Business

Monday Meltdown – Emergency Measure in China, Greece Who?

Prestidigitation.

It’s a skill or cleverness in deceiving others, usually by hand and who know what invisible hand is playing cups and balls with Global Economies these days? We are simply lurching from crisis to crisis this summer in a state of constant distraction when the answer to your investing problems is really quite simple – DON’T PLAY!!!

Monday Meltdown – Emergency Measure in China, Greece Who?

It’s a rigged game and they keep changing the rules but you don’t even have access to real information – not when the Mainstream Media you rely upon for your information tells you that the Greek vote will be “close” or favors remaining in the Euro when it ends up going 60% against – that’s not even within the margin of polling error – therefore, the polls are either faulty or simply lying to you to get you to invest contrary to the true facts.

The same thing is going on in China, where EXTREME measures are being taken to prop up the market. This weekend, IPOs have been halted in China and the PBOC announced it will provide liquidity to China Securities Finance Corp, who manage the nation’s short-selling and margin trading and Central Huijin Investments (a unit of China’s Sovereign Wealth Fund) began buying China ETFs to stem the outflows from their market.

China
China

That was just today’s action! Last week we already had: A PBOC rate cut, cut in reserve requirements, state pension funds investing in more stocks, lowering brokers fees, relaxation of margin rules allowing clients with “insufficient collateral” to hold onto their positions, bond issuances by brokers, more reduced tradijng fees, even lower margin requirements, regulators threatening to “punish” short-sellers, a meeting to discuss halting all trading in large-cap companies on ChiNext, raising the cost of Futures trading (to stop shorting), more short-selling suspensions, $19.3Bn from brokers to prop up the market and, on Saturday, 25 mutual funds jointly stated they will “actively buy stock funds and hold them for a year.”

This is EXACTLY what they mean when they say “rearranging deck chairs on the Titanic” and what stikes me about my recent conversations with investors is that they keep asking me how they should play this catatrophe which ranges, to me, from “what part of the ship do you think I should get a cabin in” to “how can I make money betting on how many poor people will drown?” You know folks, sometimes the right thing to do is NOT TO PLAY! That’s something I’ve been preaching since May.

There’s a lot to be said for simply staying on dry land and holding on to our CASH!! and waiting to see how things unfold, rather than trying to dive in and sqeeze dimes out of a catastrophe. Hey, I’m all for taking advantage of any market opportunity, even the occasional tragedy – but we are being actively LIED TO by the MSM and it makes it hard to get good, reliable information that would let us make sensible, intelligent bets – so we’re better off not playing than guessing, aren’t we?

We already did make our bets by getting aggressively short in the Short-Term Portfolio , which closed Friday up 161.2% and should be up again today. The only short in our Long-Term Portfolio, which is only 20% invested now, is an aggressive one on China and of course we have aggressive short plays on China and Japan in our Short-Term Portfolio, as well as short positions on the S&P, Nasdaq and Russell and we’re also short oil. Our biggest mistake, so far, is long bets on gold and silver but we’ll see if they don’t come around as well.

So we’re happy with our current stance – why mess around? The whole idea to being prepared for a tragedy is we get to relax and enjoy ourselves when the tragedy actually happens. This is a time to sit back, relax and now we can take some of our short-side profits off the table while we wait and see how this little drama unfolds.

Of course they will still try to fix Greece and of course China will keep doing whatever they can think of to prop up their markets – we’re now more concerned with what happens if those things don’t work because we already won our bet that this stuff would hit the markets (though it took longer than we thought it would for all these obvious, to us, things to begin to have an effect).

Also, now we’re running right into earnings season and I don’t think investors are going to be quite as quick to excuse bad numbers as they have been for the past few quarters as we pumped companies with weak earnings and little or no profits up to record highs. Another thing Buffet likes to say is “If you buy things you don’t need, soon you will have to sell the things you do need.” We don’t NEED more short positions – I think I made our short position VERY CLEAR this past couple of months. What we do need now is some fresh trees to plant so, when there’s blood on the streets, we’ll have our wallets out.

IN PROGRESS

Provided courtesy of Phil’s Stock World.

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