lawyer from Welch’s firm with a ruinous accusation. We might ask the same question of the decision makers who in recent weeks have been driving stocks higher no matter how grave the news or world-shaking the event: Have you, the Masters of the Universe, no decency?  Apparently not — at least none capable of registering even a mote of doubt or concern about what is going on in the real world. Granted, there was a fleeting loss of confidence in the literal wake of March 11’s epic earthquake and tsunami. Some investors wondered how global manufacturers would fare with their most important supplier of just-in-time parts out of commission. Others grew nervous that Japan’s very financial stability was in jeopardy. But it didn’t take long before such anxious speculation gave way to the sunny notion that it would take vast quantities of capital investment to rebuild Japan.  Ka-ching! 

That was more than a week ago.  Since then, Japan’s predicament has grown increasingly menacing. Radioactive waste is spilling into the sea, a reactor containment vessel appears to have cracked, and there is no longer even a timetable for fixing the problem. Will Geiger counters in L.A. have to go crazy for Wall Street to at least act as though all of this matters?  And it’s not as though Japan’s problems were the only thing threatening to tilt the world off its axis economically and geopolitically. In Egypt, jihadists appear certain to carry the day, negating what little chance existed for the U.S. to prevent a major war in the region. And in Libya, allied incursions to help the “rebels,” whoever they might me, seemed likely to provoke Col. Kadhafy into doing something terrible and desperate.

Beyond Desperation

And yet, stocks have continued blithely higher, rallying on seven of the last eight days.  They were ascending Sunday night as well, not so much predicting a felicitous turn in the news as demonstrating that, whatever Monday’s headlines, it could not matter less. Whence comes this arrogant certitude?  Not from the decision-makers, to be sure; for in fact, they long ago ceded all trading decisions to algorithm-driven machines with a bullish bias. How many times  have we seen the index futures waft higher overnight in thin trading, only to have the “real” averages catch up at the opening bell in the controlled chaos of high-frequency trading? So reliable has this sequence of events become that it has literally become hard-wired into the markets themselves. Stocks have become intoxicated with easy money, revved up like a Lamborghini driven by a guy with a blood alcohol level of 3.0.  The heedless, suicidal ascent of shares has become so blatant that even CNBC’s talking heads no longer try to reassure us that stocks always climb a wall of worry.  No such thing is happening here, and everyone knows it. Stocks are climbing simply because making them climb has become the obsessive concern of a central bank that long ago exceeded the threshold of reckless desperation. At 220 mph, the Lambo is headed into a tight turn with no brakes.

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Comments on this entry are closed.

dan March 30, 2011, 12:16 am

FOOD FOR THOUGHT…

WE ALL SHOULD BE RICH WIH THE AMOUNT OF usd$ THAT HAVE BEEN PRINTED….YET WE STILL HAVE TO BORROW 40% OF OUR BUDGET JUST TO MAKE ENDS MEET…

CAN YOU SAY BULL**** TO ALL IN CHARGE

ricecake March 29, 2011, 2:24 am

“Has Wall Street No Decency?”

Wrong question to ask them if you don’t tie it with other words such as: Amount, Figure, return, %, and rate etc etc..,

They only know decent amount, decent figure, decent income, decent return, decent rate,

As for why stock market go higher and higher no matter what happen in the world? Please excuse my ignorance but I think it’s because there are so much liquid money around the world have limited places to go for gains. Cash they say is trash due to money printing which. The U.S treasury bond market is a ponzi scheme, the mother of all bubbles. The mini bond market also is in default danger. There are only so many commodities you can play. So money that is fleeing the bond market goes into the stock market for now. Unless the policymakers change their policies we can expect to see the stocke market go higher and higher.

p.s. Things are getting madder and madder each day. The average Joes are starting to speculate. Who won’t? You are told and warned everyday of the demise of the dollar, the bankruptcy of cities and states and the eventual collapse of the United States. Social mood is getting darker and darker. People are restless because no place is safe anymore.

ricecake202 March 29, 2011, 3:47 am

Another reason why stock market keeps going up, may be: “Geithner to China: We’re Open for Investment”
http://english.caing.com/2011-03-25/100241062.html

ricecake202 March 29, 2011, 3:51 am

That means Wall Street will jack up the stocks price as high as possible sold to the foreign buyers.

Enrico Rusticali March 28, 2011, 10:07 pm

Just one question……
After the hydrogen explosion in reactor #1, number 3 blew up…straight up. At a height of approx. 3 times the height of the tower near by, it dwarfed the #1 explosion.
Now what else is housed inside those buildings that can provoke the release of such explosive burst of energy?
Hydrogen in the 1st blast…yes that is believable. But to say there might be a breach in number 3 I find offensive Whatever gave off that much energy is most certainly the core containment vessel if not the core.
That is my untrained opinion.

TKO March 29, 2011, 3:49 am

Rico, you are correct in your observation viz a vis the explosion in the plutonium reactor building #3. The volume, density and color of the blast, and post incident photos indicate massive damage to the building. Subsequent readings of plutonium contamination in the vicinity tend to confirm severe damage. Thus far, it seems that the Japanese are containing the damage and preventing a major release into the atmosphere.

JJ March 28, 2011, 8:47 pm

That ponzi casino called the stock market is done as dinner and careers shuffling paper are over too. Maybe our engineers will actually innovate something rather than getting employed in the financial shell game.

Consider this, the most wealthy folks in the world have been quietly dumping their stocks since about 9 months ago all while the HFT algos drawing in the little guy trying to make back his retirement lost in 2008. Consumer spending is about to drop 50% across the board when either the dollar defaults or the gov’t is forced to enact some real spending cuts and tax increases. That equates to easy a 5,000 point drop in the dow. Its coming, mark my word.

dog March 28, 2011, 8:46 pm

That post just seems like a guy sticking to his opinion and fighting the market…the situation in Japan is not getting worse. I didnt realize that Rick was a nuclear phycist? Go dance a hula somewhere with just like that other predcition you were so certain about.

Rick Ackerman March 29, 2011, 1:09 am

I’ll contribute $300 toward your plane ticket if you promise to use it for a vacation in northern Japan, “Dog”.

Harvey Wayne March 28, 2011, 8:10 pm

I believe markets are looking ahead to hyperinflation

Robert March 28, 2011, 7:21 pm

This whole “stocks to infinity” thing really has me perplexed…

On the one hand, sure it’s easy- more currency units mean higher prices in things priced in that currency. Simple and elegant.

But- there is another side to this: the equity equation.
as stock prices climb astronomically higher, the forward P/E ratios go more and more insane.

Can someone (anyone?) explain to me just how a stock certificate REALLY represents a valid equity stake in the holdings of a company?

In today’s world, common shareholders are only subjected to the liabilities of the company- the Boards of Directors make sure, quite completely and unilaterally, that common shareholders have zero access to the benefits of company ownership.

The stock market is a casino- a giant roulette wheel where bets are placed on Black, the hedges are placed on Red and the winners let it ride…

until the little ball falls on a green zero.

Betting on Green is a losing proposition over time, but on the right spin of the wheel, green can create the John Paulsons of the world.

JohnJay March 28, 2011, 10:43 pm

Robert,
If the market tanks, then the Buffets of the world just back up the truck again at the bottom and pick up the rest of GE, AXP, XOM, ad infinitum, that they don’t already own. As King George Bush the First said, “higher, tighter, and righter hands”.
They know who gets bailed out at the bottom, so they can buy with confidence.
When you own everything worth owning, that’s as good as it gets, what you paid for it over the years averages out.
Buffet and the old/smart money have been at this for decades.
We can make some money in the markets , but who among us could afford to buy millions of shares of GE at $5 at the bottom, knowing they would get TARP money and were not going under?

JohnJay March 28, 2011, 5:38 pm

Well, after 100 years of rigging the system to their advantage, with politicians doing their bidding and family “Trusts” etc. to avoid taxes, the uber wealthy have it all sewed up.
Now they don’t even need to guess right in their investments, they just tell the government to bail them out, and, voila, lead turns into gold!
The stock market reflects their reality, not yours and mine.
Now that the national debt has become threatening, they tell their politicians to head right for Social Security with a meat axe.
Not a word about the bloated MIC, GE paying no taxes on billions in profits, corporate welfare etc.
Nope, just paint SS, with it’s own revenue stream that has been looted for years, as the culprit.
Not a word about a government policy that sent millions of jobs along with their tax money offshore.
It’s all grandma’s fault, don’t you know!
Geedy geezers, that’s the problem!

Steve March 28, 2011, 6:25 pm

JJ, spot on about the corporations who own the current corporate U.S. government and its enfranchisees

mario cavolo March 28, 2011, 3:39 pm

Rick says ” The heedless, suicidal ascent of shares has become so blatant that…” etc. And indeed all true….however looking at the scenario relative to, for example the NASDAQ bubble, this rise, backed by ongoing QE which will not end because it can not end, could continue on for quite a while longer. If we’re believing that “extreme” is what is needed for the bubble to burst as we analyze all the supposed market indicators, we’re not there yet!

TKO says “Your call to go long oil and short stocks under the present set of circumstances should be a very profitable trade” Sure, but the problem based on reality is to know WHEN? I have thrown good money after bad shorting various sectors again and again and have had nothing but my head handed to me the entire time, this last two times in U.S. equities being primary examples. Why because of this simplicity of fighting the trend and fighting the FED…bad idea, bad, bad idea. At best the markets should be moving sideways, that would be “normal” but there is the new normal…disgusted.

Cheers, Mario

&&&&&&

See my note to PhotoRadar, Mario. As any Rick’s Picks subscriber could attest, calling the top of each minor rally cycle is as easy as pie. We are currently short via QQQ April 53 puts, and although the stock market’s idiotic rally has softened them, our cost basis has been reduced to 0.37 apiece by partial-profit taking. RA

Deborah March 28, 2011, 3:08 pm

The answer to your question is quite simple actually. In order to keep the ponzi scheme of government going, they HAVE to create another bubble. Not much left out there to bubble, so the markets are it!

Nat Both March 28, 2011, 2:37 pm

Rick, you are truly a Wordsmith, and in substance your piece is spot on!

JimK March 28, 2011, 2:32 pm

Wall Street has the decency of a stomach. Appetite is reliable, as we saw at the beginning of Gulf War number one, when the markets rallied hugely and obviously in response to war – complete with audible cheering on the trading floors. As far as ‘reality setting in’ the metaphor of a teenager might be more apt than the drunk driver – the teenager is wide awake but considers himself exempt from the laws of physics, and he knows that his Dad will somehow bail him out of his mistakes.

But confounding it all is the discounting of QE3, which the Tsunami makes more likely – we are sliding into a pattern with that, too. With any kind of bad news event, there is the expectation of further reason to get out of dollars into anything else – it is like the ‘buy the rumor, sell the news’ dynamic where stocks paradoxically drop the day of the good news, but written over the broad market – and maybe the lack of a real pullback in the PM group as it hits it’s upper trend channel is just one force cancelling out the other.

PhotoRadarScam March 28, 2011, 2:27 pm

I don’t understand the continued shock and disbelief that the stock market continues to rally when QE2 is in full effect and with QE3 now almost a certainty. Will all of that money sloshing around, it has to go somewhere, and stocks are one of the few attractive choices. I suggest you stop looking to short the stock market until we near the end of QE.

&&&&&&

Subscribers who did as instructed would have made a profit on five of the last six market shorts, PRS. We short it at EVERY promising opportunity simpy because we can. One of these days we’ll be right, but in the meantime why not continue to rack up gains even when we are “wrong.” RA

PhotoRadarScam March 29, 2011, 12:36 am

Rick, the beauty of your system is that you can make money going up or down in any market, so your results are not surprising. But let’s be honest. The commentary in this article and others you have written are calling for a significant correction, not just 10-40 points (plus or minus) on the Es. My point stands… If you’re calling for a significant dose of market “reality” to set in, wait until the fed is done juicing.

&&&&&&&

The “juicing” will not stop until the system collapses, PRS, and we now know that even simultaneous, world-shaking events in Japan and the Middle East are not sufficient to disrupt the flow of QE money into U.S. stocks and bonds. What this implies is that the bullish paradigm will reverse in an instant due to some event so extreme that it lies beyond anything yet imagined. Don’t expect to pick up cheap put options when this occurs. More likely is that put options themselves will be valueless and that even the geniuses who saw disaster coming will not be cashing any winning tickets. Like the rest of us, they’ll be lucky to survive financially. RA

TKO March 28, 2011, 6:55 am

Your call to go long oil and short stocks under the present set of circumstances should be a very profitable trade what with Massive debt, increasing real unemployment, housing resuming its slide, expensive gas, pandemonium in the Middle East, another war etc etc. Stocks must be the only game in town or perhaps the rationale is that conditions are so bad that quantitative easing phase three is a likelihood. The rebound in Japanese stocks is also hard to fathom. The serial explosions at the Fukushima site have without a doubt affected the integrity of the various storage and containment vessels, piping, valves, instrumentation and controls. Steadily increasing levels of radiation, increased evacuation activities and the reluctant warnings of the officials are not good omens. The prevaling westerly “divine” winds have thus far kept most of the contamination out over the Pacific. A major release of hot stuff and an unfavorable wind pattern would lead to a situation that might make what we have seen thus far seem like a stroll in the park. At best,this disaster is going to take months to control. At Worst…..?
We hope the technicians and firemen can mitigate this catastrophe quickly. They are very brave. Likewise, under these conditions, it surely takes a very brave man to be going long the Nikkei.

Erin March 28, 2011, 6:48 am

All so true…And all this because we have a printing press. What more could you ask for?

The more I think about it…Why can’t we all just get a printing press set up at out homes? You gotta admit, It sure would be convenient to have that extra cash around if we needed it and I am sure that we could really help the economy out by buying some big ticket items like real estate and maybe a new car and a nice work truck and even a couple of those new electronic tablet things, they look pretty cool!

See, the real problem is the money that the fed is printing is just going into the banks. What we need is the cash going directly into the hands of the people, who would argue with that? And how could anything go wrong if the people had all the money they needed right at their fingertips? We would all be wealthy and we could live happily ever after, Right? Just think about it…All our kids would get a great education and great healthcare and we would never have to worry about anything!

I used to think that printing money was illegal but I was clearly wrong because I know that the Federal reserve would never do anything illegal like that and they only want to help. Mr. Bernanke said on his 60 minutes interview that he went into economics because he wanted to help people. I have no reason not to believe him and judging by the stock market performance, you should too. I believe he is doing a great job!

Martin C March 28, 2011, 5:05 pm

Very good, a more succint exposure of the great lie i could not imagine. On prevailing logic why shouldn’t the currency we print ourselves be equal to that of the FED or BoE? and what a great liquidity boost



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