WOW Ron Paul responds to ISIS gold video

People have been sending me the news about ISIS going on the gold standard. They even mentioned Ron Paul. Ron Paul responds here. I haven’t even seen this yet. Exciting!

Gold haters will sure use this as an excuse to say that gold bugs are ISIS supporters or something inane like that. It’s great propaganda.


The protectionist and statist messages of Disney’s Frozen

My kids are now into Frozen. They watch it several times a week now. The only thing unique about it is that true love, in this case, was between two active sisters instead of a helpless girl and Prince Charming. My younger daughter loves the first song. Though I still haven’t sat through the whole thing yet so I’m still confused as to how the beginning fits in with the end. Because I haven’t seen the beginning yet.

But I did see the end. And the end annoyed me.

There’s these two places somewhere in Vikingville called Arendelle and Weselton. At the end of the movie Arendelle imposes an embargo on Weselton, no trade or business of any kind. One of the good guys, Kristoff, gets a special government monopoly on the ice trade, to the exclusion of all competition. And Queen Elsa is accepted as the absolute ruler.

So in the end, the simple people of Arendelle will have less goods with higher prices, and will have to pay more for ice due to the Elsa-imposed monopoly on ice distribution.

And our children are taught to impose trade embargoes on government enemies and bestow government monopolies on friends of the State.

This doesn’t mean I am banning Frozen from my house. I don’t do that kind of thing. But when they’re older, I hope to teach them its statist messages from a liberty perspective, and we should all be aware of how much Love the State is ingrained in all our culture, from cradle to grave, without being threatened by it.

How to fix your car’s stupid electrical problems

This has happened three times already, but this time I fixed it. This is especially important if you drive an old car that has no insurance on it, aside from required insurance that says that if you hit someone and kill him or injure him with your car for any reason, you can charge the bill to other people that have nothing to do with it.

So about 5 years ago my car wouldn’t start. I took it to the musach (garage) and the clip around the battery terminal was loose. He fixed it for free and I drove off. I could have done it myself. I just didn’t check.

Then about 3 years ago we were at Ikea in Netanya, and I tried to start the car but I heard sparks and fire. So I quickly shut it off and opened the hood. I was too scared to start it again, so we called the grar, the tow truck guy, who could only come the next day. We ended up getting a ride back with some random guy in a big van and I lost my backpack and earphones that day. That was annoying.

The next morning he tried to start it too and saw one of the wires caught fire. There’s this group of three wires in some kind of six-holed electrical breadboard thing. They are each covered with rubber casing, as wires tend to be. The middle wire was bare, so when the car started, the wire caught fire. I had it towed to the nearest garage and the mechanic was very busy, but looked at my car anyway, and immediately gave me a new 10 shekel wire to put in the middle. That’s about $2.60 or so. That was it.

This past May the car wouldn’t start again. Every time I’d try to start it the clock would reset. But I could pop the clutch and roll it down a hill and get it started. I checked the battery terminals to see if the clips were loose. They weren’t. I spent the whole weekend rolling the thing down hills to start it with a lot of near stalls. We finally got home from Zichron Yakov, where we were staying with my father and brother who had just moved in. I got it to my local garage, and the electrician found that the port connecting the battery clips to the wires was loose. So he tightened them for free. That was it. I could have done that myself.

Then, just before I left for the US (I am now back) I got my car fixed for the yearly government test. I got it back just in time for my wife to do her pickups, but it stalled randomly with kids in the car. This time it wouldn’t start even by popping the clutch. But there would be a long start, just no full engine start. Clearly the battery was fine. We called a tow truck, again, who took the car a few blocks to the garage. When the car got off the truck, I tried it one more time. This time it started just fine.

I was pissed. The garage people told me that there was nothing wrong with the car. So I drive it two blocks home.

We get back from the US and we go shopping for food. A hard right turn and the car stalls, same thing, kids in the car, Friday before Shabbat. I disconnect and reconnect the battery, and it starts. On the way back, it dies again. Same thing, won’t start by rolling either. Long start, but no engine run. I disconnect and reconnect the battery again because it worked last time. It starts.

Then we get home, thank God, and on Sunday night I have to go to a neighbor’s house to sign some checks and give some receipts over. I try to start the car, but same thing. Won’t start. It’s dark, but I open the hood anyway, and remember the wire thing from Ikea, and check if they are all securely in the six-holed breadboard thing. I see one of them hanging loose, barely touching the terminal but clearly not in. So I stick it in. And the car starts.

The reason the car kept vacillating between starting and dying is the wire, by inertia, kept moving and either touching the metal terminal or disconnecting, just by the movement of the car. Which is why the big right turn killed the car. The reason I “fixed” it twice was probably just the force of the hood shutting or the serendipity of me moving wires around had moved it enough that it accidentally touched the terminal again.

So an hour ago I take the loose wire out, take some pliers and bend the metal so it catches the terminal more snugly and won’t move out. The same exact wire that the guy had replaced for 10 shekels.

And now the car works fine.

So, if you think you have a stupid electrical problem, first check the battery terminal clips and tighten them.

Then check the battery terminal connection to the wires leading out and tighten those.

Then check that breadboard with six holes and make sure all the wires are securely in there.

If none of that works, you probably need a new battery or fuse.

The Abyss Deepens – China Opens Another 6.5% Down

Shanghai just opened for trading. The index is down another whopping 6.5%. Japan is down another 2%. Europe opens in a few hours.

Where do we go from here? It looks like we’re headed for another down day given the Asian opens. At some point, the Fed is going to give up and announce a new QE4. It is at that point that gold will skyrocket as everyone realizes that QE will never end, not before the dollar is fundamentally revalued down.

Four for Five on Short Calls

On March 23, I said the following:

NEW YORK (TheStreet) — Japan’s stock market may be about to put in a long-term top and there are two ETFs you can short to take advantage…

In order to take advantage of a turn south, there are two main options in terms of ETFs one can short, either directly or through options. The first is the iShares MSCI Japan ETF(EWJ) , which has greatly underperformed the Nikkei by 17% over the last year. This could mean it will also lose value faster than the Nikkei itself if and when the BOJ announces a less accommodative monetary policy. The second is the WisdomTree Japan Hedged Equity ETF(DXJ) , which has the added benefit of underperforming when the Yen rises relative to the dollar.

If the BOJ confirms no more QE, which it has already hinted at, then the Yen is likely to rise relative to the dollar, pushing DXJ down even faster than EWJ, which is not hedged against the Yen.

I went short DXJ when the Nikkei was at 19,750. The top was at 20,952. I was 6% off. DXJ was at $56, and covered at $46. It really tanked today because the Yen skyrocketed, and the DXJ holds short positions in the Yen, which brought it down even further.

On June 1, I said the following:

But, as Austrian Business Cycle Theory suggests, there need not be any actual shrinking in the money supply to bring on the bust after the boom. All that needs to happen is that the rate of increase slows. And if the policy of the People’s Bank of China is indeed to maintain the status quo in the money supply, then we may have seen our top in the Chinese stock market, and its corresponding ETF, the iShares FTSE/Xinhua China 25 Index (FXI), just from last month.

I went short FXI at $48, and covered at $39. It’s now at $34.

The Greek shorts I already wrote about.

On August 13, I wrote the following:

If the S&P (NYSEARCA:SPY) breaks through the 2040 support zone, tested twice since February, then a serious crash is both possible from both a fundamental and technical perspective. The S&P has not gone anywhere since February, and has not stagnated for so long since the 2009 bear market bottom.

Personally, I am going long the VIX here out to November. The closest ETF is the VIX Midterm Futures (NYSEARCA:VIXM), though rollover of contracts and decay makes holding the VIX options directly more attractive for less capital.

And covered this morning.

The only short that has not worked out yet is Italy. I shorted EWI earlier this year, and my position expires in September. EWI has to go to 12 for it to work, and it may not make it. Three weeks to go. We’ll see if I go 5 for 5.

And yes, I’m still waiting for gold to rise. Luckily, there’s no time limit on that one.



The Most Volatile Day in Stock Market History

What the hell was that?!

The Dow traded in a range of 7% today, in one single day. That’s wider than its trading range since December, nine whole months.

The Nasdaq was even worse, with a range of 9%. That has never, ever happened before.

The volatility was so extreme that the VIX couldn’t even open for the first 30 minutes of the day because the value of the options it’s based on couldn’t even be calculated. As soon as trading opened I covered my calls, but I was freaking out a bit at the open because it was literally frozen.

My broker’s servers crashed twice this morning while I was trying to cover it. But eventually I did. Everyone it seems was losing their minds.

Further, the Yen was trading like a penny stock against the Dollar today, up 2.65% in one day.

The S&P moved up 2.5% in the space of 12 minutes, and then rocketed back down at the close to below 1900.

Unbelievable. I wonder what happens tomorrow.

What I absolutely love about finance

Maybe I can’t sleep so well. So I’ll write. There’s something incredible about trading and investing that is unlike any other capitalistic satisfaction in the world, in my opinion. In any other job, you have to work for somebody, even if you are your own boss. You have to please clients, trade with consumers, rely on people in the end. If you have a boss who pays you, you’re even more dependent. I have a boss. I like him. In fact I have a few people over me, but we get along well because they trust me and I trust them.

But pleasing them is nothing like winning a trade. Why?

In the markets, you have no bosses. Nobody does. It’s you against everyone else. It’s everyone else against you, and you are all equals. It’s your brain against everyone eles’s brains. It all depends on how you think, if you can figure out the answer better than all the other people trading against you. You answer to no one, have no clients, are dependent on no one. If you have the right answer and are willing to put money on it, you will beat everyone else who disagrees with you and puts money on it. No matter their background, how old they are, how much experience they have, degrees, titles prestige, or anything else.

A guy making his first trade with $1,000 in his brokerage account can  beat the biggest banksters on the planet armed with hundreds of billions of dollars on any one trade. If he keeps beating them he can bankrupt them. There is nothing theoretically stopping anybody from beating the deepest insider. Anyone can beat anyone at any time. Anyone can even beat the Fed if he waits for the right timing and execution.

If you are right, regardless of your “qualifications” you will beat them. There is no one to please and no one to depend on other than your own thoughts.

If you are the type of person that has sincere convictions based on logic and morality, then the markets are the place for you. Yes, you certainly have to figure out the timing schemes and the different vehicles and how they work and the timing and spacing appropriate for each bet you make, but once you learn that technical stuff, any Austrian can beat any Keynesian over the long term.

It’s the true battle of ideas, where the true idea will win the money, and the false idea will go bankrupt, because no one, nothing, can fool the markets.

Look out Below! Asia Crashing!

Japan is down 3%. China is down 8%. Mideast markets are down 5 to 9%. Israel was down 6%. Europe wakes up in four hours. S&P futures are cutting through support at 1970, down 20 points. Gold steady.

I’m going to sleep now, and looking forward to waking up to some nice negative numbers at the open in 11 hours.

Back in time to October 17th 1987

I was listening to Peter Schiff’s podcast today and he said something I wasn’t aware of. Prior to Black Monday, October 19th 1987, the biggest one day decline in stocks in history, the Dow and S&P had had a particularly bad previous two trading days. Schiff said that the current setup reminds him of 1987.

On October 15th, the S&P was down 2.4%, from 305.2 to 298.1. On October 16th, it was down a further 5.2%. That in itself would have been considered an historic crash, had not the market absolutely crashed over 20% on Monday morning, October 19, 1987.

I did a search of the headlines on October 17, the day after the market closed down 5.2%, right before the infamous megacrash. I found this:

Stock prices collapsed in a broad selloff, with the Dow Jones industrial average suffering its first daily loss of more than 100 points. Waves of selling produced record volume of 343.2 million shares. The Dow’s loss of 108.36 points left it at 2,246.73, which was 235.48 points, or 9.49 percent, below where it began the week. The daily loss, amounting to 4.6 percent, is the sixth largest in postwar records. The breadth of the decline was stunning – only 111 Big Board issues managed to rise, while 1,749 declined. Weakness in the dollar and a related rise in interest rates are being given the blame for a correction that has now seen the Dow back off 17.5 percent, or 475.69 points, from the peak of 2,722.42 set on Aug. 25. [ Page 1. ]

Market professionals see no signs of calamity in the decline. Many of them like to remind nervous small investors that the market still has a sizable gain for this year. [ 1. ] Computerized trading by big institutions played a key role in the slide. [ 38. ] Washington officially maintained its stand of indifference to market developments. [ 39. ] The exchanges and trading houses had few problems handling the record volume, thanks to electronics. [ 38. ]

Here’s today’s headline from Bloomberg:

Stock Selloff Looks Overblown to Three Wall Street Strategists

Let us see what happens Monday morning. Money supply growth is low enough that a 1987 type event is possible.

After all that, finally covering my Greek put option shorts

Months ago, around the last Greek elections when Syriza was elected, I went short the National Bank of Greece. I bought 20 contracts of a 50 cent January 2016 put for 10 cents each. For those who aren’t familiar with options, a put gives me the right to sell a security at a certain price by a certain date. 10 cents a put really means $10, because each contract controls 100 shares.

So 20 contracts cost me a grand total of $200. It was a nickel and dime trade, because had I known economics back in 2008 (I wasn’t introduced until 2012) I would have gone short Greece then and made a lot of money. I wasn’t confident I would still make money on my contracts after Varoufakis resigned and the Greeks took the bailout, but I kept them anyway and the National Bank of Greece kept on plummeting down.

So today I sold all 20 puts for 19 cents a contract. NBG is at $0.70 a share. I think I bought them when it was at $1.50 or so. The $0.50 puts are still not in the money, but if someone wants to buy them for $0.19, they are betting NBG will go to $0.29. I don’t know if they’ll get that far. So I sold them.

(Disclaimer for all the government people, I love you all dearly: I am not advising anyone. No one should listen to anything I ever say about anything. This is all for raunchy entertainment purposes.)