Wednesday, December 31, 2014

Cheap Energy is Inflationary

More evidence that cheap and available energy creates demand for money and credit.
Interest rates no longer need to be held down. They can rise of their own free will and market.

Govt. support not needed



Happy New Year!

gh

Monday, December 29, 2014

et tu GLD?

I just want to say that today was a pretty tame holiday trading day.
Except for GLD.
I saw a sharp knockdown on the daily chart on increased volume. Usually a warning sign of continued or impending weakness.
But what I saw intra-day was of heavy buying on the low price, as the price held steady and gained on good volume at the end of the day.
All the while on a strong US Dollar.

It appears strong for gold. Why, I have no idea. Except for the concept of low energy prices being the spark for inflation.

We'll see.
The chart.

gh

Tuesday, December 23, 2014

Is It Time?

The investing world has been talking about and expecting interest rates to rise for a long time now. It seems like years. And the stock market may be getting acclimated to a gradual rise in interest rates by the periodic scares over the last couple of years. Perhaps desensitized is the word.

The recent selloff in the junk bond market attributed to the rapid decline in oil prices and the expected effect of those prices on over leveraged oil and gas producers has caused more jitters in the broader stock market. Will the rout in junk cause more disruption or is it "a buying opportunity". (I detest that phrase!)

Perhaps the decline in junk is just the opening act in a general change in trend for interest rates in general. It does seem that the riskiest bonds would be the first to feel the effects of a change in interest rates.

I trade technically, but try to consider the fundamentals, particularly when trying to pick bottoms in a market. The next year may mark the bottom in interest rates. I do not think rates will rise fast enough to kill the economy, just that they will follow inflation upwards. Lagging.
But the turn can be rapid as far as interest rate markets go. Particularly after such a long period of declining interest rates. (Thirty years! or so.)

I am trying to find a long term position in the short bond ETF TBT. I did a trade several weeks ago that I abandoned for a small gain, but the chart looks promising again.



FYI

 control risk by abandoning a losing position if your timing is wrong,
gh

Related thought: Look at the banks. They will do well with rising rates. You can track the days when treasuries are down by the days the banks are rallying. Banks loan money to make money. Higher rates will help them overcome their fear of loaning money. Higher interest rates may be all the world needs to jumpstart the next hyperinflation.  Oh, sorry. Don't get too far ahead.
gh

Monday, December 22, 2014

One Good Trade






I closed out my CUBA trade this morning. This muppet took a 55% gain over three days. I probably sold early. I have found that I just have to wait as long as I can as the price moves up and sell when the momentum is strong, and get over the regret as the price continues higher. 
That is the way it is.

Bernard Baruch was reported to have said the secret to his success was that he always bought late and sold early.


cntrl rsk,
gh

Friday, December 19, 2014

MolyCorp Squeeze

The short of MCP will get squeezed if the chart is telling me anything.
NOW.
gh

12/22/14
The short covering did not catch fire as anticipated. MCP down today.
gh

Thursday, December 18, 2014

Russian Tanks in Ukraine!

Was anyone startled at that headline. Of course not. No one reads this blog.

But, that small fact aside, I do not believe that the markets have to have any worries about Russia invading Ukraine. Not to say they won't do that, (if they aren't there already), but from the perspective of the stock market it will be a nonevent because the western nations will not respond militarily.
Some will jump on their soapboxes and accuse the US president of cowardice or "caving to terrorism" or some such nonsense. But the fact is that what has happened to the Russian economy lately proves that we do not have to shoot at Russia to defeat them. We can just starve them to death.

gh

Wednesday, December 17, 2014

Yellen and the Markets

The Federal Reserve met today and released the awaited statement. There was no change in the language referring to "an extended period" of low interest rates. Actually they did change some things. See HERE
But did they really change anything?


During comments after the meeting by Janet Yellen, the chair of the Fed, the stock markets declined, along with gold. The question is of inflation. When, the market wishes to know, is the Fed going to "rein in" inflation. And all are quivering in fear of a raise.

Let me answer that question.

You all know the difficulty of "pushing on a string". Yes?
That has been the analogy of the Fed trying to stimulate an economy that was not raring to go. In other words you can't make people borrow and create money if they don't want to borrow, or the banks don't want to lend. The economy is not ready to pull it's weight yet.

Think of a team of horses at work. An archaic concept, I know. But you cannot control a team of horses unless they want to pull forward. You can't push on a string...

During her comments Yellen made a one sentence statement that summed it up for me. She said, to paraphrase, "myself and the committee want to wait to raise rates until we are sure we can continue to raise rates in a continuing fashion".  To me that means they want the economy and inflation to be pulling at the harness before they try to control or restrain the economy.
When did Volcker raise rates? What was inflation doing when that hero of capitalism raised rates to rein in inflation? Wasn't it like 7% inflation?
We got a long way to go. Buy gold and real assets.


gh

Cuban Strategy

The political hacks are saying that this normalization of Cuba relations initiative by President Obama is a "poor trade" and they refer to the prisoner release.
The prisoner release is a token. Deals of a political nature have tokens to present to domestic constituencies. Do we think that Raul Castro gives a shit about his spy that is released? I doubt it. There are other considerations.

Take a look at a map of the world and pay attention to the Caribbean basin. Cuba sits at the entrance to the Gulf of Mexico. Now think of a Keystone pipeline bringing vast amounts of cheap energy from the northern U.S. and Canada. The supplier of that energy will gain tremendous influence being the supplier of energy to the region. Venezuela sits at the other end of that Carribean crescent. We know we can undercut them on price. Influence.

Secondarily, I think that once the Cuban people have a chance at prosperity and jobs that will come from an influx of US dollars into Cuba combined with modern technology and social media they will demand their rights as human beings. Socialism may persist in Cuba, but Communism and repression will fail. Straight Capitalism is doomed. Straight Communism has failed. A combination of socialism and capitalism is a vigorous hybrid.

Furthermore. When I have to make an important decision with a moral dimension I often ask myself, "What would Jesus do?". The answer in this case is most definitly not to continue a 50 year old embargo that has placed millions in poverty. It is time to reach out with peace and prosperity.

Let us think strategically and restrain our short sighted and tribal obsession with political conflict. For a change. I don't think the "hope and change" thing is dead. It just got chopped up with a hatchet job. Let us be progressive.

Energy Self-Sufficiency

Just a few words.

The energy independence of the U.S. will have large ramifications across the hemisphere.
In the same way that Cuba is moving closer, I can see all of S. America benefitting from a local energy surplus. From this standpoint the Keystone pipeline is appealing. I will leave the global warming argument aside. But from the perspective of the export of LNG to nearby neighbors it may be very beneficial from a security standpoint for a long time to come.

gh

CUBA

Cuba relations to normalize

Cuba cars...





The news this morning is of the coming of normalized relations with Cuba. You know, that island off the coast of Florida that is a country. Where Guantanamo is, the naval base and prison.

The country that drives all those vintage cars..... I see lots of those cars coming to the U.S. Among other things.
Like energy. We could easily export some of our energy to a nice Cuba.

And we can vacation there, like we used to long ago.

CUBA is an ETF. Lots of activity in that this morning. It barely broke out to new highs. I can't imagine how high it could go if it has been so moribund for so long.
There are surely other investments that would thrive if Cuba and U.S. normalized. It would take an expense off Russia's hands. They wouldn't have to support their comrades any longer.....

thinkin,
gh


Charts:

Monday, December 15, 2014

Middle East Unrest

This thought has been bouncing around my mind for a few days. If the Saudis cause too much turmoil in the oil world it wouldn't surprise me if the get attacked for their actions. Whether by Iran, or Russia, most probably by a proxy. But the end result would be the same. The U.S. would be reluctant to get involved. We don't need them anymore.

One refinery explosion or one terrorist attack in the Kingdom.....

From a technical perspective charts that go down this fast usually don't just stop and go sideways.....

The market gets wound too tight.

Playing with Fire


just intowishin,
gh

Sunday, December 14, 2014

The Last War

Here is a post from Zerohedge

This is what that post says....

"
UMIch Consumer Confidence Goes Euphoric - Highest Since Dec 2006
 


Submitted by Tyler Durden on 12/12/2014 10:10

The last time Americans were this full of shits and giggles was December 2006 - according to UMich latest survey of consumer sentiment. The indicator has risen for 5 straight months accelerating each time with the biggest surge since the mid-2011 US downgrade crash. At 93.8, smashing expectations of just 89.5 by the most since March 2013, for a 5-standard-deviation beat. Inflation expectations rose (as inflation plunges) and while both current and outlook indices rose markedly, it is the hope-strewn 'economic outlook' that exploded.

A picture paints a thousand words...

"
 
 

If your taste runs to conspiracies you will love Zerohedge. They rehash all of the latest conspiracies about politics and economics with regularity. And if you are looking for indications of an imminent collapse in the financial world, ZH is the place to get your dope.

It has been said that the Generals always fight the last war. This is meant to say that they learn their lessons from the war they were in, and prepare their armies according to those lessons that they learned. But the Generals on the other side do the same. So the next big war is inevitably different from the last because only a fool would fight a battle ones enemy is prepared to win.

Much the same in the financial and business world. The mistakes are in the past and the survivors learn from their mistakes and the mistakes of others. It is for this reason that the same manmade calamities rarely happen the same way twice. History doesn't repeat, it rhymes. And sometimes it isn't even a good rhyme.

I do have a problem with prognosticators of macro economic distress who base their predictions on what happened last time. All of the individual players who have some size are looking out for their own hides, and the last thing they will do is place their treasure or the assets they manage in danger from a known.
It is the unknowns that we don't know that cause the big problems. (Thanks to Don Rumsfeld) And what the conspiracy buffs talk about are the knowns.

The latest threat to U.S. finance seems to be related to the sudden drop in the price of oil. The oil industry in the U.S. has invested large amounts of cheap capital in the production of shale oil and gas over the last several years, and it is paying off in cheap energy costs. Now that the price of that product is dropping there are questions regarding which of these new drillers and energy miners will be able to survive these low prices for their products. I have heard that the high yield debt of the oil industry makes up approximately 20% of the corporate junk bond market in the U.S.  It seems inevitable that some of these companies will go bankrupt and default on their debts. Who is holding those bad debts is one question casting a pall.
Another is how long the price of oil will remain low. The Saudis seem to be resolute in holding their production at its present level. It is not in their immediate interest to support the price of energy now.
There is talk of the market finally reaching a "true market level" after long speculators are flushed out. Some of the big banks have apparently abandoned their commodity positions. The talk seems to be that energy could go much lower. That implies that those talking think there is still money to be made in the decline.
The problem with market solutions is that the market will now be waiting for supply to decline as producers shut down. And the market will tend to be short energy prices. But as the first indications come of a bottom in supply the market will move the other way. Not only the shorts will cover, but those who need the product will anticipate a shortage and stock up. A sharp reversal is possible.

The other side of the equation is demand. As the above ZH article is pointing out, consumer confidence is the highest in many years. This is not only due to low gas prices. It has as much to do with increasing employment numbers, wages increases in the works, and the paying down of debt that much of the workforce has been doing over the last few years. Debt is the last war. We won't make that same mistake for awhile. The Japanese haven't made that mistake for awhile either. (20yrs!)
The only people who make a mistake are the generals.
And the people in charge at the Federal Reserve could only be thought of as generals. But their mistakes have been widely studied as well. So perhaps there are few known unknowns there.

I can come to no firm conclusions or indications of the future course of financial markets at this time. The recent weakness in stocks, and it is only a few days of declines, may be no more than short term jitters over recent junk debt problems. But finance fixes itself. And energy demand and supply fixes itself. (Until the shale and frack gas runs out, and that will be several years) I do think we may see reversals in energy that are not expected. And we may see things in the stocks that are unexpected. The speculative reversals will probably be initiated from the political side of the jungle. I don't think consumer confidence will reverse. People are about ready to get on with the party.




Staying on my toes,
gh
 






 

Friday, December 12, 2014

CHK

Steady and heavy buying in Chesapeake this morning.
Bottom?

control risk,
gh

0854 PST
Bob Pisani just told viewers to "don't pick bottoms". What better indicator is there?


P.S. : I just want to say here that picking bottoms, and making brash comments like the above is reckless. I have some fun picking bottoms. But there is real risk in doing so. It is generally more profitable over the longer term to wait for a bottom to form, and for the trend to change.
gh

Thursday, December 11, 2014

Is The Dollar Done?

Gold has held up very well considering the strength in the US Dollar and the weakness in energy.

As we find a bottom in energy, we may find a top in the USD.

I think we are close.


Watch gold and silver soar as the dollar slips............


control risk,
gh

1230 PST: COVER YOUR OIL SHORTS BOYS!

Wednesday, December 10, 2014

Weak Dollar Volatility?

Lately as the US dollar index weakens, the volatility in the stock market rises and the indexes weaken.

This last years stock rise has been accompanied by a strong dollar on the "strength of the U.S. economy".

Part of that strength has been due to the energy self sufficiency that the U.S. has attained, and the weakness in the rest of the world economies. Namely, China and Europe, as well as much of S. America.

But low energy prices may be a boost to the world economies in the same way we expect it to boost the U.S. economy. If the rest of the world picks up the pace, can we expect their currencies to appreciate like the dollar has lately? And if so, the dollar must weaken, as it is the currency that all of the rest are denominated in.

Is this how the currency war ends. Our markets have been "the best of a bad lot". And if money flows the other way what happens then.

This is another argument for gold. And real assets.

As I write, Peter Vookbar, (sp?) is talking of the need for the Fed to raise rates.
If they have to defend the U.S. dollar how would  that be good for the U.S. economy if growth is the metric used. And how would the U.S. govt. do with rising interest rates?
 
The U.S. could be on the wrong end of money flows for the first time in a long time.
Just thinking.
gh

Oh, by the way, I am picking a bottom in Freeport McMoran (FCX) here. Bot some. I think oil may have just bottomed as well. With the currency thing and oil over sold it may be time.
gh

The Miners

The gold miners have been unusually strong lately. A bottom seems to be forming in gold and the gold stocks.

Low energy prices must be a boon to a miner, and the ongoing currency wars must spill into the economy sooner or later.

But the chart says buy.

Control your risk,
gh

Monday, December 8, 2014

Crude Reality?

For some time I have contended that the reduction in energy costs that we are seeing with the collapse in crude and natural gas prices over the past few months is good for the economies of the world. Good because low energy costs make more things possible. Good because businesses have lower costs of operation, and good due to the money most people will save and spend otherwise.

But from a market perspective a continued decline in energy prices is problematic from the predictive aspect. If the world economy is going to do better on low energy prices, demand for energy will pick up. But if "the market" keeps marking down the price of energy, at some point one must ask if "the market" actually thinks that economies are on the mend, or not?

Perhaps demand is not expected to increase.  Perhaps business profits will not continue to increase.
Perhaps.

A sharp drop in the averages today.
Gold catching a bid.

Is the Grinch coming?

Friday, December 5, 2014

Interest Rates to Rise

Sometime. Sometime, in the future, interest rates will rise.

The Job Numbers today, raise the topic of the Fed and raising of short term interest rates in a move to get away from the negative real rate in effect.

The Fed may need to make a move to satisfy their need for credibility. Their statements have been to the effect that they will be "data dependent".

Well, we have the data.

What will the reaction of the stock market to a rise in rates be? I don't know. But looking farther out the reaction of the general economy to a rise in rates may be the same as the reaction of consumers to rising prices. They buy more because the price may be higher later.

It may be that as interest rates begin to rise they will stimulate pent up demand.

Just a thought.

gh

Tuesday, December 2, 2014

Reading the Tape

gh

The Happy Season

It is the happy season in the markets when the uptrend is sold to the public anew, or the downtrends are offered tantalizingly as value.

It is wise to be careful this time of year if you are a trader. If you are an investor you can look forward to the next year and see what changes are in store. The first weeks of a new year are a time of changes in sentiment as investors re-evaluate where they are, and where they expect to be in the coming year. Volatility usually rises.

Here is a chart from today. The averages remind me of "churn".



gh

Sunday, November 30, 2014

The Dog Didn't Bark

The Swiss dog didn't bark.

DOG

And gold in the futures is down sharply.

But there was a vote. Someone actually voted on this question.
The world is thinking about this question.

As the votes pick up in frequency we will begin to have a problem.

gh

Friday, November 28, 2014

Energy Costs Plunge

The Organization of Petroleum Exporters (OPEC) met in Vienna over the Thanksgiving holiday. The decision out of that meeting was to leave their collective output of oil unchanged. Oil and energy opened today significantly lower.

A continuation of the decline in crude prices has the potential to significantly disrupt the production of shale oil in the U.S. and Canada. The higher cost producers will find it harder to be profitable, and after these recent years of low interest rates many are almost certainly overleveraged. Another example of a bubble created by low interest rates, and how they cause distortion?

So the producers of energy are lower this morning.  Gold and silver as well, but not so much as energy. My feeling remains that a prolonged period of low energy prices will counter-intuitively cause an increase in the velocity of money that will lead to the start of inflation, particularly as interest rates stay below zero real rate.

For the long term the inflation plays must be a buy.

After the shakeout in energy, perhaps in two or three years, oil will resume the rise.

Todays charts:

I am thankful this morning that I lightened up on my oil bets two days ago. I will watch how the remaining dogs react and act accordingly.
Watch the railroads. They have been dependent on shipping crude for the last couple years.

Control your risk,
gh

Tuesday, November 25, 2014

China Nuclear

It seems that the Chinese are committed to nuclear energy for the long term. Long term is how the Chinese do things.

China Nuclear

Under Construction by Country

China Nuc Cycle


More

Uranium




There is a lot of information on nuclear. Natural gas will give nuclear a run for the money in the short run, and there are questions about the supply of uranium in the longer run. I am looking for a bottom here in the U miners.

CCJ- Cameco at the top of the list.

and  UEC for the beta....

Control risk,

gh





Friday, November 21, 2014

Wedgies

The topic of rising wedges in a price chart came up recently. A rising wedge on declining volume will often break sharply. (If it doesn't finish with a blowoff top)

And the pattern is fairly reliable in different timeframes.

Conversely, a declining wedge on declining volume will often rally sharply, as the selling dries up.

Of course no price is fail-safe. Always protect yourself. That is what trading is. Expecting the unexpected while trading the expected.

Control risk,
gh

Thursday, November 20, 2014

Making Immigrants Legal





The President is scheduled to speak on the U.S. immigration and illegal alien question tonight. After years of inaction by the U.S. Congress, the President is expected to use executive action to move forward on this issue.

The Republicans, always the representative of big business, will accuse him of an abuse of power and do what they can to impeach this president.

From the perspective of the working man in this country I think it will be good for the law abiding immigrants to be granted a path to citizenship. For years the fact that these people were here illegally made them willing to accept whatever job they could find, and to not question the pay or the lack of benefits. And they would not question how they were treated by their employers. All for the fear of not finding another job, or of getting deported.
As these workers gain legal status they will change these behaviors and will become advocates for themselves in the workplace. This will cause upward wage pressure. And that is what the world and this country needs to finally regain some footing economically. When the gains of productivity are spread equitably and broadly in the economy the economy gains stability. When the gains are shared in an meritocratic way, and not hoarded by abuse of power, the output of the society is put to work again, or is able to be saved for later use.
The reason the broader economy has been so slow to stimulate over the last years is due to this lack of wealth in the broad bottom and middle of society. Over time this must change.

Support the President in his actions. He works for the common man in ways that the common man is unable to appreciate.

gh

Wednesday, November 19, 2014

PetroBras

After watching the news unfold and how the stock is trading and taking into account what the talking heads are debating on the tube.
I am beginning to buy PBR.
Not too much for now, just a little pressure on the shorts.

LOL

control your risk,
gh

Something Happening

look at gold.
energy.
US Dollar??

gh

Look For a Bottom in Energy

Here is the news for oil inventory this morning.

Inventory reports

And here is what price did in response to larger than expected inventories of oil.


Look for a bottom in energy prices.
gh

Thursday, November 13, 2014

GLD Revisited

The GLD and gold the metal made new lows recently. GLD in particular has seen volume continue to dry up. The new lows in GLD were made on low volume. This is technically something that I find encouraging from the standpoint of picking an entry in the miners.

I know, if you are a big time stock advisor, you will say that people are forgetting about gold. And that it is becoming increasingly irrelevant. From a technical aspect that is exactly what the charts tell me. And those who are short this chart are in increasing danger of getting squeezed, ie, who will they buy from?

With that said, an enduring bottom usually takes time to form and the sentiment takes time to change. A sharp short covering rally often has a catalytic effect on sentiment, however.

Here are the charts of GLD as a representative of the gold price and sentiment.

Control your risk,
gh

Tuesday, November 11, 2014

Catalyst

cat·a·lyst
ˈkad(ə)ləst/
noun
noun: catalyst; plural noun: catalysts
  1. a substance that increases the rate of a chemical reaction without itself undergoing any permanent chemical change.
    • a person or thing that precipitates an event.
      "the governor's speech acted as a catalyst for debate"


      So, the Saudis are intent on keeping their production raised, and intent on capturing market share. The price of oil goes down for an extended period due to oversupply, they increase gross revenues to themselves, and put the extra money into US Treasuries.

      The average consumer gets a windfall, interest rates stay low, business profits go up.

      And inflation gets a shot in the arm.

      Catalyst.

      Just thinking,
      Again.

      Control risk,
      gh

Monday, November 10, 2014

Uranium News

Here is the cause of the rally in the uranium stocks Here.


I tend to get my news late.....


the "Megatons to Megawatts" program ended at the end of 2013. Perhaps the price of uranium will trend to the upside from here. There will be competition from natural gas of course.

Gold miners retraced most of Friday's gains. (MOST OF)

It is to early to call a bottom in gold and the miners, that takes time. But when the Yen starts to rally we will see gold rally. And when Japan finally succumbs to their debt we will see the mother of all gold rallies. Some Day...


Until then....

Friday, November 7, 2014

Uranium





The Republicans control the House of Representatives and the U.S. Senate after the recent elections.

Will the Republicans be pacifists in the realm of relations with Russia? I think not.

The Ukraine situation continues to fester.

The economic sanctions seem to be causing Russian distress as judged by the value of the ruble, which has plunged lately.

Putin controls 50% of the worlds supply of uranium

If this "Colder War" continues I see Mr. Putting using uranium as an economic weapon. Perhaps restricting exports to the west as he sells to China.

And the prices in the uranium space exploded to the upside today. With the type of volume and momentum that signifies something longer lasting than a one day rally.

Take a look at Cameco. They mine uranium in Canada.


Scale in these stocks. Just a few millions at a time....

gh

Oh, by the way, did I mention that it is my personal belief that Putin is bankrolling ISIL.

Gold Shorts

We are probably seeing some covering by the gold shorts this morning.

And the Yen may bounce soon. Maybe......

Notice the volume on that GLD chart over the last three days. Heavy sideways volume is a sign of a possible bottom. (for awhile at least)

Control risk,
gh

Thursday, November 6, 2014

We Have A Consensus !

As I listen to the financial channels over the last few days it seems that all I hear regarding currencies is that shorting the Euro and the Yen are sure bets. I have heard no dissenters to that sentiment.

This may be what has caused a feeling of foreboding in myself regarding the action in the stock markets.

As I said earlier these markets seem surreal.

And I can't prove it with charts, but the price behavior in the miners seems to have changed as compared to interest rates and the TBT.

We'll see.

Control risk,
gh

Thursday, October 30, 2014

Emerging Markets

As the US Federal Reserve moves to a more normal interest rate policy that is characterized by modestly higher interest rates, the US dollar should continue to gain strength. This strength will be a sign of a stronger U.S. economy. The Fed will be "data dependent", as they have stated many times, so the transition to higher interest rates will be a slow one. If a strong US dollar persists it should stimulate exports from the "extractive" economies in the emerging world. A strong dollar makes it cheaper for US consumers to buy imports and that will continue.

Gold looks set to confirm a medium term downtrend, making a declining triangle on the weekly charts. A drop through to new lows will probably happen in the next few weeks. (strong dollar)

In my longer term view I have to concede that the lows for Europe are probably in. Europe seems on the verge of stimulating and eventually developing some sort of Eurozone bond sale. European recovery will help the Euro. This also should revive demand from the Emerging markets.

It is for these reasons that I went long the emerging markets today.
I had bought the US small caps a couple weeks ago on purely oversold conditions and that they just seemed to have declined for technical reasons, the decline being so fast.

I believe that over the long term low energy prices are good for world economies and will restart inflation later. In the meantime, probably several years of demand will recover.

The swing trader in me thinks we might have another down leg, but the market is strong.


Blah, Blah, Blah....

gh

Quite a reversal from my last post, eh? The debt issues will rear again, but not for now.

Tuesday, October 28, 2014

Unsustainable

So, I will admit that bearishness is probably a chronic condition with myself.

But it has served me well by enabling a honed sense of skepticism regarding what the herd is doing. The timing is the key of course.

Lately I have not been able to shake the feeling that something is wrong with the stock market and it's relationship to economic conditions. In the very long term, it seems to me that the expansion of credit must continue to contract.

We saw a huge expansion of credit several years ago in the housing area. That area has been trying to contract to reasonable housing prices for years despite a concerted effort to keep homes unaffordable for new buyers.

The expansion of credit in the student loan area must be at a peak. The ability of newcomers to the labor market to pay off their student loans with the wages that prevail in the marketplace will need to change in order to keep the student loan sphere aloft. And these new workplace entrants cannot afford the aforementioned homes.

The car market rebounded after the '08 crash on the back of low interest rates. Cyclically, the auto industry must be near a turn for the worse. And the questions about the quality of auto loans are the same as the questions of the quality of student loans. All are vulnerable to a rise in interest rates, should that come.

The talk on the financial channels in the past few years has gone from manufacturing to finance to what the latest social network stocks are doing. Along with the latest gadget that is selling. My point here is that the size of credit purchases has gone from large housing purchases to smaller car loans and student loans and now the hot sellers seem to be gadgets. Will we figure out how to buy the gadgets on credit?

One after another over the last couple months I wake to see the latest high flier stock down dramatically. Usually crushed by a disappointing earnings report or projection. I will not list them here. Volatility is up. (Down today :( ...)

The rest of the world is having problems that persist since the big crash of a few years ago. The only reason the markets in this country are able to resist the downturn seems to be just a case of the best of a bad lot. And the USD being the worlds reserve currency, still.  And fundamental conditions as a function of the effect of credit on the economy must prevail. Some day. Or currencies must adjust.

Timing of course is everything. But the latest in the stock market is surreal to me.

Grrrr.

gh

Friday, October 24, 2014

Why Buy?

The stock indexes are back up to the downtrend line established over the last few weeks.

And the question remains.

Why buy now? If you haven't bought stocks in the last five years, why buy now.

I think the bid will disappear again.

Time will tell.

Here is the news from DECK today.

GOOD NEWS!

here is the chart:
Hmmm. There seems to be a divergence.


gh

Thursday, October 23, 2014

DECK Weak

Deckers is weak intraday and seems to be rolling over. In the past I have used DECK as an indicator of what the Dow and thus the indexes are going to do.

Of course I ignore it when it doesn't match my expectations. Or maybe I am just more tuned in to it than I think I am.

As a swing trader I am anticipating a rise in the VXX again....

control your risk,
gh

Tuesday, October 21, 2014

TOP O' THE BOND MARKET?

Isn't it about time for the long bond bull to die?

I hear many people talking about deflation and how interest rates will be low for a long time.

Oil is down and gasoline is down. And OPEC is history....

Europe is down.

Gold and silver are down for the count, never to rise again.

There is no logical reason to short the long bond.

So. SHORT THE LONG BOND.


Add to positions as they move in your favor.
Control risk.
gh

Thursday, October 16, 2014

High Energy Prices Are Deflationary

As I've stated in the past. It seems to me that high prices of energy are in and of themselves deflationary. This is counterintuitive. But lower energy will stimulate people to move about and do things. And as they do this they spend money and get creative ideas. And then they borrow.

As long as this latest downtrend in energy prices is due to oversupply that is a good thing.

This may be the headfake traders are always on the lookout for. That last whiff of deflation sentiment that signals a bottom in prices......

I have always contended that high energy prices were deflationary.

Control your risk,

gh

One, Two, Three...

gh

How Could An ED Miss Ebola?

I work in an emergency department.

This is how they could miss the first case of an exotic disease in the country.

HOW COULD THEY MISS EBOLA?


We won't miss the next one.(s)

gh

Wednesday, October 15, 2014

Two

Now it is two.

Groan.

TWO



gh

TBT

GH

Irrationality

Irrationality


And by the way. Did you know that silver kills germs.

I hesitate to mention this here on my allegedly serious site. But when I googled silver and Ebola I got many sites that showed how to concoct colloidal silver.

I don't know if it really would kill Ebola virus, but it is out there. And when I mentioned it to my wife she said she had noticed advertisements in the store, and mentions of colloidal silver on social pages.
Neither of us could be considered believers in alternative medicine.
But it wouldn't surprise me if a rumor could sweep the nation on the benefits of owning silver.

just thinking.

And the selloff in the markets seem to be getting rather irrational.

There has been one death in this country. And one transmission of the virus. ONE.

gh

Ebola v.

A link to Wikipeidia:

Ebola Virus


It has occurred to me that money passing from hand to hand may be a problem.

Clorox anyone?

In fact this may be another chronic problem, and that the recent stock weakness is a "shot over the bow".
After the initial shock, life will resume. With precautions.

gh

Monday, October 13, 2014

I'll Say It

People are trying to find a fundamental answer for the recent market declines.

Ukraine?  Probably not.

Europe weakness. Not new. And fixable with policy changes.

U.S. weakness? Maybe. But the Fed won't raise rates if that is so... Ditto the EU thing.

Ebola? This may be the cause. Ebola may not be easily communicable. But it will cause terror. And it would cause a dramatic decrease in activity by everyone if the threat became credible.
And I'll say out loud what I've heard in private.
It wouldn't be very hard for ISIS or al Queda to get people infected and move them around the world.

And if they didn't seek help they would infect many, particularly if they wanted to infect people.

That would justify fears of a dramatic economic slowdown.

gh

Bounce

SPY is running out of volume as it declines.

Bounce imminent.

??

gh

Saturday, October 11, 2014

No Do-Overs

That last post is one that I really want to take back....

Can't do it.

Now I have to sit on my hands for awhile.

At least a few minutes.

gh

Friday, October 10, 2014

That's all for Now

I think that is all the selling for now.

I sold my vix for now. Bot some more SSRI.

Silver is looking good. Talk of more easing in EU with US to stand pat.....

It is all about sentiment.

Control risk,

gh

Wednesday, October 8, 2014

Doh!

Big short covering rally today. I would have thought we had more conviction. If I hadn't been away I might have sold my volatility.
But that GG I bought this morning helped. And that dog SSRI I'm still hanging on to.....

The rallies have been running out of steam fast lately. Let's see what happens here. We may be on to the idea that if the economy is slowing, the Fed won't raise interest rates. Whoopee! Maybe the unemployment rate will go up! Wouldn't that be great!

At some point we have to get over this notion that low interest rates are good for us. Interest rates are low because inflation is low. Inflation is low because the supply side has been subsidized for so long, and labor is weak. As long as labor is weak, the consumers are living on debt. Those that have a job. The rest are living with their parents or under a bridge. But they are alive. And they are citizens. Whether we like it or not. It is certainly an inconvenient truth that they are living in the United States of America, in poverty.

So, the stock market does not reflect the reality of the whole country. Only that part of the country that is captured by the statisticians. Only that part of the country that has a decent credit score.
And it is a world economy now. Particularly the stock market. So beware.

This may be where it gets dicey.

Keep your bets small and control your emotions.

gh

Tuesday, September 30, 2014

S & P Support?

The 1966 level on the S&P index was the level to watch according to Art Cashin.
Well, intraday over the last 4 days we have touched it three times now.

It shouldn't be touched more than twice if it was real support.

Next stop 1900.
I really like this song.

gh

Monday, September 29, 2014

Nat Gas Rounds Corner

On August 10 I blogged of what looked and felt like a possible turn in the price of natural gas with a chart of UNG. The trend change was more confirmed today as the price breaks above a recent price band. Winter is on the way and demand should pick up.
I sold that initial UNG position a few days after the original post as I belatedly realized that it was not going to be a sharp turn. But as the price action looked encouraging I re-initiated a position on Sept 16, and added Sept. 25.
Lets see if this is a good move......

Control your risk,
gh

Thursday, September 25, 2014

Same Advice, Different Day


 I get a kick out of the talking heads. Every time the market pulls back, they remind everyone that you really should buy when others are scared.


Again, and again.
And they are right. Until they are wrong.

Junk

gh