Stampeding Animals

The mass impulse of a cattle stampede can be triggered by something as innocuous as a blowing tumbleweed.  A sudden startle, or a perceived threat, is all it takes to it set off.  Once the herd collectively begins charging in one direction it will eliminate everything in its path.

 

bison-herdBetter get out of the way… stampeding bisons

Photo credit: Surface Niusance

 

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What Determines a Currency’s Value?

At the end of March the price of the euro in terms of US dollars closed at 1.1378. This was an increase of 4.7 percent from February when it increased by 0.3 percent. The yearly growth rate of the price of the euro in US dollar terms jumped to 6 percent in March from minus 2.9 percent in February.

 

1-EURUSDEUR-USD, 2007 – today, monthly – click to enlarge.

 

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The Inflation Illusion

We hear more and more talk about the possibility of imposing negative interest rates in the US. In a recent article former Fed chairman Ben Bernanke asks what tools the Fed has left to support the economy and inter alia discusses the use of negative rates.

We first have to define what we mean by negative interest rates. For nominal rates it’s simple. When the interest rate charged goes negative we have negative nominal rates. To get the real rate of interest we have to subtract inflation from the nominal rate, so to speak remove the illusion of inflation.

 

1-real FF rateThe “real” federal funds rate (effective FF rate minus CPI-U y/y rate of change)

 

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Bill Kristol – the Gartman of Politics?

It has become a popular sport at Zerohedge to make fun of financial pundits who appear regularly on TV and tend to be consistently wrong with their market calls. While this Schadenfreude type reportage may strike some as a bit dubious, it should be noted that it is quite harmless compared to continually leading people astray with dodgy advice.

 

2ED3-FM-0915GartmanBullishTo answer the question posed in the picture with the benefit of hindsight: not really…. (look at the price)

CNBC screenshot

 

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Erroneous Analysis of Precious Metals Fundamentals

We came across an article at Bloomberg today, talking about silver supply troubles. We get it. The price of silver has rallied quite a lot, so the press needs to cover the story. They need to explain why. Must be a shortage developing, right?

At first, we thought to just put out a short Soggy Dollars post highlighting the error.

Then we thought we would go deeper. Here’s a graph showing the price action in silver since the beginning of the year, overlaid with our abundance indicator.

 

chart-1-abundance Silver price vs. silver abundance – click to enlarge.

 

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The Wild 1990s

Not so long ago, during 1990’s, the connecting world of the connected world we now know was literally and comprehensively in the development stage during those wild crazy go go years before the crash in technology stocks in 2000.

 

Nasdaq BubbleThe infamous tech bubble of the 1990s – to this day the greatest stock market bubble ever seen in the US (in terms of multiple expansion, intensity, public participation, speed and extent of the blow-off phase) – click to enlarge.

 

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Laughing at Blue Monday

On May 28, 1962 – dubbed “Blue Monday” – the market fell 6%… its worst single-day slide since 1929.

Peter Stormonth Darling was an investment manager at investment bank S. G. Warburg & Co. at the time. He strolled in to tell his boss, Tony Griffin, how much the market had fallen.

 

1-DJIA, 1961-1962-annThe DJIA in 1961 – 1962. March – June 1962 delivered quite a scare to investors – in May the decline accelerated, as panic began to spread – click to enlarge.

 

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The Cracks in the Economy’s Foundation Become Bigger

Last week the Bureau of Economic Analysis has updated its gross output data for US industries until the end of Q4 2015. Unfortunately these data are only available with a considerable lag, but they used to be published only once every few years in the past, so the current situation represents a significant improvement.

 

decay-3Decay…

Photo credit: bargewanderlust

 

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Searching for Victims

If like me you were a Monty Python addict back in the days then you are probably familiar with the phrase ‘And now for something completely different’. As you probably know we’re in the midst of Q2 earnings season right now, and Jay The Executioner in collaboration with yours truly has been on the hunt for potential IV crush victims.

 

crushing_tank-1000x622A tragic victim of Operation Volatility Crush.

Photo via gdefon.ru

 

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Market Breadth Divergences

[ed note: readers not familiar with Frank’s trading system can look at an introductory article here: The Modified Davis Method

Over the years I have developed a lot of respect for the condition of bearish breadth divergence, when an index such as the S&P 500 is rising and the NYSE daily cumulative advance-decline line is not.

 

1-NYSE-a-d-lineNYSE advance decline line vs. NYSE index – currently breadth is strong, as many of the market’s previously weakest sectors (particularly commodity stocks, transportation stocks and industrials) have begun to rally strongly. However, tech stocks and other momentum favorites have begun to lag – click to enlarge.

 

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Insulting Mr. Erdoğan Can Be Dangerous

Most of our readers are probably aware by now that the German government finds itself in a rather awkward situation over its relations with Turkey’s government again – with which the EU has just struck a widely criticized and very expensive deal to help it stem the flood of refugees.

One thing is absolutely certain about Turkey’s president Recep Tayyip Erdoğan: He has no sense of humor whatsoever.  As of early March 2016, 1,845 lawsuits were pending in Turkey for “insulting the president”. To see how extremely ridiculous most of these cases are, consider the one involving the pictures below:

 

 

golloerd22aBilgin Çiftçi was fired from his job at Turkey’s public health service last October and detained after comparing Erdoğan to Gollum. He could face up to two years in prison. His lawyer Hicran Danisman said she was forced to argue in court that “Gollum is not a bad character” because she “got nowhere with a defense case based on freedom of expression”. The trial has now been adjourned to give the court time to “consult with a group of experts on whether Gollum is a good or a bad character”.

 

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The Prices of Gold and Silver Drift Apart

Another interesting week, in that the price of silver separated from the price of gold. The former went no nowhere, while the latter gained over 4.5%.

We get the trading thesis, that if the precious metals are in a bull market, then silver should go up more than gold. Silver is the high-beta gold. It’s a smaller market, less liquid, and at the same time it’s the preferred vehicle for betting on a rising price.

 

Entering-The-MineInside the Sierra silver mine in Wallace, Idaho

Photo credit: silverminetour.org

 

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