02
Dec
2010

Thursday Thrust – Just Buy the F’ing Dips!

Thursday Thrust – Just Buy the F’ing Dips!

By Phil of Phil's Stock World

It's very sad when you can get your best financial advice from cartoon characters.

I apologize for the language but this video pretty much says it all.  As the man in green says:  "Buy the f'ing dip, you f'ing idiot."  That's the entirety of the market strategy we are being trained like Pavlov's dogs to follow.  Also as the man says "Now, don't forget this only works if you go out and tell all your friends and family to do the same.  That way, when they are buying more expensively than you, you can sell back to them and collect your money."

Of course it's a Ponzi scheme but it's a gigantic, legal one and the best thing about it is that the Government FORCES everyone to play so you never run out of suckers.  When there is a lack of actual new sucker/investors to put money in, the Government steps in with stimulus or buys equities (QE1) or buy Treasuries from the banks so they can have free capital to buy equities with (QE2).  They debase the currency and drive inflation higher while talking it up even more so and virtually penalizing people for saving money and not shopping.  In this way, the US Government places a tax on every single citizen through a systemic devaluation of their lifetime accumulation of wealth as well as unfavorable savings and inflation conditions that are aimed to force money into equities and commodities.

What is the logic to this?  Well, none if you are a government that actually cares about the long-term benefit of 310M people but we haven't had a government that was "for the people" since they put two in the back of Kennedy's neck so why complain about it now?  What we should be doing is celebrating the sheer stupidity of the situation and enjoying the ride as this stock market roller coaster clacks up the tracks - towards a drop that is certain to have investors screaming all the way down but, for now, let's listen to what the Bernanke Bears have to say in their latest cartoon about the Bank America crisis with WikiLeaks as well as their advice on NFLX and CRM:

Now, what could be more simple than that?  Just take all your money out of bank stocks and put it into NetFlix.  Well, maybe not NFLX as we were shorting them this week and it does look like we'll be rewarded as they got a spot of bad news (that we expected, hence the short) as the FCC proposes net neutrality regulations that  endorse the concept of usage-based pricing and that would be TERRIBLE for NetFlix's model, which is based on being able to hog up about 1/3 of the entire bandwidth of the Internet for free.  What a shocker that this plan my not pan out, right?  Even Jim Cramer is abandoning the stock, telling his viewers to sell half in last night's broadcast.

While last night's video may confuse the people who took Jim Cramer's advice in this one, that NFLX was "unstoppable" at $185 (video removed by CNBC/Cramer but we saved the text!) at least it's up $15 but I'd be selling all at this price before we're back at $170!  Of course those Oct 27th viewers will be nowhere near as confused as the Nov 30th viewers (yes 2 days ago!), who Jim told to BUY NetFlix at $208, which was the same time we were buying too, only it was the January $155 PUTS at $2 that we picked up in NFLX - we'll see how that goes but we're very thankful to Cramer for his quick 180 turnaround - usually it takes him several days to be proven wrong (and months to admit it, if ever).  In fact, the above cartoon bears mention how great it would have been to have not listened to Cramer back in March of '09 and bought some banks stocks.  They forget to mention how great it would have been to listen to ME!  I was, in fact, on TV that same crash day telling people to BUYBUYBUY: BAC ($3.13) , XLF ($6), FAS ($14), the RUT ($390), GE ($7) and 8 other stocks - pretty much "buying the f'ing dips" when everyone else was panicking out of the market (video on the left is my March 6th, 2009 appearance on LiveStock and here is the summary of that week's events).

THAT'S the kind of dip you buy on, now these little pullbacks!  Meanwhile, the anti-Cramer trade is still one of the most sure-fire ways to make money in the markets but the downside is you have to actually watch Cramer - which is something not many people are willing to do anymore as is evidenced by Mad Money's 24% decline in viewers since last November, down to just 41,000 people a show according to Nielson (the ratings guys, not the cool Coconut Song guy).  CNBC has, overall, a 36% drop in ratings caused, perhaps, by 36% of the people who listen to their advice losing their homes with the Fast Money crew dropping a precipitous 56% in the past 12 months but still holding onto the same audience (41K) as Cramer.

Why is CNBC failing in the ratings? Because they put people like Kudlow and Cramer and Adami and Najarian on TV instead of people (yes, like me) who are going to give you the real news and attempt to actually inform you. Now, here's the thing you need to think about - what kind of TV show(s) have you ever heard of that lose half their audience in a year and remain on the air?  The answer - PROPAGANDA!

Only a show that has an AGENDA other than making money could possibly stay on the air while it's driving viewers away in droves.  It takes years to build up a viewership but, as CNBC has proven, only 12 months to drive half of them away.  Fast Money is not the only CNBC show that would have been canceled a year ago by any responsible programming executive - "The Call" is down 37%, "Power Lunch" is off 47%, "Street Signs" is down 45% and hour one of "Closing Bell" is down 43% while poor Maria drives another 8% away in hour 2.

So, is it a sign of a market top when CNBC only has an average of 47,000 suckers tuned in at any given moment?  Sadly, in these thin market volumes, 47,000 sheeple mindlessly following Cramer off a cliff can still move the markets, so we have to torture ourselves daily and pay attention to what CNBC is saying as neither Fox Financial or Bloomberg have managed to match CNBC's impact for moving the markets.  Even now, when I go to visit brokers on Wall Street, every office has TVs tuned to CNBC (maybe they are not Nielson families), even though, clearly, the broadcasts did nothing at all to help Wall Street avert the last crash and, in fact, many would argue that their mindless trend-following and their constant cheer-leading for the latest bubble greatly exaggerated the damage done in the markets as people tune in expecting news and instead get nothing but PROPAGANDA that leads them to making very poor investment decisions.

We try not to make poor investment decisions, of course, but we also realize that sometimes we do.  That's why PSW stresses portfolio management techniques, position sizing as well as fundamental analysis.  It is ridiculous to tell viewers to "do their own homework" and then rattle off 20 trades in a 5 minute "lightning round" that sends the tickers flying.  There's really no way to reconcile television to responsible market discussions in an hourly format, which is why I have thus far declined all opportunities to make a fool of myself in some sort of show.  If I ever did TV or radio, I would want a show from 8am to 5pm where we did pretty much what we do in Member Chat now - observe and talk about the markets live and, occasionally, share trade ideas.  Would anyone watch?  Probably not, which is why I'm writing and not broadcasting this morning but if you ever see me with an hour show or jammed into a regular "segment" on some other show, you already have my permission to call me a sell-out and I can only pray that day never comes!

To me, CNBC is just re-running the script from 2008, when we were teetering on the verge of disaster but GE had a lot of real estate loans to dump and military contracts to get signed so CNBC was on from 4am to Midnight telling you how great everything was and to pay no attention to that man behind the curtain while they funnel away your investments and sell your country down the river, signing you and your family up for a future of 3 generations of debt and a broken safety net.  We like to trade FUNDAMENTALS not whatever mental patients are trading!  That's very hard when you're in a market where cartoon super heroes can say "just buy the f'ing dips" and you start thinking - "hey, this guy knows his stuff!"

It's all fine to follow the trend if you are a hit and run trader - that's the kind of trading we've been doing since we cashed out last month but, to make real money, you need to take a stand.  We're trying to make 100% in 2 months with our $10K-$50K portfolio so we need to take a stand and our stand was a bearish one that we dug into yesterday with 4 bearish trade ideas in the Morning Alert, including the XRT Jan $44 puts, that were my Free Trade Idea of the Week in the morning post, which came in at just .80 on the morning spike.

As the market stayed strong we strengthened our Mattress Play (more bearish) and shorted oil (also mentioned in morning post) shorted China, shorted the Russell, shorted PCLN (again) and shorted TM, which seemed like a super-obvious short to me as they disclosed very poor sales numbers at about 1:20 and they just ran up from $69 to $79 in a month so we aggressively played the $80 puts for $1.60, which can make a very fast 50% or more on a $1 pullback we expected once the Nikkei opened (looking good this morning).  THAT's how you trade the market - wait PATIENTLY for opportunities to present themselves and use our FUNDAMENTAL knowledge of the market to quickly identify good trading opportunities.  You can't do that in a TV show because you are constrained by the time of your segment and that means you will be forcing trades, rather than waiting for good ones to present themselves - that's why no one on TV can tell you anything useful about the markets...

Maybe we're wrong, maybe we'll get burned but our decision was based on the trends we were following all month - the Dollar's move, the EU situation, the economic numbers, the retail sales, the commodity pricing...  So many things to watch but today it is about the dollar holding 80.50, something we discussed in last night's Member Chat so I won't get into it again here.  We didn't think the EU was really going to run a QE2, which is what rallied the markets yesterday and the afternoon rumor was, not only will the ECB run a QE Program but the US would pitch in through the IMF, which sounded like complete and utter BS to me so we held our short positions even while the market strongly disagreed with us in the afternoon.

The ECB met this morning and Trichet did not announce any major policy changes and the IMF rumors were already shot down and that is dropping the EU markets quickly.  We'll have to see what sticks but it looks like NFLX and TM should be treating us well this morning and, who knows, maybe if we hold our bounce levels again we'll be motivated to buy the f'ing dips.

Isn't trading fun?!?

- Phil

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Ilene, Phil's Stock World
ilene / Tag: BAC, BERNANKE, China, CMG, CNBC, Cramer, Europe, FAS, GE, NFLX, Ponzi, Propaganda, RUT, stock-market, TM, Trichet, XLF, XRT /