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6/30/2016 Grounding Indexes +94/+36*
*matches peak of yesterday. This number represents price deflation, as the number grows larger it portents of greater deflation. Small less deflation otherwise known as inflation.
FXY loves price deflation, FXA loves price inflation.
The topping of the number had me set up an opening position in FXA.
Nope, Foam Supply is Always Constant.
http://stockcharts.com/c-sc/sc?s=JGBT&p=D&yr=1&mn=0&dy=0&i=t11580682450&r=1467231572927
...being in Jap bonds and they have gone negative would have been a great place to be this year!
As the BOJ keeping buying them above par value it makes them negative, but for the owner the decline is nothing but gold. So how far can this go...well any minus value can be lowered by a greater value.
No limit on the foam.
A bond can theoretically go to any positive or negative yield.
Looks Exactly Like...9/1/2010.
...after a horrible August stocks and especially commodities took off on increased CB stimulus.
Destination won't be Lisbon or Cape Towne, but Sydney FXA. Ahoy mates.
Back in 2008 the CB'ers could even find the keys to the Foam Truck (QE used to dose the runways so the planes don't go up in smoke). Today however, every major currency CB'er is sitting in his truck with the engine running!
Looks like $BDI could break out of 50/200 day pattern tomorrow, and Fookie is back to positive double digits.
Picking up a piece of XIV is still possible, but not probable today. Going long on equity asset inflation (DIA/QQQ/FXA) is still a ways away.
Likelihood I'll be selling PSQ & EFZ tomorrow or Tues. Very bullish set up over the next three days #1 today end of quarter, #2 tomorrow 1st day of quarter, and Tues. the day after a Monday holiday.
Homeopaths to Overrule Surgeons???
http://www.investing.com/news/world-news/europe-launches-reform-'reflection'-after-brexit-shock-411366
...they are talking the talk, but can they walk the walk? Brexit could turn out to be best for Europe and the world.
Anyway in the mean time, talking the talk is taking the risk out of risk on.
For Silver to Shine so Must FXA.
...adding silver to the hold, which is price inflation risk-on, means the Aussie must become stronger if the price of silver is to continue to increase.
You'll note on the 'rock' report at the end of the day if prices hold that the asset inflation rock (the first) is higher and still rising, but the second rock (price inflation) is lower and stabilized.
This action favors the risk on (price inflation) FXA over the risk on (asset inflation) FXB.
In a nutshell this is telling me that SLV is a better buy than TLT/DIA.
PS: Selling off my VXX at the open, I'll likely buy .5% XIV at the close.
Tacking a Bit North.
Currencies likely at close: 93% FXY/UUP + 7% FXA (inflation loving/risk-on)
600 Year Bear Market...Silver.
http://www.choosingsilver.com/historical-silver-prices.html
...silver charts inflation better than gold which can rise during deflationary times as well as inflationary.
http://stockcharts.com/c-sc/sc?s=SLV%3AGLD&p=D&yr=5&mn=0&dy=0&i=t15752850759&r=1467203915057
...notice how SLV has experienced the 'golden cross' (a misnomer in this case) against gold. Something which hasn't happened in three years.
http://stockcharts.com/c-sc/sc?s=SLV%3AGLD&p=D&yr=5&mn=0&dy=0&i=t15752850759&r=1467203915057
What will be a key is if the 200 dma line starts moving up!
Pieces of eight were 1/8 1 oz. silver. Can't think of anything more fitting to stock up in the hole of the GA.
https://en.wikipedia.org/wiki/Spanish_dollar
So If I Was to Guess...
What would be in the GA hole by the end of summer I'd venture:
30% UUP/FXY and 15% silver, with 0% index equity shorts, and 0% VXX.
Here's what happened in the UK which was transmitted to the rest of the world on Brexit...Gilt bonds soar! All sovereign bonds soar, soaring bonds support equities and PM.
Had the pound crashed AND gilt yields rose, the market would have melted down, which could have been a natural reaction to a plunging pound. So why didn't this happen? It's called either CB intervention, or a fear growth would slow down more than inflation would rise.
So why SLV over TLT, which has far to fall relative to other sovereign developed bonds. Simple, according to my measurements SLV is now outperforming TLT for the first time in five years.
Alan G. has been warning about stagnation, well what he really wants to say is STAGFLATION, but will be laughed at if he does.
This will all end badly in either a deflationary meltdown or an inflationary crack-up boom. For the first time in five years the odds have shifted to inflation. Adding another .5% SLV to the hole of the GA at the close today.
ISIS Miffed at Turkey After Kicked to Curb.
http://www.reuters.com/article/us-turkey-blast-idUSKCN0ZE2J1
VIX Now Back to Pre-Brexit Levels.
http://www.investing.com/indices/volatility-s-p-500
...according to VIX Brexit never happened at all. Rather amazing.
6/27/16 Grounding Indexes +84/+36/+120
Beg to Differ.
I can't see France going along with Germany, now that the UK (which was a German ally against France) is gone.
Assigning Cargo to 1-5 Holes in GA
...given the rocky conditions, which will not change until the combined total of both is a negative, I'm assigning cargo to the various holes.
Hole #1 Currencies...some mix 50/50 to 67/34 UUP/FXY. Max. 30%, current allocation 30%.
Hole #2 TLT or SLV...allocated to which ever has the best relative strength as determined by my measurements. Currently .5% SLV, Max. 30%.
Hole #3 PSQ/DOG/EFZ...allocated to which ever has the best relative strength. Currently 1.0% (.5% EFZ / .5% PSQ). Max. 30%
Hole #4 VXX...allocated on relative strength and contango/backwardation measurements. Currently 1.0%. Max. 2%
Hole #5 MM...default investment. Max. 70%, Min. 8%, currently 67.5%.
Transactions + Store of Value = Money Strength.
Part of the reason the Yen is strong is due to it being the global funding (carry-trade) currency...see prior posting. So the reason to hold yen, is to buy risk assets (selling the yen making it weaker), this is the transaction aspect of the yen.
Also you don't want your money to lose value while holding it until the next transaction, this is the store of value aspect of money.
Inflation destroys the store of value, while a positive interest rate increases. A negative interest rate acts as inflation destroying store of value.
So with the yen at a neg. -.1% short term interest rate, value ought to be destroyed and the yen weaker? Right? Not so fast.
Inflation destroys value, but deflation increases value.
Running the numbers on Japan (using Trading Economics data) currently .1% interest +.3% deflation = .2% positive return.
If you crunch the numbers for the UK = .2%
Euro Zone = -.1%
USA = -.5%
Another huge aspect is the anticipated inflation often based on trade openness and political stability.
So whereas the pound has a higher relative rate of real return than the Euro or USD, the trade and political instability lead investors to question if the rate of inflation will remain low.
Hope this helped.
Turkey Does a 180 Flip-Flop.
http://www.dailysabah.com/eu-affairs/2016/06/28/chapter-33-of-turkeys-eu-accession-process-to-be-opened-on-thursday
So far in the last week Turkey has mended fences with Israel, saying it's okay if they exist. Apologized for shooting down the Russian jet along with paying damages. And for the topper saying that the backing they've given ISIS was misguided.
Of course none of this comes for a change of heart, but rather knowing lying gets them closer to visa free travel and then using that a wedge for membership holding 3 million migrants.
No Cherry Picking.
http://www.investing.com/news/world-news/merkel-vows-to-strengthen-eu,-tells-uk-no-'cherry-picking'-411017
...so said the chief surgeon, as she sharped up the scalpel.
Dear Aunt Betty Died Already.
This is the mnemonic I use to remember the five stages of death/dying or what the remains are feeling.
Denial...Not going to happen, re-vote, Scottish veto.
Anger...Getting pissed off at oldsters.
Bargaining...Article 50 hasn't been signed (yet).
...now here's when it starts getting sad.
DEPRESSION!
and finally,
Acceptance.
Historical Movement in TLT Measure.
TLT is now a purchasable asset. The movement today was one for the record books...largest ever (seven years of data).
6/27/2016 Grounding Indexes +70/+33 = +103
Relatively China Need Devaluation More than Japan.
For two years the dollar had been on a run and China has suffered. Now with the dollar moving up the Yuan has to move down. The yen is a risk-off currency when rising and risk-on when falling.
The yen is the global carry trade currency of choice. Loans in yen are sold making the Yen weaker and used to buy risk assets.
When risk assets fall (risk off) the assets are sold and converted into yen making it stronger.
Globalization RIP...From LBJ to Dubya
...LBJ started the wave of globalization, and I'm giving GBII credit for ending it.
Kicking out Sadam, for no good reason at all, touched off 'Arab Spring' and the overthrow of other strong men such as Kaddafi, and the cat with nine lives Assad.
This created a huge vacuum which tribal hatred and ISIS happily filled creating the migration wave from civil and religious wars the strongmen prevented. The migrant wave was the straw that broke the remains back.
Changing MY Odds to 80/15/5.
...the day of reckoning is approaching. Batten down the hatches!
http://www.cnn.com/2016/06/27/europe/uk-brexit-jeremy-corbyn-boris-johnson/
Adding .5% EFZ @ Close
...assuming of course prices hold at these levels. Tomorrow I'll likely add .5% PSQ.
.5 Million in Libya, 3.0 Million in Turkey.
All wanting to make Europe their home.
http://www.dw.com/en/apart-from-erdogan-there-is-a-great-modern-turkey/a-19358275
...a very thoughtful piece from an intellectual Turk. Times they are a changing.
What My Measurements are Saying About TLT
In a rocky risk-off lower growth environment, TLT is a preferred asset. According to my measures the reverse is true today and I deem it to be 'toxic'. Toxic means my measurement has broken to the downside and no investment will be made until the trend reverses.
...so what gives.
The only possible market answer would be slower global growth, but even faster rising price inflation.
Stagflation is what they call it which economically speaking is a left shift in the AS curve reducing growth but increasing prices.
The macro reasons for this shift are two fold, a decline in global productivity and the threat of reduced trade from the rise of nationalism.
This of course makes gold/silver attractive.
Plans are to add another .5% of SLV to the hole on Wednesday.
Poker Player of the Year...Fedor Holz
http://www.cardplayer.com/poker-news/20524-2016-card-player-player-of-the-year-fedor-holz-takes-the-lead
...THE most enjoyable poker player to watch since Phil Ivey, this kid is a calculating machine nice guy! Watched him play in a high-roller event against legend Eric Seidel, what a treat.
At the same event was bi-polar Phil Hellmuth who wears his heart on his sleeve with every win or loss. Great watching Phil reach across the table to introduce himself to Fedor who of course smiled back and then busted him out.
Interesting that two totally opposite personality types can still achieve superstar status in the world of high stakes poker. Hellmuth of course is a member of the hall of fame, along with Seidel, and the leading WSP bracelet winner.
So what kind of player are you when it comes to investing...emotional or emotionless. Buffett says there is no place for emotions in investing. I totally disagree. There are deep emotions which is the byproduct anytime you win or lose money.
Where emotions CAN get you into trouble is if a loss leads to anger and the anger leads to tilt. Phil Hellmuth may be emotional, but he doesn't tilt.
The Surgeons Are Definitely Running the Show
https://www.theguardian.com/world/2016/jun/26/eu-may-refuse-informal-brexit-talks-until-uk-triggers-article-50
...rather than being introspective, they plan on using the fear weapon as the remains did. We all know how well that worked out.
Yen in the GA Hole is Getting Antsy.
http://the-japan-news.com/news/article/0003041804
...if there is a race to weaken between the Yen and USD, the Japanese are masters at lowering. Knowing this I've cut back on yen and added to dollars, I stand at 60/40.
Oops...I'm Sorry to Say Pathology Made a Mistake.
A couple of months ago you go to in for tests and they want to take a biopsy. On Thursday they call you saying everything came back negative, but on Friday you get another call saying pathology mixed up your tests with someone else and yes, you have CANCER which may be inoperable!
The dreaded Big C. Of course you're shell-shocked but then shift into battle mode on how to defeat this dreaded enemy.
In this tale the patient is the UK and the physician team is the EU.
As I'm reading the Brexit stories filtering in what the physicians do will determine if the patient (and world) survive.
#1. The physician group of surgeons call for a quick break thinking the best thing to do is cut it out as fast as they can. What this means is set up trade barriers and treat Britain as a disinherited child. That's the only way to keep this cancer from spreading to other countries.
The net result is a sever recession in the UK and a moderate one in the EU with the other countries scared to death not to leave.
Stocks of course tank and risk turns off big time as the contagion of recession spreads through the world.
http://www.bloomberg.com/news/articles/2016-06-25/u-k-must-leave-eu-as-soon-as-possible-foreign-ministers-says
#2. Another group of physicians (radiologist/chemo) Merkel's team say take it slow (avoid ugly negotiations) with a holistic wait full watching approach. This of course reduces the odds of a recession but increases the odds other will leave if Britain benefits from leaving. Effectively the UK patient lives but the EU physicians die.
#3. A third group of physicians advocate a go slow approach, but then also clean up their own act...physican--heal thy self. This is hard because physicians are great at telling other people what to do, which doesn't apply to themselves.
1. Control the external borders by what ever means necessary.
2. Forgive southern nation debt.
3. Run fiscal deficits...especially in Germany.
4. Germany must run a -Xn position (caused by large fiscal deficits)
5. Reduce the Brussels meddling in writing bureaucratic rules.
The end result would be to not punish the UK and increase living standards in the EU so no one would want to leave. Eventually the UK passes another vote to re-join!
And all live happily ever after.
So how big of deal is Brexit? Huge if #1 or #2 happen, if #3 somehow miraculously occurs the world will be a better place for it. How will I know which is taking place? The rocks will tell me.
Guessing, which I can do as long as no money is involved, I'd say the odds are 60/30/10 on 1-3.
The worst thing that can happen to the world is if a bunch of pissed of surgeons start whacking away at an inoperable tumor.
Mistakes are what cause wars.
GA Now Fitted with Most Advanced 'Sonar'
...new improved grounding index 44/25
The GA is a huge ship and as such needs two salts taking the soundings one on the port side the other the starboard.
The rocks found on either side are of two varieties: asset deflation (falling stock prices) and real deflation (falling CPI).
Going into the open tomorrow the readings are: +44 asset deflation and +25 price deflation for an overall deflation reading of +69.
Deflation readings make FXY/UUP the currencies of choice, while inflation readings make FXB/FXA the currencies of choice.
As mentioned the hole of the GA is full (30%) of risk-off deflationary loving UUP/FXY.
These readings also favor TLT over SLV...but SLV over global equities, since the price deflation sounding is less than the asset deflation reading.
As it stands today SLV has entered buy territory but TLT has not.
I stand ready to buy up to 30% the combination of both.
What I'm really looking forward to buying is global equity index shorts. The choice is between EFZ, DOG, and PSQ. Today none merit purchase but EFZ is very close. I stand ready to buy 30% of the combination of all three.
Pos. vol is the easy one. 1% when one month VIX is in backwardation and 2% when 7-4 moves into backwardation.
Eight percent will be the minimum cash held, although today cash totals 68.5%.
Lesson One: Voter Turnout Increases with Age.
...or old monkeys vote.
http://blogs.spectator.co.uk/2016/06/brexit-political-awakening-young-people/
Add in a day of terrible weather conditions along with the market recovery from the Jo Cox rally all set the plate for Bexit.
What has happened over the past forty-five years is that the winners from fiat globalization (which I liken to cancerous growth) vs. gold globalization which is normal growth have become so concentrated the votes of the 'losers' finally exceeded 50%.
Still that wasn't enough. Let's take a typical 'loser' who has seen no real increase in income for 40 years, meaning 0% of fiat globalization has found it's way into his pocketbook. Then the Remains scare the dickens out of him saying: "you think you have it bad now, if Leave wins, your income will fall by 10%".
Normally this scare tactic (which the Remains played to the hilt) works, but culturally incompatible migration fears are so extreme the 'loser' feels he'll lose more than 10% in health care services, benefit cuts, and the anxiety of have so many foreigners to come into contact with if he doesn't vote Leave.
In the end he votes his self-interest, which amazed the elites thinking he didn't.
So what's with calling old voters, old monkeys?
A most interesting story was reported just yesterday saying that old monkeys act as old people do. As both age the number of interactions decline with the oldsters being picky about who they interact with.
The younger you are the more likely you'll interact with anyone, the older not so. Seems old people and old monkeys are content in their own little secure world of immediate friends and family.
http://nhv.us/content/57429-monkeys-turn-selective-about-companions-when-they-grow-old
To an old 'monkey' watching TV alone, surrounded by all the bric-brac collected over the decades is fun. It's not sad, it's biological. For a young child the whole world is there's, live long enough it will be reduced down to the size of a hospice room.
Best Start Bricking up the Chunnel.
http://www.express.co.uk/news/world/683204/calais-jungle-brexit-dover-referendum
German Officals...Withold Name of Shooter.
http://www.nytimes.com/2016/06/25/world/europe/viernheim-germany-movie-gunman.html?_r=0
...they go out of their way saying he didn't have terrorist connections (that they know of), was 19 years old, born in German, but they haven't released his name. The shooting was on Thurs. and today is Sat. plenty of time to notify his relatives.
Now I'm not a conspiracy theorist, but I bet his first name is closer to Akmed than Hans.
http://www.nytimes.com/2016/06/25/world/europe/viernheim-germany-movie-gunman.html?_r=0
Interesting, However Numerology is Not Big For Me.
Migrant News Story on Vote Day.
http://www.thetimes.co.uk/_TP_/article/7-000-migrants-are-rescued-from-sea-in-just-two-days-jklh0gdr2
...landing in Italy I'd give them a 'German Made Easy' book and give them a one way ticket to Berlin.
This IS Different!
http://www.marketwatch.com/story/why-brexit-crisis-is-a-screaming-buy-for-stock-investors-2016-06-24
...stocks a screaming buy?
None of the other events challenged globalization making it fundamentally different than the other events highlighted in the article. Think of the other events as micro episodes with Brexit being a macro event.
Brexit--Tip of the Iceberg.
http://www.zerohedge.com/news/2016-06-24/greenspan-worst-period-i-recall-theres-nothing-it
...calling the world a mess Greenspan should have pointed his finger at the US for taking the world off of gold settlement for trade imbalances in 1971, but he didn't.
So how many years has the global fiat pot been on the stove with the lid bolted down? 2016 - 1971 = 45 years of pressure building up with the likelihood of it being released with a bang rather than a hiss at close to 100%.
All monetary policy has done over the decades is increase the size of the pot making the eventual explosion more powerful.
Problem is, according to Alan, monetary policy can't make the pot any bigger any longer.
Yep, he's 90 and things have never been so bad, being a chief architect in the early 1990's to get where we are.
If blame is to be put on anyone it should be put on LBJ and his Great Society/Vietnam war fiscal deficit funding for driving Nixon off gold.
Way to go Lyndon.
UK Young'uns Are All Pissed Off.
https://twitter.com/hashtag/WhatHaveWeDone?src=hash&ref_src=twsrc%5Etfw
...false teeth marks all over this one.
Turkey Holding EU Feet to Fire.
https://www.rt.com/news/348191-eu-referendum-turkey-visa/
...Turkey wants/demands visa free travel to EU. If Merkel gives in France will bolt in a heartbeat and it will all come crashing down.
If not and three million more culturally incompatible migrants march towards Europe the individual nations will have no recourse but to put up fences to block them with Germany being forced to accept them all!
This will of course cause the Germans to rise up against mother Merkel.
The European position is untenable.
Contango to Backwardation.
The VIX term structure on Thurs. was 1st mo. +5.70 with 7-4 mos. +7.25
then on Friday it reversed...
1st mo. -2.32 with 7-4 mos. +2.16
Decay for pos vol assets (short term) had been replaced with appreciation.