Monday, January 9, 2017

Futures: Right Or Wrong Directional Trades; 12 Step Bloody Mary Redux

Stocks never had a chance on the first day of the first "full" week of trading (last week was only four days), dropping like rocks from a crumbling overpass at the open, only briefly showing any positive momentum and closing lower for the day, with the obvious exception of the wildly overpriced, speculative, and soon-to-crash NASDAQ.

The Dow refused to get even within earshot of 20,000, falling instead below 19,900 at the close, so the (so far) winning strategy of Fearless Rick remains intact. The peerless prognosticator called for "no Dow 20,000" by year-end 2016, and reiterates the same sentiment until June 2017, with a "may not" break over 20,000 until the year 2023.

It's a bold shot across the bow of the happy-happy, joy-joy "recovery" or the trumpeters of one Donald J. Trump, the president-elect who vows to "Make America Great Again." Not that Fearless Rick doubts the Donald; he backed his campaign from the start, predicting he would win the presidency as far back as December 31, 2016 (all the way at the end of the article), but the Trump years in the White House may be a calculated, "one step forward, two steps back," as radical policy shifts will cause some serious FUD (fear, uncertainty, doubt) and some liquidations that should have happened in 2008 or 2009 will occur under the Trump banner (see Sears, Mexico).

All of which brings up the point of futures and options, wherein one's ability to predict events beforehand is called into serious question. As a matter of fact, all investors are predisposed to make wagers on future events, whether they be into stocks, commodities or precious metals, because one would not "invest" in a company or anything without some idea that it would be worth more tomorrow or next month or next year than it is today.

Thus, investors fall into various camps, which, for matters better discussed elsewhere, are largely defined as "right until you're wrong" and "wrong until you're right."

The matter is simple, but real life examples provide the most descriptive narrative.

Take Fearless Rick's one-way bet on Dow 20,000. That's a case of being "right until you're wrong." So far, Rick is right and myriad derivative trades can be based upon his open principle, especially if one is to extend the time frame out to the ludicrous, or in this case, 2023.

Rick is also a precious metals speculator. In December he called for silver under $16 when it was trading in the range of $17 to $18. He was, early on, "wrong until he was right." The implications for investors - and one could take a lesson or two from the movie "The Big Short" for a glimpse at how extreme these future "wagers can become.

Speculation, prognostication and risk are not for everybody, especially those of feint heart. For the rest of us, it's a way of life.

It seems to be a law of nature, inflexible and inexorable, that those who will not risk cannot win.
--John Paul Jones

At The Close 1/9/16:
Dow: 19,887.38, -76.42 (-0.38%)
NASDAQ: 5,531.82, +10.76 (0.19%)
S&P 500: 2,268.90, -8.08 (-0.35%)
NYSE Composite: 11,169.79, -67.83 (-0.60%)

And, just because it's the preferred weather for Bloody Mary's, Fearless Rick's 12-Step Bloody Mary™
1. Glass
2. Ice
3. Vodka
4. garlic pepper
5. hot sauce
6. ground black pepper
7. worcestershire sauce
8. celery seed
9. tomato juice
10. lime (or lemon) juice
11. horseradish
12. combine, stir and drink.

Apologies to alcoholics everywhere, from drunks around the world.

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