What the Best Traders I Know Are Telling Me

What the Best Traders I Know Are Telling Me
By Jeff Clark
September 17, 2009

Three months ago, I played poker with some old-time friends and traders. These guys make their livings, feed their families, and fund their lifestyles trading the market on a daily basis.

They were universally bearish back then.

I played poker with them again last week. And they're universally bearish right now. They're even more committed to the short side of the market today, although the combined net worth of the room is drastically lower – such is the consequence of being on the wrong side of the market for an extended period.

What they've lost in personal wealth, however, they've made up in animosity and disdain toward the system.

"There's a problem," my friend Frank said to me, "when the biggest profit of the month goes to the new kid who bought 500,000 shares of Fannie Mae by mistake."

He meant to buy 5,000 shares as a speculative trade. But he typed in an extra "00" on the order terminal and inadvertently bought 100 times the amount.

By the time the risk-control manager caught the error, the trade was up $200,000 and the kid pocketed a $20,000 bonus during his first week with the firm. The market isn't usually so generous with mistakes.

"I know how you feel," said Steve, another longtime trader at my table. "It's like I'm drawing great cards but getting beat on every single hand by the guy just on the other side of the table. I know he's cheating. But I can't prove it."

The whole table nodded in agreement.

"I don't mind being wrong," Steve continued. "And I'll take my lumps when a trade goes against me. But it's happening every single day."

We all know there are forces in the market that can move stock prices higher or lower over the short term in order to benefit a specific position. There has always been a certain amount of "rigging" or artificial manipulation on Wall Street. It's the price of admission.

But even these seasoned traders – many of whom are guilty of rigging a few trades themselves – are growing weary of the recent action. The normal ebb and flow of stock prices isn't there anymore. The tide appears to move only in one direction.

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Of course, we know it won't stay that way forever. One heck of a correction is looming in the wings. Stocks are priced for perfection and the risk of a downside move is HUGE.

The best traders I know are short this market. They've been on the wrong side for a while now. But I'm definitely not comfortable betting against them.

Best regards and good trading,

Jeff Clark

The short opportunity of the month
This market is set up for another big decline...

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•	Gold closes at $1,017.69 an ounce... just 1.6% below its record intraday price of $1,033.90, set March 17, 2008.
•	Credit crisis indicator drops to 16-month lows... U.S. corporate credit default swaps are getting cheaper.
•	U.S. dollar nears one-year low... down about 15% from its March high.
•	Earnings today... FedEx and Discover Financial.

	Last	Change	52-Wk
S&P 500	1068.76	+1.53%	-11.93%
Oil (USO)	37.43	+1.99%	-50.09%
Gold (GLD)	99.91	+1.02%	+30.11%
Silver (SLV)	17.14	+2.15%	+64.81%
U.S. Dollar	76.25	-0.04%	-2.22%
Euro	1.47	-0.05%	+2.83%
VIX	23.69	+1.15%	-21.82%
HUI	444.89	+2.93%	+58.12%
10-Year Yield	3.47%	0.02	-0.02

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Company	Sym	Industry
Telefonica	TEF	Spanish telecom
Novo-Nordisk	NVO	Big Pharma
Vmware	VMW	virtual computers
Cameco	CCJ	mining
ConAgra	CAG	processed food
EMC	EMC	data storage
Google	GOOG	internet search
AMBEV	ABV	beer
Anadarko	APC	oil & gas
Cognizant Tech	CTSH	outsourcing
Southern Copper	PCU	copper
Gap	GPS	clothing retail
Sterlite	SLT	copper
Apple	AAPL	computers
Visa	V	credit cards
Credit Suisse	CS	bank
Swisscom	SCMWY	Swiss telecom
Natl Australia Bank	NABZY	bank
Banco Bradesco	BBD	bank
Gold Fields	GFI	gold
Baidu	BIDU	internet search
3M	MMM	Post-its
Toronto Dominion	TD	bank
TJX Companies	TJX	discount clothes
Juniper Networks	JNPR	net security
Itau Unibanco	ITUB	bank
AES Corp	AES	electric utilities
Goldman Sachs	GS	investment bank
Agnico-Eagle	AEM	gold
R Bank of Canada	RY	bank
ICICI Bank	IBN	bank
eBay	EBAY	tchotchkes
Talisman Energy	TLM	oil & gas
Telmex	TII	Mexican telecom
Westpac	WBK	bank
Noble Energy	NBL	oil & gas
Infosys Tech	INFY	outsourcing
Suncor Energy	SU	oil & gas
Vivo Participacoes	VIV	Brazilian telecom
Annaly	NLY	virtual bank
Motorola	MOT	cellphones
POSCO	PKX	steel & iron
BHP Billiton	BHP	mining
AngloGold Ashanti	AU	gold
Sanofi Aventis	SNY	Big Pharma
Kinross Gold Corp	KGC	gold
Telecom Italia	TI	Italian telecom

Company	Sym	Industry
Gryphon Resources	GRYO	gold
First Financial NW	FFNW	regional bank
GoldSpring	GSPG	gold

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