The Small Player as Unofficial Interloper

Exploring the Niche of the Private Investor

What can I offer that people don’t have? An opinion? What is it worth? Maybe a perspective or outlook on things ...what is that worth? I suspect these things are worth a lot to people who have less experience, or who have spent less time or resources studying the subject of the volunteered opinion or perspective. Hopefully that’s true. If the reader has a greater experience or more knowledge than I, then they might agree or disagree on that which I present here and say why. In that case a discussion begins, and from it others could learn and gain perspective and experience. If that happens, I myself might gain perspective and experience too, which always helps.

This is getting down to some pretty basic concepts just for now. So what is the market? It’s a place of contest, an arena (remember that), where assets, financial or real, or commitments are traded for a specific price which is constantly changing it's value. The big idea is to access the good side of that changing value to gain and profit from it, or at a lesser target, to gain slowly and in such a way as to hedge and remove the erosion of wealth which comes from state sponsored inflation, or the decline in the value of currency which we hold already, or we will be paid for our labour and services in the future.

So where is the value in all of this? Well firstly one needs capital to trade with, and assets to sell. Secondly one needs to have knowledge that one is assessing the changing valuation at the right time, so that we buy at the lows and sell at the highs. That sounds oh so easy, and everybody who has not traded markets has an opinion on how easy it is to do. Those who do try trading for a living however are usually unsuccessful, and whose who trade/speculate/invest very well are rare individuals who are often highly paid. In fact they are so highly paid that falsification of a successful track record and hyped up marketing of supposed expertise and insight are everywhere to be found, even in a regulated industry.

Ok then. We need to get insight and avoid errors because errors are very expensive and transfer our assets to other traders in the markets.

Let’s look at the building blocks of trading/investing ... the basic requirements:

  1. Money – takes time and effort to earn
  2. Knowledge – takes study, research which either take time to do, or take money to buy
  3. Confidence to trade – takes time to learn, or a track record of previous trades which is the same, or we must pay money to a manager of greater insight to do it for us ....Time and money again.

Now many people who want to trade came to financial markets not because they have money, but because they want to make money, or make more money than they have.

This implies that right at the start they are weak on point number one.

They have arrived at the markets and begin to trade, and find losses coming instead of gains. The need to knowledge is increased in importance, but the money has reduced at the same time. Weaker on the first requirement, and now an elevated need for the second requirement - knowledge - than was previously the case.

The third requirement – confidence to trade – is a similar problem.  At first arrival to this trading game, confidence is high, then money gets lost, and knowledge is perceived as lacking in sufficient quantities. A period of study begins and this raises confidence, whereupon more trades are made. If more losses come in response  then the third requirement to trade – confidence - is actually reducing at the same time as the first requirement erodes – money – at the same time as the second – knowledge – is perceived as being inadequate to the demands of the situation.

What I'm talking about here is resources. Often people assume capital is the only resource involved. Assume wrongly I would add. You see Wall St as an industry is organized to take the capital away from those lacking in any of the essential resources of trading/speculating/investing. Wall St does it's job ruthlessly, and completely, whenever the novice does not flee fast enough. (Learn to flee effectively!)

Now the problem with resources, like natural resources, is the unavoidable need for them, and the difficulty of getting them. Modern society just can’t work without energy, like eg oil, and the need for it is so absolutely high that wars get fought over creating better access to a source of, in this example, oil.

So we look at the three investment resources and ponder our dilemma.

Knowledge: could be called research, and we can do that given time and effort, but the big traders will have a research department where we have the library, the internet, and “inferior” sources from which we draw the knowledge we need.

Capital: we save, we trade, we accumulate capital, and then we risk it on a trade or investment. But JPM, GS, the funds et al will always have more capital, much more, and can choose to dump a big stake into our asset class, crashing the price (from our point of view) and wipe us out. Someone else will always have more of requirement number one, than ourselves.

Confidence: in the light of the previous two paragraphs, how can a realistic person have confidence in the chances of success?

Kinds depressing so far, isn’t it? We don’t have enough of that which we need, and getting any one costs in the amount of the others.

Well there are compensations, so I’ll look at those now.

Do you recall that above I used the word "arena"?

Let’s imagine we are in the position of a little guy let out onto the field during a big football game. It doesn’t matter which team we have been let in on, we’re not going to score, and if anybody passes the ball to us it will be only an instant before the moment of pulverization as heavier bodies arrive with great force in a moment of devastating contact.

So what could a puny amateur do in such a situation? Well, for one thing, the other bigger bodies have a certain balancing effect on each other, and are concerned with each other. If unnoticed, we may steal an opportunity. We can also follow behind a “blocking offensive” force and take protection in that position of greater safety. It helps significantly in doing this is if we have previously studied the offense and defense strategies of the big players. Then we can slip in and out again to suit our purpose better.

Unfortunately, I hear many little players saying things like “the big players control the game so we can do nothing”. Sorry, that’s selling yourself short, and defeatist - you can do a lot. Often after a bruising play where ground was lost (by the little guys) other voices are heard calling out “losers!” and suchlike. Well what would you expect from the crowd at a game? Encouragement? Seriously?  You know, there probably is encouragement being shouted too, but it might just be less audible among the overall cheering and booing that goes with the big game – which is after all what the mainstream (sporting) media and cheerleaders are watching and reporting on. They do their job, and we remember their reports are not about the inner game-within-a-game that we are playing. It is our private sideshow. When we are noticed, one second later we get smashed. A low profile works better when one has our size of resources and is among heavyweights. That low profile is so important that whenever you notice the mainstream media reporting on YOUR activity, watch out!

So adjust your expectations, Abandon immature desire for recognition. Leave the glory for the big team players. Study the game for the little guy, learn how it’s different - and play on. Look around. There are plenty of other little guys out there too, nipping in here, ducking out there, unnoticed, and getting on with it.

And the game does have an end, whether we are on the big team or not. And we can change sides whenever we think it’s in our advantage to do so, and change back too, but this is more challenging for them, than it is for us. And if we want to leave the pitch for a bit while the giants bash each other to smithereens, we can leave and from the much safer sideline watch that play, only to  return when one side is weakened. And they are big, so some of their plans are not flexible due to their need to dominate the opposing big team. We can see those transparent plans for what they are, once we know the game - and act on that knowledge for our own advantage.

Every resource requirement boils down to money and time. Allocate and use time (learning skills) to conserve the money cost.

We do have advantages. Some of them are good ones. Learn them. Use them.

To win you've got to somehow learn survival skills and tactics related to damage avoidance, and then get on that field and play : risk skillfully managed is the opportunity!

.

Argentus Maximus

The author posts daily commentary on the gold and silver markets in the TFMR forum: The Setup For The Big Trade. More information about the author & his work can be found here: RhythmNPrice.

54 Comments

Mudsharkbytes's picture

Finally…

...first. 

Blue Sky's picture

AM

Always a treat to read your take on the game.  Hopefully we can walk between the legs of giants and nimbly avoid being crushed.

BagOfGold's picture

So sorry folks...

But...due to circumstances beyond our control...the Super Bowl has been cancelled!!!...

94igmGi.jpg

Bag Of Gold

treefrog's picture

furth

firth

ivars's picture

There are more USA forces in

There are more USA forces in Black Sea besides the 2 ships entering-stationary  Marines:

Quote:

Besides the mini-naval task force expected to sail between the Dardanelles within the week, US Marines out of Camp Lejeune, NC are already in the Black Sea Area of Operations.

When it absolutely, positively has to be destroyed overnight ...

Formed as a rapid reaction force in 2010, Marines have been tasked with manning the Black Sea Rotation Force (BSFR) if and when the United States needs people killed and things destroyed in the region, post haste.

With the exact number of Marines assigned to BSRF-14 not available for public consumption, the Military Times noted on Jan. 11, 2014, that Leathernecks from the 2nd Light Armored Reconnaissance (LAR) Battalion are currently deployed, with their base of operations being out of the Black Sea port city of Constanța, Romania.

Despite thousands of US Army troops already stationed in Europe, as cited, 300 Marines are normally assigned to the quick-strike force contingent.

With the unofficial nickname "War Pigs," the origin of the nom de guerre is explained by 1st Sgt Justin Owens of Charlie Company:

It’s like that Black Sabbath song, ‘War Pigs.' They’re dirty, they’re nasty, but they’re capable of a lot of destruction.

They have been training for cold weather operations lately..even in Finland:

http://www.militarytimes.com/article/20140111/NEWS/301110004/Marines-train-fight-cold-Finland

Quote:

The second phase of the training will be held farther south in Helsinki, the capital of Finland. It sits on the shore of the Gulf of Finland, and temperatures are expected to hit the low teens while the Marines are there.But in Helsinki, the Marines’ training will focus on an area they’re more accustomed to: military operations in urban terrain.

Cold weather in the Black Sea? Only in mountains.

Quote:

FRIENDLY ANNOUNCEMENT: Please do not ship any items to BSRF 14.1 after January 31st. Otherwise, packages may be lost in our transition with the incoming unit in the following weeks. Feel free to message the page if you have any questions or concerns!

Turd Ferguson's picture

Really good stuff, AM

MODERATOR

Thanks!

Gold Dog's picture

A few observations from a lifetime spent trading.

Before you enter a trade know when you are going to exit. have your stop loss written down and mean it. I don't know how much money I have seen burned up by idiots changing their loss parameters mid-stream. On winners you can always use a trailing stop to allow them to run but know before you trade where you will insert them.

Remember, there are two sides to every trade. Don't presume that the person taking the other side of yours is an idiot!

Trade size is a key component. Last week I said that I only make one or two trades a year but I hit them with both barrels. By both barrels I mean something on the order of 1% of my net worth. Overtrading has killed more people than dollar cost averaging!

Selectivity is key, as is patience. Only take trades that you have a 90%+ confidence level in and ALWAYS let the price come to you. I have made more money by waiting for a better price than I have by picking good trades. (Trades are like busses, there will be another one coming along in 15 minutes!)

For newbies I would start by investing---read the book "How to buy Stocks" and then slowly branch out from there.

Your friend,

Dog

Turd Ferguson's picture

This is sad

MODERATOR

Guy was one hell of an actor.

 

Gold Dog's picture

Turd,

That's too bad, he was pretty young too. I do hope it wasn't "sprung knee" related....too many are lost that way.

YF,

D

FleetFeet's picture

Predictions

Jeff Christian sees $1320 gold before end of Q1, $1900 long term

http://www.mineweb.com/mineweb/content/en/mineweb-gold-analysis?oid=227435&sn=Detail

Gold headed higher in both medium and long term - Roulston

http://www.mineweb.com/mineweb/content/en/mineweb-independent-viewpoint?oid=227294&sn=Detail

Should we all relax for the rest of the day?   

Gold Dog's picture

Relaxation IS in order.

Gold Dog sees $1,800 gold by Halloween.

Silver at $32.

S+P at 1,100.

GDXJ at $96.

NUGT at $2,600.

Print this out. I have been taking witch classes at the "Turd Witch School of Unbelevable Predictions"!!

Your Friend,

Dog

pickaxe's picture

Great advice from a.m. and

Great advice from a.m. and GoldDog.

One additional important aspect of trading to recognize is that no matter how much research you do, how smart or experienced you are, you WILL HAVE LOSING TRADES!

The key to investing or speculating is how you manage your losers (GD's stop loss set-ups area a great way) and what you learn from them. Becoming discouraged or overly focused on your losers will taint your future trading ability.

Also remember Dirty Harry's maxim: "A Man's Gotta Know His Limitations..."                                   ~pickaxe

dirty harry photo: Dirty Harry large_dirty_harry.jpg

Dyna mo hum's picture

But none of mine...

There will be a lot of money lost on the game today.  Backwards like everything else.

Gold Dog's picture

Hum

Some of that lost money will be coming my way when the Bronc's stomp on the Seacocks!

D

Green Lantern's picture

Sage Advice.  Very

Sage Advice.  Very reminiscent of the advice given by Benjamin Franklin.  BTW, was very fond of the Irish after his visits. http://www.larouchepub.com/eiw/public/2011/eirv38n12-20110325/49-55_3812.pdf

Ben wrote a very famous booklet called The Way to Wealth" written by in 1758.  

http://kimberlystevens.com/*%20TRANSFERS/New%20Thought%20Books/The-Way-to-Wealth-by-Benjamin-Franklin-1757-SMSE-2010.pdf

His words ring true today even in a very complex economy.   He acknowledges the inherent unfairness of the market and the tax man.  Yet, he never lays blame onto others and came up with these basic lessons as a way to put one ahead of the inherent unfairness of taxes of government.

Here are five of our favorite pearls of wisdom from Franklin.  Can anybody say they have not broken any of these basic principles in the last few years? 

1. “A penny saved is a penny earned.”
Franklin’s most famous personal finance quote isn’t actually quite accurate. Quantitatively, when you consider that most people calculate their earnings prior to taxes, a penny saved is actually worth more than a penny earned. Why? Because taxes reduce your actual take home pay. If you earn $10 an hour, you will likely only see around $7.50 after taxes. Therefore, if you can cut your expenses by $10, it actually results in saving more than 1 hour’s worth of your take home wage.

  • The lesson: Saving money is the number one key to building wealth and becoming financially successful.

2. “An investment in knowledge always pays the best interest.”
Investing in yourself is just as important as saving for the future. In fact, although Franklin is also attributed with the saying, “early to bed, early to rise, keeps a man healthy, wealthy, and wise,” Franklin was known to frequently burn the midnight oil studying languages which included French, Italian, Latin, and Spanish. This gained knowledge served him and the colonies well in his travels soliciting support from the French during the American revolution, paying dividends he could have never expected. Franklin’s life teaches that success is not only born from hard work, but also from diligent study.

  • The lesson: Never stop learning. If you have a chance to take a class, or further your education, go for it. Better yet, study things that interest you on your own time. A library card is free!

3. “Having been poor is no shame, being ashamed of it is.”
Franklin was a self-made man who believed that success was derived through hard work, diligence, and study. His own beginnings were of a humble nature, but he progressed through entrepreneurship and lifelong learning. He never shied away from being honest about who he was or how he came by his success.

  • The lesson: Remembering the crushing weight of debt or poverty might be just the motivation you require to sustain your personal frugality and ensure a better future for yourself and your family.

4. “He that is of the opinion money will do everything may well be suspected of doing everything for money.”
An encyclopedia of personal finance could be written on this quote alone. Frugality, savings, and thrift are one thing, but greed is another matter altogether. The financial crisis which began in 2008 is a prime example. Greed drove billions of dollars into risky and speculative investments such as sub-prime adjustable rate mortgages and mortgage-backed securities which promised impossible returns to investors who were well beyond their depth of understanding but blinded by dollar signs.

  • The lesson: You should be in charge of your money; it shouldn’t be in charge of you.

5. “Rather go to bed without dinner than to rise in debt.”
Franklin understood the insidious nature of debt, and firmly believed that it’s better to slash expenses to an extreme level rather than to incur debt in order to afford a lifestyle that is well beyond our means. Certainly, cutting back on essential human needs such as food is a choice that we will ideally not be confronted with any time soon, but this quote reinforces the importance of building an emergency fund.

  • The lesson: Don’t live beyond your means, and get out of debt as quickly as possible.
F.Capra's picture

NYTimes

Philip Seymour Hoffman, Actor, Dies at 46

Mr. Hoffman was found dead of an apparent drug overdose. A police official said investigators found a syringe in his arm and an envelope containing what is believed to be heroin.

Green Lantern's picture

I know the big consumer game

I know the big consumer game on today.  Famous actor died pre-maturely.  

But does the fact that 25 million people are having their water supply cut off in California make any of you preppers  go mmmm, not good? First time in history of Zero Allocation and the state could run out of water in 60 to 120 days.  Do you consider that a pending crisis?

Most importantly what's going to happen to all those medicinal marijuana crops?? Oh shit.

California drought

PAST CALIFORNIA DRY SPELLS HAVE LAST FOR CENTURIES

Past Calif. dry spells have spanned centuries
Past Calif. dry spells have spanned centuries

http://columbiadailyherald.com/news/nation/past-calif-dry-spells-have-spanned-centuries

SAN JOSE, Calif. — California’s current drought is being billed as the driest period in the state’s recorded rainfall history. But scientists who study the West’s long-term climate patterns say the state has been parched for much longer stretches before that 163-year historical period began.

And they worry that the “megadroughts” typical of California’s earlier history could come again.

Through studies of tree rings, sediment and other natural evidence, researchers have documented multiple droughts in California that lasted 10 or 20 years in a row during the past 1,000 years — compared to the mere three-year duration of the current dry spell. The two most severe megadroughts make the Dust Bowl of the 1930s look tame: a 240-year-long drought that started in 850 and, 50 years after the conclusion of that one, another that stretched at least 180 years.

“We continue to run California as if the longest drought we are ever going to encounter is about seven years,” said Scott Stine, a professor of geography and environmental studies at Cal State East Bay. “We’re living in a dream world.”

California in 2013 received less rain than in any year since it became a state in 1850. And at least one Bay Area scientist says that based on tree ring data, the current rainfall season is on pace to be the driest since 1580 — more than 150 years before George Washington was born. The question is: How much longer will it last?

A megadrought today would have catastrophic effects.

http://www.weather.com/news/science/environment/california-drought-prompts-zero-water-allocation-state-water-project-20140131

http://www.latimes.com/local/lanow/la-me-ln-california-drought-zero-water-allocation-20140131,0,4678128.story#axzz2sCVmfrsy

TJeffson's picture

@GL re Cali

They shouldn't live in deserts.   It could turn into a pretty big deal.  

Gold Dog's picture

Green Lantern

We owned a Walgreens property just outside of Phoenix and sold it primarily because the Southwest is coming to the end of an approximately 125 year wet spell. We got spooked that the population may start plummeting as the water supply "dried up". (Pun intended.)

Those that have investments that rely heavily on the Southwestern area of the US should revisit them with an eye toward bailing out before the impact of a prolonged drought starts to cut a little closer to the bone.

The death of Hoffman bothers me. As I have been moving into my retirement I have been asking retired guys what they think the most important thing that they could teach me about being retired. Far and away the number one response deals with having responsibilities that force  a schedule on me. When I think of Seymour, that Beiber kid, Lindsey Lohan, et. al., one of the common denominators is a lot of both time and money on their hands. Are these people getting into trouble out of boredom? I have been so damn busy that boredom is the least of my problems but I could see it appearing in a year or two. If it happens I will share it with Turdville.

If anyone reading this is bored feel free to come on over tomorrow, I will give you one of my large stacks of paperwork to deal with and keep you out of trouble.....you can pay me later!

Your friend,

Dog

F.Capra's picture

Mexican Black Tar

The western Mexican States including Sinaloa and Michoacan have grown opium poppies brought by Chinese immigrants for a century. As Cartels there have grown more sophisticated, they have moved a far stronger/potent variant of heroin to the streets of America as well as bringing methamphetamines from chemicals imported from China in the last decade. The person who started snorting or shooting some years ago had a highly diluted product from Asia. But street level narcotics today in cities like Chicago, Philadelphia and NY City will often kill the user if he does not know the new drugs, before he can pull the needle from his arm.

ag1969's picture

Gold Dog..forgive me for intruding...

"As I have been moving into my retirement I have been asking retired guys what they think the most important thing that they could teach me about being retired."

I am younger than you, and I have not been retired since little league, but if I was you, and had your means, knowledge, and lease on life, I think I would make the number one focus of my retirement to be consistently healthy.  You have everything else and it is not going anywhere.  It seems to me that the only thing that can steal the fruits of your labor at this point is poor health.  Always remember to keep the main thing the main thing!

100+oz. in one clip huh?  Most people just get a gold watch when they retire.  You're cool. Stay healthy my friend!  TH

DeaconBenjamin's picture

The Siren Song of 'Money For Nothing'

Gold Dog's picture

Thanks AG

I have been working out a great deal more than usual. Many business dinners to get off of my mid-section!

I picked my grandparents pretty carefully and lucked out on some pretty good genes, but I hear what you are saying about staying on top of my health and keeping it running in the green for as long as possible.

That said, I am off to my buddies party to injure my health with about 15 beers and a pile of food that's really bad for me.

"Do as I say, not as I do!"

Thanks again,

YF,

D

Green Lantern's picture

California Drought....Let's

California Drought....

Let's put this in AM's category of knowledge and research. 

Besides looking for artesian wells, if you are entrepreneurial minded, then you are thinking how do I turn a water crisis into money besides going short on California oranges and NAPA valley,

CAN YOU SAY 100 Bagger?

http://www.investmentu.com/2012/April/invest-in-water.html

Three Easy Ways to Invest in Water

You can be a contrarian. Or you can be a victim. If you prefer the former, here are a few simple ways to invest in water.

“During the last century, oil was at the heart of the global economy. Nearly every development in the financial news was somehow linked to its price and availability. But in the twenty-first century, I believe the price and supply of water will dominate the headlines.”

Start at 12:30.  Rick rule Talking water.  He's been pushing the water stocks BIG TIME.  Scarier than a global financial crisis.

Occasnltrvlr's picture

Making Money Off Of Water

My brother and I discussed this a few years ago.

Making money off of the universal human need for water?  I'll leave that to the Castle-dwellers and Nazees, and anyone else cruel and callous enough to do it.

"A man's got to know his limitations."

s1lverbullet's picture

@ Gold Dog

Thanks for the thoughts and advice on trading. I have lost money a couple times because I chased price up. I have had to learn the hard way to be patient for the right trades.  Getting in a hurry is a good way to get torched.  I'm in all cash right now, sold my miners Friday. Something just doesn't sit well with me in this market right now. I could be wrong but Ill take preserving my capital right now over a chance of being wrong, short term.

Green Lantern's picture

Super Bowl Get my kush in

Super Bowl

Bad boy: Snoop Lion, aka Snoop Dogg, poses with large bowl of what appears to be uncut cannabis in his hotel suite on the Gold Coast on Tuesday

Get my kush in California, Get my dro from Arizona

Zoltan's picture

Sunday Night Silver Open (NetDania)

Blocks of 250 for 9.5K NDU in the first minute and just over 2K in the second.  Very subdued compared to previous week.

Check out the volume in the last trading hour on Friday compared to the previous few hours though.  Things that make you go hmmmmmm......

Didn't need as much ammo to burn through the bid stack this week.  Kitco bankruptcy most recent can kick now down to 6 weeks and counting.  Seems unlikely they will get a 7th life but who knows.  Cats seem to have 9.

Z

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