Monday, August 31, 2015

8/31/5 a Slaughter ticket

I think a Republican ticket of Ben Carson, pres, and Carly Fiorina, VP, and Donald Trump as campaign manager would slaughter.

8/31/15 BlackLivesMatter Black Panthers ISIS Al Queda

The BlackLivesMatter rivalry with the Black Panthers reminds me of the rivalry between ISIS and Al Qaeda.

8/31/015 Buy on the rumor, sell on the news, or sell on the rumor and buy on the news.

I have said this before.  The actual rate hike might, after initial selling, be the start of a nice bull run.  I am sure that the Fed will accompany a rate hike with lots of palliative language.  The hike may be priced in.  A hike is a sign of confidence in the economy.  Oil seems to have bottomed; the deflationary scare may be becalmed.  There was not a massive unwind of USD carry positions as evidenced by USD not going through the roof.

8/31/15 Deflationary trade is over for me

On the 7/14/15 post TLT was 117.23.  On the 8/3/15 post it was 123.55.  Friday 8/28/15 closed 122.36.  Three percent in six weeks is good.  If you are a serious trader and don’t go driving out of town with no ability to connect to the internet you might have closed your position on black Friday or even black Monday at perhaps 127 or 128.

This deflation trade was based on the 50 day moving average crossing down over the 200 day moving average and appearing to bottom and turn up.  Now fundamentals of supply and demand are in question.  China and other countries may be a steady source of supply.  Who is going to buy that supply?  Is the US Treasury going to start selling bonds again in November after the debt ceiling thing is put to rest?  Currency exchange rates will have a say in this.  Comments coming from Jackson Hole confuse me.  Vice Chair Fischer made clear that the most recent economic data and the direction of financial markets over the next two weeks would help determine whether the Fed raises rates next month. Two weeks?  There are way too many moving parts for me.  That is why I mostly close out too early leaving money on the table.  But that is me.  I accept it.  My general feeling is that prices of bonds can go higher but I don’t have a technical indication for another short term move.

Friday, August 28, 2015

8/28/15 GDP second estimate for Q2 2015

Above:  the way they report GDP month over month doesn't look all that good unless you figure the blue line will not again drop to the zero line.  This presentations shows a sideways trend.

Above:  eliminate inventory changes and report year over year and you see an uptrend.  The last five quarters yoy are +2.3,  +3.0,  +2.6,  +2.4,  2.4.  Exports pull this rate down as you can see below.

Above:  eliminate both inventory changes and exports and it looks fairly good.  The last 5 quarters yoy were +2.3,  +3.0,  +3.0,  +3.0,  +2.9.  I do wish for good exports but most important to me is the growth in the US.  Three percent growth will curve a lot of ills.

Above: this is why the Fed is afraid to raise rates.  When the Fed rate, red, goes sideways GDP goes up.  When the Fed rate goes up, GDP goes down.

Thursday, August 27, 2015

8/27/15 Guessing where stocks get stopped at least temporarily

While the general market had gone sideways before the panic holders of DVY were happily getting their 3+% dividend yield.  Interestingly, DVY had lower highs along the way.

I think the price will go back to the $74 point support that is now resistance.  I think after a consolidation the price will go above $74 in large part I think that because of the high GDP print and wanting to believe in it is probably very strong.  Also, I think the consensus will think that a rate hike is priced-in what with the averages being lower.

A lot of people will think 'if only I just had gotten out on the first day of the panic', see notation on the chart above, and will sell at that point figuring they are doing really good having gotten a second change to sell out.  And you have to realize that people are sitting on massive gains and taking some profits 'won't hurt'.

So I think 2040 is resistance.  Some technicians claim 2040 to 2050 as resistance based on the lows in January, March, and July.

8/27/15 Vester was a progressive entitled piece of shit

I say that with nothing to do with shooting people.  I know the type.  I have met them over the decades.  I know of one right now.  He is gay and flames on people at work trying to provoke them so he can run to HR and cry and wail.

Wednesday, August 26, 2015

8/26/15 Treasuries were down, could be more unwinding

Maybe countries holding treasuries are selling them, like China.

But when I see USD going up one and a third percent, it makes me think a Treasuries carry trade funded by USD is unwinding.

8/26/15 What I want to believe

If the US stock market swift decline was due to China, I want to believe the Shanghai index has to be close to a bottom after it has drawn down so much.  At least it has to be getting close to a bottom.

Tuesday, August 25, 2015

8/25/15 The reason the dollar went down during the melt down

I searched for reasons why USD went down during the meltdown.  The best I can gather is it was due to unwinding of carry trades funded in Yen and Euros.

Another reason was OPEC nations selling treasuries to cover their bills what with oil revenue being down so much.  Another is that expectations of a FRB rate increase have decreased.

There is a huge carry trade funded in USD which if it unwinds will shoot the dollar to the moon.  (Funding is raised by shorting a currency and unwinding means buying it back).

That will be interesting.

Monday, August 24, 2015

8/24/15 I prefer now than later

I prefer things to go south now rather than right after a Republican president takes over.

8/24/15 Black Monday October 1987

daily bars
 daily bars
 weekly bars
 weekly bars

8/24/15 the new game

Millions of investors are saying to themselves that they will sell when the market recovers to such and such a point.

The new game is to find the point where a critical mass of them actually do this and cause the market to start on a subsequent slide that takes the market down to levels that were though impossible.

8/23/15 The Masters of the Universe fearing for their lives

In a prior post I said Yellen and the rest should fear for their lives if the market crashes again.

Now they will have to attempt to induce high inflation to save their lives and their children's lives.

But like Carmen Reinhart said, they will create high inflation because there will eventually be no other choice because of high debt levels.

Sunday, August 23, 2015

8/23/15 The fear is China I think and the solution is for the FED to panic

With most of the world in crappy economic shape where is the S&P 500 going to get sales?  China with their large population of course.  But China seems to be in a recession.  The FRB needs to panic to stop the panic.  I don't know what they can do but it better be big.

8/23/15 This is bad

I am still out of town because of a wedding.  After driving Friday I wondered how many guests even knew of the market decline.  No one mentioned it at Friday night's activities nor at the reception Saturday night.

This is bad:

I wonder if the October 2014 melt down is the next support:

Thursday, August 20, 2015

8/20/15 bad day for bulls

The deflationary trade is alive and well

I would hate to be an SPX chartist.  They all said there was support at 2052 then they said there was support at 2044.  I have no idea where they think the next support is.  It looks like a lot of open air below on a long term chart.

Ah.  French fries comfort food.  Those very adult and stable buyers of dividends are not in panic mode.  Yet.  Yes DVY went down 1.15% but the 500 went down 2.11%.  Support at 74.  That is 2.6% lower.  2.6% lower on the 500 is another 53 points.  A 10% correction from the most recent high takes it down to 1915.  Are you ready to throw up yet?

Wednesday, August 19, 2015

8/19/15 I am sick and tired of the Fed

I am getting sick and tired of the Fed.   I feel they are playing with everybody.  They created a financial environment where every tick of their face is analyzed to death.  It is as if they are having fun with this.  As if they are saying to themselves, “We own you”.

8/19/15 Judgement day has been extended

Judgement day has been extended.  Note how symmetrical the triangle is.  I have to believe this is due to Fibonacci traders.  Who else is dumb enough to be playing in this market.

DVY never broke out of its wedge in either direction.  Investors in dividend stocks are stable long term investors.  Buying on the dip when DVY went below its 50 day moving average has been a winner for years.  Note how DVY is squeezed between its 50 and 200 day moving average.  Doesn't anyone have any conviction?

5 yeas - Ben's secret for getting in

8/19/15 Price vs Value

Fundamental valuations are right twice, like a broken clock is right twice a day.  When technicals price something too low then on the way back up the price crosses the true value of that something.  Then back on the way down the price crosses the true value of that something once again.

Who cares whether the Chinese RMB is overvalued or undervalued.  Its price is all that matters and how it affects things at the price.  Expectations will move the price of currencies more than what the prices is supposed to be.  It is a guessing game by more and less informed players.

Tuesday, August 18, 2015

8/18/15 #BlackLivesMatter is just another leftist front

The activists demand that you confess and repent.  Just like the traveling Mao Red Guard.  Just like the traveling truth commissions.

8/18/15 Saved by the 50 day moving average

8/18/15 Investors as forced margin buyers of stock

As a former financial manager, I find stock buybacks curious from a cost of capital point of view.  Corporations have been buying their stock back at high prices with low cost debt.  Well, with such low interest rates I guess the cost of debt is less expensive than the cost of equity if the company is paying dividends.

According to astute John Hussman of Hussman funds, borrowing to finance buybacks is putting investors in the position of margined buyers of stocks.

When the stock market goes down, margined owners of stock start selling creating supply that accelerates the downside move in prices.  What does that mean to companies that have purchased a lot of their own shares with debt?  Do they start issuing shares to pay down the debt they acquired for buying back shares?  Surely they would be selling new shares at a lower price than what they paid for them in the buybacks.  This would leave permanent debt on the balance sheet.  Wouldn’t it?  With permanent interest to pay.

Ok.  So for a period of time the corporation paid less in dividends due to a lower float.  But issuing new shares just means they are back to paying more dividends.

Monday, August 17, 2015

8/17/15 put/call ratio

I tried to use the put/call ratio for short term timing.  I never could make it work.  It did explain the level of anxiety in the market but I never could get rules developed to use it.  It took a lot of time and I abandoned the effort.  In fact, it was then that I decided to focus on intra-day trading solely.  But then again, here I am writing about swings.

I discovered this put/call ratio symbol on Stockcharts recently and played with it. The dots are the weekly put/call ratio.  Now ignore them.  The blue line is the 20 day simple moving average of the dots.  The solid black line is the S&P500.

The blue line shows trends.  You can see back in the later 2011 that the put/call moving average responded to the mini panic.  Then it went on a down trend as the market resumed upward.  You can see in 2014 the moving average was sideways.  You might say it was transitional.  In 2015 it is definitely trending up.

The S&P500 is sideways in 2015.  You might call it transitional.

8/17/15 The Squeeze between 50 and 200

The S&P is being squeezed between its 50 and 200 day moving averages

I think if Ben’s secret weapon DVY breaks out upward, and, the S&P500 does too, the market will go to new highs.  If the DVY breakout point is 77.50 and it goes to 80 that would be a 3.2% move.  It the S&P breaks out at 2100, 3.2% takes it to 2167.  There is no logic in that, I know.

Friday, August 14, 2015

8/14/15 Investor sentiment deteriorates

I think credit spreads are the best indication of investor sentiment.  The spreads were a lot worse 3 years ago.  But they are widening and are at where they were before the great recession.  The financial situation appears fine.  2 year swap rates are not elevated.  The 10-2 yield curve is steep.  Economic conditions have not deteriorated enough to be very concerned but enough to monitor frequently.

Thursday, August 13, 2015

8/13/15 The deflationary trade is on, in my opinion (see disclaimer)

Bonds going down (yields going up) is the reflation trade.  Bonds going up (yields going down) is the deflation trade.

Here are the bonds with the 50 day moving average in blue.  It still looks like the blue line has bottomed and is turning up.

Countering this trade there can be supply from foreigners continuing to sell Treasuries, the FRB reducing its balance sheet, from the Treasury selling bonds to repay the loans to the other funds they are borrowing from to cover deficit spending, and deficit spending can increase.

Foreigners are likely to buy Treasuries as a safe haven in a deflationary world.  The FRB is not likely to reduce its balance sheet any time soon.  The Treasury must sell bonds to cover its loans and it seems to me deficit spending will be increasing.  I have no way to quantify the offsetting supply and demand.

 The USD declined with the Yuan devaluation because a delay of raising rates by the FRB is being priced-in.  After the dollar is priced-in the dollar could continue upward as a safe haven.  Or it might not and just wait for the FRB to raise rates.

 The dollar going up means to me deflationary expectations in the world with the dollar being a safe haven.  The world buying Treasuries is an increase in demand pushing up the price.  But in the end, I am watching the 50 day moving average.

disclaimer:  I don't know what I am talking about

8/13/15 S&P 500 earnings so far for Q2

Wild Philip Davis with his very expensive subscription website did a free post where he showed the top 25 cap companies in the S&P 500.  He said only 8 of them were cheap.  Actually he said seems cheap because they corrected fairly well.  Chevron, Exxon, Apple, Proctor & Gamble, IBM, Intel, HP, and Walmart are the eight.  Therefore he was shorting the S&P with SDS right here and now.  Which ones do you think are cheap and will go up and which ones not so much?  The top 25 of the 500 make up 44% of the capitalization of the SPX index, according to him.  Of the 24 companies listed in his image the weights added up to 34%.  I don’t know what the discrepancy could be.  Maybe I can’t add.  Maybe weights are different from capitalization.

Here is the latest earnings, GAAP of course, from the Standard & Poors website:
                                                                                 With 91.8% in
Q4’14 $22.83                      Q1’15 $21.81                      Q2’15 $22.87
Q4’13 $26.48                      Q1’14 $24.87                      Q2’14 $27.14
Down 13.78%                     Down 12.30%

 The estimate for Q1’15 was $25.27 and it came in at $21.81.  Big difference.

The estimate for Q2’15 was $27.48 and so far is at $22.87.  I see no way it will come in near the estimate.  Even S&P is full of shit.

A lot of the late reporters are late reporting because they have poor results and I expect year over year to be down for three quarters in a row.

Wednesday, August 12, 2015

8/12/15 Crony Capitalism Crony Government

There was a certain amount of teeth gnashing over the layoffs at Kraft Heinz.  2500 employees.  But that is nothing compared to the pricing power the combined organization has gotten from their merger.

No Department of Justice anti-trust concerns.  The Obama Administration seems to like big companies.  Big companies are amenable to big government.  They are big government.

If you are a liberal you should say crony capitalism.  If you are not a liberal you should say crony government.

8/12/15 I am going to say something very un-nice about the GOP leadership

It is obvious that the reason the GOP leaders have been going along with Obama’s agenda is that they think that it is the best way to get a Republican elected as president.  But showing that they have no principles in mind, I can only think they just want more control so they can benefit their oligarchs having had 8 years of Democrat oligarchs getting all the government benevolence.

8/12/15 Saved Saved and Saved

8/12/15 quote

 “The earnestly naive Bernie Sanders is who the Democratic party wants to be. The corrupt and venal Hillary Clinton is who they are.”

Tuesday, August 11, 2015

8/11/15 Productivity Schizophrenia – I am going to have to be committed

There was a lot of hue and cry over the poor increase in the unit labor cost index.  Here it is year over year.  Very disappointing they say.  Why?  Because it wasn’t higher.  Like in higher cost to employers.  Well which is it we like?  We like employers to have low labor cost and we like employees to be paid well.

Worse, here is the year over year of total output per man hour.  Everybody today was saying how we need better productivity.  That productivity is the key to higher wages and a better living standard.  One leading financial website called it a crisis.  But I ask, with more automation, that is, more productivity, what happens to wages in general?  Suppose businesses respond to this wailing about low productivity with an all-out effort to buy robots and replacing their workers.  Productivity will increase on this chart nicely.  But what happens to that living standard with laid off or not hired workers?

8/11/15 Still Safe and comment on the Chinese yuan devaluation of less than 2%

The Chinese yuan was simply too strong.  Not only is it pegged to the dollar which had gotten stronger against virtually all other currencies, the Chinese had strengthened the yuan to the dollar by about 2 yuan in response to criticism they were manipulating their currency.  The yuan is still strong. I wonder if more devaluation is coming.

China's foreign reserves stopped growing in 2014 and started to decline.  To me that means their exports have been weak.  They also started having some significant capital outflows.  Outflows like that mean the yuan was so strong Chinese wanted to use this strength to buy assets in the world. Private parties certainly have purchased a lot of US real estate.

I have been trying to understand global capital flows and haven't found any authors that could really explain it to slow learners like me.  On the surface it looks like simple accounting of current and capital accounts of each country.  I find the details complex.

So China is selling Treasuries in a complete reversal of decades of buying them.  They bought Treasuries with dollars purchased with Yuan that was probably printed for just that purpose.  (I think that is shorting the Yuan).  This kept the Yuan low relative to the dollar.  Now they are selling Treasuries for dollars and buying Yuan which reduces the quantity of Yuan in the process.  (A short squeeze).  Lower supply, higher price.  And higher price of Yuan is hurting, if not killing their exports.

8/11/15 What I have against supporters of Bernie Sanders

They see that government has bestowed benefits and privileges to corporations and rich people.  What they want is a cut of those benefits for themselves.

Gimme Gimme Gimme.  They are city brats.  Facebook brats.  Google brats.  Gimme Gimme Gimme.

Friday, August 7, 2015

8/7/15 TLT doesn't agree with the pundits on the jobs report

Most pundits are saying the job report today all but guarantees the beginning of interest rate increases this September.

TLT disagrees

Hummm.  The long end is flattening while they say the FRB is going to hike the short end in September

Or if you prefer

8/7/15 saved

Thursday, August 6, 2015

8/6/15 A big picture view of employment

The 1990s, the Camelot period of Bill Clinton and the Republican congress, produced fantastic growth in jobs.  And this was during a period when the new policy was to send jobs overseas, as Bill Clinton put it, because of the economic concept of comparative advantage.  Of course, most of the job growth in the late 1990s was fraudulent do phony dot com companies sucking up the savings of the nation while producing no profits.  Also there was a lot of actual fraud during this period.

After the dot com bust the Bush administration was scathed about their jobless recovery and with Alan Greenspan the created another phony job growth that hid the purposeful job loss to Asia and lead to the phony real estate boom.

Now there is no phony economic policy to hide the job losses to Asia.  And now, the slow burn of demographics is setting in.  We grew up in a magical period for the middle class and I think the magic is over.

Wednesday, August 5, 2015

8/5/15 I recommend reading Walter Russell Mead's 8/5/15 congressional testimony re the Iran deal

Read the first 5 or 6 comments at least.

Copy and past link to your browser if the hot link doesn't work

8/5/15 Ben's chart - we're saved

July 24

August 5

8/5/15 This looks like we are in a growth recession

Core Capex June

I don't know anything about this chart below.  I don't know its definition and its history.  I just stumbled on it.  FRED says it is from the US Census Bureau.
Year over Year
Rail Car Loadings


Export index June
International Air Transport Association
Producer prices June