Tuesday, February 25, 2014

On silly charts

The problem with going through life expecting a "massive repudiation of debt as a dishonest system comes apart at the seams" is that every time you look at that darn S&P 500 chart, you will hallucinate yet another bugaboo hinting at you that the repudiation/apart-coming is right around the corner.

Viz this guy's chart of this morning:

Ooh scary! Price has gone up while RSI isn't as strong as at the last peak! Ooh scary! Let's go short the S&P!

Problem is this:

This already happened in April 2011 and June 2012. Both times avoided that 2008-style 50% decline that the first chart suggests is right around the corner. World didn't end.

In fact, the June 2012 dump was the one that generated that now-famous "massive repudiation of debt as a dishonest system comes apart at the seams" line:
Last year the wild card element to a bullish picture was the election year cycle and in particular, a sitting Democrat election year cycle. This year the wild card is something more powerful; the unwinding of US and global credit markets in a massive repudiation of debt by the withdrawal of its feeder, credit. In a leveraged global economic structure it is credit that fuels the machine.

It’s an ‘organic economy’ or it’s ‘organic growth’ you say? As credit continues to be withdrawn we’ll see how organic it is. Really, this is the single silliest thing I have ever seen in print in the financial blogosphere. The economy has been sprayed with myriad toxic elements to try to get it to grow. The system is mutating, and the Fed is the Monsanto of the financial world. Consumer spending is like genetically engineered corn; it’ll feed you but it is part nature and part laboratory (Read: a consumerist experiment).
And so after all that, what actually happened to the world after June 2012?

Hm. Seems the world didn't end. Did pretty well after June 2012, in fact.

Um... not gold, of course.

But wait, there's more:
10-year US Treasury yields are well into breakout mode now and the Banks continue with their breakout as measured in S&P 500 units.  So far so good.

Before ‘T2C’ takes effect however, rising interest rates (bond market declines) across the board could signal that the game is changing; and in my opinion it is changing for the better.  That is because linear thinkers and followers of convention will not be able to hide in bonds this time, as if it is just as easy as ‘risk off?… buy bonds’.  Lazy thinking is going to be punished.

Stock bulls should learn about the pitfalls of following convention as well, because with the funding mechanism (credit, debt… bonds) under stress, the media creation known as the Great Rotation (from bonds to stocks) is not likely to work out in the short-term.


A dishonest system is coming apart at the seams. What better environment for honest money to be taken to the woodshed for the first slaughter of its bull market?
And so what happened to bonds after this famous "massive repudiation of debt" post of 24 June 2013?

It seems the world stopped massively repudiating debt the minute that this massive repudiation was brought into the harsh daylight of Wordpress. It's truly almost as if JP Morgan and the Lizard People are out there monitoring the shadowed edges of the blogosphere, trying to find people to torment.

So easy to control, bring to harm.
A gathering of fools, unjustified, on a mountain.


Where is the god of men and children?
He is stalking the minds of dark poor souls.


  1. I didn't recognize the quote so started googling and now a little about VNV Nation for the first time in my life. Which is something, I suppose. Has a lilt of TS Eliot about it, but that could be just the Q&A rhetorical structure they use, though. Can't be bothered to listen to them, must be said

    1. You either love VNV Nation or hate them.

      I like 2 or 3 of their songs, that's about it. But I appreciate working atheist existentialism into music.

  2. He's a permabear, what do you expect? The 08 crash was about household debt. Like most bloggers, he doesn't get the difference between a currency user and a currency issuer, so he extrapolates into thin air, like the coyote running off the cliff chasing the roadrunner. Of course, like the coyote, falling to the bottom of the canyon and going splat never teaches him to knock it off.

    1. It's funny, because he's not a permabear from a charting/decision making perspective. He's pretty good at the whole "the chart is the chart" thing. He's been on the right side of much of the last few years, in terms of trading/investing, because he doesn't let his politics get in the way of that.

    2. I quit following him after he went +4% for 2011 and +2% for 2012.

      2011 sucked for everyone, but he still could have bought SPY at the end of the year, taken 2012 off, and made 20%. He could have shorted vol with XIV and made 160%.

      But his dogmatic blindness and paleolithic hatred of the leveraged financial system meant he spent 2 whole years blind to what was going on. If he's such a great chartist, why didn't he expect SPY to outperform GDXJ by 40% in 2012? And if "the chart is the chart", why was he a buyer of junior miners instead of SPY in 2012?

      "The chart is the chart" is a saying that's meant to make you buy the winners. He spent a year stuck with losers, and he did it because of blind adherence to dogma.

      He might have improved in 2013, I see he started buying 1999 tech stocks. But he was brutally wrong all through 2011 and 2012.

      Nothing is worse than a guy who is not only wrong, but completely unable to recognize that he's wrong.

    3. I take him for a permabear because his "about" page lists Robert Prechter and Doug Noland, who is probably the arch permabear's permabear, as his main influences. Noland runs a mutual fund called bearx, go look at it's 5 year chart.

    4. Plus he used to link to Russian stooge Max Keiser, and swallowed whole McLellan's "OMG it's 1929 again this year" chart, and promotes Elliot Wave.

    5. Fair enough, but I would say that hardly anyone makes consistent 20% returns year after year. It's hard to do. I think that "the chart is the chart" is meant to keep you from getting burned in whatever sector you are looking at. I can't think of anything that lets you consistently pick winners, but if there is, I'd love to have it. Could he have stepped back and focused on something else? Absolutely.

      Dang, did you make 100%+ with XIV? I just can't play those things.

    6. Yeah, I always thought TA was mostly voodoo but at least there are a few fellows who can sorta kinda show you something there, however, Elliot Wave is just a complete fool's paradise.