Sunday, May 4, 2014

Can you see The BIG PICTURE? part 1

   Hey everyone.
It's been a while since I posted anything on my blog. Well, quality is betters then quantity.
   Today I would like to talk about seeing the big picture. What is it?
Have you ever thought about how big institutions keep their doors open when economy is good or bad? Recessions, high unemployment, trade deficit...etc.
But "they" seems to be doing just fine. No one going out of business. How do they do that? ....
We about to find out!
   There are different types of institutions. Let's call them "lazy" and "aggressive" ones.
 First type's model looks very simple:

  1.  You spread the word in mass media that everyone should be invested in stock market, stock market is a way to go, Joe! Notice all of your friends talking "I own this, I own that, my friend is fully invested in this biotech" etc. So we can agree that institutions are very successful on this task.
  2.  You create ways for ordinary and extraordinary people to participate in the stock market. By providing trading services. You open trading accounts, you encourage people to trade. You get trading commissions, platform fees etc. If they feel scared to trade by them selves (not totally dumb people, some thinking still happens), you offer them to "manage" their capital for a fee by "one of our professional account managers". Usually it's about 3% annual from sum under "management".  Notice I put these words in a quotes. 

 Second type's model looks much more complex:

  1. You look into ways to attract a lot of capital. A LOT. 
  2. You find your "target" stock, sometimes even a sector. 
  3. You create from "negative" to "very negative" news environment for a stock.
  4. You start to buy shares. You maintain "negative" news background, some level of uncertainty for the company's future. 
  5. After you have bought A LOT of shares you start to paint green days on a daily chart, draw well known "long-patterns" to catch traders attention. At this point we are targeting successful traders, momentum traders. Those who are able to recognize good opportunity at early stages. 
  6. As the stock progresses, at this stage our job is to gradually change news environment from bad to OK.
  7. After a stock went 100%+ from our average price (depending on features of a stock) we are ready to unload our shares. At this point you can be sure that all major blogs, all major market portals, all yahoo message boards, all forums, all financial TV and radio shows will be screaming that finally we found a greatest stock of all. We can read/hear/see upgrades made by "reliable" (and sometimes they are very well known) rating agencies, target raises etc.
  8. Job is done. "Well done bro! Let's call hookers and celebrate, grab cocaine bro! Lets buy another private airplane! No, no...let's buy a country! Which one, which on?!! :-/  Fuck, I don't know... Emmm, let's buy Ukraine! I heard it's on sale now."
  9. And your average Joe start to realize that he has bought a top, as always...Just a bad luck, right? "Next time I might get more lucky."

   Sometimes I wonder who are getting paid for news pump more: Jim Cramer or

 to be continued...

Have a great weekend.