4 October 2008

No true binary opportunities - only booze and oil

To a very large extent it is an extremely pointless task talking endlessly about fiatscos and dollar weakness and preferred treatment of certain banks. Unless you are directly within the circle of those banks you are forced to play by the rules of the accessible financial markets - that is, if you are, or if you expect to be a financial markets trader.

The fact that there are so many so-called hedge funds and capital managers who deal with counterparties who have to go to the taxpayer for their very existence is quite absurd. How do they maintain any credibility? Pricipally because the general media is a captive of the regime - this everyone already knows.

For an independent financial markets investor using their own capital - rather than the borrowed capital from the ignorant masses and slaves who keep the pyramid alive - the only mathematically possible path to profit is a true binary risk model.

That is, a symmetrical risk case in which in instantaneous terms, one side loses 100% exactly as the other side gains 100%. This is now and has always ever been the only mechanism for hedging - not that you can tell from the amount of snake oil salesmen operating in the financial world.

When the central market mechanisms such as the Treasury Department start operating to tamper with the time components of the crystalization of losses, a new factor is created which alters the nature of binary calculations and turns the equation into a form of three-dimensional geometry - something in which axial and rotational symmetry count as significant potential problems... ...or opportunities.

The opportunity part is still not well understood in today's world because the derivations are not obvious, and usually viewed with scepticism.

For example - there is a clear physical link between the price of oil and the cost of industrial manufacturing. There is not so clear an economic link between alcohol and unemployment, yet, if oil is the most obvious proxy for the Vega premium resulting from the current market's excessive uncertainty, one of the most easily accessible is the market for pure grain spirit.

It is certain, in my calculations, that, whist the oil price will rise to around $400 dollars a barrel over the next five years, it will do so in great leaps of volatile slides and jumps. Whereas, the shelf price for pure grain alcohol will rise in a steady linear function to more than ten times its present price level on average.

It is an inescapable fact now, that tax evasion, a parallel banking system, and a form of global black market currency will all eventuate - and there is absolutely not a single thing the government, FBI, nor any other agency can do to prevent these things from happening. Moreover, communications and information technology is now so advanced, as to place matters well beyond any scope courts have of ever finding out how these things are enabled, or who is involved in them.

We are destined to witness extravagant rates of unemployment, yet high prices for alcohol and substantial rises in demand for alcohol, as well as a significant increase in the black market.

Oh, and unfortunately, it would appear that real estate is once again the investment avenue of unbridled joy...

Calvin J. Bear

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