For those who still can’t comprehend the meaning of ONE TRILLION DOLLARS OF DEBT (let alone $4 TRILLION in a single year), this excellent video by Tony Robbins may help simplify it for you. And moving onto politics, the following article sums up my thoughts quite eloquently…

(NYPost) “It’s good that so many Americans (and possibly non-Americans) donate money to the worthy cause of informing us how bad politicians are. .. Still, I fear all these negative ads will not be enough to counter the extremely destructive and diabolical (though luckily rare) positive ads.”

“The mere thought of one of these positive political ads chills my soul. Either there is a voiceover as the politician meets with hard-working Americans, or the politician looks directly at the camera with his soulless eyes and tells us that we can trust him to fix our problems and strengthen our nation.”

“Look at our bloated government, our countless regulations, and our military engaged in constant conflicts overseas — did we get all this because we listened to the negative ads about our politicians, or because we somehow got it in our heads that we could trust them? After every election, the negative ads stop, and we start to get that fool notion that we can rely on these people.”

“Do we need exorbitant amounts of money from unknown sources to tell us not to hug angry badgers? No, we’ve learned that by word of mouth from our friends, families and neighbors. This is how we should know not to trust politicians. .. If a politician asks for your money, don’t give it to him. And if he tries to trick you and instead asks for other people’s money so he can buy you presents, just get away from him as fast as you can. Catch a ride in a stranger’s van if you have to..”

“We also need volunteers to continue informing people how bad politicians are, even in non-election years; too many folks now have the ridiculous idea that they can trust the people running the government.”

“Many folks don’t trust politicians from one side of the aisle. It’s like they know not to trust a crack addict to watch their kids, yet don’t see anything wrong about dropping the kids off at the meth addict’s house.”

“And once we convince everyone that all politicians are bad, some will ask, ‘Then whom do I vote for?’ Smack them, because they still don’t get it. You don’t vote for any of them. It’s like having a choice of what kind of cancer to get: You’d just pick whichever one you think you’re most likely to survive.”

“Just remember that, after that new politician takes office and says, ‘Now I’m going to work hard on our nation’s problems and get our economy and job growth going again!’ you respond: ‘Just keep your hands where I can see them, and don’t make any sudden movements or spending decisions.’ ”

Full Story: It’s the positive ads we should worry about (NYPost)

America didn’t become great because of the government or its politicians.

America became great IN SPITE of them.

Wow, fellow Americans, maybe WE really did build THAT!

In late 2011, once the market bounced off its early October lows, there was increasing chatter over how it’s probably too early for a real full-blown European debt crisis at that point in time, and how the “powers that be” would likely run the market higher into the new year.  But, the real “tell” would be how the markets behaved come the new year, and that’s when all hell would likely break loose all over again.  I too began to think that while the rest of 2011 may lead to a good bounce in the markets, early 2012 could bring back some real turmoil.

Then a thought struck me.  Between all the blog posts, newspapers, and television media pundits calling for a “let’s see how January goes” moment – hey, even I myself was thinking the same thing…  What if, with all of us worrying over that same possibility, January turned out just fine – a perfect “non-event”?  And heck, even Ben Bernanke was probably worried about the new year, and we all know what that leads to: more cheap money and credit would likely be dumped right back into the markets at the first hint of trouble.

So as 2011 came to a close, while I did sell a few positions just in case, I decided to leave most of my longer-term positions as is.  And, while hindsight is always 20/20, that did turn out to be a great decision.  Of course, we never know for sure, and that’s why traders and investors must consistently practice sound risk management.  One must always protect against the times we miss.  And it not only serves to protect and preserve your bankroll, but it also helps provide the clarity and peace of mind necessary – an edge in itself – to properly consider and evaluate the information available to you. Worrying if your over-leveraged position might blow up in your face is not going to help you make a smart decision.

Traders and investors alike must always be open to taking every piece of relevant information into consideration, including our own preconceived notions and biases.  As Ray Dalio of Bridgewater Associates once said “I constantly want to know what I don’t know.  I want to know when I am wrong.  And it helps when someone points it out.”  While it certainly helps if someone else points it out, we can also objectively look at our own thought process, feelings, and emotions and consider how they too may be wrong or dangerously biased.  This in itself becomes part of a valid trading edge.  Everything counts, and we are often our own worst enemy in most endeavors we pursue.  As in playing chess or poker, those players who patiently take a step back in order to “see the bigger picture” and contemplate the best moves will, in the long-run, always triumph over those less savvy players just itching to make a move.

We should always ask ourselves what do other traders think they know.  What are they worried about or afraid of and to what extent?  Am I starting to feel worried or nervous myself, and are these thoughts rational and based on sound reasoning?  There was a great line in the movie Margin Call when CEO Tuld (played by Jeremy Irons) says “It’s not panicking if you’re the first one out the door.”  Granted, no one (and no firm) should ever be leveraged to that extent in the first place, but from his “clear” perspective the mortgage game was up.  And you certainly don’t want to be the one panicking out at the bottom of a move, with or without margin calls over your head.

Am I afraid that if don’t buy some stock tanking like a “falling knife” right now, I’ll miss the huge bounce coming right around the corner?  Is it possible many other traders are thinking the same way?  The reality is that it’s rarely “too late” to get a better price when buying into a crashing stock.  When the price action settles down, stabilizes, and starts to rebound, the stock will probably still be priced below your initial entry.  Sometimes our own feelings can give us strong clues as to what the “crowd” is thinking as well.  There was no need to predict ahead of time that October 4^th, 2011 would be the low of the last crisis and panic.  However, through awareness of our own feelings, astute observation into the collective thoughts of others, and by watching the price action in relation to the current headlines, we are continually provided with clues as to what is more likely to happen next.  For example, each time new headlines appeared about Greece and its debt problems, the chatter they generated seemed to lead to increasingly complacent market action and behavior.  There would be short-lived dips that would quickly recover, as if no one really cared any more.

And more recently, how has the market reacted as we’re hitting new multi-year highs?  Ironically, the VIX (fear) index (and even more so, the publicly traded VXX index based on the VIX futures) has been acting more fearful of a potential coming crash the higher the market goes.  Markets don’t generally crash right after making new highs, unless they’ve just gone through a high-volume blow-off top.  I recently read a study analyzing future market behavior when there are strong upward moves in both the VIX/VXX and the overall market in the same day.  The study showed that it has lead to even stronger upward price action in the near future.  And so far in 2012, that’s exactly how things have played out in the market.  But human behavior is not rational, and memory of the recent volatile past is still imprinted in traders’ minds.  So with each new high in the market, traders buy the VIX products expecting a crash that never materializes, and are then hit over the head with some of the highest levels of contango (the huge cost of rolling over current futures and options contracts to the next month) the VIX market has ever experienced.  And of course, traders are also greeted with another leg up in the market as well.  Never has it been easier for me to explain or visualize the term “climbing a wall of worry”.

In reality, it is the unexpected shocks that lead to the most “real” fear.  Especially where credit and leverage is concerned, it is these quick shocks that are most likely to catch firms (such as MF Global) unprepared and caught with their pants down.  But the more time that goes by with an event in the forefront, the longer the world has to deal with it, adjust by preparing for the worst, and “get used to” the new norm.  Just remember back to the Japanese nuclear crisis, the BP oil spill, or even more recently, the fears over a massively understated Greek CDS credit event once the ISDA declared the Greek bond “re-pricing” a credit event.  Banks, governments, and central banks have now had upwards of eight months to deal with the possibility of messy CDS defaults.  While there were some pundits calling for the possibility of three trillion dollars worth of losses versus the three or so billion claimed, it was likely that “the powers that be” had all the time they needed to deal with these issues.  And, believe it or not, the ISDA CDS auction also came to pass without incident.  That’s not to say there aren’t plenty of roaches crawling around everywhere.  But just as Countrywide Financial and Morgan Stanley were rolled into Bank of America to perhaps conceal a much worst debacle in the sub-prime mortgage market, the “powers that be” have likely had enough time to take similar measures to deal with any more potential blow-ups in the Greek bond market (well, at least for the time being).

In conclusion, always consider all the information available to you, be aware of what you don’t know, and consider where you might be flat-out wrong.  Seek to develop the focus and patience to position yourself in the best possible way, as opposed to merely trying to capture the next small wiggle.  Instead of missing out or being incorrectly positioned, you may provide yourself a much better chance to capture a nice chunk of the real move about to appear just around the bend.

(TheMarketTicker) Great article by Karl Denninger sums up our greatest financial problem perfectly… “ is the process by which something very ordinary (say, a TV set) becomes financed. In doing so there is inherently created the use (and usually the abuse) of leverage. .. Leverage is simply the ability to act as though you have much more of something than you really do. ”

“See, in economics there is this thing called ‘supply and demand’. The more demand there is for something with a given supply, the higher the price tends to be. In ordinary times a gallon jug of drinking water in a store is a dollar, and from the tap it costs so little we don’t ordinarily put a price on it. Yet if there was just a hurricane, and there is no fresh water available, what would the price of that same gallon be? Ah, now we have much demand and very short supply, and as such the price will be quite dear. Perhaps the price of that water might be several gallons of gasoline (for the seller’s generator, of course.) So what has happened to our economy over the last three decades? In short, things that never should have been became financialized. And as the goods and services became financialized, demand was shifted upward – people were made “able” to allegedly “buy” things they could not otherwise afford. The expected response in the marketplace to such a thing, predicted by basic economics, was that prices would rise.”

“If you’re wondering why you can’t afford to pay for college by flipping burgers or pizzas in your off hours, this is the reason.  It was precisely the distortion of the government making student loan debt non-dischargeable, which made it available to almost everyone at a “low interest rate”, that drove up the price of college educations to the moon.  And to the moon they went – up 450% since the 1980s, more than five times as much as average salaries increased.

How about houses?  A middle-class house in 1960 sold for $12,000. .. That wasn’t so hard to do when you could buy a house at twice the average income.

What happened when we financialized houses?  Prices went up.  A lot.  They went up much faster than did incomes.  First to 3x incomes, and in some parts of the nation in the 2000s they went to utterly ridiculous multiples, like 5, 6 even 10x.  How?  Nobody ever really actually owned the damn house; the bank owned it and you were turned into a financial slave!“

“How about medical care?  In the 1960s your parents wrote a check to the doctor.  If it was really serious they probably had insurance; they got billed and then filed a claim.  Bankruptcy due to medical costs was extremely rare, and you could almost always afford whatever you needed medical attention for by paying with the money in your wallet.“

“Where do you think that money went? Why, right in the pockets of JP Morgan, Goldman Sachs, Morgan Stanley, Citibank, Bank of America and yes, the bank on the corner.  I’m sure you’ve noticed that bank buildings tend to be quite nice.  Grand exteriors, high-rise buildings in the middle of cities (very, very expensive real estate), fabulous lobbies with marble floors and other similar visible elements of opulence.  Where do you think all the money came from to buy that stuff?  Why, from you – the rube standing there in the lobby!  Never mind the bankster’s bonuses!”

“Was this all the “free market” at work?  Absolutely not! Student loan debt was given “special status” and cannot be discharged in bankruptcy.  Fannie Mae and Freddie Mac massively distorted the housing market.  Medical insurance companies are exempt from anti-trust laws, and drug makers were given the ability to legally prohibit you from doing what you’d like with what you own (specifically, reselling things you purchased and paid for.)

All of this distortion in the market occurred due to the direct acts of government acting at the behest of fat cat banksters and industry insiders, using the threat of force to strip your wealth.

Every morning in the financial media we hear about how horrible it will be if we put a stop to this financial rape and the financial system’s size and influence shrink dramatically!“

THE SOLUTION

“But what happens if tomorrow all the ‘free money’ loans stop?  Now the college has empty classrooms because nobody comes any more.  Students can’t afford to attend, so they don’t.  What happens the next morning at that college?  Oh that’s simple: See, it doesn’t cost much to provide a few desks, chairs, and a roof over head along with a calculus book, does it?  Nor does an instructor cost that much when spread across a student body.  Let’s see how cheaply a college can educate you, if they’re unable to extract from you promises from the future and must instead talk you into providing them with economic surplus from your current efforts.”

“The important point here is that if we cut off the financialization of college you will still get an education.  The schools will scream and many will go bankrupt, but soon on the same ground where there was a bankrupt college there will be a new one, and this one will charge $2,000 a semester to attend instead of $10,000 or $20,000.  The difference?  You’ll have to pay cash, but you’ll be able to work a part-time job for the two grand and thus you’ll have no debt!”

“Houses are no different and neither is medical care.  The screaming about how “nobody will be able to go to the doctor” or “nobody will be able to buy a house” is a lie.  The doctor can set his fee at $100,000 for his services if he wants but if nobody can or will pay him $100,000 then he sells no service.  That doctor goes bankrupt immediately, soon there will be a different doctor (or maybe the same one after he goes through bankruptcy) and suddenly medical care will be much-more reasonably priced! After all, if nobody can buy then the seller can’t make a living either, can he?  Prices will be forced down to what the ordinary person can afford to pay.”

“There is no way that such a price disparity would hold for more than 10 minutes were these laws to be dropped.  You get screwed on your prescriptions and devices you buy intentionally by our government through their protection of these industries.  You get financially raped so that everyone in the world can enjoy our medical technology at the mere reproduction cost and the banksters and drug companies can get rich.  It’s an outrage and again, it happens due to financialization of the medical industry and the force of government coercion, NOT the free market.”

“You can bet the banksters, universities, medical societies and housing industry insiders know this, and they’re scared. They know that if you figure it out their income is cut in half or more.  They are returned to middle-class working people rather than the fat cat status they enjoy today.  Doctors, college professors, home builders, bankers and Realtors used to be middle-class citizens, not gold-clad elites driving around in Lamborghinis and living in mansions!

What’s worse (to them) is that if you succeed in breaking the back of financialization these people will lose the ability to enslave you.  You will have returned to yourself the power to choose when you work, how hard you work, and what you do with your own economic surplus, instead of having pledged it to the bank to buy the car, the bank to buy the house, and the insurance company in the event you get sick.”

“We did not find ourselves here because of the “free market.”  We are here because the rich and powerful demanded special protections from government that allowed them to enslave you, they enticed you into taking that first hit off the crack pipe of cheap money, and then once you were hooked good they used the jackboot of the government to screw you through changes in the law and special protections for themselves so that you could not easily escape. The solution is not to demand “free stuff” or “fairness.”  The only solution is to remove the excess leverage from the economy – to get rid of the debt that has been accumulated and force recognition of the fact that not only are many people bankrupt but the financial institutions are as well.  Only when the balance sheets on both sides are cleared can the economy.”

Full Story: OWS: Want To Turn The Tide? (TheMarketTicker)

If the “bad rich” always find manage to find ways to control and manipulate the government, why do so many want to empower them further with addition tax revenue, regulatory power, and more spending, … For all the calls to “more heavily tax the rich”, let’s finally go after the real controlling, manipulative, and politically-connected “rich” people / politicians / banksters / special interest groups, and stop empowering those who are the greatest benefactors of people’s rage and “wealth redistribution” agenda. Let’s also call for a return to a fair and balanced “Rule of Law“.

And for the record, I don’t consider myself a Republican, a Democrat, or a Libertarian, so much as a “Classical Liberal“.

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