BR: Eloquent, insightful, lucid — why on earth would the filter catch this? Its the perfect comment !
markpmc Says:
October 6th, 2010 at 5:24 pm
the title reminds me of the question greg maddux asked a rookie pitcher.
“You trying to throw strikes or get people out?”
Liquidity Trader Says:
October 6th, 2010 at 5:27 pm
ahab,
The comment was from a traders perspective — it went right over your head.
Not only do you impose your politics on a non-political post, you completely misunderstand it. And to magnify your foolishness, you are rude to our host in a way that reveals you to be a much bigger asshole than I previously imagined.
This site is not for people like you — its for serious asset types. Try one of the Austrians sites,or ZH — they don’t care about making money.
mbelardes Says:
October 6th, 2010 at 5:42 pm
After reading through the comments (I rarely see BR this active on the comments, by the way) I’ve come to the conlcusion that some of the commenters are here to learn about macro perspectives and data analysis as a part of money management and some are here to root against the money management sector altogether.
This is why some of the posts where BR criticizes the market and market participants, such as firms and regulators, are so wildly popular and some of the sweet charts and data analysis get MAYBE a few dozen comments.
JasRas Says:
October 6th, 2010 at 6:11 pm
I’m in the makin’ money business, and frankly this isn’t that hard!! Right or wrong, the Fed and other CB’s are doing some version of QE, monetary expansion, etc… My basic view is dollars are worth less and other things are worth more…other things mean stocks, commodities–including precious metals, etc. Things that promise to return your dollars at a latter date in exchange for a predictable cash flow (ie. fixed income) mean you are getting dollars back later at an unknown deflated value. The cash flow paid in no way is compensating you for that lost buying power. Now, you say, there is no inflation! Look at the CPI. Well….if you believe stats compiled by the government, good luck to you because assets that perform well in inflationary environments are doing well. What amount is inflation and what amount is debasement is not for me to figure out or care….
Are we short term over bought? In all probability, yes. Is this market obliging people and “letting them in”? NO! My experience with rallies that “won’t let you in” is that they’ve got a ways to go. With so many institutional types underperforming, you are witnessing a rally most likely driven by career risk. But, again, the why is somewhat irrelevant. Are you going to watch, or are you going to participate? Are you long? Are you long enough?
The interesting thing I see is the TNX is still hitting record low yields on the 10yr… Someone is going to be wrong, and in a big way because these rubberbands only stretch sooooo far. Is it stocks or is it fixed? One could argue that both are overbought right now. Gold too for that matter. Something somewhere is going to take a breather. Which do you want to be wrong on. You want to top-tick fixed income? Gold? Or a stock market that still isn’t up to the April highs? I can tell you which one is easiest to get forgiveness for…equities.
Good luck to all.
davver Says:
October 6th, 2010 at 6:22 pm
Barry,
The essential problem is how one is supposed to own assets they know are overpriced. If you believe equities are overpriced then you are playing a greater fools game. How are you to know when you aren’t the greatest fool?
“BTW, just because you are making money in other sectors, does not mean you CANNOT make money in equities.
Making money in Gold or Bonds (ala my pal David Rosenberg) does not excuse missing a HUGE Equity rally.”
Can’t you say the same thing about every bubble? Shouldn’t I have been flipping houses from 2003-2005. Shouldn’t you have been buying and then selling tech 1998-2000. The truth is you have no clue when a bubble is going to end. You could just as easily have seen the housing bubble or tech bubble end earlier or later then it did. There is no rationality to a bubble. Prices simply get more and more insane until they don’t anymore. They seem just as insane the whole way through. You can’t say you have some magic insight as to pinpoint when the insanity will stop.
Look, I use technical investing and other indicators to try and pick my buy and sell points. But I buy things I think have good fundamentals and I sell them when I think they don’t anymore. The technical stuff just helps me pick specific entry/exit points on things I already feel good about. I don’t run out and buy assets I think are crap because some chart or sentiment indicator or gut feel makes me.
When I was younger I put myself through college playing poker, which I feel is very similar to investing. I was a pretty conservative player. I read up on Sklansky, analyzed my hands logically, and played very mathematically. I was aggressive but didn’t naked bluff often just enough to keep people off balance and steal some pots. I was careful never to get too deep into a hand that was trouble. It was reliable profit.
Some people are successful a very different way. They are extremely hyper aggressive and bluff constantly. They rely almost entirely on reading their opponent with little regard for their own cards. I’m sure that there are many people with a similar talent for trading financial instruments. They have a read on the tape. They can make money that way. However, like poker there are many people who think they can do that and can’t for every one that can. In fact I’d say its less likely in investing, as the sample size on investments is too small and the complexity too great.
If you truly think you have the talent to pick the bottom and top of every single investment trend then congratulations. Me, I’ve got to be more humble. I’ve got to focus on things I understand and have a track record of success with. I’d rather stay away from things I consider dangerous that I don’t understand. So I don’t think its wrong to chase every single bubble. Like Rosenburg I’ve made decent profits in gold and bonds. And I didn’t lose any on the way down for equities, in fact I captured about half of the down leg as a short before covering. Maybe I didn’t quintuple my money, but I’ve done rather well, and with a very low amount of risk in my mind.
DiggidyDan Says:
October 6th, 2010 at 6:22 pm
I’m just glad after liquidating a lot of my positions from the stock market due to not believing the economic recovery was sustainable, I kept my basic core holdings in stocks i still believed in that pay good dividends and have constant demand such as ADM, BDX, BHP, CVX, GSK, JNJ, MMM, SCCO(formerly PCU YEAH COPPER!) and UL. and halved the rest of the stuff between long term TIPS Bond funds (LTPZ and PRRRX) and an emergency fund in 3% yield MM account. Only problem is I had a couple unforseen blowups in BP and BAX due to non market catastrophes that stopped me out and cost me some big coin. I haven’t made much money over the last 3 years, but I haven’t lost any and I have beat the S&P 500.
Only problem is, I lost 60 Large in the housing market and can’t refi at these low rates and took a pay cut.
call me ahab Says:
October 6th, 2010 at 6:23 pm
“This site is not for people like you — its for serious asset types”
laughable (and so full of self importance)- also you may want to consider a career in blog enforcement(as if BR can’t take care of himself)-
also- where are my politics? Where were they mentioned in this thread?
I guess you must have mind melded me from across your keyboard (and my guess is you still got it wrong)
Mark E Hoffer Says:
October 6th, 2010 at 6:26 pm
“Regardless of how the rally concludes, the folks who missed an 85% generational run up in equities will pound their chests and say “See, we told you so!” And they will have made absolutely no money in the process.”–BR, above
BR,
‘Equities’ are the ‘only investment’?
why not run some DOW/Gold, or DOW/Silver, Charts to go with that?
as Boockvar, rightly, was pointing out, recently, the SPX/CRBRIND, after the “strongest one-month Equity Rally since ’39″, is nearly 1 ..
Hey, you’re better than that…
call me ahab Says:
October 6th, 2010 at 6:30 pm
I ask:
“what happens if the Fed doesn’t or is unable to oblige?”
BR replies:
“Then you sell.”
I was looking for something more thorough (in a macro sense)- but I like this answer just on brevity alone
gman Says:
October 6th, 2010 at 6:59 pm
Venn,
I may use that rant in the near future…maybe at my firm…to the only person who is a “tea-party fellow traveler”…who also just happens to be the only trader of the 9 we have who is struggling!
Well put!
Andy T Says:
October 6th, 2010 at 7:03 pm
Boo-Yah Barry!
GYSC Says:
October 6th, 2010 at 7:10 pm
Barry,
I appreciate you taking the time to post this and answer all the comments. I think I see better know how you look at things.
Andy T Says:
October 6th, 2010 at 7:17 pm
It’s actually a good post BR. It does come across a little bit like “chest-thumping,” but sometimes the black and white pixels come across in a different way than the voice/tone in the head. We’ve all come across the wrong way in the written word.
With that said, I think the S&P will trade below 900 before 12/31/2011. I’d take some friendly side-action on that proposition bet.
rootless Says:
October 6th, 2010 at 7:21 pm
Barry,
We made money from March 09 til April 2010. Since then, we have mostly avoided losing money. Its been a good strategy.
Well, good. I haven’t been doing so well for recent months. But it wasn’t my fault. My trading program did it.
However, as of today, S&P500 is down only 4.7% from the peak in April. So my criticism stands. You say your approach is right, because you have made money since March 09, based on the performance mostly during the price run up. You say yourself the secular bear market has still to find its bottom. Right? And you think the market is overvalued based on metrics like CAPE? Then, I have to agree with some other commenter here, that you are playing the greater fool game. And, in addition to that, you ridicule the ones who are grumpy about it and don’t want to play along and have therefore “missed a 85% generational run up”. You basically say that everyone who participates in this game could have made huge profits. But this logic is flawed. A greater fool game can’t work and won’t have worked for everyone who has participated, after everything is said and done. It only works for some, the ones who are the first ones at the exits, you may belong to those, but it doesn’t work for many. It works for some because it doesn’t work for many. The gains for the ones are the losses for the other ones. The outcome this time won’t be different to the final outcome of the stock market and real estate bubble earlier this decade with misery for many. And the judgment over any investment approach will be spoken when the market cycle has come to its full closure, not based on the performance from the market lows in March 2009 to today.
Your at least implicit advice that one should do it like you have done it, if one wants to make big gains in the stock market, is actually very bad advice, even if it has worked for you.
Tom Perriello always knew it would be hard to hold his seat in Congress. The progressive Democrat from Albemarle County, Va. represents a district designed to nullify liberal votes with a wide swath of conservative countryside. He was elected in 2008, riding President Obama’s coattails to victory by just 727 votes. He does not represent a swing district--he is a committed progressive in a solidly Republican district. But unlike his Blue Dog contemporaries, Perriello has voted like a progressive for the past two years. And unlike many Blue Dogs, he might actually pull out a victory tomorrow night, even in the face of a Republican wave fueled by double-digit unemployment. The mere fact that he’s in the running is a stunning accomplishment.
I lived in Perriello’s district for eight years before moving to Washington, D.C. this summer. For mountains, majesty, and rock ‘n roll, it simply can’t be beat. But there were problems, namely persistent racial tensions, a lousy economy and politicians who perpetuated these two troubles. For all but the last two years we were represented by Virgil Goode, a conservative Republican and unabashed bigot. Years before Fox News made Islamophobia a mainstream political view, Goode was openly attacking Rep. Keith Ellison, D-Minn., on the grounds that he was – gasp!—a Muslim. Goode cruised to re-election every cycle, easily surviving the 2006 Democratic wave, despite being a Bush-backing war-monger in a year when voters were rejecting both Bush and his war in Iraq.
I lived in Charlottesville, a tiny outcropping of progressive politics at the northern tip of the Fifth District. From Charlottesville, the district fans out directly to the rural south, extending all the way to the North Carolina border. It’s a two-and-a-half hour drive straight south from Charlottesville to Danville, three hours southwest to Collinsville or southeast to Brunswick. All four towns are in the same district. Just 40,000 people live in Charlottesville—120,000 if you include Albemarle County (which is not as progressive as “the city”). But the district as a whole includes nearly 650,000 people, most of it tiny towns and farmland, and most of its inhabitants Republicans. Jerry Falwell’s right-wing conservative Christian enclave Liberty University is smack in the middle of Perriello country.
Conventional wisdom dictates that Democratic politicians in such districts vote like Republicans. Otherwise, a Republican runs against you, points out that you’re not a Republican, and beats you.
But Perriello decided to take a different tack when he was elected. Instead of capitulating to policies and votes he didn’t believe in, he would do what he thought was right, and make an aggressive case to voters that he was, in fact, right.
On every major vote in the past two years, Perriello voted with progressives, at times even voting against President Obama on the grounds that his policies were not progressive enough. He voted for healthcare reform and the stimulus package, but he voted against Wall Street reform because it didn’t hit the big banks hard enough, and he voted against disbursing the second round of bailout money to the banks (he wasn’t in office when the bank bailout was approved).
He never apologized for these votes or caved to right-wing rhetorical frames, and he hit the road to campaign on his record, explaining his positions directly to voters. This was old-school campaigning, and it wasn’t glamorous—trekking from Danville to Martinsville to Charlottesville every week, making speeches, shaking hands and answering questions in town-hall meetings. But Perriello is not your standard politician waiting for a cushy lobbyist job. He has a deep background in social justice work—he’s in Congress because he wants to make a difference, not to score a sweet paycheck.
All of that campaigning has paid off. Voters are pissed off this year. They’ve watched Wall Street profits soar on the back of a taxpayer-financed bailout, even as ordinary Americans have been laid off by the millions. Whether Republicans take control of the House tomorrow night or not, they will certainly make big gains as voters reject policymakers who cater to big banks while failing to tackle the jobs problem—either out of political cowardice or ideological blindness.
But Perriello is holding even with Republican challenger Robert Hurt. The fact that Perriello even has a chance in this election ought to be viewed as something of a miracle. Or maybe it’s just good governing, combined with good politics.
Tim Fernholz almost gets it right in his profile of Perriello for The American Prospect. But he misses the mark with this comment, which is going to be echoed by the Beltway establishment on Wednesday morning, however the race turns out:
“If Perriello can beat the odds tomorrow, it is not only his reputation, and the president's, that will be burnished . . . . Should he lose, the voices who call for a more timid Democratic Party will have a point in their favor.”
This is wrong. Perriello won in 2008 by just 727 votes. Any Democrat who entered office by so slim a margin is almost certain to lose this year. By any conventional political analysis, Perriello should be getting trounced He faces a massive voter registration disadvantage, representing a district that is designed to crush progressive voices during what is expected to be a wave election for Republicans, amid strong anti-incumbent attitudes sparked by high unemployment. But he’s holding even. That’s incredible. Even if things go well for Democrats tomorrow, and they hold the House, candidates in much safer districts than Perreillo’s are going to lose.
The Perriello lesson, in other words, is already clear. Whether he wins or loses on November 2, having the courage to govern by his convictions and do real work to sell those policies has paid off. It might not get him re-elected. But in an all-but-impossible district, losing close sends a clear signal to actual swing districts. Governing like a pretend-Republican only reinforces the Republican world-view and aligns voters against you. If you want to have a chance, you have to stand for something. Tom Perriello stood for something these past two years, and even if it can’t overcome a terrible economy to win him two more years, the political establishment should take heart.
eric seiger
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Great, great news: Pelosi might stay on as House minority leader.
eric seiger
BR: Eloquent, insightful, lucid — why on earth would the filter catch this? Its the perfect comment !
markpmc Says:
October 6th, 2010 at 5:24 pm
the title reminds me of the question greg maddux asked a rookie pitcher.
“You trying to throw strikes or get people out?”
Liquidity Trader Says:
October 6th, 2010 at 5:27 pm
ahab,
The comment was from a traders perspective — it went right over your head.
Not only do you impose your politics on a non-political post, you completely misunderstand it. And to magnify your foolishness, you are rude to our host in a way that reveals you to be a much bigger asshole than I previously imagined.
This site is not for people like you — its for serious asset types. Try one of the Austrians sites,or ZH — they don’t care about making money.
mbelardes Says:
October 6th, 2010 at 5:42 pm
After reading through the comments (I rarely see BR this active on the comments, by the way) I’ve come to the conlcusion that some of the commenters are here to learn about macro perspectives and data analysis as a part of money management and some are here to root against the money management sector altogether.
This is why some of the posts where BR criticizes the market and market participants, such as firms and regulators, are so wildly popular and some of the sweet charts and data analysis get MAYBE a few dozen comments.
JasRas Says:
October 6th, 2010 at 6:11 pm
I’m in the makin’ money business, and frankly this isn’t that hard!! Right or wrong, the Fed and other CB’s are doing some version of QE, monetary expansion, etc… My basic view is dollars are worth less and other things are worth more…other things mean stocks, commodities–including precious metals, etc. Things that promise to return your dollars at a latter date in exchange for a predictable cash flow (ie. fixed income) mean you are getting dollars back later at an unknown deflated value. The cash flow paid in no way is compensating you for that lost buying power. Now, you say, there is no inflation! Look at the CPI. Well….if you believe stats compiled by the government, good luck to you because assets that perform well in inflationary environments are doing well. What amount is inflation and what amount is debasement is not for me to figure out or care….
Are we short term over bought? In all probability, yes. Is this market obliging people and “letting them in”? NO! My experience with rallies that “won’t let you in” is that they’ve got a ways to go. With so many institutional types underperforming, you are witnessing a rally most likely driven by career risk. But, again, the why is somewhat irrelevant. Are you going to watch, or are you going to participate? Are you long? Are you long enough?
The interesting thing I see is the TNX is still hitting record low yields on the 10yr… Someone is going to be wrong, and in a big way because these rubberbands only stretch sooooo far. Is it stocks or is it fixed? One could argue that both are overbought right now. Gold too for that matter. Something somewhere is going to take a breather. Which do you want to be wrong on. You want to top-tick fixed income? Gold? Or a stock market that still isn’t up to the April highs? I can tell you which one is easiest to get forgiveness for…equities.
Good luck to all.
davver Says:
October 6th, 2010 at 6:22 pm
Barry,
The essential problem is how one is supposed to own assets they know are overpriced. If you believe equities are overpriced then you are playing a greater fools game. How are you to know when you aren’t the greatest fool?
“BTW, just because you are making money in other sectors, does not mean you CANNOT make money in equities.
Making money in Gold or Bonds (ala my pal David Rosenberg) does not excuse missing a HUGE Equity rally.”
Can’t you say the same thing about every bubble? Shouldn’t I have been flipping houses from 2003-2005. Shouldn’t you have been buying and then selling tech 1998-2000. The truth is you have no clue when a bubble is going to end. You could just as easily have seen the housing bubble or tech bubble end earlier or later then it did. There is no rationality to a bubble. Prices simply get more and more insane until they don’t anymore. They seem just as insane the whole way through. You can’t say you have some magic insight as to pinpoint when the insanity will stop.
Look, I use technical investing and other indicators to try and pick my buy and sell points. But I buy things I think have good fundamentals and I sell them when I think they don’t anymore. The technical stuff just helps me pick specific entry/exit points on things I already feel good about. I don’t run out and buy assets I think are crap because some chart or sentiment indicator or gut feel makes me.
When I was younger I put myself through college playing poker, which I feel is very similar to investing. I was a pretty conservative player. I read up on Sklansky, analyzed my hands logically, and played very mathematically. I was aggressive but didn’t naked bluff often just enough to keep people off balance and steal some pots. I was careful never to get too deep into a hand that was trouble. It was reliable profit.
Some people are successful a very different way. They are extremely hyper aggressive and bluff constantly. They rely almost entirely on reading their opponent with little regard for their own cards. I’m sure that there are many people with a similar talent for trading financial instruments. They have a read on the tape. They can make money that way. However, like poker there are many people who think they can do that and can’t for every one that can. In fact I’d say its less likely in investing, as the sample size on investments is too small and the complexity too great.
If you truly think you have the talent to pick the bottom and top of every single investment trend then congratulations. Me, I’ve got to be more humble. I’ve got to focus on things I understand and have a track record of success with. I’d rather stay away from things I consider dangerous that I don’t understand. So I don’t think its wrong to chase every single bubble. Like Rosenburg I’ve made decent profits in gold and bonds. And I didn’t lose any on the way down for equities, in fact I captured about half of the down leg as a short before covering. Maybe I didn’t quintuple my money, but I’ve done rather well, and with a very low amount of risk in my mind.
DiggidyDan Says:
October 6th, 2010 at 6:22 pm
I’m just glad after liquidating a lot of my positions from the stock market due to not believing the economic recovery was sustainable, I kept my basic core holdings in stocks i still believed in that pay good dividends and have constant demand such as ADM, BDX, BHP, CVX, GSK, JNJ, MMM, SCCO(formerly PCU YEAH COPPER!) and UL. and halved the rest of the stuff between long term TIPS Bond funds (LTPZ and PRRRX) and an emergency fund in 3% yield MM account. Only problem is I had a couple unforseen blowups in BP and BAX due to non market catastrophes that stopped me out and cost me some big coin. I haven’t made much money over the last 3 years, but I haven’t lost any and I have beat the S&P 500.
Only problem is, I lost 60 Large in the housing market and can’t refi at these low rates and took a pay cut.
call me ahab Says:
October 6th, 2010 at 6:23 pm
“This site is not for people like you — its for serious asset types”
laughable (and so full of self importance)- also you may want to consider a career in blog enforcement(as if BR can’t take care of himself)-
also- where are my politics? Where were they mentioned in this thread?
I guess you must have mind melded me from across your keyboard (and my guess is you still got it wrong)
Mark E Hoffer Says:
October 6th, 2010 at 6:26 pm
“Regardless of how the rally concludes, the folks who missed an 85% generational run up in equities will pound their chests and say “See, we told you so!” And they will have made absolutely no money in the process.”–BR, above
BR,
‘Equities’ are the ‘only investment’?
why not run some DOW/Gold, or DOW/Silver, Charts to go with that?
as Boockvar, rightly, was pointing out, recently, the SPX/CRBRIND, after the “strongest one-month Equity Rally since ’39″, is nearly 1 ..
Hey, you’re better than that…
call me ahab Says:
October 6th, 2010 at 6:30 pm
I ask:
“what happens if the Fed doesn’t or is unable to oblige?”
BR replies:
“Then you sell.”
I was looking for something more thorough (in a macro sense)- but I like this answer just on brevity alone
gman Says:
October 6th, 2010 at 6:59 pm
Venn,
I may use that rant in the near future…maybe at my firm…to the only person who is a “tea-party fellow traveler”…who also just happens to be the only trader of the 9 we have who is struggling!
Well put!
Andy T Says:
October 6th, 2010 at 7:03 pm
Boo-Yah Barry!
GYSC Says:
October 6th, 2010 at 7:10 pm
Barry,
I appreciate you taking the time to post this and answer all the comments. I think I see better know how you look at things.
Andy T Says:
October 6th, 2010 at 7:17 pm
It’s actually a good post BR. It does come across a little bit like “chest-thumping,” but sometimes the black and white pixels come across in a different way than the voice/tone in the head. We’ve all come across the wrong way in the written word.
With that said, I think the S&P will trade below 900 before 12/31/2011. I’d take some friendly side-action on that proposition bet.
rootless Says:
October 6th, 2010 at 7:21 pm
Barry,
We made money from March 09 til April 2010. Since then, we have mostly avoided losing money. Its been a good strategy.
Well, good. I haven’t been doing so well for recent months. But it wasn’t my fault. My trading program did it.
However, as of today, S&P500 is down only 4.7% from the peak in April. So my criticism stands. You say your approach is right, because you have made money since March 09, based on the performance mostly during the price run up. You say yourself the secular bear market has still to find its bottom. Right? And you think the market is overvalued based on metrics like CAPE? Then, I have to agree with some other commenter here, that you are playing the greater fool game. And, in addition to that, you ridicule the ones who are grumpy about it and don’t want to play along and have therefore “missed a 85% generational run up”. You basically say that everyone who participates in this game could have made huge profits. But this logic is flawed. A greater fool game can’t work and won’t have worked for everyone who has participated, after everything is said and done. It only works for some, the ones who are the first ones at the exits, you may belong to those, but it doesn’t work for many. It works for some because it doesn’t work for many. The gains for the ones are the losses for the other ones. The outcome this time won’t be different to the final outcome of the stock market and real estate bubble earlier this decade with misery for many. And the judgment over any investment approach will be spoken when the market cycle has come to its full closure, not based on the performance from the market lows in March 2009 to today.
Your at least implicit advice that one should do it like you have done it, if one wants to make big gains in the stock market, is actually very bad advice, even if it has worked for you.
Tom Perriello always knew it would be hard to hold his seat in Congress. The progressive Democrat from Albemarle County, Va. represents a district designed to nullify liberal votes with a wide swath of conservative countryside. He was elected in 2008, riding President Obama’s coattails to victory by just 727 votes. He does not represent a swing district--he is a committed progressive in a solidly Republican district. But unlike his Blue Dog contemporaries, Perriello has voted like a progressive for the past two years. And unlike many Blue Dogs, he might actually pull out a victory tomorrow night, even in the face of a Republican wave fueled by double-digit unemployment. The mere fact that he’s in the running is a stunning accomplishment.
I lived in Perriello’s district for eight years before moving to Washington, D.C. this summer. For mountains, majesty, and rock ‘n roll, it simply can’t be beat. But there were problems, namely persistent racial tensions, a lousy economy and politicians who perpetuated these two troubles. For all but the last two years we were represented by Virgil Goode, a conservative Republican and unabashed bigot. Years before Fox News made Islamophobia a mainstream political view, Goode was openly attacking Rep. Keith Ellison, D-Minn., on the grounds that he was – gasp!—a Muslim. Goode cruised to re-election every cycle, easily surviving the 2006 Democratic wave, despite being a Bush-backing war-monger in a year when voters were rejecting both Bush and his war in Iraq.
I lived in Charlottesville, a tiny outcropping of progressive politics at the northern tip of the Fifth District. From Charlottesville, the district fans out directly to the rural south, extending all the way to the North Carolina border. It’s a two-and-a-half hour drive straight south from Charlottesville to Danville, three hours southwest to Collinsville or southeast to Brunswick. All four towns are in the same district. Just 40,000 people live in Charlottesville—120,000 if you include Albemarle County (which is not as progressive as “the city”). But the district as a whole includes nearly 650,000 people, most of it tiny towns and farmland, and most of its inhabitants Republicans. Jerry Falwell’s right-wing conservative Christian enclave Liberty University is smack in the middle of Perriello country.
Conventional wisdom dictates that Democratic politicians in such districts vote like Republicans. Otherwise, a Republican runs against you, points out that you’re not a Republican, and beats you.
But Perriello decided to take a different tack when he was elected. Instead of capitulating to policies and votes he didn’t believe in, he would do what he thought was right, and make an aggressive case to voters that he was, in fact, right.
On every major vote in the past two years, Perriello voted with progressives, at times even voting against President Obama on the grounds that his policies were not progressive enough. He voted for healthcare reform and the stimulus package, but he voted against Wall Street reform because it didn’t hit the big banks hard enough, and he voted against disbursing the second round of bailout money to the banks (he wasn’t in office when the bank bailout was approved).
He never apologized for these votes or caved to right-wing rhetorical frames, and he hit the road to campaign on his record, explaining his positions directly to voters. This was old-school campaigning, and it wasn’t glamorous—trekking from Danville to Martinsville to Charlottesville every week, making speeches, shaking hands and answering questions in town-hall meetings. But Perriello is not your standard politician waiting for a cushy lobbyist job. He has a deep background in social justice work—he’s in Congress because he wants to make a difference, not to score a sweet paycheck.
All of that campaigning has paid off. Voters are pissed off this year. They’ve watched Wall Street profits soar on the back of a taxpayer-financed bailout, even as ordinary Americans have been laid off by the millions. Whether Republicans take control of the House tomorrow night or not, they will certainly make big gains as voters reject policymakers who cater to big banks while failing to tackle the jobs problem—either out of political cowardice or ideological blindness.
But Perriello is holding even with Republican challenger Robert Hurt. The fact that Perriello even has a chance in this election ought to be viewed as something of a miracle. Or maybe it’s just good governing, combined with good politics.
Tim Fernholz almost gets it right in his profile of Perriello for The American Prospect. But he misses the mark with this comment, which is going to be echoed by the Beltway establishment on Wednesday morning, however the race turns out:
“If Perriello can beat the odds tomorrow, it is not only his reputation, and the president's, that will be burnished . . . . Should he lose, the voices who call for a more timid Democratic Party will have a point in their favor.”
This is wrong. Perriello won in 2008 by just 727 votes. Any Democrat who entered office by so slim a margin is almost certain to lose this year. By any conventional political analysis, Perriello should be getting trounced He faces a massive voter registration disadvantage, representing a district that is designed to crush progressive voices during what is expected to be a wave election for Republicans, amid strong anti-incumbent attitudes sparked by high unemployment. But he’s holding even. That’s incredible. Even if things go well for Democrats tomorrow, and they hold the House, candidates in much safer districts than Perreillo’s are going to lose.
The Perriello lesson, in other words, is already clear. Whether he wins or loses on November 2, having the courage to govern by his convictions and do real work to sell those policies has paid off. It might not get him re-elected. But in an all-but-impossible district, losing close sends a clear signal to actual swing districts. Governing like a pretend-Republican only reinforces the Republican world-view and aligns voters against you. If you want to have a chance, you have to stand for something. Tom Perriello stood for something these past two years, and even if it can’t overcome a terrible economy to win him two more years, the political establishment should take heart.
eric seiger
<b>News</b> - Dad: How Demi Lovato Is Holding Up - Celebrity <b>News</b> <b>...</b>
"I want her to be happy," Patrick Lovato tells Us.
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Great, great <b>news</b>: Pelosi might stay on as House minority leader <b>...</b>
Great, great news: Pelosi might stay on as House minority leader.
eric seiger
eric seiger
eric seiger
<b>News</b> - Dad: How Demi Lovato Is Holding Up - Celebrity <b>News</b> <b>...</b>
"I want her to be happy," Patrick Lovato tells Us.
Fox <b>News</b> Beats USA Network For Top Cable Network On Night After <b>...</b>
Fox News was the top cable network during prime time on Wednesday night, the day after the midterm election, ahead of USA Network's highly-rated NCIS re-runs. Bill O'Reilly had the most-watched show on all of cable, while Sean Hannity ...
Great, great <b>news</b>: Pelosi might stay on as House minority leader <b>...</b>
Great, great news: Pelosi might stay on as House minority leader.
eric seiger
BR: Eloquent, insightful, lucid — why on earth would the filter catch this? Its the perfect comment !
markpmc Says:
October 6th, 2010 at 5:24 pm
the title reminds me of the question greg maddux asked a rookie pitcher.
“You trying to throw strikes or get people out?”
Liquidity Trader Says:
October 6th, 2010 at 5:27 pm
ahab,
The comment was from a traders perspective — it went right over your head.
Not only do you impose your politics on a non-political post, you completely misunderstand it. And to magnify your foolishness, you are rude to our host in a way that reveals you to be a much bigger asshole than I previously imagined.
This site is not for people like you — its for serious asset types. Try one of the Austrians sites,or ZH — they don’t care about making money.
mbelardes Says:
October 6th, 2010 at 5:42 pm
After reading through the comments (I rarely see BR this active on the comments, by the way) I’ve come to the conlcusion that some of the commenters are here to learn about macro perspectives and data analysis as a part of money management and some are here to root against the money management sector altogether.
This is why some of the posts where BR criticizes the market and market participants, such as firms and regulators, are so wildly popular and some of the sweet charts and data analysis get MAYBE a few dozen comments.
JasRas Says:
October 6th, 2010 at 6:11 pm
I’m in the makin’ money business, and frankly this isn’t that hard!! Right or wrong, the Fed and other CB’s are doing some version of QE, monetary expansion, etc… My basic view is dollars are worth less and other things are worth more…other things mean stocks, commodities–including precious metals, etc. Things that promise to return your dollars at a latter date in exchange for a predictable cash flow (ie. fixed income) mean you are getting dollars back later at an unknown deflated value. The cash flow paid in no way is compensating you for that lost buying power. Now, you say, there is no inflation! Look at the CPI. Well….if you believe stats compiled by the government, good luck to you because assets that perform well in inflationary environments are doing well. What amount is inflation and what amount is debasement is not for me to figure out or care….
Are we short term over bought? In all probability, yes. Is this market obliging people and “letting them in”? NO! My experience with rallies that “won’t let you in” is that they’ve got a ways to go. With so many institutional types underperforming, you are witnessing a rally most likely driven by career risk. But, again, the why is somewhat irrelevant. Are you going to watch, or are you going to participate? Are you long? Are you long enough?
The interesting thing I see is the TNX is still hitting record low yields on the 10yr… Someone is going to be wrong, and in a big way because these rubberbands only stretch sooooo far. Is it stocks or is it fixed? One could argue that both are overbought right now. Gold too for that matter. Something somewhere is going to take a breather. Which do you want to be wrong on. You want to top-tick fixed income? Gold? Or a stock market that still isn’t up to the April highs? I can tell you which one is easiest to get forgiveness for…equities.
Good luck to all.
davver Says:
October 6th, 2010 at 6:22 pm
Barry,
The essential problem is how one is supposed to own assets they know are overpriced. If you believe equities are overpriced then you are playing a greater fools game. How are you to know when you aren’t the greatest fool?
“BTW, just because you are making money in other sectors, does not mean you CANNOT make money in equities.
Making money in Gold or Bonds (ala my pal David Rosenberg) does not excuse missing a HUGE Equity rally.”
Can’t you say the same thing about every bubble? Shouldn’t I have been flipping houses from 2003-2005. Shouldn’t you have been buying and then selling tech 1998-2000. The truth is you have no clue when a bubble is going to end. You could just as easily have seen the housing bubble or tech bubble end earlier or later then it did. There is no rationality to a bubble. Prices simply get more and more insane until they don’t anymore. They seem just as insane the whole way through. You can’t say you have some magic insight as to pinpoint when the insanity will stop.
Look, I use technical investing and other indicators to try and pick my buy and sell points. But I buy things I think have good fundamentals and I sell them when I think they don’t anymore. The technical stuff just helps me pick specific entry/exit points on things I already feel good about. I don’t run out and buy assets I think are crap because some chart or sentiment indicator or gut feel makes me.
When I was younger I put myself through college playing poker, which I feel is very similar to investing. I was a pretty conservative player. I read up on Sklansky, analyzed my hands logically, and played very mathematically. I was aggressive but didn’t naked bluff often just enough to keep people off balance and steal some pots. I was careful never to get too deep into a hand that was trouble. It was reliable profit.
Some people are successful a very different way. They are extremely hyper aggressive and bluff constantly. They rely almost entirely on reading their opponent with little regard for their own cards. I’m sure that there are many people with a similar talent for trading financial instruments. They have a read on the tape. They can make money that way. However, like poker there are many people who think they can do that and can’t for every one that can. In fact I’d say its less likely in investing, as the sample size on investments is too small and the complexity too great.
If you truly think you have the talent to pick the bottom and top of every single investment trend then congratulations. Me, I’ve got to be more humble. I’ve got to focus on things I understand and have a track record of success with. I’d rather stay away from things I consider dangerous that I don’t understand. So I don’t think its wrong to chase every single bubble. Like Rosenburg I’ve made decent profits in gold and bonds. And I didn’t lose any on the way down for equities, in fact I captured about half of the down leg as a short before covering. Maybe I didn’t quintuple my money, but I’ve done rather well, and with a very low amount of risk in my mind.
DiggidyDan Says:
October 6th, 2010 at 6:22 pm
I’m just glad after liquidating a lot of my positions from the stock market due to not believing the economic recovery was sustainable, I kept my basic core holdings in stocks i still believed in that pay good dividends and have constant demand such as ADM, BDX, BHP, CVX, GSK, JNJ, MMM, SCCO(formerly PCU YEAH COPPER!) and UL. and halved the rest of the stuff between long term TIPS Bond funds (LTPZ and PRRRX) and an emergency fund in 3% yield MM account. Only problem is I had a couple unforseen blowups in BP and BAX due to non market catastrophes that stopped me out and cost me some big coin. I haven’t made much money over the last 3 years, but I haven’t lost any and I have beat the S&P 500.
Only problem is, I lost 60 Large in the housing market and can’t refi at these low rates and took a pay cut.
call me ahab Says:
October 6th, 2010 at 6:23 pm
“This site is not for people like you — its for serious asset types”
laughable (and so full of self importance)- also you may want to consider a career in blog enforcement(as if BR can’t take care of himself)-
also- where are my politics? Where were they mentioned in this thread?
I guess you must have mind melded me from across your keyboard (and my guess is you still got it wrong)
Mark E Hoffer Says:
October 6th, 2010 at 6:26 pm
“Regardless of how the rally concludes, the folks who missed an 85% generational run up in equities will pound their chests and say “See, we told you so!” And they will have made absolutely no money in the process.”–BR, above
BR,
‘Equities’ are the ‘only investment’?
why not run some DOW/Gold, or DOW/Silver, Charts to go with that?
as Boockvar, rightly, was pointing out, recently, the SPX/CRBRIND, after the “strongest one-month Equity Rally since ’39″, is nearly 1 ..
Hey, you’re better than that…
call me ahab Says:
October 6th, 2010 at 6:30 pm
I ask:
“what happens if the Fed doesn’t or is unable to oblige?”
BR replies:
“Then you sell.”
I was looking for something more thorough (in a macro sense)- but I like this answer just on brevity alone
gman Says:
October 6th, 2010 at 6:59 pm
Venn,
I may use that rant in the near future…maybe at my firm…to the only person who is a “tea-party fellow traveler”…who also just happens to be the only trader of the 9 we have who is struggling!
Well put!
Andy T Says:
October 6th, 2010 at 7:03 pm
Boo-Yah Barry!
GYSC Says:
October 6th, 2010 at 7:10 pm
Barry,
I appreciate you taking the time to post this and answer all the comments. I think I see better know how you look at things.
Andy T Says:
October 6th, 2010 at 7:17 pm
It’s actually a good post BR. It does come across a little bit like “chest-thumping,” but sometimes the black and white pixels come across in a different way than the voice/tone in the head. We’ve all come across the wrong way in the written word.
With that said, I think the S&P will trade below 900 before 12/31/2011. I’d take some friendly side-action on that proposition bet.
rootless Says:
October 6th, 2010 at 7:21 pm
Barry,
We made money from March 09 til April 2010. Since then, we have mostly avoided losing money. Its been a good strategy.
Well, good. I haven’t been doing so well for recent months. But it wasn’t my fault. My trading program did it.
However, as of today, S&P500 is down only 4.7% from the peak in April. So my criticism stands. You say your approach is right, because you have made money since March 09, based on the performance mostly during the price run up. You say yourself the secular bear market has still to find its bottom. Right? And you think the market is overvalued based on metrics like CAPE? Then, I have to agree with some other commenter here, that you are playing the greater fool game. And, in addition to that, you ridicule the ones who are grumpy about it and don’t want to play along and have therefore “missed a 85% generational run up”. You basically say that everyone who participates in this game could have made huge profits. But this logic is flawed. A greater fool game can’t work and won’t have worked for everyone who has participated, after everything is said and done. It only works for some, the ones who are the first ones at the exits, you may belong to those, but it doesn’t work for many. It works for some because it doesn’t work for many. The gains for the ones are the losses for the other ones. The outcome this time won’t be different to the final outcome of the stock market and real estate bubble earlier this decade with misery for many. And the judgment over any investment approach will be spoken when the market cycle has come to its full closure, not based on the performance from the market lows in March 2009 to today.
Your at least implicit advice that one should do it like you have done it, if one wants to make big gains in the stock market, is actually very bad advice, even if it has worked for you.
Tom Perriello always knew it would be hard to hold his seat in Congress. The progressive Democrat from Albemarle County, Va. represents a district designed to nullify liberal votes with a wide swath of conservative countryside. He was elected in 2008, riding President Obama’s coattails to victory by just 727 votes. He does not represent a swing district--he is a committed progressive in a solidly Republican district. But unlike his Blue Dog contemporaries, Perriello has voted like a progressive for the past two years. And unlike many Blue Dogs, he might actually pull out a victory tomorrow night, even in the face of a Republican wave fueled by double-digit unemployment. The mere fact that he’s in the running is a stunning accomplishment.
I lived in Perriello’s district for eight years before moving to Washington, D.C. this summer. For mountains, majesty, and rock ‘n roll, it simply can’t be beat. But there were problems, namely persistent racial tensions, a lousy economy and politicians who perpetuated these two troubles. For all but the last two years we were represented by Virgil Goode, a conservative Republican and unabashed bigot. Years before Fox News made Islamophobia a mainstream political view, Goode was openly attacking Rep. Keith Ellison, D-Minn., on the grounds that he was – gasp!—a Muslim. Goode cruised to re-election every cycle, easily surviving the 2006 Democratic wave, despite being a Bush-backing war-monger in a year when voters were rejecting both Bush and his war in Iraq.
I lived in Charlottesville, a tiny outcropping of progressive politics at the northern tip of the Fifth District. From Charlottesville, the district fans out directly to the rural south, extending all the way to the North Carolina border. It’s a two-and-a-half hour drive straight south from Charlottesville to Danville, three hours southwest to Collinsville or southeast to Brunswick. All four towns are in the same district. Just 40,000 people live in Charlottesville—120,000 if you include Albemarle County (which is not as progressive as “the city”). But the district as a whole includes nearly 650,000 people, most of it tiny towns and farmland, and most of its inhabitants Republicans. Jerry Falwell’s right-wing conservative Christian enclave Liberty University is smack in the middle of Perriello country.
Conventional wisdom dictates that Democratic politicians in such districts vote like Republicans. Otherwise, a Republican runs against you, points out that you’re not a Republican, and beats you.
But Perriello decided to take a different tack when he was elected. Instead of capitulating to policies and votes he didn’t believe in, he would do what he thought was right, and make an aggressive case to voters that he was, in fact, right.
On every major vote in the past two years, Perriello voted with progressives, at times even voting against President Obama on the grounds that his policies were not progressive enough. He voted for healthcare reform and the stimulus package, but he voted against Wall Street reform because it didn’t hit the big banks hard enough, and he voted against disbursing the second round of bailout money to the banks (he wasn’t in office when the bank bailout was approved).
He never apologized for these votes or caved to right-wing rhetorical frames, and he hit the road to campaign on his record, explaining his positions directly to voters. This was old-school campaigning, and it wasn’t glamorous—trekking from Danville to Martinsville to Charlottesville every week, making speeches, shaking hands and answering questions in town-hall meetings. But Perriello is not your standard politician waiting for a cushy lobbyist job. He has a deep background in social justice work—he’s in Congress because he wants to make a difference, not to score a sweet paycheck.
All of that campaigning has paid off. Voters are pissed off this year. They’ve watched Wall Street profits soar on the back of a taxpayer-financed bailout, even as ordinary Americans have been laid off by the millions. Whether Republicans take control of the House tomorrow night or not, they will certainly make big gains as voters reject policymakers who cater to big banks while failing to tackle the jobs problem—either out of political cowardice or ideological blindness.
But Perriello is holding even with Republican challenger Robert Hurt. The fact that Perriello even has a chance in this election ought to be viewed as something of a miracle. Or maybe it’s just good governing, combined with good politics.
Tim Fernholz almost gets it right in his profile of Perriello for The American Prospect. But he misses the mark with this comment, which is going to be echoed by the Beltway establishment on Wednesday morning, however the race turns out:
“If Perriello can beat the odds tomorrow, it is not only his reputation, and the president's, that will be burnished . . . . Should he lose, the voices who call for a more timid Democratic Party will have a point in their favor.”
This is wrong. Perriello won in 2008 by just 727 votes. Any Democrat who entered office by so slim a margin is almost certain to lose this year. By any conventional political analysis, Perriello should be getting trounced He faces a massive voter registration disadvantage, representing a district that is designed to crush progressive voices during what is expected to be a wave election for Republicans, amid strong anti-incumbent attitudes sparked by high unemployment. But he’s holding even. That’s incredible. Even if things go well for Democrats tomorrow, and they hold the House, candidates in much safer districts than Perreillo’s are going to lose.
The Perriello lesson, in other words, is already clear. Whether he wins or loses on November 2, having the courage to govern by his convictions and do real work to sell those policies has paid off. It might not get him re-elected. But in an all-but-impossible district, losing close sends a clear signal to actual swing districts. Governing like a pretend-Republican only reinforces the Republican world-view and aligns voters against you. If you want to have a chance, you have to stand for something. Tom Perriello stood for something these past two years, and even if it can’t overcome a terrible economy to win him two more years, the political establishment should take heart.
eric seiger
eric seiger
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Great, great news: Pelosi might stay on as House minority leader.
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Great, great news: Pelosi might stay on as House minority leader.
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Great, great <b>news</b>: Pelosi might stay on as House minority leader <b>...</b>
Great, great news: Pelosi might stay on as House minority leader.
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Great, great <b>news</b>: Pelosi might stay on as House minority leader <b>...</b>
Great, great news: Pelosi might stay on as House minority leader.
eric seiger eric seiger
eric seiger
eric seiger
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Great, great <b>news</b>: Pelosi might stay on as House minority leader <b>...</b>
Great, great news: Pelosi might stay on as House minority leader.
big seminar 14
Last summer, before I took full advantage of the benefits provided by e-mail filtering and multiple accounts, I was getting a ton of daily SPAM (I still get a ton of SPAM, only now it goes where it should: into its own dedicated e-mail account). Much of this unsolicited e-mail had to do with achieving wealth over the internet, usually effortlessly - a concept I had always summarily dismissed. But one day, all booted up with no place to go, I decided to take a trip into internet money-making land just to see where it would lead. Though I can identify, and know the pitfalls of a sexy come-on when I read one, I've never been averse to making money. So I set out on a crash course of making money online, starting with Google. I entered that exact phrase, "making money online", and got some 15 million results. Wow, I thought. Either I wasn’t the only one with time on my hands, or something about this concept was sucking people in. Eventually, I would click my way to an online world that I had no clue even existed. And I spend a lot of time online.
In the days and months that followed, I became intrigued with one online money making venture that had gained phenomenonal popularity: HYIPs, or “High Yield Investment Plans”. In retrospect, HYIPs had probably reached their peak right about the time I learned of them. Chances are you're familiar with the phrase, "High Yield Investment Plan." Perhaps you've seen it while skimming a prospectus or some other form of investment literature. For the record, legitimate high yield, short term investments do exist, and they are a totally different animal from what I'm talking about.
HYIPs - the acronym is pronounced, ironically, just the way you think - are tailor-made for our Right Here, Right Now generation. That's right. One of the many things the World Wide Web has brought us is the expectation of instant access. We want our information, our relationships, and our wealth at the click of a mouse. HYIPs provide this immediacy by giving you the ability to watch your money grow exponentially, incredibly, and even better, daily - online.
That is, assuming everything goes according to plan. Frequently it does not, however, and that's when many a starry eyed wealth builder runs into trouble. Fortunately, I happen to be more parts cynic than idealist, so it didn’t take a great deal of sleuthing to find that these are essentially thinly disguised ponzi schemes - which, according to the Federal Trade Commission and the Securities and Exchange Commission, are illegal.
Simply by virtue of the way they are structured, even the best run ponzis are destined to fail because in order for someone to win, someone else has to lose. It is also important to note that the fact that there may or may not be deception involved about the nature of a ponzi (false claims of investing in goods or services) makes it no less illegal.
Step right up...
The infamous scheme named after Carlo Ponzi was first launched in 1920 to great success. Brilliant in its simplicity, it worked on a simple premise: get people to invest in a nonexistent product or service, promise an outrageous return after a specified number of days or weeks, and use the money from new investors to pay off old investors who cash out. Ponzi’s plan did have one fatal flaw, though. When new money stopped coming in at a rate sufficient to pay out people who wanted to withdraw, the cycle collapsed. This was inevitable, for the simple reason that no investment vehicle can have a steady inflow of new investors forever; if for no other reason than the fact that the Earth's population is not infinite. But here's a funny thing about human nature: Where money is involved, it is not highly unusual to see ethics and common sense take a flying leap. What this means is that people may be aware that they are building their dreams on a house of cards, but will tend to ignore that fact and take their chances until they’ve been burned themselves.
This is the reason countless variations of Ponzi's scheme have been able to proliferate for nearly a century after his death. From day one, there has never been any shortage of dreamers and schemers in the world. And conveniently, the World Wide Web has given them all one huge playground in which to romp.
The blueprint...
The way a HYIP works is as follows: Using an online payment processor, you make a “spend”, or a deposit, into the plan of your choice. Generally, there will be a variety of plans, all displayed on the home page of the program (In November 2005, a typical HYIP offered plans ranging from 35% profit after four days, to 450% or more after 10 days). After your plan has matured, you have the choice of either withdrawing the money or rolling it over into another plan. By the way, if you are thinking four or 10 days is a very short time for an investment, I want to reiterate that there are no similarities between the way a HYIP operates and the way a stock, mutual fund, or certificate of deposit does, so throw out that whole paradigm. The only common element is that with all of them, you hope to eventually take more money out than you put in.
The potential returns are mind boggling. Enough to make many take the plunge, ponzi or not.
HYIPs are run by an administrator, or “Admin“. This would be anyone who woke up one morning, bought a template, or script off the web, and decided to start one up. The lifespan of a HYIP can range anywhere from a few hours to several months, depending upon how quickly it runs into problems. The main reason for the demise of a HYIP is always money. Because they act on Ponzi’s Principle, once the withdrawals start exceeding deposits, you can kiss the program goodbye, along with your money.
Also, since these are businesses run almost exclusively over the Internet, other problems can come into play that don’t even involve a faulty business model. Databases can be hacked, money stolen. More than one HYIP has been permanently disabled when the admin’s payment processor account - the one that holds all the money - was emptied because a security vulnerability in the script was exploited. Or so many an admin has claimed. The hacker alibi has been used so often as the reason for a HYIP’s demise that members have reasonably speculated as to whether or not an Admin simply ran off with all the cash before it had a chance to die of its own accord. And members have also had the unpleasant experience of discovering their own payment processor accounts were hacked. You can never be certain as to why a HYIP collapses, just that it will.
Trust me...
Admins frequently make posts on message and discussion boards devoted to the subject of online investing, and, early in a program, will work to gain the trust of online speculators by cultivating an image of accessibility, honesty, and program transparency. They encourage people to make spends into programs they have just started. An admin may have other people assisting her in this regard, people who will regularly make posts about how excellent the program is and attesting to the admin’s good character. Recently, many HYIPs have attempted an image makeover: they now define themselves as “games” or "programs" rather than investments. You are a “member” making a “spend” into said “game” or "program". There are a couple of reasons for this: 1) The Securities and Exchange Commission requires that one have a license to sell securities and generally speaking, HYIP administrators do not. A typical admin may never have even bought a share of stock in his life, let alone possessed a Series 7 license. An admin could be your barber, your babysitter, or a barber or babysitter in another country. 2) By stating that it is a game, this supposedly eliminates the obligation on an admin’s part to disclose how your money is being “invested” (Some still, however, will claim that at least a portion of member spends are being invested in the forex market, though I have not found a single instance where that could be verified). Again, such simplistic nods to disclosure do not provide a safe haven for these schemes under the law. "Robbing Peter to pay Paul" is not a legally viable foundation upon which to build a business.
If you wander to the discussion board of any HYIP - and there are hundreds of them, though decidedly fewer than just six months ago - chances are you will find several lively threads debating the merits of “xyz HYIP” and whether or not the Admin is a scamster. This discussion becomes most lively when payments start to slow, as that is a clear indication that the clock is running out on that program. But sometimes there is no forewarning at all; the program just vanishes. You find out by reading an apologetic note posted on the website by the admin: “Sorry. Hackers kept getting in my back office. I tried to keep this going as long as I could…” or something equally succinct.
Occasionally, there will also be a promise to refund those who had active spends or were due money when the program ended. Then again, sometimes there won't, and you will never "see" that admin on the internet again, at least under the same handle. In the end it doesn’t matter, though, because even if promises were made, they will likely not be kept. Assuming the admin didn’t outright rip everyone off and, indeed, could be trusted, the program ran out of money because that's what happens. As a result, there are better-than-average odds that you will never see a refund of any money you lost. Seriously. If you think I’m being redundant, I could point you right now to discussion boards of HYIPs that folded months ago, and you will find people posting who still believe they will be paid. They are believers, and anyone who disagrees is, to them, a naysayer. Can I get an Amen dot com?
Stuff happens?
If you got burned by a HYIP, then chances are your feelings are, Darn tootin’ it was a Ponzi, and the admin is a bleeping thief (I‘ve cleaned up your feelings for you). You might even be kicking yourself for being so greedy or naïve and have taken a blood oath to stick to Certificates of Deposit from now on. 3% a year may not be much, but you don’t have to worry about the bank president stealing it out of your account and running away to Cancun.
On the other hand, if you think you lost money because you had bad timing, or bad luck, or Mercury was in retrograde; if you believed in the admin, or if you happened to actually be in the money at the time the HYIP went under; if you are convinced that, despite the outcome, the admin ran an excellent program, and he was a stand-up guy... well, I can guarantee you that there is an admin out there right now hoping that you’ll visit her website. And you might want to do that soon, because, as I write this, internet schemes are being investigated with unprecedented vigor by the SEC, and in several cases, the FBI. The outcome of it all will undoubtedly influence how the "game" is played in the future, or if indeed, it will be played at all. Stay tuned.
eric seiger
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