December 27, 2013 | Leave a Comment
We applaud Rocky for his long stock hedge, and note that treas will issue less bonds which is making basis viral for shorts.
Comment: As we suggested in September, the Fed was on hold for 2013, and we now know will begin tapering in January 2014 similar to 1999/2000 when Greenspan ended Y2K liquidity….
By the time the Fed next meets, they will know the employment numbers which we have forecast to show strength…
A review of Bernanke's book on Targeting Inflation shows that his forecasts anticipate interest rates 2 years forward.
Fed to Start Unwinding Its Stimulus Next Month 2013-12-19 08:14:08.154 GMT
By BINYAMIN APPELBAUM; Nelson D. Schwartz contributed reporting from New York.
Dec. 19 (New York Times) — WASHINGTON — The Federal Reserve said on Wednesday that it would gradually end its bond-buying program during 2014, a modest first step toward unwinding the central bank's broader stimulus campaign as its officials gain confidence that the economy is growing steadily.
September 19, 2013 | 2 Comments
Can anyone explain to me why counting matters anymore?
I asking seriously and without disrespect.
How can one "count" for what happened today? Is there some sort of "the market is up 37 out of the last 42 full moons" question/equation that would lend one to believe that the the 2 pm rocketing of the market was going to occur?
Maybe there's some other form of analysis that we can do to have an edge?
What about fundamental analysis?
What about technical analysis?
What about astrology?
Maybe I should convert Scientology and see if the Thetans give me any insights?
I firmly believe that the government (and let's be not pretend that the Fed is not the government) and politics are driving 98% of what happens in the markets now.
This is a BS market.
Ralph Vince writes:
It's a GREAT market.
At the risk of being a blasphemer, my interest in market analysis is an academic one. My implementation, devoid of my personal academic failings. That is……buy low, sell high, and at the same time, sell high something else, to buy it back lower.
You should never have a move like this go by without taking a profit on something.
Yeah, I take a lot of disparagement over my bullish stance on the markets here, as I do thinking the Miami Dolphins will be Super Bowl Champs this year. I have no skins in either game you see.
Gary Rogan writes:
If you invest long-term in good companies you don't have to be hurt and/or left out of the steady progress of the market regardless of any of this.
If you enjoy this n-dimensional game of chess than you should be like the Palindrome: smart, totally cynical and totally connected.
Ralph Vince responds:
But the premise of buy and stay long HAS worked only because we have been in a bull market since forever. Every high of the past couple hundred years has been exceeded — long term bull market (for whatever reason).
That is a bet on that continuing.
Gary Rogan replies:
Ralph, but didn't Victor publish some whole-world stock data from Dimson, I believe it was, that showed steady progress? Isn't it the expectation for the previous highs to be eventually exceeded simply from the nature of the beast and not being a a "hundred year long bull market"?
There are really only three risks for a diversified stock portfolio:
-Geographical concentration risk (including where the owner lives so that he can actually access his money if it hits the fan)
-Unprecedented worldwide collapse
-The future being TOTALLY different from the past in this area
Otherwise it's steady progress all the way to infinity.
The three risks are unquantifiable, but seem better than being able to outwit the flexions day-to-day.
You pays your money and you takes your chances.
Ralph Vince adds:
The thing is, this isn't a big move up.
When the rain comes, it washes everything away in a hurry. Weeks worth of advance vanishes in minutes.
I don't recall, in my lifetime, a setup for liquidity disasters like we have under us here, and when this goes, it will vindicate any shorts you can hang onto.
Gary Rogan writes:
Ralph, why would all this extra liquidity resolve itself by the stock market collapsing in a spectacular fashion as opposed to say (1) Sudden high inflation perhaps followed by hyperinflation of the economy improves, and the stock market losing value in inflation adjusted, but not absolute terms (2) Or a multi-year stagflation period with the economy not doing well in some middling fashion and with the stock market slowly drifting down or simply not rising (3) Given that we will have this extra liquidity for quite some time now, evidently, based on the recent Fed personnel developments and Ben's short term and new-found caution, a liquidity withdrawal quite a few years from now, making any shorts in the meantime unfeasible, even if there is an eventual collapse?
I really have no idea what will happen if there is a bond vigilante battle royale against the Fed and it's printing press, and clearly bonds cannot be a GREAT investment at this point, but how can you be even reasonably certain that there will be a stock market collapse unless there is an overall economic collapse (which is reasonably likely, but will make profiting from the shorts a moot point)?
Mr. Kris Rock comments:
Counting is a discipline…like belonging to the mormon church is a discipline…
Ralph Vince writes:
I think people look for "causes" (du jour) to explain market moves. Right now, the story is QE, and it sounds plausible, but the story always sounds plausible, but it is always a very, very specious causation there.
We're talking about equities. Puffs of smoke that only have value because people day they do, right now, that the value is X. And that is only because they don;t have something shiny elsewhere to put their money. Equities are an easy place to park money.
But they have the same value as puffs of smoke, and when we forget that, the market has a cruel way of reminding us.
Gary Rogan adds:
The future is fundamentally unpredictable: no amount of past experimentation or data can preclude some fundamental parameter of the system changing and invalidating all the statistical evidence. We don't seem to have a choice in having to rely on the past to the extent that we understand it and extrapolating in the future. But what if a parameter like the unprecedented rise of the national debt in peacetime or the rise of socialism or the changing demographics flips the long term growth rates in profits? Or the reduction in de facto property rights or the rise of flexionism make it impossible to realize gains? I don't think there is an answer other than overall we have evolved to take the past as a consideration for the future, so we might as well stick with it for the lack of a better alternative watching out for the changes in the parameters where we do understand the causal relationships as well as (and particularly so) for contradictions.
February 5, 2013 | 2 Comments
Two customer anecdotes:
My wife goes into Tiffany's and asks the salesperson to measure her ring size. The saleswoman looks at her with one of those "you don't belong in here" expressions and tosses her the ring of samples for sizing across the counter. (My wife measures her finger and walks out — in a moment eerily reminiscent of the scene on Rodeo Drive in the movie Pretty Woman.)
I drop off my car at the Lexus dealer and I tell the rep that I need new brake pads and rotors. Two hours later he calls me (and I expect to hear that the bill is several hundred dollars). Instead he tells me that I'm good for at least another 5,000 miles and that he didn't do any work. The only reason I took the car in was because the mechanic who performed my required annual inspection said my brake pads were worn out.
Many business lessons here.
Jim Sogi writes:
I ordered a custom made down jacket from an outfit in Washington called Nunatak. A guy named Tom claims he makes the garments. I"ve read elsewhere he jobs it out. They make high end outdoors gear. When I ordered it, I paid in advance and he said it would deliver in 8 weeks. Okay, I understand that. 10 weeks go by with no word, so I email…No response. I call… No response. Another two weeks go by. I email again, and get no response. I figure its a rip off scam, so I call my credit card company. The day before my expedition the guy calls and says he will mail it to my son's in LA. It never gets delivered. When I ask him, he goes off on me and says, "Wow, I apologize for setting off your anger issues….I believe Walmart has what you need in the future. Tom" This is supposed to be high end custom gear, and I would have bought thousands of dollars of gear if it was any good. Is this anyway to run a business? What an unpleasant experience. I've never had this kind of antagonism from a vendor, ever, much less a custom operation. I hope this gets put on the website so others don't have similar problems with Nunatak. The guy was not pleasant to deal with or reliable or helpful.
Mr. Kris Rock writes:
He must have been Colombian and knew from hacking your email you were headed to Argentina.
Shouldn't dividend paying stocks consider reducing or eliminating dividends, and instead use free cash flow for share repurchases? Assuming long term cap gains tax will be less than tax on dividends.
Gary Rogan writes:
They have to consider that many of their holders are sub-250K and many hold in tax-shielded retirement accounts. "Widows and orphans" still rely on dividends to some degree, so there is probably some sort of a Laffer-like curve where the post-tax income total return averaged over all the holders is optimized by a particular dividend policy.
Mr. Krisrock writes:
You can't turn on a financial news program without hearing about special dividends. Companies are also rewarding employees with 15% dividends as a year end bonus. Even better is issuing debt, which is tax deductible and buying back stock when ITS is not at a market peak?
This will likely happen sometime next year…not now. Most liberal Californians haven't figured out how Obama has tactically created the seeds for a republican internal war in 2014. Boehner has made sure his entire house leadership is comprised of supporters, and he can cut a deal that enrages the tea party whom he despises. Now tell me who defends personal property rights, when there is a rebellion among republicans. Obama can get back the house in 2014 simply allowing the brain dead rep establishment to self destruct. They are really that dumb…and he is really smart …he won re-election no matter how he did it.
It would be a waste of corporate cash to buy stocks here and now and the more special dividends from companies like Home Depot, the more we can confirm the worst is coming.
Jim Sogi writes:
Isn't the threat of dividend tax a good way to shake out accumulated cash held by corporations? Wouldn't a better way be to get rid of the dividend tax? Equities would go through the roof.
Somebody is spending, but who? This chart shows YOY customs duties and excise taxes which are a fairly good surrogate for retail spending.
However, here's a question: if the federal government buys a fleet of new Chevy Volts (the ones that burn up, LOL), do they pay excise taxes?
Mr. Krisrock writes:
The combination of Higher Energy, Higher Dollar, Higher Commodities, and the September 15 California Tax on the internet has caused a SURGE in amazon orders to beat the increase…and of course Obama's playing with the numbers. Look at the huge drop in employment a year ago in October. Obama knows how the numbers work a year ahead, and of course, where do auto parts come from…electronic components come from Asia…for starters…and foreign car assemblies do buy foreign parts.
January 25, 2011 | Leave a Comment
Here is a fascinating "CIBOARD" series from the St. Louis Fed.
Mr. Krisrock writes:
It's clear that inventories are peaking and that seasonals can't account for the extreme cold weather and the probability of a weather slowdown in European and North American sales which the Russell2000 underperforming the Dow may demonstrate…so the need to borrow cash right now is high with inventory raw material costs rising in many items. Right now there are many similarities to 2007 patterns, including the rising volatility in stat arb fund counter funds. Finally, there is high likelihood of higher ranges in the week after a democrat delivers a state of the union. With the market above its 50 and 200 day MA, theories of 1220 gold and lower crude are making the rounds…
January 18, 2011 | 2 Comments
Sports betting is about emotion more than reason.
People love the Patriots and bet according to their heart.They count one way and others count other way, proving how you can get beat with 100% confidence you're right and all those who you disagree with are wrong.
Walters proves that point especially in the equity markets…he just doesn't know those who count in a different way.
Pitt T. Maner III responds:
I have heard of people that have a "team-like" attachment to stocks like AAPL. It would be almost impossible for them to sell their AAPL stock; almost as difficult as it would be for a Pats fan to bet against his team.They are emotionally attached to Macs, iPods, iPhones and everything AAPL. Perhaps there is some component of this that is reflected in price action. There are not that many companies that have that sort of following.
Jeff Watson comments:
The devotion, attachment, or worship of a team by the general public might be the "Achilles Heel" that allows them to exploited and/or manipulated by the flexions. It would be hard to find something rational with devotion, attachment, or worship.
Gary Rogan Responds:
Most of the story was about his sports betting operation, which looked quite impressive and totally devoid of emotion. He counts, knows a lot about all the teams, diversifies, employs experts with total recall who remember even more, and on top of it attempts to "push the line". The story ended with his complaint about the market, but it seemed like he simply didn't apply any of his normal techniques to a new area and got wiped out.
Jeff Watson comments:
Walters attempts to "push" the point spread is no different than a local at an exchange or a market maker trying to goose the bids or offers to move the direction of trading to prices that have the most liquidity, stops, and booby traps for the unsuspecting. The sports gambling market is really no different than any other market when you think about it, and it's probably percentage wise, more honest.
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