Tag Archives: risk

The All Everything Phase

Dialing in the theme from Friday’s post to a shorter-term view, the 2 year yield has more than compensated for the rise in CPI over the last year, as the CPI-2yr ratio shows.  That earlier post had shown a bigger picture in which the 2 year yield had declined dramatically vs. the CPI, but is in a gentle incline lately.  Flipped over and dialed in time-wise, that gentle incline (decline) is not so subtle.  Goldilocks lives there.

cpi.2yr

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Euro and Gold

I am not counting on gold going up in USD at this time because with all the anti-dollar hype and its upside reversal (from critical support) yesterday and today I am leaning bullish on Uncle Buck.  The Euro on the other hand is doing this…

xeu

There is also the case of the Euro and gold, which was the center of fear and loathing in 2010 and 2011, as gold took on too many panicked sponsors.  Here is the big picture monthly view of the European fear gap getting closed out.  Europeans who want a long term value opportunity could be buying now (most probably aren’t) as opposed to what they actually did, which was to buy in 2011.

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A Warning on Junk Loans

Record margin debt is not the only dangerous sign of the overly leveraged and speculative atmosphere the Fed has encouraged.  Now the head of the world’s largest distressed debt fund, Howard Marks of Oaktree Capital, is warning of the dangers as retail investors gobble up distressed debt.

Oaktree’s Marks Urges Caution as Money Flows into Junk Loans

Here is a pretty scary line…

“You can’t go on strike and refuse to buy the securities you’re paid to invest in, because the market may not turn for months or years,” Marks said. “Never forget the old adage, being too far ahead of your time is indistinguishable from being wrong. So you have to buy but with caution.”

So in other words, the thing just keeps going until one day… it just ceases to go.  Yeh, that’s a great fundamental underpinning right there.

From Sentimentrader.com:

leveraged.loans

4%

If the monthly chart of the COMP is to be believed, 4% is the ‘reward’ side of the risk/reward equation in tech stocks.  COMP could gobble that up in 3 days.

comp

Bulls have surely won.  The market has gone much higher than I for one thought it would when I got bullish on its prospects in late 2012.  Much higher; but then I am not a bubble chasing momo.  I am a conservative player with a negative view of the mechanics that have produced this bubble.  Still, there is no use denying its reality.

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Credit is Gold #1 and Icebergs

Guest Post by Doug Noland

The evolving EM crisis took a turn for the worse.

Backdrops conductive to crises can drag on for so long – sometimes seemingly forever – as if they’re moving in ultra-slow motion. Invariably, they lull most to sleep. Better yet, such environments even work to embolden the optimists. This is especially the case when policy measures are aggressively employed along the way, repeatedly holding the forces of crisis at bay. In the face of mounting risk, heightened risk-taking and leveraging often work only to exacerbate underlying fragilities. But eventually a critical juncture arrives where newfound momentum has things unwinding at a more frenetic pace. It is the nature of such things that most everyone gets caught totally unprepared.

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Palladium Gold Ratio Thinks it’s a Credit Spread

If you back out the fact that it is a measure of metals, the Palladium Gold Ratio is just that, functionally at least; a credit spread and economic indicator.  NFTRH manages PALL-Gold by a bigger picture weekly chart, awaiting the firm signal of a turn. PALL-Gold was an early bullish economic indicator we used 1 year ago right along with the Semiconductor ramp up.

But for today, PALL-Gold (PALL-GLD) is taking a drop that is somewhat milder but in line with paper spreads like Junk to Investment Grade, Junk to T bond.

pall.gld

Yen on the Move

NFTRH has been noting that the Nikkei had lost support, while its whipping boy in the mirror, Johnny Yen was looking a little bottomy.  As of today, here’s Johnny…

yen

One of a multitude of indicators I see now that show risk flying ‘OFF’ as greedy casino rats the world over try to abandon ship.

Risk Still ‘ON’ by TLT-SPY Ratio, but…

TLT vs. SPY is but one indicator of the current ‘risk on’ condition for the stock market.  The broad market (unlike some individual stocks and sectors; seen retailers lately?) has not made any technical breakdowns and beneath the surface indicators like TLT-SPY have not made any definitive moves to rein in risk taking.

But it is indicators like TLT-SPY and several others that would ultimately tell the story of a ‘risk off’ situation.  For now, TLT-SPY has positive divergence and is grappling around with the 50 day moving averages.  It looks constructive at least with RSI above 50, although this has happened a few times previously before ultimate failure.

Conclusion:  We’ll just keep our mid-year plan (+/-) for a market top front and center until something triggers to change that.  This market could well have another mighty suck-in in store for the public.

tlt.spy

Strange Bedfellows; Gold and USD

Two forms of money; one official but its only value is in ‘confidence’.  The other is not really money, but its value is of something more than confidence.  All confidence was lost in gold in 2013, so it had better have something more going for it.  It is debt free as it is no one’s liability and it has been used as money for centuries.

Okay, blah blah blah… gold bug sighting above.  What I wanted to actually do is show a chart of GLD & UUP looking pretty darned in line with each other over the last few months.

gld.uup

Whatever their differences, in the big ‘RISK ON’ environment cooked up by the Fed a couple of ‘risk off’ items have been fairly in unison outside the party.  Today they are both above their 50 day MA’s.

Party on Garth.

How [They] Learned to Stop Worrying and Love the [Market]

How I [they] Learned to Stop Worrying and Love the Bomb [Market]  paraphrasing Stanley Kubrick’s great cold war/nuclear paranoia film Dr. Strangelove (1964).

riding.bomb

The USA thrived during a 20th century rife with war, famine and depression.  This was a wealthy country however, founded on principles of self-reliance and valuing  thrift, saving and honest work for an honest return.  Add in unparalleled productivity and economically at least, the positives more than outpaced the negatives.

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