FAQ

BAM Investor :: Frequently Asked Questions

Q:
Do you think the FED’s low interest rates create bubbles?
A:
Behavioral analysis is what led to our belief that bubbles occur due to leverage not interest rate levels. Leverage is what creates monster bubbles in the first place because it is in essence the fuel that drives the wildfire of speculation. People have the ability to survive investment mistakes of all varieties so long as they have the “staying power” to stick with the position. It’s only when outrageous leverage is employed–such as zero down interest only mortgages–that small decreases in the value of an asset can lead to a snow-ball effect and subsequent avalanche of defaults.

Its amazing to me that we continue to talk about interest rate levels creating bubbles when leverage is the only “rope” investors have ever used to hang themselves.

We first wrote about this dynamic in our 2006 report titled “How to Identify a Speculative Bubble.” If you’re interested in reading more about this idea you can get a free copy at our website. baminvestor.com


Q:
How does the Model account for ‘reflation’?
A:
Our model obviously disagrees with the idea of reflation.

This is an epic deflationary spiral and the idea that global governments can turn it on a dime seems absurd. Even if we didn’t have our model’s message to guide us, we’d be bearish here based on simple common-sense.

We’ve been wrong–didn’t expect the latest higher-high in the stock averages, but we’ve been here before at extremes and we believe the BAM Model will, once again, guide us to the safe harbor while others are swept into the rocks.

Only time will tell but if we’re going to be correct on our call for a 50% crash into March.


Q:
Don’t you think that market is being manipulated by FED, Goldman Sachs and other banks having QUANT computers and government support to inflate?

A:
I have no clue about manipulation. What I can say is that I see odd action at key turning points. Much more prevalent is large traders running stocks through support or resistance as a method for creating liquidity into which they distribute shares. They own large blocks of shares and when they are surprised by some new piece of data (that is not yet public) they must create instant liquidity in order to exit shares. Their solution (sometimes) is to create a positive or negative “story” or simply have a skilled trader force liquidity out of the tape.


Q:
Does your model factor in all this liquidity that has been injected? Can it deal with an announcement from the Fed, say tomorrow, that it will interject more liquidity, immediately?
A:
Great questions. First off, yes the gov can change the route but I’ve never seen evidence that they can stop the mkt from eventually reaching its final destination. I think they understand this but they want to avoid the disruptions that come from the more instantaneous 20% plunges. 20% over 3-4 weeks they can handle but 20% in 2 sessions–not so much. This is especially true now because hedge funds are too leveraged and most appear to be in very similar bets.

Last year for instance you’ll see my reports warning of multiple crashes and as we started to crash the Fed or Treasury/gov would step in and stop what would have been a full-blown 20% plus 2 session event according to my work. As to your question below. Who knows, maybe IF the gov. injected more liquidity that action would be viewed as bad medicine and that might turn into the actual catalyst for a crash. I focus strictly on the model and the rest seems to work out.


Q:
What types of things does the model look at to make a determination on something like this – that the market is about to crash ?

A:
It is all proprietary as far as velocity predictions based on price action but a few components will be offered as videos at some point during the coming 12 months. Crashes and melt-ups are predicted based on the exact same data set up (flipped). Bottom-line is that everything we do is derived from past human behavior as displayed in simple price actions.


Q:
Will the Directional Plus and Global Professional service have Intraday information on market direction similar to the Tweeter campaign? 

A:
No.  The Directional Plus and Global Professional services are tailored to Individual Investors.  The Twitter Campaign was a promotional campaign to provide followers a ‘peek behind the curtain’ and determine how many day traders would be interested in such a service.  If we get enough interest, we will provide an intraday, Twitter-type service for day traders in the future.  To be notified if/when such a service is available, be sure to subscribe to the blog or send us a note via the Contact page on the BAM Investor website.


 
Q:
I’m a little confused about today’s postings – what is difference between TRADER and INVESTOR?

A:
‘Trader’ implies day traders making multiple trades each and every day.  ‘Investor’ implies an individual seeking help in positioning their portfolio, especially during periods of extreme volatility such as we’ve been witnessing during 2008/2009.


 
Q:
Please explain “6 hours to exit all stocks and move into the model portfolio”.  Does this mean I should sell the short positions I have such as FAZ or SH?  Should I still be short and adding to short positions or do something different?

A:
The ‘6 hours’ comment implies that our model is getting very bearish (again later tomorrow) and that I’m guessing we only have about 6 market hours prior to the next big plunge.  We are short stocks, we are holding PUTS and we are holding FAZ, SRS, DUG, QID, etc, etc. (complete BAM Model Portfolio is for subscribers only) because our model is predicting a crash this month as well as lower lows for the rest of the year as we trade forward.  We are NOT advising you in your portfolio, we’re simply allowing you to “take a peek at our playing hand.”


 
Q:
I registered in the beginning when the website said Founding Members get a 50% discount.  Now the website says 25% discount.  Will I receive the 50% discount?   

A:
Yes.  If you reserved your spot prior to October 2nd, you have confirmed your Founding Member status and will receive 50% off all BAM Investor products.


Q:
With so much funny business on Wall Street, how can I be sure that you are not just a company set up to try and get investors out of the market as banks and hedge funds drive prices higher?

A:
Not sure how our “getting investors out of stocks” would advantage banks and funds as they “drive prices higher.” It’s much more likely that large operators would want the public to remain in stocks so that they could dump their inventory of stocks as they move higher.


Q:
Announcing a crash is a sure way of keeping it from happening…, the more people that know about it, the less likely it will happen. How do you address this concern?

A:
Our following, for the time being at least, is simply too small to move markets or act as a contrarian indicator.

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