Thomas MacLeod

Still the 'Most Hated Rally in History'

i rest my case!


On Nov 23 02:36 PM Dave Wrixon wrote:

> The market has simply been rigged to plug the holes in the bank balance
> sheets. Nobody else actually bought this rally as far as I can tell.
> It is an illusion and an unsustainable one at that. It is largely
> based on the assumption that the dollar will continue to drop but
> rates will stay at zero. Well, of course that will be the case just
> so long as Ben has his way. But it is the market that matters and
> it is the currency markets that will determine the outcome. Ben may
> think he can control these. Unfortunately, he is simply deluded.

On Floaters and the Yield Curve

If you are saying that treasuries are the place to be then in essence you are implying that there is no risk of inflation! Perhaps the official stats suggest so but the commodity mkt is suggesting something completely different

The Consequences of the U.S. Monetary Base Bubble

I give you a 2/10 for english comprehension.

Same for ability to form a coherent viewpoint

Qui vir odiosus!

On Nov 09 08:22 PM taojaxx wrote:

> Amazing that it would take until the 14th post to read some sensible
> comment on this hastily drafted column. The author of the article
> has obviously no idea what monetary base is (try to pay your grocery
> with gold at the check out register...), let alone what it means
> that banks would keep this much idle excess reserves. Amazing as
> well that it would elicit so many approving comments. I guess that's
> the beauty of the market and the source of its wealth redistributing
> function, from Joe Shmoe's 401 K to Goldman Sachs's Hampton mansion.
>
> ;-}
>
> On Nov 09 04:18 PM user396040 wrote:

CRB vs. PPI: Cause and Effect

Hi Angel,

Sorry for the delay in replying.

We don't have one sell signal. You would probably find our methods lacking in sophistication, as do we. We gave up trying to outsmart the market, and simply trade the capital flows that we observe.

We determine our outlook, then trade this outlook. Every week we perform activities similar to the below article, to determine if the outlook should change.

seekingalpha.com/artic...

We look for relationships between bond, equity, commodity, and currency markets. Once a trend is in place, it usually stays in place for a long period of time, months and years.

To change our outlook we usually look for 90 day Rate of Change. Changes of trend rarely happen quickly (exceptional events excluded of course).

We trade with quite strict rules to protect our capital, scaling into a position, stop-losses, scaling out of a position, etc. So we have usually exited out of our positions long before our outlook changes.

We don't always stick to our trading rules, but it does takes an exceptional circumstance to break them. Occasionally we will take very long term positions and hold them for 2-5 years or even longer regardless of short term events. Other times we will take highly leveraged short term speculative positions (usually currencies). These never represent more than 5% of our capital, yet have been responsible for over 50% of our wealth accumulation over the last 15 years.

Even in light of the recent downwards movement, we are still essentially bullish. Up, down, & sideways moves are normal in a market. Next week we will go through the outlook process again.


On Oct 23 10:45 AM Angel Martin wrote:

> Hi Thomas
>
> you are right about trader vs economist. This is the first market
> I have taken speculative positions in (currently SPY calls).
>
> RE your link to the products people use and where they come from:
> inflation due to import price increases is a real risk with a devaluing
> dollar. Arthur Laffer got a great boost to his career by forecasting
> that the Nixon devaluation of the dollar would be hugely inflationary.
> The other economists in the Commerce Dept basically made the argument
> similar to what i did for manufacturing and basic materials, ie.
> that imports were a small fraction of the economy so a price increases
> would be barely measurable. Didn't turn out to be the case.
>
> The major reason why I think the big inflation won't happen is that
> we appear to be in a post-war disinflation. This phenomenon has many
> historical parallels (the one I think is most relevant is post-WW1,
> but others would be 1864-73 in the USA, and 1815-25 in the UK). In
> these past cases, the disinflationary/deflation forces are so powerful,
> that what might be quite inflationary policies in other circumstances
> don't seem to have the same effect. (why I don't know, but that is
> the historical pattern. The other factor is, you need to win the
> war, if you lose, you get inflation, again I don't know why).
>
> Regarding, theory and data vs what the market is telling you. I agree,
> I don't want to be arrogant. From what little i've read about trading,
> with humility comes profits; arrogance leads to losses which leads
> to humility.
>
> I am always looking for counterexamples that are inconsistent with
> my macro view of the market/economy. Right now, the only thing I
> see is accelerating job losses in Aug and Sept in the household survey
> for USA employment. If Oct shows more of the same, then I am wrong
> about a strong recovery this fall.
>
> Everything else I see is consistent with a normal, non-inflationary
> economic recovery. eg.
>
> High multiple tech leads the cycle: APPL, GOOG and AMZN all reporting
> great results, esp yr-over-yr revenue growth.
>
> Industrial production shows some increases.
>
> Retail sales up (slightly) since july
>
> Employment lags the cycle, so we wouldn't expect to see employment
> gains yet.
>
> Basic materials prices lead the cycle. The trend of commodity prices
> is consistent with past economic recoveries, and not necessarily
> a precursor to a larger inflation. (but the PPI etc will tell me
> if i am wrong).
>
> I think the $US will start to go up once there is some employment
> growth (but the FX market will tell me if i'm wrong).
>
> I am planning on a put position for gold, probably next year, if
> and when we get some employment growth and if the dollar reverses
> the down trend due to empl growth.
>
> Thomas, I'd be interested to know what would cause you to move out
> of your current longs. What is your sell signal?

CRB vs. PPI: Cause and Effect

Hi Angel,

Thanks for your comments - enjoying the discourse.

I appreciate your viewpoint & will respond in a more abstract manner: just ignore the naive politics.

Firstly: www.chrisjordan.com/cu...

(the same information has many different levels/viewpoints.. etc..).

Secondly: Pick any 10 objects near you at the moment. Where were they made? There is a valid and completely different viewpoint on the link you provided.

I think that you maybe placing to much confidence in yourself; and not subsiding your ego to what the markets are telling you. Of course you could also be 100% correct. No one knows.

I am a trader, not an economist. I am focused on maximising my returns whilst accepting as little risk as I can.

Emilio & I have been positioning out accounts for these trends, and slowly building our positions. Our viewpoint is the that there is no indication of a reversal anywhere, and that these trends will be with us for 18months+. Rarely have we seen such a wealth creation opportunity . Really.. pick your sector:

- oil, coal, steel, etc..
- softs
- shipping
- high yield currencies

I suspect that you could probably bore the arse of just about anyone by quoting various statistics, reports, etc.. all night. All very well, but..

What is much more interesting is how are you positioning yourself at the moment?


On Oct 21 08:09 PM Angel Martin wrote:

> Thomas, I suggest you look at the "USE" matrix Table D on page 14.
>
>
> www.bea.gov/scb/pdf/20...
>
>
> If you look at manufacturing with $3.85 trillion in total output,
> about 300 billion are commodity inputs from the Agriculture and Mining
> industries. The CRB is up 30-40% since bottom, but the direct price
> impact is on less than 10% of manufacturing inputs. And Manufacturing
> is the largest proportional user of basic materials. The overall
> industry fraction is just 2%.
>
> Compensation of employees is more than 10 times as large. (6 trillion
> in intermediate use out of 19 trillion total industry output. <br/>
>
> The employment cost index annual growth is less than 2%. With 9%+
> unemployment, I don't expect that will be increasing anytime soon.
>
>
> www.bls.gov/news.relea...
>
> There are reasons why those of us who do not buy the inflation scenario
> believe as we do.

The Perfect Inflationary Storm

Hello Mr Yankee,

Good to see you back.

Dead cat bounce? possibly.

I am a trader, not an economist.

Our commodity and currency positions are already in substantial profit & we will continue to increase these as long as the current trends continue.

Our Earnslaw portfolio is so far returning over 40%. Our Terminal Velocity portfolio is returning a more modest 6%. Both these portfolio's are not leveraged. Not spectacular numbers, but we can live with this.



On Oct 19 11:11 AM Fanatical Yankee wrote:

> Respectfully submitted, Brother MacLeod, but: You ARE joking...RIGHT???
>
>
> Look at the Long Term Chart.
>
> Dead.
>
> Cat.
>
> Bounce.

The Perfect Inflationary Storm

Angel,

"re your other articles, not sure why I would want to speculate in polyethylene" - now, you are just making things up again. UBC must have taught better than that.

"one of them must be wrong" - No.. I think your absolute assumptions are right royally flawed. But do thank you for sharing.

"But I also note the conspiracy theory rationales of many goldbugs" - seriously.. get a grip, you are raving like a loon again. It's really hard to take you seriously when you say things like that.

By the time all the boxes are ticked as per your book learning, the markets will be heading to a new place. Economist seem to make awful traders.

Are you really shorting gold right now? If so, respect, brave man.

On Oct 18 09:02 AM Angel Martin wrote:

> Hi Thomas
>
> I mentioned grad school (UBC economics, nothing fancy) to make the
> point that I was referring to the standard econ dept definition of
> inflation. The "austrian school" definition seems to be something
> completely different.
>
> Current gold price reflects a market forecast of severe inflation.
> Current T bond pricing reflects a market forecast of 2% inflation
> for the next 10 years. Current stock market pricing reflects a normal
> economic recovery. At least one of these forecasts must be wrong.
> At least one of these markets must be a bubble.
>
> I choose gold as the bubble based on the historic pattern of post-war
> deflations (for countries that win the war). But I also note the
> conspiracy theory rationales of many goldbugs. Gold must be the only
> market where many of the bulls believe the market is rigged against
> them - yet they continue to buy.
>
> re your other articles, not sure why I would want to speculate in
> polyethylene when I think that a strong economic recovery and disinflation
> will crash the gold market.
>
> On Oct 18 03:11 AM Thomas MacLeod wrote:

The Perfect Inflationary Storm

Hi Angel.

Thanks for you comments.

I am really trying to see your point. I can't work out what you are trying to say [other than "I went to grad school"].

- why mention "weimar republic"? you don't need to invent things
- "Which is it?" answer is obviously none, see above
- "a strong clientele effect" - er.. your nuts.. see above
- "many of the buyers seem to base their investment decisions on conspiracy theories" - you are raving like a loon here .. see above

Your expensive grad school education may not have been money well spent!

If your interested [possibly not by now], I went to Sorbonne. Which I can recommend as first class education in eurotrash, balearic beats and manage-a-trois. Now that was money well spent!

My real education began on the trading floor, it's still ongoing and will only end when I'm being carried along in a box.

Being serious now, you probably have something interesting and insightful to add. Leave the "grad school" stuff behind.. mentioning it as you did marks you out as an 'A' grade tosser.

We look at global capital flows, form an outlook, and trade from that. Looking just at the US economy ( as I suspect you may be) gives you a very distorted picture.

We've already discussed most of your points in these articles:

seekingalpha.com/artic...

seekingalpha.com/artic...

Take the time & look at these - our aim is to help people trade profitably.

On Oct 17 07:46 PM Angel Martin wrote:

> I look to markets to forecast future risks like inflation.
>
> The definition of inflation we used in grad school was persistent,
> widespread increase in prices. Price increases would be seen in raw
> materials, intermediate and finished goods, services, wages and salaries.
> We have no inflation on the wage side, and have disinflationary conditions
> in the intermediate and finished goods, and services The treasury
> market (TIPs vs T-bonds) is forecasting low inflation.
>
> There is only one market where there is a forecast for significant
> inflation. It is a market that seems to have a strong clientele effect,
> it is small relative to total global financial assets, and many of
> the buyers seem to base their investment decisions on conspiracy
> theories. At least one of the following: treasury market, stock market,
> or gold market is a bubble. Which do you think it is?

The Perfect Inflationary Storm

So are you going to wait until oil gets above $150 to call inflation! Here is your lesson for today - absolute levels mean little rate of change means every thing!


On Oct 17 02:22 PM Angel Martin wrote:

> The author wants another perspective, here goes:
>
> -CRB graph - if the author showed a longer time series it would show
> the CRB at less than half it's 2008 peak value.
> -same for oil, half of peak value
> -same for other commodities, eg. copper at 2/3 of 2008 peak
> -10 year treasury yields are 2.0 % above TIPs yield, same as 2008
> prior to the market crash
> -US dollar index is still above its 2008 minimum value.
> -broad market indices are still well below pre-crash levels
>
> 2008 inflation prior to the crash was mild to moderate at worst.
> CPI excl food_energy last august was 2.5%. Now we have the situation
> where commodity prices are half of their pre-crash levels, expected
> inflation via TIPs is the same, the dollar is higher and markets
> are well below their 2008 peak. In this enviroment the author would
> have us believe that Weimar Republic hyperinflation is just around
> the corner... no way!

The Perfect Inflationary Storm

"A fool thinks himself to be wise, but a wise man knows himself to be a fool." - Billy Shakespeare

With the most sincere and utterly heartfelt respect, I suggest that you acquaint yourself with the term "inflation". Warning: it may require a little intellectual effort on your part.


On Oct 16 08:37 AM chap08 wrote:

> Yet another article that foolishly looks at only the inflationary
> or deflationary forces. This article ignores the massive deflationary
> forces resulting from debt, unemployment, capacity utilization, the
> consumer, the banks, the reduction of stimulus etc.
>
> A simple request: more articles from people intelligent enough to
> see both sides of the debate please.

Dollar Update: A Contrarian View

Your views are very respected but what if more dollars are being printed to hold up treasuries? I don't know if this is true but looking at the market one does get a feeling that is the case. We are not talking about gold where the supply is limited we are talking pcs of paper where the supply is infinite!

Shipping Stocks Ignored by the Seeking Alpha Massive

Hi Carl,

Thanks for your comments.

We use a variety of proprietary indicators. These do exactly what they say.. that is indicate. One signal by itself means nothing, but collectively, across the global equity, bond, commodity, and forex markets, a picture emerges. We look for global capital flows and trade accordingly. Our approach is part quantitative and part qualitative; part science, part art.

It may help you to understand our approach if you try this exercise. Overlay the long term charts (say 40 years) of equity, bond, commodities, and forex markets, both US and globally. Whilst not exactly, perfectly aligned you may notice relationships or patterns that repeat. It is those patters that we are trading. Day traders we are not, rather slow accumulators over time. Once we are convinced a trend is place we up the leverage and commit more funds.

The 100 day ROC signals a change in trend. Our trading rules, stop losses and position limits, have protected our capital so far - but you never can say for certain.

Like most traders we've taken some losses on some trades and left some money on the table on others.

Emilio and I started Glenorchy Capital as we appalled at how badly our family and friends had been let down by "professional" money managers. And yes.. we do intended to publish both our portfolios and approach. Our portfolios will be available in the next couple of weeks.

Thanks
Thomas.

Why There's More Upside for Equities and Commodities

Mad - do you mind if I call you Mad?

Sometimes you make sense. Other times it seems like you rave like a loon.

This time you've done both. - Job well done sir!

Although you will understand if I pass on the opportunity for you to setup to trade futures for me.


On Oct 06 02:01 PM Mad Hedge Fund Trader wrote:

> nge Of course you knew it was going to happen like this. After churning
> around just below the old high, and sucking in as many profit takers
> and short sellers as possible, gold blasted through to a new high
> for the year of $1,038. Never mind that the triggering event is complete
> balderdash, a story in Britain’s Independent newspaper asserting
> that the Middle East is holding secret global talks to price crude
> in the yellow metal or other currencies (click here for story at
> www.independent.co.uk/...
> ). It didn’t hurt that Australia cut its interest rates by 0.25%,
> the first G-20 country to do so. There probably isn’t enough gold
> in the world to finance more than a few weeks of global oil production.
> Total gold holdings would only fill two Olympic sized swimming pools.
> But never let the truth get in the way of a good trade. The confirming
> moves couldn’t be more ubiquitous, with the Canadian, New Zealand,
> and Australian dollars all up big, commodities strong, and silver
> also going ballistic. Regular readers will all recognize these as
> old friends of mine, core longs that I have been strongly recommending
> since the beginning of the year. I have been trying to get investors
> into gold since it was at $800. If you aren’t in gold by now, I can
> only tear my own clothes and flagellate myself for my abject failure
> to convince you of gold’s merits. US government debt is exploding,
> and with foreigners holding a large part of our paper, the only way
> to get out of this mess is to devalue the dollar. It’s like Obama
> invited China’s president Hu Jintao to dinner at an expensive Upper
> East Side restaurant, and was suddenly called away by a crisis, leaving
> him with a big fat bill. Next stop $1,200, then $1,500, then the
> old inflation adjusted high of $2,400. If you want me to help you
> get set up to trade futures in any of this stuff, please email me
> at madhedgefundtrader@yah... If you want to know where to buy physical
> gold and silver in size with the tightest spreads over spot, check
> with the experts at www.millenniummetals.net

Service Sector Growth Points to Strong Recovery

if you had been paying attention to what calafia beach pundit has been saying since November last year you would have made a small fortune. Of all the commentators on SA he is the only one who put his balls on the line and has been consistently right!


On Oct 05 01:00 PM j-dub wrote:

> If salesman such as this were ever to respond to some of the comments
> thrown back at them on SA, he might have a shred of credibility.
>
>
> I have an interesting new model to suggest whether or not the real
> economy is actually improving. It is called the inverse CBP indicator
> and it might be quite reliable.
> As the real economy worsens, more people in unfortunate situations
> will turn to notes such as this to keep their hopes up. So his follower
> numbers will increase.
> And as the real economy improves, and peoples situations improve,
> less will need to cling to his fantasy feel good writings. So his
> numbers will at first stay stagnant and then decline.
>
> I read these notes nowadays simply for the laughs. One day, G-D willing,
> no one will need to read his notes again.

Why Are Shipping Stocks Ignored?

Indeed; we wrote about that very article a week or so ago. It was syndicated quite a bit & we saw it first in the New York Post.

You can read it here: seekingalpha.com/artic... - you might be interested as it talks the very questions that you have raised.

To my mine, the photo that accompanied the article was quite like the "Polar Bears on an iceberg" photo that Al Gore & other environmentalists use to sell their cause.

What they don't tell you though, possibly because they don't know, is that this photo simply shows the natural state of affairs. Anyone who has flown over or landed in Singapore in the day time will have seen similar numbers of ships in boom, doom, and ordinary times.


On Sep 30 09:32 AM buybigtires wrote:

> You have to look at International Ocean Freight as well. Recently,
> I was nosing around "the interwebs", and found an article the London
> Telegraph did on Ghost Fleets off the coast of Singapore.
>
> It's like a graveyard of underutilized capacity. The economy is still
> in the tank, even if losses are slowing. We are still on a downward
> trend for the forseeable future.