Daily Archives: July 5, 2010

Weekly Sector Report | 07/02/10 (by Leisa)

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Look familiar?  For the second week in a row, all of the equity sectors were red.  The broad market was down 5.59% an as you can see from the graph above, there was quite a bit of variability.  Of the 148 sub-sectors there were only 3 positive sectors–last week there were 5.  Ugly.
As is usual, I prepared for you a pdf report that you can find here.
Let's take a very broad view. 

Here's the Total Stock Market Index.

I included the time period from 03/09 through current because I want you to see the concentration of volume by price.  As you can see, we are at a very critical juncture. 

Keep your wits and your discipline about you.

I wish you good trading this shortened week.

This Rusted Garden Gate Can Barely Even Stand

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I believe the following:

+ 2009's equity rise was based on fraud and deception; the recent weakness, and the choppy market down we're going to see for years to come, will be based on ever-emerging reality;

+ The ability of the Obama administration to defraud and deceive still exists, but that power is waning, and it will eventually wither away into outright impotency (which, given who the President is, is bound to be discomfiting for one and all);

+ The OTIS ("Oh This Is Silly") disbelief the bears suffered during 2009 is now being experienced by the bulls. Even the bears (me included) are having trouble believing how powerless the bulls appear to get off the mat and execute some kind of meaningful rally.

+ The likelihood of the Dow 30 getting above 10,750 again anytime before the end of the next six years is precisely equal to the likelihood of having a mature, medically-helpful discussion on /b/ about anal warts.

In the little bit of trading the /ES got to enjoy late Sunday and early Monday, a brief push of 4.25 points higher was smacked down into – – yet again – – a loss.

0705-es 

 

The Euro isn't helping. The strongest rally I think the Euro has in store would take it to ~1.3, and no higher. It's almost a can't lose situation for the bears. If we continue weak, our shorts get more valuable. If some stupid-ass new program comes out from some government, it'll just be another opportunity to short at better prices.

0705-eur

This is not to suggest I see nothing but lower prices ahead. Indeed, on Friday, I was buying up what I considered to be battered stocks with appealing risk/reward ratios. One glancing at my holdings might wonder if I have a fixation on tickers beginning with A and B, but I simply ran out of time. Here they are:

0705-longs

I am nowhere near done looking at stocks today, but happily it is a market holiday and I've got extra time. My current portfolio is 148 shorts (somewhat trimmed on Friday), 18 longs, and 1 ultra-long (that would be TBT, since I want to prove that it is possible, sometime in human history, to make money on this beast).

I welcome any market direction at this point. I think retail and energy are the areas most prone to a bounce, and should they have one, I will have a very large number of new shorts I will be waiting to add.

As I mentioned earlier, there is basically no economic news of note this week, so it will be quiet on that front. But the following week is chock-full of economic reports and earnings season (including a little company called Google) blows into full swing.

And that's when the real fireworks should begin.

Luscious and Thurston EXPOSED | Celebrating my Collaboration with Biff (by Leisa)

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Tea and sea biscuit copy

I have engaged in a bit of duplicity that I'm compelled to expose. I’m exposing it
because there is a lesson in it, and one that I feel will benefit Slopers.  This shameless duplicity will not continue, largely because I have lost my my co-conspirator
and writing partner, Biff.  Biff has
elected to take a healthful break from on-line life. While I fully embrace
that decision, it is one that brings to an end our collaborative writing adventure.  He is also a great friend to me and many Slopers, and I miss him very much.  I
know that many of you do too—and no one was able to capture the great repartee
(the good, bad and ugly) among Slopers better than Biff.   My little post today is about the spirit and benefit of collaboration and to celebrate my writing adventure and friendship with Bifferific, which I believe models true collaboration.  I'm also hoping that you will be inspired to cultivate your own collaborations with others.

Genesis of the idea.  I frequently send Viscous and Biff some of my
chart ideas. Both were generous in responding back with chart lines of their
own.  Sometime late last year when Tim made
a call for some writing help, a worm turned in my brain. The final turn was the
idea of formalizing that informal collaboration process and constructing a post
for Slopers that was both fun and informative.  I asked Biff  if he would be interested in writing with me.  We wanted to create a piece that was both fun
and instructive.   (Now choosing Biff v. Viscous
is not favoritism…Viscous and I are collaborating on a book called, The Wit
and Wisdom of Lucy and Viscous
.  We’ve
not agreed yet on whose name goes first, so that project may be an incomplete
one).

After some discussion, we thought that presenting counterpoints from two very different approaches that we each employed to the same chart would
highlight how the same information could be viewed through very differently
lenses/perspectives.  We tried to find
charts of interest and create a theme around them. To provide these two
perspectives, we elected to create two fictitious personas—Luscious and
Thurston Drake because we wanted that posting to be separate from our own
contributions
.  Luscious
happened to Lucy’s (my avatar) nickname.

Because we created two characters that were so
different from our own personalities, we got off to a bit of a rough
start.  Sharp-eyed followers of Tim’s
comments will note that his lack of subtlety outed me from the get-go, and then
again post Las Vegas! The avatars came from a print advertisement for the Dubai
Racing Club that was sumptuous—one of the prettiest print ads I had seen.  I had managed to capture it and post it on my
blog in December 2007—and I was glad to be able to recall it (vague reference
to Find Your Inner Blogger—and ease of finding ‘stuff’ you wrote!).  We are both big fans of Nathaniel G’s
sharp-witted posts, so we enjoyed creating some content with references to NG’s
great love of Fieros.  Thank you Nathaniel for playing along!

In
writing with Biff, I realized that while my ideas were good, his beautiful
charting, and concrete and clear entries and exits clarified my own fuzzy thinking–brought the 50,000 foot idea down to the runway without crashing. I also learned the benefit of breaking down my weekly/daily
(which I always used to find larger, compelling patterns) to 60/30 minute charts
to find more attractive entries—a discipline that I have integrated with very
good results.  And, because we were
writing for a presentation to a larger audience whom we respected, we exercised great rigor.  I know that this rigor informed my thinking and improved my techniques and execution.

I get this benefit, too, in having conversations with Viscous as we objectively discuss some of our less stellar trades and what we might have done differently. Or, how we stayed in good trades though our fingers were itchy and our palms sweaty. I have an enjoyable correspondence with Jiny with whom we share trade ideas or ask "What do you think?" questions.  It is not 'what' we think so much but 'why' we think it.  Putting that into concrete terms to another is forced discipline.

The beauty of what we share here in the Slope community,
indeed what Tim and all other committed bloggers share each time they write, is
that they are providing a point of view on which others can collaborate.  The generous sharing of other ideas and
charts, which Jack D is committing to header posts and is a rich presentation
of terrific  ideas, represents the best of collaboration. Nothing is more instructive
than having another look at your chart and present you with a different opinion
about the outcome.  That opinion need not
dissuade you from your own opinion, but it can inform you of some risk of an
alternate view that you may not have considered.

My hope is that you found Luscious and Thurston's posts informative and
entertaining.  Biff and I sure did
appreciate sharing them with you.  I also hope that this post inspires other collaborations. 

I would also like to remind Slopers of SlopeFest East on September 18, 2010 in Myrtle Beach.  You can read about it here.

The World Has Been Pulled Over Our Eyes (by Springheel Jack)

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……. to blind us to the truth. 



I was looking at some interesting charts over the weekend and one of the most interesting was from chart of the day comparing job losses in the recession and recent 'recovery' to previous recessions and recoveries in the US. Here it is:



I have a free email subscription to chart of the day and in my opinion it is well worth signing up for. Here's the link to the full post with this chart: 

How could it be that when compared to previous recessions and recoveries this 'recovery' is failing to produce the jobs that we would expect from past experience? The obvious answer is that the figures for GDP, inflation and unemployment that are issued nowadays aren't actually directly comparable to these previous examples, as the methods for calculating them have been changed so profoundly in the last three decades.  



Shadowstats have some excellent charts calculating these figures on the basis that they used to be calculated, and they make grim reading. Here's the link to the alternate data page at shadowstats. 



Here's the shadowstats take on the unemployment rate with the top line including the long term discouraged workers that were edited out of the figures in 1984:

Chart of U.S. Unemployment



Here's the shadowstats take on the inflation rate with the top line using the method used to calculate CPI in 1980:

Chart of U.S. Consumer Inflation (CPI)



Here's the shadowstats take on the inflation rate with the top line using the method used to calculate CPI before Clinton's election:

Chart of U.S. Consumer Inflation (CPI)



Finally here's the shadowstats take on GDP growth once all the methodological 'improvements' made over the last thirty years have been stripped out:

Chart of Growth in U.S.Gross Domestic Product (GDP)



Looking at the shadowstats charts the reason why jobs have failed to bounce back as they have in previous recoveries is simply because the reality is that on the same basis that those previous GDP figures were calculated, we have not yet started a recovery.  



A powerful and pernicious idea took hold in the last two decades particularly, and it was that what was really important was not so much what was happening, but rather people's perception of what was happening. Spin became a central tool of government policy and inconvenient figures were massaged until they showed what policymakers wanted them to show.  



The problem with that is that policy based on fantasy is unlikely to deliver much that is useful, and the best that can be managed is that people can be fooled into thinking that a high inflation and low growth economy that is going nowhere is an achievement rather than an escalating problem.  



On the government's own unemployment figures, this recovery and the last one both look bogus, and they lend considerable weight to the shadowstats alternatives.  



interzone posted a couple of links at slope that shed some light on the thinking of mainstream economists nowadays, with a comical attack by a Fed economist Kartik Athreya attacking economic bloggers lampooned here at Bruce Krasting's blog, and demolished by Ambrose Evans-Pritchard at the Daily Telegraph in the UK.  



To a certain extent Kartik Athreya has a valid point. To the relatively untrained eye, it looks obvious that the path to sustainable prosperity has never been, and could not ever be, to borrow a lot of money that you cannot afford to repay, in order to buy goods and services that you do not need.  


Only after years of training in current orthodox economic thinking might it appear otherwise.  


There are no examples in history that I am aware of that would suggest that this strategy might work, and the largest and most obvious recent example where this has been done on a huge scale, in Japan, suggests just the opposite. 


It is my belief that economists in twenty years will look back and wonder what the many economists like Kartik Athreya and Ben Bernanke were smoking to make them think that blowing up a series of asset bubbles with an orgy of debt was a good idea.  


They seem likely to join the many other groups of trained experts historically who defended the orthodoxy of the day past all reason, only to see their ideas later ridiculed and consigned to the dustbin of history.