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Truly, Words of Wisdom from LPG

Big Al
February 7, 2016

I’ll thrown in my 2cts on this one and on Avi’s methodology.

Every time I hear something along the lines of “something is complicated so it’s difficult to use”, I get interested. I ask myself: is it the thing that is complicated ? or is it that the person didn’t put the effort necessary to master the thing properly ?

As I’ve written previously on KEREPORT, I’ve used the free-trial on Avi’s website in the past, and I’ve been in several of his trading rooms. I’m not a subscriber, and I don’t receive anything from him. So I feel pretty unbiased and “conflict-of-interest-free” to post the following.

I did a free trial on Avi’s website and didn’t follow-up on this w. a subscription because i could not follow the Elliot counts properly. And it is not because the count are complicated: it is because I didn’t put the effort. In other word, the issue is not him/the Elliot Wave + Fibonacci method, it is me. I repeat: without making the effort to learn the method, the problem is myself, not the method.

Many of us believe that we can just start something and in a few hours we’ll “get it”/understand it and bang, we’ll get rich. Financial markets don’t work like that. You can be as smart as you want…. but being successful is a lot of hard work. A lot. And a lot of hours of dedication. A lot. Being smart without hard work doesn’t lead you far.

As most of you know, Doc/Richard and I exchange daily. A few months ago (summer 2015), I was not using Bollinger Bands (BBs) in the array of tools I used back then. Last sumer, I told Richard that, basically, I didn’t use BBs as they seemed complicated and I didn’t really want to put the effort to try and learn them because what I was using as tools was fine for me. However, sometimes, my technical tools (which didn’t include Bollinger Bands back then) could not give me clear signals, while Richard had clear signals and was later on proven right.
So guess what? I’ve made some effort and started to learn about Bollinger Bands. Now I use them ALL THE TIME. And my investing/trading has gone up another notch.

Likewise, I was not using Fibonacci. I’m increasingly using it as I trade. But I keep it very basic. And it works pretty well.
So for me, these are 2 cases were I have the following sequence: INTELLECTUAL EFFORT –> HOURS DEDICATED TO LEARN/WORK –> FINANCIAL REWARD. It’s as simple as that really.

I love driving and I suspect most of us do. I love driving…. fast. And when I say f-a-s-t, I mean f-a-s-t.
Now try to drive fast (again, I mean f-a-s-t) without having a good understanding of your tires quality, your tires pressure, the difference in pressure between the front and the back, if your car as front wheel drive or rear wheel drive or all wheel drive, and lastly and more importantly, a good understanding of what I call “masses transfer”. Or better: if you don’t know all that, for your own safety, forget the driving fast part. Really. Forget it. What I’m trying to say here is the same: without spending the time and make the effort to acquire knowledge, and serious activity is unlikely to produce results.

If you don’t make the effort to lear a few things about physics applied to cars, driving a car fast is likely to end badly. Very badly. If you try to be involved in markets trading stocks, or ETFs, or levered ETFs without having a good grasp of “what you are doing”, it’s also gonna end badly for your portfolio. Soon or later. [You can make money for a while being lucky, but don’t forget luck reverts to the mean]. And to have a good grasp of what you are doing, you need to spend hours of work. Plenty.

Now, because you spend hours learning something about markets doesn’t mean you will be right all the time, or it doesn’t mean that you will not have accident if you are driving. But it means that what you have learned should avoid you fatal accidents/portfolio blow ups. Let’s never forget: managing money is first and foremost MANAGING RISK. So how can one manage risk if he hasn’t got the tools to manage it, or if he doesn’t even fully comprehend what it means to start with? Just food for thought…

Going back to markets, I’ve discussed here about technical analysis as a way of apprehending them.
I am aware many among the KER community think technical analysis is BS and that at the end, fundamentals prevail. That’s right: in the end, fundamentals do prevail. But until fundamentals prevail, it could be days, weeks, months, or… years. Sound familiar ?
A good grasp of technical analysis help in telling now is probably the time to trim/get out of a position, and now is the time to add a bit/add big to a position. Technical analysis is the same as using fundamentals: to make the best use of each, one has to spend hours of work. And without that dedication and work, I don’t think one can discuss them with much legitimacy.

I use fundamentals to look at macro ideas.
I also use fundamentals when I look at stocks: I look at their story, their financial statements, I do some valuation models for regularly. That helps me – but that’s a lot of work to do.
I look at charts and I use technical analysis: that helps me too – but that’s also a lot of work.
And it helps me only because I’ve put the effort to learn it in the first place too.

**********

So to conclude, I’ll go back to my initial point.
I’ve been on Avi’s website and his various trading rooms. He and his analysts do a very fine job, a VERY FINE JOB.
They don’t get everything right, but they don’t make crazy calls which put your portfolio in trouble.
This, I think, shows the professionalism/quality of the risk management he and his team uses. Anyone who is a sceptic should just go to his website and do a 2 weeks free-trial. No credit card information is required.
As a background, and just to provide some perspective, I assisted managing a few hundreds of millions of USD in the not too distant past… so I believe I have a “little idea” of what proper risk management is about when I see it in action.
As far as his method is concerned, I didn’t really put the effort, so I AM the one to blame. NOT his method.
There are people who say the way Avi looks at markets is always two-sided and he can never be called wrong: that is inaccurate IMHO. There is a way to understand what he says. If you don’t try to learn it, you will not get it. Plain simple.

I feel lucky to be able to converse in several languages.
So I’ll suggest this little experiment: try to express yourself in German the way you express yourself in Spanish. I doesn’t work. Why ? Because the structure of the language is different. So first you have to learn the structure of the language.
Try to express yourself italian the way you express yourself in Arabic. It doesn’t work for the same reasons. You have to learn the language structure first.
Try to express yourself in … Whatever. You get the point.
If you do not make the effort to understand how something works, how something is structured, you will NEVER get it. NEVER. But because you do not get it, you should not blame the thing you tried to mast. You should, humbly, realize/admit/conceal that you just didn’t put the effort. Blame your own “laziness”… and stop looking for external factors/outside excuses.

When I don’t make the effort, I blame my laziness.
When I am not diligent enough in my analysis and miss something, I blame myself for being sloppy – ask Richard/Doc about that: he hears me bashing myself once in a while.
When one of my trades go wrong, I don’t blame the market – I try to find what my analysis missed.
When my fundamental views are not in line with the performance of the asset in the market, I don’t blame/cry manipulation: I FIRSTLY tell myself there is something I am missing.

********

I am not that smart so I try to compensate by hours of work.
I also came to a personal conclusion that in life, most of the issues come from ourselves, and our cognitive biases: not the outside world. So in order to be able to master the world better, I work on myself and my biases FIRST.

But that’s just me.

My 2cts.

LPG

Discussion
46 Comments
    Feb 07, 2016 07:43 AM

    Thanks Professor.

    You know,with all of the posturing yesterday, pro one and bash the other, I was very impressed with what LPG wrote me.

    Feb 07, 2016 07:14 AM

    OIL………..Iran wants to be paid in EUros, not US dollars…………zerohedge.

    Feb 07, 2016 07:22 AM

    Very good LPG!

      Feb 07, 2016 07:00 AM

      Yes it was Pete.

    CFS
    Feb 07, 2016 07:33 AM

    While zerohedge makes a political point in:
    “The irony is this: if Iran follows through on its promises to flood an already oversupplied market, crude might not fetch any “worthless pieces of paper” at all – dollars or euros.”
    The fact is while
    iran has already in creased supply by half a million barrels per day and will double that by year end and double that again in 2017, that is as fast as they can increased supply, and as hedges on fracked oil disappear and production drops in the US, the Iranian increased in production will barely offset.
    Current excess supply is between 2 and 2.5 million barrels a day, but increased demand from China and India continues dependent on the growth of their economies.
    Every new car sold to replace a moped or electric bicycle consume more fuel and oil supply-demand will probably switch back into deficit supply in late 2017, depending on the world economic development, of course.

      Feb 07, 2016 07:59 AM

      If true, that should continue to keep the price depressed.

      LPG
      Feb 07, 2016 07:24 PM

      CFS,
      FWIW, Kyle Bass believes excess supply is well below the 2-2.5mn figure you have in mind.
      https://www.youtube.com/watch?v=dY-F-aGFyt4
      Best,
      LPG

        GH
        Feb 08, 2016 08:58 AM

        Kyle Bass is always worth a listen. Thanks!

    Feb 07, 2016 07:35 AM

    Avi seems kinda conceited. Saying people refer to him as the best metals trader on the planet. Never even heard of the guy until the other day. Does he sell a service? Lol

      Feb 07, 2016 07:57 AM

      Some people may very well refer to him as that. Notice that he did not even imply that most people say that.

        GH
        Feb 07, 2016 07:52 PM

        Avi started it with an unprovoked and unreasonable potshot at Gary, and almost all further escalation came from his side.

        I can see why Gary wouldn’t want to come on KER anymore when he has to defend himself against other guests lacking professionalism.

        It would be interesting to see, if Avi decided not to come back, if he would receive the same outpouring of support that Gary has over the last month. Not that I doubt Avi’s success or ability. But the attitude!

        Not my fight. But as someone said, having guests bickering like this is unseemly.

          GH
          Feb 07, 2016 07:57 PM

          Why do I say ‘unreasonable potshot’? Not because Gary hasn’t tried to call the bottom before–he has tried. But he’s a TRADER!!

          He has explained very clearly his reason for getting in here, and why it could be bad to be TOO cautious here. So why should he have to accept potshots like this, not from some crank commenter, but from another KER guest???

          Most who rip on Gary seem not to grasp that swing traders don’t claim to have a crystal ball, that they get in and out based on cues in real time, and that’s a fine approach.

            Feb 07, 2016 07:14 PM

            +1

            Feb 07, 2016 07:19 PM

            Thanks for the opinions GH

            Feb 07, 2016 07:40 PM

            +2

            And yes avi took it to far imo on a professional level. Gary also gives it from time to time and I have also noticed he instigates doc or “lures” him in imo. Gary I hope I’m wrong as doc is a stand up guy and never ever comes across strong. Gary I believe your a very generous and intelligent guest but like I have said previously, don’t let things fir you up.

    CFS
    Feb 07, 2016 07:40 AM
    CFS
    Feb 07, 2016 07:20 AM

    https://www.youtube.com/watch?v=r8O7iDPgFqQ

    pitchfork radio…..Jim Willie

    Feb 07, 2016 07:28 AM

    Great stuff all the way around!

      Feb 07, 2016 07:19 PM

      Thanks for the Jordan Roy-Byrne post. I hadn’t made it over to Palisade yet this weekend.

      Jeb Handwerger up above – there’s a blast from the past…..

        Feb 07, 2016 07:12 PM

        Jordan noted the strength in the Majors, breaking out about their 400 week moving average) as a sign that the miners have bottomed.

    bb
    Feb 07, 2016 07:38 PM

    Venezuela Prepares To Liquidate Its Remaining Gold Holdings To Pay Coming Debt Maturities Zerohedge

    Surprise surprise, just as the price increases more becomes available.
    Funny how that works.

      Feb 08, 2016 08:28 AM

      I think they are broke……….check the oil price…..and the valuation on the currency is the problem. LAST week, the country received SIX JUMBO JETS full of paper currency from the likes of printing presses in Germany. Hyperinflation has hit the country, and their currency is junk. Gold is the last man standing.
      Check zerohedge two or three days ago.

        GH
        Feb 08, 2016 08:05 AM

        No doubt they are broke.

        I lived there in 2004/5. The official exchange rate was 1700 bolivars to the dollar, black market was 2500. EVERYONE used the black market, it was as easy as going to a pawn shop, I could even cash paychecks from the US in a fancy office building at the black market rate.

        Since then they cut three zeroes off the currency. So in today’s terms the black market was 2.5 to the dollar. Now it’s 600 or 700, I believe, with an official rate at a laughable 6!

        A Colombian friend was there two years ago, and told me that although 5-star hotels were very affordable, even they didn’t have functioning air conditioners due to lack of parts. The only place she saw where things were more or less normal was Canaima/Angel Falls, which gets enough foreign tourism to insulate it from the larger economy.

        It’s very sad, but it will be interesting to see how (if) they can dig themselves out of their hole.

        I do put a lot of responsibility for this on Chavez. But I also believe the US and their proxy, Colombia, have been waging a dirty, covert war against them. No country is allowed to go their own way, and certainly not in America’s back yard.

          bb
          Feb 08, 2016 08:31 AM

          I saw that article Frank.

          GH, Ive read that Venezuela is on the American invasion list, I have no doubt they would work covertly first.

          Most people around here have heard of John Perkins. Confessions of an Economic Hitman.

          Its no wonder alot of the world wants to drop the American dollar, Russia and China working in local currencies, Iran requiring Euro for oil etc.

    Feb 07, 2016 07:11 PM

    Morris Hubbartt from Thursday Feb 5th – noting bullish nature of Gold & Miners.

    http://www.superforcesignals.com/video/2016feb4gold/2016feb4gold.html

    Feb 08, 2016 08:13 AM

    As someone who has lived for 20 years in a foreign country (Japan) – yet has never really been able to express himself beyond the level of a six year old suffering blunt force trauma to the forehead – I feel compelled to upvote LPG’s thoughts about not only how a different language represents an entirely different schema for interpreting one’s reality. Using another language forces you to re-examine your assumptions and your norms about information, communication, relationships,… everything. And, if you never acquire fluency in that language (or any other skill you want to learn), blame your own lack of commitment – not the thing itself.
    I’ll keep this essay in the back of my head as I listen to LPG from here on. Seems like a wise man and I could profit from that sense of perspective applied to markets.

      GH
      Feb 08, 2016 08:08 AM

      So true. Nothing like learning a new language to get the synapses firing and keep you young 🙂

    Feb 08, 2016 08:29 AM

    Monday and 1182………….

      GH
      Feb 08, 2016 08:24 AM

      I’ll be shocked if it takes out 1191 without a sharp pullback first.

        GH
        Feb 08, 2016 08:21 AM

        Well, there we go, but I’ll withhold my shock until the breakout is confirmed. Seems like a great opportunity for a bull trap to me.

        Grim: http://finviz.com/map.ashx?t=geo

        GH
        Feb 08, 2016 08:21 AM
        Feb 08, 2016 08:45 AM

        GH…………I just got back……….I see 1191……..up $17……..so that takes out
        1185….., Gold on a roll………………….

    Feb 08, 2016 08:06 AM

    Impact jumped 103% briefly and got halted (which is BS in my book). You might recall that I recently said that Claude had made a long term top relative to Impact and that looks even more likely now (to say the least).

    CRJ.TO:IPT.V
    http://schrts.co/gLg9PA

      Feb 08, 2016 08:30 PM

      Wow. I tried to get an order filled on Friday for Impact, but it never got filled. I had some nice gains today but that would’ve been a big score. Well done!!