We Are Fearful as a World

The best description for what occurred yesterday in our stock market, and to our world, is summed up well by trader MP in his email to me yesterday:

"Honestly Floyd...

I've been a subscriber for about 9 months now...When I started we were in the 12,000's...now we are in the 6,000's...this is NUTS!!!

I know you must be surprised as well because my old emails indicate that you never thought we would be this low...

I mean seriously...when is this thing going to stop?

I heard this morning that if people are going to sit on the sidelines and wait for the DOW to hit 6,000 then they might miss the biggest pop we've seen in a long time...

But then again...I heard back in October that we were heading for 5,000!!!

I don't know what to think my friend...I'm kicking myself that I bought Exxon, Chevron and Alcoa on Friday because I had a feeling that they would keep going down...But how are we supposed to know?

And when we hit S2 this morning, I made my FIRST purchase on the 370 calls at 3.40....but I have a feeling that was a mistake as well...

I guess this is my big question...we've dropped so far so quickly....are we really looking at 5-10 years just to get back to where we were like most people are saying?

Christine and I HAD 50K sitting in a college fund for the girls that is now worth about 25K - can I do anything about it? As a young couple, what do you recommend in a time like this? Conservatively trade the OEX, buy blue Chip Stocks like Chevron, Exxon etc...What else can we do? "

Trader MP is scared, rightfully. He later wrote yesterday to apologize for his email, that he knew was fearful:)

So, first the facts. By 2 p.m. the market went to a theoretical Dow low of 6760. New historical bottoms. AIG, the slime, need more money, and off we are to give it to them, as really they are so integrated in our financial system we "have no choice." And Rush Limbaugh, our New Republican leader, "wants Obama to fail."

Sigh.

March is historically strong early in the month. But, the GDP declined at an annual rate of 6.2% in the fourth quarter of 2008, showing the steepest drop off since the depths of the 1982 recession, and signaling a potentially longer term return to any strengths. The first quarter looks awful, and companies are now reducing dividends, allowing companies that don't to actually be outperforming those that do. And AIG's government intervention again pushed the market to the lows we were going to suggest would occur AFTER a run up.

The U.S. has also been hurt by the synchronized nature of the global downturn, with exports now declining at a 24% annual rate.

Family values may be stronger as we lose our USD as a strength, and perhaps lose our SuperPower Nation ranking. All of this could be part of the shift that is taking place.

And, a lesson on money from our long term subscriber BD that I find fascinating.

"Floyd, the story you are about to read is, of course, fiction. But if you found it to be disturbingly close to the truth and would like to know who Fabian was in real life, a good starting point is a study on the activities of the English goldsmiths in the 16th & 17th centuries. I'll send the conclusion later.

The Beginning…
Fabian was excited as he once more rehearsed his speech for the crowd certain to turn up tomorrow. He had always wanted prestige and power and now his dreams were going to come true.
He was a craftsman working with silver and gold, making jewelry and ornaments, but he became dissatisfied with working for a living. He needed excitement, a challenge, and now his plan was ready to begin.
For generations the people used the barter system. A man supported his own family by providing all their needs or else he specialized in a particular trade. Whatever surpluses he might have from his own production, he exchanged or swapped for the surplus of others.
Market day was always noisy and dusty, yet people looked forward to the shouting and waving, and especially the companionship. It used to be a happy place, but now there were too many people, too much arguing. There was no time for chatting - a better system was needed.
Generally, the people had been happy, and enjoyed the fruits of their work.
This was the Government’s one and only purpose…
In each community a simple Government had been formed to make sure that each person’s freedoms and rights were protected and that no man was forced to do anything against his will by any other man, or any group of men.
This was the Government’s one and only purpose and each Governor was voluntarily supported by the local community who elected him.
However, market day was the one problem they could not solve. Was a knife worth one or two baskets of corn? Was a cow worth more than a wagon … and so on. No one could think of a better system.
Fabian had advertised, “I have the solution to our bartering problems, and I invite everyone to a public meeting tomorrow.”
The next day there was a great assembly in the town square and Fabian explained all about the new system which he called “money.” It sounded good. “How are we to start?” the people asked.
“The gold which I fashion into ornaments and jewelry is an excellent metal. It does not tarnish or rust, and will last a long time. I will make some gold into coins and we shall call each coin a dollar.”
He explained how values would work, and that “money” would be really a medium for exchange - a much better system than bartering.
One of the Governors questioned, “Some people can dig gold and make coins for themselves,” he said, “This would be most unfair”.
Fabian was ready with the answer. “Only those coins approved by the Government can be used, and these will have special markings stamped on them.” This seemed reasonable and it was proposed that each man be given an equal number. “But I deserve the most,” said the candle-maker. “Everyone uses my candles.” “No”, said the farmer, “without food there is no life, surely we should get the most.” And so the bickering continued.
Fabian let them argue for a while and finally he said, “Since none of you can agree, I suggest you obtain the number you require from me. There will be no limit, except for your ability to repay. The more you obtain, the more you must repay in one year’s time. “And what will you receive?” the people asked.
“Since I am providing a service, that is, the money supply, I am entitled to payment for my work. Let us say that for every 100 pieces you obtain, you repay me 105 for every year that you owe the debt. The 5 will be my charge, and I shall call this charge interest.”
There seemed to be no other way, and besides, 5% seemed little enough charge. “Come back next Friday and we will begin.”
Fabian wasted no time. He made coins day and night, and at the end of the week he was ready. The people were queued up at his shop, and after the coins were inspected and approved by the Governors the system commenced. Some borrowed only a few and they went off to try the new system.
They found money to be marvelous, and they soon valued everything in gold coins or dollars. The value they placed on everything was called a “price,” and the price mainly depended on the amount of work required to produce it. If it took a lot of work the price was high, but if it was produced with little effort it was quite inexpensive.
In one town lived Alan, who was the only watchmaker. His prices were high because the customers were willing to pay just to own one of his watches.
Then another man began making watches and offered them at a lower price in order to get sales. Alan was forced to lower his prices, and in no time at all prices came down, so that both men were striving to give the best quality at the lowest price. This was genuine free competition.
It was the same with builders, transport operators, accountants, farmers, in fact, in every endeavor. The customers always chose what they felt was the best deal - they had freedom of choice. There was no artificial protection such as licenses or tariffs to prevent other people from going into business. The standard of living rose, and before long the people wondered how they had ever done without money.
At the end of the year, Fabian left his shop and visited all the people who owed him money. Some had more than they borrowed, but this meant that others had less, since there were only a certain number of coins issued in the first place. Those who had more than they borrowed paid back each 100 plus the extra 5, but still had to borrow again to carry on.
The others discovered for the first time that they had a debt. Before he would lend them more money, Fabian took a mortgage over some of their assets, and everyone went away once more to try and get those extra 5 coins which always seemed so hard to find.
No one realized that as a whole, the country could never get out of debt until all the coins were repaid, but even then, there were those extra 5 on each 100 which had never been lent out at all. No one but Fabian could see that it was impossible to pay the interest - the extra money had never been issued, therefore someone had to miss out.
It was true that Fabian spent some coins, but he couldn’t possibly spend anything like 5% of the total economy on himself. There were thousands of people and Fabian was only one.
Besides, he was still a goldsmith making a comfortable living.
At the back of his shop Fabian had a strongroom and people found it convenient to leave some of their coins with him for safekeeping. He charged a small fee depending on the amount of money, and the time it was left with him. He would give the owner receipts for the deposit.
When a person went shopping, he did not normally carry a lot of gold coins. He would give the shopkeeper one of the receipts to the value of the goods he wanted to buy.
Shopkeepers recognized the receipt as being genuine and accepted it with the idea of taking it to Fabian and collecting the appropriate amount in coins. The receipts passed from hand to hand instead of the gold itself being transferred. The people had great faith in the receipts - they accepted them as being as good as coins.
Before long, Fabian noticed that it was quite unusual for anyone to actually call for their gold coins.
He thought to himself, “Here I am in possession of all this gold and I am still a hard working craftsman. It doesn’t make sense. Why, there are dozens of people who would be glad to pay me interest for the use of this gold which is lying here and rarely called for.
It is true, the gold is not mine - but it is in my possession, which is all that matters. I hardly need to make any coins at all, I can use some of the coins stored in the vault.”
At first he was very cautious, only loaning a few at a time, and then only on tremendous security. But gradually he became bolder, and larger amounts were loaned.
One day, a large loan was requested. Fabian suggested, “Instead of carrying all these coins we can make a deposit in your name, and then I shall give you several receipts to the value of the coins.” The borrower agreed, and off he went with a bunch of receipts. He had obtained a loan, yet the gold remained in the strong-room. After the client left, Fabian smiled. He could have his cake and eat it too. He could “lend” gold and still keep it in his possession.
Friends, strangers and even enemies needed funds to carry out their businesses - and so long as they could produce security, they could borrow as much as they needed. By simply writing out receipts Fabian was able to “lend” money to several times the value of gold in his strong-room, and he was not even the owner of it. Everything was safe so long as the real owners didn’t call for their gold and the confidence of the people was maintained.
He kept a book showing the debits and credits for each person. The lending business was proving to be very lucrative indeed.
His social standing in the community was increasing almost as fast as his wealth. He was becoming a man of importance, he commanded respect. In matters of finance, his very word was like a sacred pronouncement.
To be continued…
About the author:
This story was written by Larry Hannigan in 1971 – The sole purpose is to explain the simple maths of reality and the current Banking System – that is - 100 plus NOTHING does NOT equal 105 – and that charging interest on something that is created out of nothing, makes it impossible to repay, giving great power to those who do create money out of nothing - ie the Banks

And, from trader JK, what he thinks is an Abraham Lincoln quote:

"The money powers prey upon the nation in times of peace and conspire against it in times of adversity. The banking powers are more despotic than a monarchy, more insolent than autocracy, more selfish than bureaucracy. They denounce as public enemies all who question their methods or throw light upon their crimes. I have two great enemies, the Southern Army in front of me and the bankers in the rear. Of the two, the one at my rear is my greatest foe."

Abraham Lincoln

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The answer to MP, and in general, is that the the stock market historically has predicted the economy. Anyone remember when Priceline.com was at a higher value than all the U.S. Airlines combined, in the dot com bubble? How quickly we forget?

The Dow is now halved, and we are fearful as a world. The stock market is now becoming, I think, a barometer of how effective policy makers are dealing with the credit crisis. If the stock market can find optimism, and any upside, we believe it will proactively lead "faith." Most Americans do not even understand what the stock market IS, but they do know when it goes UP or DOWN. The news tells us.

If the market is not able to control itself, our concerns will mount, as it leads to further "cutting back", less confidence, and thoughts of the Great Depression.

Much of our issue is again the bi-partisan babbles that take place now, with "fights" on what should be done, and Obama's goal of unity as a nation led by Rush Limbaugh helping create even more of a split.

My answer: if we cannot "find a bottom" we will soon create a massive worldwide Depression. I'm saddened daily to read the lack of understanding by our own people on what has occurred, and what now really must be done. Those that believe we should "let free enterprise" correct, without intervention, simply have no understanding how banking credit runs our world.


Traders were only able to enter on the March310P yesterday if buying above prior day close. The low was 4.30, and the position rose to highs of 6.30.

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Floydian Therapy:

Worry does not exist. We create the emotion, create the body reaction (long and short term) and argue with ourselves on what there is to worry about. If I throw a rock at you and you see it, your perception will be altered, and your fear and dread will rise. This will manifest in adrenalin rushes.

But it is not truly real, as one could see the rock coming and "not care" (it is possible) and have no fear, only calm.

We are thusly what we decide and choose to "be, see, or experience."

The only indisputable fact is that there is no fact, only our definition that there is such a thing. A rock is NOT necessarily hard.

As an example, to a religious person it is indisputable that there is a God. But there is no fact of this, only interpretation of fact. There is no physical proof of a higher being, only our desire that there be one, or our interpretation of doctrines and examples.

Religious people will argue, and are wrong. It is unprovable. Atheists and non religious people will argue factually or in anger, and are also wrong. They do NOT know there is no God, they choose to believe that there is not one, and that no fact can be proven that there is.

This means both are wrong. So, is there a God, or are we God? Or is there no God. Or, is there only one God. This "false fact" thinking is the stuff of persecution and wars. Assuming there is a God, I'm sure she's smiling at us as we struggle with our training wheels.

Join me if you are interested in Private Counseling with Floydian Therapy:
Write me at : floydiantherapy@gmail.com
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