The “Frenemy” Audit: A Forensic Look at the 2007 Edge of the Abyss

How a combative billcara.com reader cataloged 169 warnings just before the world changed.

I am often asked why I trust my methodology so implicitly. The answer lies in the archives.

Recently, I revisited a document titled “169 Gems.” It is a collection of my market commentary from March to August 2007—the quiet months before the financial storm broke. But I didn’t compile this list. It was compiled by a reader named Kyle, and later written up by NYUGrad.

Kyle (I hope you are still following me) was, in my view in 2007, intelligent, committed, and deeply passionate about “investing the right way.” He was also, at times, impossible to deal with. In fact, I had to ban him from my comments section for picking fights when I was simply trying to educate. Over 19 years, I only banned ten followers out of tens of thousands. I banned Kyle twice. Yet, despite our personal friction, he spent hours analyzing my writing, stripping away the noise, and cataloging the core lessons I was teaching day in and day out.

He wasn’t curating these quotes to flatter me; he was curating them to prove he was listening.

What follows is a “Forensic Audit” of those months. It is not a victory lap I wrote for myself; it is a record of warnings issued in real-time, captured by a rigorous observer. If these principles held up against the volatility of 2007 and the scrutiny of a combative reader, they will hold up for you today.

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1. The Primacy of Price and the “Distribution Zone”

In the spring of 2007, amidst a roar of fundamental noise and analyst spin, my guidance remained steadfastly technical. The core philosophy was that price movements dictate reality, not the other way around. Kyle noted this theme repeatedly in my quotes because it is the foundation of survival.

From the Archives:

“The point really is that global markets do not operate in a vacuum. Prices are not random.”

“In the meantime, we just have to watch those prices. And that is precisely why I believe that Relative Strength Index (RSI) is the most important technical indicator available to traders... But this is also the phase of the price cycle I call the Distribution Zone, which is another word for ‘extremely over-bought’.”

“I have a very simple mechanical system... I simply accumulate positions when the Monthly-Weekly-Daily Relative Strength Index (RSI) technical indicator is below 30 and distribute when it is over 70 for each stock.”

Why It Matters Today:

Nineteen years later, algorithmic and high-frequency trading have made technical boundaries even more rigid. The concept of the “Distribution Zone” (RSI > 70) remains a critical shield against euphoria. [In fast markets, the limits expand to 80-20.] The advice to ignore the narrative and trade the price is timeless because human emotion (greed) and mathematical reversion to the mean are constants in market physics.

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2. The Conflict of Interest: HB&B (Humungous Bank & Broker)

A defining characteristic of the 2007 commentary was the relentless exposure of the structural disadvantages facing the retail investor (”Mom & Pop”) versus the institutional machine, which I refer to as HB&B. Kyle captured the warnings that the financial industry is not a service utility; it is a counter-party.

From the Archives:

“Is this the world we want to live in? You know my biggest complaint with capital markets is that the Buy Side faces impossible disadvantages posed by a Sell Side that can act as both principal and agent in the same transaction, where they are permitted to advise us and also trade against our order flow.”

“What we have is a system so conflicted in favor of HB&B that the table is tilted almost upright to facilitate the rolling of our capital right off and into their pockets.”

Why It Matters Today:

This analysis anticipated the modern controversies surrounding Payment for Order Flow (PFOF) and the dominance of market makers. Understanding that “HB&B” often trades against its own clients is the first step toward independent risk management. As I noted then, “We have to strike at a moment’s notice - before those HB&B computers can smash and grab.”

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3. The Mechanics of the Liquidity Crisis

While the mainstream media was downplaying the sub-prime cracks in early 2007, the “Gems” show a clear understanding of how debt service destroys liquidity. The mechanism is simple: liquidity is just debt, and when debt service fails, asset liquidation begins.

From the Archives:

“And loans will be called because too many debtors cannot make the loan payments. That’s called debt service, and when it becomes a problem, the banks start calling loans. That’s when things like houses and automobiles and stocks and mutual funds have to get sold in order to pay back the banker.”

“You see, unless you discover gold, you cannot print money by itself. There is always debt on the other side of the bookkeeper’s ledger... But HB&B will go to the highest court of the land to ensure the offsetting debt does not diminish.”

Why It Matters Today:

We currently live in a global economy with significantly higher debt-to-GDP ratios than in 2007. The mechanic identified here—that liquidity is merely debt, and when debt service fails, asset liquidation begins—is the exact playbook for every liquidity crisis, including those we face in the current sovereign debt environment.

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4. The “G Team” and the Illusion of Free Markets

While analysts in 2007 were discussing “soft landings,” my blog was documenting a hostile takeover of the regulatory apparatus. I identified a “revolving door” between Wall Street and Washington that had fundamentally altered the playing field. This is what I called the “G Team” (Government and Goldman Sachs).

From the Archives:

“After all, Goldman Sachs has taken control of the US Treasury, the Fed, the New York Stock Exchange and now the World Bank - all since March 7, 2006... Is this concentration of the nation’s financial control in the hands of a single private company what the US Founding Fathers had in mind?”

“It’s both houses of Congress, the White House and HB&B to blame. The people with the biggest money have the lobbies in place to have things go their way.”

Why It Matters Today:

The “financialization” of government is now a central theme in global economics. The identification of the “Plunge Protection Team” dynamic—whereby authorities intervene to suppress volatility—was prescient. The lesson remains: Do not trade based on what the regulations say; trade based on what the “G Team” needs to happen to keep the game going.

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5. Gold as the “Dessert” (The Ultimate Lagging Indicator)

In the face of reckless monetary expansion, the commentary consistently pointed to gold not as a trade, but as a currency and a lagging indicator of confidence failure. Kyle picked up on my specific rotation theory: Gold moves last.

From the Archives:

“At the end of the day, gold will always be good to buy the essentials of life, and to buy asset repo’s from HB&B, like houses and land... bankers will always take Gold.”

“So, when the Gold Bear arrives on the scene, it is almost always a case of having desert to end the meal. By then, the rest of the market has already been consumed.”

Why It Matters Today:

The view of gold as the “dessert to end the meal” is a profound insight into market cycles. It suggests that gold shines brightest when faith in paper assets dissolves. With central banks currently buying gold at record rates, this 2007 advice regarding the distinction between “fiat” and “real” money is vital for long-term wealth preservation.

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6. The Decline of the “American Century”

Long before “de-dollarization” became a buzzword in the 2020s, the 2007 archives were already signaling the structural decline of the US economy relative to emerging powers.

From the Archives:

“And with that in mind, I noted that the S&P 1200 global index has now a US weighting (ie, S&P 500) of about 47 pct, down from 50 pct just a couple years ago... America is losing the competition for economic supremacy to the developing nations.”

“In America, control of private sector assets is being transferred from independent owners and managers of capital (We The People) to a handful of connected players. The mind boggles.”

Why It Matters Today:

The prediction regarding the S&P’s global weighting was mathematically accurate. The shift of economic gravity toward the East and the Global South has defined the last two decades. The advice here is strategic: Home bias is a portfolio killer. A modern portfolio must look beyond US borders because the “connected players” have already moved their capital offshore.

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The Epilogue: The Value of the Independent Mind

Looking back at this audit nineteen years later, I am struck by two things.

First, the math of the market does not change. The RSI levels that signaled a “Distribution Zone” in 2007 are the same levels that signal danger today. The behavior of gold as a “lagging indicator of confidence failure” remains consistent.

Second, I am reminded of Kyle. Despite his combative nature, he understood the most important lesson I have tried to teach: Independence.

He didn’t rely on the Wall Street Journal or the talking heads on TV. He did the work. He tracked the prices. He held me accountable, and in doing so, he held himself accountable.

The market doesn’t care if you are polite. It doesn’t care if you are optimistic. It only cares if you are on the right side of the trade. As we navigate the uncertainties of the 2020s—with debt levels and geopolitical tensions that rival or exceed 2007—I invite you to adopt that same rigorous skepticism.

Read the charts. Ignore the noise. And remember: We trade prices, not stories.