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.

Inviting the Vampire

By -

Nosferatu's Shadow

Dear SOH, I love October and Halloween, don't you?  😉

This article in no way pretends to be real, actionable analysis like that which appears in Notes From the Rabbit Hole (NFTRH) each week.  Rather, it is just a metaphorical riff on a big picture macro economic theme that is currently in play.

Setting the clock back to January of 2011, we find long term Treasury bond yields hitting a critical high along the 'continuum' and finally beginning to signal an end to the inflation hysteria – born of the previous Fed sponsored QE campaign – as illustrated on the blog in May.  At that time, it was noted that the Wizard (metaphor temporarily switched to 'Vampire' for today's article) was powerless to work his magic against an oncoming economic contraction in the face of inflamed inflation expectations (long term yields at a 'do or die' breakout point parameter) and a then rising 'austerity' movement in the US.

Well, you see in the picture above (source info) that times are much different, a mere 6 months later.  Indeed, austerity has been cast to the scrap heap as the usual macro-managers come out of the woodwork, one after another, and invite the Vampire back into our homes.  You know the legend is that the Vampire must be invited in, don't you?  There is nothing like decelerating global macro-economic fundamentals and caving asset markets when it comes to inviting the Vampire to do his work.

Why are we using the Vampire as the metaphor for the US Fed (and I might add, its counterparts the developed world over)?  Because they are now being called upon… invited to provide more policy – in the name of asset price inflation – that is ultimately destructive to would-be normal, healthy economies that thrive on productivity and investment of capital toward these things of productivity and value.

In short, more inflationary policy creates more macro debt burden, provides potential asset price inflation and a growing overhang from which many economies will fail to recover (insert here the macro subplot in Greece and the PIIGS in general, which are just a tip of an awfully big iceberg) as inflationary policy sucks the life out of a real economy over time and cycles.

So we have come full cycle.  The updated chart of the 'continuum' is in a picture, an invitation.  The most recent red arrow indicated a time when the Vampire was reviled and politically scorned.

The 'continuum' AKA secular trend in 30 yr yields

Now we have a different atmosphere – expected by this writer and indicated by the chart above so many months ago – with deflation and systemic collapse at the forefront of the collective financial and economic mindset.  Austerity?  Please, give me a break.  The Vampire has already received his invitation, but having been scorned so soundly earlier this year, he sits back and lets the call become louder by the week.

The balance of current NFTRH analysis holds that he may await a final capitulation to be sure that the invitation is near unanimous.  

http://www.biiwii.blogspot.com
http://www.biiwii.com

Fidelity Confirms, The Fed Is Done (by Goatmug)

By -

MAINSTREAM GIANT GETS PESSIMISTIC

Here is an article from the Telegraph this morning that highlights comments from mainstream investment giant Fidelity who just be came my new favorite fund company because they actually have someone on staff that will speak the truth to the public.  I can only imagine what is really being said at all of these investment shops, but I'm sure they are now smart enough not to state their true feelings about market environments, stocks, and other things in email like our old friend Henry Blodgett.

Telegraph Article by Dominic Rossi of Fidelity (CIO of European Equities at Fidelity) -

"Markets have reacted badly to the Fed's policy statement and European sovereign debt issues continue to rumble on.

At times like these, it can be difficult for investors to know what to do.

We should expect news over the next few weeks to deteriorate further. As we go into the earnings season shortly, there will be more missed forecasts and guidance from companies will be uncertain and gloomy. For investors, valuations will come in to play at some stage. Yields will be well covered because balance sheets are strong.

It is clear now that the Fed cannot bail equity markets out any more and any interest rate cuts by the ECB may not have much of an impact on markets. The solution on the fiscal front will be either Greek default or Germany accepting that it has to fund debt restructuring and so reduce the quantity of debt in Greece. This will be a prototype for other European countries.

At times like these, investors should remember the strong get stronger. We will see M&A pick up in Europe. There is little capital around and so the threat for companies from new competition is disappearing.

Markets will have to consolidate so that oligopolies or duopolies are created and the remaining companies have strong cash flow and don’t have to rely on the debt markets. This is a carbon copy of what happened in emerging markets 15 years ago. Equity will shrink as well-financed companies grow by acquiring others and buy back their own equity. In time, this will stabilise equities. "

No argument here.  We seem to have a little stabilization today with a few rumors that the G20 would ensure stability and that everything would be just fine.  Hopefully we get some more confidence here and we move up to my targets that I outlined yesterday in CLOSED FOREVER. 

Let's go back to my chart on GLD.  If you desire to look back at the August 31st post where I suggested that $162.50 on GLD would be the target for a retest. http://goatmug.blogspot.com/2011/08/charts-to-watch.html.  I've updated that same chart with the recent day's action and you'll see that we are right there.  Personally, I am willing to take a shot here and go long, but those with bearish leanings might press their bets and hold out for a possible $153 to either cover or begin buying. 

I've been an advocate of physical gold for some time and one of my SOH mentors, Market Sniper, has conditioned me to know that drops in gold are opportunities for purchases as the final result of this fiat scheme will highly benefit the shiny stuff.  I've called my gold guy and he sounds very depressed and I am adding a few ounces today.  Those physical positions get bought and never see the light of day, so as much as I trade around GLD and SLV know that I really have two different perspectives regarding timing and purchases, plus selling physical gold and silver is a total hassle so it tends to stay in the portfolio forever.

 

(Wow!  That TA stuff works!)

 As of 9:45 CST gold is getting smacked around and SLV is getting smashed.  I am buying GLD here with a short term target of $170.  My stop will be $160.

Be Careful cause the weekend will be full of emergency meetings for the financial heavy hitters as they attempt to save the world (again.).

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog – Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/

The Permanent Waiting Game

By -

Well, it's unusual for me to wait so long to put a post together, but I've been digesting and processing the antics from yesterday. I have a few general thoughts:

+ The bear market that should be in full-force, cleansing the system, is being held hostage;

+ As long as it is held hostage, rises will be grinding and excruciating, and drops will be extraordinarily fast and largely unpredictable (in other words, if you aren't in place with your positions, you're not going to profit much);

+ The market seems transfixed that Autumn 2011 will simply be a sequel of Autumn 2010, thanks to Bernanke. That is, the kick-off to a substantial, sustained rally.

(more…)

Always Fighting Our Last Battle

By -

About a year ago was the single worst trading day of my entire life.

The day was September 1, 2010. I came into the day 135% committed and entirely short. In other words, I had used all my cash and an additional 35% in margin buying power on a huge quantity of short positions. The market pushed higher all day. I was deer-stuck-in-headlights shocked, and I bear the mental scars even now from both that day and the months of QE2-inspired upswing that followed.

I thus view Jackson Hole 2011 with no small amount of discomfort. What really killed me last year was the notion that the head and shoulders pattern (that everyone – I mean, even the likes of Cramer – was talking about) was going to precede a big drop in the market. On the contrary, things flipped higher and didn't look back.

The easy assumption is that Bernanke will QE3-ize the environment and, just like last year, the market will shoot higher. I was reviewing the posts from last year, and I was surprised to recall that the market actually fell last time after Bernanke's speech. In other words, the big push higher didn't take place until several days afterward. So the idea that we're "in the clear" a few moments after the text of the speech are released Friday morning is simply untrue.

Looking at the post from the end of that awful day, the amazing thing is that the market wasn't even up that much. The killer was the level of commitment. The devastation I suffered was so horrendous that, in a later post, I actually wondered out loud if I was dead wrong. Just take a look at this quote:

"what if I'm wrong about the economy? What if all this government intervention, in the end, turns out to be a brilliant stroke, and it really does set the economy on the road to a robust economy complete with healthy, growing earnings, growing employment, and worldwide prosperity?"

Well, it seems pretty clear I wasn't wrong, but it didn't matter a whole lot. Jackson Hole commenced a nine-month puke-fest of rising prices which just about killed me. The market then spent nearly the next three months farting around and whip-sawing everyone, and only during a few weeks that followed did reality reveal its beautiful self again.

I guess what's disappointing to me is to realize (through research, since I had forgotten) that Friday morning doesn't mark some kind of milestone for us. It won't be like the unemployment report or the FOMC announcement whereby the market will figure out its direction with a couple of hours of gyrations. No, if last year is any guide, it could be days before the market gets its bearings.

So the reaction Friday will frankly not really help any of us. If it lurches down – – well, it lurched down in 2010, and the bears got butt-hurt for months on end afterward. If it lurches up, well, God knows what the means, although a push to 1250, I continue to maintain, might be the greatest gift from God to the bears in history.

So I guess in reviewing the various posts leading up the That Awful Day, it has actually imbued me with some additional caution. I am, as I type this, 47% committed, and purely short, but I don't think I'll get aggressive until at least the middle of next week.

The charts that I'm closely following fall into two broad camps – – one smallish camp are those that seem appropriate to short right now (and, thus, I am short them); another large camp are stocks which have a long way to run before they are safe to short. That gives me a muddy picture, since it either means the market is going to start falling again next week, and the beaten-down stocks are simply going to get uber-beat-down; or the market is going to rise, which means the shorts I have now are totally premature.

The two sectors that I am seeing the most potential for weakness right now are Real Estate and Energy. The sector that seems to have to most room to run higher is Financials.

I will say this, however: no matter what happens with Dr. Bernanke, my faith in a ferocious bear market in the coming months is stronger than it has ever been. I think it is simply impossible for 2012 to pass us by without a devastating worldwide economic calamity. The only thing I don't know is whether it is right in front of us or if we have to suffer a QE3 rise in order to partake. This uncertainty compels me to remain cautious for now.

Thus ends my ramble. Thanks for your patience with me.

In Accordance with My Convictions

By -

I can practically feel the market trying to shake me out of my shorts (and, let's face it, that's the only entity that would ever consider doing such a thing), but it's not happening. I feel about my current positions the way our beloved Kooks feel about precious metals. That is…….I'm staying put, rock solid.

This is not to say that I've removed all my stops and am shutting off my computers. But, in spite of the severity of the sell-off during recent weeks, the charts I'm in are simply too marvelous to close simply because I am afraid of the Chairman this Friday. There isn't a living organism on the planet that doesn't know about Ben's speech Friday morning. Do you think the markets will rally on the "surprise" of this news? I don't. Leading up to it, yeah, maybe – which is what we're getting now.

I intend, by the way, to speak respectfully of the Chairman of the Federal Reserve. I am counting on him at some point to really goose the markets into uber-shortable territory. I am 55% committed now, but I want to be 200% committed, and I can't do it without Dr. Bernanke's help. So, until that time, I shall treat him with the kind of decorum – even reverence – to which any sycophantic object is entitled.

The chart below is an example of the kind of thing I'm short. Yes, a huge market rally might fracture or even break the technical legitimacy of charts like this, but until such time as a rally, should it ever take place, transpires, it is illogical for me to run over going into 100% cash based on a phantom menace. I will handle my positions, one by one, on their own merits.

Chairman Bernanke, best of luck to you this Friday. I'm with ya. Shalom.

0822-pph