Wednesday, February 15, 2012

15 Feb 2012

As you can see we have finally come off highs for the top two indicators.  Both are nearing their lower bollinger band.  I am a perfectionist so as this has been declining I haven't been initiating new shorts because there usually is a few more pandemonium days at a top, especially after an increase like this, to make a nice U pattern. I only try to initiate positions when the shortest term indicators are at the most extreme levels to increase confidence right away, but for all intents and purposes, the medium and longer term are still pretty overbought. 

Apple blew through my target but only for a bit.  Today was a classic euphoria blow off.  It should have a few other similar candles during violent oscillations if this is a medium term top.  I actually was told by someone that they had all of their money in AAPL stock.  I said to consider selling; they thought I was crazy.

November 15, 1923 & beyond
  1. "Firms that mushroomed during the inflation now found that the real interest they paid on loans for the first time was positive rather than negative, lower though the rates appeared to be. Perhaps most significant, for the first time they were obliged to pay real taxes, many of which were extremely high because of the necessity rapidly to balance the budget and to bring official salaries, which had fallen disastrously, up to an acceptable level again. Companies were often unable to buy new machinery after stabilisation came, so much so that huge stocks of unsold iron and coal began to build up in the Ruhr. Not even the foreign loans flowing in were able to prevent the seizing up once again of the Ruhr mining industry where pit after pit, especially any producing poor quality coal, was forced to close. Workers were to flock from pit to agriculture, from mines and quarries and engineering to the production of food and direct consumer goods, and to building. Hugo Stinnes himself had been deceived by the artificial prosperity of inflation into a fanatical confidence in the future of coal. It was the post-stabilisation depression in the coal, iron and steel industries, contriving even the depopulation of Ruhr townships, which led eventually in June 1925 to the collapse of the Stinnes empire. "
  2. "That event finally pricked the abscess. The great groups who had resisted over-expansion during the depreciation — Krupp, Thyssen, Gelsenkirchen — were able to ride the storm. Others such as the Sichel and Kahn groups foundered. The defects of 'vertical' industrial concentrations, embracing all stages of manufacture from raw material to finished article, had been revealed, the strength of horizontal combines confirmed. The speculators, in a word, found they had to pay for their folly, improvidence and greed; and the old captains of industry resumed their sway.
    The Stinnes debacle demonstrated above all that great industrial possessions could not be held without adequate liquid resources (as early as June 1924, Stinnes had been trying to pledge Bochumer Verein and Gelsenkirchen shares against Dutch loans); and that vertical combines were inefficient and unprofitable except under the exceptional conditions which had bred them. "
  3. "In the inflationary period new factories were built, old establishments reorganised and extended, new plant laid down, participations in all fields of industrial activity bought up, and the great amorphous concerns founded. Too late, it was found that this process had undermined the capital structure of the country: capital was frozen in factories for which, because of the extermination of the rentier and the reduction of the real wages of so many of the great consumer classes, there was no economic demand. Once the demand for goods was shut off and the flow of cash dammed, the fate of the productive apparatus was sealed. Even in 1924, firms of undoubted solidity and large assets were unable to pay out trifling sums of money. In 1926 that apparatus was still too great in relation to the working capital and the nation's power of consumption. Thus, whereas in 1913 there were 7,700 bankruptcies, and in 1924 only 5,700, the figure for 1925 was 10,800; and between the third quarter of 1925 and the second of 1927, bankruptcies numbered 31,000 — a rate of 15,000 a year. " 
courtesty of

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