Archive - Nov 2010 - Blog entry

Why should this time be different as the current conference broke up with NOTHING accomplished other than to promise to get right on these issues at next year's meeting. REALLY?

The approval of a massive 2.8 megawatt plant in California is a game changer for the solar industry. Entering the big time. It’s all part of a rush to start alternative energy projects before Federal subsidies from Obama’s 2009 stimulus package expire at the end of this year. This one plant will provide about 15% of the total residential power in California. Will the Golden States become the first to free itself of hated foreign oil imports?

"Once they get their hooks into you, you're a dead pigeon"--Bud Abbott

Retail traders are notoriously wrong at picking market direction/tops and bottoms. Most retail traders very naturally seem to adopt a counter-trend stance and this offers very accurate signals for individuals looking to trade against this group. This daily report is designed to help traders focus their efforts on higher probability pairs.

The market slid today as Cisco spooked investors with a bad Q as they are still struggling to come up with a hit after the Thong Song, the G20 meetings proved to be less positive than a Helen Thomas pregnancy test, and macro news was more non-existent than dark matter (for now), as...

No increase in taxes sounds good. But nothing is free.

In fact, just yesterday we had a TERRIBLE 30-year note auction on just $16Bn worth of notes. Already Ben is pretty much the only buyer of Tim’s trash paper and, as that bid to cover ratio drops below 2:1, you’ll see rates begin to tick up dramatically, despite the Fed’s best efforts to contain them and that will put pressure on houses, corporate debt, government debt, municipal debt etc and suddenly we’re Greece.

According to the C.D. Howe Institute, Canadian government pensions are grossly underestimating their pension shortfalls and so are European and US governments. Will pension shortfalls trigger the next sovereign debt crisis?

Pixilating the News...

So here were are in 2010 and the US and China are now butting heads in a major way. The US (debtor, consumer, declining empire) wants to devalue the Dollar and export inflation to China. China (creditor, producer, rising empire) doesn’t care for this arrangement as its hurts profit margins at Chinese companies, increases food inflation (food is a higher percentage of income for the average China compared to the average American), which in turn means civil unrest.

What do "hot money," gold, sovereign debt, foreign trade, and Germany and China all have in common? Everything. They are all lined up against the U.S. and our new quantitative easing (QE2). There is fallout related to quantitative easing, and the markets are reacting, from the Fed's perspective, badly.

Earlier in the week we posted that Market-Neutrals were deleveraging, we then further speculated that a market drop would soon follow as liquidity disappeared and small sell block trades would move the market. We received many emails from individuals asking for further explanation of this metric and why we feel it is a useful indicator to look at. While this is merely a theory with no empirical evidence, we would like to display the following chart 2-year with daily closes in which m/n's rapidly delevered days before a market drop. On all 5 occasions, the rapid decline in HSKAX was indicative of the S&P500 index experiencing further weakness.

Visiting the world’s most overpriced asset. The recent action in the markets suggests that the big turn may finally be behind us. Why have bond prices been falling for the past month, despite an assumed promise by the Fed to provide unlimited amounts of liquidity? (TBT).

China is decades ahead of the global curve when it comes to understanding the strategic importance of rare earths. But with demand set to double to 225,000 tons by 2015, not accounting for the burgeoning green energy industry, nobody's immune to the coming supply shortfall, including China.