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Just a small fish swimming in shark-infested waters. I have a BS in Chemical Engineering and a deep interest in science and investment management. My investment strategy was designed based on fundamental, technical and intermarket trends. Asset allocation follows this plan, which mostly focus on... More
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  • The Bull, The Bear And The Chupacabra: Part II - Politicians, Psychology And Fear

    The June 17 vote in Greece is a crucial event that may define the course of the second half of 2012. It's a wild card, but apparently, most Greeks want to remain in the euro.

    On the politics psychology front, I think Samaras has the advantage. Fear is a powerful weapon. New Democracy Party's strategy is about asking people if they want to stay in the euro for progress or return to the drachma for chaos and economic depression. Meanwhile, the leftist party's strategy is more about promoting a Greece that can't be submitted to austerity measures and forced bailouts.

    Can we simplify it as a "fear" vs "pride" bout? Maybe not completely, but I would bet on fear to win the fight. Speaking about fights, the Pac vs Bradley fight last weekend resulted in the worst decision in boxing history. It was a shameful scorecard and it showed us that almost anything can happen. Although I think anything can happen in Greece too, the fear that Greek residents feel of potentially loosing a substantial portion of their savings by returning to the drachma if SYRIZA wins the vote, and also the fear for the inflation-induced civil unrest that may come after that potential scenario, the New Democracy Party's should prevail. We will see about that on Sunday.

    What about Spain?

    They are receiving money for their ailing banks. That should restore a little confidence in the markets, eh? No. The bond market drank too much caffeine.

    My preferred method to measure the fear induced by the European crisis is to follow the 10 year bond yields, specially in Spain and Italy, which are big economies...

    (click to enlarge)

    (click to enlarge)

    The Spain 10 yr bond yield reached the previous high of 2011 and then started to come back down, but not for long. Tension is rising again, even with the ECB replenishing the liquidity drain that's happening there. Italy yields have been on the rise, they are not high enough yet as to cause mayor panic, but they are rising fast and most probably will add more fuel to the fire.

    Angela Merkel has a copper yield strength, not a steel one.

    So for how long must the chupacabra terrorize the world before the printing press goes from 0 to 60 in a fraction of a second?

    In material mechanics science there is something called yield strength. The strain or deformation on a material is plotted in a graph along with the force that is being applied to it. As the stress increases, there comes a time when the material starts deforming permanently. It can no longer remain in its elastic zone. In other words, it yields.

    Ok, but why in the world are you boring me with this, you ask.

    Well, I'm just stating the obvious. Dry banks, Greece mess, an onslaught of ominous economic data, ECB pressure, US pressure... you get the picture.

    In short, there is no a lot of room to remain in the elastic zone for a long time. Tensors will keep pulling, and the chicken game will have to end. Merkel's time to act will come again. By the way, it's election year here in the US. That means the US president will try to make anything he can to improve the local economy.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Jun 16 1:28 AM | Link | Comment!
  • Article Approval Time In SA

    Apparently, the recent violent moves of the stock market have caused a big increase in articles written in SA, which has caused a glut. This situation has made the approval process to be very slow.

    I would not like the written material simply to go wasted because I couldn't publish it. Given that in some cases the articles have time-sensitive technicals and opinions that are based on market conditions, I've decided to publish the rest of my first article here on my instablog. After all, what fun is it if we don't speculate about the market and post some "evidence"?... even if turns out to be wrong.

    Jun 16 1:22 AM | Link | Comment!
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