Monthly Archives: November 2015

In Defiance of the Gods

HUBRIS
noun
  1. excessive pride or self-confidence.
    2. (in Greek tragedy) excessive pride toward or defiance of the gods, leading to nemesis
    The Weekend WSJ is chock full of stories on "The Decline and Fall of Rome" and hubris through history. A long article reviewed the Kraus play "The Last days of Mankind." The popular, Hilary promoting TV show Madame Secretary covered a near world war after the Ukraine shot down a Russian fighter jet. (wild considering Turkey) These topics seem at odds with the notion of US expansion and pending monetary policy retraction.
    Instead of the more common, "Nothing will ever go wrong again" attitude of most cycle peaks, this one is characterized by a pervasive feeling of doom. The long history of hubristic behavior and war folly is well documented - as suggested above. The reality is the Federal Reserve has consistently acted in defiance of the gods with equally dire consequences for its citizens. Behind the Fed, a long line of sketchy bankers and traders submit to the characteristic.
    The latest fear floating around the markets is the pending drop in issuance of US government securities. This meta-issue flows simultaneously with the "too much debt" EOTW-ers in a perverse circle of the inane. The new hiccup is the scheduled rise in Bill issuance and the large take down of securities by MF investors (42% by some recent counts). The November rise in T prices has taken place under a plethora of twisting curve scenarios and simplistic "sounds right" forecasts; keeping John Q well  exposed to the obligations of Uncle Sam. Succumbing to the Disney force feeding (get it?) of Star Wars onto the public, the Fed is poised to fire the Death Star into the shifting, twisting, fearing monetary much-gutch.
    The view from the vineyard is this: at the onset of the first monetary adjustment in 7 years, both the Fed and the public find themselves long historic amounts of the paltry yielding IOUs of the US Treasury. That is a position in defiance of the gods.

Classical Monday

30 minute atr

240 minute atr

daily atr

daily pivots

weekly pivots

monthly pivots

upside retracements

downside retracements

regression channels

support and resistance
On the economic calendar:-
  9:45 am Chicago PMI (Consensus 54.0 v Prior 56.2)
10:00 am Pending Home Sales Index (Consensus 1.0% v Prior -2.3%)
10:30 am Dallas Fed Manufacturing Survey (Consensus -11.0 v Prior -12.7)
11:00 am 4 Week Bill Announcement
11:30 am 3 Month Bill Auction
                6 Month Bill Auction
  3:00 pm Farm Prices

 

Classical Tuesday

30 minute atr

240 minute atr

daily atr

daily pivots

weekly pivots

monthly pivots

upside retracements

downside retracements

regression channels

support and resistance
On the economic calendar:-
 8:30 am GDP (Consensus 2.1% v Prior 1.5%)
                International Trade (Consensus -$62.0 v Prior -$58.6 )
                Corporate Profits
 8:55 am Redbook
 9:00 am S&P Case-Shiller HPI (Consensus 0.3% v Prior 0.1%)
10:00 am Consumer Confidence (Consensus 99.6 v Prior 97.6)
                Richmond Fed Manufacturing Index (Consensus 1 v Prior -1)
                State Street Investor Confidence Index
11:30 am 4 Week Bill Auction
                2 Year FRN Note Auction
 1:00 pm 5 Year Note Auction

Treas Sec. Oscar Diggs

"I'm just a man, a humbug." - Oscar Diggs a.k.a. The Wizard of Oz

Although, well-known as the tag line for a miserly curmudgeon spooked into being nice, "humbug" was a late 1700's term for a hoax.

The latest in a long and seemingly never-ending stream of things you're supposed to freak out about is the additional interest to be tacked on to $17 T in US government debt if/when interest rates rise. That total line item cost has dropped during the protracted low rate zirp is undisputed. That rolling into higher rates is a pending crisis is hardly assured.

The debates have provided a platform for several monetary fear mongers to promulgate a return to metal. A brain is not on their wish list. The terrible consequence of tying all that debt to their shiny idolatry escapes the narrative. We live in a fiat world. Technology is stretching the "faith-based" monetary system thinner. Non-government issued "currencies" are the medium of exchange for billions of global transactions every day. Backed by the "full faith and  bandwidth of the network" is replacing "the Government."

Central Bank debt buying has placed the humbug of government accounting on display. 3 Trillion of the aforementioned 17 T in obligations (or 17.5 ish %) sits on the Fed's balance sheet. Purchased with a keystroke, the interest, created by a like issue, is transferred by keystroke back to the Treasury dept. Oscar Diggs would be proud. No curtain or elaborate smoke machine is needed, this all takes place in the great wide open. Men with brains, courage and hearts do all they can to convince you that such an arrangement MUST be "bad." That is a value judgement.

We have seen low government debt and high rates, large amounts and higher rates, and various other combinations. Even the widely held view of a "stronger dollar" because "the Fed is raising rates" does not hold up in practice. The exchange rate is a reflection of the humbug we operate in, sometimes bold and other times meek. This Thanksgiving I'll make a special novena to the awesome bounty ingested by the simple transfer of humbug.

 

Classical Monday

30 minute atr

240 minute atr

daily atr

daily pivots

weekly pivots

monthly pivots

upside retracements

downside retracements

regression channels

support and resistance
On the economic calendar:-
 8:30 am Chicago Fed National Activity Index
 9:45 am PMI Manufacturing Index Flash (Consensus 54,5 v Prior 54.0)
10:00 am Existing Home Sales (Consensus 5.40 M v Prior 5.55 M)
11:00 am 4 Week Bill Announcement
11:30 am 3 Month Bill Announcemnt
                6 Month Bill Announcement

Why Do We Have a Brain?

OR- How I quit worrying about markets and learned to live in the world.

I have been influenced by the writings of futurist Ray Kurzweil. His trilogy on thinking, The Age of Spiritual Machines, The Singularity is Near and How to Create a Mind is a great addition to any trader's tool kit. The latter book is a "must have" companion to Reminiscences of a Stock Operator in any serious practitioner's library.

The actual primary reason we have a brain is predicting the future. You can bypass all the science behind the neocortex and skip to the actuality of the last sentence. Our brains are designed and exist for us to trade. We are hard wired for the activity.

Kurzweil espouses the Pattern Recognition Theory of the Mind. Basically, the neocortex "thinks" by creating and recognizing patterns. Having a stored memory of such patterns the brain is then constantly predicting what the next connection should be. Consider the extraordinary case of Garry Kasparov. Kasparov, we know, had learned roughly 100,000 chess board positions. (most doctors master about 100,000 medical concepts and Shakespeare used about 100,000 word senses) Deep Blue was able to store roughly 200 million board positions in a second. And yet, Kasparov was able to contest Deep Blue admirably. The reason is the same reason you, post reader, think there's a "bear flag" in the Yen future, pattern recognition.

Read the book.

But here's what interested me most: The brain confabulates to help it make sense of undirected thoughts. Human beings - by neocortex design - confabulate ALL THE TIME when explaining the outcome of events. That's right Neo, you make it up. The best example of neocortex confabulation is financial market commentary. The next time your listening to Pasani explain "what just happened" or feeling you blood pressure rise at a Rantelli white board hysteria - realize they are doing what the human brain is predisposed to do. They are filling in the pattern sequences they are missing by making stuff up. It's biological.

Read the book. You won't be disappointed. You will come away with an understanding of how we "think" about the future, about what comes NEXT. Nervous concerns over algorithms and "HFT" will fade away to the reality that our brains can manufacture these technologies no other way, YET. Best of all, you'll know the next time a financial commentator (hey, I was/am one too !) crosses your screen, he/she is by their very design, making things up.

Classical Thursday

30 minute atr

240 minute atr

daily atr

daily pivots

weekly pivots

monthly pivots

upside retracements

downside retracements

regression channels

support and resistance
On the economic calendar:-
 8:30 am Jobless Claims (Consensus 270 K v Prior 276 K)
                Philadelphia Fed Business Outlook Survey (Consensus 0.0 v Prior -4.5)
 9:45 am Bloomberg Consumer Comfort Index
10:00 am Leading Indicators (Consensus 0.5% v Prior -0.2%)
11:00 am 3 Month Bill Announcement
                6 Month Bill Announcement
                2 Year Note Announcement
                2 Year FRN Note Announcement
                5 Year Note Announcement
                7 Year Note Announcement
 1:00 pm 10 Year TIPS Auction
 4:30 pm Fed Balance Sheet
               Money Supply
Speaking today:-
13:30 pm Dennis Lockhart

 

Classical Wednesday

30 minute atr

240 minute atr

daily atr

daily atr

weekly pivots

monthly pivots

upside retracements

downside retracements

regression channels

support and resistance
On the economic calendar:-
 7:00 am MBA Mortgage Applications
 8:30 am Housing Starts (Consensus 1.162 M v Prior 1.206 M)
10:00 am Atlanta Fed Business Inflation Expectations
10:30 am EIA Petroleum Status Report
 2:00 pm FOMC Minutes
Speaking today:-
 7:30 am William Dudley
12:00 pm Rob Kaplan

Classical Tuesday

30 minute atr

240 minute atr

daily atr

daily pivots

weekly pivots

monthly pivots

upside retracements

downside retracements

regression channels

support and resistance
On the economic calendar:-
 8:30 am Consumer Price Index (Consensus 0.2% v Prior -0.2%)
 8:55 am Redbook
 9:15 Industrial Production (Consensus 0.1% v Prior -0.2%)
10:00 Housing Market Index (Consensus 64 v Prior 64)
11:30 4 Week Bill Auction
 4:00 pm Treasury International Capital
Speaking today:-
12:35 pm Jerome Powell
 3:30 pm Daniel Tarullo