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August 2010



A Simple Explanation of the Great Recession and Why It Has Years To Go

August 31, 2010 – Comments (13)

Yelnick has an excellent new post up. He draws upon Steve Keen's work putting GDP + private sector debt into perspective as a measure of the magnitude of the problem that is faced. The current macro environment for the US (and many advanced economies) is highly deflationary. The Fed has thus far been crediting and shoring up bank reserves hoping they will lend (which they haven't) in order to spur more consumption. What the Fed has also done is go around the banking system to monetize private debt directly. So while crediting banks is inflationary only if the banks lend, taking over private sector debt directly is highly inflationary. I would expect (or at least seriously consider) the Fed to attempt more of this in the future to spur 'aggregate demand'.

I continue to stand by the idea that we will not get either monolithic inflation or monolithic deflation. We are going to get something far uglier and far more mixed. Something akin to stagflation. But whereas 70's stagflation was caused by an oil shock + out of control deficits, this one will be much more sinister. Because it is not some 'exogenous' event, but rather a homegrown balance sheet recession which the economy has not faced in over 70 years.  [more]




August 27, 2010 – Comments (6) | RELATED TICKERS: BVN

I think BVN's Weekly chart is very bullish. This series of patterns (a cup and handle forming the handle of a much larger cup and handle) is suggesting a large move up. BVN is a major gold and silver producer. And I (of course) am very bullish on gold and silver.  [more]



A Bullish Hawk? err, Hawkishly Bullish? ...umm, HAWK = BULL = GOOD?

August 26, 2010 – Comments (22) | RELATED TICKERS: HAWKQ.DL

What I am trying to stay? Ahh yes, I am a bull on HAWK. TMFDeej wrote this excellent post back in June: It is a great post and the upshot is that Seahawk Drilling is selling for less than scrap. There is more to the story, and read TMFDeej's post for the details. I went long it in Caps on July 26 at $10.02 just on a hunch (round number of $10 and was getting oversold).   [more]



Perma...Frog (?)

August 25, 2010 – Comments (16) | RELATED TICKERS: FRO , G

Okay, here is my new defition:

Permafrog: One who invests on a premise (macro, micro, sector, company, currency, etc.) for specific timeframe or until the conclusion of specific events. When those conditions are met, they will 'leap' to the next most compelling premise.  [more]



Hey, Do you Remember the 80s?

August 25, 2010 – Comments (20)

The NIKKEI sure does. It is reliving its 80s glory years: Miami Vice, Member's Only jackets, The Breakfast Club, Walkman's, etc. But at this rate, they will be revisiting the 1970s.

Because critical support has been broken. The NIKKEI is now trading below the levels seen in May ... of 2009  [more]



Is It Time to be Bullish on Cattle?, (part III)

August 24, 2010 – Comments (11) | RELATED TICKERS: COW

Here is an update on my cattle-call (yuk, yuk)  [more]



Somewheresville (?)

August 22, 2010 – Comments (10)

However, not all markets are grinding sideways. There are many that are still trending strongly. My favorite (of course) is Gold. For the long term, I always like looking at a monthly chart because it tunes ot the noise (and Gold is *very* noisy). I still see a very strong market in a clear uptrend.  [more]




August 22, 2010 – Comments (2)

For nearly the last 12 months, the major equity indices have gone ... nowhere. We have been in a trading range and the overall gains are virtually non-existant. The problem is the volatility and the size of this range is giving a lot of fakeouts to both the upside and the downside. Neither bulls nor bears can claim any kind of victory here (I sure can't). And I doubt we will get any kind of market clarity until we break out of the range. As much as I like to predict things (and I do, I am a sucker that way :) ), this pattern exists for one reason only: to exhaust both camps. I personally think this pattern still looks "toppy" but dramatic reversals are now par for the course.

Have fun, but be careful.  [more]



Everybody is a contrarian indicator!! What is the actual sentiment like?

August 22, 2010 – Comments (32)

I am bearish. I point to the bearish macro. I point to the number of bullish posts and use it as a contrarian indicator.

You are bullish. You point to the bullish macro. You point to the number of bearish posts and use it as a contrarian indicator.

This is (obviously) a dumb game involving confirmation (or non-confirmation) bias. We will each seek out posts to prove our points regarding the level of sentiment. So instead of playing a dumb game, how about actually looking at a few sentiment measures? Here are are the two biggest (Equity Put/Call ratio and the VIX) and a slightly less well-known one (Bullish percentage of SPX stocks), with a 5 year history to put them into perspective.  [more]



Benner Cycle: The 18-Year Cycle Of Secular Stock Markets

August 21, 2010 – Comments (17)

This is a great post by Trader's Narrative. I am a huge fan of cycle theory, so this one was right up my alley. Take a look at the attached picture (the card was originally made in 1872). Good stuff :)  [more]



... Wow. That is very interesting.

August 20, 2010 – Comments (1)

First, if you have not read my new post (it got buried pretty quickly this morning) please see it here:
Do Deficits Matter, Debt and Deleveraging,
Resource Constraints, In/De/Hyper/Stag/etc./flation, Part I
-  [more]



Do Deficits Matter, Debt and Deleveraging, Resource Constraints, In/De/Hyper/Stag/etc./flation, Part I

August 20, 2010 – Comments (6)

This post is a follow-up to my last post The Matter of Deficits, Sovereign Default, and Modern Monetary Theory found at MTaA or on my Caps blog. Also in the process of writing this post, the length kept increasing that I decided to break it up into a series. This will be Part I.  [more]



The Matter of Deficits, Sovereign Default, and Modern Monetary Theory

August 18, 2010 – Comments (38)

Okay, fair warning. This is going to be one of my "thinking (and probably unfortunately rambling) out loud" posts. But I really do hope you read it because I am looking for feedback in this post. Because some of the conclusions I come to are ..... disturbing.  [more]



This is not the 1930's

August 17, 2010 – Comments (13)

The Pragmatic Capitalist has another very good post up regarding employment trends  [more]



Not Europe Again…

August 17, 2010 – Comments (0)

The Pragramatic Capitalist has a new post up discussing European CDS spreads.

I put up a post yesterday and this weekend on my other blog along these same lines, discussing Soverign Default Risks. You really should read the Soverign Debt series on Calculated Risk, it is excellent  [more]



The Big Interview with David Rosenberg

August 14, 2010 – Comments (17)

This is a very good interview. I am a big fan of Rosenberg. He is bearish on equities, but he is not bearish on everything. He has a very interesting take on bonds, but in particular high-quality corportate bonds in this environment. Good interview that is worth 20 minutes of your time  [more]



I do not care, I want gold

August 13, 2010 – Comments (23) | RELATED TICKERS: EYE , LUV , GOLD

Otto at Inca Kola News found this little gem. It is awesome that it is an obvious "beating up the straw man" example. It pokes some serious fun at the "gold bug" mentality. Or more specifically it points out how a gold non-bug (?) views a gold bug's position. I have outlined my thoughts on gold here: binve's Gold Foil Hat Zone: More Thoughts on Gold's Massive Bull Market - and here: Why I hold Gold: Why I am a Long Term Optimist and consider holding gold and Optimistic Endeavor, and Why I think the Stagflationary Scenario is more likely Macroeconomically in the Intermediate term (next several years) -

At any rate, this was quite humorous. Because the level of discourse in discussing gold is pretty much at this level a lot of times. Several of us on Caps try to elevate it, and give honest objective analysis on it, but let's face it, gold is a very emotional topic. And people who think gold is stupid / a barbarous relic quite often reduce the gold investor's position to that of a "gold bug" and assume that all gold investors think like this poor chap on the right.

So for all gold-haters and gold-bug-haters, enjoy the video. And for all gold investors and "gold bugs" just enjoy the one-dimensionalizing of your position.  [more]



Risky Business

August 11, 2010 – Comments (17)

Not a long post here, just showing you an update on my risk chart. For an explanation,
-- see: You say goodbye and I say hello, Another look at an old friend: Risk
    (or on Caps:
-- and: A look at an old friend: Risk
    (or on Caps:  [more]



I found a portrait for this market

August 11, 2010 – Comments (7)





Are you a SHEEP!! ... or are you a Shark?

August 06, 2010 – Comments (13)

That Guy: There are two kinds of people: sheep and sharks. Anyone who is a sheep is fired. Who is a sheep?
Dr. Zoidberg: Errr, excuse me... which is the one people like to hug?
That Guy: Gutsy question. You're a shark. Sharks are winners, and they don't look back because they have no necks. Necks are for sheep.   [more]



Global Macro Investor August Report - This is a Must Read

August 05, 2010 – Comments (4) | RELATED TICKERS: MUS , TR , EAD

Absolutely phenomenal report. This really is a must read: READ REPORT HERE  [more]



Bond Market and Yield Spread Update

August 05, 2010 – Comments (3)

Back in March, I wrote this post: What the Bond Market is Trying to Tell the Stock Market: A Look at the Yield Curve and Expectations.

Here is what I had to say then:  [more]



Mutual Fund Cash Levels Are at Bearish Record Levels

August 03, 2010 – Comments (5)

Very nice chart from Jesse at Jesse's Café Américain  [more]



How About You?

August 03, 2010 – Comments (12)

I love a fireside when a storm is due



John Hussman: Valuing the S&P 500 Using Forward Operating Earnings

August 02, 2010 – Comments (8)

John Hussman of puts out a Weekly Market Comment (which I highly encourage you to read every week). Per usual, this is another good article. This WMC discusses (obviously) a more rigorous approach to valuations and expected returns using FOE. Also there is a very important update on macroeconomic risks.  [more]

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