basehitz

Are the Policymakers Waking Up?

Karl, I added your latest clip to my video library. Substance is what is sought here to counter the drivel of Dennis Kneale (the annoying idiot).
market-ticker.org/arch...

Regarding Hoenig, the link from “markfl” quotes his remarks opposing the easy money Fed policies. Since he will be a voting member next year, this is encouraging. But many officials have said “we believe in a strong dollar policy”, and their actions caused the opposite. If Hoenig votes accordingly, it is helpful. Otherwise, it is likely just more propaganda to temporarily boost the value of USD and UST, while they try to sell a mountain of treasuries.

The 29 Minute Fund and the Siesta Fund

As you have often highlighted, the blatant manipulation encourages traders to join in these shenanigans. (e.g., your Optiva post.)
www.fundmymutualfund.c...

I prefer fundamental research, but the robotic trading does not reward this. A rising market rewards junk over quality, and asset classes move in packs. Given HFT dominance, what happens if this blows a basket and the machines shift into reverse? Will “the hand” not allow a selloff, as some bulls confidence suggests?

Ideas that do make sense include:
1) Play the fade – example, long Natty gas Thursday, sold Friday. Given all the cross currents between storage limits, ETF structural issues, and hurricane season, this will remain volatile.
2) options – volatility is relative low so options are cheaper. Given my overall skepticism, long puts or strangles.
3) VXX – (short term volatility) technicals suggest a long play coming soon.
4) TLT – seems counterintuitive given Banana Ben’s proclivities. But short term traders need someplace to stash cash in the event of a market selloff. Long term I expect this to be a big loser given the ubiquitous debt auctions and our benefactors’ stated (and justified) concerns.

Presumably with summer ending, trading volume will increase. We’ll see if the manipulation still dominates. Last weeks high volume selloff suggests not.

Rosenberg: Mr. Market Telling Us to Take Profits?

Thanks for highlighting this report. I find Rosie’s research thoughtful and persuasive. From his Sept 4th “Breakfast w/Dave” Report focusing on employment picture:
1) No matter how you slice it or dice it, the U.S. economy remains fundamentally weak.
2) The magnitude of the intervention and incursion of the public sector into the private economy is breathtaking. The critical question, of course, is what happens once the heavy doses of medication wear off.
3) The all-inclusive U6 jobless rate rose to an all-time high of 16.8%.
4) The number of people not on temporary layoff surged 220,000 in August and the level continues to reach new highs, now at 8.1 million. This accounts for 53.9% of the unemployed — again a record high — and this is a proxy for PERMANENT job loss.
5) Initial jobless claims . . . key four-week moving average rose 4,000, to 571,250. At 570,000, claims are actually higher now than they were at the PEAKS of the 2001 and the 1991 recessions.
6) As an aside, the BLS also publishes a number from the Household survey that is comparable to the nonfarm survey, and on this basis, [August] employment sank — brace yourself — by over 1 million, which is unprecedented.
7) Our advice to the Obama team would be to create and nurture a fiscal backdrop that tackles this jobs crisis with some permanent solutions rather than recurring populist short-term fiscal goodies that are only inducing households to add to their burdensome debt loads with no long-term multiplier impacts.

My favorite line from Rosie to the cheerleaders:
“We shall see if the nattering nabobs of positivity discuss [these] statistics in their post-payroll assessments; we are not exactly holding our breath.”

Me neither. The problem is, TPTB apparently are unwilling to engage in an adult conversation with us about our structural imbalances and long term actions required to repair our collective balance sheet and improve our long term prospects. Instead, the “solution” is another version of past actions which caused today’s problems. Apparently they hope to persuade an overleveraged consumers to resume borrowing and spending in order to reflate the bubble. So far, the folks aren’t buying it as evidenced by savings vs spending, and other metrics.

Since joining his new firm, they are making Rosenberg’s analysis available free. His thoughtful analysis I find helpful.
www.ritholtz.com/blog/.../

Marc Faber: Buy a Machine Gun

If this wasn’t so tragic, it’s be funny.

After Marc rips Banana Ben and Easy Al, he says “Volcker would have been a good choice but he has been isolated.” I have read that when Volcker broke the back of inflation to set the foundation for a durable recovery, the pain provoked outrage from some in Congress and the sheeple. Paul was right, but not popular. . . then. Now he’s a hero.

Mark, I know you follow Hugh Hendry, who is long USD and expects stock/commodity selloff. He argues for deflation, at least intermediate term.
www.ft.com/cms/893ac9c...

TBTB are going to throw everything at this (money and propaganda mostly) apparently in the hopes of convincing Da Folks that everything is fine cause stocks are higher, and we should therefore stop all this foolish saving, resume borrowing, and buy stuff we don’t need. Depending who wins this debate IMO will decide whether Hendry or Faber are correct in the intermediate term.

Long term we are structurally damaged due to decades of indebtedness, job outsourcing, energy dependence and unfunded liabilities. It would seem the responsible thing to do is for BHO to explain to Da Folks the mess we’re in and the discipline it will take to fix it. He didn’t make this mess, but his “solutions” of doing more of what got us here is ill-advised IMO. That would be a very tough thing for any politician to do. He could probably sell it. I would support it. But I don’t think most would be willing to endure the short term pain to build a durable economy. Remember, Volcker was sharply criticized for bringing discipline in the early 80s.

To the great consternation of the propagandists on WS and Tout TV, so far the folks aren’t buying it. But the “experts” are fat, dumb, and happy.
www.ritholtz.com/blog/.../
Could it be that the “professionals” are now the contrary indicator?

Natural Gas Is a Trade, Not an Investment

HTL, thanks for the informative post.

On storage, EIA estimates 3,789 Bcf = Peak storage capacity (April 2009 report). I estimate that will be breached by Oct 23rd projecting an avg of the last 3 weeks injection rate through the remaining injection period. And as we saw last week, the injection rate has increased from prior weeks with moderating temperatures. If that continues, we get there quicker.

I had expected producers to cut supply as prices caved. SA contributor Trader Mark suggested they won’t as markets are rewarding production over profits with higher PPS, which gave executives financial incentive to over-produce.
www.fundmymutualfund.c...

Some may find it hard to believe they could be so selfish (not me), but a 2nd factor is, they need the cash. So they take what they can get.

Barring an event to change present course, I expect to reach capacity storage forcing production curtailments, and possibly jeopardizing survival of some producers. This will produce an investment opportunity and I will therefore be concentrating research in this area.

BTW, last year I thought like many that UNG was a very promising way to INVEST in a vital commodity. I had a disproportionately large position at $35, just above the prior year’s low. NG was about $7 and Jim Crammer said at that price, industrial usage would provide price support, so it was a Buy. (BTW, I do not watch CNBC at all since March when they were fear mongering during the best buying opportunity in 7 years.) Nevertheless, this carnival barker reinforced my misconception, that it just couldn’t go down much more. Fortunately, I sold with a $3 loss. This was as vivid an example as one could get to cut your losses. Given the outrageous contango and monthly punishing negative roll yield, I’m not clear how they get out of this box.

Defending the Fed

Does Kimberly work for CNBC? To be certain, the one’s with vested interest in the status quo would not want “we the sheeple” actually knowing what these geniuses have done to us. . . like completely trashing the dollar as these financial wizards “engineer” the economy. A good book is Bill Fleckenstein’s “Greenspan’s Bubbles”. He highlights Greenspan’s statements and specific policy actions showing blatant market manipulation. And when the tech bubble blew up, Maestro created a second bubble, housing. Only this time, it wasn’t just stock traders that got nailed. This time the world economy imploded. Nice job fellas.

And after all the mischief caused by these manipulators, some want to give them more power and protect their secrecy. My concern is that if we continue to allow Banana Ben to print money whenever he wants, that if the debt bubble implodes, the consequences will dwarf the last collapse.

Scary Drop in Velocity of Money: Is Deflation Knocking?

“Bernanke has said we will have inflation. If you have cash, you are de facto an enemy of the people”

My elderly mother who lives off interest income is being punished by our central banker, as are all people who lived within their means and accumulated savings. Banana Ben should at least acknowledge that, due to the misguided policies of the Federal Reserve for 30 years which encouraging indebtedness, that he has no real solution to our predicament.
2.bp.blogspot.com/_vIR...

Instead, they paper over problems, allow banks to submit fraudulent financial statements, and promote govt giveaways hoping to create the illusion of prosperity. So far, most people aren’t buying the BS as reflected in higher savings and lower spending. It’s about time!

China and India: Canaries in the Coal Mine?

To define the last market bottom, a 1-year chart of SPY vs EEM shows the following:
• EEM bottomed last fall, SPY had further to go.
• March EEM low was HIGHER than it’s previous low. SPY made a new low.
• EEM advance in March slightly before SPY.

If we are now repeating the opposite of above, the following should set the stage:
• EEM hit a rally high Aug 1,but SPY had further to go.
• August EEM subsequent high was LOWER than previous high.
• SPY high on Aug 1 was beat by subsequent high last week. (i.e., EEM started down first)

However, IMO the jury is still out. Nevertheless the above 2 sequences – so far – repeat the pattern where EEM leads and SPY follows. I am currently using EEM UST USD VXX and USO as indications of where SPY may be headed next on my live trading screen.

Everything is so highly correlated, I’m waiting for more clues on the bigger picture before trading, except very short term stuff.

Gold Explodes, Silver Shines, What's Up with Natural Gas?

As you are aware, Hugh Hendry and Robert Precter are USD bulls and think the market is headed south. Last year, the playbook was - SPY down = USD up. Intraday charts still show that now. On longer durations, the dollar bears/gold bulls point to Banana Ben actions inevitably trashing the dollar as “cure” to the debt. I agree. Still, traders using a short term mindset won’t care if the USD is trashed 3 years from now. If they’re selling stocks, they’ll want to hide somewhere. Notice also Treasuries have been moving higher this last leg of the market run, which is new and suggests that some traders are already positioning for the market fall.

Maybe it’ll be different this time, but I’m gonna assume they replay last year’s playbook. That is, a market selloff ramps UST and USD, which temporarily pulls down commodities. Since I do not buy that we’ve fixed the banks, or the US serious structural problems, I want to use that as an opportunity to buy a basket of commodities and producers.

The Five Economic Horsemen

For any readers who have not listened to the 3 hr presentation on Chris’ website, I found it a good investment of time. It is not comfortable to learn the predicament we have put ourselves in from decades of living beyond our means. But I’d rather understand what is going on and at least have a chance to prepare.

www.chrismartenson.com...

Chris, you said “the Federal Reserve is printing up roughly $15 to $30 billion dollars a day just to keep things limping along“

That equates to $5.5-10.9T/year. I assume that includes all the bankster backstops, giveaways, etc.

Thanks for the time you've invested to help educate us.

Is a Crash Impending?

I am also suspicious that when the phony support fails, those trading machines will work just as fast in reverse.

What irritates me is those “advisors” pushing their clients to buy stocks now. I recall vividly early March. In spite of the fear mongering from the “experts”, I bought aggressively. However, my resolve was weakened by the fear mongering from these experts and I sold too quickly. Those same jackasses who couldn’t see the buying opportunity in early March, NOW recommend buying. And CNBC throughout this process has typified that back-asswards thinking.

Over the last 2 years, track records are being established. As a result, almost all my research now is through bloggers who have earned credibility. And I have completely stopped watching Cheerleading Central and am suspicious of everything that comes out of the WS propaganda machine, for which the shills at CNBC serves as the mouthpiece.

Buck Is Bottoming: Time to Go Long

Precter was recently interviewed on Tech Ticker. He sees 1-2 year bull market in USD.
finance.yahoo.com/tech...

As hard as that seems to believe, this robotic market continues to buy USD when equities sell. Commodities of course sell off when that happens and US Treasuries have been a beneficiary of HAL9000. I’m looking to position for that via long UST, short stocks, out of all commodities.

Natural Gas ETF: The Short-Term Story

Thank you for the informative post. The opposing forces of low NG prices and near capacity storage limits creates a dilemma for traders. Add the ETF structural issues and it is difficult to justify the huge premium to NAV. So I’m still waiting.

One point of clarification. . . Bloomberg article states “Supplies may reach 3.9 trillion cubic feet, which would be near U.S. storage capacity”. However, EIA states “As of mid-2008 peak working natural gas storage capacity in the Lower-48 States was estimated at 3,789 Bcf”. (April 2009 report)
www.eia.doe.gov/pub/oi...

The “Lower 48” referenced above is also used here.
www.eia.doe.gov/oil_ga...

That 110 Bcf storage could come into play. Using recent fill rates, we will breach the EIA limit in the last week of October. If weather moderates as expected, it could be sooner. Hurricanes are the wild card.

Asset Price Driven Economic Recovery Underway

“How many do not believe the government and the Fed will do whatever it takes to put a floor under the housing market?”

And every other market it seems. The indebted are helped by inflation. So they will try to prop up everything, with short-term fixes:
1) massive subsidies to political allies, some of questionable long term benefit. Example, GS saved/LEH flushed (Hank Paulson former GS CEO). Example, GM given $50B but CIT denied $3B, though CIT provides critical financing to 1 million small businesses. (1m businesses = a lotta jobs. Was this really just about jobs?)
2) handouts to consumers for short term boost to housing, autos, appliances, whatever. All short term, at the expense of future spending and much needed consumer saving.
3) A confidence building campaign designed to inflate stocks, which Da Boyz then cite as “proof” that good times are ahead. (Ignore all those “stick saves”, sandbagged estimates, distorted news releases, etc. The market “knows”.) Instead, listen to Tout TV and forget that they led you off a cliff last year.

Long term solutions are lacking. Consumers are still deep in debt with a weak job market, a particularly nasty combination. And due to decades of outsourcing, the long term prospects are weak also. Yet consumers are being seduced to stop saving and resume over-spending. Bad idea.

Add to that CRE risks, on-going home foreclosures, foreign resource dependency, unfunded liabilities, weakening demographics, etc. Handouts and hype are producing a sugar high. Long term prosperity requires something better.

This is not fear mongering, as is being increasingly suggested by some. (A rising market does that.) We’ve got some really serious problems, that wishful thinking will not fix. Here’s just one of them.

2.bp.blogspot.com/_vIR...
(ht TraderMark)

Barney and Ben: Will the Fed Be Held Accountable After All?

I understand that Pelosi was stonewalling this bill even though a majority in the House were co-sponsors. The banksters are also opposed as Zero Hedge reported. And Obama announced BB's reappointment.

Many are suspicious of Bazooka Ben's balance sheet given he was also stonewalling this measure. I expect some have a lot to hide.

So it seems the bets have been placed. This will be interesting.