11/30/2009

The Day V

ROFLOL

Ya gotta love trading. No signal and no trade.

2 Minute Crude Oil Chart

The Day IV

Long entry at 11:20:08 @$76.46, exit at 11:41:27 @$76.65, MAE -2, MFE +39.

2 Minute Crude Oil Chart

The Day III

Long entry at 8:32:03 @$76.87, exit at 8:34:59 @$76.74, MAE Full Stop, MFE +4.

Humbug.

2 Minute Crude Oil Chart

The Day II

Long entry at 8:02:05 @$76.41, exit at 8:09:42 @$76.39, MAE -11, MFE +18.

My "filter" chart kept me out of a short entry, after the successful short trade, that would not have worked, however it also put me into this long a little later then I previously would have entered.

There is no holy grail.

2 Minute Crude Oil Chart

The Day

Short entry at 7:06:31 @$75.77, exit at 7:15:32 @$75.22, MAE -.08, MFE target. On the bar after entry price came back to within 1 tick of my trailing stop.

Sometimes things go your way. :)

2 Minute Crude Oil Chart

11/27/2009

Dubai

I wonder if many people, as I did, assumed all this was being built with petro dollars. That is petro turned into cash, turned into real estate.

Turns out they used just a "little" debt as well.

Too bad no one told them, capital is scarce. :)


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Hello!

Daily Crude Oil Chart
Nothing like a little 555 tick opening range to get your heart started. Hopefully we see some trade set ups today.

11/24/2009

Solfestland

Your Supreme Ruler
Greetings and Salutations:

Welcome to Solfestland.

Do not be alarmed, I, Solfest, have taken over the world and this is how it shall work from now on.

Before I outline how our new world will work let me offer a few key beliefs that our world will be based on.

1) Governments cannot create jobs, only businesses create jobs.

2) A corporation is not a human, it cannot vote, it does not require health care, it is simply an entity through which commerce occurs. Therefore we shall not treat it as a citizen.

3) Government is a charity not a business.

4) Governments can only exist by legislating donations to themselves.

5) We as a society wish to work together as a collective on a few key issues. We shall leave all other operations to private enterprise.

6) As we citizens shall all receive benefits from these collective entities we shall therefore be required to donate to our government in order for them to offer these services to us.

7) We will expect our government to provide us with security, health care, energy management, and that's about it.

Ok let's get started.

First things first, I need money.

Taxation: From this day forth there shall be no corporate income tax. Business is the engine that feeds us all and we shall not remove precious capital from this engine until they are done with it. There shall be one exception to this rule. Any company that hoards cash shall pay a 35% tax on this cash. Hoarding shall be considered to have occurred if the company holds a cash amount that exceeds their current liabilities by a factor of three to one for a period greater than one year less a day.

In case this has confused you let me explain. Business can do four things with their net income, hoard it which we tax, pay dividends to humans which we tax, hire more humans which we tax, or reinvest in their business by purchasing capital goods or acquiring other companies.

We shall tax all humans who derive income from capital gains, dividends, interest, or employment. All capital gains, dividends and employment income shall be taxed at a flat rate of 10%. Interest income shall be taxed at a flat rate of 15%. This is done to encourage individuals to invest their savings rather than just earn interest on their savings. That said the interest tax rate is not so punitive that it would discourage those from interest bearing notes if that is their preference.

There shall also be a consumption tax of 10% on all goods and services sold to humans in Solfestland. If you are frugal your total tax bill shall be less than those who are not. In other words you are not tax punished for earning more income you are only tax punished for spending that income. (ha ha) Solfest loves this idea.

State Work Force: Solfestland will have a small state work force. This work force will be comprised of the very best people we can identify. These people will be paid very well. These people will understand that they have a grave responsibility to the citizens of Solfestland. These people will understand that is a great privilege to work for the people of Solfestland. Integrity will be the key character trait of this work force and all state employees will be asked to sign a Statement of Duty before they are hired. This statement declares that any conviction for a breach of the public trust will be punishable by death.

If you are not comfortable with this we suggest you do not work for the state.

Justice: We shall employ one national police force. No jurisdiction issues, no overlap. Judges shall be appointed by the state. Corruption will not be tolerated in our justice system. If you are convicted of offering or accepting a bribe or if a public official steals funds from our public trust they shall be put to death.

We consider this a deterrent.

A country cannot exist if the state officials are corrupt. Law and order must never be questionable. They are absolutes. You can trust us. Individuals and business cannot flourish without this trust. It is the most important component of any country. Thus the penalty for breaching this trust is a final one.

Parole shall be abolished; the state will build and staff all prisons. Sentences will be fair and will be served in their entirety. No other offence other than corruption shall have the death penalty as the outcome of conviction.

Murder does not undermine the state. Murder is usually a crime of passion and the death penalty is not a deterrent.

Convicted murderers shall serve life in prison. There is no degree of murder. No other offence will have a life sentence. First time offenders, other than murderers will be sentenced lighter than repeat offenders. You will get a second chance at life. Prisons will be run by the staff not the inmates. No prisoner shall be abused by anyone while in prison. Prison staff are state officials, the penalty for bribery and or corruption is the same for all. Death.

Health Care: There shall be a state funded health care system for all citizens. The state cares about its citizen’s health and wishes to provide them with the best health care we can offer. Private health care can continue to exist for anyone who wishes to run such a business and for anyone who wishes to pay for such a service.

Defense: Defense and justice are rolled into one entity. The national police/security force consists of law enforcement, army, navy, and air force. All are bound by the Solfestland Statement of Duty.

Transportation: All transportation systems shall be owned by private entities, not the state. They shall receive tolls from all users to pay for the infrastructure they provide. All vehicles will have an identification tag that is read by monitors at the tolls. Cars will not have to stop. You will receive a monthly bill for your infrastructure usage. If you don't drive you don't pay. Any conviction for hiding or defacing your automobile tag will result in the loss of your vehicle use privileges. There will be no second chances. You will never drive again. Impaired driving convictions will have the same result. You will never drive again. Convictions for throwing garbage out of a vehicle onto the road will have the same result. You will never drive again.

We consider this a deterrent.

Education: The state will provide buildings to house groups of human children. These were formally known as schools. Adult humans will gather resources and hire other adult humans to teach their human children. The adult humans will determine what they want their staff (formerly known as teachers) to teach to their human children.

If an adult human does not participate (pay) in such a group the state will take their children and provide housing and education for them. These adult humans will then be sterilized by the state as they have proven that they are capable of reproduction but not capable of nurture.

The state does care that the human children are educated and cared for. The care of these children by the state will by done by the very best people we can find. These facilities (formerly known as orphanages) will not be a house of horror for the children but rather a home that will provide them with a chance at life second to none. The state employees that run these homes understand they are bound by the Solfestland Statement of Duty. Any conviction for breach of this public trust is punishable by death.

We consider this a deterrent.

Social Security: All humans over the age of 17 will have 10% of their gross income removed from their salary (pre tax) and placed into their own retirement savings account. No tax will be levied on dividends, capital gains, or interest while the funds are in the retirement account. Once the funds are in that account it is up to the human to determine how they invest these funds. Humans can begin drawing funds out of the account at the age of 55 if they wish. The withdrawal rate will be prorated on the state actuarial tables for male and female life expectancy. This will be the maximum you can withdrawal. You can choose to withdrawal less. The state will charge the normal 10% tax on all funds withdrawn from the plan. If you run out of money before you run out of life it is your problem. The state does not care.

Energy: Energy is precious. From this day forth it shall be treated as such.

Companies shall have access to all the energy they need at market rates. Humans shall have their market rate energy rationed. Any consumption over your ration will have a 35% tax attached to it. This includes all heating, power, and transportation fuels. Your utility bill will automatically add the tax for any consumption over your ration. For example if you own a 1200sq ft house and use an average amount of electricity and heat you will not pay the tax. If you own a 10,000 sq ft house or just use way more than the average home does in power and heat you will pay the tax on the amount over the ration.

This means you Al Gore.

All transportation fuels will be purchased with a state issued pre paid card so we can track how much fuel you use. If you wish to exceed the state determined monthly ration for fuel you can still purchase more fuel with the 35% tax included.

The proceeds from the energy taxes will be used to develop and deploy new energy sources and fund all state research into things that can possibly destroy us. Private research can continue if funded by private sources. The state has the option to review and use this research if it is made available. Public policy on things that can destroy us will only be made from the state research teams. All private research is considered corrupt by its funding source.

Treasury: There is now only one currency and we shall call it the Loonie. (ha ha) Interest rates will be fixed at 5%. Banks can borrow from the treasury at that rate and charge whatever they want on the money they lend. Banks will float the rate not the state.

The state will play no role in business. If you bankrupt your company you bankrupt your company. If you bankrupt yourself and your family then so be it. The state does not care. If banks and humans do stupid things that create speculative bubbles they will be left to suffer the consequences of their actions. The state does not care.

We believe our initial level of taxation may be too high. We will maintain this level until we have cash on hand equal to one full year's expenses. Once we achieve that we will lower taxes to meet our annual budgeted expenses. We will only spend in the current year what we received in the previous year. This way we will always know in advance how much money we have to spend in the current year.

Mrs. Solfest
If we find that income is not sufficient to meet our needs we will increase taxes and or cut spending. We will ask you before we do this. We will always state our budget and ask if you want us to cut spending out of the budget or if you want us to increase taxes. You decide. We will not borrow money. The state is a charity not a business. Charities should never borrow money. In fact we will make it illegal for a charity to borrow money.

All other current government departments and employees are free to go. In case that is not clear to you let me phrase it another way, your cheque is not going to arrive next month.

Mrs. Solfest and I would like to take this opportunity to welcome you to Solfestland.

As this is a new document and a work in progress we welcome your comments and suggestions.

Thank you.

11/20/2009

11/19/2009

I Don't Feel Like Writing

So read some others.

Infectious Greed: Interesting animation on empires declining.

Daily Speculations: Victor Niederhoffer's blog. Niederhoffer wrote The Education of a Speculator. Many large brained fellows write for his blog.

Plus take the time, if you are not currently, to read the usual geniuses in my blog roll (my daily read, bottom right hand column)

I hesitate to post charts right now as I am trading off of two charts and only showing you one chart. The other, while working nicely, does not have enough data to be considered proven.

I know that hasn't stopped me from posting before. I guess this does show I do have the capacity to learn from my mistakes. :)

Wait a tic, did I just write something.

Humbug.

11/18/2009

Pi


I saw this little gem on Anonymous Market Notes and my first thought was LW must own this movie.

My second thought was maybe LW wrote, directed, produced, and starred in this movie.

My third thought was if LW does not own this movie he is currently running naked (no time to dress) with tears of joy streaming down his face screaming PIIIIIIIIIIII at the top of his lungs to his local DVD retailer.

God help them if they don't carry the movie.

Pi

11/16/2009

T Boone Pickens

Boone Pickens bring some common sense to the energy complex.

Click here for the Business News Network interview with Boone.

There are three parts to the interview that roll one after another.

Picken's Plan is to replace some crude oil usage with natural gas. His argument being that natural gas is plentiful in the USA so why not use it instead of crude oil.

Makes sense, except the infrastructure is not currently in place to use natural gas for trucks rather than diesel fuel. Another issue is the sound of a 450 hp diesel engine compared to a natural gas one?

Truckers love that sound. :)

Ayn Rand



Apparently Angelina Jolie is set to star as Dagny Taggart.

I think I can live with that. :)

This project has been talked about for a long time. I hope it happens and I hope they do it right as this will be a very difficult adaptation to film.

Atlas Shrugged

The Fountainhead

11/13/2009

'Back in Black'

Yes that means it was a nice week.



2 Minute Crude Oil Chart
105 seconds to target. You just never know.

Have a nice weekend everyone.

11/12/2009

The Life of a Trade

I liked DT233's Why Trading Will Kill You post the other day so much I thought I would offer another selection along those lines.

Maybe this is just because I finally had a trade that lasted long enough to actually tell a story about it, 45 minutes and 24 seconds. That may be a record for me.

Why so long in the trade?

I am no longer moving to break even at a certain point, instead I am trailing the stop at +8 from the hard stop of -13. I have found, albeit with a statistically insignificant number of trades, that I am staying in the trades longer.

I have moved my target up to 55 ticks as well, so this now means that I can have a -13, a +55, or any number in between -13 and +33 as my final result.

Now the real story on this trade was all those yellow bars after my blue bar entry. Ten of them, yuck. Did I want to check out with one of the many passes through my entry point?

Yes.

Would that have been an ok thing to do after 20 plus minutes in a trade that's going nowhere?

Probably.

Why didn't I?

I talked to myself.

I talked through the trade, yes my short ema was flat and getting breached, however my trailing stop had moved down 2 ticks to -11 so risk had been reduced a little.

That stop was still sitting above the middle ema, so I asked myself why do you have that middle ema on your chart?

Well it's supposed to tell me where trend is at on a longer time frame basis.

Right, so that trend is still what?

Short.

Right, so why not let it ride and see if momentum comes back your way?

Why not, I'll tell you why not a -$115.50 dollar result is why not.

Why not bail out at +-1 or 2 and wait for the next signal?

Hmmm.

Well, the move is slow...

Slow, it's non existent! (I'm now interrupting myself in this conversation)

Ok it's non existent but you had a valid signal, you have set your risk management parameters for a reason, why not let those parameters play out?

Fine.

But if this doesn't work I'm holding you responsible.

Fine.

Ok I'm done talking to myself now.

As you can see it finally went. Now the next emotion racking event was the MFE, 55 you say? Not quite, 52. LOL

Trade stats were, short entry 10:32:01 MST at $77.08, MAE -0.08, MFE +0.52, exit 11:17:26 MST at $76.77.

Yes 3 ticks away from target and it turned back to the trailing stop. A +31 result. Still very good.

So if there is a moral to the story it is this, we all have emotional responses in this business, no not just DT233, we all second guess, micromanage, and if it works in our favour we are genius, and if it doesn't, well you know.

Message to us all.

Let the probabilities work.

If you have a statistical data base don't corrupt it with your emotional in flight responses.

Trade like Captain Sullenberger; we're going into the Hudson, brace for impact, we've arrived, I hope you all enjoyed your flight.

11/10/2009

The Two Faces of Solfest

Daytrader 233 wrote a blog post about his mental status during and after a successful trade.

I thought I would add to the conversation with my two trades today. Trade number 1, which I have titled, I am moron, shows a big up move with many blue bars and the cheers of successful traders along the way.

Solfest's entry endured heckling from the peanut gallery and ended with tears and the gnashing of teeth.

I am moron.
Trade number 2 which I have titled, I am genius, shows a nice downtrend, a thoughtful entry, and target reached.

I am genius.
The truth of the two trades is that both were successful. Both trades met my guidelines completely, I took both trades and executed the in flight plan perfectly, and I accepted the outcome from both as part of the business.

Money management took 13 ticks on one and money management gave 55 ticks on the other.

The moral of the story is I am neither moron or genius, (although I am human and therefore could be stupid) I am simply following a plan that has statistical merit.

It's just that easy.

HA!

It's never easy, unless you can somehow get into the Long & Wrong robotic mindset and stay there. I get there, but I don't always stay there. I guess I am stupid.

But I'm not a moron or a genius, I'm a trader.

11/09/2009

A Blog About......

Trading crude oil!

Right, right, trading crude oil. That's why we're all here. That's why tens of people show up every day, hoping for a glimpse into the exciting world of crude oil trading.

Indeed.

Well here you go, a couple of trades today.

I am working with an old filter for the blue bars. One that I can't figure how to code into the blue bars so I am currently watching 2 charts again.

If it shows any promise I'll let you know.

Hint, part of it appears and disappears off my blue bar chart.

2 Minute Crude Oil Chart

Armageddon


We need a new word in the English language. We have to identify the new threat to civilization.

The media.

Media Terrorists?

Mediorists?

That's it!

Mediorists.

New flash from the desk of Solfest: The world is not coming to an end. We are not running out of fuel. We are not running out of water. We are not running out of food. We are not going to die of aids. We are not going to die of H1N1. We are not going to die from dandelion herbicide. We are not going to boil in our own skin from global warming.

What else are we not going to die from? Have I forgotten anything?

Probably.

All those behavioral finance videos I have been posting point out one very important theme.

The theme from the Bald Men with Large Brains is this; humans are stupid. In fact even people with PhDs are stupid. There I said it, it's out there. We are stupid, and as a herd we may have to find another new word that is worse than stupid.

Dr. Kahneman (bald large brained fellow) stated that it takes about 3 years for humans to completely change their paradigm.

3 years.

So if you tell the world for 3 consecutive years that we are going to die from something, anything, we all believe it. We stop questioning the source, we don't ask why, we just accept it as our new reality.

I would argue that in the new world of 24 hour news that 3 year time frame may be shrinking.

Now you may argue that humans can't be all that stupid, because, well look at us. We have all this stuff. We eat the other animals on earth. We are kings of the blue planet.

True.

But.

We are frightened easily.

Why?

Because death scares us. We are wired to try very hard not to die. So when the Mediorists tell us we are all going to die we freak out. And here in lies the problem. The things the Mediorists frighten us with are not going to kill us, but our reaction to these things just may.
"The only thing we have to fear is fear itself". Franklin Roosevelt

Remember War of the Worlds? Orson Wells did a radio broadcast on Halloween (hello, it was Halloween, and we're not stupid?) and told the world that Martians had landed and we were at war with them.

People believed him. People panicked. People are stupid.

Now the latest threat to the blue planet is H1N1.

IT'S THE FLU PEOPLE!!

The Mediorists are stealing the education from the youth of the world. Parents are not sending their kids to school because they're afraid they will get the flu.

The flu.

So that begs the question, when will you send your kid to school? When is it safe? Who signals the all clear?

Oh and by the way your child has a larger probability (LW just woke up) of dieing from the car ride to school then from the flu.

Sorry.

Here's another newsflash, you and I won't die from the flu.

How do I know this? I know this because I know how many people read this blog (not many) and I know how many people there are in the world (a bunch). The probability of any of my readers or me dieing from the flu is so small a statistician could say it's impossible.

The 24 hour news vacuum is always starved for food. It needs to eat and it needs to eat now. They need you to watch so they can sell advertising. They will tell you anything they can in order to scare you into watching them. They need you to watch. They need the money.

So people it's time to wake up. It's time to tell the Mediorists to take their 24 hour load of you know what and shove it you know where.

The only danger to mankind is the one we have all forgot, while we're busy picking dandelions out of our lawn with our bare hands there are nuclear and biological weapons ready to take us all out.

Of course there is always that black swan out there that no one sees coming. :)

11/08/2009

Franklin Delano Roosevelt

Apparently we have been here before. Yet here we are again. I guess Daniel Kahneman is right when he says people only have a 3 year memory. Meaning whatever constant we see for 3 years in a row we grab as the new permanent reality.

Roosevelt delivered this inaugural address on March 4, 1933. Obama could have delivered the exact same address with the exact same relevance on January 20, 2009.




"I am certain that my fellow Americans expect that on my induction into the Presidency I will address them with a candor and a decision which the present situation of our people impel. This is preeminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facing conditions in our country today. This great Nation will endure as it has endured, will revive and will prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory. I am convinced that you will again give that support to leadership in these critical days.

In such a spirit on my part and on yours we face our common difficulties. They concern, thank God, only material things. Values have shrunken to fantastic levels; taxes have risen; our ability to pay has fallen; government of all kinds is faced by serious curtailment of income; the means of exchange are frozen in the currents of trade; the withered leaves of industrial enterprise lie on every side; farmers find no markets for their produce; the savings of many years in thousands of families are gone.

More important, a host of unemployed citizens face the grim problem of existence, and an equally great number toil with little return. Only a foolish optimist can deny the dark realities of the moment.

Yet our distress comes from no failure of substance. We are stricken by no plague of locusts. Compared with the perils which our forefathers conquered because they believed and were not afraid, we have still much to be thankful for. Nature still offers her bounty and human efforts have multiplied it. Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply. Primarily this is because the rulers of the exchange of mankind’s goods have failed, through their own stubbornness and their own incompetence, have admitted their failure, and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.

True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.

The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.

Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow men.

Recognition of the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit; and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing. Small wonder that confidence languishes, for it thrives only on honesty, on honor, on the sacredness of obligations, on faithful protection, on unselfish performance; without them it cannot live.
Restoration calls, however, not for changes in ethics alone. This Nation asks for action, and action now.

Our greatest primary task is to put people to work. This is no unsolvable problem if we face it wisely and courageously. It can be accomplished in part by direct recruiting by the Government itself, treating the task as we would treat the emergency of a war, but at the same time, through this employment, accomplishing greatly needed projects to stimulate and reorganize the use of our natural resources.

Hand in hand with this we must frankly recognize the overbalance of population in our industrial centers and, by engaging on a national scale in a redistribution, endeavor to provide a better use of the land for those best fitted for the land. The task can be helped by definite efforts to raise the values of agricultural products and with this the power to purchase the output of our cities. It can be helped by preventing realistically the tragedy of the growing loss through foreclosure of our small homes and our farms. It can be helped by insistence that the Federal, State, and local governments act forthwith on the demand that their cost be drastically reduced. It can be helped by the unifying of relief activities which today are often scattered, uneconomical, and unequal. It can be helped by national planning for and supervision of all forms of transportation and of communications and other utilities which have a definitely public character. There are many ways in which it can be helped, but it can never be helped merely by talking about it. We must act and act quickly.

Finally, in our progress toward a resumption of work we require two safeguards against a return of the evils of the old order; there must be a strict supervision of all banking and credits and investments; there must be an end to speculation with other people’s money, and there must be provision for an adequate but sound currency.

There are the lines of attack. I shall presently urge upon a new Congress in special session detailed measures for their fulfillment, and I shall seek the immediate assistance of the several States.

Through this program of action we address ourselves to putting our own national house in order and making income balance outgo. Our international trade relations, though vastly important, are in point of time and necessity secondary to the establishment of a sound national economy. I favor as a practical policy the putting of first things first. I shall spare no effort to restore world trade by international economic readjustment, but the emergency at home cannot wait on that accomplishment.

The basic thought that guides these specific means of national recovery is not narrowly nationalistic. It is the insistence, as a first consideration, upon the interdependence of the various elements in all parts of the United States—a recognition of the old and permanently important manifestation of the American spirit of the pioneer. It is the way to recovery. It is the immediate way. It is the strongest assurance that the recovery will endure.

In the field of world policy I would dedicate this Nation to the policy of the good neighbor—the neighbor who resolutely respects himself and, because he does so, respects the rights of others—the neighbor who respects his obligations and respects the sanctity of his agreements in and with a world of neighbors.

If I read the temper of our people correctly, we now realize as we have never realized before our interdependence on each other; that we can not merely take but we must give as well; that if we are to go forward, we must move as a trained and loyal army willing to sacrifice for the good of a common discipline, because without such discipline no progress is made, no leadership becomes effective. We are, I know, ready and willing to submit our lives and property to such discipline, because it makes possible a leadership which aims at a larger good. This I propose to offer, pledging that the larger purposes will bind upon us all as a sacred obligation with a unity of duty hitherto evoked only in time of armed strife.

With this pledge taken, I assume unhesitatingly the leadership of this great army of our people dedicated to a disciplined attack upon our common problems.

Action in this image and to this end is feasible under the form of government which we have inherited from our ancestors. Our Constitution is so simple and practical that it is possible always to meet extraordinary needs by changes in emphasis and arrangement without loss of essential form. That is why our constitutional system has proved itself the most superbly enduring political mechanism the modern world has produced. It has met every stress of vast expansion of territory, of foreign wars, of bitter internal strife, of world relations.

It is to be hoped that the normal balance of executive and legislative authority may be wholly adequate to meet the unprecedented task before us. But it may be that an unprecedented demand and need for undelayed action may call for temporary departure from that normal balance of public procedure.

I am prepared under my constitutional duty to recommend the measures that a stricken nation in the midst of a stricken world may require. These measures, or such other measures as the Congress may build out of its experience and wisdom, I shall seek, within my constitutional authority, to bring to speedy adoption.

But in the event that the Congress shall fail to take one of these two courses, and in the event that the national emergency is still critical, I shall not evade the clear course of duty that will then confront me. I shall ask the Congress for the one remaining instrument to meet the crisis—broad Executive power to wage a war against the emergency, as great as the power that would be given to me if we were in fact invaded by a foreign foe.

For the trust reposed in me I will return the courage and the devotion that befit the time. I can do no less.

We face the arduous days that lie before us in the warm courage of the national unity; with the clear consciousness of seeking old and precious moral values; with the clean satisfaction that comes from the stern performance of duty by old and young alike. We aim at the assurance of a rounded and permanent national life.

We do not distrust the future of essential democracy. The people of the United States have not failed. In their need they have registered a mandate that they want direct, vigorous action. They have asked for discipline and direction under leadership. They have made me the present instrument of their wishes. In the spirit of the gift I take it.

In this dedication of a Nation we humbly ask the blessing of God. May He protect each and every one of us. May He guide me in the days to come."

Source: Franklin D. Roosevelt, Inaugural Address, March 4, 1933, as published in Samuel Rosenman, ed., The Public Papers of Franklin D. Roosevelt, Volume Two: The Year of Crisis, 1933 (New York: Random House, 1938), 11–16.

11/05/2009

My Black Swan

I bought a farm.

I bought a farm located in an area that receives about 18 inches of rain per year.

The year that I bought the farm we received about 1 inch of rain.

A neighbor of mine who had lived in the area for over 80 years told me this was the driest year he had ever seen.

This was my black swan.

I was highly leveraged and in no financial shape to with stand such a shock.

Through sheer idiotic stubbornness (working 10 hours a day 7 days a week off the farm) I survived the event and did wind up selling the farm for a profit 10 years later.

But I was never the same person after that.

I have seen two oil / real estate bubbles rise and fall in Alberta.

I have seen a technology bubble rise and fall.

I have seen the 1987 black Monday stock market meltdown.

I have seen the 2008 stock market collapse.

I have seen crude oil fluctuate between $3 and $147 dollars per barrel.

I have seen interest rates fluctuate between 21% and 2.00%.

I'm 45 years old.

Hopefully I'm only half way gone.

I wonder what the next 45 years will bring.

How do I protect my family from future rare events?

Number one, I disagree with Taleb on these rare events.

I don't think they are all that rare.

Number two, I agree with Taleb that the best way to protect oneself is to stay, or get, deleveraged.

Number three, I must own assets that can survive "rare events".

Assets such as cash, gold, land, and companies.

The companies that I own must live with the same leverage principals that I live with.

With all this in place I still may not be properly prepared.

Why?

Because the real black swan is the one you have never seen before, the one that no one has seen.

I guess for that there is no preparation.

Nassim Taleb






The Black Swan: The Impact of the Highly Improbable

Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets

11/04/2009

Bald Men with Large Brains

If you are serious about this business of trading, or investing, you must watch this. If you're really serious you should watch it twice.

(you have to click on the watch full progarm icon)
My formal education is very limited; however my experience and "informal" education is quite vast. I find that combination interesting when ever I dip back into the "formal" school for anything. I remember when I was working in the bank I thought I should continue along the Canadian Securities Institute’s offerings and decided on a course called Modern Portfolio Theory. Now remember no business school for me, however I had started and sold my own business, spent 20 plus years reading my Father's business magazine, and read hundreds of books on business and investing.

So it was with much excitement that I opened my shiny my new book and course work on "Modern Portfolio Theory". The first thing I noticed were math equations that covered an entire page. This does not sit well with me so I skip over those and try and find some words. Finally I do find some words that state those massive equations are going to tell me what my expected return will be based on the asset allocation I use.

My formally uneducated response to that was, huh?

That's impossible.

You can look back and see that stocks outperformed bonds and bonds outperformed cash over the past 100 years. But you have no idea how those returns will roll in, or out, each year.

I'm a mathematical neanderthal and I could see that.

However the people that wrote the book seem quite learned, formally learned, so I carried on desperately looking for more words and less math. Finally I see a small paragraph quoting Warren Buffett, aha I say Warren will explain this to me in words I can understand.

To paraphrase, Warren's little paragraph stated that markets are not efficient and "Modern Portfolio Theory" is a load of crap.

Apparently the learned authors of the book were offering a one paragraph rebuttal of their "theory".

Bye bye book.

Perhaps you can be too formally educated.

11/03/2009

A Tale of Two Tuesdays

Trading is a strange business.

As of Tuesday October 27th, 2009 the Solfest Magic Blue Bar System was about to be thrown in the garbage and Solfest was about to don the Magic Blue Fireproof Coveralls and start work as a derrick hand on an oil rig.

As of Tuesday November 3rd, 2009 the Solfest Magic Blue Bars are proudly displayed to the public so his adoring fans can shower him with praise recognizing his complete domination of the crude oil pit.

2 Minute Crude Oil Charts



As for Wednesday November 4th, 2009.

Who knows.