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Despite all the newly released investing and trading books available. some of the older ones still remain on the top of the “must have” list.  Price Headley’s Big Trends in Trading is one of those. 


The book is divided into three major sections.

1. Getting the Market Right First – info on put/call ratios, Bix, mutual fund flows, volume and other indicators, and survey systems.
2. Stock selection techniques – ket technical indicators such as classic trend indicators, acceleration bands, momentum divergences, relative strength and more.
3. Options – a mixture of stock options strategies, trading psychology and money management.

The Price Headley trading rules are one small section of part 3.  Price’s well defined trading system is detailed out and is a model for anyone to use as a guide to developing their own system.  It’s a well known fact that all successful traders have one thing in commmon – a written plan to guide them in their quest to master the markets.

Excerpts from Price’s plan follow.

PRICE’s PRUPOSE:  To continuously learn and grow to become the best trader I can be, by simplifying and focusing my energy to achieve a balanced, centered state that controls the emotions of fear and greed, allowing me to take action when my analysis says the time is now.

PRICE’S PHILOSOPHY:  Big Trends – via Accelerations, Divergences and Relative Strength – to define the best opportunities.

Price also provides more specific trading suggestions that can be used in your own plan, such as:

• focusing on a small number of trades
• take big profits and small losses (sounds simple, but I have read or hear many top notch traders quote the same concept).
• Adjusting stops with the market
• Pre-planned entry and exit points – BEFORE placing the trades

The appendices cover a stock picking checklist, types of orders (contingency order, market and limit orders, not held order, once cancels the other, all or none, fill or kill), favorite web sites, and last but not least the favorite quotes.

“There is only one side of the market and it is not the bull side or the bear side, but the right side.” – Edwin Lefevre, Reminiscences of a Stock Operator

Big Trends in Trading: Strategies to Master Major Market Moves (A Marketplace Book) by Price Headley

It’s a huge problem that our fiscally reckless government  has been kicking down the road for decades.  It’s the bankruptcy of social security, which everyone knew was going to happen, but government economists were saying would not happen until 2017.  But now thanks to a deep recession, and probably also due to incorrect government calculations, the day has come 8 years early.

From the Associated Press article on Social Security, is the following:

Big job losses and a spike in early retirement claims from laid-off seniors will force Social Security to pay out more in benefits than it collects in taxes the next two years, the first time that’s happened since the 1980s.

The deficits — $10 billion in 2010 and $9 billion in 2011 — won’t affect payments to retirees because Social Security has accumulated surpluses from previous years totaling $2.5 trillion. But they will add to the overall federal deficit.

Applications for retirement benefits are 23 percent higher than last year, while disability claims have risen by about 20 percent. Social Security officials had expected applications to increase from the growing number of baby boomers reaching retirement, but they didn’t expect the increase to be so large.

What happened? The recession hit and many older workers suddenly found themselves laid off with no place to turn but Social Security.

But there is a huge flaw in the AP article, mainly in their statement that “Social Security has accumulated surpluses from previous years totaling $2.5 trillion”.  This is only partly true, and its related to the demographic trend of the population.  When social security was created there were far more workers paying into the system than pulling out of the system, resulting in decades of accumulated social security surpluses.  Normally this would not be an issue, if social security were a true trust fund.  But politicians have been raiding the surpluses nearly since social security’s inception, counting the surpluses in the same bucket as general income tax revenue, and every penny of the surpluses has already been spent.  To that point, consider the following snapshot of the current total outstanding government debt of the United States, directly from the source, the United States Treasury website.

As of September 24, 2009, the total national debt of the United States is nearly 11.771 trillion dollars.  Of that total, 7.46 trillion is held by the “public”, which represents the current total ownership of U.S. government bonds.  The other portion of the national debt – some 4.31 trillion dollars – is the money borrowed stolen raided from retirement funds – social security retirement funds and other government worker retirement funds.  I haven’t verified the $2.5 trillion figure from the AP article, but one thing is certain.  Regardless of the true figure of social security “surpluses” built up over the last few decades, it is more than accounted for in the $4.3 trillion dollars already borrowed and spent.  Social Security is now officially bankrupt.

Also see:

• The United States Has Not Had A Balanced Budget Since 1957!
• Obama Flip Flops On Fiscal Discipline And National Debt
• Santa Demands Bailout
• The United States National Debt Limit Has Become A Joke

Amherst Securities Group, a “leading dealer and market maker in mortgage-backed securities (MBS), agency securities and select fixed-income investments”, just published a housing report with more details on the huge overhang of shadow inventory.  The full report is not readily available on their website, unfortunately, but there is a good summary of the findings by Bloomberg in this article.  A few excerpts follow.

The crash in U.S. home prices will probably resume because about 7 million properties that are likely to be seized by lenders have yet to hit the market, Amherst Securities Group LP analysts said.

The “huge shadow inventory,” reflecting mortgages already being foreclosed upon or now delinquent and likely to be, compares with 1.27 million in 2005, the analysts led by Laurie Goodman wrote today in a report. Assuming no other homes are on the market, it would take 1.35 years to sell the properties based on the current pace of existing-home sales, they said.

“The favorable seasonals will disappear over the coming months, and the reality of a 7 million-unit housing overhang is likely to set in,” they said.

Also see:

• Mark To Model Reason For Not Foreclosing
• Seattle Housing – Microsoft Layoffs And Mortgage Walk Aways
• Time Magazine On Las Vegas – Then And Now

The Housingstorm blog had an interesting take on why the banks are reluctant to foreclose on delinquent borrowers.  But before going into housingstorm’s take, consider the case of Mr Microsoft, whose own foreclosure case (or lack thereof) was depicted in this article.  The value of Mr. Microsoft’s condo, according to recent listing and sales data, has declined by over 40 percent.  Mr Microsoft has not made a mortgage payment for almost a year, and although the bank initiates contact with him regularly, they have yet to foreclose on his severely underwater mortgage.  Why are banks not foreclosing?

According to the housingstorm article,

Banks don’t care about home prices. They care about not losing money. Because the government changed mark-to-market accounting rules, the link between low prices and losing money is broken.

Banks make more money by NOT foreclosing on homes. Banks are dragging out the foreclosure process for their own selfish reasons. Until the day they foreclose, the amount of money owed to them is an asset…sure, it’s an asset that isn’t paying interest payments…but it is still an asset. The day they foreclose, a $400,000 asset could become a $150,000 asset and a $250,000 loss.

Multiply that loss by 10, 20, or even 30 times leverage and there are several million dollars worth of new loans that the bank can’t make.

Faulty government programs and doctored accounting rules have produced the fiasco before us: There are roughly 4 million homes that should be foreclosed on but they won’t be any time soon. This enormous can is continuing to get kicked down the road.

Economists are predicting a recovery. They say that our various programs are making an impact. In reality, all they’ve done is kick our can of reckoning a little further down the road.

With so much shadow inventory being held back from the market, can any sane person possibly think this is a good time to buy a home?

Julian Robertson, founder of Tiger Management, has a bleak perspective on the enormous debt load of the United States.  CNBC recently interviewed him and summarized his take in this article, the excerpts of which are below.

The US is too dependent on Japan and China buying up the country’s debt and could face severe economic problems if that stops, Tiger Management founder and chairman Julian Robertson told CNBC.

Robertson said inflation is a big risk if foreign countries were to stop buying bonds.

“If the Chinese and Japanese stop buying our bonds, we could easily see [inflation] go to 15 to 20 percent,” he said.  “It’s not a question of the economy. It’s a question of who will lend us the money if they don’t. Imagine us getting ourselves in a situation where we’re totally dependent on those two countries. It’s crazy.”

China and Japan are still the largest foreign holders of U.S. debt.  Check out the latest report from the treasury department website to see the trends of their purchases and sales.  The image below is a subset of the data from the treasury website.

It was pretty obvious in 2008 that Warren Buffett had lost his investing touch. The financial world was showing its dirty, stinky underbelly for what is what – a giant fraud. Meanwhile, Berkshire Hathaway was accumulating shares in these turd infested companies such as Moody’s.  Moody’s sole purpose during the entire credit bubble was to stamp AAA ratings on everything that crossed their desks – including the million dollar home loans for every unemployed derelict on the planet – , and collect large advisory fees during the process.

It’s not clear if Warren Buffett has got his magic touch back, but today it was announced that he finally came to his senses on Moody’s, dumping 800,000 additional “worth less” (as Warren calls it) shares on some other poor saps.  From Yahoo Finance:

Billionaire Warren Buffett’s company has sold another 794,388 shares of Moody’s Corp. stock, leaving it with control of 16.6 percent of the credit rating agency.

Berkshire Hathaway Inc. revealed the sales in documents filed with the Securities and Exchange Commission on Thursday.

Earlier this summer, Berkshire sold nearly 8 million shares of Moody’s stock.

According to Durangobill’s website, the odds of hitting the mega millions jackpot (all 5 balls, plus mega ball) are 1 in 175,711,536.  The grand prize of the Mega Millions jackpot drawing tonight will be $333 million, with an after tax payout of approximately $210 million, according to this site.  On top of that, there are numerous other potential prizes that a $1 ticket holder is entitled to, ranging in value from $2 to $250,000.  Even with the IRS taking roughly one third of the jackpot, the number of combinations in the final jackpot (175 million) is about 16-17% less than the after tax total payout of $210 million.  And that does not take into consideration any of the additional non mega jackpot award amounts.  With positive expectations like that, it may be time to skip that $8 lunch today and buy 8 mega millions tickets instead.  Good Luck!

The Brix condos in Seattle’s Capital Hill were completed sometime in 2008, but with very dismal sales.  Despite the low sales they were content on keeping the prices abnormally high (even for a strong market, which this is not).  Earlier this summer, they sent out an e-mail blast announcing price cuts of as much as 20% below original prices.  It was a good start, but still not enough to spur sales, and now it looks like they have had enough.  This morning’s e-mail blast announced the new auction style pricing, with the auction set for September 27th at 1pm.  Here is a sample of their price sheet.

For a comparison of another recent Seattle condo auction, check out these results of the Queen Anne high school condo auction.

Just about 5 years ago, Time Magazine did a cover story on the booming town of Las Vegas, which was in the midst of non stoppable economic growth.  Here is an excerpt from that article:

The city’s casinos, hotels, restaurants, shops and clubs took in a record $32.8 billion in 2003. Vegas is the fastest-growing major U.S. city; 7,000 people move to Clark County each month, bulging the population to 1.6 million and overstretching the police, fire fighters, hospitals and schools. The unemployment rate is more than a third below the national average, and there’s more construction than in any other city in the U.S. It’s the country’s top tourist and convention spot, with Vegas taking in more money from conventions ($6.5 billion) than gambling ($6.1 billion).

Fast forward to 2009, and times have changed quite dramatically to the city.  Time Magazine just did another cover story on Las Vegas, with some very notable differences.

This has been the first major recession Vegas has experienced since it became a real city. After two decades as one of the fastest-growing metropolises in the U.S., Las Vegas has seen its population growth flatten. It’s got the highest foreclosure rate of any major metro area, and the unemployment rate jumped from 3.8% to 12.3% in just three years. Even if you have a job, it’s not a good time to have your wage be dependent on lavish tips. The No. 1 convention city has also had a wave of cancellations from the AIG effect — companies don’t want the bad publicity of being seen in Sin City. Just as Las Vegas was the epicenter of the extravagant consumption of the past 20 years, now it’s the deepest crater of the recession over the last year.

Also notable are the incredible vacation deals available in Vegas today:

The hotels, led by Wynn Resorts boss Steve Wynn, slashed room prices to increase occupancy rates to 82% from a low of 72%. On the right day in July, you could book the type of 750-sq.-ft. room that was $500 a year ago at the Wynn for $109 and get a $50 gift certificate.

As for real estate in Las Vegas, the spiraling down of property values continues, and its making room for a new breed of real estate agents.  Brooke Boemio is showcased in the article, and she specializes in helping home “owners” abandon their overvalued homes and swapping it with a new purchase of a distressed or foreclosed home.

Boemio specializes in short selling, in a particularly Vegas way. Basically, she finds clients who owe more on their house than the house is worth (and that’s about 60% of homeowners in Las Vegas) and sells them a new house similar to the one they’ve been living in at half the price they paid for their old house. Then she tells them to stop paying the mortgage on their old place until the bank becomes so fed up that it’s willing to let the owner sell the house at a huge loss rather than dragging everyone through foreclosure. Since that takes about nine months, many of the owners even rent out their old house in the interim, pocketing a profit.

My how times have changed for Vegas.  The old adage rings true in Vegas – what goes up must come down!

The San Francisco Money show started today with a handful of keynote speakers, including Steve Forbes, who delivered the final speech.   If his republican bias was not apparent beforehand, it was pretty clear during his presentation, entitled “Battling the Anti-Capitalist Administration and Washington Politicians–Can They Be Stopped“.

Forbes delivered some compelling arguments on what makes sense for healthcare reform, such as removing restrictions that prevent consumers from buying health insurance across state lines.  He seemed to oppose most of the reforms being pushed by the Obama administration, and cited the example of Britain denying dialysis treatments to the elderly purely due to costs.  Here is a google books link that briefly mentions this, but it’s not entirely clear if these treatment denial policies are still in effect today.

On the topic of government size, Forbes supports small government, lower taxes, and a free market system.  He was of the opinion that the only reward for failure in this country occur in government and not in private industry.  This, we know is completely false, especially in light of the multi trillions in recent government bailouts of private enterprise financial institutions.  Sorry Forbes, nice try.  Almost immediately after this pro-private enterprise anti-government intervention remark, he seemed to give his approval of the bailouts by stressing what a mistake it was to let Lehman Brothers fail.  He also seemed disappointed that the government had not yet stepped in to buy worthless consumer credit card debt from private enterprises.  Despite the obvious misgivings and contradictions in his beliefs, it was a pretty entertaining speech.