Category — Markets

Absolutely YES! It has already happened in my own lifetime as a trader. The markets today are no longer as they were when I began trading. They are hardly recognizable today compared with what they were then. It is as though trading, as I knew it originally, has disappeared. But there’s more, as you will see.
As traders, we tend to build our lives around our trading without giving much thought to what we would do if trading and markets were not available to us.
Recently, the question was asked:

“Joe, do you think we could ever see a complete collapse of the derivative markets?”

The answer is most certainly yes! The world is awash with all sorts of derivatives. A futures contract is a derivative of the underlying cash market. An option on futures is a derivative of a derivative – the underlying futures contract. All stock warrants and options are derivatives. And think of all the SWAPS that exist out there.

At some unknown point, if a hedge fund, a bank, a government, or other entity were to fail to meet its obligations, it could bring down the whole house of cards. We are living in a gigantic global bubble. The stock market is a bubble within a bubble, as were the dot com bubble and the real estate bubble. There are few indeed who know the true worth of anything. All fiat currencies are nothing more than a bubble with nothing whatsoever to back them up other than the willingness of the populace to accept essentially worthless pieces of paper.

It seems to me that an awful lot of people assume that things will always go on as usual, and yet, everywhere I go I detect a certain uneasiness about the status of the world’s economies. Certainly any worldwide stock market “correction” gives a lot of people pause for thought. Only a fool would think that a boom such as we have seen in recent years would never end. Yet that is exactly what I’m seeing in ever increasing numbers of people.

Do you realize that there was a huge crisis in equity markets a few years ago, precipitated by a devastating shock to the Asian currency markets? Beginning with the Thai Baht, the Philippine, Malaysian, Korean, and Indonesian (I’ve probably missed a few) currencies all plunged. The reaction to this was an immediate call by many Asian nations for a cessation of currency trading. If they couldn’t get a complete halt to trading of their currencies, they wanted at the very least to stop all short selling.

This is the way governments react to crises. Do you think for one minute that the same thing would not happen in Europe, the U.S., or Canada?

In any crisis of that sort, the President of the U.S. has the power, without anyone’s prior approval, to shut down all markets, banks, borders, etc. He can freeze all assets, both domestic and foreign. He can declare a state of emergency, call out the National Guard, and declare Martial Law. So I ask you, what is your plan “B?” You really need to have one!!

Is GM the winner of the government takeover of GM?
Is Chrysler the winner of Fiat’s takeover of Chrysler?

NO! The real winner is TOYOTA. The Japanese automaker now takes over the #1 spot. It has the largest share of the U.S. light vehicle market. Toyota’s share is expected to reach 20% this year. GM will lbe ucky to have 16%.

For years I have asked why would someone want to buy a “Toy” Ota? But now I have to change my tune. I am going to send in a suggestion to the automaker. I think they should change their name to REALOTA. After all they are the REAL auto company of the U.S. In fact, we should consider renaming the car as the “Otamobile.”

Realota should do well in the green smaller otamobile market being pushed by the government. You might consider it as an investment.

If people are pulling out of high yield stocks, what are they doing with that money?

Right now, investors are far more interested in commodities, emerging markets, and inflation plays… not stocks with high yields.

A great play right now is to be long silver. Silver futures, options on silver futures, silver ETFs and Options on silver ETFs. Silver coins are good if you can get them without paying outrageous prices.

Playing the gold silver ratio, long silver and short gold has produced around $10,000 in a very short time. In Traders Money Club, I’ve been beating that drum for quite some time. The gold/silver ratio was way out of whack. Either gold had to come down hard, silver soar, or a little of both. Right now silver is soaring.