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.

Turbo Tim – Keep your Eye on those Shells

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Further to my Monday comment on Steve Liesman, Turbo Tim Geithner's interview with Liesman this morning made me shake my head as well.  In essence Turbo Tim suggested that the President's plan to reduce the deficit would protect the middle class and social security while reducing over time the fiscal deficits.

I'm a simple man (no jokes please), but to me the government doesn't create anything.  It in essence takes resources from some parts of society and redistributes them (less the cost of running the various programs) to other members of society.

The unasked question (thanks to Liesman) if the deficit is going to be reduced and heaven forbid, the national debt paid down, who is going to pay for it?  Tim says not the middle class or seniors …. maybe one of the talking heads at CNBC might ask that simple question.

Cheers … in my cave with my loaded gun and cans of beans.

 

Steve Liesman …. Not Just a Pretty Face

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I have CNBC on my tv in my office from where I trade everyday … I tend to 1/2 listen to what the talking heads say except when they break some news.  This morning I was again reminded of why I do this … Steve Liesman is an economics reporter not an economist.  He made that point very clear this morning when the talking heads were debating the merits of the S&P warning of the US treasury being put on a downgrade watch.

Liesman who is in the back pocket of the US Fed and their virtual talking puppet for running ideas up the proverbial flagpost stated (I am paraphrasing) … the US Treasury issues the debt and also prints the US currency, so there will never be a time when they can't repay their debt.  In essence, Steve is arguing that the US Treasury just has to turn on the printing press to pay their bills.

Is Steve really that stupid?  Of course you can print all the money you want Steve …. just don't expect the rest of the World to accept it when you try to go and pay for anything you need to import.

Keeping it simple Steve, since I live in Canada, I would suggest that Canadian Companies that export 200 million barrels of oil to the US every year be paid in Canadian $ not US $.  Ten years ago today the Cdn/US fx rate was $1.56 Cdn for every $1 US …. today it is $0.964 Cdn for every $1 US.

Keep your printing press working Steve, it cost you 40% more to buy that oil from us today not taking into account the rise in energy prices.  Probably even the Russian Lada auto you previously drove in your native USSR where you cut your economist reporter''s teeth probably costs more today in US$.  I forgot …. you drive a 700 series BMW …. oh wait that was made in Germany.  Face it Steve you're fucked.

Keep whistling past the grave yard Congress …. $14 trillion at a weighted cost of capital of 6% creates $840 Billion in annual interest costs.  That is $2710 per person in the US (based on 310 million).  You can reduce this amount by the % of government revenue that individuals pay in personal income taxes directly but then you also have to reduce it by the amount of individuals that pay no taxes.  All in all, the fat lady is getting warmed up even if Liesman and his Fed buddies don't want us to believe it.

 

Liesman 

A Low VIX and Market Tops (by PikerTrader)

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On Friday the VIX aka the Volatility Index closed at its lowest level since 2007, closing at $15.32.  Support for the VIX has been around $16.90-$15.60, since 2008 before the market tanked.  The most recent line in the sand is at $15.60, which was broken on Friday.  With the VIX measuring fear and the volatility in the market, this extremely low number in theory represents a complete lack of fear and complacency in the market, meaing very bullish sentiment.

VIX_3_year_4_17

Just looking at this VIX chart, one can see when VIX hit these levels it quickly bounced the next few days. Moving up to the 21 day ema.  The longest time it spent at this level was in late 2010 early 2011.

 Here is a look at SPX with the VIX.  The last time VIX was near these levels, the market topped in May of 2010, right before Waddle & Redd killed the market with their order of sell 10 E-minis.  In addition it marked the December 2010-February 2011 short-term top.  But more importantly in early 2008 the VIX was near these levels, it was trading around the high $16's and this marked the 2008 top. 

  VIX_SPX_4_17

Looking at VIX, when it has dropped below support at $15.60 here are the changes in the market over the next 1 day, 5 days, 30 days and 60 days:

Screen shot 2011-04-17 at 8.05.04 PM

The biggest decline came just a year ago, the VIX broke below the $15.60 level and the market tanked for the next 2 months.  But looking at the chart we can anticpate a market that does not move anywhere for the next 1-5 day. But after that it will chose a direction, the biggest moves have been moves down. This table does not include, the drop from 2008, since the VIX never broke the $15.60 level.

Now a caveat to VIX being this low is that if it continues lower, it is possible there could be another bull leg. Notice when VIX broke the $15.60 in 2003, the market climbed and climbed.

VIX_SPX_4_17_weekly

To sum up, we have a VIX at a very low level and in the most recent past this has marked market tops.  The most significant market top was the 2008 high.  But VIXs continues lower it is possible to see a new leg up. But the edge seems to be pointing towards a move down.

For more post like this check out PikerTrader.com