On “Market meltdown refutes ‘efficient markets’ theory,” Kate Gibson of MarketWatch interviews market strategist, Nicolas Colas, who questions the validity of efficient markets and other common notions upon which our modern financial theory is based.

An “efficient market,” according to the traditional financial and academic community is supposed to “efficiently” factor in all available information in its price. This obviously wasn’t the case with the recent market meltdown, as investors and financial experts had all the information (in company filings and reports/news about the housing and mortgage markets) right under their noses, yet ignored the news until companies started failing.

The recent debacle also throws out the window the notion that holding stocks for 5 to 10 years will produce almost sure returns.

Colas wraps up with an important comment: “What I’ve tried to say is don’t baseline your expectations on the notion that markets are as efficient as the academic world wants to believe, think for yourself.”

We’ve been preaching that for years! It’s time to change and upgrade investors’ way of thinking.

Start by attending our free training.

If you haven’t seen Jon Stewart hammer ex-hedge fund trader and CNBC commentator, Jim Cramer, on The Daily Show last week yet, I strongly suggest you watch this video.

Jim Cramer is the loud clown that hosts CNBC’s Mad Money at nights. I’ve never really understood why anyone would pay attention to this joker, let alone listen to the over-hyped crap he has to say about stocks. I often pondered at CNBC’s decision to air his investor-dumbifying nonsense. It is obvious that the network’s objective is to entertain and boost ratings rather than inform and educate the investment public.

During this video, Stewart criticizes Cramer for his shameless admission of manipulating stocks and using various techniques to profit from short selling. He also bashed Cramer and CNBC for failing to warn investors of the pending banking crisis and for indirectly promoting it by letting officials from many of the companies that got us into this mess to lie to our faces on air.

Even though we knew for years where this blatant market manipulation and greed would take the stock and real estate markets, it still makes me sick to my stomach to watch this interview. This should be a wake up call to all those who have swallowed the “invest-for-the-long-term-and-trust-your-financial-advisor” lies that our country has been brainwashed with for decades.

Madoff keeping Baby Boomers out of the stock market? At least that’s what this Market Watch story suggested.

I cracked my ASSets off when I read that. Was Madoff really the culprit in the desire of Boomers to shun equities? Common! Get real!

It is true that what this Jewish con man and ex-Nasdaq Chairman did does not really inspire confidence in traditional stock investors; milking many wealthy and non-wealthy alike dry without placing even a single trade in his alleged “investment fund.” Nevertheless, this is far from being the main reason.

The fact of the matter is that excess greed and rampant speculation have truly brought the astronomical risks of the stock market to light - and investors [Boomers and non-Boomers alike] have lost over half their wealth in stocks; bleeding trillions and trillions of dollars in losses.

How’s that for discouraging?

The key going forward will be whether or not investors will stand firm, stay positive amidst a negative global environment, and - most importantly - look for DIFFERENT ways to invest their hard-earned money.

Like Einstein once said, “The definition of insanity is doing the same thing over and over again and expecting different results.” Investors who personify this definition will continue falling prey to the stock market machine.

It’s pretty bad.

I’m glad that in our world of forex trading, stocks just aren’t welcomed! In fact, I have been in favor of alternative investments instead of stocks and the economically-sensitive real estate sector for years.

Since my post, “Stock Market Trades Below Key Support Level,” the Dow has fallen further. Just look at this cool chart to compare the magnitue of our little, never-ending stock market roller coaster ride in the US:

Click on the chart to enlarge it, then hit the Back button to return to this blog post.

The current bear market, which began in late 2007, is still alive and well. So far, only the extremely painful bear market of the Great Depression era (grey graph) is greater in magnitude. It actually took the stock market during that time a painstaking 25 years (from 1929 to 1954) to recover and exceed the peak it established before the bear market began.

Even though no one knows how long the current bear market in US stocks will last, a VERY SLOW recovery (also known as an L-shaped recovery) is a likely outcome.

I strongly believe that traditional investors who haven’t already realized the colossal risks inherent in stocks, will certainly do so during this slow-motion recovery period; especially those who give in to the “buy-at-dirt-cheap-prices” recommendations of many of today’s traditional investment advisors and financial planners.

This realization of the “true risks” of stocks might cause investors (both domestic and foreign) to “reprice” equities in their heads for decades to come, paying relatively lower multiples for each dollar of a company’s earnings. Consequently, annual stock market returns going forward could drop significantly - way below the historical 10%-mark.

Even if we assume a 5% annual rate of return for stocks from this point on, it will take the market over 15 years to recover to the peak value established in 2007 (near 14,200 on the Dow). Is the wait really worth it?

Due to the significant risks and opportunity costs I feel traditional investors will face going forward, I plan on writing a series of blog posts to address these issues in greater detail. My objective will be to educate investors and help them understand the true risk of the investment decisions they make, as well as the advantages of alternative investments.

I think this information is priceless and will help investors pull away from the traditional stock-market-and-real-estate-masses group; a must to survive any future crisis.

The hits just keep on coming as the Dow Jones Industrial Average (Dow), the most popular US stock market index, closed below the 50%-retracement level.

Traders familiar with technical analysis know that when the price of anything falls 50% from a peak, it tends to be “supported” from falling further - but if this level doesn’t hold, the price could accelerate quickly to the downside.

The all-time high for the Dow was 14,198.10 on October 11, 2007. If we take half of that level, we come up with almost 7,100. Last Friday, the Dow closed around 40 points below this level - leaving many wondering what would happen on Monday. Well; on the first day of trading this week, the market was basically on a downhill slide from start to finish, causing the Dow to close at 6,763.29.

Now that we’re obviously past the 50% mark, what may lie in store for the most popular financial market in America? Probably nothing pretty.

Hold on to your hats ladies and gentlemen. My guess is that the wild ride will continue, as the US keeps rewarding crooked giants like AIG and speculators who gambled their ASSets away in real estate.

When will investors learn that the world does not revolve around stocks?!?!? Do I hear anyone say “forex?”

The stock market got hammered again today. The Dow Jones Industrial Average (Dow) was down over 3% to a close of 7114.78. That’s about 50% off from its high near 14,000 in 2007. Trillions of dollars of wealth continue to evaporate with the perpetual decline.

But this is nothing new. I have been warning others about this for years - since late 2004; bugging the hell out of everyone I knew. Since the first Forex managed account webinar we had in early 2005, we tried pounding it over and over into investors’ heads. “Get out of stocks! Get out of real estate! They are freaking bubbles!!!”

Even since late last year, as some thought stocks would recover, and as the idiotic stock analysts and portfolio managers on CNBC preached to continue investing in equities, I told everyone I knew to get out of the market (please read “The Ugly Side of Traditional Stock Investing” in the Day Trading Tutor blog).

But unfortunately, people have an almost mystical attraction for the wonderful world of stocks; continuously trying to catch falling knives as they drop and drop and drop….

It’s quite ugly already, but it could get uglier - believe me!

Another by-product of this widespread, exponential wealth reduction phenomenon is the destruction of even more wealth in various Ponzi and pyramid schemes that suffer blow-ups due to a shortage in cash. Just look at the recent ones like Allen Stanford’s and Bernie Madoff’s. There will probably be a lot more.

Most of these problems (including the astronomical losses in stocks and real estate) could have been avoided if investors would have put their greed hats on the shelf and used a bit of common sense; but, unfortunately, they never do. Greed and ignorance always take them over.

Even though the damage has already been done, I will write a few articles soon to help educate both investors and traders going forward; education that will hopefully stop the bleeding and prevent future hemorrhages. Hopefully!!!!

Start by learning about alternatives. Register for our free, live training here.

During today’s global banking crisis, more and more day traders are worried about the safety of their funds if their forex broker goes under.

In the United States, the NFA (National Futures Association) does not protect against insolvency of forex brokers. Nevertheless, I believe that FX (foreign exchange) remains one of the best asset classes for active traders.

That’s one of the main reasons why many traders and investors are switching brokers. Different jurisdictions offer access to brokers and banks that offer account protection in Forex. Some of these firms offer the MT4 (MetaTrader) platform, which has become sort of a standard in the retail forex trading arena despite some critics. The execution quality many of these trading firms are providing has also improved - and many claim there’s no intervention from a human dealing desk.

So the next time someone recommends for you to open an account with a brokerage firm just because of NFA membership, think again. You need to do your homework and find out just how “safe” your trading or investing account with each brokerage firm is.

Americans’ love affair with stocks has caused the delay in many retirements (perpetually in some cases).

This historical credit crisis and real estate bubble blow-up has impacted 401(k) balances across the nation - as well as IRA accounts and non-retirement stock portfolios. Even diversified bond portfolios have gotten whacked, as corporate debt across traditionally “solid” (yeah right!) sectors, such as financial services and insurance, have suffered devastating blows (due to blatant gambling with real estate).

We’ve been warning people against this for years, but unfortunately, the stock-and-bond-centered traditional views of retirement and financial planning are too ingrained in the minds of many investors. It takes a lot of unbrainwashing to bring people out of that spell.

But don’t get me wrong here. I’m not rubbing it in. I feel a lot of sorrow for what our country is going through right now (and it can get A LOT worse). I just want people to throw the traditional investment pyramid in the garbage and open their minds just a little bit. Don’t wait for your stocks to drop to the level of Lehman Brothers (i.e., zero) to take action.

There are other ways to add diversification and safety to your investment portfolio, without lowering your return to that of bank savings accounts. Even though, I’m a fan of day trading (but not with stocks), that should only be a small part of your financial pyramid; assuming you learn to day trade correctly (sign up for our free training and start learning). Most of your pyramid should be composed of investments that provide an attractive return, but with little market risk; investments that your overdressed broker at Merrill doesn’t know about.

During critical times like these, retreating in a fetal position to a dark corner of your closet while sucking your thumb and crying for your momma is not the best solution by far. You need to be proactive and take action early - and don’t wait for any politicians to rescue you (they’re only interested in saving the fat, corporate pigs that caused this mess in the first place).

So what do you do then?

Sign up for our next day trading webinar by clicking here. Believe me; we’re not only going to talk about day trading.

If you want to read the entire article about the heavy toll stock losses are taking on retirement savings, click here.

Day traders; this may sound a bit dramatic, but at the rate the SEC is going with the regulation of short sellers, this might become the next headline!

In my blog post yesterday, “SEC Adopts New Short-selling Rules,” I commented on the SEC’s latest move to regulate naked short-selling. Even though I agree on restricting this activity, I expressed my opposition to wining politicians wanting to ban ALL short-selling of financial companies like banks and insurers. Banning short-selling goes against the principles of free market economics, where supply and demand dictate the price of a commodity. It makes total sense for traders to want to sell stocks short of companies that are in trouble - and now, what a better bunch to sell the crap out of than the glutton banks and insurance companies that fattened their rear ends out of the latest real estate mega bubble?

Early this week, it seemed that the excess was beginning to get squeezed out of the market at full speed when stocks began to suffer severe losses; but then, what happened later in the week? Regulators stepped in with their sloppy, patch-up-the-holes mentality and began regulating the “evil” short sellers. Things got even more dramatic today when the shorting of 799 financial stocks was banned altogether.

In the MarketWatch article, “SEC bans short selling in 799 financial stocks,” SEC Chairman Christopher Cox is quoted saying,

“The emergency order temporarily banning short selling of financial stocks will restore equilibrium to markets. This action, which would not be necessary in a well-functioning market, is temporary in nature and part of the comprehensive set of steps being taken by the Federal Reserve, the Treasury and the Congress.”

That’s just too funny! With the phrase, “restore equilibrium,” the Chairman seems to imply that the market has to go up to be in balance. Nonsense! These financial stocks should suffer for their excessive greed. Why should they go up? The same holds true when he states that the short selling restrictions won’t be necessary in a “well-functioning market.” If it ain’t going up, something must be broken?!?!?

Fellow stock day trader, this is why I strongly suggest that you don’t day trade stocks. What for? The stock market is one of the most manipulated markets in the world with blatant favoritism for rising prices. The forex market is a much “cleaner” and “purer” market for day trading. I strongly suggested that you take our free, live day trading webinar and find out more.

But what about for “longer term” investments; “aren’t stocks the best asset class for that?” - you ask. I know that financial planners and stock brokers have been preaching this since the dinosaurs, but that’s all they know. It’s one of the big lies our society is founded on.

If you want to learn about alternatives that, in my honest opinion, are much better than stocks for the long run, dare to give us a call (305-600-4651). But please note: you will have to make an important choice when you dial - if you want to take the red pill or the blue pill. It will all depend on whether or not you want to find out how deep the rabbit hole goes!

“The SEC [Securities and Exchange Commission] adopts rules against naked short-selling,” writes Marcy Gordon of The Associated Press. I laughed my assets off when I read this headline just a few hours ago. This is why I love forex (or foreign exchange) for day trading so much better than stocks.

I’m not saying that naked short-selling should be allowed, but things like this always happen in the stock market during times of crisis (like today when the Dow dropped over 4%). There are so many stupid regulations in the US stock market to control the price of stocks that one might wonder how “free” of a market the stock market really is.

You never hear forex day traders blurb out terms such as “curbs in” or “halted for news pending,” when referring to the buying and selling of Euros, Dollars, and Yens. It’s really quite silly how regulators attempt to control periods of high volatility in the stock market. Many traditional investors and traders (by that, I mean folks who believe that stocks are the best thing since sliced bread) actually swallow the moronic excuse that such artificial price controls are there to protect investors when the world is “freaking out.” Nonsense.

A free market should be allowed to fluctuate by the laws of supply and demand. If traders want to take the stock of a greedy insurance company who got caught with its hand in the real-estate-bubble cookie jar to zero, so be it (anyone got life insurance with AIG? :). Why does the government have to use my tax dollars to bail them out?!?!

Let the system implode from its own avarice I say. We’ve been screaming bubble when it comes to stocks and real estate for over three years now during our managed account webinars. The best way to get rid of a bubble is to let it blow up; not to patch it up with rules against short selling. If you’re trading stocks, how else would you make money when the market is getting hammered other than by selling short?

Apparently, our government doesn’t even want us to sell short stocks anymore. In the same AP article, Gordon states, “Sens. Charles Schumer and Hillary Clinton, New York Democratics, asked the SEC to temporarily ban all short-selling, not just naked short-selling, of stocks of major financial companies.” That one made me pee in my pants (can I say that here?).

If you are a day trader or want to take up day trading, please do yourself a favor and get out of the stock market. Trading currencies, in my humble opinion, is much better. If you don’t believe me, sign up for our free day trading webinar by clicking here.

If you want to read more about the naked short selling mess in the Associated Press article, here it is: SEC adopts rules against naked short-selling