How big is a Trillion dollars?

What happened on Wall Street.

Nice video by WSJ.

Part 1:


Part 2:

John Stewart nails CNBC

I watch CNBC regularly. This is the best description of the channel I've ever seen.

Morons.

Was the crash manufactured?

Disclaimer, this post was sitting as a draft since November if 2008 and I just now decide to publish it (March 2009)

You are going to think I'm crazy, but something doesn't feel right about this crash. Granted, I've only lived through one crash before where my focus was on the market, but this crash feels like it has been manufactured.

The whole time, I've been running under the same rules that I did the last three years. Find a good company, predict what their business will do and use that to invest in the company or not. My friends will tell you that I have been right most of the time until this year. This year has really sucked. Every call I make on a company's performance is right, but the behavior of the stock goes the opposite direction.

I just figured that it was me until I put two and two together last night when Jim Cramer mentioned that you could tell which way the market is going by watching XOM. Previously, he had mentioned that AAPL, which is a favorite stock of mine was a "tell".

Which is what made things click for me.

I think that AAPL was a target at the start of this year by people trying to take down the stock market and bring upon a crash. I think that XOM and other Dow Oil stocks were jacked up so that they could be brought down in the same way that AAPL was - hard. By proxy, if AAPL drops 50%, the Nasdaq drops with it since it is so large a portion of that exchange. XOM and other Oils drive the Dow and much of our economy.

Think about it, have we really had a recession this whole year? Has it felt like things have been slow until the last two months? The American people have been largely oblivious until this stock market crash in October that we were in any trouble at all.

I mean sure, we are in a recession now, but without the news on CNBC and the constant battering of stocks causing people to start contracting, would we be here now? Would it be this bad?

I don't know.

The Stock Market Sucks.

Yep.

All bad. No Good. Just plain sucks. I feel like a red shirt in Star Trek that can't get a break.

1929 Crash Video

I think that we are nearing a bottom to this market, but the fun never stops. Contemplate this while you enjoy a video of the crash of 1929.

Should I buy AAPL (again)

As most of you know, I'm a proud owner of Apple stock and have been for a long time. There have been a lot of times this past year where it seems that I should have sold and did not. Oh well. That is the problem with my having invested in the company and not having traded the stock.

Of course, had I just traded the stock, I would have sold during 9/11, I would have sold when Jobs had surgery and I probably would have sold at any of the times that it has lost half or almost half it's value in the last 7 years. Had I been a trader, I would have lost out on the current 1000% gain that I'm sitting on.

Would I have been smart to jump last December when the stock hit 202 intraday? Yes. But I didn't buy the company wanting to sell it. I bought it because I wanted to own it. I guess that some people probably won't understand that. There have been a dozen times in the last 7 years that I would have been right to see that would have cost me money if I took them.

So now, AAPL looks like it could test 52 week lows again during another market drop downward. I've been buying calls every time this drops, and I'll probably do so again if it drops over the next couple weeks. The calls I'm buying are at least a year out, so I'm not saying that AAPL will rocket upwards in the next couple months. But by next year at this time, unless the entire market gets halved again, you will be wishing that you picked some up here.

I do think that there will be an event at next earnings that could be profitable to the upside. I think that there are a couple things that indicate we could have a massive short squeeze if all things align just right. Apple has traditionally not had a very high percentage of shorts. But this is going up in general with the overall market problems. Take a look. Also, there is some bullish sentiment that Apple could blow out numbers again, even in the downturn. I think that these two things indicate a potential for great upside in a squeeze if enough shorts get on this bandwagon before earnings. Like lemmings, I think they will.

So what gives me confidence? Three things:

1. The first reason is contrary: During a recession, people tend to do small things that make them feel better. Apple has this category well covered, iTunes gift cards are everywhere, iPods are cheaper and better than they have ever been, and even if you got one last year or the year before, you are feeling the need for the new one. Is your old iPod a gaming machine? Does your old iPod have apps? Face it, you feel the technolust, and everyone else does too.

2. The second reason is trend: There is a global move (finally) to mobile and hand held computing. Apple leads in laptop sales and "pwns" everyone in hand held computing.

I have been a cutting edge consumer of this trend for the last 12 years. Starting with palm pilots hooked up to Nokia cell phones with a tether and almost every iteration of Windows Mobile or other hand held since then. None of the many devices that I have owned compares to the iPhone.

The only device that seems to come close is the Android based "gPhone" but even it falls short. Feeling cheap in comparison. I managed to stop in and play with the Android phone at T-Mobile and was able to play with the MySpace App that my team designed for the first time on a live phone*.

The Android phone feels "plastic", like a toy. The screen "wiggles" when slid out and when I picked it up, I had thought that I was holding on of the fake display phones until the screen lit up.

The iPhone, and for the timid, the Touch, are the best handheld computers on the planet. The hardware is not cheap and plastic like the Google phone, the software does not feel locked down and corporate like the Blackberry. The developer market and simplicity of the app store make this a killer that everyone will adopt. The price that consumers see up front is too cheap to pass up and likely to get cheaper with new models.

3. The third reason is personal: I visited the mall yesterday at 1:00 in the afternoon to stop by the Apple store and drop off an old computer in need of repair. The mall was a grim sight. Even for a weekday, the mall was barren. It felt like a ghost town that had no ghosts. The food court had people, but it was just after lunch at 2:00 and there weren't many people there either.

But the Apple store was different.

It had so many people in it that I had to wait to get help. Every station had someone shopping or buying. There were people engaged, iPods being sold and happiness all around. It's hard to judge traffic at the Apple store, as it has always been packed, so it might have less than it did 6 months ago, but on Tuesday of this week at 2:00 in the afternoon, it seemed to be doing very well.

I didn't go into any other stores, but of the ones that I passed, about half the mall, there was little to no activity. So Apple really stood out as busy.

I think it's possible that this could be a good season.


Do I think the market or AAPL can go down?

Of course. There is the possibility that all hell has broken loose and the consumer, always slow to catch on that they should be in a recession, has finally realized it and is slowing their spending. So if you buy. Realize that things can get worse before they get better. Also realize that if hell has broken loose, we could go down another 50% and stay there of the next ten years.

I'm hoping that hell has not broken loose.

I think AAPL can hit as low as 80 under great, massive fear in the market or under any general collapse that does not decimate the market. But I think a year from now, this will be back to the 130 to 150 mark on some returned optimism in the market.


* The app is great and is better when viewed on the live phone than in the simulator. My team rocks. (We designed MySpace on the iPhone as well.)

Stop paying your mortgage?

Sad but true. It's come to this. I know that the article is a rant and does not propose that as a real solution, but after reading, I found quite a few articles that do propose that as a real workable solution.

Anyone else here feel like a sucker?

I propose a new law. Let's just shoot on sight anyone who does not pay their bills.

Too harsh?

RIP: Wall Street, Main Street, and any other street.

I guess that there will be no value in business after this week.

Maybe every ounce of value is gone. No company that has a ticker symbol will make it through even the next few months. It's all just over.

Maybe we have reached a point that is unrecoverable. Not in terms of a short term stock market hit where a lot of people get scared out of stocks, but a point much worse. A point where everyone gets scared and freezes up.

Maybe we've decided collectively, as a species, that it's over. That we need to end any kind of good thing that is going on and just stop.

Probably some companies during this earnings season will report good numbers. But all forward guidance given by any intelligent CFO will be cut "just in case" anyway so any good won't matter.

Oh well.

Guess what. It's not even Wall street that is the real problem. Wall Street is just an indicator of what is to come. Wall Street will probably recover pretty soon and start making more money for all of the people who still have money. But based on what is going on in the market right now, this next 2 to 5 years will be a real shit-storm for Main Street. As they say, "You ain't seen nothing yet"

But how bad could it be?

Enough of the bad news has leaked out into the general population that "Everyday Joe" everywhere will now cut back because they are now scared and it takes a long time for "Everyday Joe" to recover. Anyone who has not lost a house is battening down whatever hatches they still have.

This is a self fulfilling prophecy of the worst kind and I don't think that we'll see a good indication of a recovery for many years. I think it's truly possible that we are actually going to see the worst.

A better question is "did anyone see this coming?"

This is where this gets interesting. I sort of did, but I didn't want to believe it. I read about this back in 2005 in books that foretold this very thing. I even made a point about talking about it to anyone who would listen.

One of the books that I read at that time was a book by a crazy man named Harry Dent.

Not Harvey Dent (the Two Face) or Arthur Dent (the galactic traveler), but some whack job called Harry Dent. Read the reviews on Amazon and it will seem that the world hates him. (but do they hate him now?)

What makes this interesting is that despite some timing differences (He's off by a about a year) the book was written years before this cycle really got underway.

His book is based on a theory called the Kondratiev Wave, or the "Long Wave". (If you haven't guessed, it's a theory by a Russian economist named Kondratiev.)

Long Wave theory is nutty stuff that states simply there is a season for everything and everything must have it's season. It goes on to state that these seasons are cyclical in nature and that there are many cycles that overlap. 4 Year cycles that follow presidential elections, Ten year cycles that follow decades and even 20, 40, 80 and even hundred year cycles.

These waves bring up and down times and right now, all of them, every last one, is lined up at the perfect low. The last time this was set up like this? The great depression, this chart shows a few seemingly perfectly spaced dips, with each following a spike. This alignment of cycles is called the Grand Supercycle in Harry's book.

Pretty Ominous really. But it made a lot of sense to me when I read it. The charts were what really scared me. They make a bit too much visual sense.

I've been trying to figure out whether this is all crap or not for the last few years of my life. I guess that the next year will make me a believer or show me that this is all bunk.

So how does all of this affect you and me?

As I said before, the stock market is a great indicator of what will happen to the economy going forward. Stocks drop before main street feels the pain. The great depression didn't happen during the course of a single day on Wall Street, it happened over ten years after everyone went home that day. We may well face that same situation right now. And if so, I'm not looking forward to what comes next after the size of the train that is in process of running us over right now.

I sincerely hope that things do not get this bad, but it's possible that we could be facing a time when the best investments are food and guns.

Me, I'm crossing my fingers that this will turn around and hoping beyond hope that wave theory turns out to be the aforementioned bunk. Because If I'm wrong, not much matters anyway.

Holding and buying (selectively).

-Don

If you are interested in the Kondratiev wave or Harry Dent's book, here are some helpful links:

Wikipedia page on the Kordnatiev Wave

Long Wave Analyst

Google books has a great preview of the book.

And of course, I have no idea where I found this chart, but it's great. I have had it for several years and it shows wave theory very well in many aspects. Use your right mouse button to zoom in and your mouse to pan around once you have. Awesome stuff.

I hate being a fanboy - But I need a new laptop

And of course, the object in question can be seen here. (perhaps, if true).

Here is a list of Apple liveblog locations for today's "The focus turns to Notebooks" event you will find me watching these today as I'm taking a day off to try and finish up some needed tasks at home. (um... taxes for last year.)

• The Mac Observer - http://live.macobserver.com/


• Gizmodo Liveblog - http://live.gizmodo.com/


• Ars Technica - Live Coverage



• CNET


• Mac Rumors - http://twitter.com/macrumors | Spoiler Free Coverage


• TechTalkz - http://live.techztalk.com/


• CNBC Tech Check with Jim Goldman



• Engadget


• Technologizer


• SlashGear - http://live.slashgear.com/


• MacScoop - http://live.macscoop.com/

News from the 1929 Stock Market Crash

This country is fundamentally sound and the economy is strong.

Hmm... Sound familiar?



Regulation is bad... Just ask this guy... (or John McCain ;-)



And of course, the end result, a lot of you will get out of the market for good like this lady who lost her million. Of course, had she managed to place the 25,000 she had left in the market or kept the stocks that she owned, she'd probably be a millionaire a few times over before she grew old.



Fox Movietone news by way of "the big picture"

WSJ - what history tells us about the market.

We're at a strange time. Financial advice has essentially turned to prayers and shrugged shoulders. Financial news sites are reporting on events that have few living witnesses not because there was massive death at the scene, but because most alive at the time have passed on from old age.

That's not a bad thing. This article by the WSJ is, I think, more helpful than any other advice or modern news on what the G7 are up to this weekend. An article in a news site about events that took place almost 80 years ago. About as far from "news" as you can get. But you should read it. Another feature comes from Newsweek. Also a great way to spend a few minutes.

If you have some time to read about the events of 1929 and other crashes, I'd recommend listening or reading Reminiscences of a Stock Operator (here is the iTunes link: )

It's a story about a stock operator modeled on Jesse Livermoore from the turn of the last century who lived through a lot of what we are living through now and thrived on movements like these.

I listened to it a few months ago and have thought back to it many times during this crisis. If I could have embraced Jesse's love for "plunging" earlier, I'd be a very rich man. Sadly, I believe too much in the country to bet against it so strongly.

Interactive bear market chart NYT

The NYT does it again with an awesome chart showing this bear against all other bears. Looking at this chart, it looks as if we have a while to go, but possibly the worse is passed and now truly is the time to look for bargains.

I'm still in AAPL, and I feel they are at a bottom. I'm playing a lot with QID when the market goes down, and I'm keeping my Marvel. I've pretty much sold out of everything else.

I usually don't play things safe, so this downturn has hurt a lot and I felt it before many others did. This bear has been painful to say the least.

Speaking of the bear markets on the chart, none of them, including this current one compares at all to the awesomeness of the bear cavalry.

Did social media just cause the second great depression?

By now, everyone knows that we had a huge bailout that did not pass and then did pass.

One of the stated reasons for the bill not passing the first time by many representatives was the high number of their constituents who contacted them saying that this bill should not pass.

In this video, congresswoman Bachmann states that she received a 10 to 1 ratio of calls against the bailout and that was similar to the experiences of other members.



Of course, there have always been people who would contact Washington to give them a piece of their minds, but now in the world of immediate contact through email, online forms, massive social organization by sites like Facebook, Digg and Reddit, community organization is far easier than it ever was.

Think about it. Social media has had a huge effect on the campaigns of the more technology savvy politicians like Obama and those with social savvy followers like Ron Paul. This theory is not unrealistic.

At one point prior to the first bill failing to pass, while I was reading Reddit (My favorite site) I noticed that there was one post on "stopping the bailout" for every five other posts Everyone was pushing to have people contact Washington and tell them the bailout was a bad thing and to vote it down. Digg was in a similar state. Twitter was "all atwitter" about stopping the bailout.

I think that it's a plausible scenario that all that social activity on Reddit, Digg Facebook and other social sites could have tipped the first bill from "pass" to "fail" in the minds of some congresspeople and swayed their votes to stop the bill.

I'm not saying that the actual sites themselves were read by the congress, but that the power leveraged by distributing the message "of the people" much more efficiently than it would have happened twenty years ago.

I'm saying that social media allowed much more efficient recruiting of constituents to sign petitions, attend rallies and telephone representatives.

The bill failed when it really needed to pass. It didn't pass until almost a week later. Had it passed the first time, we might be in a better place.

I know it seems hard to fathom but in a situation as dire as the one that we are in, a week is a very long time. A lot of things froze up in the economy during that week. Things that might have provided just enough liquidity to keep the economy from going over the edge that it has seemingly gone. That one week could have been the "tipping point".

If that proves true, then it's possible that the failure of our economy can be partially blamed on the popularity of Reddit, Digg and Facebook. Potentially it could actually be the fault of those social sites. The votes were close enough that a clown car load (23) of congressmen would have changed the outcome.

A pretty small number that could plausibly be affected by calls, emails and letters.

What will monday bring?

The hoopla about whether the bailout should be passed has passed and now we must focus on all new hoopla about what the fallout from passing the bill will bring.

Will our taxes skyrocket? Will our stocks drop or rise? Will banks get enough money to survive or will they all fail anyway?

Considering that My taxes are already rising, my stocks are already dropping and at least one of my banks have been acquired, I'd say that all of that sounds plausible.

I'm thinking that we'll see a rate cut, a stimulus package and a number of small bank failures before we get out of the month of October.

Currently thinking: puts and QID on the next rally up.

Steve Jobs heart attack rumor is a "fail" for citizen media, big media and blog media.

On Friday, October 3rd 2008, CNN proved how costly "citizen" news and blogs can be.

It cost a 10% drop in AAPL in about ten minutes. 10% adds up to about 9 Billion Dollars of their market cap at today's prices and is an awful big hit to take from an untrue rumor spread by a blog.

By allowing news stories to be written and published directly by readers, CNN is expanding on our great democracy and the importance of a free press. But by presenting that un-verified news with the CNN logo, they are also lending a certain amount of validity to things that are just not true. So much validity was added to one false story that Henry Blodget's Alley Insider decided to push out a story prior to adequate fact checking.

The item in question is a citizen journalist's "iReport" that Steve Jobs had a heart attack. The text from that iReport is below:

"Steve Jobs was rushed to the ER just a few hours ago after suffering a major heart attack. I have an insider who tells me that paramedics were called after Steve claimed to be suffering from severe chest pains and shortness of breath. My source has opted to remain anonymous, but he is quite reliable. I haven’t seen anything about this anywhere else yet, and as of right now, I have no further information, so I thought this would be a good place to start. If anyone else has more information, please share it."

As it turns out, Steve Jobs did not have a heart attack. Apple released a statement almost immediately to that fact. All that was actually newsworthy was that this incident proves that CNN does not understand the dangers of web 2.0 and Alley Insider is more on par with gossip sites than professional news sites.

If people had read this on the Yahoo or Google message boards or on a blog like this one, I don't think the story would have traveled much farther. But being attached to the CNN brand, and being passed along by the Alley Insider brand, this was taken very seriously and caused a massive drop in the shares of AAPL causing a lot of people to lose a lot of money.

Currently, Bloomberg reports there is an SEC investigation underway but I don't think it will produce much since level of credentials that an "iReporter" has to provide to make a report are small and easily faked. All that is needed are a username, email, a password and an successful response to a captcha. All of which can be accomplished in a completely anonymous manner. In fact, this guy's account was only open for this one post.

My hope is that the investigation might uncover other suspicious activity or potential manipulation in the stock. The rumors about Steve Jobs health have been pushed suspiciously hard for the last few months and I think that there is a good possibility that whoever pushed this rumor might have something to do with older rumors as well.

One place the SEC might start looking are social bookmarking sites like Digg.com or the 4chan message board as indicated by Arnold Kim who suggests that he found the story being promoted by users. Whoever the first users were to post the link may have some connection.

Another place that the SEC should start looking is at www.alleyinsider.com. This is a somewhat respectable source and they look to be the first to grab onto this iReport and present it as real news - giving the story even more credence. I only wish they had fact-checked prior to publishing.

An excerpt from the AlleyInsider story is below:

Apple’s Steve Jobs Rushed To ER After Heart Attack, Says CNN Citizen Journalist

“Citizen journalism” gets its first real test. A story of major consequence that, thus far, no one else has reported.

CNN’s iReport:

Steve Jobs was rushed to the ER just a few hours ago after suffering a major heart attack. I have an insider who tells me that paramedics were called after Steve claimed to be suffering from severe chest pains and shortness of breath. My source has opted to remain anonymous, but he is quite reliable. I haven’t seen anything about this anywhere else yet, and as of right now, I have no further information, so I thought this would be a good place to start. If anyone else has more information, please share it.

We’re making calls, but as yet we have no idea whether it’s true. Confirmation/denial the moment we get it.

Meanwhile, very interesting that this report appears on CNN’s site. If it proves correct, CNN will look great. If it is wrong, CNN’s credibility will likely be significantly damaged–and we wouldn’t be surprised if this caused them to pull back from “citizen journalism.”

It is probable that this article is just an attempt by AI at getting headlines on Techmeme and other aggregation sites. However, considering that there don't seem to be any disclosure statements specifically relating to ownership of AAPL anywhere on the site and considering the site is run by Henry Blodget, who was charged with securities fraud in 2003. (wikipedia) I would imagine that the SEC might be calling on him.

Alleyinsider removed the story about ten minutes after they published it, but this should never have made it to their site in the first place. Publishing that story shows how unreliable Alley Insider really is.

In my opinion, this second post about Apple probably shouldn't have appeared on AlleyInsider either. This second article questions why AAPL was still dropping. Placing it's decline in the spotlight a second time that day for what appears to be no reason.

This would be news if other big tech stocks were not dropping at roughly the same rate at the same time. But with AAPL matching the broad market decline, one has to wonder why the second article was relevant to publish at all. Read the short article yourself, but I think that the last line of the article says it all: "Anyone heard anything?" To me, this appears to be rumor mongering, plain and simple.

In the end, the really sad story is that one guy, seemingly unchecked and unverified by CNN or Alley Insider in any real way prior to publishing, was able to leverage the CNN brand to destroy a lot of wealth for others and potentially make a lot of money for himself.

Of the three players, nobody had enough integrity to stop a bad story from leaking through the system. Not the citizen journalist, not the Big media company that enabled them and certainly not the blogger.


disclaimer: I own Apple stock and have for years. I occasionally buy calls and puts on apple as well.

End of the world

Well then.

That hurt.

I'm tired of the government trying to save me by voting no. It hurts too much.

Screw buying gold. I'm buying canned goods, ammunition, gasoline and water.

The next five years of our lives are going to suck.

A thought about the "bailout"

Ok, I hear that there are a lot of people that are against the bailout. They think that somehow, 700 Billion dollars will have to be taken directly out of their pockets. I'll admit, on the surface I have these same feelings. I have a lot of anger about having to go through this at all.

But let's face it. If this fails to go through, you, I and every other American will be much worse off than if it passes. This deal has to pass. A solution has to be implemented.

1. Do you want to buy a new or different house? You won't get it unless this passes. I don't care what you think you can afford.

2. Do you want a new car? no luck with a balance sheet like yours, you'll need a credit score in the 700's to afford that.

3. Have credit cards? Get ready for the big recall and cancel because you are not a good enough risk unless you can prove that you don't need the money and won't ever use it.

4. Like your job? Companies won't get credit easily either and unless your boss is sitting on a huge pile of cash, you may not have that job much longer.

5. Cash is king. If you have it, you can spend it. If you don't, you'll have to learn to do without. This won't be too hard for you if you fondly remember college life and Ramen noodles.

In other words, unless wall street gets some "charity" main street will likely get a first hand lesson in exactly how tightly integrated wall street and main street really are.

The value of stocks.

Doing a quick bit of reading/surfing and thought I would share this page that I found on the value of stocks, which in this period of depressed valuations, might allow you to profit.

Good luck.

Crash Manufactured?

So, one thing that has been worrying me lately is that it's been about a year since this thing officially started.

During that time, the "economy" has done very well. People bought stuff, they took vacations and spent money on frivolous things. A lot of money on frivolous things. People have lived "paycheck to paycheck" but that still allowed them to get by and spend while doing so. Some collapsed in bankruptcy, but many more just kept going.

My thought is this: If nobody talked about a "recession" would this one have come about? If the word "depression" was never uttered on CNBC would investors have pulled their money out?

Sad times none the less.

Good luck all.