Saltpeter Rising (AOBC,AAPL,IEF,OSX)

It’s shaping up to be one weird summer.   Consider what our fellow Norman, Hugh L. O’Haynew, wrote last week about the market’s ‘fear gauge’, the VIX. And whaddaya know, last week the damned thing fell to 9.37, just spitting distance from her all-time low of 9.31 back in December of 1993.   As for volatility compression, of which Hugh spoke at length, we still haven’t seen anything noteworthy, though that doesn’t mean a meaningful decline has been avoided.  Everything is still possible.   Including War?   Now, we don’t like to get caught up in hysterics.  And the media is good at nothing if not that: working up folks into a lather – as, indeed, it appears the baseball shooting whacko from Illinois was.   But we can’t help feeling that conflict and rage and violence have managed to creep their way into our daily lives and find a more or less comfortable place there over the last couple of years.   The question is have we gotten used to it?  Are these phenomena now acceptable to us? Consider the following –   During the Obama years there was a huge spike in the number of ‘militias’ operating in…

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From Rio to Shanghai! (FXI,NOC,AAPL?)

From Rio to Shanghai! (FXI,NOC,AAPL?)   It’s always surprising to us just how much dissonance can exist between the news on a stock or sector, on the one hand, and the actual price moves for the security, on the other.   It can be outrageous.   So, for example, when you see the financial press go to town on Brazil or Twitter or the auto industry, it behooves you as a clever investor to take a look under the hood, kick the tires and offer a good long gaze at the nearest Brazilian Twitters you can find.   For the results are bound to surprise. We bring this to your attention because the current sound and fury surrounding the financial picture in China is one of awesome dread.  The Chinese banking system, you’ll read, is weak in the face of both credit and asset bubbles; the recent investment downgrade by Moody’s will gut the desire for Chinese securities; the rejigging of the currency peg – a move that took everyone by surprise – should scare the beJesuits out of you; the commodities glut… in fact, nearly every reason to avoid, flee, short or outright assassinate your Shanghai investments, is now…

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New Tech. New Mania. Old Bird. (AAPL)

New Tech. New Mania. Old Bird. (AAPL)   Ever since we gave up horse travel for railroads, folks have been giddy-up giddy over the latest tech innovations.  Investors, too, saw fit to jump from the buggy to the railcar to the telephone to the phonograph without missing the chance to be the first to own the latest.   Some inventions, of course, came and went and made their splash before being ousted by newer, trendier, or cheaper ideas (think Polaroid, Atari and the Commodore 64).   But others have stayed.  And a number have profited wildly as the pace of changed revved higher over the last quarter century.   We needn’t name names.  It’s clear who we’re talking about.  Many of them were part of the boom and bust of the dot.com bubble at the beginning of the century, while some emerged later, like Facebook and Netflix. And now…?   What we’re currently witnessing is something that has the makings of an equally troubling bubble – a nascent tech bubble, less than twenty years after the first.   Howzat?   Consider – the biggest five tech stocks in the country tacked on close to $700 billion in the last six…

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Best Be Bond Bound (IEF,AAPL)

Best Be Bond Bound (IEF,AAPL)   We’ve been surprised by action in the bond market of late, where an upward trend appears not only in the making, but at a time when rates are beginning to ratchet higher and the stock market has gotten some traction, one would think that Treasuries had little hope.   Not so.   In fact, before we get to the actual charts, consider a number of fascinating bond market data from the last couple of weeks.   To begin, we are now witnessing the largest short squeeze in the Treasury market since the world was created.   Look here – Better than $25 billion in Ten Year short futures have been closed in the last seven days.  Never has this occurred in so short a time span.   But more than that, the money didn’t just move to the sidelines.  Those same traders took active long positions in a swing the likes we haven’t seen since Brunehilda Zona’s chandelier act of the late 1950’s.   Have a peek at this – Over the course of the last two months, nearly $62 billion in 10Y Treasury shorts were closed, moving the net long position in the…

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Finally! A Financial Ever-gasm! (AAPL,TLT,SPY)

Finally! A Financial Ever-gasm! (AAPL,TLT,SPY)   Is this it?   Like the long sought after Fountain of Youth, have we finally managed to create financial perfection?  A means by which wealth never dies?  A device by which it only grows and grows?  Where profits are guaranteed in a never ending advance toward greenback bliss?   Could it be that there is, indeed, a place where glad tidings and robust, good cheer flow in swaying amplitude?  Where the champagne flows, the laughter spills and the bad guys are routed regularly?  Where the Leafs finally win the Stanley Cup? Could it be?   There are many who point to signs that the Trump Rally is coming to an end, but we say to hail with that!  Mr. Trump, it could be, has provided just the right mix, a perfect elixir of Tweetery and policy that’s neither too hot nor too cold that keeps the pie baking sweet and crisp for all eternity.   Could it be?   Let’s look a little deeper. We’ll start with the sentiment numbers we always rely upon to determine if a top is in, those from the American Association of Individual Investors (AAII).  They run a weekly…

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From Trump Tower to the Seeonee Jungle (EPI,AAPL)

The so-called ‘Trump Rally’, that daily confuses the wizards of Wall Street because it doesn’t want to roll over and die, had an equally confusing, initial effect on Emerging Markets traders.   Those markets, and particularly the big four BRIC countries, responded by taking it square on the chin for the first month after the election.  Their currencies, too, struggled in the wake of the the torpor and hysteria that prevailed in those first heady weeks of the transition.   After everyone calmed down, of course, the EMs quickly jumped on the bandwagon and have been streaming skyward ever since. Apparently, the confusion lay in conflicting understandings of the Trump team’s economic policies, and whether they, indeed, had a realistic chance of passage through Congress.  A subsequent softening of positions on trade played a role, too.  What began as a clear, strident anti free-trade agenda during the campaign may, in the end, not be legislated in its entirety so quickly, if at all.  And that, too, spurred hope among Emerging Market investors that it was safe to dive back in.   And now?   At this point, we’ve passed some major hurdles, including a number of important technical ones, and…

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Kissing Apples (AAPL,KSS)

Over the past month we’ve discussed in broad terms the notion of trading stocks for a living.  As we stated in Becoming an Independent Equity Trader, and then again in Short Sellers Disappeared? Time to Short, it’s by no means an impossible task.  So long as you’re a fella who has his wits about him and can adhere to a self-imposed discipline, you can likely make a successful go against the horde of math PhDs and trading algorithms of the Wall Street stalker set. You would need the appropriate tool kit, of course, and you’ll have to be proficient in employing it – as you would in any endeavor.  But the bottom line is plain: it can be done.   In our last discussion, we outlined the pyramid upon which successful trading depends, noting that without proper attention to:   a) system signals, b) proper money management principles, and c) psychology   there’s little hope an individual will consistently make money in the trading game.   ‘System signals’ was covered summarily in our January 19th letter.  And today, we briefly explain the need for proper a money management regimen.   We should interject at this point that our ultimate goal…

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Overripe Fruit (FNV, AAPL)

When the newspapers get shrill about absolutely everything that transpires in Washington, screaming maniacally that the train is off its tracks and careening headlong toward the Whos down in Whoville, and that we’re all doomed, there’s a killer on the road, the zero hour awaits, etc. etc…. it gets to be a little ho-hum.   So we say, anyway.   That never-ending, fever-pitched scream eventually morphs into an almost soothing, anesthetic sound – not quite a lullaby, but something akin to that, and one’s eyelids begin to flutter and before long the doze benumbs.   And at that point only one thing is certain…   When a genuine crisis hits, or a real scandal is thrust upon us, everyone will be fast asleep.   No one, but no one, is going to listen.  We’ll be a nation of Neros, fiddling as the country burns, because the hellfire screech of the media, sounding the greater alarm, that the sky was falling (when it wasn’t), inured us completely to the sound of a genuine siren.   We’re being drugged, friends.   Call it the incessant noise drug. No, not yet.  But we are rapidly approaching that hour when the whole thing will…

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The Madness of Trade Liquidation (TLT,AAPL,OLN,PM,MO,GDX,IYT)

You’ll have to forgive our French, but there are several sectors of the market that are taking an absolute ass-kicking at the moment, and we’d be completely remiss if we didn’t pony up and say something about them.   The first is the long bond – the entire Treasury complex, in fact – that’s been given a vicious stomping of late; its worst takedown in a year and a half.  But when you throw in the technical damage done, we can’t remember seeing a month this bloody since the meltdown of 2009 gutted close to 30% from Treasury investors’ pockets.   The second is the precious metals, including gold, silver and the miners, all of which have seen tremendous declines in the last three months and which could stand to lose significantly more if the stock market continues on its sexy way, drawing in fresh flows of funds from all manner of suitors domestic and foreign.   The third is a number of big tech and internet names that we’ll likely have to address in a coming letter.  There’s just too much to deal with given the space we have.   The Coming Madness   We’ll look at the charts…

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400 Decibels and Climbing (GDX,AAPL)

It’s another case of the circus noise masking the thieves’ million dollar getaway.   Who, after all, could hear the sound of that drill working behind the elephant cage amidst all that racket? It’s always been that way.  The news on the tube and in the papers trumpets WAR! FRAUD! MURDER! or RIOT! and the market is meantime smashing through its old highs while no one’s paying attention.   Call it textbook ‘wall of worry’.   The market is now drifting sideways, but we expect the post-election thunder, with its eternal debriefing and shrill accusation and counter-accusation to mask the rally that inevitably ensues.   You can count on it.   We’re just warming up.   Real Good News on the Way?   It’s always hard to judge your team midseason.  Everyone’s hopeful that the playoffs are a certainty and a championship year is within reach.  So it is, too, with earnings season.  Every new quarter brings investors renewed hope that the S&P will crush estimates and the markets will soar.   And that’s where we are now.   Here’s a look at the current quarter’s beat rate for earnings and revenues and – lo and behold! – what’s it…

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