Philosophy – Stock Picks & Trades

Food Shortages- Not Going to Happen

About 90% of what I read online is complete junk. I take breaks reading the junk here and there. But I can’t help myself sometimes. There is a website called “The Economic Collapse Blog”. I visit it once in a while for comic relief. The latest article talks about food shortages in 2023. He starts off the article as most would. Promoting fear.

Things are far worse than you are being told. Over the past few months, I have been carefully documenting facts that show that global food production is going to be way down in 2022. Unfortunately, most people out there don’t seem to understand that the food that isn’t being grown in 2022 won’t be on our store shelves in 2023. We are potentially facing an absolutely unprecedented worldwide food crisis next year, but the vast majority of the population doesn’t seem very alarmed about this. So I would encourage you to help me get this warning out by sharing this list with as many people as you possibly can. As you will see below, we now have so many data points that it is impossible to deny what is coming. The following is a list of 33 things we know about the coming food shortages…

Let’s take a look at the first nine facts:

#1 The hard red winter wheat crop in the United States this year “was the smallest since 1963”. But in 1963, there were only 182 million people living in this nation. Today, our population has grown to 329 million.
#2 It is being projected that the rice harvest in California will be “half what it would be in a normal year”.
#3 The U.S. tomato harvest will come in at just 10.5 million tons in 2022. That is over a million tons lower than a normal year.
#4 This will be the worst U.S. corn harvest in at least a decade.
#5 Year-to-date shipments of carrots in the United States are down 45 percent.
#6 Year-to-date shipments of sweet corn in the United States are down 20 percent.
#7 Year-to-date shipments of sweet potatoes in the United States are down 13 percent.
#8 Year-to-date shipments of celery in the United States are down 11 percent.
#9 Total peach production in the U.S. is down 15 percent from last year.

I click the link to each of the nine facts. They link back to the same MSN article which is written by Laura Reiley. I find it humorous that a right wing website is linking back to an article written by a left wing political hack.
I also found it interesting that fact #1 is very specific about hard red winter wheat. All of these facts smell like a classic media trick: factual but not relevant. So I go to the USDA website and decide to plot the data for all wheat supply quarterly going back to 2007. Not just cherry pick hard red winter wheat.

Lo and Behold, total wheat production is just about near its all time high.
As long as prices are allowed to function there will be no food shortages. If there are food shortages, it will be because of government imposed price controls. The same author wrote similar pieces about food shortages dating back to 2011. You can read one here.
Prediction: In the year 2023, you will not experience food shortages if you live in the first world.

Words from Richard Dennis

My trading plan is one of the most irrelevant factors of being a successful trader. Trading my plan and risk management are more important than my actual plan. Trading my plan when it dictates is my goal. I cannot control what happens after I execute my plan. Richard was a successful commodities trader in the 70′ and 80’s. Discipline is the keyword:

I always say that you could publish trading rules in the newspaper and no one would follow them. The key is consistency and discipline. Almost anybody can make up a list of rules that are 80 percent as good as what we taught people. What they couldn’t do is give them the confidence to stick to those rules even when things are going bad.

An interesting book on the story of Richard Dennis and his underlings is here.

Bleeding Risk

I aggressively move up my stops. When a trade moves at least 25% to its target, I automatically move my stops to a break even point. Getting stopped out does not bother me. Large draw downs bother me. I keep my stops very tight. Statistically, I know only 2 out of 10 of my trades will make it to its price target.
Based on my open future trades, my dollar amount reward is $95K to my risk of only $4K. This is a reward to risk of 24. Risking next to nothing for massive gains.

Sym	Pos	Stop At Break Even?	$ Amt Reward	$ Amt Risk
6C	Short	No	$12,000.00	($4,000.00)
HG	Short	Yes	$37,500.00	$0.00
ZWZ22	Short	Yes	$45,500.00	$0.00
		Total	$95,000.00	($4,000.00)

The Mania Goes On

The corporate press and political class have gone crazy over the below data.

The positive test match the amount of testing. Which means they are not conducting test the proper way. I address this problem in my post, “Unscientific and Sloppy“.

Even more embarrassing, none of these measures seem to do anything.

Year in Review

I always think in terms of $100,000 blocks. For each trade, I never risk more than 1% of my capital. That is how all my trading is conducted.
I had my 100K trading blocks go from 100K to 160K last year. In the beginning of the year, I had a series of losers. The markets were choppy. This cost me nearly 40K per 100K block. As my account size decreases, so does my risk. This is called the Ritchie Rule.

Risk management, risk management and more risk management.

The Coming Non-Revolution

Political analysis talk about the coming violent revolution. The civil war around the corner. At least once a week I read such an article. Both the left and right wing indulge in such fantasy talk. There are three questions that should be asked when you read such an article:
Who is going to fight?
Where will it be fought?
What weapons will be used?
If you ever read an article about the coming revolution or civil war, keep these questions in the back of your mind. If the author does not address them, you can safely disregard the article.
They believe social media and open source technology are paving the way to a revolution. It is not. The greatest political upheaval in the modern western world were the Revolutions of 1848. You can read about it here. It started in early 1848 in France. It spread through 50 countries in Europe. Some of them were nationalist in nature. Others were socialist in nature. It was a whole bunch of uncoordinated revolutions. Facebook, Twitter and YouTube did not exist in 1848. Revolutions are about centralizing power. This is true of every revolution, including the American Revolution. Even the clueless Fredrick Engels understood this. He wrote a paper ‘On Authority’ discussing this. You can read it here. Social media and open source technology are having a decentralizing effect. That is why there will be no revolution.
The revolutionary mindset existed since at least the 1780’s. Its origin is placed in the cafés of the Palais-Royal. Less than 10 years later, the French Revolution started. This philosophy died in the 1970’s. During this time there were full time revolutionaries. They were committed to violence. These revolutionaries were usually exiled to one of three countries: The United States, England, and Switzerland. Lenin was exiled to Switzerland for a time. Marx found his home in London where he died. It is an astonishing fact that these three countries were immune from the revolutionary faith and revolutionaries. They never gained any traction in these countries. Étienne Cabet led his followers to America in 1848 and settled in Texas. They then moved to Illinois. Cabet died in 1856 with virtually no followers left. The only series movement of revolutionaries to reach America was the First International. This did not happen until 1872. The First International fell apart in Philadelphia in 1876. Hardly anyone in America even noticed.
And now someone wants me to believe that a revolution is going to start in the USA? By whom? A bunch of coach potatoes that watch Netflix? The last remnants of the revolutionary faith is seen with Antifa. I can summarize these people in one word: Losers. They are exactly how you imagine them. Smoking pot in their mother’s basement. They do not have any power. They will never have power. Political movements need a face. Everyone in Antifa wears a mask. In short, they are a joke. Shayne Hunter is an ex-antifa member. He gave a fascinating interview here. He tells you how laughable they are.

Revolutions vs Riots
Revolutions are not riots. Riots are not revolutions. They are different. Very different. People point to riots and shout, “Look, the revolution has already started. The civil war is here”. Riots have always occurred. They are a common occurrence throughout history. You can read about the endless riots throughout history here. These are only the ones that we know about. Revolutions are centrally organized. People need to be organized politically. Revolutionaries are committed to risk everything. Revolutionaries cannot be bought off. They are ideologically committed. They are extremely disciplined. They are in it for the long haul. Consider the scene from the Godfather II.

The exact opposite is true of rioters. Rioters are not committed to any cause. They do not believe in anything deeply enough to sacrifice their life for it. They are easily bought off. They have no long term plan. Riots do not last very long. Eventually they burn out. Everyone goes home. They mount their new 55” flat screen TV they lifted from Walmart in their living room. They wait for the next opportunity to do it again. Rinse, wash, repeat.
The wave of the future is not a revolution. The decentralization of information is challenging the legitimacy of every institution. Blog by blog. YouTube video by YouTube video. Facebook post by Facebook post. The legitimacy of the media, the universities and central governments are being revoked. This is going to lead to one outcome: secession. Secession through non-cooperation with central governments.
The legitimacy of Washington DC will not be fully revoked until the money stops flowing. It does not matter how badly the federal government screws up. It does not matter how many boondoggles and scandals that are amplified by digital media. The internet has paralyzed Washington DC, but the public still shows up with their hands out. Over the past 100 years, Uncle Sam has become Uncle Sugar Daddy. Nobody likes to upset Uncle Sugar Daddy. Uncle Sugar Daddy provides all the goodies-Social Security, Medicaid and Medicare. When Uncle Sugar Daddy’s checks start to bounce, he will lose legitimacy. Why would you listen to Uncle Sugar Daddy when the goods stop flowing? What leverage will Uncle Sugar Daddy have? At this point, politics will become radically decentralized. This is going to bring the greatest advancement of freedom across the entire western world. The trends are pointing toward freedom and liberty.

The Middle Class

Endless articles are written about the middle class. They claim that it is disappearing. This has been a rally cry for about 40 years. Whenever I read such an article, a few questions immediately come to my mind.
How do you define middle class?
Where is the evidence that it is disappearing?
Why is this a bad thing?
Classes do not exist in nature. They are constructs of the mind. Any author that talks about any economic class must define those terms. The word “poor” today had a different meaning a 100 years ago. The poor, today in the western world, have cars, cellphones and AC units. A 100 years ago the poor were drinking puddle water. That is because capitalism has created an enormous amount of wealth over the past 100 years. Now we understand that the word “class” is relative to a time and place. Any author that writes an article about the end of times due to the disappearing middle class must define this word. If he does not define it, you should ignore him.
Most articles use household income or some variation of it. They post a chart of it declining since the 1970’s and tell you its the end of the world. There is a major problem with household income statistics in general. The number of people per American household has declined over the years. When you compare household incomes from a year when there were 6 people per household with a later year when there were 4 people per household, you are comparing two different things. Let us say income per person increased 25%. This mean that 4 people are now making the same income as 5 people made earlier in time. But not as much as 6 people made. So household income will actually show a decline, when in fact per capita it has risen.
Let us pick on the pew research center. Click here to read their article. They define classes by using household income which is size adjusted. Below they print a graph showing the trends of the years.

So the middle class lost 9% since 1971 according to them. The upper class grew 5% and the lower class grew 4%. If the upper class grew more than the lower class is this bad? Why? I can also play with their parameters to show a different story. For instance, see this chart showing the middle class is moving to the upper class.

The middle class is not the basis for any civilization. Think about the Pareto distribution (the 80/20 rule). A very small percentage of people are the true innovators and entrepreneurs. They are the great builders. Such names as Henry Ford, Jeff Bezos, Sam Walton come to mind. They are always a small percentage of any civilization. These individuals have made the middle class (however you define that word) better off. There are more gadgets. Living conditions are far better. There are more medical breakthroughs.
The word middle class is a buzz word. It invokes a lot of emotions in people. Politicians use it to get the masses all riled up. I suggest you consider the three questions above whenever you hear the word middle class.

Some Costly Trading Errors

Here are a few of them.
1- Not predefining your risk.
2- Not cutting losses.
3-Not systematically taking profits.
4-The need to be “right”.

Your need to be “right” and being a profitable trader are enemies. People often ask, “Have you ever been wrong”. This is about as silly as asking a professional boxer if he has ever been punched in the face. Getting stopped out and being “wrong” is part of the business.
The question is not, “have you ever been wrong?”
The questions is, “how does being wrong affect you executing your plan?”
Novice traders often feel after a losing trade that the market is out to get them. Or the market owes them something. They seek revenge on a given market. These are the worst emotions to have while trading. They throw out there trading plan and become reckless. It is important to remember that the market is neutral. It does not care about your feelings.

Why I Do Not Trade Bitcoin

Bitcoin is going parabolic again. I have no idea where it will stop this time. Last time I called the top in Bitcoin almost to the day. You can read about it here. I do not sense the same mania phase. I do not know if most people realize this but there are Bitcoin futures. I have not traded them in some time. I trade on breakouts. Bitcoins breakouts almost complete the pattern the same day.

For instance, on a close above 20K it completed an ascending triangle. The problem for me is that it ran up so far away from the breakout point I could never get a good entry with a good stop in place.
Even on the longer term chart, I seen the head and shoulder pattern forming a few weeks back. I was never able to get a good entry point. The market just runs away.

The volatility is bad enough, but the leverage on this contract is too much. I would never be able to sleep at night.

To enter one contract requires over $49,000. I risk a very small percentage of my trading capital per trade. I know there are other exchanges that sell fractions of bitcoin, but the last thing I need is another account.
There was a time when I thought Bitcoin was going to zero. My thinking has changed over the years. These cryptocurrencies might be around for a while. I have no idea what they are going to be used for other than a speculative vehicle. No one has yet to explain this to me. With price swings like this it will not be used as a currency.

The Discipline of Trading

The human aspect of trading is very important. This is why entire books are written by professional future traders that focus on the human element. A novice trader just wants to know the entry and exit points. If it was that easy, we would all be professional commodity traders. A successful trader must overcome the human emotions of fear, greed, overconfidence, false hope, etc. Even the euphoria of winning can be dangerous. For instance, I have the following open positions:

Symbol	Position	Date Position Opened	Price Position Opened	Price Now	Per Contract Profit
CAD	Long	12/2/20	0.7732	0.7848	$1,160.0
GPB	Long	12/16/20	1.3556	1.3551	$0.0
GPL	Long	11/23/20	926.4	1054	$11,680.0
JZ	Long	12/14/20	0.0096225	0.009691	$887.5
NASDAQ	Long	12/13/20	12410.5	12625	$4,295.0
NG	Long	4/21/19	2.492	2.643	$1,510.0
NIY	Long	11/9/20	25465	26760	$6,475.0
NZD	Long	11/11/20	0.688	0.7104	$2,240.0
	Total Open Profit				$28,247.5

On a per contract basis, the profit is over $28K. When you have open large profits, it encourages you to do stupid things. First, it is tempting to take all of this money and run off. However, some of these trading patterns have a long way to go based on my trading plan. This is where “let profits run” comes into play. Sticking to your plan requires discipline. Second, it encourages to pyramid these winnings and keep adding to them. The risk of becoming over leveraged grows. Suddenly, the market moves against your position and all of your profits vanish into losses.