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04/22/2017 Weekend Update

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Cobra
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04/22/2017 Weekend Update

Post by Cobra »

Just start a new thread so that guys can have chat in the weekend. Actually every registered user can start a new thread, you don't have to wait for me to start a new one.

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Cobra
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Re: 04/22/2017 Weekend Update

Post by Cobra »

don't forget our weekly sentiment poll here: viewtopic.php?f=9&t=2438&p=239835#p239835

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Cobra
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Re: 04/22/2017 Weekend Update

Post by Cobra »

No stock picks for the next week, here's the number of strong stocks found:
viewtopic.php?f=10&t=2440

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Trades with cats
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Re: 04/22/2017 Weekend Update

Post by Trades with cats »

Nat Gas- Not looking good. With the past winter 17% less cold than expected inventories are higher than last year. Hedge funds have a large long position. Drilling activity is still pretty good.

On the plus side there is still hope for at least a normally hot summer. That is to say the Pacific Oscillator seems to be in normal for now.

But once again my only reason for looking at Natty is the historic change in exports. A couple of more liquefaction trains running will mean a long term move toward world prices. We are still a year or two away but the long term bottom could happen this spring or next fall or the spring of 2018 if it is a really warm winter.
Trades with cats
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Re: 04/22/2017 Weekend Update

Post by Trades with cats »

Oil My oh my what a week. The war waged with words and rumors got really hot. The great houses that will reap untold commissions from the largest IPO in the known universe were out in force assuring their allies (the Hedge Funds) that the cause was still winnable if they would stay the course. But some members of the media openly mocked them while others did their best to sound concerned but positive. I think the technical term is yellow dog journalism, you've all seen it before, lots of charts and explanations but stuff like seasonal trends is quietly forgotten about. The positive spin was that OPEC/NOPEC was winning in the wider world but the pesky US inventories were refusing to show any real draw down and that is a problem as the US is about 1/2 of the world total. Insult to injury the weekly inventory report was a bit less than hoped for and then the Friday rig report showed zero mercy from those pesky shale drillers. It was so bad that even new jaw boning from the Kingdom itself failed to turn things around.

The first fund to get out of a failed trade is a smart trader, everybody who follows is just panicking.

Here is a chart that tells the tale.
premian break evens.jpg
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Re: 04/22/2017 Weekend Update

Post by Trades with cats »

Risk Parity Chart.jpg
Risk Parity is allocating a portfolio based on risk using leverage to make the less risky assets equal in portfolio risk. The issue has been that when they underestimate risk, and usually you may substitute volatility for risk, they have to unlever the portfolio to reduce risk. To me it is the same thing Van Tharp has been teaching all us retail types for years on position sizing based on R multiples of each stock, only instead of limiting the number of shares based on your total dollars the funds, with essentially unlimited credit go the opposite way.

So those very leveraged funds are blamed for every significant market drop. So is the team at Bridgewater superior to the rest of us or do they just have a higher credit limit allowing them to capture more returns from the central bank put propping up the markets? Well Uncle Warren says we will find out who was swimming naked when the tide goes out.

Mid week I saw a chart showing that 52% of the S & P gains year to date were due to 10 mega cap stocks. End of the week I read about how puts and different flavors of VIX were skewed because of the very large levels of drop insurance on the S & P. I would ask what about the effects of buybacks on these mega caps. Hasn't that damped volatility? Doesn't reduced volatility mean even more leverage from the risk parity funds?. So the obvious conclusion has to be that it is all about unlimited cheap debt where the funds and management are in some sort of bidding war and the best part is that it is all other peoples money. Our management proxy Tim Cook wins short term for himself and our Ray Dalio proxy the 28 year old Ivy League history major collects his 2 and 20 with money pouring into his fund.

But as Nassim Taleb has said somewhere in his books these sort of arrangements continue to work until they don't. Then the big problem becomes that the people who looked like financial wizards are proven to be one trick ponies. But when will volatility return? Clearly the crowd has decided that the Fed is lying about rate hikes just as they have been for several years now. So party on! Or maybe not. First quarter saw a huge shot of liquidity from ECB and BoJ. US Treasury dumped money into the US market by paying off debt rather than rolling it over. It looked like a credit surge from PBoC ending on some charts but many do not include PBoC so I am not sure. And they are the biggest expander in the world. Current media chatter is that Super Mario is running out of time and those cautious Germans have had enough of the printing. Also something about PBoC trying to deflate the stock market bubble. But how much public outcry can the central bankers stand before they relent and once again turn on the presses? We know there really is a limit as Zimbabwe, Argentina and now Venezuela have added their names to that long historical list of governments that have destroyed the value of fiat currency, or in the Roman tradition shaved their coins.

This Time Is Different: Eight Centuries of Financial Folly: Carmen M. Reinhart, Kenneth S. Rogoff, was a whole lot of tables that I admit I didn't read. What I did read is you just never know when the house of cards will come down. They called it the Aha moment. I like the story of the little boy crying out the truth in "The Emperor's New Cloths". It is all the same, at an unpredictable time an unpredictable event will change public opinion and overnight what was acceptable becomes unacceptable. Financial systems or maybe a better term would be arrangements, happen and then stay in place as long as they work well enough to not take the risk of change. But the issues slowly build up, the inefficiencies and the dead wood and the parasites untill the whats wrong overwhelms the whats right and it blows up. Most of the historical markers are pointing to the end of the cycle. With all the extra stuff that has been put in place by the central bankers and all the interference in the markets to keep risk from getting out of hand, well I just wonder how deep are the pockets of those central bankers when the Risk Parity funds decide to get out of the market. And I wonder what will be the trigger for that test?

As we wait I can't help but imagining the great wizard up on stage announcing what is about to happen while glancing at the central banker behind the curtain. There are clearly several wizards of Oz around the planet right now and I am guessing that the one in Europe runs the best chance of being booed off the stage as a fraud but maybe that's because I just watch too much news.
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Al_Dente
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Re: 04/22/2017 Weekend Update

Post by Al_Dente »

[Bespoke, April 20]
% of stocks above 50dma
422percent above 50.png.png
Disclaimer: I am not an investment advisor. This is just my opinion NOT investment advice.
Shaishen
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Re: 04/22/2017 Weekend Update

Post by Shaishen »

Trades with cats wrote:
Risk Parity Chart.jpg
Risk Parity is allocating a portfolio based on risk using leverage to make ... Then the big problem becomes that the people who looked like financial wizards are proven to be one trick ponies. ...
Financial systems or maybe a better term would be arrangements, happen and then stay in place as long as they work well enough to not take the risk of change. ...
Nice write up. Start your own newsletter and charge.. just kidding, I really enjoy reading your thoughts with sprinkled in history tidbits and the occasional cynical touch. Cynicism motivates to keep reading (at least me) I like Taleb also for that reason.

We party on till it stops. Nobody really believes it will ever stop. Doomers like Faber are presented as laughable caricatures. Hugh Hendry eventually gave up on armageddon. Canadian housing bubble bursters are wrong for 5 plus years..

Friend of mine with substantial assets in the markets sends me her fund managers' news letters.
These fund managers get away with manipulated graphs and write ups justifying their investment phylosophy/1/4ly results. The game is take advantage of their busy clients who (almost) blindly rely on their expertise.

Eventually the reset button will be activated, the rude Aha moment. As usual timing is everything, and humans are really bad at timing.

-
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Al_Dente
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Re: 04/22/2017 Weekend Update

Post by Al_Dente »

SKEW 148.42
Folks are once again taking steps to insure their portfolios against big-risk
Contrarians will note it’s not extreme yet, but near extreme
Disclaimer: I am not an investment advisor. This is just my opinion NOT investment advice.
daytradingES
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Re: 04/22/2017 Weekend Update

Post by daytradingES »

I was reading in Gann how each time they think they have broken market cycles and each time they are wrong - because they don't study enough cycles and have a short term memory.

In 2000 free money poured into dot.com it was different and then it all of a sudden wasn't
In 2007 free money poured into MBS and their countless derivatives and it was different and then it all of a sudden wasn't
in 2017 free money poured into the bankers coffers and it was different and then all of a sudden it won't be.

----------

It is surprising, at least to me, that no one seesthe absurdity (and immorality) of the Fed pushing rates to zero.

If your money price is 15% you need 7 yrs for a payback (1 divided by 1/7)
If your money price is 5% you need 20 yrs for a payback (1 divided by 1/20)
If your money price is 0% you need an infinite number of years for a payback (1 divided by 0)
Educational only and not trading advice (EO&NTA) :)
Good trading to all
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