Meanwhile, aboard The Errol Flynn–where I am just as connected as I am when I am back at The Factory–Flash and I are entertaining Cary, Pinky, Holly and Amanda. Flash is in an apprenticeship program, and I have just given him a new incentive: his own Bloomberg terminal. You’ll get to know Flash in time. He’s someone everyone needs to know at some point. Like the rest of the cast here at the set of the richest man on the planet, Flash adds an immense amount of value.

“WHAT?” Flash asked, “You think gold might pull back?”

“Yeah, I think so,” I admitted, “That’s why I sold the majority of it.”

“You said you wouldn’t sell it till it hit $10,000 per oz. Why the switch?”

“I still think it’s going to $10,000 an ounce,” I smirked, “but I am cautious in the short term. I think we could see a pullback more severe than I want to sit through. Besides that, there are so many things that I want to buy now. And I can always get right back into gold whenever I choose.

Gold is crowded here–is there a gold bear anywhere? I haven’t met one in weeks.” I continued. “What’s more, I haven’t seen or heard from a bull in stocks in what seems like months. There are too many bulls in gold and too many bears in stocks.”

“So what are you buying?”

“Calls in everything–especially financials like Goldie (GS). I haven’t been this bullish in a while. You know I love the bull side–particularly when there are too many bears.”

Then Pinky called and said to meet her in the lounge, where we sang with Cary Okie.

Flash didn’t even show up to the party in the sky; he stayed back in the office lost in his new Bloomberg. Flash is one of the greatest traders I’ve known. And he is just getting started.

And the beat goes on.

Dedication: My yoga pals I spent time with in Ubud.
“Two men look out through the same bars: One sees the mud and one the stars.”
–Frederick Langbridge (1849-1933)

Meanwhile, back at the coastal office, things got weird and even weirder. Go figure. If it hadn’t been for a few different happenings, I may not be where I am–which is still in question.

Secret

Someone said it to me again the other day, “Heya…so what’s your secret?” I said, “What are you talking about?”

“I mean, ah…what’s the secret with money. How do you have so much?”

“Oh, that secret,” I said. “Well that’s easy; I swung for the fences.”

Early Investing

Think of it like this: when you are young, you must accumulate some capital. Even if it is a small amount–you need some. And with it, you must swing for home runs every time you bat. When you are young, you should always be “swingin’ for the fences.” Without a few homers, you can’t make it to the next level.

Midlife

In your middle years, you become an investor, allocating the capital from those home runs to money managers and managers of businesses. You will learn a great deal in your years as an investor–more than you think you will. When you have learned what you need, you’ll be ready for the final phase.

The Name is Bank

In your latter years, you’re the bank. That’s me. Remember that every great bank is sometimes the party and sometimes the counterparty, depending.

But I am not just a bank. I am a story. The story of a man who was fed up with all the gunk and the filth and couldn’t take it anymore. The story of Vincent M. Vega, the richest man in the world. A man that believes he is a superhero–and because of the power of positive thinking–he is.

Secular Outlook by Mohamed El-Erian of PIMCO.

“Last weekend’s drama in Europe is yet another illustration of this phenomenon. Policymakers are now forcefully using the balance sheets of the EU (ultimately Germany) and ECB to compensate for the debt excesses in the periphery (particularly Greece) and the related overexposure of European banks.”

Meanwhile, back at the Factory, I am captivated by one of the most desperate attempts at self-promotion that Wall Street has ever witnessed: the SEC suing Goldman Sachs (GS) for fraud. According to my lawyer, John Doe, the charges could possibly be the most irrelevant charges ever brought against anyone, anywhere, anytime.

The Facts

1) True, the CDO was sold by Goldman with a triple A rating. However, anyone who runs money should know well and good that a AAA offering 150 bps over swap has great potential for not being AAA after all. Right?

2) Yes, Goldman was long this deal. The issuer is almost always long some tranches of any deal–usually the most junior parts that have the toughest time being sold. This caveat is integral to selling the deal. We’re long it too!! They shout as though they hit the cash register on all the fees.

3) Gold. In reference to the gold market selling off, some circles allege that the catalyst was fear—fear that John Paulson may have to liquidate his gold holdings. I don’t buy that at all. Gold sold off because it sold off. John’s gold holdings could be sold off with little to no impact. He doesn’t run that much money. Also, he understands leverage very well. So well, that he shorted on over-leveraged real estate market and made a fortune. John is not going anywhere, nor are his gold holdings.

Now that we have our facts in clarifying order, we can move on to the markets. The market sold off broadly with the S&P lower by 19.61 points or 1.6%. The VIX gained 15% up by 2.47 points to close at 18.36. I am not convinced quite yet, but it looks very, very tempting to call a bottom in the VIX. I think it could spike more from here, but we could see even lower lows in the VIX later this year. After all, it is a bull market. There are plenty of problems out there, but we have GDP growth, and we have corporate profit expansion. We have the technicals and the fundamentals on our side.

Volatility Index Oil on Canvas

Best of all, Chief Market Technician at The Tinker Factory, the Timer, agrees with me. The market is bullish until proven otherwise. Friday was nowhere near the proof we need to call this the top and thus the beginning of a new significant move lower. Pullback, perhaps. Top, no. Don’t mess with the Timer. He is named what he is for a reason, and he is exceedingly good at what he does.

Now we have to wait and see how the crowd reacts to the reaction. Only then can we gauge if the sellers are met with buyers or more sellers. Stay tuned. I wasn’t buying on Friday because I don’t buy into selling; I buy into buying.

And the beat goes on.

The other day at the office, I was discussing my bullish view of the market with one of my most trusted advisors, X.

“So you’re bullish eh?,” he asked, “Why?”

“Because the market is going up.” I said. “So’ I’ll remain bullish until general conditions change.”

“Why do you think the market is so strong?” he inquired.

“Consumer spending is extremely strong, which drives demand for a whole host of gadgets.” I explained.

“So consumer spending is driving profit growth,” he countered. “This makes me wonder where consumers are finding the cash to spend, given unemployment is so high.”

“It’s the oldest trick in the book.” I offered. “You know, the infamous tapping on a person’s left shoulder when you’re standing on their right. Consumer spending is extremely strong, which is driving profit growth–tap on the left shoulder–but the money consumers are spending is the money with which they are not paying their mortgages. The banks are standing on the right.”

“So when will you turn bearish on stocks?”

“When the market is going down.” I said. “For now I’ll trade to the long side. I’ll own names that resemble the chart of Sirius Satellite Radio (SIRI)–which I also own.”

And then I was gone.

SIRI Oil on canvas