Saturday, September 13, 2014
Friday, September 12, 2014
Vix is >+2SD, which is a good time to not be in the market:
Except it's not >+2SD:
It's only >2 standard deviations above norm if you use a period of 20. That's because of that little $VIX spike we had more than 20 days ago: if you select a period of 20, it falls out of the equation, and thus the Bollinger bands for a 20 period tightened a few days ago.
The Bollingers for a 30 day period (second chart) are still big because the spike hasn't fallen out of the dataset yet.
Thus today's $VIX is only a statistical outlier if you cherry-pick your statistical set to make it so.
That's an important thing to remember about all statistical TA indicators: they depend on the dataset. If your local TA doesn't quality-check the dataset for sources of error, then he's an idiot and you should ignore him from now on.
So, because the Bollinger function is telling me two different things depending on the dataset, I'm going to ignore the Bollinger indications for this present situation, and concentrate on $VIX's relation to the short-term EMA (which shows it still in an uptrend) and also keep an eye on the VIX futures curve (not remotely inverted yet at all, still boring) and HYG (which has been doing nothing for 2 days, but still has a chart that hints there might be a change taking hold in the character of the high-yield market's performance).
Some reading for you:
Bespoke - gasoline prices lowest since February. If this trend continues, just imagine what a boost it'll provide to consumer spending!
Ritholtz - buying stocks based on how other people feel. How sentiment is bullshit. I'd point out that retail has proven itself not to be the "dumb money": over the past 6 years, the dumb money has been the hedge funds.
FT beyond brics - China's problem is not property, but too few modern homes. Still lots of room for capital investment in China. And given they're a command economy, they can accelerate development instead of letting the drunken invisible hand do its job - the way it's done so well elsewhere in the world, where the poor still live in tin-roofed shacks.
FT beyond brics - EM companies face end to easy growth. That's a secular change, buddy.
Reuters - India's love affair with gold may be over. Wait a sec, is there an upcoming OpEx that I don't know about? Usually these stories are only paid for when there's an upcoming option expiry.
Mining.com - iron ore bears come out in force. I think the whole Jim Rogers "EM bear/commodity bear/DM bull" thesis has now gone mainstream. Is anyone of any consequence or intelligence still arguing against it? If not, why aren't you investing based on it?
WTF? Now even Slowdive have reformed?
WTF? They even played the Treffen Festival? WTF?!? In the Agra in front of 3000 goths?
WTF? They're even on tour?
And they're playing Toronto on October 28th?
I saw them with Catherine Wheel in Toronto, maybe around August or so 1993. Someone fell in love with me that night. So while I couldn't be arsed to go to a MBV reunion gig, I might just go to see Slowdive.
Thursday, September 11, 2014
On a weekly close below $1.90, B2Gold will
Some will be underwater by 50%. Most will be underwater to the tune of 30% or more.
And they'll all see the lower low, and expect there to be more of a price drop to come.
So Clive, you were once great and all, I was your biggest fan, but in the words of Gary Oldman:
At this point it's your responsibility to identify the origin of your suckitude, and determine how you can stop sucking in the future. Cos right now you've disillusioned about
Figure out how not to be the turd in the punchbowl, Clive.
And what about the monsoon?
Economic Times - heavy rains narrow rainfall deficit from 15% to 11%.
This doesn't directly address the question of harvest yields.
But I guess we can hope that the farmers sowed late to miss that first horrible month, and that the monsoon might retreat later than usual so that the crops still get sufficient rainfall.
An 89% rainfall should, on the aggregate, have no negative effect on harvest tonnage, according to the past several years of data. It's only when you get 80% or less that the harvest craps out.
But I guess the market feels that Indian farmers aren't going to buy any gold anyway.
Here's the daily silver chart:
Oh my! <-2SD and down below the June low?
To shreds, you say!
Well, how's the weekly candles look?
To shreds, you say!
On a weekly close below $17.75 all hope is lost. Seriously, go ask your goldbug TA buddy what the downside target is of a break of the triangle's support. Hint: it's around $13.50 if he uses log charts, $12 if he uses linear for some stupid made-up reason, and all the silverbuggery and Sprott-worship in the world ain't gonna change that.
Click through for my prediction for what happens to silver next.
Mining.com - case against 26-year-old mining CEO dismissed. Here's the kid, Aaron Thomas:
Here's what the shareholders alleged:
Thomas, who was fired this year from the company he founded in 2010, was accused by the remaining shareholders of embezzling money to buy luxury cars, private jets, exotic vacations and $20,000 breast implants for his Brazilian fiancée, among other extravagant expenses.
Moral of the story?
No judge in the world will ever find you guilty of a crime if you invest in fake tits.*
Here endeth the lesson.
* - though I fail to see why a presentable 26-year old millionaire CEO can't find a hot Brazilian fiancee with real tits.
You know I'm intrigued by the inverse $VIX ETF XIV, and I often trade its Canadan counterpart HVI.
And you've read in the past how I'm a bit scared of it as well, because I don't understand how it makes such a fantastic return.
Anyway, I found a bunch of articles at Six Figure Investing on the topic of XIV, so I thought I'd share them:
Six Figure Investing - for inverse volatility, the winner is XIV. Quote:
This Easter one of my brother-in-laws asked what I was investing in. My response was “inverse volatility.” I might as well have said pixie dust. I stood there wondering where (or if) to start. First you have stocks, then you have the S&P 500, then you options on the S&P 500, then you have implied volatility calculations, then you have futures on volatility, then you have ETNs with rolling mixtures of futures on volatilty (VXX), and then you have the inverse (or the short) of that. We looked each other in the eye and wordlessly agreed that we wouldn’t start.So when he mentions the contango of VXX, is he suggesting that XIV really makes its money shorting decay?
I like inverse VXX/VXZ investing. It’s seldom boring and over the long run the advantage is on your side. Volatility has a return to mean behavior, and volatility futures are almost always in contango—which erodes the value of VXX. If you buy inverse volatility when the VIX is relatively high, your chances of making a good profit eventually are very good.
Six Figure Investing - how does XIV work? Quote:
Unfortunately it’s not possible to directly invest in the VIX, so the next best solution is to invest in VIX futures. This “next best” solution turns out to be truly horrible—with average losses of 5% per month. [....]Again, so you're really making money on decay?
This situation sounds like a short sellers dream, but VIX futures occasionally go on a tear, turning the short sellers’ world into something Dante would appreciate.
Six Figure Investing - contango losses. Again, so is it
Six Figure Investing - IVOP and XIV and termination events. One of the things I've been saying is there has to be some massive drawback to buying XIV, or else the market would abandon stocks entirely and just short volatility. Money is supposed to maximize return, right? In this article the author points out that XIV gets liquidated on a big drop. That, to me, is one scary frickin' risk. Quote:
With XIV termination (or “acceleration” in marketing speak) relates to daily percentage moves. If VXX jumped more than 100% in a day, then if VelocityShares didn’t terminate XIV its notational value could go to zero. They avoid this particular unhappy situation by terminating the fund if the daily move of VXX is 80% or more—although losing 80% in one day would still be plenty traumatic.So I guess we can put a big red star beside "liquidation" as a significant "you won't ever sleep again, and good luck finding a therapist that'll take you" downside. I've been reading the HVI prospectus and haven't seen any direct mention of this provision there, but as noted above (if HVI is structured the same as XIV, which it seems like given how well it tracks XIV) the notional can still drop to below zero on a >100% daily VIX jump if there is no liquidation provision; so Horizons must still have one. Scary.
Just to be clear, these funds aren’t tied directly to VXX, but rather the underlying futures contracts, but I believe VXX is a good proxy for the situation.
The termination risk for XIV appears to be limited to market crashes worse than the Flash crash. Two examples that come to mind are the 2009 crash and the October 1987 crash. VXX didn’t exist for either of these. I have analyzed VIX data (or simulated data) since 1992—there were 20 days with VIX jumping over 30% (previous day close to intraday high) during that period. The highest percentage jump over that period was 70.5% on February 27, 2007. There were three days with VIX jumps over 30% in the 2008/2009 crash, and during the Flash Crash.
Six Figure Investing - under the hood of XIV: cause for concern. Two years ago he expressed the same fear that I did more recently: the massive influx of new capital into the inverse-VIX ETFs might just be moving the market. After all, you're shorting the premium on downside protection, which makes downside protection cheaper, which makes it easier for others to hedge, which might make the market levitate up faster than it should. XIV essentially causes $VIX to give the market a false signal, and we all know how much of the market is being run by algos nowadays.
Then again, if XIV only has $670M in it right now, that's not much in comparison to the total size of the futures market, right? So maybe we don't have to worry until the day that everyone's gone short $VIX: at that point one little wobble in equities will wipe out the market like Chicxulub wiped out the dinosaurs.
Til then, though, eat dance and be merry.
Six Figure Investing - taming inverse volatility with a simple ratio. Problem is, this system will likely work until it doesn't.
Wednesday, September 10, 2014
Whenever I get a rash of hits for my Raoul Pal post of a year ago, I go to check out what this clown is doing now.
In case you don't remember, Mr. Bottom-Tick Raoul Pal predicted an imminent collapse of Western civilization. In fact, his prediction came out on 1 June 2012.
If you had shorted his idiotic, childish, infantile prediction and bought SPY, you would have made about a 57% profit since then. 65% if you'd bought QQQ. If you'd shorted $VIX with XIV, you would have made about 430%.
Raoul Pal basically bottom-ticked the one best day to buy the market in decades. You can truly make a fortune doing the exact opposite of what this buttmonkey says.
So what's this clown up to now?
BI - Mister Bottom-Tick Raoul Pal, the fucktard who got the past two years completely fucking wrong, is launching a "TV channel".
Awesome. You can apparently subscribe to his internet "TV channel" for $400 a year.
In fact, his special introductory rate is only $200 if you act quickly!
He thinks someone's going to pay $200 for a year of blather from some assclown who can't even get the market right?
Wait: let me clarify that.
He thinks someone's going to pay for the privilege of losing even more money by listening to this fucking clown.
The real crime here is that Joe Wiesenthal still gives this assclown free pixels for his idiotic ventures.
Hey Joe, David Icke is still around. Why don't you run a few articles on him too? I'm sure he must have a speaking tour that you can promote. Get him on the topic of how the economy is being manipulated by the planet Nibiru and Bohemian Grove, that'll be good for some clicks.
Or what about the Church of Scientology, Joe? Why not run an article on what they think of the economy? They'll instruct their membership to click on the article's ads a hundred times and all of a sudden your shitty website will be making money.
I don't know anything about Peru, except it's down there somewhere beside Columbia. Oh and they're communists of course, and they hate America. Yup, that's about it.
But after doing a youtube search for "chicas peperas", entirely in the interest of searching for cautionary documentaries, I seem to have instead come across a Peruvian girl group.
They're not really anything like our girl groups up here:
The girl with the mandolin is really the only one I'd actually hand crackers to.
Tuesday, September 9, 2014
This is a work of utter genius from years ago.
There's an IRC chat. The people in the chatroom include Aphex Twin, Wagonchrist, Squarepusher, a constantly ignored Moby, Plaid, Prodigy, Crystal Method, Paul Van Dyk, Plastikman, William Orbit, Orbital, The Orb, Autechre, Matmos, 808 State, Underworld, Arovane, the odd incoherent message from Bjork, and the odd very incoherent message from Boards of Canada.
Except not really.
Anyway, it's a fake chat between the various electronic artists of the age, and it's hilarious.
Spaz.com - *** Topic is 'WHOEVER I LENT MY NORD MODULAR TO /MSG ME ASAP'
Here's some news:
Calculated Risk - job openings up 22% yoy. Would you say the US jobs recovery looks sustainable?
Gavyn Davies - the US recovery looks sustainable. Quote:
With the crucial exception of the labour participation rate (which the same Fed authors say is driven mainly by demographic and other structural factors, and is therefore unlikely to rebound), most labour market indicators are moving towards previous mid cycle norms, and a few have reached there already.So you tell me which direction the market should go.
So much for the demand side of the question. Now for supply.
The economy could run into supply side constraints that lead to overheating, as it normally does in late cycle phases. But, despite the weakness in labour supply growth, which will cut potential GDP growth by 0.5 per cent per annum, it seems premature to worry too much about capacity limits at present. Labour and capital resources are still under-utilised. Productivity growth should rebound as investment picks up.
FT beyond brics - the EM selloff already started. And the selloff started in the FX market. But I guess Josh Brown doesn't may attention to FX markets, and that's why he's now gonna get caught with his pants down.
Mining.com - Chuck Jeannes says we've hit peak gold. Uh, Chuck? Yeah, Barrick was saying that in 2009. Look it up. You're such a johnny-come-lately.
IKN - on gold mining costs. Junior gold miner seeker presents the case that gold simply can't drop to $1050 if you want anyone to mine it. Well, we'll see.
Monday, September 8, 2014
Oh, internet! You will always be a source of merriment!
Did Cookie call something "another Voisey Bay"?
I wouldn't want to know, since he might have meant "another horribly inaccessible monster deposit five thousand miles from civilization that will take ten years to develop, need its own bulk carrier ship, and be subject to constant government interference".
Cuz he has a sense of humour you see.
And yes, hail Satan to Katy Perry. If she serves the dark master then I wanna get me some hot sticky Satan.
HYG is doing that thing again:
HYG has broken below its SMA(50) on a few days of selling.
The last time junk broke down, the lamestream media freaked out with stories of impending doom for weeks - until junk had recovered 80% of its July drop, remember? So maybe this new downward spike can act as fuel for another small equity correction.
And everyone seems to be wanting a September correction anyway. So I guess that's what we'll have.
And here's $VIX:
It began a slight upward trend 2 weeks ago, but I was ignoring it til now. Now, however, it's moved beyond its short EMA and seems to want to break through the descending +2SD Bollinger line. Note that August printed a higher low in $VIX from July - not that that matters at all for an index of downside protection, but dumbass chartists will be dumbass chartists, right?
Put those two together and I guess we get a correction. Certainly that's how the algos will trade it, right? I man, what other inputs can you use for a downside risk model?
I'll be interested in whether we can see HYG below $91.50 and $VIX above 17; if we can get both of those conditions, people might really start to freak out. A freak-out like that will set up a fantastic $VIX short opportunity for me.
The US economy is not doomed and the only reason to not be long is because you want to get longer lower.
But for now, I've closed half my US equity positions for small profits, to take some risk off the table. We'll see if that was a good idea or not.
SLV weekly candles:
Below $17.50, this chart turns into a screaming massive short. One of those shorts that really brings out the bloodlust among the commodity traders, I'd think.
I wouldn't own a silver miner right now. This is a point in the silver price chart where I'd put a no-questions-asked sell stop on everything; I'd be worried about waking up tomorrow to a 10% drop in the silver price and a crazed stampede for the exits in the miners. If that support line breaks, I'm worried it'll break with conviction, similar to the April 2013 PM collapse.
I don't see a reason why gold would collapse at the same time, but the problem is that moves in the junior gold miners do still correlate strongly with moves in the price of silver. So maybe the juniors turn into a screaming massive short as well? We'll have to see.
Frankly, SLV below $18 would make me start to think that the entire commodity supercycle is at an end. With silver dropping, you have to ask yourself whether energy and base metals soon follow.
And what will that do for the US economy? Something good, you think?
Maybe nothing happens. Maybe the drop right now is coming from early shorting in anticipation of a support break. Maybe you even get a break and a fakeout with a strong recovery. But I'm not interested in playing those types of moves.
With the clobbering of all the other miners today, what about Rio Alto?
It was advancing strongly in the face of all the doom.
But today it seems like it's giving up.
Maybe it just has to sell through all that accumulation that happened from $2.20 to $2.95? Or maybe it just drops to the 50-day. Now, Rio sucks a heck of a lot less than it did before the Sulliden buyout, but you know how little the miner market cares about fundamentals when the price of gold is going down.
In any case, Rio going down means you don't have to buy Rio til after it's done going down. And you might want to sell Rio now that it's finished going up.
Thus, Rio goes down from here.
Let's look at some US-listed silver miner charts:
Down a quarter from its peak in July, nearly -2SD, next support is $3.75-$4.25 which is another 10-30% from here. Oh my.
Hecla is -3SD, down 20% from its July high, and a print below $2.72 or so sets up a lower low. Oh my.
Silvercrest is already down 30% from its June high, it's <-2SD, and it's only another 10% to get to its $1.60 print of late May, after which you gotta wonder how much lower it goes.
My take on this?
I think a lot of people who thought themselves so darn clever for buying silver stocks are feeling a lot less clever now.
And I think the people who bought low-liquidity silver stocks are feeling even less clever, now that they've seen they're not the first ones out the door.
It'd be interesting to compare pure silver plays versus silver-zinc-lead plays; then again, I bet the zinc-heavy silver miners are also getting clobbered.
Ford Motor Co.:
It's -3SD on a supposed Morgan Stanley downgrade and $16 target. And maybe there's something else about a China recall, which really means the recall news has already been baked into the price.
Thing is, with a 13 cent quarterly dividend, this stock yields 3.1% right now - that kind of yield for a cyclical just looks stupid to me. And US auto sales should continue to grow; the US fleet is still too damn old. And Ford is the company that makes light trucks for construction.
I'm not buying because the bank makes love to my bum with its insane forex charges, but I don't get why everyone else shouldn't be piling in on this stock right now.
Sunday, September 7, 2014
New Deal Demoncrat - weekly indicators. Everything's still fine, and there's nothing in the economic indicators that coheres with this week's bad jobs print. So quit piddling your frilly pink panties. Or in the words of the late great Chopper Read: