Monday, January 28, 2013

The Smart Money, The Idiots & The Fools

Ok, so hopefully now having demonstrated to anybody who has taken the time to read through the bountiful trading posts that these idiots have a reasonable (better than the average blog dog, we would wager :) grasp of how it works, if no conclusive proof as to the reasons (they suspect as to) why, the idiots thought a broader view of how it all appears to fit together (to an idiot) might be useful to some. 


"What the fool believes he sees, the wise man idiot has the power, to reason away.."

There are three types of players of the money game, smart money, idiots and fools.

The Smart Money
I will tell you my secret if you wish. It is this: I never buy at the bottom and I always sell too soon. – Baron Rothschild, Reminiscences of a Stock Operator
To start with, understand that you cannot "be" smart money, without having smart money. You need to have almost infinite resources available, the financial power to trend markets, and to design develop and deploy terminators.

(There has been a lot of jesting about "Termy" as he's affectionately known to the idiots who joust with him daily, however the idiots are deadly serious - Nanex is the authority, but there's a decent overview with cool pics here - Only yesterday Terminators were active in the closing seconds of AAPL. How many fools bought it at $500-700+ and have been seriously banked over a one year cycle, never mind in the closing milliseconds of the day yesterday?  Terminator is very much out there.) 
Otherwise you are just smart, and more likely an idiot than a fool. On the other hand not all "money" is smart, in fact quite the opposite. The fundamental thing to understand is that the smarts drive the market trend. They are always  the other side of the helix from the idiots and fools, and if idiots and fools are buying, smart money is selling to them.

Logically therefore, if smart money is selling something that is going up, they are losing on that trade, all the time it continues going up..?  And smart money, does not lose.  So having been selling into all the buying pressure all the way up, eventually the buyers will run out, the trend reverses, and idiots and fools get banked.  Was the trend actually your friend after all?

This Terminator manoeuvre is known as "Crazy Ivan"
This same cycle plays out everywhere there is financial activity, but nowhere is it more apparent than electronic "Markets". The cycle plays continually and forever, at all levels, from patterns that repeat every few minutes, through hours, days, weeks and years.  Smart money is also old money and play a very long inter-generational game too. 

This cycle is fundamental to understanding the way it works. You may dismiss it as conspiracy theory if you like, but this understanding is the basis of our trading system, which we think have shown, also, mostly works

The Idiots - "The Power to Reason Away"  

Idiots may or may not be smart. Many are not that bright. Many idiots are no better off than fools ultimately, for a greater understanding does not help them if not applied effectively. Many successful idiots are also just lucky, right place and time, or school and upbringing etc.

What successful  idiots mostly have, that fools do not, is the ability to see past the facade and grasp at least some of what the game actually is, although inability to actually do anything about it is often the downfall of many idiots.

However, the one thing all successful idiots do appreciate that fools do not, is that the only way to win longterm is to try and play the way the smarts play. Which is easier said than done, given the lack of smarts, and money, and you cannot find out what "smart money" is doing, by reading  it in Investors Weekly at Starbucks.

What you have seen here this last two weeks is a raw display of the retraining of every natural instinct common to humans, that is required to become a successful idiot, i.e. when something is going up, fools rush to buy.. 

These idiots instead ask, "who is selling?"

Until you have tried pressing a button to activate a short into a spiking market and watching your money vaporize into the ether in seconds a few times, it is very difficult to understand quite how hard "selling high" can be. 

(NB: SilverMan's post - this particular idiot is most likely richer than anybody you know)
And here is the same chart after the patiently lurking idiot interception and on the way back up..

Which leads us nicely onto..

The Fools. An unfortunate statistic says that 95% of the world are in this category.

That means 95 out of 100 of you reading this are, which of you think you are in the 5%?   How are your critical thinking skills? Fancy trying your hand against the market? It would be quite an eye opener, the idiots assure you.

The Fool's primary problem is that he thinks that he is wise. Fools believe what they read, and think they understand all that they see, and can make total sense of the world around them. They court audiences and delight in explaining the mysteries of the world to less "fortunate" others.

Only fools think they can predict longterm outcomes from an irrational, unstable, dynamic and chaotic system. Maths and probability theory applied to this scenario suggests otherwise, never mind history.

So secure in his deep knowledge and understanding of the world and all things around him (information supplied by smart money enterprises™ ) he boldly predicts the future and acts upon his visions.

Many will delight in bragging about their investments for a while, then go quiet for a year or two when caught in yet another foolish bursting bubble, only to reinvent themselves again on the next crest, as having always been successful and correct about the future, and think no one will notice. (idiots might)

Now it is true some fools just get lucky (right place right time) and some do ok by dogged hard work, e.g. flipping houses into a continually rising market for years, however if they are ultimately caught by the bursting bubble, they're definitely just fools who were lucky for a while.

Most fools might even notice prices rising for a time, but not act until Auntie Maud at the filling station mentions she just bought some, "and look the price is going up after all.."

A fool and his money ARE easily parted.  Statistically fools buy high, and sell low. The fools who trade (trainee idiots) are the "Stupids" we've referred to in the trading pics, they are buying above the stupids line and getting banked. As their longs are stopped out and they are selling back lower, we sold high and buy back from them.  

People say it's almost impossible to "time the market". Well actually :) - not if you know what you're doing it isn't, but over the long term it is very difficult to beat the market, fortunately for idiots it's quite easy to tag along with it as banks the fools sometimes. Like the fat friends meeting a bear (terminator) in the woods, idiots don't have to run faster than the bear, just faster than the fools.

Understand, this is 90+% of all (non market-making) traders on the losing side, your Mutual Funds, your Pension Funds your "Portfolio Re-balancers" etc, just because somebody does it for a living, does not mean they always win, far from it. Often they could care less, its not their money, they just get another job somewhere else.

These idiots make every effort to be facing 180 degrees to the stupids at all times, and are selling above the stupids line, betting against the fools, in line with the (hopefully) inevitable banking trip to come.

Its really not so hard to understand, at least not unless you are a total fool. 

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