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.

Fed – Extended Period (by Ultra Trading)

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The Fed has clearly stated its policy regarding the Federal Funds rate with each monetary statement

"The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period."

Let's take a look at other rates which are less controllable by the Fed as witnessed by changes since August 2 when hints of QE began surfacing.


  • 1 Month: gained 1 bp (basis point)
  • 6 Month: gained 2 bp
  • 2 Year: gained 21 bp
  • 5 Year: gained 63 bp
  • 10 Year: gained 67 bp
  • 30 Year: gained 67 bp


So the shorter end of the curve the Fed has managed to keep rates low but as you move further out on the curve rates have clearly moved up in the face of a monetary policy intended to keep rates low.  If you remember when Bernanke gave his 60 Minutes special he clearly says at 6:45 in the video – "What we are doing is lowering interest rates…"

Clearly QE in the eyes of the Fed is not working and they know that.  They have shifted the bar of success to equity performance but don't lose site of the Fed's failure to achieve a low interest rate environment for an extended period.  They have in fact lost control of the yield curve beyond one year.


  • Recently Fitch issued a report that 30% of commercial real estate that needs to be rolled in 2011 do not meet their standards.  


  • Residential mortgage is negatively impacted by rising 10 year yield. 


Regardless of what Bernanke may say publicly about the success of QE they understand its failures and they understand the extreme negative impact rising interest rates will have on future growth, bank balance sheet risk and credit formation.

Listen to Bernanke in the video below discuss employment.  He's very concerned and this was only two months ago.  Either QE is going to occur for the 4-5 years he says it will take for unemployment to come down to acceptable levels or the Fed will be looking for a way to save face while exiting future QE.  If this move in rates continues, the bond market may very well set future monetary policy and NOT the Fed.


Submitted by Ultra Trading.  If you would like to read more, please visit - Ultra Trading

Picking Off the Sissies, Again

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NFTRH 'charter' subscriber and 'Gold This Morning' blog contributor, Jonathan relayed the beautiful title phrase to me in Q4 of 2008 as we both became bullish during Armageddon '08. NFTRH9 noted…

"Yes Gary, I spoke last night with one of the legendary street traders from the old days (pre 1990). He wants to leave Miami and work free at our shop because he has never seen a time when there is more money to be made the old fashioned way… picking off the sissies."

The best traders know when it is time to get opposite the herd. This is not easy to do because the act of being contrary by definition comes with much more negative reinforcement than anything else. Trend followers are awfully right for long stretches of time, until they are suddenly wrong, and go into hiding… or revision mode. Become known as a bull, bear, stock, precious metals or commodity guru, stake out your territory, and then blame the manipulators when the violent turn comes. This is a tried and true tradition in market analysis.

Being a successful contrary player is different, however. If I am doing my job correctly, I am pissing off bulls, bears, gold bugs, commodity gurus and deflationists at varying times, and as their respective favored trends mature. It is imperative not to join any of these teams.

Sure, I have been big picture bullish the gold sector for nearly a decade now, but as noted several times in the past, I would rather not have to be. If I were not bullish on gold, it would mean that I lived in a society and participated in an economy that was in the sweet spot of a secular cycle yet to come, like in 1980, as Paul Volcker got serious about regaining austere control through monetary policy aimed at regaining real confidence in the system.

Volcker did not just talk the talk; he walked the walk and took interest rates as high as they needed to go to show he was serious. It can be argued that he created a wellspring of goodwill that subsequent Fed officials have opened up as a trough for herds of pigs to drink, wallow in and ultimately, pollute.


In November of 2008, the 'sissies' theme was put forth in reference to getting bullish on many asset classes, markets and in my case at least, getting bearish on the Deflation argument, which the public had quickly gotten up to speed on, as evidenced by the Time cover that was also included in NFTRH9.

As noted last week, I cannot apologize for the bullish contrarian signals currently popping up in gold, nor the fundamental ones. Does NFTRH have a preordained right to be well, right? If it had that key, I would not be spending two thirds of my weekend writing and editing the newsletter.

But bear in mind that the writer claiming risk is sharply reduced in gold today is the same one who got certain gold boosters' pants in a bunch with some downside targets just weeks ago. There are times to be appropriately bullish, and times to be guarded. It is okay, and it is all part of a bull market. Cheering and bashing are just noise.

What I currently see in gold is a cocksure arrogance creeping in among the usual trend follower suspects that the monetary metal has made an important top. One might assume this is due to the gold bear not having been on board the secular run (the bull market has thrived on these people all the way up), or possibly due to his having been burned badly, compliments of the actions of Mr. Volcker, in 1980.

From 1980 on, gold was a four letter word to my parents after being 'put in' by a stockbroker at the very freaking top. Today, with a little help from their hard working boy, they are doing much better (with the modest funds they were able to bring themselves to allocate) where gold is concerned. And I do not intend to have them sitting there like bag holders when the bull market peaks, either.

As stated in NFTRH120, 'Nominal gold is bullish on a risk vs. reward basis; in fact, it is compellingly so.' This week we will again review many of the fundamental and technical reasons why, and also importantly, review gold's relation to other assets to see if its 'real' price is any closer to indicating whether the 'gold stocks above all others' stance remains on track [edit: after completing NFTRH121 on Jan. 30th, the gold stock investment (as opposed to trading) case has not improved, as explained later in the report]. This in turn, may help indicate coming events in the broad markets, commodities and economies as well.

Another QE Head Wind (by Ultra Trading)

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The US equity market may be experiencing low volatility but beyond that HFT driven "market" volatility is rising fast. There are a lot of moving parts right now, each of which on their own could cause a severe shock to an extremely fragile global economy.  It is important to stay focused on what is out there and the risks they present.  Maintaining a false sense of security regarding the future of QE is ignoring the real investment risks that are present today.  One does not know when nor which event will be the tipping point so patience is needed.  It's important though to stay focused and educated so when events surface as investors we are ready to react.

I want to focus on global food prices, primarily the recent price action in rice.  Below is an excerpt from a  2009 USAID Study 

"Approximately 1 billion people—or one sixth of the world’s population—subsist on less than $1 per day. Of this population, 162 million survive on less than $0.50 per day. At the household level, increasing food prices have the greatest effect on poor and food-insecure populations, who spend 50 to 60 percent or more of their income on food, according to the International Food Policy Research Institute (IFPRI). Overall, increased food prices particularly affect developing countries, and the poorest people within those countries, where populations spend a larger proportional share of income on basic food commodities."

Even within the US, food prices affect one in seven Americans.  That is because 15% of the US population does not have the income to pay for the most basic necessity of life and that is food. Rice is one of the largest staples of the global diet and its recent price action is signaling yet another threat.  

This heat map of rice consumption per capita shows Asia as the most at risk to rising rice prices


Rice prices in 2010 relative to the 2007-08 highs are relatively low but as the chart shows, price can accelerate very quickly. 



The chart below shows just how fast prices have begun to move since 2009.  In fact the prior resistance level has already been taken out and a massive melt up is not only possible but also probable.  We are in a yield chasing environment right now.  Those who missed the move up in sugar and cotton, etc will pile in to the rice trade and accelerate this move.  


 "It's really very simple Governor, when people are hungry they die…"  Bob Geldoff

 Submitted by Ultra Trading.  If you would like to read more, please visit m blog - Ultra Trading

Broken Metal

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I think there's only one genuinely technically broken market right now, and that is (allow me a moment to don my suit of armor…..…) precious metals. Below is the gold/silver sector chart. I seriously think that GLD, SLV, and GDX are all poised for meaningful drops. The equity indexes are all still annoyingly, agonizingly, irritatingly strong. But metals………they're bear-ready.