Monthly Archives: October 2013

Classical Wednesday

 30 year -30 minute atr trend
10 year - 30 minute atr trend

5 year - 30 minute atr trend

daily pivots -R2 coinciding with price resistance (see below)

upside retracements

downside retracements

240 minute regression channels

price support and resistance levels
On the economic calendar:
07:00 MBA Purchase Applications
08:15 ADP Employment Report (Consensus 138 K v Prior 166 K)
08:30 Consumer Price Index (Consensus 0.2% v Prior 0.1%)
10:30 EIA Petroleum Status Report
13:00 7 Year Note Auction
14:00 FOMC Meeting Announcement (Consensus 0 to 0.25%  v Prior 0 to 0.25%)


Nobel-ist Eugene Fama with Rick Santelli on CNBC today. There are plenty of chuckly moments but buried in the sniping was an important and - in our opinion - grossly uncovered point. As the "esteemed" Prof. says, " Short rates have fallen, despite the Fed's massive actions and a IOER rate that is intentionally "set higher than the market rate."

As our earlier Death Star posts indicated, this is a "floor" discussion that centers on shadow banking and the GSEs absence of Fed accounts. Dr. Fama is content to say don't worry about issuing short "debt" to buy long debt because its a wash but he is dismissive of the reality that a plethora of short market rates converge into or even through the IOER "floor." The FAFRRRF (Death Star) is a "shim" to support that spongy level. (Just raising the IOER far too scary I guess)

But what if delusional market participants - full disclosure I'm a card carrying charter member - are on to something when we opine that the CB cannot set both the quantity and the price (IOER) of its "good." More directly, if attempted, how would they luckily pick the proper (neutral, natural equilibrium to sound smart) rate. As we showed at the time, during the Taper/Convexity Vortex rate move, short money rates made consistent new lows. More dangerously, if policy were to gain traction, then the short/long swap would alter the shape of the curve rapidly and dramatically in the worst way - the advancing Bear Flattener.

I'm just a Dog watching TV, I see but cannot comprehend. Color me skeptical when Prize winning college professors tell me everything will be just fine. I was involved in a mess with some other Medal Winners called Long Term Capital.

Classical Tuesday


the 30 minute atr trend suggests bullishness

daily pivots
looking for a break out/down.

upside retracements

downside retracements

looking at the daily

240 minute regression channels

price support and resistance levels
On the economic calendar:-
07:45 ICSC-Goldman Store Sales
08:30 Producer Price Index (Consensus 0.2% v Prior 0.3%)
          Retail Sales (Consensus 0.0% v Prior 0.2%)
08:55 Redbook
09:00 S&P Case-Shiller HPI (Consensus 0.7% v Prior 0.6%)
10:00 Business Inventories (Consensus 0.3% v Prior 0.4%)
          Consumer Confidence (Consensus 75.0 v Prior 79.7)
          State Street Investor Confidence Index
11:30 4 Week Bill Auction
13:00 5 Year Note Auction
10:15 - 11:00 Outright Treasury Coupon Purchases between $1.25 - $1.75 billion


From the Fed

Though profits are more stable than in earlier estimates,
the central bank’s balance sheet wouldn’t return to normal for
the foreseeable future, according to the Fed economists. Even by
2025, almost two decades after the housing bubble that
precipitated the financial crisis began to burst, the Fed would
still own $407 billion in mortgage bonds.

Under a higher-interest-rate scenario, the Fed would suffer
losses and be unable to make a remittance to Treasury from 2017
to 2019, according to Carpenter and co-authors Jane Ihrig,
Elizabeth Klee, Daniel Quinn and Alexander Boote.

Please ,,,enough already,,,

Stability, Certainty and Abundance

Outside of a late Spring, early Summer shift in the Treasury Bond market, capital has benefited from the Stability Goal of global central banks.


Certainty, or "forward guidance" has broken out as this year's policy "It Girl". F.G. is central banking's admission that it does not (or cannot) trust market participants opinions. The laundry list of mortgage shenanigans, LIBOR rigging and P/L modifications by the System's finest justify the skepticism.

Certainty of policy has not morphed to certainty of outlook, however. Little can be extrapolated beyond the ever increasing random number generator that is the S&P. If "stability" is the goal and policy "certainty" is the path to achieve it, then 2% growth, immigration level employment gains and a hemorrhaging wealth gap appear to be the offspring.

The supply side of the equation dominates the discussion. If you flood it with money, they will borrow. If you overwhelm with choices, they will covet. If we eliminate risk, guarantee outcome and buttress against any and all possibility of failure or loss, nothing will ever go wrong again. Powerful stuff this FG ! Unfortunately, despite the branding and advertising onslaught, demand has languished, Demographics, debt and dismay have thwarted the arrival of the CB induced nirvana that FG allegedly portends.

We would only submit that uncertainty is necessary genetic code to a capitalist society. Risk, Failure and Loss are the judgmental Triumvirate that oversee the score. Without them, everyone "achieves" only the award of "Participant" -and the hollow feeling that there must be more to it than this. I hope the Fed, at its meeting this week, would embrace the concept of uncertainty and the wild, wooly and ultimately wonderful consequences embedded in it. The truth is, I'm certain they won't.