Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

The Real Pee Wee

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If you've ever heard US3's Cantaloop (and if you haven't, you'd better correct that by clicking here), you may have wondered – as I have – who made the introduction ("Ladies and gentlemen, as you know we have something special down here at Birdland this evening – a recording from Blue Note Records.….")

I always thought it was Ella Fitzgerald, but it turns out it was this really pissed-off black midget who was the M.C. for the Birdland Jazz Club. Check this out:

He had a reputation for being mean and demanding "tips" to the point of extortion. An explanation of this system is given by Bobby Hutcherson in an interview. He claims Marquette told him on his first day that he was not needed and that he should "pack your things and get on out of here." This did not occur as he had been asked to play, but Marquette still made Hutcherson's first night playing at the club difficult. Marquette intentionally announced his name wrong to embarrass Hutcherson and blew cigar smoke in his face to further the irritation. However once Marquette was paid his "tip" he announced Hutcherson's name correctly. This is said to have been a pattern for him and other musicians had similar stories of having to pay him to avoid public humiliation.

I mean……..he's a midget…..who runs a night club….abuses the talent…..and is a successful extortionist. How cool that can possibly be? Viscous has nothing on this guy. Here he is with Count Bassie – – Pee Wee is the 3' 9" guy on the left.


On a different note, this just in from Boston Wealth:

Slope weekly competition.. first prize.. $100 gift certificate to Morton's steakhouse (or Lowe's if you prefer) – email your estimate, screen name or real name.. as to where SPX (make your prediction out to two decimal places) will be on Friday (this coming Friday Nov. 19, 2010 at 4 p.m. close.. SPX cash not futures….competition closes Sunday evening at 5 p.m. EST..  Winner will be the one closest to close.. above or under…  Buddahboy will be the monitor of the results…  Email your predictions to 

OH No its POMO (by BKudla)

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There are a lot of questions out there regarding POMO, what it is, what is does, its effects, and most importantly to me, can I profit from it.  So I did some research from the FED's site, Safehaven and Cantor Fitzgerald and aggregated these thoughts and articles into a post.  It was an eye opener for me.

What is POMO (Permanent Open Market Operations)
(From the FED). "The purchase or sale of Treasury securities on an outright basis adds or drains reserves available in the banking system. Such transactions are arranged on a routine basis to offset other changes in the Federal Reserve’s balance sheet in conjunction with efforts to maintain conditions in the market for reserves consistent with the federal funds target rate set by the Federal Open Market Committee (FOMC). "

Open Market Operations

Open market operation refers to Fed’s purchases and sales of bonds issued by the US
treasury. These transactions are with banks, public, and firms. When the Fed buys bonds
in the bond markets it pays for the bond by creating new Bank deposits at the Fed. These
new Bank deposits at the Fed add to banks excess reserves, and can therefore form the basis of a multiple expansion of the money supply through new loan creation by banks.

What is QE?
(From Chris Mack "QE, or more simply known as money printing, is a dilution transaction similar to issuing more shares for a stock. The dilution has two primary affects: a decrease in the value of the initial shares and a redistribution of wealth from the original owners to the new owners.
The most significant difference between stock dilution and currency dilution i.e. QE is of course that publicly traded companies tend to use the funds raised through dilution to add value by investing those funds – whereas governments don't add value by QE."

What is the Purpose of QE?

In the case of QE2, $900 billion will be diluted to purchase US treasuries so the primary benefactor of the QE will be the U.S. federal government and the financial institutions selling that debt. However, capital flows can rarely be controlled and the newly created money will find its way into other markets and asset classes.
Interestingly, the $100 billion per month figure that has been mentioned as the target rate for QE is almost exactly what is needed to roll over maturing treasuries coming due – so it could be argued that the plan is to effectively finance the U.S. federal debt which would eventually lead to a complete monetization of the treasury market. Supporting this argument is the recent projection made by ZeroHedge that the Federal Reserve will own more treasuries than China by the end of November.

How Does QE2 Size Compare to Other Markets ( From Bob, This is important)

In an attempt to measure the above affects, we can compare the size of the QE plan to the size of several markets.

  Outstanding $900B as
Percent of Market
Diluted value of
$900B entering market
US GDP $14,500.00 6% $0.94
US Federal Debt $14,500.00 6% $0.94
M2 $8,750.00 10% $0.91
M1 $1,800.00 50% $0.67
Currency $900.00 100% $0.50
Treasuries $11,030.00 8% $0.92
Municipal $2,670.00 34% $0.75
MBS $8,860.00 10% $0.91
ABS $2,600.00 35% $0.74
Money Market $3,900.00 23% $0.81
Corp Bonds $6,720.00 13% $0.88
Silver $24.30 3703% $0.03
Gold $2,475.00 36% $0.73

If the QE funds went into the currency market, its value would fall in half. However, $900 billion is roughly 6 percent of U.S. federal debt. Inflation is defined by the growth in the money supply. If using M2, the QE plan would dilute the money supply by 10 percent. $900 billion represents 36% of the world's gold supply, so an equivalent move upward in price could be seen if the money finds its way into the gold market. QE is 37 times the size of the world's estimated silver supply so a flow of capital into the silver market could be explosive (see more here).

QE2 Projected to See Inflation Rise by 10-20%!

A dollar on November 1st is now worth 92 cents if measured in treasuries or 91 cents if measured with the money supply. It can be seen that inflation as measured by the growth in money supply is projected to increase by 10 to 20 percent on an annualized basis (see more here).


The result will be a double digit real negative interest rate and a carry trade opportunity to sell treasuries and other U.S. dollar secured paper at a cost of near 0 percent while accumulating real assets such as precious metals and other resources that cannot be diluted."

My thoughts.

The gold, silver, dollar markets are the most sensitive to the capital flows and where we can find the best bang for our speculation.

There is a story floating out there that Goldman Sachs has been accumulating Precious metals for a long time and at the same time you have JP Morgan and HSBC selling naked short.  I cannot help to wonder when Goldman sees the tipping point and force these guys to cover and bankrupt them.  They have been known to do this to their competitors.

The conclusion was the stunner for me.  The banks get to use my money to accumulate hard assets and stick me with the tax bill because it is being laundered through government instead of direct infusion to the private market. 

This simply reinforces in my mind, of my course of action in regards of owning hard assets and hard asset producers.  We may be digesting some sell the news in the markets after the QE announcement, but I intend to continue to scale in. If you are long the market, start paying very close attention to margin compression, as it will exceed end user sales growth, thus collapsing profits and cash flows.

Also an interesting read on the effect of QE from a different angle but the same conclusion. I know he is pitching something, but the article is extremely well written.


Leisa here:  Shout out to our Yazzer who is running in the Richmond Marathon today…

Slopers and Area 51

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The first thought I had this morning was this: what is it about lunatics that strikes a chord with Slopers?

I mean, we joke around at being tin-foil-hat-wearing types, but I don't think anyone seriously believes it to be true. However, there is a common element between us and the wack-a-loons out there, which is where I believe this resonates from.

The majority of the public operates under a couple of premises I believe to be false:

(a) things are pretty much as they appear;

(b) in the end, everything is going to work out OK, just like in the movies

The loonies believe these to be false, of course, because there's a conspiracy around every corner and an alien behind every cloud. Even this week's briefly-mysterious contrail in Los Angeles was instantly deemed to be "a nuclear ICBM heading to Iran." Errr, no. It was an airplane. It just took a little figuring out to deduce this.

Slopers, in my opinion, are more like to believe:

(a) things aren't always what they appear, but to find the truth takes a lot of time, research, examination, and thought;

(b) individuals will strive toward positive outcomes, but sometimes their efforts will fall short, or circumstances will simply force an undesirable outcome upon them

I'm only partway through the already-terrific Griftopia book that just came out, and one of the earliest statements the author makes is that understanding our modern, complex world is hard. It takes the kind of time, effort, and examination I just mentioned. And the cold fact of the matter is that 90%+ of the public isn't interested, motivated, or intelligent enough to make that kind of effort.

I'm smarter than the average bear, and I've spent years studying the financial markets, and even I find it very, very difficult to really grasp everything that gets discussed week in and week out here on the blog. If it's hard for me, well, hell, it's going to be hard on a lot of others, too!

My point is that there is an intersection between ourselves and the loonies – – – a big dose of skepticism – – – but hopefully it ends there.


On a final note, I'm giving a talk in San Francisco this afternoon, so I'm out for the rest of the day. Guest editors are encouraged/welcome to submit articles for posting later this weekend. I know a lot of old timers (Fujisan, Nathaniel Goodwin, etc.) seem to have disappeared, although I'm in touch with them. So those that are still out there – get crackin'!