Friday, November 1, 2013

Tie Domi's birthday

Happy birthday, Tahir Domi.

After the break, you can watch the one-hour special "Tie Domi: What It Takes".

More reading for you

Some more reading for a boring Friday.

Reformed Borker (Bork Bork Bork!) - a reasonable explanation for the upward tilt in PEs. It has to do with changes to the tax regime. I guess, when you realize the market in sum is an exercise in simply trying to beat the aggregate return, this makes sense. Quote:
We can't look at long term historical valuations because the tax code has changed dramatically.  Prior to 2003 dividends were taxed at ordinary income levels, so for the highest two or three brackets fixed income was as valuable as the dividend at the same yield. Today, at the same yield, dividends are far more attractive since fixed income is taxed at a higher rate for the upper brackets. Additionally, prior to 1982, capital gains taxes were generally higher (as were the dividend tax rates because marginal tax rates were much higher).

Ergo, because of the tax code there should be a rerating higher of p/e levels over the past 30 years relative to prior to that time. And a further upward boost in 2003  - especially for dividend paying stocks.  Whether the level for the S&P 500 should be 17, 18 or more versus the long term historical average of 15 is something for the statisticians to debate.

Unfortunately there are other factors, such as earnings  growth and interest rates that also influence the multiple and pinpointing what the exact level should be is probably impossible. But 15 looks too cheap when taxes and current returns from fixed income are considered.
Point being, your market analyst is an idiot if he's doing long-term analysis on the market without compensating for the fact that the thing he's analyzing has changed its character over time. You have to keep your apples and oranges properly organized.

Calculated Risk - how much risk to homebuilding? Jan Hatzius doesn't think the recent data is indicative of a new downward trend.
Second, the fundamental supply-demand picture for housing still looks positive. If the population grows at the rates projected by the Census Bureau and the size of the average household trends sideways to slightly lower--in line with historical trends--we estimate that household formation should climb to 1-1.3 million and steady-state housing demand to 1.3-1.6 million. This implies significant upside for housing starts from the current 900,000 level once the remaining excess supply has been eliminated.
Don't thumb your nose at demographics.

Ritholtz - corporate profits after tax. Chart says they've tripled since 2000. So why would you expect the secular bear market to continue?

Bespoke - October sales of F-series trucks highest since 2004. And yet Ford is going down today. Because blah blah taper blah blah manufacturing is good.

Michael Shaoul - on EM carry currencies. I guess he's warning of a new bear move in EMs around the corner.

FT beyond brics - India and gold, the story in charts. One seems to suggest that household asset allocation in gold is 18% in India.

Italy and Spain - rollover goes worldwide

Ritholtz and Brown will tell you that the Euro periphery markets flew up when everyone else in the market turned the Euro recovery story into a fad.

Well, now the new fad is selling Euro periphery back down.

For pretty much no reason, since SP10Y is 3.99% and IT10Y is 4.09%, both yields down on the day.

Continued selling of these ETFs after Europe close will prove that.

So I guess the market is now going whole-hog on selling everything and going to cash because OMG the US is recovering.

Comment on the US markets

Oh noes! We've got strong manufacturing data, and someone was talking about how the taper might happen this coming winter if the economy is doing as well as people think!


When the market is being a fucking moron, don't invest in it.

Gold miners: the failing continues

And GDX fails the Bollinger mean on a Friday, with volume increasing.

And GDXJ fails the Bollinger mean on a Friday, with volume increasing.

Fail and fail.

Four articles on India and gold

Here's some reading for you:

FT Alphaville - Rajan and the informal market. I disagree, btw, that the large informal economy can pay a demographic dividend. First you have to bring them out of abject poverty and into the 20th century.

Caravan Magazine - Rajan takes charge at the RBI. Month-old article, but probably very good for background. Check it out, I haven't looked at it yet.

Economist - India's informal economy. Valuable background. Though again, remember India has a structural problem in the continued existence of the caste system and a class conflict between bourgeois and proletariat - and hey, I'm sorry to resort to Marxist terminology, but frankly Marx would have had a frickin' field day in India. The country makes 19th-century London look like a bloody worker's paradise.

FT - gold is part of the fabric. Here's something interesting:
“If you are a mass-market consumer and live in a semi-urban or rural area and have some money to save, you can buy gold easily, close to where you live, and it is liquid and fairly safe,” says Mr Thomas. Loans against gold are easy to come by too – though in a nation where relinquishing family stocks carries stigma, this option tends to be used only in emergencies.
Sharply rising rural incomes have spurred gold investment further, a factor that in some instances is complemented by the metal’s rising price. “If gold prices go up it doesn’t deter people from buying . . . it is only an indication that it is a good investment,” says Shinjini Kumar, a director at PwC India.
Breaking out of the cycle will not be easy, says Eswar Prasad, an economist at the Brookings Institution, requiring the creation and successful marketing of other products. “The allure of gold is symptomatic of the weakness in India’s financial system, and finding financial alternatives to it is crucial for the country’s development,” he says.
Though in the south of India, there is higher per-capita gold ownership despite more banking penetration. So don't believe all you read, especially from ignorant upper-class Indians blinded by their own wealth.

And here's something I like:
As western investors lose patience with gold, however, the traditional sources of demand are once again catching the attention of traders and analysts. Since the government restrictions on imports began to take effect, the amount of gold being smuggled into India has become one of the key unknowns for the market. “It’s one of the main things we’re looking at,” says one hedge fund manager. “It’s fair to say that the physical markets are becoming more important again as the investment markets have contracted,” says Mr Steel. “India’s prominence is moving closer to centre stage again.”
1. Been reading my blog, guys?

2. What, supply and demand means something with gold? It's not "money"? It's not a hedge against Treasury yields? Really?

3. If gold-trading Whiteys are now paying attention to Indian demand, I wonder what'll happen to the price of gold as Narendra Modi's election victory approaches? Get bid up like crazy, perhaps?

Friday videos - Celtic Frost's "To Mega Therion"

Why not, it's Halloweenish.

Thursday, October 31, 2013

Some news

Michael Shaoul - FOMC statement. Some thoughts on the change in language.

Michael Shaoul - Japan housing starts. He still seems to think the data points to expansion, and not just moderation of the 2 decades of Japanese gloom.

FT beyond brics - India and gold part 1. Some basic facts about India and gold, including a link to a not-directly-related report on women's participation in the jewelry industry by the Federation of Indian Chambers of Commerce and Industry. For god's sake Avantika, FT wants you to link to primary sources, not to parentheticals.

FT beyond brics - India and gold part 2. On the gold-backed loan system in India. Why does the government have a problem with this? It provides a way for otherwise penniless peasants to access capital, and the loan is even asset-backed. Only 800 tons of India's gold gets encumbered this way, nothing that could severely kill the value of the underlying asset. And as for the gold-loan companies who were issuing loans based on gold, the problem with them is simply that they didn't hedge their gold position against losses the way any modern business would.

Miners fail, again

Here's GDX:

Failed to overtake its SMA(50) with the Tuesday reversal, then failed its EMA(20) today. Next up in the failure sweepstakes is the Bollinger mean.

And here's GDXJ:

It never even got to its SMA(50), and is now falling through its Bollinger mean with MACD signal failing to even become positive.

Sorry, dudes. That's failure right there.

Wednesday, October 30, 2013

Joke #19: past the kids' bedtime so we can get nasty

19. What do you get when you inject a goat with human DNA?

A lifetime ban from the petting zoo.

And that's it for the jokes day.

Joke #18: late at night so we'll use pictures


Joke #17: combining anti-Catholic and anti-Jewish sentiment

17. A priest and a rabbi are sitting in a bar.

Priest: "Let's go screw a couple of boys".

Rabbi: "Out of what?"

Joke #16: we just can't stop with the nuns

16. Four nuns died into a car wreck, and are now standing before the pearly gates.

St. Peter asks them each if they have any final confessions before being judged.

The 1st says, "I once saw a man's penis."  St. Peter told her, "Wash your eyes in this font of holy water and you hall be absolved."

The 2nd says, "I once touched a man's penis."  St. Peter tells her to wash her hands in the font of holy water and she will be absolved.

The 4th one then cuts in front of the 3rd and asks, "Can I rinse out my mouth before she has to sit in that water?"

Joke #15: more about economists

15. How many University of Chicago economists does it take to change a light bulb?

None. The market will take care of it.

Joke #14: it's funny cos it's nuns

14. Sister Mary and Sister Agnes are out for a bicycle ride, and eventually they get lost in the old section of town.

"Oh my," says Sister Mary. "I don't think I've ever come this way on a bicycle before!"
Sister Agnes smiles knowingly and replies: "It's the cobblestones, dear."

Joke #13

13. So two hookers are discussing their favorite kinds of clients. They talk about all different kinds of men, good points and bad, until finally one says, "No, really, the absolute best kind is a software developer. All he does is sit on the edge of the bed and tell you how great it's going to be."

Joke #12

12. A truck driver is driving through Harvard because he as to deliver some books, but he gets lost.  So he calls out to one the students, "Hey buddy can you tell me where the bookstore is at?"

The student sneers at the driver, "Here at Harvard, we never end a sentence with a preposition."

The driver says, "I'm sorry.  Allow me to rephrase.  Can you tell me where the bookstore is at, asshole?"

Joke #11

11. How many perverts does take to screw in a light bulb?

Only one, but then he has to spend the night in the emergency room to get it out.

Joke #10

10. An English doctor, being shown around a Scottish hospital, is taken into a ward with a number of patients who show no visible signs of injury.

He goes to examine the first man he sees, and the man proclaims" "Fair fa' yer sonsie face, Great chieftain e' the puddin' race!" The Englishman, somewhat taken aback, goes to the next patient, who immediately launches into: "Some hae meat, and canna eat, and some wad eat that want it, But we hae meat and we can eat, and sae the Lord be thankit."

The next patient sits up and declaims: "Wee sleekit cow'rin tim'rous beastie, O what a panic's in thy breastie! Thou need na start awa sae hasty, wi' bickering brattle. I wad be laith to run and chase thee, wi' murdering prattle!"

Well, says the Englishman to his Scottish colleague. "I see you saved the psychiatric ward for last."

"Nay, nay," the Scottish doctor corrects him. "this is the Serious Burns Unit!"

A few boring newsbits, not really anything to get worked up about

Really, I've found all the news to be utterly boring, and so haven't been posting my normal news thingies. But what the hell, I'll waste your time with some stuff now:

FT beyond brics - China set for most ambitious reforms in a generation. Some guy with his opinions. I'll wait for Billy Bishop's take on the Plenum.

Mineweb - miners still unwinding hedges despite Goldman's advice. By the way, someone post a pic of Jeffrey Currie somewhere, so that when gold fails to go to $1000 in the next year or two we can all find him and give him a good punch in the cock.

Sean Brodrick - a heads-up on gold. Blah blah Shanghai gold at discount. We'll see. Could just be that the London-Geneva-Shanghai pipeline's recently been widened. Meanwhile, the Chinese government is tightening liquidity in advance of the Plenum, obviously cos they don't want bullshit going on when they're in a meeting; without a material change to the Chinese economy I don't envision the liquidated gold changing the existing supply-demand situation there.

Joke #9

9. Werner Heisenberg is driving down the highway one day when he was pulled over by a cop.

The cop gets him to roll down the window and says "sir, do you have any idea how fast you were going?"

Heisenberg says "No, but I know precisely where I am."

The cop says "Well, you were going exactly 105 miles an hour!"

Heisenberg throws up his hands and says "Oh, thanks! Now I'm lost!"

Joke #8

8. What do you do with an elephant with three balls?

Walk him and pitch to the rhino.

Joke #7: Economists are never funny

7. A chemist, a physicist, and an economist are trapped on a desert island with 1 can of food but no can opener.

The physicist says "If we take a rock and throw it with a certain force and a certain angle, it will hit the can and open it so we can eat."

The chemist says "If we mix salt deposits with some of the chemicals from our signalling flare, we'll create a corrosive chemical that will eat through the metal of the can so we can eat."

The economist pauses for a moment and says "Let's start by assuming that we have a can opener."

And gold goes wild! Again

At 2PM, gold suddenly hammerblowed down on news that the FOMC thinks the US economy is sort of okay, except with fiscal headwinds.

Of course we already knew all of that, but it won't stop gold from getting torqued up and down for little reason.

Joke #6

This one must come from Baldrick:

6. What's brown and sticky?

A stick.

Joke #5

Here's one from my late dad:

5. Q:  How did the constipated mathematician solve his problem?

A:  He worked it out with a pencil.

Joke #4 - a two-parter

4a. A Buddhist monk approaches a hotdog stand and says “make me one with everything”.

4b. The vendor makes the hot dog and hands it to the Buddhist monk, who pays with a $20 bill. The vendor puts the bill in the cash box and closes it.

“Excuse me, but where’s my change?” asks the Buddhist monk.

The vendor replied, “Change must come from within.”

Joke day, #3

3. A photon checks into a hotel and the bellhop asks him if he has any luggage. The photon replies “No, I’m traveling light.”

Joke day, #2

2. Werner Heisenberg, Kurt Gödel, and Noam Chomsky walk into a bar.

Heisenberg turns to the other two and says, “Clearly this is a joke, but how can we figure out if it’s funny or not without destroying its momentum?”

Gödel replies, “We can’t know even know whether it's a true joke because we’re inside it.”

Chomsky looks at the other two and says, “Oh, come on. Of course it’s a joke, and of course it's funny. You’re just telling it wrong.”

Joke day

I'll be posting some jokes today, because people are complaining that I don't post enough what with all the news not being news and all.

1. Your mother's got so little class, she could be a Marxist utopia.

Tuesday, October 29, 2013

B2Gold to acquire Revolting Resources - blah blah but more importantly The Clive.

The article says Kiaka can support 340koz/y over 10 years. I assume, since it's The Clive and using Otjikoto as an analog, that there must be a lot of exploration upside there too.

That looks like a pretty good deal for only $63 million!

Now if only some other mid-tier miners started wading into the pool and snapping up sensible assets for pennies on the dollar, we could have a market again.

Monday, October 28, 2013

On NYSE margin debt

Dear goldbug newsletter writer who has been warning everyone about the record high NYSE margin debt:

Here are four articles that your smarter readers have already seen.

Reformed Borker (Bork Bork Bork!) - margin debt, another bogeyman slain. He notes it's this year's favourite among the doomers, like the Baltic Dry was in 2010 and look how predictive of an imminent crash that was.

Philosophical Economics - margin debt. He uses historical charts and past headlines to show how silly the fixation with margin debt has been in the past. Basically, it fails the backtest.

Michael Shaoul - NYSE margin debt update. He notes that total interest burden of total outstanding debt is less than a third of what it was in 2007, so based on fundamentals there's no problem.

Ritholtz - NYSE margin debt at record high. He points out margin debt goes up as markets go up. Again, nothing to see here since Shaoul notes this debt is easier to carry than last time because of lower debt servicing cost.

Now go explain to your subscribers how you've been wrong because you were mistakenly getting your macro picture from ZeroHedge.

Some noontime reading

A bit of stuff:

Calculated Risk - data release schedule for the week. Lots of opportunities for algos to puke gold into nonexistent bids this week!

Reformed Borker (Bork Bork Bork!) - the state of the rally. The US market has gone up 518 days without a major correction. However, in the bull move of 2003-2007 it went 1153 days; and in the secular bull of 1990-1997 it went 1767 sessions without a >10% correction. So really, the takeaway is that regular 10% corrections are not normal market behaviour.

Bloomberg - China signals unprecedented changes on agenda at Plenum. Again, Billy Bishop would note that these "changes" will take years to implement, it's really just a policy meeting; nevertheless, it looks like the Chinese leadership are interested in doing all the right things, from hukou replacement to property taxation.

FT Alphaville - prepping for the Plenum. More on the topic. Read the whole article, Dong Tao from CS summarizes the significance of the advance document.

GLD and GDX are now officially interesting

Check these out:

GLD has not even bothered to diddle with its SMA(50), it's just gone +2SD as if it doesn't want to look back. The higher low (relative to end of June) is also interesting.

GDX has also just carried on thru its SMA(50) and is now >2SD.

I was expecting a pullback after Friday's candles, so probably a lot of other stupid people were expecting the same thing as well. This now catches the market flatfooted as things start to look good.

Seriously. PS Dave thought the August pop was all there is, and we'd settle into a brutal 2 months of tax loss selling (as if there haven't already been tax losses realized!). Cookie's been calling for a long grinding bottom.

So I've now went and bought $10K of HGU.

Two miners' charts have me thinking something's at work

Buenaventura is really convincing me that its downtrend is over. The August-September pennant has been reversed, and now it looks like it's set to fight through the $14-$15 resistance. Notably it's above its SMA(50) too. And check out the two weeks of strong RSI.

Sandstorm Gold is also looking good here, after grinding out a nasty bottom that made you think something was wrong with the company.

I'm left wondering if these charts look the way they do because someone big has just now given up on shorting miners?

Or has the short side simply left the scene while Dhanteras is in full swing, since they know how dumb it is to short-sell gold that then gets melted down and sold as bangles to Indian peasant women who will never, ever let that gold go back into the commodity market?

Cryptolocker warning

A nasty new ransomware is out and attacking people.

Wikipedia - Cryptolocker.
Ars Technica - you're infected: if you want to see your data again, pay us $300 in Bitcoins.
Computerworld - Cryptolocker: how to avoid getting infected.

As usual, do not ever click on any email attachment, even from a person you trust, until you know what it is. A lot of people who you enjoy talking with are ignorant when it comes to computer security.

Do not click on any email attachment that is a zip file.

Do not click on any email attachment.

Always ensure that you inspect Windows file extensions, and learn how to view headers and view source in email, to ensure you really know what you're clicking on.

It might also be a good idea to repartition your hard drive and have the ability to dual-boot into Linux: it won't save you from this, you're still screwed, but at least you'll still have a computer that works.

And to the dude who's been sending me perfectly safe things from a "Xerox copier": please don't send me those anymore unless you rewrite the "Subject:" line. I had a frickin' heart attack just now when I saw that Cryptolocker is sometimes spreading as a "mail from Xerox copier" message.

Sunday, October 27, 2013

The stunning Brazilian corruption scandal that just doesn't stop stunning

The guy who normally covers LatAm corruption is apparently off somewhere biting the heads off cuddly rodents today, so it falls to me to bring this shocking story of bribery and double-dealing to your attention:

Daily Mail - Brazil's Miss Bumbum competition rocked by allegations of bribery after rivals accuse contestants of paying judges.

Here, let me quote the entire article for you:

Wait, that's not it.

Here, here it is:

No, that's not it either.

It's proving hard to ctrl-c ctrl-v with just one hand.

Man, though, Miss Rio (0:51-) sure is a little fireplug, eh?

Wait, no, that's not it either. Aw, screw it.

Anyway, Miss Roraima (0:59-) is the clear winner if you're judging by face. Which I guess they're not. But if I were in the market for a Brazilian woman with a large round butt, she'd be my choice. Though Miss Rio seems to have a really exciting personality, which I also assume doesn't earn her any points in a Miss Bumbum competition.

The chick who bribed the judges looks like Michael Jackson ate her nose.

Then again, I guess she didn't need a nose to compete in Miss Bumbum 2013 either.

Oh, the strange ways of foreign nations!