It Is What It Is
Pardon the self-indulgence that follows. The plan is to get back to more focused market observation along with an expanded view into other subjects after this commentary.
It has been over 1.5 years now since I took the common phrase that is this article's title, which was often uttered by a macro-analyst friend (in regard to the predicament of a late-stage great economy that now runs more and more on credit creation AKA debt and less and less on actual productive endeavor) and named a website after it. The idea at the time was to lend another voice to the growing chorus that was singing a song that was out of tune to most Americans. Or, as per Rush "You can't have...something for nothing...you can't have...freedom for free". To lend a voice highlighting the denial and hubris of modern Americans in relating to the economic world around them. I came to understand just what debt is, just how much debt currently backs the US Dollar, and how most private and professional market participants seem to discount it from being anything more than a minor complication. This is all well and good if you believe we all get what we deserve in the end. But do our kids deserve the bill for this mess? What about their kids?
The bill must be paid. That is what debt is; an obligation in the future. This will either come to pass through continued depreciation of the dollar, with debt being "inflated" away or the entire consumption by credit model may just seize up, roll over and die of its own bloated weight one day when there are no longer enough productive enterprises to support real economic activity. I do not think these are the only two options, but given the current macro-data, they seem the most likely. Personally, I cannot get thoughts of technology, globalism and progressive human spirit out of my head (I mean, I am sitting here writing this on a computer that is a gateway to a world of information and technology that is just awe-inspiring), although I would never bet my family's future on the happy ending "US information economy with third world labor arbitrage" scenario in the face of hard evidence that tried and true economic laws are being violated on a massive scale in today's global economy.
Hence, what the website isn't is a bullish cheerleader and stock pick rag. It isn't a "we got all the answers" guru site or a "this time the markets really are going to crash, promise!" scare site. We don't have all the answers and are not afraid to admit it. There are some truly gifted and hard-working market analysts plying their trade out there, don't get me wrong. In fact, if I were to list all those I consider reputable and of value to people who are willing to listen, it would make up the balance of this article. Suffice it to say, I personally subscribe to two services, Steve Saville's Speculative Investor and Robert Prechter's Elliot Wave International. I like Saville because he obviously works hard to see the markets as they are, not as any particular ideology would have him see them. When I fade Mr. Saville, I do so only after careful consideration. EWI on the other hand, has had a tough go of it in recent years and I have personally cast my investments mostly contrary to them since 2003. But I believe their deflationary unwinding of debt lies at the end of the inflationary rainbow. So I want to know how they are seeing things every step of the way.
Free from the binds of a briefly-considered professional advisory service for Biiwii, we move on. Currently, my day job is just too good and the freedom of speech and opinion I have while not charging anyone for it is just too good as well. I love working with charts and I enjoy managing portfolios and trading. In truth, I am having a blast! Gold? Uranium? Alternative Energy? Tech? It is all good if it's good, and when it's not, it's not. A gold guy? Only in so far as collective human nature has trashed most currencies, intrinsically if not functionally. A bear guy? Nah uh. A bull? Gimme a break. A "be on the right side of the trade" guy is more like it. Not to mention a "make preparations for a simpler life with less debt and less of the conveniences we take for granted on a daily basis" guy. I don't know if people want to hear that there are no easy answers, but it is what it is.
Just the fact that there is so much contempt for people who would be so presumptuous as to believe they can make sense of a bunch of lines, squiggles and bars on a chart tells me that people who use TA, really get to know their own style and implement it into their trading decisions, are onto something. I want to suggest an excellent article that Clive Maund recently wrote on the subject entitled Now try telling me that charts don't work if you haven't already read it. I know what I think I know fundamentally about various markets and stocks, but I have found that bringing the charts front and center in investment decisions has been a winner. Now of course one must be on the lookout for when an indicator "stops working" such as the VIX did in 2003. In truth, the VIX didn't stop working, it just stopped working the way people wanted or expected it to work. It was telling a story the whole time and bears that got too comfortable in their stance were plowed under as a result. Be open minded. The market will rip you a new one if you cannot be.
People can argue it all they want, but those who have gained the experience of hammering out a TA regimen that works for them personally can be well rewarded. But there is no one size fits all solution, so I avoid the automated TA solutions like the plague. Aside from the usual suspects like wedges, flags, trends, volume and relative strength, etc., I personally see shapes and patterns that really don't have names, but find myself getting excited over. When I find a certain pattern, then get a confluence of indicators, say a fib retrace that coincides with a trend line or strong support (or resistance), I will then weigh that against what I think I know about the stock or market, and then move forward with one more tool for the decision-making process. All I can tell you is that TA works, just as Mr. Maund points out. I have made more money because of charts and avoided catastrophic losses the same way. In fact, my one major loss last year happened when I looked away from the technicals on a particular stock that I thought I knew. I didn't. Luckily, I found religion once again, never strayed from what worked, and more than made up that loss to beat the market handily. If it ain't broke, why fix it?
Goldbugz, Paper Jockeys and Perma-Bears
I have received a good bit of supportive and complimentary feedback since becoming a regular investor gone "public". But when I have irritated people, it has been members of the above noted three groups by and large. In all cases, it has shown how tied people can get to their particular ideology. "Put that dogma on a leash!" That was not me. That brilliant line comes from a legendary Boston rock band of a bye-gone era called the Volcano Suns.....Gary Tanashian, rock'n roll market commentator. I have been called a "crazy goldbug" by a defender of all things paper (and debt) and a "stupid American bull" by a sour perma-bear and while not being called names by goldbugs (that I know of ), I have been well-lectured after submitting views that gold is not the be-all and end-all but simply a means of protecting or furthering one's financial situation. Given the choice, I would still rather we had a dollar that was healthy and not suffering from policy abuse. But that is not the case. Again, it is what it is and we deal with what is.
Speaking of policy abuse, over the last few years there has been a growing theme that pits an evil Fed (no I have not read "The Creature" so that may disqualify my opinion from the consideration of many) against the common man, as they and the treasury department oversee the sustained devaluation of the USD. It is true, the dollar is being devalued as any economist or consumer can plainly see. It is also true that these official entities oversee and tend to this devaluation.
Where I part ways with this school of thought is in the assigning of blame. A good deal of virtual ink has been used in financial commentary explaining how the Fed and/or the "elites" are stealing from "the people" through inflation policy and driving asset prices higher through money supply inflation run amok. But a theme I have continually worked is the fault of the "collective". Maybe that is due to my interest in psychology, especially collective or societal psychology. Meeting The Shadow by Zweig and Abrams presents a collection of short essays about the Jungian "shadow" including sub-sections entitled Devils, Demons and Scapegoats and Enemy Making: Us and Them in the Body Politic. Biiwii's main object of ridicule and assignee of blame is and has been the average American consumer, who gets the government policy he and she deserves. I clearly remember the anger and blame launched at Alan Greenspan after the markets began to break down in 2000 at the end of a rate hiking cycle. The truth is, he was more accommodative then people had a right to expect, but when reality finally hit that it was not a new economy after all, they called for his head. Of course Greenspan then did what he had done throughout a good deal of his tenure; he succumbed to the pressure and gave the markets what they wanted, namely liquidity any way they could get it. While it is true that the die-hard goldbugs and the fundamentally schooled bears were advanced in economic theory beyond the average bull-only bubble head, it was the bubble head and his fund managing institutions who got what they wanted. We were dragged down to what the lowest common denominator, or lowest common voter, wanted.
On a personal level, and through whatever biases I may operate under, I see daily an electorate and a society that is nowhere near ready to deal with even the most rudimentary ideas of fiscal restraint and the former American attitude that holds that you work for everything you get, where you produce something of value to a market, locally or globally and that productivity is rewarded through healthy trade. We know that the easy money real estate ATM has replaced productivity to a large degree, but I have not seen any guns pointed to consumers' heads forcing them into those Hummers or McMansions.
When one steps back away from highly charged, even emotional rhetoric, a bigger picture comes into view. Part of that picture for me is the fact that the bears' promised unraveling has as yet failed to materialize, at least on the surface. There is certainly rot beneath the surface of the "feel-good" economy that insightful people are concerned about, but I find myself unable to deny my own history. In a 2004 article called Deflation: A Manufacturer's View, I tried to show the positive side of deflation, as represented by a continued draining of liquidity from a US sector that seemed to matter less and less as collective greed and denial took root and consumption by credit became our most vital economic "fundamental". To this day, despite the inflationary headlines and even the inflationary realities my company has experienced, we continue forward, profit margins intact and I assure you it is not through charging higher prices.
The company was started by my father in the 1970's and though there have been problems along the way, has largely ridden a continuum of progress and efficiency from day one. We are on the verge of eliminating all of our capital equipment debt (and here again, I thank a friend for hammering home to me just what debt means to an American business person and/or consumer in an age of debt-as-economic-fuel) while maintaining a highly progressive stature. An early commitment to automation and a realization that global forces are at work (for us it was the dreaded thought of the Japanese "eating our lunch" in the 1980's) and you had better progress or simply shrivel up and blow away. We progressed. Many of us did. What I have not yet resolved is that despite the deplorable economic fundamentals the consumer economy runs on, a "channel check" of the manufacturing sector shows full speed ahead. As I have noted previously, it is not simply hedge funds buying copper futures or what have you. Actual productive companies are doing so and they are doing it in the USA as well as globally. Someone smarter than me can probably explain how liquidity is managing to find its way to the productive sectors, but it is getting there. Caveat: That same "channel check" indicates that the busiest sectors are military and my company's bread and butter, healthcare equipment. Unlike the defense industry, the medical equipment industry does rely on global dynamics to a fair degree.
I have learned an awful lot over the last few years and become acquainted with many insightful schools of thought. Biiwii's modus operandi will be to take it all in, cull out the b/s (as I see it), and go its own way, free from heavy dogma and hyperbole. Some, who are accustomed to being fed a heavy helping of one particular econo-meal, may find this to be pure vanilla. As a non-commercial entity, the site will go the way that I find most satisfying. Right now I am following the trends and themes of the market and having fun as I mentioned above. At the same time, organic gardening has been taking a hold of my interests and fits in with other initiatives and interests like major debt reduction, alternative energy sources and community building. Biiwii will expand from here with the potential to cover a wider scope of subjects going forward. The resources page is continually being updated to reflect this theme. As I close out this epic exercise in self-indulgence, I will simply wish you all good luck in whatever lies ahead. Biiwii will be right there serving up the vanilla scoops of TA and whatever.