10/11/16 Pyrrhic Victory Day.

...off only .05% FTD as UUP gives me time to cut equity longs and FX.

Sold off all FXA, and CEW. Only FX held is YCS with 18% in UUP

Sold off 1/3 in each: WIP, EMLC, VT, IWM, EEM.

Bought 1/3 in RWM.

Equity long to short went from 4:1 down to 2:1 and if the market has a bad day tomorrow perhaps 1:1. Net percentage exposure to equity longs tomorrow is 5% of total portfolio...so the hatches are well battened.

On a relative performance basis, today was a huge winner.

Still not touching vol.

10/10/16 No Change in Manifest.

...assets on the radar, or should I say sonar.

WIP, EMLC, CEW.

I'll Update the Manifest Daily

...and redo the total manifest holdings (stickie) monthly.

at current AM prices I'll be selling CEW and adding to UUP.

Complete Hole Manifest*:

*current holdings

40%:

VTIP*/SHY/ or MM cash

2% each credit (10 longs / 3 shorts)

EDV
TBF-S*
IEF
TBX-S*
JNK*
SJB-S
BNDX
LQD
TIP
WIP*
EMLC*
EMSH
IGOV

2% each equities: (10 longs / 6 shorts)

VT*
EFZ-S
DIA
DOG-S*
SPY
SH-S*
IWM*
RWM-S
EEM*
EUM-S
FXI*
CHAD-S*
VPU
SEA*
SCS
AAPL*

1% each volatility: (1 pos vol / 1 neg vol)

XIV
VXX

2% each vs. UUP*= 14%/UDN 'winner' (10 longs / 3 shorts)

FXC
CEW*
GCC
RJA
CYB
SLV
GLD
FXE
EUFX-S
FXA*
CROC-US (ultra short 1%)
FXY
YCS-US* (ultra short 1%)

Blame it on an Algorithm

http://www.ibtimes.co.uk/algorithm-that-pounded-sterling-prompted-bank-england-probe-1585323

...computer picked up words 'hard Brexit' and placed short bets.

Match Race Week #40.

GA down .23% for the week and 3.70% YTD, as USD holding switched from being short to long.

QGMIX up a remarkable 1.05% for the week and is now positive .63% YTD, with the mutual fund category Alternative Global Macro Funds (AGMF) up down .70% for the week and 4.27% YTD.

The recent strong performance of QGMIX has me scratching my head as both GA and the category both took hits this past week. Friday was especially confusing with equities off, bonds flat, and QGMIX up a whopping .71% for the day!

Whatever they are doing I wish they'd send me an email an tell me.

For All the Negative Zone Financials Talk...

the market for zone fins in approaching a golden cross.

http://stockcharts.com/c-sc/sc?s=EUFN&p=D&yr=1&mn=4&dy=0&i=t02249794063&r=1475837194685

Pumped by talk of tapering bond purchase and the overall improvement in global growth prospects.

http://stockcharts.com/c-sc/sc?s=%24BDI&p=D&yr=1&mn=0&dy=0&i=t56430867608&r=1475837792957

$BDI has been putting on quite a run this year.

Right you Are.

Pound down 4 then 2 then 3 now 2 tells me it's not a pudgy index.

More on the Pound Swoon.

http://www.investing.com/news/forex-news/sterling-slumps-as-support-levels-crumble-in-thin-asia-trade-430870

...love the fat finger hypo which comes from adding an extra zero or two or three to an order.

The British Pound Just Blew Up.

...@ 6:45 EST the pound crashed over 4% in a matter of minutes. Of course this is good news for UUP.

What I'm Seeing.

1) Currency positions are doing a very quick 180.

2) Bonds of all strips are selling off, but only have had one sell signal TIP...three days after I bought it.

3) No roll over in equity positions, yet, but VT is getting closer to a sell.

Inflation Winds Died Out.

...moved from UDN to 1/3 position UUP.

The stronger dollar is deflationary but with VTIP inflationary and still a hold the winds are at cross currents with each other.

All in all these are markets that are going nowhere fast.

The kick off for the dollar was Theresa May's 'hard Brexit' announcement some five days ago with the dollar advancing each day since.

GA Not Carrying any Vol.

...Like China the GA is neutral on vol not holding either XIV or VXX since both are sending a buy signal. When one turns to sell I'll buy the other.

'Safe Haven' Utilities Beat Down.

http://stockcharts.com/c-sc/sc?s=VPU&p=D&yr=1&mn=0&dy=0&i=t92918760158&r=1475663644103

...interesting that in a period of stagflation no equity class of assets does worst than utilities, the reasons being #1 slow growth, #2 falling stock price making dividend yield increase to match rising bond yields, and #3 energy commodity prices increasing at a faster rate than utility rate increases.

In a very real sense the rise in commodities portrays econ. fall, while the decline econ. summer.

Got to Love the Cat.

Thanks for the forward.

No one, and I repeat no one, in my book is better than Kevin.

Cat of course is short the yuan and Chinese equities which has not been kind to them so far this year. No poker pro wins every tournament, but the fact that there are a select few who can make a living at it is a testament to the Cat's amazing track record.

No one knows what the next card will be, no one knows what the markets will do tomorrow so for either a poker or market player to consistently beat the competition is rather incredible.

It's very interesting that I'm currently neutral on China with FXI (long) flashing a buy, along with CHAD (short). Being prudent I'm holding off buying either until they both line up.

Added Positions...

TBF, TIP, VT, EMLC, and 1% of newly added -2x Yen short YCS (the leverage reduces the holding by 50% with no single Yen short available)

Oct. 3rd AM Illustrative Day.

Stronger than expected ISM and weak Brexit Pound driving the dollar up which is deflationary.

Yet the deflationary loving SHY is down -.03% and the inflationary loving VTIP -.06%

Now if this becomes a trend (vs. a one day event) then I would eventually move from UDN to UPP

AND.

Sell off my VTIP and hold cash rather than buying the also declining SHY.

If you look at my previous posts the winds would then shift and blow the GA East aka econ. fall, with an increase in growth dominating both the effects of inflation / deflation.

Stocks are selling off as the growth is not enough to outweigh the increase in interest rates.

All in all a perfect mild fall day...so far.

Very Gentle Breeze Moving the GA North-Start 4th Qt.

The direction the GA is moving (if any) can be determined by the assets found in holes #1 & #2.

UUP + Cash blows the GA East or deflationary growth aka econ. fall.

UUP + SHY blows the GA South or deflationary depression aka econ. winter.

UDN + VTIP blows the GA North or inflationary depression aka econ. summer, the current situation.

UDN + Cash blow the GA West or inflationary growth aka econ. spring.

Both UUP + VTIP and UND + SHY create cross current winds which stale the GA's movement.

The Four Big Questions + Answers.

What to hold? How much to hold? When to buy? When to sell?

What to hold + How much to hold:

Hole #1. The GA will always hold a 10% position in the USD, either being long with UUP or short with UDN.

Hole #2. A 40% position in either short term straight UST (SHY) or inflation protected UST (VTIP) will usually be held if the favored asset outperforms cash. Holes #1 and #2 are the ballast holes adding stability to the Ames.

Going into the fourth quarter hole #1 contains UDN and #2 VTIP.

Hole #3. The credit hole contain ten potential assets with a min/max position of 2% each or cash: EDV, IEF, JNK, WIP, TIP, EMLC, EMSH, IGOV, BNDX, and TBF (a short). This is a good mix of domestic/international/emerging market debt, both short/long and straight/inflation protected.

Hole #4. The currency hole contains eight potential currencies with commodities (the oldest form of money) considered as currency. Again the min/max is 2% each or cash: CEW, FXA/FXY, FXC, GCC, RJA, GLD, and DGZ (a short). Hole #4 will always contain either 2% FXA or FXY.

Hole #5. The equity hole contain ten potential equity assets with five longs: VT, FXI EEM, IWM, and SPY, and five shorts: EFZ, CHAD, EUM, RWM, and SH, again at 2% each or cash.

Hole #6. Vol hole can contain either 1% VXX or 1% XIV or cash.

The GA will always carry a min of 12% assets, other than cash, and a max of 100%.

When to buy + When to sell:

Based on a proprietary moving average timing signal (or pivot points as Livermore would say) common to all potential 34 assets on the GA manifest sheet. My only task now is to adjust the sails as we head into the waters of: deflationary depression...aka winter, inflationary depression...aka summer, deflationary growth...aka fall, and inflationary growth...aka spring.

Going Into Club House Turn.

With three quarters of the race run this year has proved tricky to say the least caused in no small part by the constant stream of mixed signals send by the Fed.

A planned four or five rate increases this year (Fisher) has turned to one/zero with a one and likely done in Dec of last year.

The dramatic plunge in Jan - mid Feb was more than covered by an epic bounce back rally once Janet grew concerned about plunging global equity prices destroying the wealth effect she and the two previous Fed chairs had worked so hard to produce with zero interest rates + QE.

Japan of course added to the rush in equities as global bonds exploded upwards as rates on sovereign ten year bonds went negative pushing stocks still higher.

China, a worry earlier in the year, has rebubbled its real estate market which has had positive spillover holding the yuan steady while driving up Chinese equities.

In sum the reversal of Yellen + BoJ + PBoC = lower interest rates, more leverage (borrowing) = higher credit, equity, and real estate prices (a bubble in everything).

What will end this game. It's certain the CB'ers of the world won't as they are hardwired into the global equity markets quick to reverse policy at a moments notice of volatility.

The end of the game will be price inflation as fiscal policy kicks into gear along with increased protectionism resulting in global stagflation.

Match Race Week #39 End Third Quarter.

GA up .02% for the period and 3.93% YTD, as 60% (of 100% cash) was put to work.

QGMIX up .21% for the period and -.42% YTD, with the mutual fund category Alternative Global Macro Funds (AGMF) up .12% for the period and 4.97% YTD.

CEW Added at Close.

As of the close today: 40% VTIP, 10% UDN, and 2% each CEW, FXA, WIP, EEM, JNK.

Total of assets other than cash 60%.

Only Second Time This Year.

http://stockcharts.com/c-sc/sc?s=%24DJTTR%3AEDV&p=D&yr=2&mn=0&dy=0&i=t35673523916&r=1475260078089

...transports relative to ZEROs has broken the 200 dma.

FXA:FXY Sending a Buy Signal.

http://stockcharts.com/c-sc/sc?s=FXA%3AFXY&p=D&b=5&g=0&i=0&r=1475153602851

...long term, this is a great market indicator.

http://stockcharts.com/c-sc/sc?s=FXA%3AFXY&p=D&st=2007-09-29&en=2000&i=t05270904367&r=1475153833511

Glad I Kept My License Tags...EURO FX

Back in July 2015 I bought vanity plates on my new retirement present to myself car with the thought the Euro was replacing the USD as the world's reserve currency.

Here is what the Euro had going for it the USD doesn't

1. Size, the Zone is 1.4x USA in GDP.
2. Positive trade balance.
3. Conservative Germany calling the fiscal policy shots stress balanced budgets.
4. The more conservative ECB vs. Fed delaying QE for three years after the Fed went to zero.
5. Health care costs under control for aging population.
6. Lower race / ethnic problems relative to USA.
7. Lower overall inflation rate.
8. Lower military spending not looking for fights in third world countries.
9. High rates of literacy and low rates of obesity.
10.Lower overall debt level...less leverage in housing.

...and then Merkel decides to blow the whole thing out of the water saying there, and I quote, 'NO LIMIT ON THE NUMBER OF MUSLIM MIGRANTS SEEKING REFUGE'.

Crazy, insane, unbelievable, to think a first world country with first world religions and cultures should throw open it's doors to a third world religion and culture courting total contamination.

In a melting pot, Muslims don't melt. There's is the least tolerate of all major religions...if there is one thing that can't be tolerated it's intolerance! Draw a picture of their 'prophet' and drop in a funny caption, they will kill you!

It would have been better if she opened the door to Ebola victims, at least they could be cured.

Now that Merkel has seen the light via complete denunciation of her migrant policies by the German electorate she now is in mop up mode to stop new migrants and get rid of the ones who should have been allowed in the first place.

Happy to be sporting EURO FX again.

Day Three of Inflationary Breakout.

...one graph says it all the pairing of the inflationary loving short-term treasuries VTIP with the deflationary loving short-term treasuries SHY.

http://stockcharts.com/c-sc/sc?s=VTIP%3ASHY&p=D&yr=3&mn=0&dy=0&i=t91501967687&r=1475092519956

Remember back in July 2014 the beginning of the massive deflationary force? Well that's history. Inflation in the new sheriff in town.

New signals yesterday and today have been in the most inflationary loving assets: FXA, EEM, WIP, JNK.

Tomorrow could well have me buying TIP.

Picked up positions in: EEM JNK WIP

From We Can to Won't Do It.

https://www.washingtonpost.com/world/europe/germany-used-to-be-the-promised-land-for-migrants-now-its-turning-back-more-of-them/2016/09/27/6b5c7a7a-7a7c-11e6-8064-c1ddc8a724bb_story.html

German electorate having fun beating some sense into the moralistic daughter of a minister who happens to run Europe.

Future Buying: Fewer iPhones More Depends.

http://www.haver.com/comment/160927g.png

The composition of the consumer confidence index is a hoot which young demo contracting and old demo exploding.

Stagflation-lite With 2/3 Fewer Calories.

Calculate out the good old 'misery' index, made famous in the 70's.

5% U + 2% inflation = 7%.

Back in 1980 the numbers were 9% U + 13% inflation = 22%

No Harm in Asking.

Adding 4% FXA at Close.

Since 1994 It's Been All Bubblenomics

http://www.zerohedge.com/news/2016-09-26/dangerous-bubbles-plain-sight

...yep Alan started it all and passed the baton to both Bernanke and Yellen who both blew their own.

Sir Alan Finally Has it Figured Out.

Love the comment he made some time ago about how the understanding of economics came late to him.

http://www.afr.com/opinion/columnists/greenspan-warns-weak-growth-and-rising-wage-spell-stagflation-20160731-gqhnlf

In a stagflation the USD will fall along with bond prices. However, if the Fed supports bond prices (more QE) in a rising inflation environment then gold will explode.

USD Overvalued IMHO.

Inflation (unless compensated by a positive interest rate) destroys the value of a currency.

The US is leading (along with the UK and Canada) the world to a higher inflation path, but by not increasing rates makes the USD venerable to low inflation currencies...the euro, aussie, and yen.

http://www.businessinsider.com.au/this-nifty-chart-from-deutsche-bank-shows-how-inflation-is-tracking-around-the-world-2016-8

Something is wrong when the core inflation rate in a country is greater than the real growth rate as is the case in the USA with a 2%+ core inflation rate, but only a 1% real growth rate.

This officially moves the US into a low level stagflation mode.

The market is finally recognizing the fact and now has given me the signal the USD should move lower.

I'm Not Into Swans...of Any Color.

...for me it's all about trends, long term confirmed by the short once the pivot point is reached. Today I picked up an inflationary trend and allocated 10% to UDN, and 40% to VTIP.

Had a deflationary trend shown itself I would now be 10% UUP and 40% SHY.

Tomorrow I'll compare the price action of 25 other assets to check for additional cargo additions. Good chance I'll pick up some WIP.

Starting to Fill Up the Holes.

...wonder of wonders I'm finding things to buy today.

UDN...USD short, and VTIP...short term inflation protected notes.

Details after close, assuming levels hold.

John Mangudya for Fed Chair.

https://www.rt.com/usa/359474-zimbabwe-printing-own-us-dollar/

If the Fed is really worried about low inflation boot out Janet and put in John. Wonder if the notes will have pics of our dead presidents?

Sure Was.

My moose drive under happened in late Aug. 2007, when we visited our son running a river rafting operation outside Fairbanks. Driving south the day got away from us and we found ourselves 50 miles north of Homer where we had a motel reservation when it became dark.

I estimate the time to be a bit pass 7:00 pm when the black shadow of a monstrous bull moose stepped on the road then turned his head lighting up two red retinas that looked like something from Terminator. We were traveling 55-60 mph with maybe 100 foot before impact.

Twenty feet before impact I closed my eyes as my screaming wife did and braced for impact...which never happened. No way the huge beast could have moved out of our way in the second I closed my eyes.

I say we drove under it, wife thinks there was divine intervention with a team of angels lifting the thing in the air.

Needless to say I was interested if anyone else had the experience which is kind of like saying you were abducted by Venusians...no one is going to believe you.

Then a couple of years ago I ran across the following article which said it was technically possible to drive under a moose, provided: The moose was huge (it was) and it was standing stock still with it's legs together (it was).

http://jalopnik.com/5954296/can-you-drive-under-a-moose

Now the moose in Maine aren't nearly the size of an Alaskan, so on our trip south from Quebec City we stopped for the night, not wishing to press my luck counting on French angels.

I Faced Two Grizzlies but...

never a T-Rex!