Response to Kyle

As posted at…

With his kind permission, I would like to publicly respond to a critique I got from subscriber, Kyle. This is not the first bone he has had to pick with me and if I am doing my job well, it won’t be the last that either he or others pick. Now, pissing off subscribers (my customers) is not something I want to do routinely, but I have a way of communicating that is just that, my way of communicating.

In that communication there are all kinds of buzz words and phrases I’ve made up, like Armageddon ’08, Inflation onDemand, Fiscal Cliff Kabuki Dance and probably 50 others over the years that just popped in my head and got popped right down into NFTRH, the websites or both. Then there is the Federal Reserve and the Outer Limits shtick and a hundred different ways to flog Fed officials (Good Cops/Bad Cops, etc.).

Those instances noted above don’t seem to upset people, but when I mention cults it starts getting dicey because so many of us identify ourselves, through ideology, to firmly held beliefs and cults well, they depend on an ideological grip on their members.  [edit] FWIW, I have my own firmly held beliefs, but I consciously try to make sure they don’t screw me up when managing the markets on an interim basis.

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We have deflation of footballs and deflation of my lungs after round 1 out there in the driveway.  Back in and taking a break, I always find Jeff Gundlach an interesting listen.  Maybe you will too… Pardon the ad if one pops up in the 1st 30 seconds.

Out my Front Door

Doo doo doo, lookin’ out my front door.  It’s so pretty.  I wonder if I’ll feel that way when I finally get out there to deal with it.


Think This Semi Deal is Positive?

How often do you see one company acquire another, at a 24% premium, and see its own share price pop by 7%?  Answer… not very often.  On a day when the market is down big?  Even less often.

[edit] Here’s the PR:  Lattice Semiconductor to Acquire Silicon Image for Approx. $600 Million  oh, and LSCC is now +15%; very strange indeed.

I had tentatively held LSCC and now need to go look into why the market perceives this as such a nice marriage.  Strange stuff on a gloomy market day, including in the Semiconductors, where Intel is eating away at my gain in Lattice.

Even stranger, all of my Biotech holdings are green, as are the miners.  The miners I can see, given continued deceleration in economic data, but it appears people are pile driving the Biotech’s and doubling down on momentum in the face of bearishness elsewhere.  But the broad market seems to be making some decisions here folks.  It is a strange and bifurcated market.


Around the Web


Around the Web

  • Would a Gold Standard Brighten Economic Outcomes?  –Big Picture  [biiwii comment: the old argument… the author’s conclusion is laughable as practically applied by today’s CB’s (“a gold standard is not needed to preserve price stability as long as a country’s central bank is independent and has a clear mandate to achieve price stability), but a gold standard for a modern financial and economic system is not the answer; discipline and transparency are the answers in large part imo; esp. discipline, which is lacking world-wide]


NFTRH 327 Out Now

The ‘top down’ macro work continues and frankly, I am too fried to try to detail what a good report I think #327 is.  But it is high quality stuff and another in a progression of reports that will have us on the right side of things, rather than following orthodoxy in an unorthodox environment.


Pink Frost… the Chills

I heard one of my old favorite bands from Kiwi land today and realized that I’ve not imposed my taste in music on you for a long while, so here is a weird and beautiful song by the Chills.  Have a nice weekend.

Gold Miners Mini Correction

They tell me you are supposed to take profits and so that is what I have done with another gold miner, Klondex Mines, because no matter how positive I am on the company a chart like this is vulnerable, too far above the EMA 10, let alone the SMA 50, which is around where I originally bought it.

We had previously advised that traders consider taking profits as GDX hit 23 and HUI hit 210.  I did that with some positions, but had wanted to hold this one indefinitely.  Well, so much for that.  Meanwhile, I’ll get dinged on the ones I decided to hold but with lots of cash am in a position to either take advantage of this pullback or in the less likely (IMO) event it violates certain parameters, avoid most of its damage.

NFTRH analysis fully anticipated the disturbance in the sector and advised profit taking for traders and a probabilities based view of what this pullback is and is not.


Utilities Leading Market Higher

Guest Post by Tom McClellan

DJ Utilities and DJ Industrials
January 23, 2015

The news out of the European Central Bank on Jan. 22 helped to lift the major averages higher.  The DJIA and SP500 have not yet made it back up to the level of their December 2014 highs, but the Dow Jones Utility Average has already pushed to a higher high.  That promises more upside movement for the rest of the market.

It is not surprising that utilities stocks tend to move up and down in sympathy with all of the rest of the stocks.  They are subject to many of the same forces of liquidity, and returns chasing.  In spite of that general tendency, we do see differences in behavior sometimes, and those differences are worth paying attention to.

If the DJIA makes a higher high but the DJU makes a lower high, that sort of divergence usually leads to a selloff for the broader market.  It is as if the utilities stocks can act as a canary in the coal mine, sniffing out liquidity problems ahead of time.

That is not the situation we are seeing now, though.  With the DJU already up to a higher high, and leading the industrials higher, we are at least several days away from possibly having a bearish divergence, and that would only come into play after the DJIA has made a higher high.  And this strength is to be expected now, as we are in a period of strong seasonality at the end of January, and we are also in the 3rd year of a presidential term which is nearly always bullish.  In other words, the market is supposed to be going up now, and the DJU is confirming that a rally is what should be coming for the DJIA.

Money, Commodities, Balls and How Much Deflation is Enough?

Guest Post by Michael Ashton

Money: How Much Deflation is Enough?

Once again, we see that the cure for all of the world’s ills is quantitative easing. Since there is apparently no downside to QE, it is a shame that we didn’t figure this out earlier. The S&P could have been at 200,000, rather than just 2,000, if only governments and central banks had figured out a century ago that running large deficits, combined with having a central bank purchase large amounts of that debt in the open market, was the key to rallying assets without limit.

That paragraph is obviously tongue-in-cheek, but on a narrow time-scale it really looks like it is true. The Fed pursued quantitative easing with no yet-obvious downside, and stocks blasted off to heights rarely seen before; the Bank of Japan’s QE has added 94% to the Nikkei in the slightly more than two years since Abe was elected; and today’s announcement by the ECB of a full-scale QE program boosted share values by 1-2% from Europe to the United States.

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