The Difference a Year Makes
Here’s the Shanghai Composite Index over exactly the last year of action.
From 1600 to 4300…that’s just a hair under 170%. You know, I have to wonder whether guys like Greenspan are paid by the pros to issue "warnings" about China…oh, wait…that’s from 2004…here you go.
Well of course there’s going to be a contraction at some point.
Lots of people and institutions are riding on profits of 200% and
more, and at some point they’re either going to want to take them, or
the fear of being the last out the door is going to tip the balance and
there’s going to be selling (heavy distribution), which, of course, is going to be in excess of what will be
able to be absorbed. So if there aren’t enough buyers at the
prevailing prices for stocks and people still want to sell, then the
bids (prices) drop until there are sufficient buyers to take on all
sellers. (Sometimes I get the impression that people think there’s some other
sort of mechanism going on, other than a very simple market mechanism
writ humongous.)
At any rate, my speculation right now is that the pros are still
buying, which means that they need guys like Greenspan to stoke up the
fear, like earlier this month. The biggest trading mistake longer term
investors make is to fear that their gains might get wiped out so they
play it safe instead of learning how to deal with the unnatural feeling of riding a
winner for all it’s worth. Even still, that big drop in early June
would have probably been enough to shake me out of anything I was
holding. And of course, in retrospect, having sold would have given the
big boys the most stupendous entry imaginable. Wowzer!
It always pays to have an idea of what the big institutional money
is doing. If they aren’t heading for the door, chances are you’re looking
at a fake out.
So ends my head-up-my-ass report
on the irredeemable evil commie Chinese regime. Don’t even stop to
think who and how many a 170% gain in the stock market might be helping
and life changing. Pay no attention that so far this year, 8 million
stock brokerage accounts have been opened on behalf of regular Chinese
people — a record 350,000 on last May 8 alone — and the total number
of small investor accounts is topping 100 million. Do you, dear American, have a trading account at a brokerage? Are you paying attention to anything?
They’re going to catch you, you know.
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Sabotta:
Well, first: Fuck off.
Second, I didn't claim that even if Greenspan was doing that it's immoral. He's speculating, just like anyone else. If his "predictions" have the power to move markets (and they do), then it's everyone else's job to understand that and place their bets accordingly.
Perhaps it's because you're such a miserable crybaby who blames everything around you for your own problems that you assumed I view the world likewise.
Third: Fuck off.
R
As long as we're throwing around vile slander about Greenspan, are we also entitled to speculate about who you're shilling for, Nikoley?
If you have proof that Greenspan is being bribed to make statements that he knows are untrue in order to manipulate markets, then let's see it. Otherwise what you are doing is despicable.
You. Youse guys.
That's not Greenspan.
Greenspan was abducted by aliens nearly twenty years ago.
Y'all fight nice, wouldjda?
Um, no doubt I am a terrible person but that's not the point, is it?
"You know, I have to wonder whether guys like Greenspan are paid by the pros"
That's an accusation. Weasel words nonwithstanding.
Do you have proof or not?
"Second, I didn't claim that even if Greenspan was doing that it's immoral."
Of course it would be immoral. Now you are just backpedalling furiously.
Sabotta:
The operative word is "wonder." That's speculation, not an accusation or allegation. There is an implicit identification, however, which is that every time Greenspan issues forth with one of his hand-wringing "warnings," small long-term investors in individual stocks and ETFs get their stops hit (which means they took their max calculated loss on the trade and lost their position) and the big boys are then compelled to buy the dip because they have so much riding.
Alternatively, or in combination, they can hedge, but that usually ends up being a wasted insurance premium, so if you think that you and all the other big boys will be able to buy your way out of it, it's better because then you actually end up making big bucks off the correction — at the expense of the small retail investors.
This is all well understood and acknowledged dynamics. You can look it up.
No, I don't think it would be immoral for Greenspan to say whatever the hell he wants to about the market, paid to say it or not, whether he actually believes it or not. But then, you have no conception about how life in the business fast lane works, do you? You have some Pollyanna notion of how ethically upstanding everyone is or ought to be, but the fact is that's it's a real-man's game and nobody is going to care if you get wiped out. You ought to know and understand that to some extent you're sitting down to a poker game any time you engage in business or trading, and as such, you accept the risk and consequences without resort to childish moral platitudes (in this specific context). If someone can get an edge or an angle on you, they will, and I happen to like it that way.
Now, sure, there are probably markets and niches where it's mostly nothing but straight shooting, so if that's your preference, fine — or just take a paycheck and eliminate even more risk (some business owners pay employees before themselves, as it should be).
But seriously, Sabotta: you "live" in a world that doesn't exist, and I'd say doesn't even appeal to me. Frankly, I like the idea that I'm operating in a shark tank or vi[per pit. It suits me.
…Oh, just to clear up any misunderstanding, I still wonder whether Greenspan is on the pay of the big boys. If you think that's still "despicable," then fine. Perhaps at least you understand how I view your complaint, and indeed moral assessment if it were true, as naive.
When I was in my colleg-age days, a group of my friends and I would have a near weekly poker night. It was a friendly game, and the stakes were generally low. Still, the pots would occasionally get into "throw in the paycheck or the car keys" level. We didn't mind much, because we were all living cheap, and besides, this was the Reagan '80s, and the streets were paved with gold.
One friend got to really like a certain game. It was a game that the rest of us knew subtly favored the dealer. So this guy would play it a lot, and to keep the excitement going, would raise the stakes on it. Turns out that the higher stakes amplified the subtle advantage to the dealer.
He got to liking this game so much, it was all he would play – and the antes went higher and higher as his enjoyment built.
When we finally got sick of it and explained to him why it was his favorite game, he was mortified. He never thought through the dynamics of the game, he just felt his excitement and enjoyment grow the more he played and the higher the stakes got. So we added a slight modification that took away the dealer's advantage.
He claimed he would never intentionally game the system against us like that, and we believed him.
Kyle:
I'm not altogether certain I get your point here, but I don't think there's anything wrong with what he did even if he was aware of it. In poker, the game starts as soon as you all agree to play. Poker is indeed about out-foxing your opponents and that can happen as early as choosing the rules you play buy. If he proposes rules that are to his advantage and you guys go for it, then well he's done his first thing right.
Analogous to business and markets, the rules of the game are like laws and statutes, and there, since they are forced on everyone else it's a different thing I'm talking about. I'm talking about getting leverage and edges and advantages by foxing your competition to freely undertake actions that are more to your advantage than his.
To some extent it's like a poker game, but not completely.
It wasn't wrong, and we knew all along what was going on, we tolerated it until we didn't. *He* thought it was wrong, and it could be argued that it conflicted with the idea of a "friendly" game, but it's pretty hard to quantify friendly in a way that still allows for competition using differential skills.
Anyway, my point is that not all gaming of the system requires a conspiracy, or even ill intent. And not all beneficial dynamics are gaming the system – explicit awareness of the dynamic is not required in order to act so that you benefit from it. It's easy to jump to the conclusion of bad acting, even when the real problem is the dynamics of the system. And it's easy to jump to the conclusion that a common style of tongue-in-cheek expression is an actual accusation.
Oh, and in that last paragraph, "problem" should have been in scare quotes. I don't know that there is any real problem here.