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Egypt, the Stock Market and……Yoga

Mubarak before getting into his disguise

Mubarak in disguise as he slips out of the country

I feel compelled to write a blog about the events of the day. I assume I will be one of the multitudes of individual’s blogging about Egypt, the stock market, and yoga in a single blog. Let us begin with Egypt. Incredible, Fascinating, Mesmerizing. Look I am actually loving the fact that we are on the verge of real change in the middle east. But here is the crazy thing. It wasn’t Hillary Clinton, President Obama, Former president George Bush or 2009 senate maj. Leader George Mitchell who brought about this monumental change. Who do we have to thank for what seems to be the beginning of the end of Islamic fundamentalism? Not very surprising, Jack Dorsey – Twitter founder, a St. Louis Missouri kid who went to NYU and has changed how we communicate. Not very surprising, Mark Zuckerberg – A Jewish kid from White Plains, NY who went to Harvard, created Facebook and changed how we socialize. Definitely not surprising, Steve Jobs, the da Vinci of our generation for creating the tools by which we communicate and socialize. And yes, let us not forget to thank Al Gore for inventing the Internet. These are the true revolutionaries, sans Al Gore, who when all

Tapas in the Stock Market

the dust settles and a real democracy exists in Egypt, deserve Nobel peace prizes. Al Gore already has one. The Internet has changed our lives forever; we are still at the beginning stage of understanding just what that means. Yoga has taught me to live in the moment, to be present. As we watch these momentous days unfold, it is best not to fear the future, but to embrace the change optimistically. While he was not a yogi to the best of my knowledge, our 16th president Abraham Lincoln wisely said, “The best thing about the future is that it comes one day at a time.” Now I am not suggesting that violence and rioting are good things, but change very often is a great thing. Real change such as we are hearing in the voices of the Egyptian populous is revolutionary, it is evolutionary. And it has been driven by the genius of the aforementioned innovators. The most devastating blow the Mubarak government has thrown was not tear gas and rubber bullets; it was shutting down the Internet. It was also the final nail in their coffin. A starving man will kill to eat. A repressed society will revolt for enlightenment.  No revolutionary moment has come without a price to be paid; there is no success

without sacrifice. Yogic scripture refers to this sacrifice as Tapas. It is the suffering and pain we must go through for self-purification. Today was a Tapas day for the stock market. There may be a few more to come or not. We will have to wait for Monday to see if there is more Tapas to come. But what we saw today was healthy. We had approached a psychological level in the market. 1300 on the S&P is not a level to be taken lightly. Nor is 12000 on the Dow. We were not going to just glide through these levels. We need to blast through them when the time comes. And we needed a catalyst to sell off from the levels. But now is a time to breathe. Perhaps we need to pull back a bit more. But not much. What we need to do is rest. Observe the world around us and take stock of our current situation. Monday is month end. I do not expect much as funds will neither want to paint the tape to inflate returns, nor will they want to see much more damage done to the strong returns of the opening month of 2011. As the saying goes in the market “So goes January, so goes the year”. We are still in a bull market, but that doesn’t mean you have to be net

Breath of a Trader

long. It does not mean you buy every pull back. I expect a couple of weeks of stagnation and then a real attempt at breaking the psychological barriers in the market. Make sure you are long the market when that moment arrives. Until then, remember what Andrea Boydston famously said, “If you woke up breathing, congratulations! You have another chance.”

VXX: In the midst of Reversing Course

I wanted to follow up with a blog about VXX after Erik K. blogged about a bounce in the VIX earlier this week.  With investors/traders selling into the strength in Apple earnings today and the cloud names getting demolished after the close there is alot of uncertainty in the market and today’s bounce in the VXX could be just the beginning of a month long bounce.

As you can see on the chart the RSI is trading around 20 and we have had substantial bounces from these levels in the past.  The RSI coupled with the fundamentals and current sentiment is giving me confirmation that the VXX is ready to reverse course.

Bonus Season - Wise Advice from Tom Bernard, The Human Pirahnha and Pappa Bull

Bonus Season - Remember what the Papa Bull Said

Bonus Season - All those lucious grazing cows

My first Wall Street year-end was 1990, 21 years ago. I was a grunt on the Kidder Peabody High Yield (Junk Bond) trading desk. I worked for the iconic Tom (The Human Piranha) Bernard. I was 22 years old. My base salary was $18,000. I had been on the trading floor less than 6 months. My bonus was zero. Nothing, but a few pearls of wisdom from my fearless leader. After sensing my frustration during my year-end review, Tom closed my file and sat back in his chair. He was younger than I am today, 39 maybe 40 at most, but wise beyond his years. He told me a story. He told me that there was once this Father Bull and Son Bull taking a stroll on the top of a mountain overlooking a canyon filled with grazing cows. For those who don’t know this as Bernard found it necessary to explain to me, “Cows” are Female Bulls. Male Bulls are just “Bulls”. As the story goes, the Son Bull got very excited when he saw the canyon filled with these luscious cows. He turned to the Papa Bull and said “Dad, Dad…lets run down there, nosing in the direction of the

Bonus Season - "F" em all

eutherian harem, grab one of those cows and have sex with her.” “Let’s go, lets go, come on Papa.” Bernard paused for a moment; letting the young bull’s words sink in.  The Papa bull slowly turned to his son and looked him straight in the eye, “Patience my son, patience”…..”Why don’t we walk down this mountain and f*** them all”. Then silence. Bernard looked me straight in the eyes as he leaned forward over his desk. “Do you understand the f***ing story?” he asked. “Yes” I said, dead seriously, “I understand the f***ing story”. He was quite brilliant. Silence followed for a moment. I got up, shook his hand, ready to return to the trading floor and get my head back in the game. “Hey”, he called to me as I began to open the door to his glass office dubbed the “fish bowl”, at the far end of the trading floor. “Keep working hard and stay focused, maybe you wont be disappointed next year.”

He was right, too right.  Bonuses on Wall Street are a conundrum wrapped in an enigma. The next year I got a nice bonus.  And yes I wasn’t “disappointed”, but I wasn’t ecstatic either. Bonuses are meant to achieve a balance in your mind, often referred to as “satisfaction”. Satisfaction that you make more money than you ever thought you would but not as much as you now want. Satisfaction that the number you received was somewhere between the low end of your expectations and the high end, and you wont have to start looking for another job. Bonuses are also meant to give you a taste but not the full treat. They are meant to get you hooked. They are like a drug that gets you high but leaves you wanting more, needing more. Six months after you get your bonus, you are meant to have somehow elevated your life style, and increased your expenses such, that as you count down the next six months you work your ass off praying and hoping for a bigger bonus than the previous year, only to repeat the entire emotional process again and again.

Bonus Season - It is an addictive drug

There were year-ends of famine and year-ends of feast over the last 21 years. Such is the nature of a career on Wall Street, finance or trading. Even if your career is not structured around a year-end bonus, the last week of December is still a period of annual “career self reflection”. “What was my total take for the year?”, “How much better or worse did I do year over year?”, and “How am I going to make more money next year?”. During your early days, you try to gauge what you think you are getting by consensus. While it is taboo on wall street to discuss your actual bonus with anyone other than your manager, it is vey common to discuss bonuses as a concept with just about everyone under the sun, or at least on the trading floor. “What are you hearing? Up or down year over year.” “I heard there hitting the new guys first but they cant do anything about all the guarantee, so we are getting screwed”. Some of my favorites were, “look, we had a good year, but we have to make up for some of the groups that didn’t, we are a team”. I am not sure I knew which group we were making up for, let alone anyone’s name.  My other favorite was, “look, expect the worst and no matter what you will be happy.” What the f*** did that mean? Jesus, it was like water torture in the month leading up to bonus. Should I expect cancer my whole life and when I die of heart attack, be happy?” In the final week certain people would get told their bonuses before other, and then the rumors would start. “Did u hear that so and so trading desk was paid down 20%?” Or “I heard so and so desk really got fucked, they are all


Bonus Season - This drug will help value yourself

downstairs drinking and putting together resumes”. Occasionally you would actually have a random trader crack, and see him kicking in stall doors in the men’s room. The worst though is when you saw someone who you knew was just told their comp and he was F’n smiling. You felt like ripping out his gullet. You see, traders were told there was a finite pool for bonuses, and any body smiling before you had gotten comped could only have taken money out of your pocket.  The whole process was structured such that when the moment finally arrived when you were to be told your bonus, your expectations had been lowered so severely, that the best you are hoping for is not to have to hit the men’s room in the middle of your review, because your stomach gives out. As you get older you are plagued by other questions. “Are my best years behind me?”, “What did I do to screw things up?” , “Why cant I be the guy who makes 1 million?” or “Why cant I be the guy who makes 10 million.” This whole process that begins as early as November is commonly referred to on Wall Street as, bonus messaging. It is both a science and art that has been practiced by management for centuries.

This year is different for me in a number of ways. It is the first year in a long time that I have not worked for an institutional firm and I am not getting a bonus. It is the first year in a long time that I am not being reviewed by a manager. But it is actually one of the most difficult bonus seasons I have faced in quite a long time. I am on my own. I will live or die by my own sword. There is no bonus for me this year, and there may not be any for many years to come. I continue to plow money into the business I started a year ago. I am investing in the journey, and there is no promise of a bonus or reward at the end…..Yes, I no longer will measure myself by “year end”. I have finally broken myself of “Bonus fever.” I will not suffer the year end “self worth affliction.” After 21 years of the December “money malady”, I see December no different than January or February. Each day I keep my business running and stay alive to fight another day is my bonus. The journey itself has become my reward, and I am looking inward for self worth. Management no longer will judge me, but I will weigh in on my own value. My “Self” will review my “Ego” and while the “Ego” may never be satisfied as I am sure it never has been in previous years. My “Self” will be much better off and has learned to have no expectations. That is my bonus.

Yes, year-end and the holiday season are about peace on earth and all that other stuff. But unfortunately for those particular demented species known as Wall- Streeters, bankers and traders, it is about money and self worth and then maybe peace on earth. So during this time of holiday cheer, try to remember the Papa Bull’s lesson.

My personal Bonus season message, is ignore the “Ego”, focus on the “Self” and try to enjoy the Journey…..Oh yeah, Peace on Earth too.

Bonus Season - Peace on Earth and may the Bull run free

Trader Rehab: Trying To Control My Bull Market Gorging

Dr. Schwartz at Trader Rehab

Dr. Guterman at Trader Rehab

Dr. Machado at Trader Rehab

Take them up. The S&P cash should move up another 3 – 5 from here, over next couple of days and then rest or more likely test the 1212 level before another few gaps take it close to my predicted 1275 year end close.  It May even test the 1212 level today. So take advantage of the pullbacks on single points of data that do not impact the long-term trends. They have moved up for the past week because the majority of you believed they shouldn’t. The market will contradict the masses at the start of bull market cycles. It is part of a process to clean out the shorts. Expect to hear the Einhorn type disciples to start beating their chests harder as they declare we are still on the brink of a disaster, though they cannot explain why. In bull markets, emotional trading shifts to the Bears. The media will flip flop everyday. Bulls, Bears, Bulls, Bears until some senior producer gives some concrete direction to the mass of talking head reporters and journalists.  The Bears seem to have difficulty articulating their positions. No different than a Bull like me did in Bear markets. But my days in trader rehab have helped me see things more clearly. For a long

time, I looked in the mirror and saw the bull staring back at me. I couldn’t clearly see the market or myself. I found myself gorging on the Bull

mentality, and then puking my positions. But I am getting better now. I can see myself for what I am. I am an optimist, working on becoming more of a realist. And I am more comfortable with my beliefs and market calls.  My advice is to buy a bit here, but save your firepower for what should still be one more small pullback. That said, those with a longer time horizon should have no fear and continue to add to their positions, as I believe this will be a long cycle of equity appreciation. As they let me out of Rehab on weekends, I plan on spending time with my family, take my kids to see “Mega Mind”, my wife to a nice dinner and finishing a book I just began by Phillip Pullman called: “Jesus And The Scoundrel Christ”. It is a fascinating book. I want to send a special thanks to Dr. Machado, Dr. Schwartz, and Dr. Guterman for their hard work on me this week. The treatments seem to be working and I am thankful for letting me out this weekend. I will return to the institution Monday morning and continue My treatments with the wonderful staff at Hedge Fund Live’s Trader Rehab.

I look in the mirror and see the bull staring back at me

S&P 500 Futures Performance During Hannukah

How To Solve The Sovereign Debt Crisis: Pass The Hot Potato….Again


A short Friday and we trade down nearly 100 points in the Dow. Is Portugal bankrupt? Is Spain Bankrupt? Probably the same way your neighbor down the block or in the next-door apartment is. If my expenses exceed my revenues for too long I will be bankrupt too. Perhaps I can get someone to bail me out….finance me. But when they take a look at my kid’s tuition bills, my utilities bills and mortgage, the potential financiers will exact such a pound of flesh that it will take decades for me too get back on my feet. But it doesn’t matter. Ultimately the Financing will be there, and statistically I will get back on my feet, it is all part of the human condition…..suffer, prevail, suffer more, prevail again.  Therefore, there will always be someone or some group that is willing to take the risk for the appropriate reward, and as history has taught us, most recently with TARP, that time heals all wounds and then in financial markets, “patience leads to profits”*. Sure enough you wake up this morning and France and Germany have come to an agreement, along with other interested parties, to bail out Ireland and create a permanent facility for dealing with these issues by 2013. Credit spreads will certainly tighten and all will be good in the kingdom of Europe again. But do not perceive this to be some fantastic altruistic act on the part of particular governments and “interested parties”. It is a trade, one in which the new creditors believe one way or another it is ultimately more profitable to them to finance then to let countries go bankrupt or currencies disintegrate. Oh, sure there will be lots of blood shed and losses for some groups but others, in time, will be rewarded handsomely. That is the nature of markets and crises. It has been for all of history and it will be for the foreseeable future, until all government can figure out how to efficiently and perhaps even profitably run their countries. But if you believe in that prayer then I have a bridge I would like to sell you in downtown N.Y. Until then “The world will keep passing around the Hot Potato known as Leverage.”** We, the leveraged ones are the world’s Hot Potatos. But at the end of the day, what does that mean for your investment portfolio?  I believe that as we finally clear this European debt crisis part 2,  that volatility will start to come out of the market. I believe that the Koreans will stand down, because neither wants war, but more importantly China and the U.S.

Hot Potato

do not want the Koreans to have another war. I believe that our country is recovering and that recovery will be exponential as new industry and leaders are born out of the wreckage that was the previous decade. I am long the market in size, not because I am a gambler looking for a big payoff, but because I am a believer in this country and the triumph of the spirit……. OK, yes I am a bit of a gambler as well, and I am looking for a big Pay Day. But I still do believe in the triumph of the spirit. Pass the Hot Potato.

*(Jeremy Frommer Nov 2010)

**(Jeremy Frommer Nov 2010)

I was wrong about Friday Being an Outside Reversal. I Think I May Be Right Today.

I was wrong on Friday

Yes, I was wrong on Friday. I miscalculated the Friday impact on an outside reversal. But today is different. It is Tuesday, a day known for reversals. The S&P futures have traded nearly 5 to 6 handles below yesterdays lows in the overnight session. The S3 reversal buy pivot is 1192, a very achievable and likely level to hit and the all out break out buy signal, R4, is 1204. A strong close above 1205 would signal an outside reversal at the end of 5 difficult market days, we are in a bull market. Ireland banks will be bailed out, and China’s stock market does not dictate it hunger for commodities. Its ever-growing infrastructure requires commodities to feed the beast. It is no different than our market it indicates fear and greed. It has now experienced a nearly 10% correction, quite healthy. Once again, I called it wrong on Friday, but I think I got it right today. So once again, buckle up, buy the beaten down tech names, banks, homebuilders, and all potential takeover targets. Its going to be a wild ride.

The Stock Market Has A.D.D.

The Stock Market Has A.D.D.

While I didn’t get the outside reversal on Friday, I did get confirmation that there are real buyers in our market. The bloody sell offs, the shorts keep looking for, do not seem to materialize. And we are again set up for an extreme move to the upside having seen the overnight S&P hit the 1292 level yet again. This is fear for the sake of fear. As painful as Friday was for me, taking us negative on the month, having been strongly positive, going into the day, I have learned not to change my convictions because of what I perceive to be emotional behavioral patterns without substantive catalysts. Unfortunately I do not believe the basket of names we own can be hedged with futures barring an exogenous event. The irony is that had I left my book alone three months ago, literally not touched a single share, we would have made tremendous amounts of money. The lesson to be learned is that while trading is a proactive engagement, the market has become an environment that requires significant patience, a stomach made of steel that can absorb much pain, and finally the need to not overtrade.  Pick your names lay out your bids, hold onto core positions and do not let yourself get shaken out. There is limited momentum in the market, much reversion that requires taking risk and to some extent picking bottoms. I still look for an extreme run that takes us to new yearly highs. The breathing period I discussed a week ago did not turn out as I

Riding the bear

expected. It seems the market craves volatility instead of rest. Maybe the market is like the rest of our A.D.D. nation. We cannot sit still, even as we prepare for long journeys ahead, I can never get my kids to just sit still in the back of the car. If only I could give the market a DVD player and an Ipad, tell it sternly to relax as I start the engines and get ready for the ride. My expectation for the next 5 weeks in the market is that we will actually overshoot my 1275 level before the end of the first week of December, and then pull back to it by year-end. Buy the banks, the Homebuilders, the tech stocks that have been beaten up, and finally the rumored takeover names.

Break On Through To The Other Side

Break On Through

I ended my last blog on the morning of Nov 3rd by saying we will soon cross over 1200 on the S&P cash, and I will speak to you on the other side. We seem to have smashed through that level. It has taken nearly 2 years to get here, 2 years of pain, and millions of jobs lost. Our homes have lost value, our bills have gone up, and our children face a changed world where for the first time in many generations, the challenges they face make it improbable that the will advance beyond the achievements of their parents.

Our troops are still engaged in wars on multiple fronts. A “political shellacking” humbles our president. Our healthcare system is a mess, our educational system is deteriorating and our deficit keeps growing.

Now all this may sound odd coming from a Bull like myself, but as I have blogged about all year, I expect the S&P cash to close the year around 1275. With 7 weeks left and the S&P closing Friday at 1225, I am realistic about my expectations for the rest of the year.

So what now? We have broken through to the other side. What does it all mean? The last 2 ½ years have been a healing period. It takes time for all types of wounds to heal, from physical to emotional.

A Humbled Obama

The Financial crisis cut deep into the soul of our country. It battered our arrogance, and brought masters of the universe to their knees. It humbled us as a nation. To believe that not only could the U.S.A., one of the most powerful empires of modern civilization be brought to the brink, but that we could infect the entire global economy, is almost too much to fathom.

The march back to 1200 has been long and difficult. Many of us, including myself have not financially recovered nearly as much as the index itself. Emotionally, it will be a long time before I am able to reconcile how I too got swept away in the euphoria of the crowd. 1200 does not mean we have recovered, but it verifies that we are in the process of healing. Perhaps 1200 is like a battle wounded soldier, awakening in a recovery ward, fever finally broken. The soldier still faces a long road to recovery and may never be 100% again. Surviving a battle wound must change a soldier forever. It reveals both his vulnerability and his perseverance. We too have changed forever.

The Wounded Will Survive

Talk of a double dip recession is behind us. Fears of inflation or deflation are overblown. The media will continue to play on our emotions and our fears but in the end, the market and the country, as a whole will persevere. Over the next few weeks and months, look for the market to grind higher as I continue to hold to a 1275-year end close. But I do not expect many more extreme rallies. At least not too many left this year. Fear will still dominate the crowd mentality. I still believe you should buy the dips, but I am more likely to wait for extremes. Don’t be extreme, just play the extremes.

Break on through to the other side……..

Break On Through To The Other Side

“We chased our pleasures here

Dug our treasures there

But can you still recall

The time we cried

Break on through to the other side

Break on through to the other side”

Jim Morrison

Hedge Fund Live Comes To Westchester

Jeremy can really take a punch. I haven’t seen anyone take more hits and keep coming back for more since Chuck Wepner the “Bayonne Bleeder” got knocked upside the head by Muhammed Ali.
Time and again he would corner someone…  “Hey Tim, when are you going to post a blog”? TIm would respond, “I’m following Steve’s lead”. JEREMY: TIm,what about blocking out a time for a show and putting it on the schedule?” TIM: “I will work my way into it “.  JEREMY: Tim, if you want me to f-off just tell me.TIM: Jeremy F-off.  JEREMY: Ok TIm, but you know Steve already has a show on the schedule so maybe you want to schedule one.TIM: Ok Jeremy I will get to work on it when I have some time.  JEREMY: Great TIm ,I will be back in 10 minutes and we can work on it.      or the next one…….
JEREMY:Hi Morris, how about we video a segment with you right now? You can tell us what you think about the Sephardic perspective on trading.  MORRIS: Huh???? JEREMY: Yeah you know, give the HFL audience a chance to get to know you. MORRIS: Uh ,I don’t usually do interviews.. its not really my comfort zone.  JEREMY: Morris, just make believe your at a bar mitzvah and someone sticks a camera in front of you and you have to congratulate the family.  MORRIS: Jeremy, I have to go the bathroom.. I will be right back.JEREMY: Thats ok Morris, the stalls have doors so we can just take the audio for now and do the video afterwards and dub it in back at the home office. Tynik, work with Morris!
And on to the next one……….JEREMY:Jerry, Tim ,here’s some notepads. Every time Cliff speaks write it down. If he makes any faces videotape it. Start noticing his mannerism’s and sayings and post it in his glossary. Don’t worry about the market… Cliff is good enough to trade without you and this is how you can really provide value to him.JERRY AND TIM: Jeremy, if we do that ,he’s definitely going to fire us!!  JEREMY: No way!! he told me that this is what he wants you guys working on.
And to the next………JEREMY:Jared, good blogs.. you need to do some more and coordinate everyone elses blogs and glossaries in your room……… Jared would never say no to anyone and obliges dutifully. Jeremy moves on to Perry’s room and Jared turns to Steve his boss and asks,” Who was that?????
And the next…………JEREMY:Hey Darren, you want to work on a blog?DARREN: No! JEREMY: When do you think you can start?? DARREN: Soon as I start making some money! JEREMY:Darren ,we recently did a study of all trader bloggers and we found that trading p&l improved by 300 percent for each blog a trader wrote.DARREN: Ok ,I will try and work on one when I can focus on it. JEREMY: Darren ,if you want to tell me to f-off just say it.DARREN: F-off Jeremy. JEREMY:No, not to my face Darren just write it as part of your blog!!
And next…………JEREMY:Nice blog Jody. Now thats some good content. Great stuff. How about you Jonathon ? JONATHON:I don’t blog! JEREMY: It doesn’t have to be about stocks. Whats your favorite movie? JONATHON:I don’t go to movies!  JEREMY:How about TV shows.. do you watch Entourage? JONATHON:I don’t have cable.. JEREMY: Well, maybe network shows then. JONATHON:  No TV!   JEREMY: Jonathon, you seem kind of quiet.. do you consider yourself introverted?  JONATHON: Huh???   JEREMY: You know are you a loner….  JONATHON: Well, im not going to come to the office and go postal or anything if thats what you mean!! JEREMY: Thats great stuff Jonathon, let’s get that on camera.
Next……….JEREMY: Cliff, would this be a good time to do an interview?  CLIFF: Not really Jeremy ,it’s 3:45 and I have 12 million in inventory and i need to get out by the close. JEREMY: Ok, I understand.. how about if we just do yes or no questions??  CLIFF: No Jeremy! JEREMY: Come on Cliff, you can just blink your right eye for a yes and your left eye for a no. CLIFF:No Jeremy! JEREMY: Ok, I will pick you up at your house tomorrow and I can interview you in the car.  CLIFF: For a blog?  JEREMY: No, I want to record it. CLIFF: You mean an audio? JEREMY: No, I want to video you. CLIFF: I don’t like to do video Jeremy.  JEREMY:Perfect, then I will meet you at the office and we can do it there instead!
JEREMY:Sam, I am so pumped about this business… your guys are the best we are going to make hundreds of millions on this project!!!                How can you argue with that logic?