Friday, August 15, 2014
I'm reading through the intro to this Vox EU book on secular stagnation and have one comment so far:
What's the problem?
One assertion is that savings has exploded (because of demographics) past the point where productive investment can mop it up.
I don't buy that: there's lots of opportunity for productive investment all over the world right now. Five billion people are still living in mud huts; come back to me when they're all drinking Pepsi and shopping at Ikea.
Fact is, EM demographics are probably exploding one hell of a lot faster in the next 50 years than DM savings will be exploding. This "secular stagnation" seems a tremendous opportunity to funnel a large amount of cash into the EMs to develop them. Again, come back to me with your complaints when there's a "greying crisis" in Laos.
The secular stagnation story really still seems like the snotty whine of the rentier class, about how they're no longer able to make 5% a year off the poors. Know something, rich boy? Pay the poors more money and they'll be able to afford carrying more debt.
Is "secular stagnation" supposed to be something more than the simple artefact of fourty years of misguided austerianism and plutocratic class war against the workers?
Then that got me thinking to government debt. In an ideal world, government creates debt to pay for investment in future productivity growth, which then pays down the debt incurred. Well, if you take a country like the USA, what is the NPV of all necessary future investment? What is the NPV of (say) all future US road construction and repair out to 2050?
The US' NPV of future investment should be a lot higher now than it was 100 years ago, or even 50 years ago. Frankly, I'd expect the capital intensiveness of US growth is a lot higher than it was in the postwar decade, or certainly the wild west years.
Capital is supposed to go toward production of more and more growth. If capital's not going there, maybe it's because it's too ignorant. Maybe the problem is the decadence of the rentier class.
The Krugginator felt it was important enough to give it a plug in his column, so here you go:
Vox EU - our new e-book on "secular stagnation".
I don't know if the download is for free or not because the damn site is slower than hell right now.
Reuters - top Saudi cleric calls for code of conduct to curb violence. Quote:
A top Saudi Muslim cleric called on Friday for a global code of conduct for leaders, scholars and young people to halt a further slide into violence and "terror" in the Middle East.
He said "there was an urgent need to prepare a global code of conduct in which the leaders and scholars would deliver their messages and in which the youths would set their thoughts right and the path of the new media is set right," SPA added.
Newsflash, buddy. You guys already have a code of conduct. It's called your religion.
If your religion encourages violence and terror, then your people are already obeying your religion's code of conduct. Good for you.
If your religion instead abhors violence and terror, then your people are disobeying your religion's code of conduct. So do something about it - they're your people, not mine.
If your religion both encourages and abhors violence and terror depending on which way you look at it, then your religion is no moral code whatsoever, in which case I don't see why you're wasting your time with it.
Thankfully, on the market going "clunk" at about 10:45, I was able to quickly puke my $VIX shorts and make a few thou profit.
Now the market is crashing again, on disinformation from Zerohedge.
Basically, there was yet another Russian APC column entering the Ukraine, and the Ukrainians shelled it.
The aid convoy is something entirely different, they're still waiting at the border with Red Cross meeting them.
But the Zerohedge Soviet disinformation, combined with OMG stories that Soros has bought junior miners and SPY puts, has got the market diving to end the week.
Here's the VIX at this second with a tightened Bollinger period of 9:
And like I said Wednesday or Thursday, by a 9-period Bollinger the VIX was -2SD and a little too happy, so I guess this little correction was to be expected. Earlier this morning I was kinda suspicious that $VIX had already dropped to 12, so I was kinda waiting to be disappointed anyway.
I eagerly await a chance to re-short $VIX at another advantageous point, if it even happens. I'm doubtful, cos I don't want to do it today and be short $VIX thru the weekend; but if everything is fine Monday, $VIX might move back down on its own and I'll miss out.
Oh well. 8% win for a couple weeks' work. Now I get to stay in a high-cash position over the weekend.
Gold barfed in the early morning, and now that the US is open the charts look like this:
Silver reversed on Wednesday and did a dither on Thursday, but it turns out that this action simply lured in the bugs thinking there was a hard bottom at $19.80 silver. Now today silver is lower, and I think it needs a full reversal today to make things not suck. Otherwise, you're back to a downtrend with the August OpEx coming on August 26th.
GDXJ is still up there, but the "keeping it up there" volume has dwindled over the past week. Now GDXJ has popped back below its EMA(9) and is in danger of failing its SMA(50), for what it's worth.
Go insane! Go insane! Throw some glitter, make it rain on 'em! Let me see them Haines!
Here's the song that's been called "the Jägermeister of pop singles".
Ke$ha says the following about the rainbows:
"I had this idea running in my head with just the idea of unicorns. If I massacred unicorns, they could bleed rainbows. I'm a fan of violence and I'm always trying to find a way to make it OK."
Actually, that was the director, but Ke$ha should have said it.
Thursday, August 14, 2014
Oh dear me, I have to go check the Friday video I have scheduled, to make sure that it doesn't offend anyone's frickin' sense of taste.
Meanwhile, here's the news:
Calculated Risk - I am totes amazeballs and Achuthan is teh dumz. You are right Bill, you definitely are totes amazeballs and Achuthan definitely is teh dumz.
Ed Yardeni - S&P earnings growing solidly. Um... what direction does the market go in when earnings are growing solidly, do you think?
Bespoke - Dow now less oversold, brown cow. Um, does anyone remember why they puked McDonald's and Amex? Can one of you stock market professionals out there ask some of your buddies why they puked McDonald's and Amex? Did they do it because junk bonds went down 4%? I see. Well, do they at least feel stupid now? If you'd like, pass them a link to my blog and I can make them feel stupid for you.
FT Alphaville - Eurozone is dooooomed. Do you fascist austerian pigs at the FT finally admit that austerity only screws things up, and Krugman was right all along? Hm?
FT beyond brics - has Modi really been that bad so far? I guess the fascist pigs in the West are getting tired of waiting for Modi to wave the Holy Handbag of Margaret Thatcher and rescue India from sociamalism and backwardness.
Mineweb - China gold demand drops 52%. Uh-oh! I guess that's what happens when you clamp down on corruption in China, eh? But demand also dropped in Vietnam, Thailand and Indonesia. Uh-oh!
Yahoo News - markets advance on Putin saying nice things. Seriously? Does anyone care what he says? Even his girlfriend Merkel stopped listening to him a month ago.
FT Alphaville - fuck the cops. What reason do cops have for wearing army camo? Hint: it's green camo, not urban camo. Answer: because when you wear army camo and carry an army gun, you think you're in the army and your country has given you the right to kill everyone you march against.
ERMAGERD JERNK BERNDS!
That look like an ongoing crash to you?
It's looking more and more like the ERMAGERD $7 BERLLIERN ERN ERTFLERS! was nothing more than some amateur hedge fund moron bid-smashing a sell order for no reason.
$7B in outflows dropped junk by 4%, which then freaked out the equity market, which then popped $VIX by over 50%.
So junk is a point of easy leverage against the $VIX.
I mean, you can puke $7B of junk, then after $VIX pops you can take a short VIX position that makes you a 50% profit as the equity market recovers.
Looks like easy money.
Then again, Hanlon's razor:
Never attribute to malice that which is adequately explained by stupidity.
Here's the $VIX. Check out the Bollingers:
Not bad. According to the Bolls, we're at -0.8 sigma, which is not much to get worked up about.
But check this out:
Ermagerd! With a Bollinger period of 10, all of a sudden $VIX is rather oversold, at -1.7 sigma.
The point of this is that all these period-based indicators will give you radically different info depending on what period you're using.*
That's why I like to vary my EMAs to properly fit the price movements, instead of just blindly taking whatever stupid number people always use.
If this was a slow-moving dataset, a longer Bollinger period is totally okay to use. But when it starts moving quickly, you should really change your indicator's period to reflect the speed of the moves. Otherwise you're getting info that isn't properly reflective of the data.
* - The only reason to care about EMAs and Bollingers is that they are a mathematical approximation of people's present attitude versus their emotional memory of previous price performance. When a stock pops above its EMA, that's significant because the viewers are seeing a price that has exceeded their expectations based on its prior trend; when a stock hits the Bollinger rails, that's significant because people can instinctively feel the sigma of the overbought/oversold condition and might be encouraged to take the contrary position.
Wednesday, August 13, 2014
That's a lower low, below a short-period EMA. The move also comes after a week of dithering whether it had done enough with filling the June "gap" (and yes, I know, there are no real gaps in gold and silver because they're traded all day - but I assume Wall Street Whitey ignores this). Thus I guess we can expect silver to keep going down for a while.
So what would happen to the gold miners?
GDXJ is supposed to correlate with SLV, but it hasn't been doing so recently. So does it finally break down out of this horizontal band it's been in for the past 2 months? The last 5 days of low volume suggests maybe.
We'll see what happens. Metals opex isn't til Aug 26th, so I don't know why these should be making big dumb moves right now. Maybe it's just because there's almost nobody left trading silver, so the moves are exaggerated.
The senior miners are actually threatening to break out to the upside?
But the last week of volume has been really uninspiring. It's as if there was institutional buying drove GDX up in June and July, and now it's been left for an ever-dwindling pool of retail to make the next push.
Again, we'll see what happens. Yes there still is gold seasonality in the goldbugs' favour, Diwali is still coming. But maybe the mid-season pullback has to get strong enough to piss everyone off before moving back into a blowoff advance thru September..
Tuesday, August 12, 2014
Here's your daily newsgarbage:
Reformed Borker (Bork Bork Bork!) - with panty-piddlers like these, who needs bears? Quote:
One of the most remarkable and persistent features of the current bull market is a willingness – nay, a compulsion – on the part of investors to turn negative at the drop of a hat.Thinking of anyone in particular, Josh?
This is entirely to be expected given the fact that this generation has seen two back-to-back peak-to-trough S&P 500 declines of 50% since the beginning of the millennium.
FT beyond brics - EM exports reveal split in fortunes. Apparently the EMs who manufacture are doing better than the EMs who just dig crap out of the ground. Something to keep in mind - will this moderate the EM secular bear market?
BI - junk funds just experienced a six sigma event! Oh god, it's the click-whores again, led this time by Williamsburg scenester and former zine editor Sam Ro:
High-yield bond mutual funds saw outflows total an eye-popping $7.1 billion last week.Last week?
The week where they went up 1%, you mean?
"This is the largest HY outflow on record – a 6-sigma event when flows are scaled by mutual fund assets under management!"You mean that $7.1 billion, which is only about 4% of 2014H1 US corporate junk bond issuance, is something to get worked up about?
Sigma is another way of saying standard deviation. And the greater the number of standard deviations, the more unlikely the event.Great, Sam. Thanks for letting us know you write for idiots who have never taken a goddamn stats class.
I mean seriously. You need stats for engineering, technology, business, economics... even sociology students take stats. You're telling us that Business Insider writes articles for highschool dropouts and drama students.
This is not to say the outflows and price declines will end anytime soon.Uh... Sammy? You might want to look at the chart again and see what it says.
Here, I'll mark it up for you:
Now THAT is technical analysis!
zerohedge - wharr evil Ukrainian fascists block aid convoy from glorious Russian motherland. Quote:
Wharr evil Ukrainian fascist genocidal forces wharrgarbl poor innocent starving
Russiananti-fascist citizens yarr brave Putin glorious motherland who doesn't fund our website at all no
Please compare with:
BCC News - yeah no not really. Quote:
Ukrainian officials have set conditions for receiving Russian aid in the east, after a huge convoy of food and medicine set off from outside Moscow.
Security council spokesman Andriy Lysenko said aid should pass through a government-controlled border post and be accompanied by Red Cross officials.
Ukrainian officials insist that the Russian trucks will stop at the border, where their freight will be passed onto vehicles controlled by the Red Cross. Russia's emergencies ministry, which is overseeing the convoy, has confirmed this version of events.
A Russian Emergencies Ministry spokesman later told the BBC that the Russian lorries would not cross the border, and that it was up to the Red Cross to decide what to do with the aid.
So, is Zerohedge already saying that the Russians have lied and are going to crash through the border with hidden weaponry?
Or are they just repeating Russian misinformation from the Russian propaganda network in order to spread lies to make Ukraine look bad?
Damn, Rio Alto's taking off:
That's a breakout. We buy those, don't we?
GDXJ's not breaking out.
GLD is maybe back into its seasonal uptrend after the customary midseason correction, but maybe not, but probably.
But the silver chart still sucks, and silver correlates with GDXJ.
What to do?
One the one hand, RIOM is better than your average GDXJ denizen, and Rio should be going up even with gold steady because they've derisked their future with the Sulliden buyout.
On the other hand, if gold becomes weak then RIOM can drop back down hard.
On the left foot, gold isn't supposed to be weak because Diwali's coming up.
On the right foot, are we sure the monsoon is okay yet?
I'd whip out my junk but that was another topic entirely.
So basically, if I'm a disciplined investor I don't buy RIOM on the breakout because the background is still cloudy... but a disciplined investor should also buy the breakout! What to do? What to do?
Answer: I already own a far-sized short vix position, and that might move as much as Rio, and the rest of my money is in S&P. So buying Rio adds to my risk profile unless I buy it with my short vix money, and that means dumping a short vix position that I bought at a great low which could return me 5-10% more in a week, easy.
So I only want to buy Rio here if I expect it to return more than a short vix position.
That's still not a sufficiently actionable answer, but at least it gives me a better sense of the problem.
Monday, August 11, 2014
By the way, pursuant to the previous on the last time we had a horrible crash on insanely high valuations and taper and dooooom and yadda yadda, back in Feb and 150 S&P points ago:
Hm. Seems this time around was even less of a dive.
Maybe that's because in January (if y'all remember) we were getting clobbered by Arctic low after Arctic low, the US was shut down all the way to Georgia cos the dumbasses are too dumb and too fat to use a fucking snow shovel, rail traffic was down hard (according to Warren Buffett himself, and he should know), and the Zerohedge crowd was crowing about the coming market crash. Cos blah blah CAPE ratio blah blah downward earnings revisions blah blah taper tantrum.
So maybe this time is slightly different, thus the bottom is slightly shallower.
Or maybe shit all turns around and dives further tomorrow.
But anyway, if you think this time is anything like the last time, here's a $VIX warning:
$VIX, after recovering from the early Feb spike and getting back below its short-term EMA, remained steady (not descending) til the good economic news started coming out in April.
And that has implications if you've gone and bought XIV or HVI.to:
It seems that a short-vix ETF does actually bleed your money away (slowly) if $VIX is staying steady and not descending. See the Feb-Mar action above.
I got my HVI at an average price of around $29.50, which equates to XIV of around $37.50, so I'm okay; even if this above scenario replayed exactly I could expect XIV to get back above that SMA(20) (maybe $40-$41 by then) before it rolls over. After all, we're still recovering from a $VIX spike and already I'm in the black. The benefit of shorting $VIX at +3.5SD, I guess.
Then again, what would the reason be now for two months of a level market? In Dec-Apr the economic news was crap (unless you were reading NDD's weekly indicators); this time around the US economy is fine.
I guess as long as Russia doesn't invade the Ukraine we should be okay.
I was poking through someone's blog of bad calls, when I saw there was some similar "market collapse" commotion going on back in the beginning of February.
Maybe this JNK cycle is going every 6 months and not every year?
Here's the chart:
You see that? Back in the end of Jan and beginning of Feb, JNK turned down a bit.
So the market responded back then by diving for a bit too, as you can see from someone else's chart from early February:
|stolen from someone else's website|
And dammit all if that wouldn't have been a really fantastic time to buy DIA calls. Cuz shit, Feb 3rd was the bottom.
I mean seriously, absolute bottom.
But the guy who made the above chart dumped his DIA calls the same day for a loss. WTF? Is that because he's reading loonies like Tom McLellan, who just a few days later asserted that the market was about to crash cos some bullshit Coppock curve turned down?
Anyway, just one week later, I guess he still didn't believe that the market had bottomed on Feb 3rd, because he then posted this:
Which is eerily similar to a post from today, meant to warn y'all that the market could turn back down when it hits a magical red line.
That gives me faith that today's red line will be broken through successfully as well.
I guess if all you read are doomers like McLennan, you're going to doubt the market so much that you not only will bottom-tick sell your DIA calls, you'll also refuse to participate in the advance from the bottom til after you've proven it's broken out to a new high.
Because you're going to be scared of the market. Scared for no damn reason, as it turns out time and time again.
But if that's the case, why trade in and out of the market in the first place? The idea behind trading in and out is to exceed the performance of buy-and-hold.
If your strategy (or your fundamental disbelief in the American economy) is instead forcing you to stay out of the market, and trade too often, and not buy low, then maybe you should quit trading altogether, buy the frickin' SPY (or a few hundred pounds of gold, whatever tickles your fancy), and play Skyrim for the next ten years.
Here's some Coldplay for Mr. I Like Questionable Crap Like Radiohead:
Keep beaking off and I'll post one Nickelback song every hour.
How's that R2K bear flag coming along?
Seems to me there's probably some sort of rule in technical analysis to help you determine whether a bear flag is really a bear flag, or actually a bottom.
Other than, y'know, you just calling it a bear flag and then getting proven wrong the following week as your flag channel gets broken to the upside.
I mean, if "technical analysis" is nothing more than "oh, things could go down from here, unless they go up" - or in this case "yeah this thing is going up a bit right here this week, but don't be fooled, it might turn around and go down" - then there doesn't seem to be any reason whatsoever to pay attention to technical analysis, is there?
I mean, sure it is actually useful if your "technical analyst" looks at the break of the R2K bear flag to the upside and tells you "that's the signal, now you can buy the R2K cos it's broken the bear flag to the upside".
Cuz if the bear flag was broken to the upside, then the bear flag wasn't a bear flag, was it?
But if your favourite "technical analyst" instead just pretends his "bear flag" call never happened, and goes back to whining about fiat money and Ben Bernanke and the %-above-SMA ratio, and AAII and Frankenmarket and lemmings and such, then he's not giving you a technical buy call at a technical local bottom, is he?
In which case he's not even a real "technical analyst", is he?
When's the buy call?
Well, there goes all that fear:
Note the EMA used in the above chart is wholly arbitrary. Still, a Vix-gap-down and further rundown in the morning is a good thing, innit?
Can it move back into that 15-17 cluster quickly? Well, not without a big reversal today from where we are right now, methinks.
Can it drop much lower? Meh... we'll see what it does at the Bollinger mean. If it drops through that, then we'll see what happens at the SMA(50): there might be good reason to argue it's unjustified for VIX to be under 12.
Look at the ongoing crash in junk this morning!
It's moved above the EMA that governed the entire drop, and now it's back up to the Bollinger mean, and MACD is turning up.
So... not much of a crash then.
In fact, it didn't crash all last week either. In fact, it went up 1% last week.
Why are people still talking about a junk collapse like it's news?
Some stuff worth reading:
Reformed Borker (Bork Bork Bork!) - the guys who get you out will never get you back in. Josh must have had a nice relaxed weekend, cos here he is suddenly shining the bright light of reason upon the markets. So ask yourselves: did your favourite permabear anti-Keynesian Obama-hating clown on a blog somewhere tell you to buy the S&P at 666? No? Did he tell you to buy in June 2010 at 1020? No? Did he at least tell you to get in at the 1560 breakout in Spring 2013? No? Then why the hell would you listen to anything that idiot has to say? If he didn't tell you to buy the S&P in Spring 2013 then he's a moron and he cost you money.
Ritholtz - Kotok on Skew:Vix ratio. I do not trust that Kotok has gotten his antecedent and consequent in the right order: the chart he provides merely shows that SKEW:VIX goes down when the market goes down. Maybe it goes down because people see stocks going down and get scared, hm? Worthless indicator, quit trying to time the market Dave, try maybe just looking at US economic indicators once in a while.
Bloomberg - job market tilts towards workers. Nice and all for the longer term US prospects, but I can expect the market will dive into a serious correction, or at least a year of sideways chop, when the fascist pigs on Wall Street see wage growth increasing. Because the fascist pigs on Wall Street have never understood that wage growth is good: they've always wanted to see the workers beaten down. Who the hell do you think supports the anti-union Republicans throughout the US? Hm?
BI - Hussman is calling a new bubble. It's not as good a market bottom timing signal as a BI article on Faber, but it's close. Seriously: Hussman is a clown, and here he bitches about a 2% yield on equities as a signal of the coming apocalypse. Meanwhile he brings up the canard about high yield, ignoring the fact that HY debt is as well-funded as it's ever been. The question remains: when did Hussman put out his buy call on the S&P 500? Hm? When? Did he ever?
FT Alphaville - a mere trickle of equity ETF flows. But you have to recognize the distortion underlying the chart: the previous outflows occurred during the Eurozone "crisis", the Greek "crisis", the US government shutdown "crisis", and all the other dinky little problems that the press blew way out of proportion in an effort to sell more gold and canned food. You don't have another Godzilla to trot out for this year's "crisis", do you? Then why do you expect the same outflows?
FT Alphaville - Keohane chimes in on HY dooooom. He's another one who hasn't seen the chart showing the same HY correction every summer over the past three years:
No more comment required, the chart says it all.
Sunday, August 10, 2014
Orlando Sentinel - John McAfee appears at hacker conference, unveils new website. And get this: the whole point of the website is that you go there, log in, and then post complaints about things.
You log into the website, and you post complaints about things.
My god, this has never been done before!
New Deal Demoncrat - weekly indicators.
I saw a bunch of articles this weekend, written by amateurish clowns and anti-Keynesian propagandists, that are all calling for an imminent top in the S&P 500.
I was going to list them all for you, but then I decided it'd be better to just post a link to NDD's weekly indicators, where he notes that M1 & M2, tax withholding, rail loads and consumer spending are all still doing fine.
Therefore there is no imminent crash and you can decide yourself whether your investment strategy should include reading clowns whose portfolios haven't even beaten an S&P 500 index ETF over the past 3 years.
And so let's see what's been the most exciting and thrilling news here on this blog, as chosen by you the viewers (or more likely, those other idiots the other viewers who are far dumber than you):
1. While IKN posts a chick looking at 89 dicks, I post Samuel L. Jackson not being Laurence Fishburne.
It's a funny clip, but it's only #1 because IKN linked to it on his own blog.
2. WEST ANTARCTIC ICE SHEET COLLAPSE HAS BEGUN: here's what you need to know.
Everybody loves the all-caps doomery. Especially more than they love real news, analysis, or opinion. I have new respect for Fox News' business model.
3. JUNK BOND COLLAPSE WILL DESTROY AMERICAN ECONOMY, USHER IN NEW DARK AGE, MAKE BABY JESUS CRY: here's what you need to know.
And another all-caps story. I could get a job at Business Insider with this skill, except I'm already making a decent living elsewhere at a company that will still be in business in 5 years' time, and I also have at least an iota of self-respect.
4. A thought for the weekend.
It's only there because coasta and comet52 keep clicking back to it to see if I've responded to their comments. Those two guys are always good for a few clicks. Why not chat with each other, guys? I don't respond to comments much anymore because seriously it's a lot of work for me to pull up a browser that can successfully load the Blogger comment form.
5. silver is plummeting, so obviously that means economic contraction.
Strangely, a semi-serious post made it into the top five!