We all know the Fed Decision now. The MBS and Bond Buying Program is cut back by 10 Billion Dollars a month even though relatively bad financial news was prevalent in recent releases. The Stock Market reacted by selling off from about S&P 1781 to SPX 1770.45 afterwards, then closed at 1774.20 in an hour and a half of mixed trading. It was off 18.30 points for the day. This went down again after recovering much ground from the recent Thursday through Monday Morning selloff. The Asian Markets are down a percent halfway through the session at 10PM Eastern. It is a worldwide thing now as every central bank follows suit and tightens monetary policy. Not as tight as Turkey, but tightening nonetheless.
Now is the time for the markets to pout like a child being relentlessly drag-marched past the candy store window with no pause. We are into a new era of dialing up the Wah-mbulance 111 as the correction comes, but may not go as soon as they have for a banner 2013 market year performance. Cushy Fed Policy has taken a sidestep and the novice bicycler has to pedal. Old folks are cautiously optimistic as they watch the reaction. Some are old enough to remember 1934 all too well, but were comforted that Ben Bernanke was spending his whole academic career preparing for such a second take at the Depression.
Should one doubt the worldwide effect this Federal Reserve Policy would have, they can see now. Emerging markets are also tightening up and turning the lights on at the party. The Fed has ruled the roost nearly since the Airplane became mainstream, and presided over the money since before even the USSR was formed in a badly failed shot at a money-less society. Marx just ignored that part. It kept score over a couple World Wars and the rise of the automotive Hydrocarbon Economy. It still stands after several successive failed attempts at establishment of a tweaked "Good German Political System," to go with the refined money system born of Frankfurt Goldsmiths.
Ben is off to retire to the speaking circuit now and to write his memoirs after presiding over the 2008 Financial crisis. Enter Janet Yellen, another Fed board member, and the juggernaut goes on. We will have to wait and see where this all settles as time marches on. A bear market may be on us but for how long is unknown.
Wednesday 29 January 2014
Tuesday 28 January 2014
Ben Bernanke and the Federal Reseve -
Presently the Federal Reserve is having their monthly meeting. These meetings garner garner a lot of interest these days for several reasons, but mostly because people want to know how they will adjust the Forward Guidance, or unprecedented injection of liquidity to the mortgage backed security (MBS) buyback and bond buying programs they initiated with Quantitative Easing.
It is also Ben Bernanke's last such meeting as Chairman of The Federal Reserve (System.) The stock market has had a love-hate affair with Ben over his two terms at the helm as the Dovish (Easy Monetary Policy) Chairman, moderating the various Doves and Hawks on the Federal Reserve Board. Hawks want to get the Fed back in the business of moderating the money supply by raising interest rates, and letting the market take care of bad mortgage backed securities.
OK, so call me Captain Obvious, but just walk up to anybody and try to explain this. They generally won't know what you are talking about. A lot of the ones that think they do advocate abolishing the Fed, which is basically like the passengers voting to turn off the airplane engines over the Pacific Ocean. Alex Jones and a zillion other Conspiracy Theory websites told them it was a good thing. If you are losing the game, cut down the scoreboard. Then they can Occupy a world of total chaos without any money for Anybody. I hazard a guess they have thought this through. Their nirvana has no guns either. Those pesky remaining guns will be the New fungible proxy of goods and services to lighten their "Ronulan" load of copper, silver, and gold.
So it is a safe bet that they will eliminate themselves and we will be right back to square one waiting on the monthly Fed Meeting Rate decision, with a later Press conference, at 2 PM EST Wednesday. At that time we will also see if Easing will continue to be Tapered off with Treasury and MBS buybacks. Durable goods purchases were bad, but bad is good in this reverse world where anything bad means more easing in the money supply. And it is more inflationary pressure pouring another few buckets of water intothe already waterlogged slow boat to retirement.
In this shell game, markets have a faster reaction than you can see on the street. They are already "baking it in" even before the meeting as they see the open poker hand the Fed has, but not the hole cards. For that we have to wait, then read 'em and weep. Ben has already telegraphed his strategy with the "Whatever it takes" monetary policy intentions. This is akin to ensuring the engines of our airplane have enough fuel. Hopefully someone installs another engine before the sheer weight of the fuel starts our downward trajectory to the Ocean. Let's just hope a Scully protege is at the controls, but then what? Stay tuned...
It is also Ben Bernanke's last such meeting as Chairman of The Federal Reserve (System.) The stock market has had a love-hate affair with Ben over his two terms at the helm as the Dovish (Easy Monetary Policy) Chairman, moderating the various Doves and Hawks on the Federal Reserve Board. Hawks want to get the Fed back in the business of moderating the money supply by raising interest rates, and letting the market take care of bad mortgage backed securities.
OK, so call me Captain Obvious, but just walk up to anybody and try to explain this. They generally won't know what you are talking about. A lot of the ones that think they do advocate abolishing the Fed, which is basically like the passengers voting to turn off the airplane engines over the Pacific Ocean. Alex Jones and a zillion other Conspiracy Theory websites told them it was a good thing. If you are losing the game, cut down the scoreboard. Then they can Occupy a world of total chaos without any money for Anybody. I hazard a guess they have thought this through. Their nirvana has no guns either. Those pesky remaining guns will be the New fungible proxy of goods and services to lighten their "Ronulan" load of copper, silver, and gold.
So it is a safe bet that they will eliminate themselves and we will be right back to square one waiting on the monthly Fed Meeting Rate decision, with a later Press conference, at 2 PM EST Wednesday. At that time we will also see if Easing will continue to be Tapered off with Treasury and MBS buybacks. Durable goods purchases were bad, but bad is good in this reverse world where anything bad means more easing in the money supply. And it is more inflationary pressure pouring another few buckets of water intothe already waterlogged slow boat to retirement.
In this shell game, markets have a faster reaction than you can see on the street. They are already "baking it in" even before the meeting as they see the open poker hand the Fed has, but not the hole cards. For that we have to wait, then read 'em and weep. Ben has already telegraphed his strategy with the "Whatever it takes" monetary policy intentions. This is akin to ensuring the engines of our airplane have enough fuel. Hopefully someone installs another engine before the sheer weight of the fuel starts our downward trajectory to the Ocean. Let's just hope a Scully protege is at the controls, but then what? Stay tuned...
Monday 27 January 2014
Anatomy of the Volatility of Market Corrections 2013 YTD
Looking back at previous Market corrections over the past year, there were several. We know that past performance is no guarantee of the future, but was there any similarity?
On Monday, February 25, the second largest correction rose out of a rising week of uncertainty that started February 20 with a large 25% volatility rise over that day. Can you recall the news that day? Greece?
March 18 and 19 was a 2 day Monday Tuesday 25% VIX Future correction.
April 15 was the largest Monday correction, but unlike Feb 25, the Weekly aftermath rose an additional 5% to peak on the Thursday 18th after a 15% fall Tuesday.
Monday May 20 was the start of a long trend of rising volatility for an entire month until Monday June 24.
Then a rising trend started again from August 14 to Aug 30 when they expected Tapering bond covering and mortgages to start in September.
The next started on September 16 and lasted to October 9 for a 44% rise.
Then it went to a low on November 15 that peaked December 17.
It seems like these things were generally following the Monthly Fed Decisions, and uncertainty over the Taper Policy which has come and gone, or has it? Markets do not like uncertainty. They do like clarity. I would think it was clear that the Fed said it will do whatever is appropriate to nurture the recovery as it progresses or does not.
Well I hope that is all clear. Anybody want to guess or have a crystal ball? It remains to be seen what happens after the current correction with several important news releases pending. The SPX has dropped about 4% so far from an all time high of 1850.84. After hours though, ES futures dropped 10 more points to around 1780.25 from a high of 1846.50. It was about a 3.6% correction back from the high. The futures have corrected about 5% in the past, but never all at once. Comparable 2 day corrections would be like June 19 and 20 with a pause on the 21 followed by another drop after the weekend.
During all these corrections there were intermittent minor rallies, possibly due to short covering. That happens when short sellers betting on the downward movement cover their bet. They do not like to hold short positions over the weekend apparently according to Art Cashin of UBS at the NYSE. Here is a video showing what another forecaster thinks may happen.
And now it is another week, starting down after a pre open high. The bears have come out of hibernation, but who knows when and if they will tire? We will see...
On Monday, February 25, the second largest correction rose out of a rising week of uncertainty that started February 20 with a large 25% volatility rise over that day. Can you recall the news that day? Greece?
March 18 and 19 was a 2 day Monday Tuesday 25% VIX Future correction.
April 15 was the largest Monday correction, but unlike Feb 25, the Weekly aftermath rose an additional 5% to peak on the Thursday 18th after a 15% fall Tuesday.
Monday May 20 was the start of a long trend of rising volatility for an entire month until Monday June 24.
Then a rising trend started again from August 14 to Aug 30 when they expected Tapering bond covering and mortgages to start in September.
The next started on September 16 and lasted to October 9 for a 44% rise.
Then it went to a low on November 15 that peaked December 17.
It seems like these things were generally following the Monthly Fed Decisions, and uncertainty over the Taper Policy which has come and gone, or has it? Markets do not like uncertainty. They do like clarity. I would think it was clear that the Fed said it will do whatever is appropriate to nurture the recovery as it progresses or does not.
Well I hope that is all clear. Anybody want to guess or have a crystal ball? It remains to be seen what happens after the current correction with several important news releases pending. The SPX has dropped about 4% so far from an all time high of 1850.84. After hours though, ES futures dropped 10 more points to around 1780.25 from a high of 1846.50. It was about a 3.6% correction back from the high. The futures have corrected about 5% in the past, but never all at once. Comparable 2 day corrections would be like June 19 and 20 with a pause on the 21 followed by another drop after the weekend.
During all these corrections there were intermittent minor rallies, possibly due to short covering. That happens when short sellers betting on the downward movement cover their bet. They do not like to hold short positions over the weekend apparently according to Art Cashin of UBS at the NYSE. Here is a video showing what another forecaster thinks may happen.
And now it is another week, starting down after a pre open high. The bears have come out of hibernation, but who knows when and if they will tire? We will see...
Saturday 25 January 2014
The Velocity of Money
There is a nice simple explanation of it in Wikipedia. But what are those money supply graphs and what do they mean? The Fed is interested in it because they can punt the can down the road looking for some distant shore to put money on from a very slow boat to that promised Retirement. They want to keep it from causing too much inflation. Now what is going to happen when all the Baby Boomers retire, and there is no more need for their skills in a workplace increasingly dominated by robotics?
Ignore that for a while... It is like a ship in transit. That is what they tell us. We all want that boat to go faster but at what cost? Inflation you answer when in actual terms it is closer to Inflation in a slower, but not Stagnant, economy.
Suze Orman of course tells you to eliminate debt. Live in relative poverty while addressing any and all debts instead of chasing the trappings of games and the latest coolest thing. Use your time and youthful industriousness to an advantage. Get somebody else's used things to eliminate the increasingly rapid depreciation curve, or buy broken things and learn to fix them yourself. I followed that religiously while younger, but what now? The whole game is not only being made harder by trying to split the receding goalposts, but try to make gains where nobody is looking.
The past couple of trading days have really walloped the market down. If you have some cash, it is a spot where you can jump on to try and fight at least some of the inevitable. Last year, that same market really beat inflation. But where to put it? If you do not have a trading account funded and ready, you are out by default, so you are waiting for the next cycle. The Mad Money guy is looking for a newsworthy home run. More realistically, maybe we are looking for more RBI's. Anyways, we both have our list of bargain hunting stocks looking for the same thing because soon, the bases will be loaded for a very short time if the rain doesn't cancel the game with a quick rebound.
I don't know, but some Consumer Staples, Health Care Staples, and something related to an Aging Population seems good for starters. Maybe some consumer staples ETF's and Healthcare Staples ETF's would help. They should provide a fair hedge against inflation. A wise old accountant told me that Undertaking seemed to be a high growth recession proof industry. Two things are inevitable they used to say; Death and Taxes. But we are in a more complicated state waiting for the former while reducing the latter. That would be the Mysterious appeal of Bonds I thought maybe.
Of all things to get clobbered down, Inverse Volatility ETF's will take the biggest hit. They will also make the biggest rebound. They continue to ratchet up and grow from reversing the Contango of Carrying Fear Insurance. They can be noticeably cranky though on a monthly basis. At least they have some relation to the oft reported *general* market sentiment according to the perceived expected volatility of the S+P 500 Index. And there is the VVIX Index to guage it. But how close do you guage your entry point to get as close to bottom as possible? What do we know will be coming? Will Monday be Black or White, only to be followed by a Blacker or Whiter Tuesday before more earnings, and the Fed Decision regarding tapering of bond and MBS (Mortgage Backed Securities) near the Wednesday Close?
Anyways, the current market downturn preceding a big numbers week will present some real opportunity to get ahead a bit. The question is will it last? My answer is that is has to eventually. Warren will be taking advantage of the elevated Fear of the unknown to get greedy.
And Janet Yellen, the incoming Federal Reserve chairperson, will be doing her best to quell the fear of the real bunch of nervous nellies this week.
Ignore that for a while... It is like a ship in transit. That is what they tell us. We all want that boat to go faster but at what cost? Inflation you answer when in actual terms it is closer to Inflation in a slower, but not Stagnant, economy.
Suze Orman of course tells you to eliminate debt. Live in relative poverty while addressing any and all debts instead of chasing the trappings of games and the latest coolest thing. Use your time and youthful industriousness to an advantage. Get somebody else's used things to eliminate the increasingly rapid depreciation curve, or buy broken things and learn to fix them yourself. I followed that religiously while younger, but what now? The whole game is not only being made harder by trying to split the receding goalposts, but try to make gains where nobody is looking.
The past couple of trading days have really walloped the market down. If you have some cash, it is a spot where you can jump on to try and fight at least some of the inevitable. Last year, that same market really beat inflation. But where to put it? If you do not have a trading account funded and ready, you are out by default, so you are waiting for the next cycle. The Mad Money guy is looking for a newsworthy home run. More realistically, maybe we are looking for more RBI's. Anyways, we both have our list of bargain hunting stocks looking for the same thing because soon, the bases will be loaded for a very short time if the rain doesn't cancel the game with a quick rebound.
I don't know, but some Consumer Staples, Health Care Staples, and something related to an Aging Population seems good for starters. Maybe some consumer staples ETF's and Healthcare Staples ETF's would help. They should provide a fair hedge against inflation. A wise old accountant told me that Undertaking seemed to be a high growth recession proof industry. Two things are inevitable they used to say; Death and Taxes. But we are in a more complicated state waiting for the former while reducing the latter. That would be the Mysterious appeal of Bonds I thought maybe.
Of all things to get clobbered down, Inverse Volatility ETF's will take the biggest hit. They will also make the biggest rebound. They continue to ratchet up and grow from reversing the Contango of Carrying Fear Insurance. They can be noticeably cranky though on a monthly basis. At least they have some relation to the oft reported *general* market sentiment according to the perceived expected volatility of the S+P 500 Index. And there is the VVIX Index to guage it. But how close do you guage your entry point to get as close to bottom as possible? What do we know will be coming? Will Monday be Black or White, only to be followed by a Blacker or Whiter Tuesday before more earnings, and the Fed Decision regarding tapering of bond and MBS (Mortgage Backed Securities) near the Wednesday Close?
Anyways, the current market downturn preceding a big numbers week will present some real opportunity to get ahead a bit. The question is will it last? My answer is that is has to eventually. Warren will be taking advantage of the elevated Fear of the unknown to get greedy.
And Janet Yellen, the incoming Federal Reserve chairperson, will be doing her best to quell the fear of the real bunch of nervous nellies this week.
Playing with Paper Money
The markets are closed for the weekend. I could write about something else like arts and crafts, needlepoint, quilting, shoes, cooking, or the inner workings of the several diferent types of continuously variable transmission. That has all been done before though.
What nobody ever talks about is the specific differences between Paper Money programs, designed to practice Real trading online in Real time with "Monopoly" style Money versus how the same software trades in the Real world. Of course it is like playing Poker with unofficial Plastic Chips. There is no risk except to your pride. If you need, I can call you a "Wah-mbulance" if you think that helps.
For one, you are not part of the Real World answer. If Liquidity and Volume are too low, your Real trades will actually affect the Real market numbers. In Paper Money, the other side does not hunt around to grab your Stop Loss or execute at an undesirable price (to you... not them of course.) Dead President/Live Monarch Money brings lots more people to the Table, and You are an entree... if not the main course! If you are lucky enough to find some way to really beat the system, they will change the system, even if it takes themselves down. Think the recent manipulations and covering for the bond market with the Fed. It has hurt the time value of Real Money.
Now, I know that I have that annoying habit of capitalizing words in the middle of sentences for emphasis. I also have lousy grammar and punctuation habits, but humor me for the sake of Paper or bits as the case may be. They also do not have little hearts to dot the eyes and jays with. Pity. But I digress again...
Some Paper money programs just Buy and Sell at an Average Price between the Bid and Offer or Ask. If Real Money only had that "feature," then we would be too busy jet setting to hobnob in Davos, Yachting to Margaritaville, or feeding carrots to the Polo Ponies to Blog about Faux Financial Stuff. Eliminating half the Spread provides a handsome Paper Salary indeed. I made my first Paper Million that way. It certainly highlights. the difference between the plotted MARK and the BID or ASK.
Yet these programs are invaluable to keep track of the performance of relatively long term held equities, options, futures, and FOREX trades. The Functionality of the software is basically the same even if the executions differ, and sometimes more than slightly. Never mind that the "Munny" is worthless, although that very fact does create a false bravado in that you can always wipe the slate clean and start over again after recklessly playing with "What if?" scenarios.
There is a Volatility Approximation in these programs. Real volatility effect appears even larger, coupled with real liquidity and volume. The difference between BID and ASK may not be as advertised in quotes once you add yourself into the mix unless there is enough open interest in that strike. Watch the spread carefully when putting on short straddles or similar in a high volatility environment. UVXY Option Spreads have ballooned by a factor of ten times normal or more for more distant month expiry dates after this recent volatility spike, and even then, the executions can be stingy. Definitely haggle with them, but it may cost you a resubmission fee.
Regular financial advisers do not know. They simply say it does not work. Ask them why and they cannot put their finger on it. Knowing why something works in the simulator and why something does not is of course crucial to using this stuff as advertised.
There is an exception for the Profit Loss YTD in some programs. It seems the "reset" will not change that. YMMV. I haven't tried every paper money program out there, and I haven't had a reset for ages, although I am guilty of having adjusted positions after mistakes. It is almost like being a Progressive politician; You can almost do no wrong in the Paper after a little spinning, or by ignoring the bad stuff. Real Money is obviously the opposite.
It seemed like network troubles always cropped up around the approach of Quadruple Witching expiration in Paper. This happened 4 times annually when all the index futures and options expire simultaneously, and generally around the equinoxes and solstices. I haven't had that oddly regular problem in Real that I can recall so far, but there have been various other option exchange outages at different times, some possibly due to an organized cyber attack. It does highlight the fact that we are slaves to the network, have become complacent due to the relative rarity of outages, and we may have to fall back on the phone with all its limitations as well.
"It looked good on Paper!" has been recalled more than once though. Seek out someone who has done enough real trading, even though they will be reluctant to tell you about these things without remuneration.. That alone has to tell you something. A seemingly successful trading strategy developed in Paper will quickly expose weaknesses born of low liquidity, fast moving contrary markets, and faked sunny execution prices. Armed with that tidbit, plus what you will inevitably find out on your own, hopefully you can come away with more than you paid for it.
What nobody ever talks about is the specific differences between Paper Money programs, designed to practice Real trading online in Real time with "Monopoly" style Money versus how the same software trades in the Real world. Of course it is like playing Poker with unofficial Plastic Chips. There is no risk except to your pride. If you need, I can call you a "Wah-mbulance" if you think that helps.
For one, you are not part of the Real World answer. If Liquidity and Volume are too low, your Real trades will actually affect the Real market numbers. In Paper Money, the other side does not hunt around to grab your Stop Loss or execute at an undesirable price (to you... not them of course.) Dead President/Live Monarch Money brings lots more people to the Table, and You are an entree... if not the main course! If you are lucky enough to find some way to really beat the system, they will change the system, even if it takes themselves down. Think the recent manipulations and covering for the bond market with the Fed. It has hurt the time value of Real Money.
Now, I know that I have that annoying habit of capitalizing words in the middle of sentences for emphasis. I also have lousy grammar and punctuation habits, but humor me for the sake of Paper or bits as the case may be. They also do not have little hearts to dot the eyes and jays with. Pity. But I digress again...
Some Paper money programs just Buy and Sell at an Average Price between the Bid and Offer or Ask. If Real Money only had that "feature," then we would be too busy jet setting to hobnob in Davos, Yachting to Margaritaville, or feeding carrots to the Polo Ponies to Blog about Faux Financial Stuff. Eliminating half the Spread provides a handsome Paper Salary indeed. I made my first Paper Million that way. It certainly highlights. the difference between the plotted MARK and the BID or ASK.
Yet these programs are invaluable to keep track of the performance of relatively long term held equities, options, futures, and FOREX trades. The Functionality of the software is basically the same even if the executions differ, and sometimes more than slightly. Never mind that the "Munny" is worthless, although that very fact does create a false bravado in that you can always wipe the slate clean and start over again after recklessly playing with "What if?" scenarios.
There is a Volatility Approximation in these programs. Real volatility effect appears even larger, coupled with real liquidity and volume. The difference between BID and ASK may not be as advertised in quotes once you add yourself into the mix unless there is enough open interest in that strike. Watch the spread carefully when putting on short straddles or similar in a high volatility environment. UVXY Option Spreads have ballooned by a factor of ten times normal or more for more distant month expiry dates after this recent volatility spike, and even then, the executions can be stingy. Definitely haggle with them, but it may cost you a resubmission fee.
Regular financial advisers do not know. They simply say it does not work. Ask them why and they cannot put their finger on it. Knowing why something works in the simulator and why something does not is of course crucial to using this stuff as advertised.
There is an exception for the Profit Loss YTD in some programs. It seems the "reset" will not change that. YMMV. I haven't tried every paper money program out there, and I haven't had a reset for ages, although I am guilty of having adjusted positions after mistakes. It is almost like being a Progressive politician; You can almost do no wrong in the Paper after a little spinning, or by ignoring the bad stuff. Real Money is obviously the opposite.
It seemed like network troubles always cropped up around the approach of Quadruple Witching expiration in Paper. This happened 4 times annually when all the index futures and options expire simultaneously, and generally around the equinoxes and solstices. I haven't had that oddly regular problem in Real that I can recall so far, but there have been various other option exchange outages at different times, some possibly due to an organized cyber attack. It does highlight the fact that we are slaves to the network, have become complacent due to the relative rarity of outages, and we may have to fall back on the phone with all its limitations as well.
"It looked good on Paper!" has been recalled more than once though. Seek out someone who has done enough real trading, even though they will be reluctant to tell you about these things without remuneration.. That alone has to tell you something. A seemingly successful trading strategy developed in Paper will quickly expose weaknesses born of low liquidity, fast moving contrary markets, and faked sunny execution prices. Armed with that tidbit, plus what you will inevitably find out on your own, hopefully you can come away with more than you paid for it.
Friday 24 January 2014
A Return to the Rules
Today, the market got crushed. I was feeling bad, so the Boss told me to read over The Rules [TM] again.
You know them. I thought I knew them too. But here they are again.
1. "When people are Greedy, be Fearful. When people are Fearful, get Greedy" That one is from Warren Buffett, and it is the source of his success he claims, so it has to be good. I interpret that as Shorting the Call side of the VIX Fear Index, or going long an Inverse ETF that tracks it like SVXY or XIV. I thought it was also shorting UVXY Calls, but they changed that last night, and reverse split it 4 ways from 15 yesterday to 60 this am. It is now at about 75.50. Why would they do that? "Because they can!" says the Boss.
2. "No matter how bad things are, they can always get worse!" Talk about today! This morning it looked like a ray of sunshine was about to peak through. It was simply the Eye of the Hurricane! And boy did it ever hit! The S+P wobbled over 1810 after touching 1850.84 a week and a half ago, only to get hit by the backside of the storm and got crushed even further to where ES Futures are trading 1780 after hours presently...
3. "The Second Mouse gets The Poisoned Cheese!" That one belongs to The Boss... Well, and Today's Market too!
4. "Keep your powder dry." I still have some in reserve, but Today took a lot of powder! I could see the White, Red, AND Blue of their eyes still coming at us too!
5. "The Last Man standing (other than the guy turning the lights out at The Exchange) is Short!" Oh Dear! I went long at the end...
6. "Patience is a virtue." Everybody says that, but can you please hurry up and get to the point?
7. "The best way to advertise is to tell everybody to keep it a secret!" That could be why you can toss a rolled up hanky and hit 3 Starbucks in Vancouver... They must have kept new franchises a *secret.*
8. "The Only Thing we have to Fear is Fear Itself!" I know that one! That is the VVIX VIX Volatility Index! It ended today at 97.73. The Boss likes to see it at 100, but it has eclipsed even 120.2 on October 9 last year. Now I really know it.
9. "The Ultimate Risk is the System Itself." Stocks, Computers, Networks... Gee, I can't see how that would screw up! But now they want to replace Gold with Bitcoins?
10. "The trades that cause the most pain often seem to work out to be the best ones in the end." That is sort of like all exceptions the rules except 5. It is too painful being short... until that fateful time, like this past week, and particularly, this past two days. The Fiscal Cliff caused a lot of pain, like the Sequester and the Shutdown, but those worked out better after all.
Oh well, I was doing so well. I will regroup and see if I can recover. But if you have dry powder, watch that VVIX! Gold rebounded a bit to 1268.8 in futures trading at the moment, while the Bitcoin bounced around all over between $915 and 935. We will see what happens on Monday. And by the way, did you know there are different kinds of switches? Suffice to say, I am glad I can run fast! My hide is sufficiently tanned in my own *special* way, thank you!
I hope it gets better, but like The Boss says, it can always get worse... Now how are we going to deal with those new Mercedes M Class cars with the automatic Collision Avoidance at the weekly Banker's Demo Derby? Hmmm... I wonder how they handle a good old fashioned T-Bone?
You know them. I thought I knew them too. But here they are again.
1. "When people are Greedy, be Fearful. When people are Fearful, get Greedy" That one is from Warren Buffett, and it is the source of his success he claims, so it has to be good. I interpret that as Shorting the Call side of the VIX Fear Index, or going long an Inverse ETF that tracks it like SVXY or XIV. I thought it was also shorting UVXY Calls, but they changed that last night, and reverse split it 4 ways from 15 yesterday to 60 this am. It is now at about 75.50. Why would they do that? "Because they can!" says the Boss.
2. "No matter how bad things are, they can always get worse!" Talk about today! This morning it looked like a ray of sunshine was about to peak through. It was simply the Eye of the Hurricane! And boy did it ever hit! The S+P wobbled over 1810 after touching 1850.84 a week and a half ago, only to get hit by the backside of the storm and got crushed even further to where ES Futures are trading 1780 after hours presently...
3. "The Second Mouse gets The Poisoned Cheese!" That one belongs to The Boss... Well, and Today's Market too!
4. "Keep your powder dry." I still have some in reserve, but Today took a lot of powder! I could see the White, Red, AND Blue of their eyes still coming at us too!
5. "The Last Man standing (other than the guy turning the lights out at The Exchange) is Short!" Oh Dear! I went long at the end...
6. "Patience is a virtue." Everybody says that, but can you please hurry up and get to the point?
7. "The best way to advertise is to tell everybody to keep it a secret!" That could be why you can toss a rolled up hanky and hit 3 Starbucks in Vancouver... They must have kept new franchises a *secret.*
8. "The Only Thing we have to Fear is Fear Itself!" I know that one! That is the VVIX VIX Volatility Index! It ended today at 97.73. The Boss likes to see it at 100, but it has eclipsed even 120.2 on October 9 last year. Now I really know it.
9. "The Ultimate Risk is the System Itself." Stocks, Computers, Networks... Gee, I can't see how that would screw up! But now they want to replace Gold with Bitcoins?
10. "The trades that cause the most pain often seem to work out to be the best ones in the end." That is sort of like all exceptions the rules except 5. It is too painful being short... until that fateful time, like this past week, and particularly, this past two days. The Fiscal Cliff caused a lot of pain, like the Sequester and the Shutdown, but those worked out better after all.
Oh well, I was doing so well. I will regroup and see if I can recover. But if you have dry powder, watch that VVIX! Gold rebounded a bit to 1268.8 in futures trading at the moment, while the Bitcoin bounced around all over between $915 and 935. We will see what happens on Monday. And by the way, did you know there are different kinds of switches? Suffice to say, I am glad I can run fast! My hide is sufficiently tanned in my own *special* way, thank you!
I hope it gets better, but like The Boss says, it can always get worse... Now how are we going to deal with those new Mercedes M Class cars with the automatic Collision Avoidance at the weekly Banker's Demo Derby? Hmmm... I wonder how they handle a good old fashioned T-Bone?
;p,
Robin
xo
<Ponders strategy...>
Thursday 23 January 2014
I am in a Pout today...
I was doing smashingly well, buying the dip. Then out of nowhere, the Boss stepped in and said I was being too risky. I bought the dip in my own special way. What did I do wrong?
Dammit! I would have been up to 60 million by throwing fear to the wind where it goes anyways! Duh! I followed it down to the bottom, buying every retraction after lunch, then it snapped back as it almost always does. Oh lookee... It is settling out even BETTAH! Teehehehe!
That is easily a dealership sized garage full of BlueTecs! W0o+! We are off to a fair start this year anyways. But that isn't all. Apparently, there is another Debt Ceiling looming large in The Colonies. I LOVE those! Plus we have about 2 Bills of Dry Powder now for this one since the Boss chickened out to grab it while the iron was hot. That Owe Bomber will rue the day he messed with the likes of me. <giggle>
Key word there is *almost* always snaps back. Oh well... Apparently I have to go into the woods and find a switch for the Boss. I wonder what he needs that for? This one from Home Depot is brand new! There wasn't any out back... Anyways, Toodles and Au Revoir!
Dammit! I would have been up to 60 million by throwing fear to the wind where it goes anyways! Duh! I followed it down to the bottom, buying every retraction after lunch, then it snapped back as it almost always does. Oh lookee... It is settling out even BETTAH! Teehehehe!
That is easily a dealership sized garage full of BlueTecs! W0o+! We are off to a fair start this year anyways. But that isn't all. Apparently, there is another Debt Ceiling looming large in The Colonies. I LOVE those! Plus we have about 2 Bills of Dry Powder now for this one since the Boss chickened out to grab it while the iron was hot. That Owe Bomber will rue the day he messed with the likes of me. <giggle>
Key word there is *almost* always snaps back. Oh well... Apparently I have to go into the woods and find a switch for the Boss. I wonder what he needs that for? This one from Home Depot is brand new! There wasn't any out back... Anyways, Toodles and Au Revoir!
<3,
Robin xoxoxo
Wednesday 22 January 2014
February VIX
January Expiration Yesterday, so this morning was the February SOQ of the VIX. It was about 12.5... a low one if there ever was. Now the wheels can fall off...
I rebalanced a bit. I had help. I hated Calculus so the Boss has to do that part. But we are a good team. Now I can keep in Swiss chocolate and cheese for a few weeks. But wait a second ... The Dippers came in to buy the dip after the market close, taking a loaded Mercedes E Class...
That is because the options will not open until the market does again tomorrow at 9:30 Eastern. But I am not going to waste any Haagen Dazs over it. Patience is the name of the game. T'was a fair day though. I can get them back with an old 300TD station wagon in the MB demo derby coming up. It goes about 50 in reverse for a Big Butt-check! That BlueTec will rue the day he took out my lil' vintage 450SL rag top now that I have some Diesel Momentum too. Teeehehehe!
Oh Dear! Gotta go... Secret Lives of the Super Rich Season Premier is coming on CNBC!!!
I rebalanced a bit. I had help. I hated Calculus so the Boss has to do that part. But we are a good team. Now I can keep in Swiss chocolate and cheese for a few weeks. But wait a second ... The Dippers came in to buy the dip after the market close, taking a loaded Mercedes E Class...
That is because the options will not open until the market does again tomorrow at 9:30 Eastern. But I am not going to waste any Haagen Dazs over it. Patience is the name of the game. T'was a fair day though. I can get them back with an old 300TD station wagon in the MB demo derby coming up. It goes about 50 in reverse for a Big Butt-check! That BlueTec will rue the day he took out my lil' vintage 450SL rag top now that I have some Diesel Momentum too. Teeehehehe!
Oh Dear! Gotta go... Secret Lives of the Super Rich Season Premier is coming on CNBC!!!
<3
Robin xoxoxo
Tuesday 21 January 2014
Hedge Hog
Dr. John C. Hull is a financial engineer, and has written a nice Tome on Options, Futures, and Other Derivatives. It is up to the 9th edition these days. Sigh. I only have the 8th Edition. What's a girl to do?
Dr. Hull outlines the most famous Hedge blowups in one of the chapters of each of his editions. LTCM. Metalgesselschaft. The new one likely has MF Global where the huge futures brokerage got slammed in a pickle hedging Spanish and Italian Bonds.
While these all were not due to Breaking the Hedges by taking the hedge off temporarily to speculate on a movement one way or the other, Dr. Hull says that breaking the hedge to speculate has been behind some of the more spectacular hedge blowups in history. In the case of MF Global, it was an imperfect hedge of European Bonds of indebted countries that behaved more like a speculative pairs trade. To be a perfect hedge, the pairs must move nearly exactly opposite like the Australian Dollar Calendar hedge shown earlier. Here is a Canadian Backwardation memory refresher for you... with thanks to Thinkorswim Paper Money at that same CME...
Colour me guilty. I broke the hedge after being T-Boned by a banker in a Blue Tec during our last Mercedes Demo derby day. It wasn't on a currency... I'm not Crazy! I unbalanced my pet hedge, taking a calculated risk, going long where I should have been short.
I pick my poisons carefully. This one went down a bunch at first, but if you grit your teeth and hold it long enough, it will come back. Plus my pockets are deeper than a Wall Street Ho's! I'm sorry. It won't happen again. (Fingers crossed behind back)
Anyways, talking about calculated risks, Brokerages tend to say that short positions are dangerous! That is especially ironic because Brokerages are short of Everything! "You could lose everything if the stock goes up!" they say. Now think about that for a second. When was the last time you heard of a stock going to infinity versus the last time you heard of a stock going to zero (think MF Global)?
Another thing about being short is that you have the cash in hand. Of course they take about triple the buying power to hold a short position, and will demand that you close out some of the position if the underlying security becomes hard to borrow. They like to keep those for themselves, so they make it hard for you to hold those shorts. They don't care if you have them hedged where you are getting what ever they gained back on the other half of the portfolio.
Note this presents a second paradox and an arbitration opportunity if you stretch it even further. You will have to figure that one out yourself though. We do not have to show you our cards even though the broker looks at them through his glass poker table.
The truth of the matter is that stocks go off market lots. Mining stocks are one example. Volatility tracking ETF's are another that have to be rebalanced all the time to keep from going off the market. Think UVXY, TVIX, VXX. It is almost a sure thing!
Close enough for me! Teehehehe!
Dr. Hull outlines the most famous Hedge blowups in one of the chapters of each of his editions. LTCM. Metalgesselschaft. The new one likely has MF Global where the huge futures brokerage got slammed in a pickle hedging Spanish and Italian Bonds.
While these all were not due to Breaking the Hedges by taking the hedge off temporarily to speculate on a movement one way or the other, Dr. Hull says that breaking the hedge to speculate has been behind some of the more spectacular hedge blowups in history. In the case of MF Global, it was an imperfect hedge of European Bonds of indebted countries that behaved more like a speculative pairs trade. To be a perfect hedge, the pairs must move nearly exactly opposite like the Australian Dollar Calendar hedge shown earlier. Here is a Canadian Backwardation memory refresher for you... with thanks to Thinkorswim Paper Money at that same CME...
Colour me guilty. I broke the hedge after being T-Boned by a banker in a Blue Tec during our last Mercedes Demo derby day. It wasn't on a currency... I'm not Crazy! I unbalanced my pet hedge, taking a calculated risk, going long where I should have been short.
I pick my poisons carefully. This one went down a bunch at first, but if you grit your teeth and hold it long enough, it will come back. Plus my pockets are deeper than a Wall Street Ho's! I'm sorry. It won't happen again. (Fingers crossed behind back)
Anyways, talking about calculated risks, Brokerages tend to say that short positions are dangerous! That is especially ironic because Brokerages are short of Everything! "You could lose everything if the stock goes up!" they say. Now think about that for a second. When was the last time you heard of a stock going to infinity versus the last time you heard of a stock going to zero (think MF Global)?
Another thing about being short is that you have the cash in hand. Of course they take about triple the buying power to hold a short position, and will demand that you close out some of the position if the underlying security becomes hard to borrow. They like to keep those for themselves, so they make it hard for you to hold those shorts. They don't care if you have them hedged where you are getting what ever they gained back on the other half of the portfolio.
Note this presents a second paradox and an arbitration opportunity if you stretch it even further. You will have to figure that one out yourself though. We do not have to show you our cards even though the broker looks at them through his glass poker table.
The truth of the matter is that stocks go off market lots. Mining stocks are one example. Volatility tracking ETF's are another that have to be rebalanced all the time to keep from going off the market. Think UVXY, TVIX, VXX. It is almost a sure thing!
Close enough for me! Teehehehe!
Sunday 19 January 2014
The Gambler
It is a song penned by D. Schlitz, and famously covered by Kenny Rogers, but it is also descriptive of a person I know. He liked to play those video lotteries. Of course that is risky, and given the odds, you can't win. The lottery corporation always wins if you play long enough.
People like to compare the stock market to gambling. So do I. It looks like the house always wins. But the major differences are many and varied. For one you can play the house in the stock market, less a portion of the vig. Gambling is winner take all, less the vig. Therein lies the allure of gambling. You double nearly half the time, but the house wins in a tie.
The payoffs are a lot more complicated in the stock market, and they are generally smaller, but can be bigger too. There are a lot more games as well including let's play house minus commissions. There are even binary options, a custom game of high-low with a win or lose payout where the odds are stacked against you.
People "cheat" on both games. Insider trading can get you in hot water if you are caught. Some people are banned in Vegas because they have an "unfair" advantage. Canadians are banned in Chicago even though they run the place like a rented mule with TD Ameritrade (That TD stands for Toronto Dominion Bank by the way.) "Banned in Vegas" is worn like a badge of honor; "Banned in Chicago," YMMV. You must be an Approved Canadian "cheater" on their side in The Pits. A "cheater" is anybody who beats them a lot I guess.
They are supposed to keep how you beat them a secret just like poker players do not have to show their cards when everybody else folds. That looks like it is so they can use it exclusively to cheat everybody with your "secret". In Vegas your secret is good; "What happens in Vegas..." Chicago, a little different... Turd Ferguson from TF Metals likes to call them "The Crooks." They can wait 72 hours after you "Win" so they can change the game in their favor. A friend I know says, "If you find a way to beat them, they'll change it so that you can't."
So what if you play the House? There has to be a point where they wallop themselves over the head too. Hmmm... ;)
People like to compare the stock market to gambling. So do I. It looks like the house always wins. But the major differences are many and varied. For one you can play the house in the stock market, less a portion of the vig. Gambling is winner take all, less the vig. Therein lies the allure of gambling. You double nearly half the time, but the house wins in a tie.
The payoffs are a lot more complicated in the stock market, and they are generally smaller, but can be bigger too. There are a lot more games as well including let's play house minus commissions. There are even binary options, a custom game of high-low with a win or lose payout where the odds are stacked against you.
People "cheat" on both games. Insider trading can get you in hot water if you are caught. Some people are banned in Vegas because they have an "unfair" advantage. Canadians are banned in Chicago even though they run the place like a rented mule with TD Ameritrade (That TD stands for Toronto Dominion Bank by the way.) "Banned in Vegas" is worn like a badge of honor; "Banned in Chicago," YMMV. You must be an Approved Canadian "cheater" on their side in The Pits. A "cheater" is anybody who beats them a lot I guess.
They are supposed to keep how you beat them a secret just like poker players do not have to show their cards when everybody else folds. That looks like it is so they can use it exclusively to cheat everybody with your "secret". In Vegas your secret is good; "What happens in Vegas..." Chicago, a little different... Turd Ferguson from TF Metals likes to call them "The Crooks." They can wait 72 hours after you "Win" so they can change the game in their favor. A friend I know says, "If you find a way to beat them, they'll change it so that you can't."
So what if you play the House? There has to be a point where they wallop themselves over the head too. Hmmm... ;)
Thursday 16 January 2014
The Long and Short of it
Anything that is a sure thing about the markets is probably being done already. Who wins in that case? Are we back to the Stanley Cup question? And what is a question about a question? Aghhhh!
So many indecision points. Some say it is like Fibonacci's Rabbits. The only thing predictable about that is that it will be unpredictable.
Now you can Buy or Go Long on a Short or Double Short ETF to emulate a short position with all the extra cost baked in. If they have Options, you can in effect emulate a short position on that same short ETF. That would be like going long on the net effect.
Well then what happens when you have two opposing ETF's and short them both? One says yes while the other says no, hedging the variations in the market. To win at that, you have to wrap your head around the opposite side of the trades of opposites. You would have to own the exchange, or in effect you would be emulating owning the exchange.
There are several ways to do that. CME is a ticker and a place! CBOE too! So whats Da Problem? You can invest in the hopefully increasing entropy of it. Somehow it seems like there should be a badda bing badda boom at the end of that.
Well, what is the best stuff under the hood of that? Anyways, this hermaphroditic monster is called The Market. To ultimately make it ya gotta sell the market.
We all hope that when the dust settles The Market is the last group of men standing other than us! To make sure that they are, they build enough cost into the services to make sure they have enough to keep running. So what are they standing on?
Now cut that out! lol Anyways, gotta go.... Ben's Talking!...
So many indecision points. Some say it is like Fibonacci's Rabbits. The only thing predictable about that is that it will be unpredictable.
Now you can Buy or Go Long on a Short or Double Short ETF to emulate a short position with all the extra cost baked in. If they have Options, you can in effect emulate a short position on that same short ETF. That would be like going long on the net effect.
Well then what happens when you have two opposing ETF's and short them both? One says yes while the other says no, hedging the variations in the market. To win at that, you have to wrap your head around the opposite side of the trades of opposites. You would have to own the exchange, or in effect you would be emulating owning the exchange.
There are several ways to do that. CME is a ticker and a place! CBOE too! So whats Da Problem? You can invest in the hopefully increasing entropy of it. Somehow it seems like there should be a badda bing badda boom at the end of that.
Well, what is the best stuff under the hood of that? Anyways, this hermaphroditic monster is called The Market. To ultimately make it ya gotta sell the market.
We all hope that when the dust settles The Market is the last group of men standing other than us! To make sure that they are, they build enough cost into the services to make sure they have enough to keep running. So what are they standing on?
Now cut that out! lol Anyways, gotta go.... Ben's Talking!...
Wednesday 15 January 2014
Watching "American Greed"
There seems to be an endless string of them. They must have no shortage of material. Stacy Keach narrates each one in his inimitable style. As soon as one bunch is busted another crops up, offering the irresistable bait: Great Returns. And the sharks... Big ones... come to get hooked by it.
Now I realize that if they go to all the trouble to make a TV show about the scam, it is probably the whopper of all scams too. And there are a lot of similarities between them all. Charismatic individual with nice partner, driving nice car, has nice office, travels in style, infiltrates high life world to schmooze and groom a high life reputation, lightens everybody's load then runs off scot free with all the loot.
Real estate is a common one. Just forge a document, file it to get the title, and sell it... Over and over. One guy allegedly stored rare wine, drank it instead, replaced it with ripple, and nobody is the wiser. Why not just forge cases of the stuff? They can store your art too, replace it with a forgery, and sell it. The scams are endless.
The frightening thing is the ease with which they are pulled off. But they all guarantee the highest rate of return. Why aren't they investigated then and the phony books outed? Most people roll it back in. It is when they try to get money out, the gig is up in most cases.
The more crafty breed takes that into account to really hook the fish. After all, real funds do the same thing. They will not let you take the money without incurring some sort of penalty. Red Flag Number one is Slow Liquidity, but then red flag number 2 might be too fast liquidity in the Ponzi scheme shuffle game.
Anyways if you are retired and not aware of this program, maybe you should watch it before you become a bit player victim on it. It looks like anything that is more than 13% and is regular seems to be the point where the wheels start to wobble here. Yet a lot of serious direct traders are able to do that safely by hedging their positions. But if it were such a good thing, why wouldn't they put all their money back into it too? Everybody I have seen who is successful is usually pretty frugal. Just sayin'.
Now I realize that if they go to all the trouble to make a TV show about the scam, it is probably the whopper of all scams too. And there are a lot of similarities between them all. Charismatic individual with nice partner, driving nice car, has nice office, travels in style, infiltrates high life world to schmooze and groom a high life reputation, lightens everybody's load then runs off scot free with all the loot.
Real estate is a common one. Just forge a document, file it to get the title, and sell it... Over and over. One guy allegedly stored rare wine, drank it instead, replaced it with ripple, and nobody is the wiser. Why not just forge cases of the stuff? They can store your art too, replace it with a forgery, and sell it. The scams are endless.
The frightening thing is the ease with which they are pulled off. But they all guarantee the highest rate of return. Why aren't they investigated then and the phony books outed? Most people roll it back in. It is when they try to get money out, the gig is up in most cases.
The more crafty breed takes that into account to really hook the fish. After all, real funds do the same thing. They will not let you take the money without incurring some sort of penalty. Red Flag Number one is Slow Liquidity, but then red flag number 2 might be too fast liquidity in the Ponzi scheme shuffle game.
Anyways if you are retired and not aware of this program, maybe you should watch it before you become a bit player victim on it. It looks like anything that is more than 13% and is regular seems to be the point where the wheels start to wobble here. Yet a lot of serious direct traders are able to do that safely by hedging their positions. But if it were such a good thing, why wouldn't they put all their money back into it too? Everybody I have seen who is successful is usually pretty frugal. Just sayin'.
What is the most valuable commodity?
Oh Dear! This one used to be easy. Gold was it... Keyword there being "was." Gold "was" a good hedge against inflation. Gold "was" very liquid. You could exchange it easily for a stable cash price at any time, and the price seemed to only go up. Now that is a tough one. The recent counterfeit gold scandal where tungsten clad in gold was being passed off for cold coins and ingots has sullied the once "Golden" reputation of gold. GLD the SPDR Gold Trust ETF tanked -26.25% this last year to date.
Bitcoins and other crypto-currencies have had their day as being called Gold 2.0... A gold-like unique identifier that couldn't be counterfeited. However CEX.io and Ghash.io, the Ukrainian Bitcoin exchange and mining consortium respectively, got dangerously close to holding over 50% of the Bitcoins in existence, thereby making it possible for them to use their majority position to enable a double spending scam. This has added to the volatility of the bitcoin price from day to day. Bitcoin has gone from nothing to everything and may be headed back to nothing. Who knows where that Winklevoss Twins ETF is?
Ca$h is a disaster waiting to happen. While most of the newly "minted" stuff from the Federal Reserve and other affiliated National Central Banks is tied up in mortgages and retirement liability books, there is a huge wave of retirees about to hit the system and start spending it. All that Quantitative Easing is about to come home to roost.
Consumer staples may be a candidate. FXG, a consumer staples ETF, has gone from 26.1 to 35.86 at the moment over the last 365 days. Have to check the management fees on that. That's 36.51%, beating the SPX which did 24.9% over the same period. FXD which is consumer staples discretionary did 34.65%. Plot these over two years though and it hasn't always been that rosey. XLP Consumer Staples Index did 17.26% and it has options on it, so not as well, but it still went up in dollar value. Everybody has been telling us Equities, but FXG and FXD are telling us that they OD'd on Horse Cookies.
They say Bonds, short term and corporate, are an opportunity but that ship may have sailed too. This is the stuff of RRIF's and such, managed heavily. 10-12% regular yield is a good RRIF, but some of them can lose. Nothing is that sure of a thing.
The Boss may be a dreamboat, but he's older than dirt, likes Jack Daniel's, pricey Tequila, Chinese Guitars, Smoking, and Classic Hard Rock that all his elders hated. Big Red Flags and a recipe for disaster there. He's like XIV crossed with a UVXY short though... A damn rough ride, but you know it's going up in the long run. Which reminds me, they say the only sure thing are death and taxes... How about alcohol, tobacco, and firearms with a fitness, health, and wellness hedge?
At least he is aware of all this stuff, he is doing something about it, and it kinda works. Caveat Emptor though. He may drive his cube van off a cliff in reverse yet! Oh my! What will I do then? I am a disaster in the kitchen, and I swear my derriere has grown a bit even while thinking about this! Sob!
Bitcoins and other crypto-currencies have had their day as being called Gold 2.0... A gold-like unique identifier that couldn't be counterfeited. However CEX.io and Ghash.io, the Ukrainian Bitcoin exchange and mining consortium respectively, got dangerously close to holding over 50% of the Bitcoins in existence, thereby making it possible for them to use their majority position to enable a double spending scam. This has added to the volatility of the bitcoin price from day to day. Bitcoin has gone from nothing to everything and may be headed back to nothing. Who knows where that Winklevoss Twins ETF is?
Ca$h is a disaster waiting to happen. While most of the newly "minted" stuff from the Federal Reserve and other affiliated National Central Banks is tied up in mortgages and retirement liability books, there is a huge wave of retirees about to hit the system and start spending it. All that Quantitative Easing is about to come home to roost.
Consumer staples may be a candidate. FXG, a consumer staples ETF, has gone from 26.1 to 35.86 at the moment over the last 365 days. Have to check the management fees on that. That's 36.51%, beating the SPX which did 24.9% over the same period. FXD which is consumer staples discretionary did 34.65%. Plot these over two years though and it hasn't always been that rosey. XLP Consumer Staples Index did 17.26% and it has options on it, so not as well, but it still went up in dollar value. Everybody has been telling us Equities, but FXG and FXD are telling us that they OD'd on Horse Cookies.
They say Bonds, short term and corporate, are an opportunity but that ship may have sailed too. This is the stuff of RRIF's and such, managed heavily. 10-12% regular yield is a good RRIF, but some of them can lose. Nothing is that sure of a thing.
The Boss may be a dreamboat, but he's older than dirt, likes Jack Daniel's, pricey Tequila, Chinese Guitars, Smoking, and Classic Hard Rock that all his elders hated. Big Red Flags and a recipe for disaster there. He's like XIV crossed with a UVXY short though... A damn rough ride, but you know it's going up in the long run. Which reminds me, they say the only sure thing are death and taxes... How about alcohol, tobacco, and firearms with a fitness, health, and wellness hedge?
At least he is aware of all this stuff, he is doing something about it, and it kinda works. Caveat Emptor though. He may drive his cube van off a cliff in reverse yet! Oh my! What will I do then? I am a disaster in the kitchen, and I swear my derriere has grown a bit even while thinking about this! Sob!
Tuesday 14 January 2014
How do I put pictures on this thingy?
One guy complained that my blog doesn't have enough pictures. It isn't for lack of trying. I have literally thousands of out-of-focus selfies trying on various halves of bikinis or trying to scope my tan lines. But who would want those they are out of focus from this crummy phone camera. Instead I have lots of Screenshots of financial software showing my Naked Puts and Bottom Lines! Here is an oldie but a goodie from last year before my boyfriend dumped me and I went on a Hagen Daz curl an' hurl binge while buying an entire room full of Prada shoes an' purses in a pout...
But I digress... I have all these weird purses now, and a way to illustrate my blog! Yay!
It is a new year, and we are off to a slow start with the change jar...
Perhaps you can follow and help me add it all up. Either that or it's back to those annoying out of focus off center selfies. Toodles!
<3 Robin xoxoxo
Speak of The Devil...
There was a sell-off on the market yesterday, January 13, 2014. It did OK for a bit in the morning, but then everybody ran for the exits. It may even continue today. They have been warning that it was overbought for a month now, but it finally happened. Why? Who knows! If we did we'd be so rich that we would be too busy at the morning Rolls Royce Demo Derby to Blog about it here, and looking at picking up a new one for the afternoon version of the same thing. That's because by our nature, being reputed suckers for punishment, we would crave some more in the absence of any.
The VIX, sometimes referred to as "The Devil," by options traders, reared its ugly head for a bit. But just Hold Your Horses for a second. If it is derived from the SPX, isn't that a case of the Cart driving the Horse? Funny you should mention that. Several months ago, a couple gurus were talking about exactly that on some trading webinar. VIX products have been so popular through all those Volatility ETF's that the weight of them itself can actually smooth out or steer the market at times now.
It has served to quell the fear investors have somewhat or the rickety nature of the markets. Whenever there is a correction, they can now go after the fact, and sell some of that high volatility to get some of it back. And this is where the plot thickens. Well, I see the markets are opening again... What will today hold? We will see...
Well it went back up. The VIX went up 10%, and has given almost all of that back in less than a day. It went most of the way to where it was. But I bought the dip. Technically, I sold call options on a double short VIX tracking ETF at the peak instead, because try as they might, they can't finagle the spread enough to bake in the contango of all their adjustments. Likewise, I sold them far enough into the future that I can hold them, taking advantage of the time volatility premium, lousy slow chart updates, and gritting my teeth, until the inevitable happens and time works its magic for us, presenting an opportunity to cover them when they are a lot cheaper, hopefully before the next downturn.
Perhaps that is what the banks do under the hood with our money. It makes a lot more than we do with it when we entrust it to their non redeemability. But gotta go... I think its Mercedes demo derby day today with the back office bankers... TaTa! Yours adjectively, Robin xoxoxo
The VIX, sometimes referred to as "The Devil," by options traders, reared its ugly head for a bit. But just Hold Your Horses for a second. If it is derived from the SPX, isn't that a case of the Cart driving the Horse? Funny you should mention that. Several months ago, a couple gurus were talking about exactly that on some trading webinar. VIX products have been so popular through all those Volatility ETF's that the weight of them itself can actually smooth out or steer the market at times now.
It has served to quell the fear investors have somewhat or the rickety nature of the markets. Whenever there is a correction, they can now go after the fact, and sell some of that high volatility to get some of it back. And this is where the plot thickens. Well, I see the markets are opening again... What will today hold? We will see...
Well it went back up. The VIX went up 10%, and has given almost all of that back in less than a day. It went most of the way to where it was. But I bought the dip. Technically, I sold call options on a double short VIX tracking ETF at the peak instead, because try as they might, they can't finagle the spread enough to bake in the contango of all their adjustments. Likewise, I sold them far enough into the future that I can hold them, taking advantage of the time volatility premium, lousy slow chart updates, and gritting my teeth, until the inevitable happens and time works its magic for us, presenting an opportunity to cover them when they are a lot cheaper, hopefully before the next downturn.
Perhaps that is what the banks do under the hood with our money. It makes a lot more than we do with it when we entrust it to their non redeemability. But gotta go... I think its Mercedes demo derby day today with the back office bankers... TaTa! Yours adjectively, Robin xoxoxo
Monday 13 January 2014
What is the S&P 500?
Wikipedia says it is this. Looking at it from 1950 to present, it has been a rough ride. But why should we be interested? It looks like it has had a good run, and if past performance is any indication, while it is no guarantee, it looks like the wheels will fall off again.
Yet everybody follows it like lambs to the slaughter. The VIX Volatility Index, based on that same S&P 500 SPX Index, is how exchanges determine forward valuations of not only the stocks in it, but stocks everywhere. Fund managers use it as a baseline to show how much better their fund did than it. It is the ultimate weighted average of 500 diversified NYSE and Nasdaq stocks for everybody to see relatively how things are going at a glance, and it is used as a yardstick to measure the entire US Economy. If you buy an Exchange Traded Fund unit of it like SPY or SSO, you can walk into nearly every major publicly traded corporate store, and say, "Full Disclosure: I own it!"
Well, if you do, you certainly have the diversified angle covered. You can even buy an ETF to short it x2, and bet that the wheels are going to fall off while you hold it: SDS, thus minimizing your losses, albeit inefficiently. Products that are based on the S+P 500 are also very liquid. That means plenty of shares, capital, and interest both ways on the trades.
This brings us to The VIX S+P 500 Volatility Index. From the link, "On March 26, 2004, the first-ever trading in futures on the VIX began on CBOE Futures Exchange (CFE). As of February 24, 2006, it became possible to trade VIX options contracts." It is the 30 day expectation of Market Volatility of the SPX Index. Well, great, but why? People use the VIX options and futures products to hedge, or lessen, their risk exposure to fluctuations in value of SPX Index based holdings. Generally as the SPX drops, the VIX goes up, and vice versa. As the VIX rises, spreads on the options and futures get wider. If you can't or do not want to trade futures or options, here are plenty Volatility ETF products like XIV, TVIX, VXX, UVXY, SVXY. Those last three have Options on them as well.
There are other volatility indices for other index products as well. The VXN is related to the Nasdaq. The RVX is related to the IWM Russell 2000 index. The OVX is for Oil Volatility. They are less popular than the VIX, but also rely on the VIX for their respective calculations to some extent.
The bottom line is that there are new tools to hedge on the stock market. Maybe there is something there for us! Well, it probably doesn't surprise you that I am all over this like white on rice. Why? Because like the bank robber said when asked, "Why do you rob Banks?", "Because That's where the Money is!" In the Stock Market, that is where most of it all is... Literally.
Yet everybody follows it like lambs to the slaughter. The VIX Volatility Index, based on that same S&P 500 SPX Index, is how exchanges determine forward valuations of not only the stocks in it, but stocks everywhere. Fund managers use it as a baseline to show how much better their fund did than it. It is the ultimate weighted average of 500 diversified NYSE and Nasdaq stocks for everybody to see relatively how things are going at a glance, and it is used as a yardstick to measure the entire US Economy. If you buy an Exchange Traded Fund unit of it like SPY or SSO, you can walk into nearly every major publicly traded corporate store, and say, "Full Disclosure: I own it!"
Well, if you do, you certainly have the diversified angle covered. You can even buy an ETF to short it x2, and bet that the wheels are going to fall off while you hold it: SDS, thus minimizing your losses, albeit inefficiently. Products that are based on the S+P 500 are also very liquid. That means plenty of shares, capital, and interest both ways on the trades.
This brings us to The VIX S+P 500 Volatility Index. From the link, "On March 26, 2004, the first-ever trading in futures on the VIX began on CBOE Futures Exchange (CFE). As of February 24, 2006, it became possible to trade VIX options contracts." It is the 30 day expectation of Market Volatility of the SPX Index. Well, great, but why? People use the VIX options and futures products to hedge, or lessen, their risk exposure to fluctuations in value of SPX Index based holdings. Generally as the SPX drops, the VIX goes up, and vice versa. As the VIX rises, spreads on the options and futures get wider. If you can't or do not want to trade futures or options, here are plenty Volatility ETF products like XIV, TVIX, VXX, UVXY, SVXY. Those last three have Options on them as well.
There are other volatility indices for other index products as well. The VXN is related to the Nasdaq. The RVX is related to the IWM Russell 2000 index. The OVX is for Oil Volatility. They are less popular than the VIX, but also rely on the VIX for their respective calculations to some extent.
The bottom line is that there are new tools to hedge on the stock market. Maybe there is something there for us! Well, it probably doesn't surprise you that I am all over this like white on rice. Why? Because like the bank robber said when asked, "Why do you rob Banks?", "Because That's where the Money is!" In the Stock Market, that is where most of it all is... Literally.
Sunday 12 January 2014
"Past Performance is No Guarantee of Future Results"
There is a good reason for that boilerplate on all that Financial Information. Imagine that you are forced to drive a cube van containing all of your meager possessions in reverse along a narrow mountain trail. You can't see in reverse because both mirrors have been taken off. You have a clear view of only the poorly defined centerline of the road. You can't see the edges. Welcome to the world of Charts!
Most charts are wrong. First, most don't even tell you the most basic information. If they did, they would have two lines; One for the ASK and one for the BID. And those ones are a rare animal indeed. Interactive Brokers TWS has that option, but you must go looking for it, and then demand it. In Thinkorswim, you can have one or the other, but not both unless you program it yourself using ThinkPipes. My first question to any wannabe investor would be, "How do you propose to chart the Bid and the Offer?"
So we must be aware of the spread to start. They sure aren't going to tell you right out. In fact, it looks like they intentionally keep it hidden. What a bunch of slippery weasels, huh? What are they trying to hide with this? We get it that there is a cost of doing business, but why do they not want us to know this, and find out the hard way?
They try to hide as much useful information as they can. Volatility. Velocity. Liquidity. Dollar Weighted Put Call Index. Everything that affects the price and availability that they can. Then they freely give you enough information to hang yourself with, and they even charge for it. No wonder they need a disclaimer in this scenario.
Then there are the Commissions. Whether you win or lose, you still have to pay the commission on the trade on top of the spread. There are lots of ways to keep commissions low, but the simplest is to trade less. They even penalize you for having the nerve to trade less than their minimum amounts. It is obvious that these guys are Sharks.
Let's say we have a gun held to our heads, and we have to trade or die! The deck is stacked against us, but is there any way to succeed? Let's be a Pilot Fish! They seem to at least survive is some pretty hostile waters. We'll have to snack on the leftovers from the shark to sooth it, and groom it to keep it happy to avoid being invited over for dinner.... As the main course! It looks like we are not alone either. Let's go to "School!"
Most charts are wrong. First, most don't even tell you the most basic information. If they did, they would have two lines; One for the ASK and one for the BID. And those ones are a rare animal indeed. Interactive Brokers TWS has that option, but you must go looking for it, and then demand it. In Thinkorswim, you can have one or the other, but not both unless you program it yourself using ThinkPipes. My first question to any wannabe investor would be, "How do you propose to chart the Bid and the Offer?"
So we must be aware of the spread to start. They sure aren't going to tell you right out. In fact, it looks like they intentionally keep it hidden. What a bunch of slippery weasels, huh? What are they trying to hide with this? We get it that there is a cost of doing business, but why do they not want us to know this, and find out the hard way?
They try to hide as much useful information as they can. Volatility. Velocity. Liquidity. Dollar Weighted Put Call Index. Everything that affects the price and availability that they can. Then they freely give you enough information to hang yourself with, and they even charge for it. No wonder they need a disclaimer in this scenario.
Then there are the Commissions. Whether you win or lose, you still have to pay the commission on the trade on top of the spread. There are lots of ways to keep commissions low, but the simplest is to trade less. They even penalize you for having the nerve to trade less than their minimum amounts. It is obvious that these guys are Sharks.
Let's say we have a gun held to our heads, and we have to trade or die! The deck is stacked against us, but is there any way to succeed? Let's be a Pilot Fish! They seem to at least survive is some pretty hostile waters. We'll have to snack on the leftovers from the shark to sooth it, and groom it to keep it happy to avoid being invited over for dinner.... As the main course! It looks like we are not alone either. Let's go to "School!"
What is Fiduciary Aikido?
What if you could play both sides of the trade?
Shouldn't it be a wash?
With a fiat currency, it is an impossibility, but close. Let's look at the Australian Dollar with a forward month shorted against an open long position in the pocket... over the time frame of a quarter...
Take a look at this. (with thanks to TD)
That is because the Australian Dollar is a well managed currency, and was in a very slight Backwardation over that time frame, keeping it both available enough while in short enough supply to prevent excessive inflation. They can conversely choke it back by creating a slight relative shortage, putting it in Contango. Clearly something else is at work there since it has to be impossible to make money with two opposing securities of the same underlying, this time being the Australian $ futures contracts for those months, right?
Well, Timing isn't just one of those things, it's nearly Everything! And then there are the trades themselves. How far are those Asking Prices, or what you get to purchase the contract for, apart from the Bid prices, or what you get to sell them for? You get to buy them for more than you can sell them at any given moment. Then there is the nature of the futures contracts themselves. Can you predict the future? Well, other than those who are able to read tea leaves as a secret Superpower, nobody can! The only certain thing about the future is its uncertainty. This isn't lost on the Futures Exchange either. They make up for it as best as they can by widening that BID/ASK spread of the forward future month, or even year, contracts.
But Ahhhhah, Grasshoppa! There is more to The Future than Australian Dollar Futures! Surely there must be some better underlying securities managed by complete imbeciles! The good news is that there is, and they are managed by You and Me and several thousand others! They are just as lousy at predicting the future. You have to believe that there is a way to turn the shortcomings of such a Perfect (cough, cough!) Well Oiled Machine as that to our Advantage. That is good because the Market gives them a well deserved spanking. Everybody loses!
Well, here is where we talk about, "Who always wins the Superbowl?" There are lots of winners, but some of them win at every Superbowl. They may not get a ring, but they win none the less. Budweiser comes to mind. Ticket sales too. And how about those guys that make all the snax? "That's the Vig!" the bookie/market maker says. "Can I put a Hundred on You to Win?" is likely your reply, at which point you might get punched and shown the door by being put through it before they open it. "Geddavuggouddahere! Capiche?" I did anyways... YMMV, Capiche?
Fiduciary Aikido can be painful in the learning stages as it is more physical than mental. Perhaps you can learn from my mistakes on my journey from White Belt Begginah to full Zircon Encrusted Black Belt with Fig Leaf Clusters dat nobody in their right mind goes left with!
Luckily, the Markets are marginally nicer to do business with than that. Not much, but a little anyways...
Shouldn't it be a wash?
With a fiat currency, it is an impossibility, but close. Let's look at the Australian Dollar with a forward month shorted against an open long position in the pocket... over the time frame of a quarter...
Take a look at this. (with thanks to TD)
That is because the Australian Dollar is a well managed currency, and was in a very slight Backwardation over that time frame, keeping it both available enough while in short enough supply to prevent excessive inflation. They can conversely choke it back by creating a slight relative shortage, putting it in Contango. Clearly something else is at work there since it has to be impossible to make money with two opposing securities of the same underlying, this time being the Australian $ futures contracts for those months, right?
Well, Timing isn't just one of those things, it's nearly Everything! And then there are the trades themselves. How far are those Asking Prices, or what you get to purchase the contract for, apart from the Bid prices, or what you get to sell them for? You get to buy them for more than you can sell them at any given moment. Then there is the nature of the futures contracts themselves. Can you predict the future? Well, other than those who are able to read tea leaves as a secret Superpower, nobody can! The only certain thing about the future is its uncertainty. This isn't lost on the Futures Exchange either. They make up for it as best as they can by widening that BID/ASK spread of the forward future month, or even year, contracts.
But Ahhhhah, Grasshoppa! There is more to The Future than Australian Dollar Futures! Surely there must be some better underlying securities managed by complete imbeciles! The good news is that there is, and they are managed by You and Me and several thousand others! They are just as lousy at predicting the future. You have to believe that there is a way to turn the shortcomings of such a Perfect (cough, cough!) Well Oiled Machine as that to our Advantage. That is good because the Market gives them a well deserved spanking. Everybody loses!
Well, here is where we talk about, "Who always wins the Superbowl?" There are lots of winners, but some of them win at every Superbowl. They may not get a ring, but they win none the less. Budweiser comes to mind. Ticket sales too. And how about those guys that make all the snax? "That's the Vig!" the bookie/market maker says. "Can I put a Hundred on You to Win?" is likely your reply, at which point you might get punched and shown the door by being put through it before they open it. "Geddavuggouddahere! Capiche?" I did anyways... YMMV, Capiche?
Fiduciary Aikido can be painful in the learning stages as it is more physical than mental. Perhaps you can learn from my mistakes on my journey from White Belt Begginah to full Zircon Encrusted Black Belt with Fig Leaf Clusters dat nobody in their right mind goes left with!
Luckily, the Markets are marginally nicer to do business with than that. Not much, but a little anyways...
Saturday 11 January 2014
Why do we need Fiduciary Aikido?
It's the equivalent of Financial Martial Arts against a much larger and better armed opponent. OK, let's be frank. Your banker has a triple garage full of a million dollars worth of sports cars. His lawyer does too. So does your broker if you even have one. What gives? Why can't we at least have a morsel of that?
You may think that is good news... You at least have a pension, you at least have assets... And you may even have an alternate income. But this leads to awful government catering to that completely idiotic and blissful majority, and by extension, fiscal policy basically destroying the hard won real wealth of those who had foresight to plan for this. Some are already planning in their Twenties for their retirement, so they can even retire comfortably at an older age, at which time it will be ripped off by that majority who didn't plan. Majorities elect governments to officially grab it for them. Likewise, you could pass it on to siblings, but if they aren't aware of this problem, it will be gone before long.
At this time, the great invisible ripoff artist is inflation. The Central Banks say that is only 2.5%. You can simply prove to yourself that it is over that number by a factor of 4, being closer to At Least 10%, using the "72 Rule". Simply put, divide 72 by the % interest rate to give the time in years to double. If prices double in about 7.2 years, the described rate should be about 10%. Look at the price of food, which is basically based on fuel. Before they became so stupid that they burnt food to make into "Biofuel," it may have been only 10%. They don't include fuel of food in that official "inflation rate." There's your COLA, already short by 7.5%.
In effect, this complete ignorance was like giving a critical patient a blood transfusion from their own ankle. Couple this with the Central Bank propensity to print away the unfunded liabilities of both the government portion of, and of your pension, it is a double runaway hit, delayed by only the very fact of Your and all of Your Peers' Retirement Itself. Let me know how that is "Booming" for Ya. For now it is all hidden "On Paper."
Now keep in mind I failed Economics at University. This was after having A+'s in College in the same topic. Anyways, they gave me a pass based on the weight of all my other courses. Given the same exams today, it turns out the answers were correct, but wrong according to the professor at the time. He was dead set against Trickle Down, The Laffer Curve, and Airline De-Regulation. All worked explosively spectacularly. Here we are again. Notice anything familiar as people rewrite history to suit their politics? So are we trying "Trickle Up?" this time?
Apparently. It will fail as surely as Trickle
Down worked. The trick and fallacy is that it is ultimately feeding that much
ballyhooed 30% Stock Market. We'll just pay later. But look out. The
peak was in 1955 for children born. The plan to kill them all off in
Vietnam was interrupted. Aren't ya glad you fought against that now?
There is a lot more, but that is enough for a start. It used to be simple; Buy Gold to fight inflation. There are lots of reasons why that isn't working these days. Notice all those gold ads have been disappearing? So we have to find something else more permanent, or at least right for the times. At least I am working on it. Are you?
The following is typical of stories cropping up all over. Why? Literally, the majority is in the same boat!
http://www.marketwatch.com/
http://www.marketwatch.com/
You may think that is good news... You at least have a pension, you at least have assets... And you may even have an alternate income. But this leads to awful government catering to that completely idiotic and blissful majority, and by extension, fiscal policy basically destroying the hard won real wealth of those who had foresight to plan for this. Some are already planning in their Twenties for their retirement, so they can even retire comfortably at an older age, at which time it will be ripped off by that majority who didn't plan. Majorities elect governments to officially grab it for them. Likewise, you could pass it on to siblings, but if they aren't aware of this problem, it will be gone before long.
At this time, the great invisible ripoff artist is inflation. The Central Banks say that is only 2.5%. You can simply prove to yourself that it is over that number by a factor of 4, being closer to At Least 10%, using the "72 Rule". Simply put, divide 72 by the % interest rate to give the time in years to double. If prices double in about 7.2 years, the described rate should be about 10%. Look at the price of food, which is basically based on fuel. Before they became so stupid that they burnt food to make into "Biofuel," it may have been only 10%. They don't include fuel of food in that official "inflation rate." There's your COLA, already short by 7.5%.
In effect, this complete ignorance was like giving a critical patient a blood transfusion from their own ankle. Couple this with the Central Bank propensity to print away the unfunded liabilities of both the government portion of, and of your pension, it is a double runaway hit, delayed by only the very fact of Your and all of Your Peers' Retirement Itself. Let me know how that is "Booming" for Ya. For now it is all hidden "On Paper."
Now keep in mind I failed Economics at University. This was after having A+'s in College in the same topic. Anyways, they gave me a pass based on the weight of all my other courses. Given the same exams today, it turns out the answers were correct, but wrong according to the professor at the time. He was dead set against Trickle Down, The Laffer Curve, and Airline De-Regulation. All worked explosively spectacularly. Here we are again. Notice anything familiar as people rewrite history to suit their politics? So are we trying "Trickle Up?" this time?
There is a lot more, but that is enough for a start. It used to be simple; Buy Gold to fight inflation. There are lots of reasons why that isn't working these days. Notice all those gold ads have been disappearing? So we have to find something else more permanent, or at least right for the times. At least I am working on it. Are you?
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