Monday, October 20, 2014

ERIC SPROTT BATS ONE RIGHT OUT OF THE PARK: you won't believe what he said. No really you won't.

I mean it. You won't believe what Sprott just said.

Seriously, pour yourself several stiff drinks.

In fact, tell you what: I'll wait here while you dash out to the LCBO and fill up your liquor cabinet. Look for the cheapest, most powerful axle grease remover you can find.

Don't bother being posh, don't bother worrying about what it's going to do to your brain. A 24-litre keg of cheap Uzbekistani red wine laced with wood alcohol and mercury is perfectly okay, if you can find it.

Click through when you're done, but be warned this is NSFW even for me:

Cam Hui gives me some useful data: SPXU

Well, Cam Hui is long SPXU.

"What's SPXU I wonder?" asks the ever-curious me. See, that's how I preserve my braincells - constant curiosity and learning.

Here's SPXU:

OMG it's an ultrashort SPX. He's ultrashort the S&P. Great way to work that timing model, dude! Use ultras for that extra kick! Or something!

Hey, that's one heck of a surge in volume these past few weeks, no?

It's almost as if someone thought that shorting the S&P is a no-brainer, no?

Man, look at all those people who were buying at SPXU>$53 on Wednesday and Thursday. They must feel really clever right now.

Here's the weekly:

With the caveat that the volume shown here isn't price-based but share-based, that's still close to a high in volume.

Now remind me... is the market supposed to reward the largest number of participants?

Vix term structure is unstupidating today

Vix term structure:

There, that's nice. Nov-Oct was -0.15 earlier today, now it's back to positive. Now we just need to flatten Dec and we'll be back to an unstupidated term structure.

Tell your buddy Cam Hui that he missed the bottom. What does his system say he should do now? Stay in cash?

Thus the problem with trying to time bottoms and tops. What do you do if you're wrong?

Backtesting doesn't work because backtesting doesn't include psychology.

Is the barfage done in high yield?

Looks like the market feels confident that Pimco is done puking high yield into a bidless book.

That's good I guess.

Fun things to do with small children

Here's a fun thing to do with children.

Find one who thinks Spiderman is really cool. Tell them he got his superpowers by eating a spider, and tell the kid if he eats a spider he'll get cool superpowers too.

Stuff to read

Market is boring me to tears so here's some news:

Calculated Risk - Fannie & Freddie will boost mortgage lending. That has been a big problem through the recovery, and this is positive macro news.

Reuters - US corporate cash holdings way over a trillion dollars. Yes, therefore we should puke stocks!

BI - these countries are screwed if oil keeps falling. Ignore the ignorant crap about what Saudi Arabia does and doesn't want, okay? The real story ran over a year ago. The Saudi royal family is worth a collective $1 trillion, and their mortal enemies are the Shiites of Iran. That's why Saudi Arabia doesn't care about falling oil prices: they'll survive, but Iran won't.

der Spargel - German intelligence determines Russian separatists downed MH-17. Um... I guess Fritz doesn't have a Vkontakte account? Because the Russky separatists admitted they shot down the plane right after it happened. Good work, Fritz! Now you can go back to selling arms to hostile countries.

Vix at do-or-die level, with extensive footnoting


You'll see I changed my Bollinger period to 14 for this chart. That's because 14 gives me a Bollinger mean that seems* to govern the $VIX uptrend.

Cuz if you look closely, the close on $VIX pullbacks ends at the Bollinger(14) mean on three separate occasions.

If the $VIX pop is over, $VIX needs to close at less than 19.6. Prefarably a fair bit less.

I'm kind of worried right now because index ETF volume seems to really have dried up. Anyone who wants to sell into this can really bitch-slap the market. Then again it's not like I can see the book from minute to minute or anything.

Also you gotta wonder about the Pimco selling high-yield in odd-numbered weeks thing that I mentioned in the previous post.

We'll see. QQQ is a hair's breadth away from Friday's high of $93.85 right now. If it pops above, things will look better to me. Welp... just popped above as I typed that. Woops... just popped back down as I wrote that.

* - it's not magic. But it seems** to work, sometimes, until it doesn't.

** - There's actually a rational mathematical reason to watch these things. The more volatile your market, the shorter-period the governing EMA will be - that's a mathematical truism. So when your market in something cools down, you'll see it being governed by longer and longer period EMAs until it dissolves into a random walk waiting for the next external torque to set off a new move. Or so it seems.***

*** - no really, all I'm saying is that if $VIX doesn't drop below the mean, it'll go back above the mean. That seems* to be a pretty ironclad prediction, no? And going back above the mean means $VIX going up, which you don't want if you're short $VIX. So really all I'm doing is elementary momo, not TA.

Did Pimco become the market for high yield?

Humble etc shorten your blog name you git - not the bottom yet.

He thinks it's not the bottom, but he conflates the Euro Collapse Crisis of 2011 with this year's meaningless bout of lemmingness so I don't have a lot of respect for his opinion.

Frankly if this thing were like that thing then we'd be reading about the imminent collapse of something or other, and I've even been checking in at BI and Zerohedge and I haven't found anything written about an imminently collapsing thing yet.

But at least he gave us an interesting quote from Dealbook:
When it comes to high-risk bonds, the asset management giant Pimco has pretty much cornered the global market.

Be it bonds issued by the automotive financier Ally Financial or the student loan financier SLM in the United States, or government bonds in Spain and Italy, Pimco holds a commanding position in these high-yielding securities.

But as Pimco’s portfolio managers double down on their bet that high-risk bonds will thrive in a world of low interest rates, a growing number of global regulators are warning that the positions being taken on by the big asset management firms pose a broad danger to the financial system.

These concerns were amplified this week as stock markets gyrated, the yields of high-risk corporate and European bonds spiked upward and, crucially, trading volumes evaporated.

Regulators and bank executives have cautioned that an accumulation of hard-to-trade, risky bonds by a small group of fund companies could turn a bond market hiccup into a broader rout, in light of how illiquid many of these securities have become.
Stupidest thing in the world that you could ever do is become the market in anything.

Cos then when your psychopathic boss quits and you lose a few billion dollars worth of investors in the process, your selling ends up looking like this:

Doesn't it?

There's no reason for HYG to seesaw down one week, up the next, down the next and up the next, other than that some idiot has become the market and is desperate to balance their books.

I guess, if Pimco's not sold everything off yet, we'll get another week of weakness this week.

And then that will bleed through to equities because reasons.

Not that there's any reason to even sell high-yield. Because you're supposed to own it for the coupon, not because you're a smartass day-trader. The swings in even high-yield are such that the only way a company like Pimco will make money is by clipping the coupon and reinvesting.

Active investment managers seem to be morons: a chart

See It Market - NAAIM exposure index moves to say what now? God, look at this chart:

Are you serious? You guys spent the past year complaining about the advance leaving you behind, and how you wanted a market drop to buy the dips.

But now that the market really has dipped, you've sold everything?

When you try to win new clients, are you guys lying and telling them that you'll do better than if the client simply flushes all their money down the toilet?

One reason not to worry about deflation

WSJ - 5 reasons to worry about deflation. It's become annoying how everyone is fixated on this article, to the point that it's monopolizing the discussion, so let me respond with this:

1 Reason Not to Worry About Deflation

1. It's not happening in the USA. It's happening in Europe, and even a pinko sociamalist like me admits that Europe's economy is and always has been a clusterfuck. So the fact that Europe's economy is going down the drain shouldn't be news to anyone: it's just reaffirmation of the status quo.

Thank you. Please place my Nobel Prize in Economics over there beside the big stack of furry porn.

Sunday, October 19, 2014

Sunday evening news

Some news:

New Deal Demoncrat - the US is doing just fine. Weekly indicators are fine. So let's puke the S&P 500 some more!

Reformed Borker (Bork Bork Bork!) - here come the best 6 months of the year for investing. One reason the market went down was everyone was reminded that the market goes down in October, and it was no October. So now let's remind everyone that October always closes positive, even despite its crashes, and that everyone likes to be fully invested from November to May, so we can get this idiotic puking out of the way.

BI - Blackrock: here's one reason rates will stay low for a long time. Um, they blame it on technology. I guess we didn't have any technology back in the 1960s and 1970s when inflation was rampant? Obviously nobody at Blackrock has heard of the phrase "liquidity trap" or reads Paul Krugman, so we can now be thankful that they've demonstrated their ignorance for us so that we can ignore them from now on.