Friday, April 11, 2014

Fade the Midday?

I tend to fade, or at least not trust the action that happens in the middle of the trading day.
And I avoid putting on positions in the morning.....
Today as the selling is expected to continue we are heading lower at midday.
So I don't trust the move....

Late day rally? I don't KNOW.
gh

Is the Grain Sack Empty?

I've been writing this over the last few days. It is a bit disjointed. But seeing Ken Langone bloviating on CNBC this morning made me finish and post.



It occurs to me that the birth of capitalism was coincident with the use of hydrocarbon energy.

Coal use got going in the late 1700's. And capitalism as we know it today got started about that time as well. And each discovery of easier energy, from oil and gas caused another spurt in the growth of world economies and capitalism.

Capitalism depends on growth. Capitalism depends on the continued growth of money. The effect of capitalism is to concentrate the wealth in a few successful hands. Without the creation of more money that goes into the hands of those at the bottom of the economy, the workers and laborers who are engaged in the mining of the wealth of the earth for the use of all, those at the upper layers of the food chain have no buyers for their brilliant ideas.

So, if it indeed does follow (from an earlier post) that the decreased EROI of energy stunts growth and makes all activities more relatively expensive, then the money creation that capitalism depends on will be constrained. And what that would mean for the world is mindboggling. If energy becomes less available worldwide how will the wealth that is now concentrated in those few hands get distributed?

A picture of a large sack of grain comes to mind. The mice have a heyday. They grow fat and have lots of babies, who also do the same. There is no limit to the good times. Until the sack of grain is empty. This is the analogy to the deregulation of business in the 1980's and the manipulation of interest rates that resulted in the largest credit expansion in human history. These actions were in reaction to the end of the good times in the 1970's and early '80s. Perhaps, if the mice had conserved some grain they wouldn't all have to die of starvation.

The same could be said of the United States of America as we expanded from Atlantic to Pacific oceans. It was easy. And capitalism was useful. Now we are crowded. The larger the concentration of people the more regulation is needed.

The world has been harvesting millions of years of stored energy in oil and gas in the last 200 yrs.

I guess we MUST have faith in humanity and our ability to find something else. But nature is not so romantic. So the prospect is devastating.

But, what the hell. In the long run we all die. Right?

Or we change our way of government and our way of economics. And start to reward cooperation rather than competition.

And this morning on CNBC was Mr. Ken Langone, the former head and cofounder of Home Depot, bloviating about what the country needs to "get the economy going again". His main point was that we need to deregulate business. This all comes from a man who made his name at the heart of that great credit expansion. I wanted to ask him if we shouldn't just do what President Reagan did: namely, cut taxes and increase govt. spending, and deregulate the airlines and the banks in later years. We know how that worked out. We are paying for it still.

And that thing about removing Carter's solar panels from the White House......

Thursday, April 10, 2014

dangerous territory

We are getting into dangerous territory on the indexes here. The lack of follow through on yesterdays rally, and the tone of the selling could push this market to the point of capitulation.

Flash Crash, anyone?

Trading Note

Just a note about how I trade.
I have been doing some bottom picking in some of the former high fliers over the last few days.
IRBT was one of my targets. And I had 2/3 of a position in the stock as of yesterday, buying twice before the stock started to rally. Something that I don't recommend, but I felt strongly about the general market rallying shortly, so IRBT was one of the things I bought.

However, yesterday after the FED minutes came out the general market took off to the upside and IRBT did not follow. So I sold it. It was not acting as I expected. If it is not doing what is expected then I am wrong. At least right then.

So far today the stock is also weak. It may take off and rally in the future. Or it may not. But right NOW it is not. And I don't like losses.

This becomes an ego thing. If it rallies from here I will be reticent to buy it again JUST BECAUSE I HAD IT AND SOLD IT. At least that is how I was in the past. If the action is sufficiently strong I will buy it again. Sometimes it takes a few tries to get things right. I don't pretend to know the future, my edge is in the present.....


And that is that.
SCTY was one of the others.    :)

gh

Later: I ended up selling that SCTY for a small gain. The selling is heavy this morning. There are sellers who are waiting for volume to sell...
But the oil, gas, and gold are strong.
It has to be the Putin effect.
War??
gh

Tuesday, April 8, 2014

Ready to go UP

Every chart looks the same intraday.
A rising triangle locked against the ceiling.
gh

Emerging Markets are Strong

It is interesting that the emerging markets are strong even as the U.S. stock markets are weak. And as there are questions about China et.al...

This is a good sign for the world.

And if the rest of the world gets to resume growth again that is good for the U.S. as our dollar gently ;) declines and we start to provide the world with food and steel goods. (Have you noticed the strength in steel?)

EEM

gh

Buying Energy

I have been accumulating some of the energy names.
DVN, CRK.
And now some KMP.
Here is the chart. This stock pays over 7% dividend. I don't normally buy stocks for the dividend. BUT if they are in a field that is appreciating AND they pay a dividend that is a double plus.
We'll see. If you like to buy "low" this is appealing.

remember why you buy, and control your risk.
always,
gh

Monday, April 7, 2014

covered shorts

I covered those shorts about an hour ago. The selling is fizzling. At least for now.
gh

Thursday, April 3, 2014

YTD Distribution

A look at a chart of the Russell small cap index as represented by the ETF IWM, the I-shares Russell shows what appears to be distribution of shares.
Whenever I see higher than average volume with sideways price action after a long decline I think accumulation, or short covering.
The opposite is true after a long advance. Distribution selling, or short selling.


I bought some TWM today. It is an ETF that goes up when the Russell goes down.

We'll see. It is a trade.....

controlling risk,
gh

Wednesday, April 2, 2014

Decreased EROI is deflationary

What is the one thing that may have caused the huge growth the human race has experienced over the last 150 years?

Fundamentally, it has to be hydrocarbon energy. Oil and gas.

If that is the case then can we surmise that generations have become accustomed to "growth". And have we not come to expect growth as a normal condition of economic health.

In a fractional reserve banking system, as is in practice most of the world over it is economic activity, and growth, that enables the creation of money by the borrowing and lending.

If the fundamental driver of growth is getting more expensive when measured in energy expended for energy recovered then the cost of energy must restrain growth. And a restraint of growth will restrain the economy and velocity of money which is the driver of money creation will be subdued.

As it has been for years.

And if the cost of energy rises for businesses depending on the consumption of energy, and most do,they will have less to spend on other aspects of the business. Namely, labor and materials.

So, does it not follow that the effect of a real higher energy cost is deflation since the higher cost of energy slows growth and growth is essential to the printing of money in a fractional reserve system of economics? And hasn't the world been fighting deflationary forces since oil peaked in the 1980s. Is this the "pushing on a string"?

My question, and my thought, is that the human race will go to any length to continue "growth", and will go to any lengths and to the ends of the earth to get the hydrocarbon fuels they have come to depend on for economic growth.

Buy the explorers and the drillers.

just thinkin'

gh

EROI