The Last Headfake

Gold down this morning. U.S. Dollar down this morning. Japanese Yen up this morning. Euro up this morning.
Gold down this morning................
Really?

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Dry Bulk Rates

Worldwide dry bulk shipping rates continue to grind lower. Last summers rise has evaporated and the continued grind to the downside must say something about the state of the world's economies. The bulk rates are influenced by the supply of ships of course, but after all this time the ships should have been scrapped as companies that were hard hit liquidate assets.
The straw that broke prices some time back was political developments in South America. One of those countries, I don't recall which, banned exports of ore and that sent the bulkers down.

The reason I mention this is that we may indeed be overpriced in the equity markets. Any strength in the world economies is almost certainly due to the stimulus of zero interest rate policies. (ZIRP)
And zero real interest rates are an attempt to stimulate consumption on top of a glut of debt that occurred in previous years. People need to save for awhile, and pay down their debt before there can be a REAL rebound in the broader economy.
Housing remains weak. The strength in automobiles is probably related to the replacement cycle that was put on hold in '08-'10. That will end.
Gadgets are strong. The little phones and computers that people can buy will run out of steam, just as the Nasdaq is running out of steam. How do these gadgets increase productivity anyway?
We have a big El Nino coming this summer. And the world population is still growing.
Russia has a madman at the helm who is not content to be a part of the world economy on economic terms only.
Is energy plentiful? The price keeps rising.
But dry bulk rates continue lower......

Chart from Dryships
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Trading Patterns as Tea Leaves

An interesting chart pattern in FXE, the fund that trades the Euro currency.

A rising wedge pattern on declining volume is often the harbinger of a sharp fall in the security that is being traded.

A couple of reasons for the Euro to fall sharply come to mind. One would be if the ECB was to lower interest rates and join the global currency war that is ongoing. The countries of the world have been in a race to devalue their home currencies for decades. If the US didn't have this pesky world reserve currency we would have had hyperinflation years ago.

I don't know what the reaction in the Euro would be if a shooting war breaks out in Ukraine. But if it led to NATO involvement I can't see the Euro gaining. If this FXE ETF actually reflects the volume in the underlying currency, then I expect this currency to fall. Sometime.

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Expeditors International

I was sitting here trying to remember the name of that stock that did so well during the Iraq war. It took me awhile, but I finally remembered Expeditors International. And when I brought up the chart my thought was that others had remembered the name too.
I don't know why, but this stock is being bought today...

And this is how I am positioning myself.
The Ukraine thing is hanging over the markets. Despite some persistent buying on dips, it seems that one by one the momentum stocks are rolling over.

I've bought some volatility and have some exposure to gold and silver and oil.

control risk, don't buy the dip.
hold no losers
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Keep An Eye on Ukraine

The Ukrainian situation seems to keep escalating despite the appeasements of the European and American leaders. I work with a woman from Kiev. She has been increasingly upset about the situation in her homeland. Two days ago she told me that "they will fight". Referring to her Ukrainian compatriots who believe in a modern and western country. She told me "they are buying guns".
The Ukrainians are preparing for war. She went on to say that the "Baltics will be next". A reference to Putin's ambitions.
Some time ago, another person I know, who came from Russia recently told me in no uncertain terms that "he is evil". Referring to Putin.

Today the action in the stock indexes seems to indicate the prospect of war. Gold and Silver up sharply. Energy remains strong. And heavy selling at the open on most other things.

Control Risk,
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When The Work's All Done This Fall

Ray W. Hickey

1925-2014

My father died on April 17th. I had seen him just two days before on the day he was released from the hospital and went on hospice care. I helped get him moved into my sisters house. She was going to take care of him until he died.
Dad was in very good spirits that day. I can't remember him being so happy in years. At one point he told us he "was going home". We told him, "No Dad, this is your home now." But he repeated, "I'm going home", and he pointed out the glass door and motioned with his hand. We gave him a gentle look and supposed that he was a little confused. He wasn't confused. He went home the next day.

 The song is a song my dad sung to us when we were kids. It was just a few years ago that I stumbled across it and was surprised that it was a well known cowboy song. Dad was a cowboy and rancher when he was a young man.

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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.
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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......

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.    :)

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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??
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Ready to go UP

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

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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,
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covered shorts

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

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EROI

What is the sound of a Cow?

MOO

That is the ticker for the "all things agriculture" as Josh Brown of The Reformed Broker put it today on CNBC.

From a technical perspective, for an investor with a longer timeframe, this chart looks interesting.

A breakout to new highs on increased volume could be the start of something big. Something big due to the length of time this ETF, and by extension agriculture stocks, have been collectively treading water near all time highs. The fact that they have held up so well is the prime reason for the increasing possibility of a continuation of the trend. The trend over the LONG term being UP.

This is an example of paying attention to the value of time in trading and investing. This does not mean this is a slam dunk trade. Only that the odds of a prolonged appreciation in price are improving as this ETF moves higher from here, ie, anyone who wanted to sell has had ample opportunity.

This is a weekly chart. Each bar represents one week of price movement. So an astute and risk averse investor will keep time in mind when allocating capital.
As always I prefer to scale in on the way up. I do this because I prefer to make money.
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