Bill Cara’s Blog for Jun 15, 2012
CTA Trading Desk Morning Report
[7:00am ET] Good morning, Geoff here.
I believe that risks are too high to place major trades on Fridays, especially when market changing geopolitical events have a good chance of occurring over the weekend.
I have also been discussing being patient and waiting for confirmation of market trends.
At this time, I would be lining up both buy and sell candidates with the goal of placing those trades based on confirming price action.
With that said, here are some charts to ponder:
Have a great trading day!
Here are the 7:00am ET snapshots of the latest equity market trading results for Europe, and futures prices plus 5-minute charts of the futures for S&P 500, 30-year US Treasury Bond, US Dollar index, Gold and Crude Oil.
|Symbol||Name||Last Trade||Change||Related Info|
||34.24 (1.81%)||Components, Chart, More|
||51.00 (2.47%)||Components, Chart, More|
||55.50 (1.83%)||Components, Chart, More|
||65.96 (1.07%)||Components, Chart, More|
|^AEX||AEX General||Chart, More|
|^OSEAX||OSE All Share||441.80
||7.74 (1.78%)||Components, Chart, More|
||2.25 (0.74%)||Components, Chart, More|
||12.14 (0.21%)||Components, Chart, More|
||28.18 (0.52%)||Components, Chart, More|
||7.60 (0.87%)||Chart, More|
||6.53 (0.48%)||Chart, More|
|GD.AT||Athex Composite Share Price Index||547.34
||2.76 (0.50%)||Chart, More|
The team will check in during the day, reporting in the Discourse when there is a new entry.
Enjoy your day.
Vad’s Catch of the Day
Kaimu’s Sound Money
Never mind market volatility maybe we can start a new ETF to track US Treasury debt volatility! I offer a new acronym for this new ETF called the “DIX”(DEBT VIX)! It looks as if things are getting dicey on the debt side of things at the US Treasury these days, especially at the “net debt” line item I refer to quite frequently. Here is a snapshot of the net debt line item for May 31st …
Here it is the day after on June 1st …
On May 31st up $54BIL USD and the next day down $46BIL … The difference between the two is on May 31st there was a real “marketable” debt issuance of some $230BIL USD but the redemptions to cover that debt fell short at only $179BIL. Remember there are two debt components at the US Treasury, marketable and non-marketable. It is like derivatives where once the fraud is exposed there is no market, but at the US Treasury they announce clearly they own “non-marketable” debt. That “non-marketable” debt is traded back and forth between government accounts, like the Trust Funds and State and Local accounts. This is stuff PIMCO has no access to, yet these are some of the largest debt accounts on record at the US Treasury. Many economists say that these debts do not count since these are debts we owe to ourselves. I always say that if these debts do not count then let’s just ZERO them all out right now and see what happens! Do not be inane; believe me these “non-marketable” debts do count. In fact the USA would be in riot lock down mode if the government decided to ZERO out all the debt they owe us. I did not pay into Social Security and Medicare for 40 years just to have everything taken out of my payroll checks add up to “zero”!
I bring this to your attention because I have never seen the US Treasury net debt line item so volatile from one day to the next. On June 1st there was no “marketable” debt traded, it was all “non-marketable”. Once again we get these “non-marketable” debts wagging the dog. It was the Government Account Series that was doing the “wagging” on June 1st. It seems “non-marketable” has become virtually “marketable”.
Speaking of “zero” …
HIGHER ZERO YIELDS?
I find this totally absurd … First off the City of Buffalo has not taught JP Morgan a lesson in anything and second what sort of a drunken sailor thinks a 0.30% interest rate is “higher-yielding”? The City of Buffalo surely must realize that a 0.30% yield when even 2% official inflation is factored in is a negative return.
Buffalo City Comptroller Mark J.F. Schroeder announced on Thursday that the city would be pulling $45 million in funds from an account with JPMorgan Chase, following concerns raised by members of the Occupy Buffalo movement.
BuffaloNews.com reported that the Buffalo Sewer Authority funds will be deposited into a higher-yielding account with the local bank First Niagara. The new account will earn 0.30 percent interest. The account with JPMorgan had a 0.25 percent interest rate.
“Not only will the funds earn more interest with First Niagara, a major local employer headquartered in Buffalo, but it also sends a crystal clear message to JPMorgan Chase that the City of Buffalo is not happy with their business practices,” Schroeder said in a statement.
Now more “zero” …
On Zero Hedge we were treated to this lovely chart …
This is what Tyler said …
But how many have seen this chart showing global sovereign debt as a percentage of total government revenues? Is there now any doubt after seeing this why the proverbial four horseman are really just one giant black swan, only not one of failed bond auctions or something quite as dramatic, but something as simple and mundane as the smallest uptick higher in rates which would blow up the entire global financial farce, starting with the most imbalanced domino of all – the land of the rising sun?… And that at least Greece is not Japan?
As you can see by the chart the date is 2010. I have to ask if this chart is based on “net tax revenues” or “gross”. Let me do the official up to date calcs according to the US Treasury numbers on this using “net tax revenues” and I will show you how much worse the USA is than even Greece.
These numbers are from May 22, 2011 US Treasury Daily Statement …
Total NET (not gross) tax revenue is $1.063TRIL USD for May 22nd, so here is the formula …
$15.679TRIL/$1.063TRIL = 1,470%
So as you can see debt exceeds revenues by nearly 1,500% if you only use net tax revenues as a basis for revenue. It seems though that the US Treasury has other sources of revenues like TARP and GSE MBS “investments” and military sales. Let’s give them the benefit of the doubt and just go with this number which is total deposits for May 22nd …
Okay now we will back out any sort of debt issuance since debt is not “revenues”. If you think debt is revenue just because the US Treasury lists it on the asset side with other revenues then why don’t you start reporting your car loan, mortgage loan and credit card balances on your 1040 AGI for 2012! If I back out the debt line item it is this for May 22nd …
That leaves me with $2.014TRIL. Back out the tax refund numbers though …
Then we get $1.765TRIL USD. Still that ends up being nearly 900% sovereign debt/revenue, which is way more than double what the Zero Hedge chart shows for the USA. Of course back in FY2010 we had a lower US PUBLIC DEBT number, but then again that was 2010 and none of us live in 2010 anymore! So with that updated calculation we are not exactly Japan yet, but we make Greece look like … um … Greece! I do like how Australia is the lowest on that chart, even lower than Switzerland. The chart is yet another dubious debt data point at best though. Even Paul Krugman will blurt out on cue that America has lots of room left for much more debt accumulation and he chides Bernanke, his fellow raconteur, for not throwing more money at the economic disaster sooner.
Did you say “disaster”? Here … we thought Greece had a lot of unpayable loans. Look at these private banks. We were told they were paid off, yet here we see there is still a “balance due”.
The man who helped create the housing crisis in 2008, Larry Summers, Mr. Fannie Mae, suggests this to Obama when he first took office as President …
Here are more ideas from Larry on credit card debt. Capping credit card rates at 36% sure is helpful!
DEBT AND GDP
According to John Taylor from Stanford Economics 1 the US FED bought 77% of US Treasury debt during FY2011. I decided to investigate further and see what the maximum amount of debt the US FED has ever held, as a percentage of GDP in US history. It turns out by Table 1 below we see the year after WW2 the US FED held US Debt equal to 10.7% of GDP in 1946(see blue arrow).
By this historical comparison you would think we were deep into WW3 since debt held by the US FED as a percentage of GDP exceeds that of 1946 when America was struggling to pay for WW2. By all accounts I would say the increase in the US FED debt/GDP from 1945 to 1948 signified a deep commitment by the US FED to secure funding for the Marshall Plan, which in essence was the IOU that laid the ground work for a USD reserve currency. That agenda worked well for the USD.
By historical US FED Debt/GDP standards can the US Congress afford a WW3 since the US FED is already at World War standards now, maxed out? We are at War now, only it is a global “Debt War”! What country can really afford an all-out War now anyway? Maybe being in debt has inadvertently created a scenario for “World Peace” … NOT!
US GOVERNMENT FLOW
Below we see the total financial assets of the Federal Government (USA). For FY 2011 assets totaled to $1.349TRIL USD. Now look closer at those “assets” listed below in Table L.105. How many of those assets are truly “assets”? I would count “trade receivables” and “tax receivables” as an asset, but I would only count the “tax receivables” after deducting refunds so that only “net tax receivables” were counted. Without that based on past US Treasury numbers only 2/3 of that line item #13 would be an asset. I believe “deposits” would qualify (aka:OPM) as an asset lines #3 and #4, but I do not count such debt as “mortgages” (lines #6 and #9) and “consumer credit” (line #10) as an asset. I also do not count line #5 “credit market instruments” as an asset. Either one of those four line items are subject to vast counterparty default. We have discovered that “counterparty” makes all the difference in the world in terms of what is a true asset.
In order to verify what most American citizens consider a risky venture I cut this quote out of a Yahoo Finance article about how Americans have more home equity now than they had 60 years ago. Clearly Americans do not consider a mortgage as an asset and why should they since they do not own their home, they own debt.
“The willingness of homeowners to carry housing debt has been radically altered,” said DeKaser, chairman of the American Bankers Association’s Economic Advisory Council. “When the market was booming, a mortgage was used as a leveraging tool, and now it’s seen as a risk.”
Given that statement above it seems only those who purvey debt believe it to be an asset. We see some $1.349TRIL in Federal Government Financial Assets, how much in liabilities?
The answer is $12.262TRIL USD! That is quite a bit more liabilities than assets-nine times as much! What say ye S&P? Are ye ready for what be comin’ in 13, matey? Will it be just one “A” for USA?
WHAT IS AND WHAT ISN’T …
The world is a dynamic universe of random patterns of chaotic timing. Or is it? Ludwig Von Mises called it “Planned Chaos”! Ever wonder what the world would be like now if things happened different? Maybe things are going backwards here in America. Certainly the Home of the Free and the Brave has changed in many ways. I doubt our Founding Fathers would recognize our current form of government as a Republic. They most definitely were not fond of central banks.
US FED monetary policy innovation is starting to look and feel a lot like this …
Imagine if this guy was born in the USSR and decided to go to military school instead of tinkering with electronic parts in his parent’s garage with a bunch of long haired hippie freaks …
Before Steve Jobs there was a time in America when this was perfectly acceptable, a time when the Ku Klux Klan was as wholesome as apple pie. In this 1926 photo the Klan is putting on a parade in Washington DC with a huge audience lining the streets.
It wasn’t too long ago this sort of advertising was normal stuff …
What’s legal? There was a time when illegal drugs were legal in America …
Perhaps now we need to return to the days of “Truth Dollars” …
It seems the ad claims that for every $1USD you can buy “100 words of truth”! Today I doubt if a dollar buys the letter “T’ in Truth, especially at the US FED … SUPPORT RADIO FREE US CONGRESS!!
In 1973 we had gas shortages due to OPEC supply restrictions. This was the result …
Gas prices were $0.38USD per gallon (see sign top right corner) and you even got S&H Green Stamps when you filled up! Yet even at those low prices when there’s no gas – there’s no gas! US Energy policy is exactly what now nearly 40 years later? Certainly the Middle East is not any safer now than it was in 1973.
Okay, speaking of the Middle East, the photo below was taken at a record shop in Kabul, Afghanistan in 1959. Notice anything missing in the photo? Why yes, I do, US FOREIGN POLICY intervention is missing!
If you want to see Afghanistan pre-US military and pre-USSR military in the 1950/60s go here. Both USA and USSR foreign policy, Cold War corruption, has killed off a viable future for millions upon millions of people now relegated to a debt based Third World existence. In exchange for this brilliant policy many hundreds of thousands of soldiers have died needlessly for empirical bureaucratic policy of the absurd. The strategy is destroy every country you touch with both corrupt government and warfare for decades then offer to rebuild with an IMF loan that is onerous and impossible to repay. The US Reserve Currency is an Empire of Debt sprinkled with cronyism such as the thin veneer we tout as “human rights”. Afghanistan had more democracy before the Cold War …
So why do I bother putting these photos up? I want to drive home the point that we live in a changing world where everything changes with regards to social issues and technology. This speaks to HUMAN ACTION. What we once accepted as “normal” is now radically abnormal. What we once thought would go on forever has not. At one time our leaders and people in America thought that Communism would dominate the world and we would all be subjected to the Iron Curtain. Now our largest trading partner is Red China. In the 1970s I never dreamed I would ever have to pay over $4USD for a gallon of gas, not when I was pumping it into my tank at $0.40! Gasoline costs 1,000% more now than it did in 1973. In 2006 it was abnormal for regional banks to fail every weekend. I never dreamed toothpaste would be confiscated and full body x-ray scans at airports would be routine fare. I used to think Greece was for tourists not riots. In the 1980s when I was contributing to my 401k I never dreamed PIIGS in a TARP would jeopardize my retirement. Now debt wags the dog … The common denominator in all these failing economies is “Government Gone Wild” backed by “Money Gone Wild”!
Is it not barbaric that our monetary system has not evolved past a corrupt debt based political system? Is it not barbaric that our government forces us by outdated laws and threats of violence to submit to such a corrupt and barbaric debt system whereby only those elite politicians and bankers and those “connected” to such a failed system are the only ones who benefit? Do the 1% benefit if America and our Constitutional values collapse? Who truly benefits from such chaotic consequences? Certainly it is not the future generations who benefit. Is it the present generation and past generations that benefit then? Not likely! Chaos is a C WORD also …
Maybe look at Capitalism from a different angle …
Definition of Capitalism
Capitalism is conventionally defined along economic terms such as the following:
“An economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a free market.”
This is an example of a definition by non-essentials. An essential definition of capitalism is a political definition:
“Capitalism is a social system based on the principle of individual rights.”
In order to have an economic system in which “production and distribution are privately or corporately owned”, you must have individual rights and specifically property rights. The only way to have an economic system fitting the first definition is to have a political system fitting the second definition. The first is an implication of the second. Because the second, political, definition is fundamental and the cause of the first, it is the more useful definition and is preferable.
Because people often use the term “Capitalism” loosely, “Laissez Faire Capitalism” is sometimes used to describe a true Capitalist system. But this phrase is redundant.
Capitalism is the only moral political system because it is the only system dedicated to the protection of rights, which is a requirement for human survival and flourishing. Defending individual rights is the only proper role of a government. Capitalism should be defended vigorously on a moral basis, not an economic or utilitarian basis.
Since the advent of the US FED our rights and our monetary and economic base have been steadily eroded by the use of “debt”. Sadly the US FED powers and those of Congress have only increased over time, especially during the latest credit crisis. The tragedy is that even for those of us who use no debt we are caused to suffer as well, only to a lesser degree. Debt has totally subverted our individual rights. In essence the ECB has taken every Greek citizens rights through the use of debt. If you owe debt you are owned. Debt is not the proper way to govern a country or to live as a citizen. Debt is a tool used only by oppressors not liberators. Who died and made Debt God? For me the true “evil” of money is not “gold” but “debt”. Who can say that debt does not rule the world now? All global markets and currencies go up and down now based on Greek bonds, a tiny country with only 10.7 million people. Talk about wagging the dog! Debt wags the dog.
This week I was audited by the State of Hawaii for excise tax (sales tax). It seems my out of state exemptions were suspicious so they decided to audit KAIMU NURSERY back to 2003. Luckily I still had all that paper work. I was audited for tax years 2003 to 2008. Out of all that the State got me for $235.28USD, which included penalty and interest. It probably cost the State of Hawaii about $500 for me to tie up their reps for hours and run a computer generated revenue fishing expedition. I am just a lowly farmer trying to make ends meet in a debt ridden world. Yet many employees are needed to make the State grow larger while the private sector shrinks smaller. The only tax base any government has is the private sector.
In America if you are “productive” you have a target on your back! Somehow the government has this idea that only they are entitled. Only they have the expertise to intervene into US and foreign markets. Only they have the ability to take from the private market and create debt based monetary policy out of thin air. After decades of CIA and US Congress supported US FED intervention into foreign affairs all we have to show for those efforts is a global economy on the verge of total collapse. We have ever expanding government programs and committees investigating everything from real estate to Jamie Dimon. As you saw above some of the assets listed by the US Government is “consumer credit” and “credit market instruments”. What business does the Federal Government have with private credit? Since when has the US Congress become a commercial bank backed by virtual taxpayers?
“The further a nation goes on the road toward public control of business, the more it is forced to withdraw from the international division of labor.” – Ludwig Von Mises, Nationalism, 1955
“For the bureaucrat, the world is a mere object to be manipulated by him.” – Karl Marx
“Give us the child for 8 years and it will be a Bolshevik forever.” – Vladimir Lenin
“The end may justify the means as long as there is something that justifies the end.” – Leon Trotsky
“You must obey the law, always, not only when they grab you by your special place.” – Vladimir Putin
“We of the sinking middle class may sink without further struggles into the working class where we belong, and probably when we get there it will not be so dreadful as we feared, for, after all, we will have nothing to lose.” – George Orwell
Deron’s Daily ETF Analysis
Yesterday, on a burst of volume, the iShares Nasdaq Biotechnology ETF (IBB) undercut its 20-day EMA but reversed to close near session highs. A move above the three day high of $123.94 could provide a buy entry trigger in this ETF. We are placing IBB on the watchlist. Trade details are available to our subscribers in the watchlist section of the newsletter.
The commentary above is an excerpt from The Wagner Daily newsletter, which we have been publishing since 2002. Subscribers to the full version receive our exact entry and exit prices for swing trades of the top ETF and stock picks, access to our market timing model, and more. To get started today, sign up for your 30-day risk-free trial to our Wagner Daily stock newsletter or visit our trading blog to learn more about our proven technical trading strategy.
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