Wednesday, October 26, 2011

Linkage roundup

Some reading material for you from my twitter stream:

RT @zerohedge: "It was grim. The worst mood I have ever seen, a complete mess," said one eurozone finance minister.

RT @TBPInvictus: My fave homemade chart on labor market slack and why inflation's a long way off: #FRED

RT @FactSet: What do yield curves tell us about the outlook for the world #economy? We take a look: -- Inverted Yield Curves are bad....

RT @simonsinek: Blow Up Your Business Before Someone Else Does 

TED spread going the wrong way --

RT @EpicureanDeal: This Switchblade drone is scary as hell: Long-distance, remote-controlled , tightly targeted antipersonnel munitions.

Good commentary by GaveKal on the current european situation.

RT @BreakingNews: Biographer says Steve Jobs refused early and potentially life-saving surgery on his pancreatic cancer - @CBSNews

RT @NicTrades: FT: French banks curbing credit lines for commodities trading -- What do you think will happen to all the base metals when Greece goes POP!  ??

#copper getting crushed today. Will it completely break down or bounce off the bottom again? -- looks like it bounced.

Italian bond yields going wrong direction.

RT @lessig: Ben Smith is brilliant: An Occupy Wall Street/Tea Party Venn diagram #rootstrikers #tpp

Tuesday, October 25, 2011

Ray Dalio on the challenges in front of us

Ray Dalio of Bridgewater Associates has recently appeared on the Charlie Rose show as well as written a piece for the Financial Times. I think he does a good job of describing how we got here (continually borrowing money to improve our standard of living) and the tenuous situation we find ourselves in (Greece, falling home prices, etc.)


We are in the midst of a deleveraging, we are nearly out of ammunition and we are at each other’s throats. Being in a deleveraging and nearly out of ammunition is a very difficult position to be in. But, being at each other’s throats is our biggest problem.
Our character and our political and social systems are now being tested in ways that have typically been tested in past deleveragings. In deleveragings bad economic conditions typically lead to emotional reactions, social and political fragmentation, poor decision-making and increased conflict. When this occurs in democracies, the checks and balance system, which is intended to yield the best decisions for the whole, can stand in the way of thoughtful leadership and lead to ineffective “mob” rule. This dynamic can lead to a self-reinforcing downward spiral.
The video goes into a little more detail of his philosophy of knowing what you don't know and being willing to have your ideas and conclusions challenged throughout the corporate structure.  I suggest you read both the article and watch the interview.

Thanks to The Intrigued Trader and Also Sprach Analyst

Thursday, October 20, 2011

Linkage roundup

Some reading material for you from my twitter stream:

RT @pdacosta: World's first malaria vaccine works in major trial

Custody of your assets is ALWAYS important, no matter what...

RT @planetmoney: New podcast: The price of default. Argentina's default in 2001 offers a cautionary tale for Greece. |

RT @niubi: China reveals size of copper inventory - huge news $$

RT @NicTrades: Japan 'offers 10,000 free trips to foreigners' in an attempt to boost tourism - Telegraph

Paging radioactive swan, paging radioactive swan...

From @ProfSteveKeen We are still screwed and the Doctors have no clue what's wrong HT @stacyherbert

Worried about radiation? There's an app for that.

Prehistoric kids left marks in caves.

Saturday, October 1, 2011

You don't buy the last bounce, especially when Mars Attacks

I don't usually comment on the price of the equity markets but considering what I'm seeing I thought I'd bend one of my self imposed guidelines. Remember you are hearing this from someone who does not see any positive forces influencing the market right now.

The markets have been pretty much stuck in a rut since early August and seems to be driven by the constant stream of contradictory rumors coming out of Europe. Will they save Greece? (no, they can't) Will the European banks be nationalized?  (no idea, but I'm not hanging out to find out)  Meanwhile China's negative real rate maneuver and excessive credit creation is coming back to haunt them.  And America is slowing down.

Stuck in a rut for the last two months.

Here are some of the indicators I look at to assess financial market risk and as you can see all of them are going the wrong way.

Notice how the TED (Treasury - Eurodollar spread, an indicator of banking stress) peaked and started healing before the market bottomed in early July 2010; showing a positive divergence.

The spread for emerging market bonds also shot up before the correction in 2010 and also showed a similar positive divergence. Right now spreads continue to widen.

My own proprietary indicators are not showing any sort of improvement either, again the opposite of 2010.
Note how in 2010 risk stopped going up.

Compare to 2011 where the RiskMeter keeps going up. 

Do I think the market is going to crash? I can't answer that question.  If the European situation looks like it can be truly resolved we could get a serious rally. I'm waiting to see what my fundamental indicators of market health tell me before I get back into the stock market.

Right now they are saying wait.

Remember, no matter what happens there's someone out there who'll be trying to convince you to buy stocks right now.

Additional Reading: - He's been calling for a slowdown for a while and he just upgraded to calling for a recession this week.

Humble Student of the Market - Germany engaging in expensive can kicking. We may get a bounce but it does not fix the fact Greece has too much debt. Who owns it is immaterial.