Wednesday, November 27, 2013

Trading Reality

One of my favorite lines is from the movie "Platoon". "I am reality".

And the part that pertains to trading is learning to recognize reality. In speculation reality is what the price and volume is doing. That is reality.

"There's the way it ought to be. And there's the way it is!"

gh

Monday, November 25, 2013

This Economy is Top Heavy

Could it be fact that the attempts by the worlds central banks to lower interest rates, weaken their home currencies, and print money only provides more supply into the supply chain, making production cheaper, and CAUSES deflation.

Low interest rates only cause inflation if the consumers can use the money to bid up prices. And labor has no power due to the attack on unions for 40 years.

And the consumers are the ones who have a job. And business is about increasing the profit margin by the use of labor saving devices. Robots, software, and as a last resort actual cheap labor. Whether in S. Carolina or in India.

The inflation that almost took ahold in 2006 did not have a chance because by that time the consumer debt was way too large.

The workers need a raise.

How about a single payer health care system in this country. Let the central bank give the money to the govt. to pay for it until the economy picks up. That puts money into the base of the economy.

Then we make the workweek 32 hours. 20% more workers needed. Business must pay out the money they previously spent on healthcare into wages. Money into the base of the economy.

And finally, some protectionist policies in this country. Let's make things we use HERE.

We can pay some higher prices if needed because we are working. And the workers that have been set free from the bondage of healthcare can look for work in something they actually excel at, instead of keeping a "job" that they don't like. That is workforce flexibility.

Just thinkin'

gh

Sunday, November 24, 2013

Shipping

There is a nice little site over at http://gcaptain.com/

And that is where this on the shipping trade came from.

http://gcaptain.com/things-cant-get-worse-shipping/

So that strength in those things was from Mr. Soros doing some buying....

It was fun to watch those bases form. And the price would shoot up on heavy volume and just drift down on tiny volume. Then do it again. They were my best trade of the year.


DRYS is forming a tight triangle. Which way it goes is any ones guess.

gh

Friday, November 22, 2013

Sometimes a Great Notion

No charts. No opinion.
Just this from Jesse's Café Americain.

Thursday Evening. We are Slow to master the truth

Every once in awhile I am reminded of what happened to me about four years ago now.

God talked to me. And I asked "him" questions and received answers immediately.

There was a unique dream during that time. 

And I came to realize the truth.

That God IS love.

Love is God.

And wherever two or more gather in his name. Love. There is God.

Love is the mystery that is God.

After I understood this my life changed. I became much more emotionally secure and stable.

And from a trading standpoint, not to make this vulgar but trading is my passion, my trading and my profitability increased significantly.

It was uncanny. Almost from that week I became able to see what would happen.

To say it makes it sound like some sort of "line".  But this happened to me.

And thanks to Jesse for bringing this message to his readers on a regular basis.

http://jessescrossroadscafe.blogspot.com/

Wednesday, November 20, 2013

An Acorn?

Alon:


gh

One Good Chart

It has been difficult to find good looking charts lately. Most of the breakouts have happened and the challenge has been to stick with the trend.

Here is a chart of AMX.   America Movil..... cell phones etc in S. America

EEM the emerging markets look strong from all time frames.

AMX:
Control risk,
gh

Friday, November 15, 2013

Long Term Optimism

For quite some time it has been my belief from observation and the study of history that the basic requirement for a vibrant and growing economy is a cheap source of energy. If indeed the world has discovered a way to obtain cheap and plentiful natural gas and oil from shale, and if indeed the U.S. is poised to become the largest producer of oil and nat gas in a couple of years as reported recently, then the U.S. and the world has the basic fundamental driver of growth.

Against the above premise is the backdrop of a private debt overhang that is being slowly liquidated. A long decline in the real earnings of working people in the middle classes. And a demographic challenge of an aging population and the entitlement problem.

Given the advancements in productivity of the last several decades and the ability of manufacturing to produce goods with low labor requirements it seems logical that we don't need a large workforce to manufacture to export. In fact if this country has the cheapest energy around we should have enough of an advantage to support our elderly AND provide employment to our younger and smaller workforce. As our older workers move into retirement they will begin to spend what they have been saving. (They are saving frantically now) And the jobs they vacate will go to the next generation. That smaller workforce will gain political influence as the demand for their labors goes up due to labor supply constraints. I see the workers in a country with an export advantage gaining a bigger piece of the productivity pie as they support themselves and their parents.

The medical system will evolve, due to the coming properity and the fact of a much larger geriatric population, into a single payer system. Would you stand by and watch your parents get substandard care? The hopes of todays Tea Party to turn the young against the elderly will fail. As it must.

So the stock market may be vulnerable to short term shocks from the prospect of higher interest rates, but rates will lag the economy for quite some time. Energy sufficiency typically produces a strong currency that will be able to stand a relatively low interest rate with low domestic inflation. If we can export cheaper does that not mean that WE will be exporting deflation? For a change......

Lots of "If's" there. Just sayin'.

gh

Wednesday, November 13, 2013

Indigestion and intraday clues?

Well, the short thing hasn't worked out so well. The markets, so far do not seem particularly worried.
I closed out my short positions over the last couple days.

I guess Satanta has some indigestion....

Intraday today: the dollar falls, gold sits still, and the indexes rally from a lower day that is quiet. And long bonds are up.

We must be getting another announcement of continued QE!

gh

Tuesday, November 12, 2013

How is the Dr. doing?

The copper market is often referred to as "Dr. Copper" due to the central nature of copper as a metal in the world economy. Increased economic activity, particularly in construction, usually shows up in a higher price for copper. There are speculators in copper as well and if the speculators on balance think things are picking up they will bid up the price of copper....
Perhaps it is just a supply problem.


Copper has not gone anywhere in years. Even with the latest worldwide rounds of QE and interest rate cuts.

Charts of JJC, the copper ETF.


gh

Thursday, November 7, 2013

Time to buy some Volatility

Volatility is poised to pick up. I don't see how it can avoid increasing.

Their is a rotation going on. The QQQ  and IWM have been weak for days. DIA stronger as big investors rotate from small and tech to the "safe haven" stocks in the Dow. P&G, GE, etc....

VXX is the ETF for volatility

gh

Race to the Bottom

The headline out of Europe last night:

ECB Cuts Key Rate to Record Low to Fight Deflation Threat


"Both traditional and unconventional monetary-policy tools have become impotent to kick-start the euro-zone economy," said Carsten Brzeski, senior economist at ING Groep NV in Brussels. "Nevertheless, there is little worse for a central bank than having to admit that it has reached the limits of its zone of influence."

The race to the bottom continues. There is little hope for recovery in the western world if the Eurozone is still cutting rates. If the U.S. was recovering it's buying power Europe would have no need to cut rates. Interest rates and thus currencies around the world are being cut/devalued in an ongoing effort to stimulate domestic industry and exports. But one countries exports are another countries imports. And after a couple of decades of China manipulation of currency values and the unfair advantage they gained by that strategy the rest of the world is trying the same thing.

I believe this is the reason the Fed is keeping easing in place. They are trying to devalue the USD in order to stimulate US exports. Japan is doing the same thing for the same reason. And China is reluctantly and very slowly allowing their currency to rise. Attempting to retain their export advantage while growing their middle class, who they hope will buy domestic goods.

Japan, China, Europe, and North America. All attempting to devalue their money. This is not the "comparative advantage" that makes economies efficient. This is mercantilism. The blatant effort to artificially stimulate economies by currency manipulation.

So the race to the bottom in currencies and the all out effort to avoid any deflation. Why so scared of deflation? It must be that assets are still our claim to solvency. And we must avoid asset deflation at all costs. What those costs will be may be more than we willingly pay or are able to avoid.

The dollar may be up today, but the heads are already talking about what the US Federal Reserves next move will be and what ammunition the Fed has to counter this move in the Eurozone.

Gold will come back as the goldbugs have been saying all along......

Tread carefully,
gh

Tuesday, November 5, 2013

This is what I mean

Ran across this from Bill Gross the head of PIMCO.

He is the bond guru that I listen to for macro-economic wisdom.

And so should you....

Mr. Gross


margin debt at record high

Barry Ritholz had this on "The Big Picture" a few days ago on the record margin debt in the stock market.
Today was another quiet day as the averages held near record highs.

And all the talking heads could do was tell us why it is still a good time to buy.

New rumors of Fed support for the next several YEARS!

And the market just sat there.......

Lots of bubble talk, that is why the discussion on CNBC. Of course everybody is a contrarian nowadays and everybody wants to be the first one to spot the next bubble. A bubble being defined as a self reinforcing sustained rise in prices that have no connection to fundamental reality.

What is the fundamental reality of the stock market?
If one talks of corporate earnings they are at record levels. About 12% of U.S. GDP. Also a record.
But what of the underlying economy? Isn't that a fundamental? Unemployment levels remain high. Wages remain unchanged and have lost ground to inflation for how many years?
Personal and household debt levels remain high. Not at record levels due to the declines in the housing enthusiasm, but still high.
The economy is increasingly concentrated. Companies marketing to those who still have purchasing power. But across the board the word is that no companies have intentions to hire people. They make their profits by increased productivity....
A couple days ago Kellogg said they saw trouble on the earnings front, but when they announced a plan to decrease their workforce by 7% the stock went up....

Eventually the leveraged crowd will become pensive, and then wary, and then afraid of the economy that does not improve fast enough to justify the leveraged positions. That means there is some sort of "bubble". An sustained rise in prices unjustified by fundamentals. But it ain't a bubble 'till it pops!

The chart from the Big Pic:

waiting.....
gh

Rising wedge revisited

Here is a follow up from yesterdays IWM chart.

There was another rising wedge on the chart that I hadn't noticed yesterday...

Weakness in small caps??  Maybe.

gh

Monday, November 4, 2013

Never short a quiet market?

There is a saying in the speculation trade that one should "never short a dull market". This refers to the distinct probability of a short covering rally caused by the bears themselves.

There also is in technical analysis a probability of a rising wedge price formation to have a sharp selloff. Particularly if the rise is on below average or declining
g volume. I suppose the saying for the broader market could be "never be leveraged long in a dull market".

Today is a very dull market. The Russell in particular, although up, the volume is low. So far.
One hour to go....
Chart below