I Couldn't Have Done a Better Job

So I present this article which is a MUST read and touches on the things I've been saying about the market. My job here at WOWS is to find the opportunities and for many, they've found incredible returns. More importantly though is keeping your portfolio intact and while some may think my constant calls for risk management to be inconsequential to performance, look at it this way: You have a $50,000 portfolio, you've lost 50% of it, leaving you $25,000-now you need to generate a 100% gain just to reach break-even; that's how important risk management is and it's the only way to provide for your long term success. Overnight riches are a myth of Wall Street and one best left to others to chase after. Slow and steady wins the race. 


So here's the article.


Some things I'd like to note within it:


With regard to the POMO effect on the markets which is documented:


"Whether or not there is a direct connection between QE and a bid for stocks, the mere fact that the link is so widely believed has played a non-trivial role in the equity markets. Which begs the question: If the markets have risen on this scenario, does it matter whether or not an actual connection exists? After all, millions of investors have been benefiting from the ride. The cynical answer is that it probably does not matter -- if such manipulations could continue in perpetuity. There’s the rub: Nothing continues in perpetuity. "


The role of HFT firms undermining the market's structure that has provided for semi-stable markets-at least compared to what we may yet witness:


"Regardless of the Fed’s role, there have been other, more disturbing bits of evidence that we are in a Matrix Market. Exhibit One is the so-called flash crash of May 2010 during which stocks fell by 600 points in five minutes before staging and equally vertiginous recovery. The crash offered evidence that something truly scary lay behind the reassuring façade of buoyant markets. Subsequent investigation revealed that High Frequency Trading, which relies on algorithms to execute super-fast trades, exacerbated the collapse. Revelations about the extraordinary percentage (sometimes over 80%) of trading attributable to HFT programs in stocks such as Citi (C) and AIG (AIG) suggest that the metaphor of a Matrix Market may be literally as well as figuratively true, and also helped explain how a market suffering continuing retail withdrawals could still rise to a multi-year high during a very weak economic recovery. Economist Michael Hudson of the University of Missouri calculated that the average time a stock was held during 2010 was 22 seconds, not exactly buy and hold."


Regarding taking the market's current status quo taken for granted and not being vigilante in exploring and understanding the role various factions play and how it has reshaped the market structure by eliminating the traditional role of market makers to provide liquidity and the trap it sets. (Note this is not bad news if you are prepared for it, it's an opportunity, maybe a once in a lifetime opportunity)


"The recent example of the auction-rate securities market shows that fake markets can seduce and then trap the most sophisticated investors. Adapted for municipal finance in 1988 by Goldman Sachs (GS), the market grew to about $300 billion before it collapsed amid a series of failed auctions when the main players -- Citi, UBS (UBS), Morgan Stanley (MS), and Merrill Lynch (MER) -- pulled back from their practice of being the bidders of last resort."


"Those who paid attention (which did not include me) saved themselves much grief. Others remained oblivious for 11 months before the axe fell, and when it fell, it fell suddenly -"


"In hindsight it’s obvious that during that “dead man walking” period it wasn't in any underwriter's or broker’s interest to say that the ground had fatally shifted under what had been a highly profitable market."