Protests in America 2011

Brian Hicks

Updated October 6, 2011

So it turns out I got the same emails Adam Lass did…

“Why are you hoping for the downfall the global markets? You rich guys writing these letters are rolling in money while the rest of us suffer.”

We’re not Buffett here. We all have two to three kids, a dog, a wife, and a mortgage or two.

As Adam wrote yesterday, I’ve been writing about the downfall of America since 2007, using options to capitalize on the failure of subprime, Alt-A lenders, housing, banks, and corporate giants.

I called the downfall of Lehman, Bear Stearns, and the dismantling of Morgan Stanley.

I called the recession that began in December 2007, six months before the economists caught on.

All in all, we had a very good crisis.

And as fear and volatility have reemerged with a mass of kicking, screaming, and selling for the last few weeks, our iPath S&P 500 Short-Term Futures ETN (VXX) options returned 109% and 150%:


When the market is losing ground like this, the last thing you want to hold is a stock, as any New York protester will tell you.

Meet Ari Rosen, Protester

Ari Rosen was one of the 700 people arrested the other day.

He wasn’t doing anything illegal. “I was just voicing my hatred against corporate greed. I wasn’t even blocking traffic,” he’d tell me days later over the phone.

“It’s not greatly organized, but still…”

new york protests 100511

But you’d have to know Ari to know why he’d taken part.

An old college drinking buddy, Ari was an athletic guy, hell-bent on achieving that 4.0 and having the perfect girlfriend, 2.5 kids, and a job on Wall Street.

What he didn’t expect was to have to move back in with his aging parents post-graduate degree, making a living selling cell phones from a mini-mall kiosk in downtown Manhattan.

“A lot of these protesters are tired of being screwed. No wonder people are rioting,” he told me.

“Americans are facing some of the worst economic crises in history. If one more person tells me we’re not in a recession…”

I didn’t have the heart to tell him his hero, Warren Buffett, just said we’d avoid a recession.

But the Economic Cycle Research Institute just reported:

The U.S. economy is indeed tipping into a new recession. There’s nothing that policy makers can do to head it off. It’s too soon to predict just how bad it’s going to get.

[We expect] another spike in unemployment and further expansion of the federal government’s $1 trillion deficit. This forecast has huge ramifications… for the already struggling U.S. consumer…

As Ari yelled in frustration during our call: “Has America learned anything since 2008? Even the damned charts look the same!”

He’s right…

Back in 2008, the S&P 500 failed to hold the 50- or 200-day moving averages, sinking from about 1,200 to less than 800 points in months.

Today, we’re failing at the 50. We’re failing at the 200. And there’s an ominous bear flag sticking out the right side (connect the tops and bottoms of the consolidation between August 2011 and today).

sp500 chart 100311

No one has learned from the 2008 crisis. And no one, it seems, can come to the rescue…

  • Banks on both sides of the pond are teetering on the brink of failure.

  • Europe has a debt crisis; Greece is nearing default; Germany is saying it’s done all it is going to do.

  • Investors around the world are fearful of another “Lehman moment.”

  • There is a global job crisis not unique to the United States.

  • More than 77% of Americans are living paycheck to paycheck, as compared to 43% in 2007; more than 44 million Americans live on food stamps.

  • Hiring is weak. Consumer confidence is sinking. Housing is a disaster put on hold.

  • China is slowing. The recovery we were promised isn’t coming. A trade war is brewing.

  • Corporate profits are about to take a hit, which will crush valuations.

“Of course you don’t want to hold stocks here,” said Ari.

“We’re about to fall off the cliff. How many Americans need to be convinced we’re about to get rocked… again? Time to load up on my puts. Living on $30k from cell phones won’t cut it… Tell your readers to load up on options, too. It’s the only way they’ll make any money. You the man, Coop.”

And with that, he hung up.

I didn’t have the chance to tell Ari his arrest didn’t go unnoticed…

Turns out Bernanke “can’t blame them” seeing that “Americans are dissatisfied with the policy response here in Washington.”

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Ian L. Cooper
Analyst, Wealth Daily

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