Oops…I Did It Again – FTX Edition

There are times I tell myself to post something, and I have a topical idea, but they just don’t seem inspiring. Then this week happens. If I want to have a timely topic, it’s not a reach to figure out what it is. Let’s talk FTX, crypto, smart people, hubristic (it’s a word I looked it up) people, and the rest of us.

As someone with decades of experience, having watched crashes, scams, crashes caused by scams, I didn’t see this one coming. I figured we needed an ‘event’ in crypto, but I didn’t think this is where it would happen. I was an SBF fanboy. I really thought Sam was smart enough not to be dumb. But…shit happens. Again and again and again. My most vivid memory of super smart people blowing up in spite of their intelligence is probably the Long Term Capital Management blow up. I’ve mentioned this one before, smart people being dumb.

So how does stuff like this keep happening? Previous fails being brought up in comparison to the FTX blowup; Enron, Madoff, even Lehman Brothers. Recently I saw a mention of MF Global, which kind of seemed like a good analogy. But when you dig in, is this exactly the same as any of those? No. But that isn’t really the point. The point is that we seem to semi-regularly have these ‘events’ and every time there are countless articles, also by smart people, saying I told you so. Then why do we keep listening to the wrong smart people? Let’s try and unpack at least some of the personal and group thinking that leads us astray over and over.

There’s greed. That one is pretty simple. We want to make money…today. Enron and FTX both encouraged their employees to buy stock in the company. Kind of doubling down on your employer. Enron’s CEO, Ken Lay, campaigned hard for those employees to do this weeks before the collapse of the company. He knew. FTX, from what we’re learning, was most likely supporting the losing trading operation at Alameda Research, an affiliated firm that actually was the reason for FTX to exist in the first place. FTX was created in order to provide a place for Alameda to better access crypto markets as a liquidity provider.

If the overlapping parts of all the stories and rumors are true, the small circle of people running both firms knew that FTX was funneling money into a money hole. And yet this management team told the employees to buy more. Just another source of outside money to feed the beast. Why? Cutting losses is hard. Big reason why Trading is Hard. It hurts. It hurts financially and it hurts emotionally. You need to admit you were wrong. But the hubris of the success that you initially had leads you to believe you’ll be right in the end. Everyone else is wrong.

This same hubris also leads to CEO’s forgetting something that needs to always be remembered; the more successful your company and the more it grows, the more lives you now have in your hands. It’s a real responsibility. Those people are following you and your vision. When you say we’re changing the world, they believe it. When you say buy more stock, they do. And when the plan you’ve masterminded to keep yourself from cutting your losses and losing your sudden found wealth blows up, those people are the ones whose lives are impacted the most. Some will be wounded, some will be broke. All will become just that much more cynical.

So if we’ve seen this repeat itself over and over why do we keep jumping in the pool? Our own greed. Our own FOMO (Fear of Missing Out). If my neighbor is making money I want to make money too. And even in crypto, much of what’s out there is headed for the same fate as those FTT tokens issued on FTX…worthless. When Changpeng “CZ” Zhao, CEO of Binance said he’d sell $2 billion worth of FTT tokens, he was well aware he couldn’t. It’s what’s known as a thin market. The beginning of the end.

A thin market is when there are not a lot of people looking to buy or sell something on a large volume basis. Think of it this way; if last week and the week before houses on your block sold for $500k, you would reasonably expect to be able to sell yours for near the same price, particularly on one of those blocks where all the houses are exactly the same. In a normal situation, where there’s a house or maybe 2 for sale on the block, this is probably a reasonable expectation. But (!), if all of a sudden 19 of the 20 houses on the block went up for sale the same day you probably aren’t getting that $500k. Someone on the block is going to sell their house to the first buyer they can find. And then the rush begins. The rush to be the next seller. Now the prices on the block crater.

Other markets work the same way. There are a lot of people that own Bitcoin and see some value in it. The only value in the FTT token was FTX. And if someone with $2billion worth wants to sell he must know something. At least that would probably be the perception. And now the rush to the exits begins and anything connected to the FTT token, and in turn FTX collapses along with it. I’ve referenced the words of my wise friend before; Lather, rinse, repeat.

So that’s kind of how we got here in a very very general way. The point was not to delve deeply into the collapse of FTX itself, but more why similar events will happen in the future. It’s a combination of factors; individual greed, group greed combined with FOMO and jealousy, and less not acknowledging the past but more always convincing ourselves that this time it’s different. Sure it is. Just like the most recent Halloween movie (#13) was different than the first. But the common theme remained. Everyone has, as I’m so fond of saying, seen the movie before. We still spent over $43 million to see it opening weekend. ‘Nuff said.

What’s In Your Wallet?

I’m back. I’ve waited out enough time to find something to discuss that I don’t think needs to reflect any political arguments that circle around economics and markets these days. I’m going to write about a prediction, which I generally try not to do. Hate being wrong with such regularity, unless it’s just small trading losses on the way to a long ride on a trend.

About a year ago when I was pondering the last blog I published, Trading Is Hard , I told my wife I was thinking about writing a blog about Stagflation. I hesitated and finally decided against it because I hadn’t heard anyone else mention it and was convinced I must be wrong, and that would somehow quickly be demonstrated. Yet here we are. Stagflation on the tip of everyone’s tongue. My wife, to her credit, does remember the conversation and has said so out loud. This time I’m going to go ahead, be bold, and publish my prediction. Can’t think of a better way to ensure that it’s wrong, but here it goes.

Global Digital Currency within 10 years, but one still controlled by international central banks. I wanted to say 5 years, but every time I say 5 years for something, it takes 10. Either way, it’s printed. Bill’s newest prediction. So what’s the big deal? This to me is the most realistic intersection of the crypto nirvana that is so often put forth and the reality that global governments don’t give in easy. Especially when there’s money involved. Especially when what we could call The Currency is involved. The Currency could be every sovereign nation’s own fiat. In a bigger sense though, those could be referred to as the currencies, and the US Dollar would be The Currency.

I don’t want anyone reading this to think I believe this is an original idea. I also know I didn’t define Stagflation. I’m just here to try and help people make sense of what’s going on and what some of the possible outcomes or ramifications may be. This idea has previously been floated, so at least if/when I’m wrong, I know I’ll have company.

The US Dollar is considered the global reserve currency. We think of the value of other currencies in terms of the USD cross rate. Global banking is mostly served using USD. On the same level of importance possibly, energy is priced in dollars. Oil that is, black gold, Texas tea (credit The Beverly Hillbillies theme song). This is important. It shows that globally we want a reference or benchmark. And that reference has grown to be the USD. Is this a forever thing? Definitely not. China is discussing trading oil denominated in Yuan. The public reasoning is facilitating movement of Russian oil. But I’m gonna say, as a Political Science major, that China rarely thinks only about now. Their system of government provides for longer term plans; no one’s running for re-election every couple of years or so. This can easily be seen as a first step towards working to replace, or at least weaken the dollar as a global reserve.

Now let’s look at crypto…I mean beyond the hypocrites who want to change the world right after they buy a Lambo. One of the arguments put forth for Bitcoin is its ability to become a global currency. The ease with which the underserved or completely unbanked can join the world economy via digital assets like bitcoin should not be overlooked or understated. Digital currency does indeed allow for simple direct transfers without the additional touchpoints along the way. But it’s not perfect, and it’s not something that, given the degree of HODL’ers, can easily become the instrument we’re actually using for day to day transactions.

However to ignore the technology and what it can help achieve would be foolish, naïve, and just dumb. We’ve got cars, assembly lines, all the way up to iPhones thanks to technological advances. And the idea of complete decentralization is great in theory, but much like political systems will either fall down at worst, or be unrealistic on a timing basis at best. But diversification can be a stop along the way that makes sense and is kind of a good compromise. A good compromise is what’s at the end of most negotiations. I was taught a negotiation is successful if both sides are happy or both sides are unhappy. As long as it’s even. And that’s what a global reserve digital currency gets us…Some satisfaction mixed with a bunch of feeling ripped off.

A USDC, or US Digital Currency, doesn’t do much in the big picture. There’s not a lot of cash transactions happening these days. We don’t even write paper checks anymore. We use credit cards, Venmo, bank transfers, and auto-pay. So what’s the big step? The next Treasury Secretary doesn’t get their signature on a paper bill to frame? I can live with that. So a USDC, or any other digital fiat tied to a specific sovereign is merely the next simple logical progression along the same old road. Think VHS -> Tivo -> VOD. Think later, rinse, repeat.

But the idea of a global digital currency accomplishes a lot more. It takes control from one nation. It makes it harder for a nation to control a global economy. I’m well aware there are a lot of countries trying to reverse time and become more self-sufficient as they like to claim, but I’m going out on a limb and saying supply chain issues will convince us to open back up rather than close down further. Because if people think inflation is bad now, wait until everything we buy and eat needs to be US sourced. Careful what you ask for, I’d hate for us to get it.

So we’re up to paying for all this stuff from around the globe. I understand that much of the movement toward nationalism around the world is based in national pride, but I’ve said many times as a trader, “When there’s money involved, pride only gets in the way,” (or at least close to it). This is not about pride. This is about maximizing what each country can bring and leveraging the assets found around the globe. And paying for it in a way that both makes transactions simpler and takes the economic power out of a single hand. Not needing to use USD as a basis for trading, business, banking and everything else related will add a layer of efficiency while still letting governments follow and tax the money…you didn’t think I’d be that idealistic did you?

Is this simple to accomplish. Um, fuck no. Is it a logical way forward? I think so. Does it solve all of our political problems? We’re back to the ‘fuck no’ thing. But it brings a level of accessibility to the world economy that’s never existed before. It allows anyone with access to a [Insert Currency Name here] to have the ability to participate. To make and spend money. To be a part of the machine instead of merely depending on it. Won’t solve every problem, and this blog doesn’t begin to address the majority of the hurdles this idea would face, but that doesn’t mean it isn’t worth doing. I’m a big fan of always Moving Forward. This to me, is moving forward. And I know I’ll probably be wrong, but at least this time if I actually am right, I got proof.

Trading Is Hard!

I’m not sure if I need to add anything to the title, to be honest. Sometimes it’s the simplest things that become the hardest things to accept. Like the fact that trading is hard. There sure are a lot of people in crypto that don’t think this is true. That’s pretty much what spurred me to write this blog today. It’s the idea that all you have to do is buy and HODL. Nope, not a misspelling. HODL, which started as a misspelling, has become the battle cry for the crypto crowd. The group think is Hold On for Dear Life. The idea is if it goes down, just hold on to your position, eventually you’ll be rich.

As I’ve stated so many times at this stage of my career, I’ve seen this movie before. No this isn’t a Charlie Munger, Warren Buffet, Jamie Dimon, etc denial of bitcoin and crypto. As my readers are well aware, I’m all in bullish, to the point that I work for a crypto exchange. That’s about as IN as you can get. So am I long term hyper bullish on crypto? Yes. But I’ve been trading a lot longer than bitcoin has been around. I was good enough at it to stay in the business for a long time. Dead markets, wild west markets and everything in between. I’ve taught others and spoken with many many traders of different instruments over the years. We all agreed on one thing…to have longevity in the business you needed to accept that it was hard.

Don’t get me wrong. Can you get rich trading and not be good at it? Absolutely! I’ve always believed in luck over skill any time. And generally successful people have some luck along the way. It’s been said those people make their own luck, but either way there’s still some luck involved. And crypto traders and hodlers alike have been lucky; this has been one helluva bull market. I’m not saying it’s over, just saying it’s been going on for a while. The run has had some hiccups let’s call them, but it’s been a 10 year (+) bull market. So looking back, yeah just holding positions has worked. No matter what. And those are some strong hands, or ignorant, or a little of both.

Back when I traded gold futures and gold was trading under $300/oz. I used to hear the same refrain. Gold will make new historic highs. The previous high was approximately $850/oz. back when the Hunt brothers were trying to corner the silver market. My response was simply, “If you survive long enough and your pockets are deep enough, you can wait for any position to come back.” This is not something I would recommend…for a couple of reasons.

First, if you’re trading exchange instruments you’re probably getting a lot of margin calls along the way to support the position. Second, instead of holding that position as it goes against you, just get out. You can buy it back again when the setup seems more bullish. Or you can buy it back cheaper. Or you can simply reallocate the money to a better trade. But getting out allows newfound clarity every time. Third, and extremely important,  it’s Painful! Sitting on a position that is going against you and you’re just sitting there watching yourself lose money hurts. And that’s hard. One of the things that will always stand in the way of profits is emotion. Thinking you’re right and the market and the world are all wrong. You may be vindicated eventually; let’s just hope you haven’t run out of money before it happens.

So about that movie. We’ve discussed on more than one occasion the ‘internet bubble.’ When it seemed that anything with .com in the name would make money. One of my favorite examples is always Pets.com. Cutest sock puppet ever! Never made money, stock went to zero (Ok, there’s a trade that isn’t coming back). Everyone and their brother, and their sister, cousins, aunts, etc. thought they were the best traders in the galaxy. Why? Because they were making money. One friend used to trade on his lunch hour and didn’t understand why I wasn’t richer. He was buying things and taking vacations…then it all blew up and he realized no more of that nonsense; couldn’t afford to make money like that anymore, cost too much in the end.

Recently we saw this in fast motion with the Wall St. Bets crowd looking to crush shorts in traditional stocks. Sending Gamestop up over $400/share was a lot of fun…unless you were the one that bought it at $400, because ‘they’ promised we’d get it to $500. This plays out over and over for the same reason Ponzi schemes do. Easy money, or seemingly easy money, is attractive. But most money isn’t easy.

The second favorite refrain in crypto, after HODL, is BTFD. Buy The F*cking Dip. Another strategy that’s fun and profitable, until it isn’t. Buying the dip is great, but how do you know which dip? Or how deep a dip? Or when the dip is done. Buying the dip in gold, in our previous example, probably felt good at $600, and $500, and $400…when do you give up? Throw in your cards? Often it feels like you did it just when you really should have been buying more. But it’s tough! Those emotions again. I’ve got 10 rules of trading; one is ‘Save Emotions For Your Family.’

[Click to Bid – NFT Bids Accepted Until May 23]

The point is that there’s a difference between riding a wave and actually trading. The other thing I like to say is trading is not a hobby. Another friend once told me he got a financial settlement and he was going to turn that $100k into enough to live…for a while. After all, his girlfriend had bought him Trading for Dummies. I kid you not. I have known him since high school, so we discussed this plan. We agreed that while not the smartest guy in the room, I’m generally not the dumbest. And yet, after reading books, studying charts, writing successfully implemented trading algo’s, I still wasn’t rich. If it was easy, then even I should be able to make enough…he finally agreed, it must not be easy.

Sounds like I’ve seen the movie, huh? It doesn’t make me feel good to have to constantly point this out. It usually means people have lost money. In this case I hope it saves some people money. Like I said, the story is an old one. In fact my grandmother, immigrant from Hungary who lost her husband early, yet never worked a day in her life after that. How? She found a really good advisor. For even she had the wisdom to tell me when I was younger, `Any idiot can make money in a bull market.’ Now you don’t have to pay attention to me, but I do think we should all pay attention to her.

A quick note: We lost Welles Wilder recently. He invented many of the indicators we use today. I am a heavy user of his RSI and ADX indicators; in fact the TrendStall indicator I built while at Bloomberg is actually a derivative of ADX. I owe much of my charts success to using what he gave us. I always wanted to discuss his use of recursive calculations over simple, and whether that was his choice due to having to do hand calculations vs what he would have chosen if he had a PC way back then. I’ll never get the chance. Hope he’s looking down with satisfaction, knowing his tools are used and taught and discussed, and will continue to be at the center of our industry for many years. RIP Welles Wilder.

OK Hedgie

So the new kids won the game and the old guard is crying. After printing their own profits for years, the hedge funds lost money. WTF? You can’t make rules, break them yourself and then blame someone else when you lose. I’ve often pointed how often people try to blame their losses on anyone but themselves, yet every profitable trade is just further proof of the genius at work. I’m not trying to save on word count here, so I’ll spell it out…Shaking My Head.

This is not the first short squeeze. This won’t be the last. And every time, there’s an outcry to take short selling out of the market? Why? Because a bunch of people on reddit decided to band together and make the same trade? I remember when we used to be told how cute it was when a group of old women got together and made trading clubs. They’d gather, share their research and decide as a group what to buy. Why is this one different? Because we don’t like the crowd that inflicted the pain? Because we want to protect the crowd that lost money? Maybe some of both?

We’re all pretty familiar already with what happened. ‘Hedge Funds’ were short some stocks, betting they’d go down based on their ‘value.’ Then the reddit crowd came in and bought up the stocks, squeezing the shorts or in old trading terms, giving them a facial. There are so many parts to this that this blog writes itself, though it might need installments. We can examine hedge funds and their trading missions. We can examine other short squeezes. We can examine Liquidation Only, possibly the equivalent of a long squeeze. And we can examine why the people shouting about banning short selling and exchanges deciding a stock’s ‘value’ are misinformed and really haven’t thought enough about their points of view.

Let’s start this by looking at those hedge funds that lost all that money. The guys we’re supposed to feel sorry for. Obviously, I don’t. A hedge fund, by definition, is supposed to hedge. In other words, they’re supposed to have laid off much of their risk by having some sort of counter position. Reason one to have no sympathy. If they were hedged, they wouldn’t need to get inflows of billions of dollars to stay in business. Understand, this is not Bernie Madoff. This money existed, still does, but has changed hands. Isn’t that what buying and selling is all about? Hedge funds rarely hedge. They take sides. Call it what you want. They buy or sell because they think something will go up or down. So, in effect, they’re gambling. Thing is, usually they’re more like the house…they win more often than they lose. But every once in a while even the largest casino loses to a whale. And then they don’t let him into the casino again. Kind of like when Robinhood shut down trading for the masses so the hedge funds wouldn’t lose more money.

It wasn’t that long ago, in fact, that hedge funds were actually the devils of Wall St. So to now turn it around seems like an argument of convenience against the new newcomers. The part about the reddit crowd being called reckless gamblers and the hedge funds being portrayed as the victims is really crazy. Seems to me they weren’t reckless, they were on a mission. To inflict pain.

I’ve told stories here before about the old commodity futures trading pits. Every once in a while, one trader would get pissed at another (well, that part happened all the time) and vow to inflict pain. People said things like, ‘I don’t care if it costs me 10 grand, I’m gonna make you lose 50!’ We called it running someone in. In this case, the reddit crowd was on a mission to run in the hedgies. And it worked! So now we need to change the rules? Maybe we should have changed them before; or at least followed the ones we have. I’ve been in this industry for a while, but I still don’t get how a stock that is shorted can be shorted to the tune of 140% of the outstanding float when shorts are supposed to borrow the shares. IOW, the shares you’re shorting need to exist, and be deliverable. So who was in the wrong?

Again, nothing new. 1922, Piggly Wiggly. More recent? Porsche, Herbalife, Tesla, etc. etc. etc. In 1980 there was a kind of a long squeeze, in fact. The Hunt brothers attempted to corner the silver market driving prices up to $50/ounce. This became a ‘problem’ and so the COMEX changes the rules on futures; it was called liquidation only. It meant silver would crash and the Hunt’s would be ruined. So while the Hunts were portrayed as the bad guys, it was the exchange Board of Directors that changed the rules mid-game.

Robinhood wouldn’t let you trade? I know the issues they’ve spoken about around reserves. But few believe that; their position as one of many firms being paid to provide order flow was exposed and that sure seems to be a bigger problem than a bunch of r/wallstreetbets people getting long GameStop at the same time. This also is nothing new. I’ve had my own account shut down at TD Ameritrade. Why? While no one would provide an answer, I’m pretty convinced it was because we found a way to beat the firms that were paying for order flow at their own game. We were making money. Every Day. I was trading commission free, they were paying TDA for order flow. We both know who won.

Traditional Wall Street firms are like the kid in your neighborhood that as soon as they were losing, took their ball and went home. So why all the outrage? Why the call to protect them? Why are we going to ban short-selling, which anyone who’s actually participated in these markets is well aware adds more liquidity and serves to make markets actually more efficient. Why? Because the suits don’t like getting played by those ‘unprofessional reddit kids who don’t understand how this works.’ Actually, they do understand how this all works. So well, they were able to run you in. Deal with it. These markets aren’t guaranteeing profits, they’re guaranteeing opportunity. Will this end well? Probably not, but a lot of people have learned a lot about the realities of a somewhat free market. Now to go grab some more popcorn.

Which Way Is Up?

In case you haven’t heard there’s an election in the US this week. At the top of the list is the contest for President. You may end up reading this after Election Day, but few believe we’ll be sure of the actual outcome on that day, so I decided this isn’t too late to write…and maybe make a prediction.

I’ve spent the last few years writing this blog and attempting to stay out of the political discussion. As a Political Science major, it’s amazing I can be this exhausted, and this disappointed. Disappointed in the way this has turned into Us vs. Them, no matter which side of the us and the them you’re on. So I’ve been trying to think of what to write about without blatantly espousing for one side or the other. What did I come up with? Well, market analysis, of course.

I look at charts. I try to keep emotion out, except when I can’t take it anymore and I trade on emotion. When I do that, I generally accept that I’ll be wrong. So let’s discuss the chart, briefly, and then go into the why’s. The chart of the S&P, NASDAQ, or [insert broad equity index of choice here] says buy the dips. So on an objective basis, that’s what we should be doing. But what about the post-election moves? Well, rules are rules, so let’s see how to fit this into the current narratives around what happens after the election results.

Mini S&P Futures – Monthly Chart

If we read the above, after the election the charts say the probability is markets go up. But we’ve spent 6 months hearing how if one candidate wins it goes up, if the other wins it goes down. With a trend this advanced, it’s easy to discuss reasons it could go down based on who wins. But I’ve learned too many lessons the hard way. Those lessons usually are the results of breaking so many of my own Technical Analysis tenets.

So let’s try and actually find the narrative that makes this bullish opinion work, from both sides. We can start with either side. Let’s start with the incumbent, Donald Trump. It’s been said by many that a Trump victory is what’s needed for the equity markets to continue this run. We can see where this comes from, as much of the rally is supported by banks, trading firms, wealthy individuals, and family offices with money that needs to be put to work. And while many have stashed money in bond markets over the years for safe returns, rates are too low across the board to really make this a worthwhile position to take on a risk reward basis. Even rich folks want to return more than 0% to 3% based on the risk of the assets backing the bonds, from the US government to smaller municipalities to corporations. So this money is funneled to equities and it feeds on itself…like so many rallies do.

This audience is traditionally better served by having a Republican administration driving the bus. So based on that, it’s easy to see why there is a valid argument to be made for the continuation of the current leadership. Are there counter arguments? Of course…a lot of money has been printed recently. Not the usual Republican way of doing things, but hey, whatever works. There’s not a lot of evidence that the practice of feeding corporations and the wealthy will change with a re-election, so it’s easy to see how a Trump victory leads to a continuation of this ride higher. Anything else is pulling the rug out from under.

On the other side is Joe Biden, the challenger. Many narratives say that a Democrat in the White House will lead to a large sell-off in these markets. Now history doesn’t necessarily support this, as some of the largest bull runs have come with Democrats driving the same bus. Yet it’s an easy argument to make. Taking aim at corporations and rich folks by taxing all those winnings at a higher rate, supposedly printing more money than the other side, these are the things that drive arguments for a bear market. But if you’re making money, well it’s not quite as painful to pay higher taxes. Think about it…would you rather (as the kids game goes) pay $40 out of $100 in profits, or pay $10 on $50? Well looking at percentages only, it’s easy to say the latter. But if I’m only able to make $50 vs making $100, personally I’d rather have the $60 in my pocket post taxes than $40. That’s my math.

But how does the market keep going up under Biden. Well, if we can conclude that much of what has kept these markets afloat is an expansion of the monetary base, it’s pretty fair to say that a Biden administration will pump more money into the economy. It’s how the promise to support those suffering the most financially in a pandemic gets translated into more dollars floating around. But will those who need the money most actually be buying stocks with payouts? Probably not. Rent, food, clothes and all that. But it would be naïve to expect that the only beneficiaries of a monetary policy designed overall to help those in need will be confined to that audience. And we know that interest rates won’t fly higher in this scenario, so we’re back to the place for this money being equities. Yup, bullish.

Will it play out this way? Maybe not. Maybe the second Trump administration doesn’t really keep printing money. Maybe they do find their way back to Republican roots of tighter monetary policy. Maybe the rally that has, for the most part been confined to a small selection of stocks within the indices does run out of steam with a lack of new money.

And on the Biden side? Also not guaranteed, but it’s difficult to find a scenario where a Democrat led administration doesn’t keep the printers going and interest rates low. Now granted it’s difficult to imagine getting a mortgage refinance at less than the 2.75% I just got, but we still have positive interest rates. They could always go negative on a federal level, a la Japan which means I could refinance even lower next year. Negative rates are not something I’m in favor of, didn’t work for Japan, but that doesn’t mean it can’t happen.

So where does this leave us? Well, this blog is titled The Story Behind the Picture. This is what I see as ways for the bull market to keep going. Will I be right? That I don’t know. What I do know is that I’m not getting short again until the chart tells me to. Cheaper that way. Sometimes no trade is the best trade.

Please go vote! It’s your responsibility. And if you don’t, and your candidate of choice loses, please don’t bitch about it. You only earn that right when you take care of your responsibilities.

I Don’t Want That Job

I recently lost my dad. It’s painful, we always discussed my blog of course, but what was most amazing was all the stuff that had to be dealt with. One of those things involved my parents’ investment accounts at Morgan Stanley. My dad had a good relationship with his Advisor. I met him once prior, and found him to be personable, smart, informed, and realistic. I realized immediately why my dad always said how much he enjoyed their conversations.

When dealing with paperwork, establishing new accounts, etc., I made it clear to him that no matter my background in markets, trading, advising, and teaching I have no intention of trying to tell him how to invest what is now my mom’s account. This was a worry of my mom, so I wanted to squash that one quickly. I continued to chat with David over the following days and weeks, and finally asked him, “Can you please explain new highs in the indexes to me? I just don’t get it!”…as evidenced by the obvious losing trade I wrote about previously. I told him I definitely don’t envy the position he’s in.

He laughed. He told me that many of his clients call as they watch this crazy rebound (my description) and wonder why he’s got any cash on the sidelines. How could he not have them fully invested? The line that stuck out to me the most was when he told me some of his clients actually feel like they’re losing money. After all, NASDAQ futures (I think in futures, old habits are tough to break) are up over 80% from the lows of the spring. E-mini S&P futures are up over 60%. So if your account hasn’t grown that much in the last 5 – 6 months you, or your advisor, are lagging. At least that seems to be the thinking of many investors, whether you’re considered a novice or advanced investor. Many of these people are even at the level of accredited investors which, by the government’s definition, means they have an understanding of market movements over time.

SnP Up

But is this a fair critique? I’m not sure. As I said in my last blog entry, many of the most advanced professionals I’ve spoken to, or whose opinion I’ve read, seem to have a problem understanding this rally on a fundamental basis. Being a chart technician, I should be bullish. Buy every dip. But I’m not. Neither are many of these professionals. As a believer that the market is always right, does that therefore mean all these opinions are wrong? Let’s examine a bit and you can draw your own conclusions.

The NASDAQ index is based on 100 stocks. The S&P 500? Eponymously named for the 500 stocks in that index (505 actually). I keep reading on Twitter that my 401k, if I actually had one, is screaming higher. I should be thankful for this recovery as it will cushion my later years. OK, then why can’t these advisors keep up? Well, a couple of reasons. One, it’s really difficult to call a bottom when it’s falling out from under us. And if you did call the bottom, what did you do about it? Most of these accounts are not trading index futures or even ETF’s; they’re trading equities, and that’s when it gets really hard.

The bulk of the S&P up move is centered around 5 NASDAQ stocks; AAPL, AMZN, MSFT, GOOGL, and FB (Facebook). Those 5 stocks have a Year-to-Date return approaching 50%. The rest of the S&P? Negative 3%. By another person’s measure, those stocks account for 44% of the up move. I’m guessing most professional money managers would not consider themselves to be truly performing their fiduciary duties were they to focus portfolios on only 5 stocks. That definitely isn’t the diverse holdings model that is constantly taught and hammered home. And we always seem to forget why these people are good at their jobs, even if they haven’t returned 60% – 80% over the last few months of this surrealistic world we’re living in.

SnP Down

I’ve tried to explain this to many people over the years who have pointed out that if you “Just buy an index ETF, over 10, 15, 20, 30 years you’ll make good money.” The problem with that statement is not only is it overly simplistic, it shuns human nature for most of the population. We’ve discussed corrections and why a 10% down move is a buying opportunity in a bull market. A 20% correction converts that same index into a bear market. The S&P e-mini futures dropped 36% in one month. That does not sound like a buying opportunity based on all the old rules. And we all know I don’t believe in a New Normal. At least not as often as we’re told they happen. We’re usually told by different experts each time, and this is not a new normal I’m willing to buy into (literally).

Double digit unemployment. Small businesses begging for another life line. And every time we’ve thrown that lifeline recently, we’ve done it in ways that devalue the US Dollar on the global currency markets. The argument can be made that even if you are making money, you’re making a lot less than you think you are. But that’s not the point I want to make. What I do want to point out, is that emotions drive most investment decisions that aren’t automated strategies. And even people using those computer models often want to override them when they don’t get the returns they want. They may be getting the returns they expect based on the research, but it still sucks to read on social media how much more money people are making than you. Personally, I think it’s like those Photoshopped vacation pictures. If you were having that good a time, or making that much money, you really don’t need to brag. We can all tell from your smile.

What we need to learn and keep in mind, is that a single benchmark rarely tells the full story. A long term strategy, be it fundamentally based or technically, has to have rules. And you have to live by those rules or else for all intents and purposes they don’t exist. Don’t look at someone else’s family pics on FB to decide if you’re happy. And definitely don’t believe the hype of how much money you should be making. Devise a plan, stick to it, keep your head down, and worry about your own money. That’s more than enough to think about for any one person.

Where to Begin?

Yep, I’ve been absent for a while, so this one’s a bit longer than usual. There definitely is not a shortage of material. In fact I can start briefly with my own personal COVID-19 journey. Not going to ignite any big debates about re-opening and crowding bars. I don’t want this to get political and that will send us there. Being a survivor, feeling stronger every day makes me feel lucky. This thing kicks your ass. Only way to describe it. And I thought I was being careful (paranoid) before I got sick. Just want it known; I’m a believer in masks and distancing. ‘Nuff said.

Plenty of economic material too. I recently went against all of my own rules. I shorted the NASDAQ. Bought puts soon after the open for the trading day after all-time highs. The day the NASDAQ dumped about 150 points. When teaching or discussing charts I always tell people that you should have the same opinion about a chart no matter the symbol. And if I was looking at a NASDAQ chart with no symbol, I’d be solidly in the ‘Buy the Dips’ camp. But I just couldn’t stand it anymore.

So I broke the rules. I went against the chart. I put on a trade steeped in emotion. I went with my gut. The list goes on. And yet, so far I’m right. Stepping back I do see some places that were cracking that maybe I saw but didn’t pay attention to. Maybe those actually were good reasons.

The lack of good measurable momentum. The RSI couldn’t make a new high when the market did on either the weekly or monthly (so far). The monthly chart shows an impending TrendStall, which would indicate the move is over, at least temporarily. But not great reasons to fight the overall trends.

NASDAQ              NASDAQ Monthly

[NASDAQ e-mini Weekly]                                     [NASDAQ e-mini Monthly]

But the Fed is printing money and they’re ready to print more. The government has even gone so far as to buy corporate bonds. Sure sounds like a nice soft cushion under that ugly looking cliff jump. We don’t want to fight the Fed, as the old saying goes. And I’ve discussed in this space what happens when an incumbent President is running for re-election. Make no mistake, many of the actions sold as helping citizens when they need it might not have occurred a year or two ago (one man’s opinion, but it is my blog).

What made it so that I just couldn’t stand it anymore and had to get short? Well, timing aside as it wasn’t the first new all-time high day, but I had been holding back. Printing money is nice, but what good will come out of it (unless you’re long gold and/or bitcoin)? Let’s look at what else is going on and we’ll come back to that one. Unemployment is around 14%. That’s not going to get better. There are business that have hung on for the last 3 months, but now we’re faced with being back where we started. States reversing course on openings. Bars realizing they’re the center of it all, helping extend the pandemic to a population group that we all thought was in less danger (but isn’t), and the people in that group believing they’re invincible…didn’t we all when we were in our 20’s? And many of those people go home to parents in known risk groups. Not going away.

So all that curb side pickup that let restaurants hang on while they thought a re-opening after a couple of months would help them make it through, now see that the light in the tunnel may be a freight train. And even home improvement can only go on for so long when you’re semi-quarantined. Eventually the house is in decent shape. With the economic problems we’re facing and the fact that they could get worse rather than just being a brief period of pain, well, people get nervous. They get nervous about losing their income, i.e. job. Sure don’t live on Amazon as much when you start getting that feeling in your gut.

It hurts to see how many small, family businesses will be seriously hurt and probably close. More unemployed, many somewhat older and less employable; just late 40’s early 50’s is older or simply old in today’s corporate America. These are the entrepreneurs and businesses we’ve encouraged for almost 15 years. Since the last time people lost jobs en masse. We’ve created a Shark Tank nation. Can’t find a job, simply invent a business. It’s great in times when things are expanding and people are spending money. Unfortunately, now is no longer that time.

Commercial real estate? Not feeling it as more companies see people really can be productive from home. Big purchases like cars? Really need a brand new Ford F-150 truck? Well if you’re in the home building or improvement business probably not as business slows. If you leased the last one because you thought it was the awesome truck you absolutely needed to haul your Home Depot stuff home, you’ve probably figured out a smaller, less overkill truck will suffice. How many grills are you really going to need to bring home. You may even question whether you really need a truck at all. Maybe a nice electric car after all. Save money on the purchase and the fuel. Double win. You get the idea.

Vacations? LMFAO. If you can’t drive there, and probably stay semi-secluded like a beach house (but not going to the crowded beach), chances are you’re just staying home. Drinking more perhaps, but there are only so many alcohol stocks out there to invest in. And all of this is just the easy to spot low hanging fruit. The lack of jobs and resulting lack of spending are like pebbles in the pond. The ripples will touch every part, every piece of shoreline. And if it doesn’t happen to you, it will happen to enough people you know to scare you.

Now back to that money printing thing. Eventually that leads to inflationary pressures, Econ 101. One can argue that with the lack of spending I’ve just argued is in progress inflation probably isn’t a worry as there isn’t demand across the board for goods of all kinds. And that’s true. What’s also true is that food is not part of the inflation measures that are cited to make arguments one way or another. But we all feel it when food goes up; I know I’ve noticed. Therefore it’s tough to say that’s not an important thing to think about when really thinking about the price pressures that hurt the most.

So what do we get? Some inflation that no one can avoid. An economy that’s going to struggle in almost every aspect and sector to find a way not to contract. In fact, it’s tough to argue against a worldwide recession. Ugh! As in Ug-Ly. Maybe F’ugly is an even better word. Stagnant economy, inflationary pressures, and don’t forget a currency under pressure as we lower rates and talk about negative rates. This is called stagflation. People cringe at the word. It’s kind of the worst of all worlds, economically speaking. It was coined in the 1980’s to explain problems that previously followed economic theory never accounted for. In other words, the shit would never hit the fan. I’ve heard that one more recently…Oh yeah; mid 2000’s the educated professionals said real estate would never go down. Nope, we don’t learn…short memories. And negative rates will not improve that situation or outlook. Brief Public Service Announcement: Negative rates are not a good thing. I’d go into more depth, but it’s a blog unto itself. That blog will focus a great deal on the economic history of Japan since the mid 1990’s. Or look it up. Probably be quicker than waiting for the blog.

The point I’ve been trying to make is this upward movement in the market is unsustainable. Hopefully one of the many arguments I’ve put forth has made that point in your mind. Did I pick the dead high? I’m not going to bet on that. If I did, well better lucky than smart any day. But the lack of technical momentum, paired with overall economic news that contains no positive long term indicators drove me to it. I won’t learn from this trade if I make money. In fact, it will probably just lead me to do the same undisciplined thing again. But this market is like that old joke about shit inside Tiffany boxes. If you put some shit in a box, no matter how pretty the box may be, robin’s egg blue with a wide white ribbon, it’s still, well…just shit in a box. And no matter how much money we print to find its way to temporarily drive a bull run, any look at history will show this is unsustainable. As I’ve said before, there’s rarely a new normal. It just looks like it till we go back to the old normal. Be prepared.

Remain Calm and…WTF?

Monster 1

So here we are. No more complacency. Now everyone knows what a black swan is. She’s swimming by as I speak. Interesting thing is, as rare as she is, she’s not the only one. Some are larger, some smaller, some less ‘dark’ perhaps than this one, but we’ve seen them swim by before. They’re those things we don’t see coming…and we’re generally glad when they leave ‘cuz they’re ugly, at least on the surface.

What am I talking about? The current market conditions. I can’t and therefore won’t speak to the health ramifications and related issues. There are people that do that every day and know way more than I do. What I do know about is market events. They do happen. With an interesting degree of regularity. For one would think that some of these events should be remembered longer; should be felt longer. These events create pain. They create financial pain that easily leads to mental pain that, unfortunately, even more easily can lead to physical pain. And yet, we forget them. Probably healthier in many ways. Let’s us move forward. Maybe some sort of reaction to economic PTSD.

Please don’t think I’m using that term lightly or with any degree of sarcasm. When you lose a job, when you lose a house, when you worry about your family’s future as the result of an economic event, I have to argue this counts as PTSD. But one of the positives of the economic kind of shock and lingering syndrome, is that we suffer as a group and recover as a group. And economics, unlike emotions, seem to recover every time. Like the swans themselves, you don’t know how long that recovery will take. But you know it will come. Remember those pendulums we discussed a little while back? If ever there was an extreme, this is it.

In just over 40 years, we’ve seen the Crash of ’87, the Internet Bubble of 2000, the Great Recession of 2008, and now this. Pretty regular. And each time, we think this is the time we won’t recover. Each time, we wonder how we ever let it get that far away from us. How did we not know this was coming? Well, we didn’t want to. Having way too much fun. Bring up things like portfolio insurance and hedges, all of a sudden you’re the ‘Debbie Downer’ of the party. Why would I hedge when I can make so much more this way? It’s all going up. It’s not gonna go down. And when it does, we’ll all know it.

Pick any of the above years. Same words each time. First time, I was one of the crowd. Second time, thought I heard an echo. Third time, knew I’ve seen the movie, just wasn’t in a position to capitalize. This time? I’m keeping my perspective and I’m doing my homework. It’s not going to be easy. But opportunities will present themselves. Many of those will seem obvious when looking back in a few years. Things like lots of “Pandemic Babies” feeding infant supply companies…everyone needs a diaper when they start. Sounds humorous, but we’re all home these days.

I remember 9/11 babies. And every year, and the victorious city, nine months after the super bowl is this crazy increase in births. All within a week. Go figure. Misery, fear and celebrations all leading to the same conclusion; rebirth. And as corny as it sounds, that’s what we’re going to observe on an economic basis. People will act slower, will do more research, will run lots of ‘what if’ scenarios in their heads, but in the end, they’ll still buy houses, cars, trips and all the same things they’ve bought before. And like those consumers, investors also need to add that extra level of analysis. But start with common sense. Start with perspective.

Recessions last an average of 6 – 9 months. And let’s not fool ourselves, with the equity markets down 30% from the peak, interest rates forced to zero and earnings thrown into question for a few months, avoiding a recession would be a much larger surprise than entering one. The job market alone will be frozen for the next 2 – 3 months. Just the act of interviewing is thrown into disarray. Companies can’t hire when they can’t interview. Heck, right now they don’t even know if their network infrastructures can handle the employees they have…when everyone is working from home.

So take some time. You’ve got it now. Rediscover conversation with family and friends. Might as well. Can only binge so many streamed shows before you need some human interaction. And that could lead to investment ideas. One person brings up diapers as an investment, maybe another says people will take vacations again in six months…cruise industry maybe a longer wait. The point is there are and will be opportunities and some people will take advantage of. And it doesn’t need to be the professionals. Sometimes they miss the most obvious winners. Even I’ll admit that not all great investment and trading ideas are borne out of charts (as much as I’d like to think they all are). Much of it is common sense. Much of it is just a bit of thought. And all of it comes back to my favorite word, uttered in this blog of mine many times; Perspective…this time mixed with some Patience.

What Time Is It? What Day Is It?

Melting Clock

I’ve been using charts for a long time. Bar charts, Point and Figure, Market Profile, and of course Candlestick charts. In fact, I build a platform that provides charts. Well, time series charts, where time is measured in equal increments along the X (Bottom) Axis. And that comprises most of the universe of chart technicians, or technical analysts. It makes sense. Everything we do is time based. Going to school or work in the morning, coming home in the afternoon or evening. We do that, generally, five days each week. I get paid twice every month. And every year I celebrate the same holidays. They mark the passage of another year, most notably acknowledged at the transition from December 31st to January 1st, aka New Year’s.

Traditionally, trading markets easily facilitated the use of time series charts. There was an opening time and a closing time each day. There was a break for the weekend. Many markets have come close to 24/7, but not quite, and therefore the traditional time series charts still work. But I work in crypto now, and something I’ve realized is that this is a pretty random thing to do now, create a time series chart. Why do I say that? Well, the crypto markets truly never sleep.

Earlier in my crypto involvement, prior to landing my current role, I interviewed with a company trying to create their own crypto exchange. They let me know that their plan was to close for up to 15 minutes a day, with up to a one hour break each weekend to reset, reboot, or re-something that seemed to me to be not very well thought out. If you are the only exchange, or the largest exchange it’s relatively routine to impose your own rules on a trading community. This company was a startup. This was in 2017 when crypto was at the early stage of going ballistic, both with a parabolic price move and previously unexperienced volume.

And they were going to close regularly. I explained that as someone being brought in to build a product and know the audience, one thing I was sure about with the trading community was that if you were the only exchange closed at the busiest moment of a busy day, you were closed at the wrong time. No matter the time, based on the situation, it would be the wrong time. And customers would go elsewhere. And once gone to another exchange, they would need an excuse to leave and come back. It was a bad plan. They didn’t understand the business they wanted to get into. I didn’t go work there.

Back to the charts themselves. If we decide that we really can’t close, then how do I build a bar or a candle? So we use midnight UTC time for open and close. But it really isn’t. It’s just 12:00 a.m. in a small segment of the earth. And weekly charts? When I got where I am now, our weeks started on Thursday at 12:00 a.m. because that was the time that computer clocks rolled their weeks according to Unix time. Why? Because someone decided that the beginning of time should be January 1, 1970.

And how was this decision reached? I’ve read it was the birth of Unix; I’ve also read it was convenient since Unix had been around for a while already. Kind of arbitrary, huh? Crazy to imagine there was no reason to ‘count time’ (that’s what Unix time does) prior to 1970. A lot of cool and important stuff happened prior to 1970. Someone put in an arbitrary cut-off.

We still do that with our charts. We changed the weekly open on the charts we produce to Monday morning. What this means is that the week ends on Sunday. We could have changed it so the week ended on Friday, since both Monday morning and Friday afternoon represent a data point in a weekly chart from traditional markets. Heck, why not start at the turn of the day Sunday morning. After all, most of us think of the week as running from Sunday to Saturday. Yet no platform sets their crypto charts that way by default. It’s usually Monday to Sunday in these markets with other chart platforms. So we decided to follow what seems to have become industry standard.

BTC Weekly Light


I decided to write this blog after writing one for work by request; Why Charts? Actually Wy Charts, because in crypto we say Wen Lambo, but you get the idea. It got me thinking about these time series charts. Maybe this crazy advanced audience needs to slow down and even back up. I think the chart I’ve used that may actually provide the most value is the good old Point & Figure chart.

There’s actually very little creativity in the crypto world, to be honest. Fundamentally, it’s mostly sentiment driven. Bitcoin goes up or down on sentiment. Everything else goes up or down with Bitcoin. So it’s sentiment. And when it comes to charts, it’s pretty much all candlesticks all the time. Funny thing to me is there isn’t a lot of discussion of candle patterns on candle charts. It’s mostly limited to a couple of momentum indicators, MACD and RSI, Bollinger Bands for volatility, and the always quoted, rarely understood Elliot Wave patterns. Oh, and Fibonacci retracements. There, I think I’ve covered most of it. Add in a trendline or two, and we’re looking at a crypto chart. But if we’ve simply put these artificial rollover points in there, is there truly value beyond a self-fulfilling prophecy?

A Point and Figure chart doesn’t care about time. It doesn’t care about Monday or Thursday or New Year’s. It cares about price. In the end, price rules. Indicators are merely derivatives of price; with volume mixed in occasionally. But if price rules, then what we should be focused on is just that, price. How the market moves and reacts. Time be damned. Because while I’m sleeping someone on the other side of the planet is trading. And vice-versa. And of course the bots never sleep. So I think we need to stop trying to be so smart and focus on K.I.S.S. Keep It Simple Stupid. Let some guru draw Elliot Waves and pontificate about the way they’ve quantified the market’s moves and its future. And another person can draw pretty trendlines. That’s fine.


I just want to make money. That’s what being right is all about in the trading biz. We’ve certainly covered that before. So when looking for an edge, don’t depend on someone else. Don’t even depend on time if it doesn’t matter. Find a way to picture price and act on that. And the simplest way to picture price without a watch or a calendar is with a Point and Figure chart. They’re out there. Learn about them. Then try it out. Get back to me with an opinion. I’m guessing that the best new thing you’ll find is one of the oldest tools available.

I Thought I Was Always Right

Lebowski Customer Service

With virtually every topic I’d like to write about needing to be influenced by political leanings, I’m going to write about something that I’ve been saving. I’ve been saving it because I think it’s always a timely topic, but as I’ve revealed my bias for the light in our economic tunnel being a freight train coming our way that will lead to market declines and economic ‘issues,’ I do think that this topic will become more prevalent in discussions when (if) that time comes. What’s this topic that’s always pertinent but not always top of mind? Customer Service. Yup. We all deal with it. And our allegiances are often tied to it. Ever heard of a little company called Apple? That one was rhetorical.

So let’s delve a little deeper. We all have lots of Customer Service stories to share. In fact, my friends and family affectionately refer to me as the ‘Consumer from Hell.’ Why? Because it’s rare that I don’t get the satisfaction or relief I’m seeking. But I’m also pretty relentless. I’ve had to deal with some of the larger global companies recently, and it’s interesting to see the differences in approaches. Even beyond these minimal experiences, it’s simple to see the differences in how various companies interact with, and I’d say therefore value, their customers.

One company that I’ve only been on the company side is Bloomberg. Many clients stuck with Bloomberg, and its price tag, largely due to the company’s approach to clients. Bloomberg was known for many things; the depth of its analysis on the Terminal, the quality and breadth of data, and the amount of attention you could command as a regular paying client. It became policy to visit clients on a regular basis. Yes, even the ones in the middle of nowhere. Call in with an unsolvable question about a company, industry, or just functionality? Someone would spend hours figuring out which functions to give a detailed explanation of, or build you a custom spreadsheet, or come to your office and walk you through the best path to the information you were seeking. That alone could help a firm make enough extra money to pay for the subscription. And Bloomberg thrives, through good economic times and bad.

As a consumer, I’m amazed at the level of service provided by Apple. To be clear, I’m not an Apple guy. I always feel that I can get the same level of technology for less money. My daughter, however, is the other side of that. She is everything Apple wants her to be. What’s everything? Loyal. And for years I would tell her that everything Apple is overpriced for what’s inside, that there was probably a planned obsolescence factor that could cause her to spend more in just a couple of years, and that really she was more joining a cult than making informed technology decisions. And yet, because of my own recent experience, I’ll probably get my first iPhone when I upgrade next for 5G. All due to the way they interact with me, the consumer.

And here is where we get to start looking at the difference between good and bad customer service. Why? Because like everything else, home refurb’s, vacations, or just going to dinner for a special occasion, technology decisions are based on the level of confidence you have that the choices you make will treat you well in good times and bad times. Heck, you’re betting they’ll even still be there.

I’ve run into the negative side of this situation twice recently, with companies that will survive the next recession I’m sure, but how wounded do you want to be? I don’t own an iPhone. My phone’s manufacturer isn’t any fruit name. They are big though. And when my phone died while still under warranty (as any phone can), I was without a working cell phone for 2 ½ weeks. Now I remember living without a cell phone way back just a couple of decades ago. And to be honest, after the first few days the experience was a bit liberating. Except(!), no Uber. No parking app in Hoboken to be able to park my car legally. The list went on. Things we now take for granted are tied to our cell phones. So along with the liberating feeling, I kept asking myself, “2 ½ weeks? Under warranty?”

In fact, I went to the company’s US headquarters to try and get anyone at the company to actually take an interest and help rectify the situation.  When two employees happened by and listened to my tale of woe in an attempt to help, I explained that when there’s a problem with my daughter’s Apple anything, I can walk into a mall, drop off the iSomething, shop, eat, and 2 hours later go home with an iSomething that works. Fixed, replaced, whatever. My satisfaction as a consumer is the top priority. These employees from that ‘other’ manufacturer gave me understanding looks as one remarked, “Yeah, I hate when I have to deal with our Customer Service.” And they work there!

Airlines are famous for this, and I was recently affected by that as well. The comments I kept repeating as I moved up the ladder of employee titles were “I know I don’t have many choices when flying, it’s a shame you lean on that,” and “How would you feel if you were put in this exact situation.” When I asked these questions, I got answers that were nothing short of arrogant and patronizing. It amazed me that I was treated as if I was lucky to sit on the plane. We all know that air travel is not what it once was. Nothing is. But this level of condescension toward the customer is not what builds great businesses. Loyalty builds brands for the long term. And loyalty is earned, much like trust. Difficult economic times come along, and sometimes that’s too late to change your approach. That’s a problem.

Econ 101 teaches it’s cheaper to keep a customer than to get a new one. This is not old econ or new econ. It’s basic econ. But good economies breed a level of hubris that kills companies when times change. I’m not an Apple fan, but I don’t doubt people will overpay for their technology. Heck, in this day and age of Python programmers being a dime-a-dozen, the analysis tools on Bloomberg are overpriced too. But Apple stock is at all-time highs, and Bloomberg Terminals sit on well over 300,000 desktops. And Apple and Bloomberg will survive the next recession just as they survived the last; through loyalty.

These tough times will come. Cycles, pendulums, they’re always at work. So are the employees at Apple and Bloomberg. We’ll remember that. We’ll also remember the employees and attitudes at that other phone manufacturer and that airline. And as has been proven time and again through history, the consumer will speak with the loudest voice they have; their wallets. Stay tuned…