My Posting Activity...

I have recently received some feedback complaining that some of my recent posts have a abundance of grammatical and spelling errors…it seems that the deduction of why is that I am just "another guy with a blog”. I do agree there are too many spelling and grammar errors but its not because of said reason. So, out of respect to all of the people who read my blog I wanted to publicly discuss the subject.

I would like to address this for several reasons…Firstly, because I would like to ask for your patience and understanding for my process which is less than optimal as I am not seeking to be a professional blogger like Mish Shedlock for instance. Secondly, because I often am aware that I make a lot of mistakes when building a post or establishing a theme. And finally because of that I want to remind you, as readers of my blog, that if you read a post with a lot of errors - I am often in some state of review…which usually tends to occur after I hit the post button! Like I said my process is not exactly optimal. I will usually correct most of my mistakes and update the post in a timely and subsequent review…and sometimes add clarifying content or charts. So, IF you see a post with a lot of errors it pays to reread it later since I will likely correct most things and may add some addition content or clarity.

I want to clarify, for the record, that I NEVER edit posts for content once I released the post. So, once I am finished with my basic review of it, if I think its final, I will not touch it again. Many bloggers make a habit of editing prior posts post history so that their assertions in those posts look better. I consider that highly disrespectful of the reader. I do not edit my posts for content post history and do not edit comments out either. In fact, I used to have comments live on this blog, but it was a nuisance to manage them - especially when one particular idiot spent all day spamming…so, I simply eliminated comments functionality. But for a journalistic integrity I think articles should not be changed nor should comments be selectively edited.

On another note, i am requesting your understanding, writing a blog is not my main career objective…I am generally focused on writing software for trading or the actual trading itself. Additionally, very often as in last night, I am attempting to put together a fairly complex theme which is a challenge in an of itself, becomes an article of roughly 1000 words and I am doing it late at night when I am prone to be tired but have some spare cycles I can use to write a post. As I recall, I am one of the only bloggers who is sharing the level of clarity of what is going on in our markets and financial system that I am - yesterday’s post as many important ones are was timely, illuminating and I think useful even with its spelling and grammar mistakes…I am also generally doing the posts when I can…which means I may be rushing. This creates a greater opportunity for me to make grammar and spelling mistakes. Additionally, my personal process sometimes means I hit the post button to get the post out faster than sooner…then take a break and come back and review the post for a decent run of grammar, punctuation and spelling. I am doing this work as I can, I am not getting paid and I am trying my best.

To put this in perspective, currently my trading systems are live and long nearly $1 billion notional of Dollar futures contracts not to mention the equity shorts and commodity shorts I am dealing with…no matter how you slice it that is where my focus is and it is a significant pressure…as I am up double digits for my funds so far this month - I think my  efforts need to remain prioritized as they are…which definitely leaves proofreading my blog as a significantly lower priority. As I do enjoy writing for the blog and have the impression that people find some of this work of use, I will endeavor to improve my process and posts. Thanks for your readership and feedback.

Try-Tri-Trianglulations, Rounded Tops and Waterfalls

It is highly unusual for us to get very high negative tick into the close…it usually leads to a nearly immediate reversal, however, there needs to be support and better yet confirmation for that to occur. The reality is that debt, currency markets and many indexes have no indication of any pending bounces and offer no confirmations other than for more weakness. Additionally, as I have said in previous posts…everyone and their brother is watching the bullish pennant continuation pattern - yes that Triangle. It certainly appears rather deformed on the Pit Sessions - to say the least…yes MUCH MORE LIKE A ROUNDED TOP, but WSJ left that option out because its not bullish I guess. Highly publicized patterns and consensus within the society (investors being a subset of society) or a community are VERY suspect. More over the Wall Street Journal has now gotten into the action of identifying the pattern…

So far, there seems little to support their thesis and quite a lot to support that the HEAVY down ticks hitting the close are a sign of the panic and desperation among the investment world to generate cash…I suspect that particular activity will become far to customary going forward. There is a very real potential that the heightened sense of desperation on these market participants will cause a market failure. It will not likely look pretty, to say the least, and I would think its possible to see double digit declines in a very short period of time.

The irony is that while Kyle Bass will be insured with his "put option against the idiocy of the political cycle"…he may find himself being unable to maintain/sustain his position over time and will end up being rewarded with significantly constrained purchasing power for his efforts - likely quite a bit more than his highly misinformed trade analysis may indicate. But, this is the pattern, Bass, Paulson and many others like them will reach the desperation phase and sell anything not glued down, even their most prized jewels, to generate cash. Central and Sovereign Banks and Commercial Banks will have to desperately sell anything not glued down because there is no escape from default for them. This means all that Gold in the Spanish, Greek, Belgium, Portugese, Irish and Italian vaults will have to be released on the open market much sooner and more desperately than anyone could imagine…and that gold will not likely protect you when this occurs…So, ultimately even the insurance it gives you may be of great value when you can hold it for the next 20 political cycles, however, like normal mortals there are practical elements to managing positions and assets - it will find a need to be liquefied most likely well before the insurance value has paid the cost of its carry.

Lest anyone think that the Fed and ECB can invent a miraculous plan by tomorrow morning to shock the markets…they need an event first in order to change rules or sell their unpopular transgressions of society’s rights under some cover. They need an EVENT in order to setup and then will proceed to market their reaction and subsequent plan. By the time that event has happened any plans they think they have now will likely need to change dramatically in addition to amounting to typical peashooter exercises. So, there is little likelihood that the Fed can really do anything miraculous in the very near term.

What you see going on around you is a contraction of credit money…the Fed/ECB can try to offset that with printing and monetization but they will simply be replacing a small piece of the credit destroyed by asset devaluation and credit defaults…their actions will fix nothing and very likely continue to make things worse - as their harebrained schemes have done over the last two years. Lastly, the dramatic constraints on available cash will tighten like a noose around the neck of its prisoner.

Anything that the supposed authorities do will most likely result in less available credit…and there is but one result from that in this extreme stress environment…strong demand for existing and available cash and very weak demand for ALL assets. So, whatever the Super Committee, BURNanke and TRICK-IT come up with will likely further intensify the stress we currently have by further constraining the flow of available CASH where they it is really needed and trapping it where it is not. This means DOLLAR/CASH up and ASSETS down in value. Since the EURO is not really proper cash don’t expect it to fare will against the dollar when there are very few choices left.

What people fail to understand is that in our system, the drug addiction is the credit based money amplification schema and the cure is not real assets or gold…but is something more akin to the relationship of heroin and methadone. In this case, the cure for credit based money is non-credit money. Translated that means - simple, pure fiat paper!

Kyle Bass: kettle calling the pot black

"The Profligate Idiots in Europe: They Have A German Pope And An Italian Central Banker” - Kyle Bass

The irony is that Kyle is totally off base with his concepts, his portfolio and his rhetoric very likely profligate himself - even though the leaders in Europe to happen to be fools. Kyle, however, is fresh off the success of a lifetime and fails to understand the issues we are facing…just like most of the successful PM’s out there is focused on Gold and Silver and so-called real assets. Kyle has bought 198,416 pounds of nickles, for Christ sake, because they have silver in them! Atleast, I would buy nickles because they have cash in them…but he has failed to study the problem and is simply hoping for a repeat of previous sucesses…The most obvious trade there is right now is buying REAL assets and Gold and Silver or Commodities. The inflation/real asset trade is not going to work.  Thank god I trade with systems…things are NOT as simple as Kyle would need them to be! In my opinion any PM who employ’s this ego driven trading idiom is a disaster waiting to happen.

It seems like Kyle is working on biting the dust just about as hard as Paulson…which given that Paulson is likely to be losing over 75% this year as per my previous forecasts quite a few months ago…is a pretty big dust bite. I think Kyle may fare better because he is actually smarter than Paulson and because it may take longer for him to cry wolf.

Past success is definitely not an indication of future returns - especially with regard to ego driven and highly misinformed trading and portfolio management.

The market problem is too many Fiat IOU’s...

The issue is that the global financial system has allowed great magnification of its money creation mechanisms to be directly translated into credit which is then spent as money. The problem IS NOT fiat money - its the credits that amplify the fiat money. For this reason we have too many assets and at way too high of prices with artificial demand impulses driving them. Therefore, this markets performance will not be based, in the near-term, on financial performance of a company or even a product or commodity - but the ability for people to obtain the currency and purchasing power with which to acquire said instrument.

In short, equity and commodity markets can idealize all that they want, but the trade in them will be governed by the root of our problem - access to currency and purchasing power.

At this time, people are still watching relatively deformed triangle patterns in very crappy looking equity market trading. Those patterns, in addition to being deformed are not correlated to anything remotely inverse in the dollar. The dollar setup is just plain bullish and the EURO is clearly in the midst of a large move down that is not likely to be interrupted by much…other than a Goldman Tax Short recommendation I guess.

I will post some charts, but its my recommendation that people trade with an edge towards the direction of the Dollar, Euro and Aussie Dollar.

from miami…"Give A Wall Street Banker Enough Rope and He Will Hang Himself"

You know things are not going well when you find effigies of bankers hanging from electric lines with nooses around their neck, entire murals painted on the walls of abandoned buildings and tent cities full of discontented people. Well, I figured there may be some interest in seeing what is happening here in Miami - and I am quite sure in many other places.

These are some pictures that I took today…

Tent City Downtown Miami Near the Court House

A mural of social discontent/class warfare triggered by irresponsible central planning and social engineering.

Mural and effigy (I had to rush to take the picture so my car is in it)

Bankers above…

CME - What and who is putting a gun to their heads...

The reality of life, especially corporate life, is that no one spends money unless there is something in it for them. Corporations either spend big money when its clear that they can make a lot or that they could lose a lot more if they did not spend preemptively. That appears the be the case with the CME which spent $300 million of their reserve fund designed for internal FCM obligation defaults to other FCM’s or risk entities. The CME has an obligation to its members NOT to their end clients. The posturing is that $300 million was offered to the MF Global Bankruptcy Trustee as a gesture of goodwill - a "helping hand" if you will. Nothing could possibly be further from the truth. NO ONE GIVES AWAY $300 MILLION DOLLARS TO BE HELPFUL OR NICE when they have ZERO obligation to do so…they only do it when there is some sort of a gun to their head…in this case, I am left wondering what is going on that could scare the CME so much? Obviously, it has to be something much bigger than $300 million, since that is what they are giving away without so much as getting any reward or upside. So, the R/R does not look good here - unless there is a far bigger problem lurking in the wings. What is it that is on the other side of this very generous and supremely nice/kind offer?

Well, I think we can see some of clues in the currencies. I am posting the Dollar index components chart which I have occasionally produced in the past and watch everyday. With the exception of the parallel upward trend channels drawn on the index itself, none of the labels or patterns have been substantially changed from how I placed them in June…things have played out rather well, indeed. Somewhere in these patterns there lies something that must be related to the issue that is scaring the CME so damned much…and this is likely why the Dollar index has such substantial targets.

See for youself…things do not look good for the inflationist currency debasement and real asset prophets. Sprott and Bass and most of the assorted gold and silver extremists will likely not enjoy what is about to happen. Mind you that in the beginning phases of these currency moves, Gold and Silver will likely be looked at a safe havens and may enjoy a brief throwover…until people are forced to look at them for what they are: assets that are collateral to be sold to service obligations elsewhere.

Party like its 2008...

Earlier in the year, I posted charts showing the major foreign indexes and the Nikkei…those patterns have played out to a tee…the US markets have been MUCH stronger and have had much more effort placed in the by our illustrious banking cartel leadership. That is about to change as their bullets have turnd from lead to rubber and now sand…

The interest that people have in the triangle that I posted about on Friday is very much like the head and shoulders pattern idenfied by CNBC and the general public in 2009…everyone sees this continuation pattern…but its most likely only going to occur in their imagination.

Earlier in the year I posted a buch of charts documenting the state of the European markets…I will be adding some more european charts to this post…but you may be interested in a look back...A rush out of risk leaves almost NO choices

I will be adding some more charts to this post, including one if the non- triangle pattern occuring in the nasdaq.

When the cat is away…BURNanke is in the fray

The reality is as we sit here assorted non Greek/Italian bond markets are imploding. The US bond market is closed and there are way less places to play in the markets today without that market open. Of course if you were a mentally challenged central banker you would prefer to try paint rosy pictures on days when there is less money in play - even while around you Rome burns…

Forex and Repo activity is signficantly reduced without active trades in the Bond markets to support…this makes Equities a fund place for Central Banksters to play when the cat’s not on duty and additionally, you have money flow in the markets chasing momentum that would normally be chasing bond momentum.

Meanwhile the dollar index is in a zigzag pullback and testing its support trend line off the highs as well as finding support at its 300 day MA.

Here are some charts…

With three wishes they could be rich…

...as long as they can put off paying for the Hamburgers until Tuesday.


The interesting thing about our markets is that this is the EXACT condition that is going on throughout the financial system. People are using short-term financing (usually through overnight repos) to pay for longer-term obligations and further their accounting control frauds - what’s more - they think that they can get rich doing it. The reality is that the managers who collect the bonuses or over-committed books, often do get rich, but their firms often also go broke and have the added benefit of making sure tax payers end up paying the bill - the result is that economy and financial system suffers. These are the exact conditions that brought down ponzi schemes like Bear Stearns and Lehman among a fair list of alternatives - short term credit covering huge losses has disappeared. Its gone. Financial managers usually seek to arb their risk…in my opinion any derivative/tertiary risk is actually greater than the source/natural risk since new risks are introduced that have not been accounted for. We are dealing with that now.

Banks and large investment firms have financed leveraged and losing positions in many asset classes through many techniques from their illustrious carry trades to the most common Repo trades. The window on these short cuts is now sealed and broken…yet they still hold the assets they are seeking to get rich with…but can not afford. Its not too far from the Wimpy situation - wanting to have a hamburger today and pay for it on Tuesday - only to be out gunned by sorcerers who think they can make money of a money losing deal if they can get their magic wishes…which they ironically don’t even know what to do with.

The other irony is that people who are embedded in the mix, are all clamoring to get into gold now that they feel like they can’t trust leveraged cash or assorted assets…the problem is they are really acting based on their three wishes and of course you can’t eat gold…nor may you be able to easily pay to eat with gold for some time to come…it just another asset the global overleveraged ponzi schemers will be required to sell before they implode. I see no good outcome for quite some time for any asset whose price was levitated by access to cheap short-term (or even long-term) credit based capital.

Good luck market…this is not going to go well…Ben, Tim and Trich and most of the big players are in some deep doodoo.

As expected…the flags have broken out...

the ZigZag bounces are done...The EURO has broken its flag down…and look out below and the Dollar has broken its flag to the upside…and look out above…this will be VERY BIG and the S&P500 is doing so now and BTW EMD (S&P Midcaps 400 Futures) is leading the way down and is continuing its recent trend toward significantly weaker trading than S&P…targets for these flags are below1.28 perhaps even to parity on the EURO, Dollar in the upper 80's to anywhere in the 90’s and the S&P500 below 1000…it will all happen faster than most are thinking possible…there will be bounces of course, but people will rest all their hopes on them and not remember them for very long…

Anyone looking for the Buy the Bounce…and BTFD to come and save the day…this is different game and they will most likely be sorely dissapointed…Short-term cash is gone…and there is a run on the banking system - forget any single bank…its the whole system people are running from…what’s more the margin call that accompanies the run is contagious and will spread anywhere it can go.

And the are off and ON THEIR OWN…no handouts coming from Russia or china or the US in time to save this stinking pile from its true nature...

For a little reference, a key played in the deriatives and REPO market can keep up this charade going any longer...LCH Clearnet is:

LCH.Clearnet (previously known as the London Clearing House and the Paris based Clearnet) is a British independent clearing house, serving major international exchanges and platforms, as well as a range of OTC markets. LCH.Clearnet clears approximately 50% of the $348 trillion global interest rate swap market, and is the second largest clearer of bonds and repos in the world, providing services across 13 government markets. In addition, LCH.Clearnet clears a broad range of asset classes including: commodities, securities, exchange traded derivatives, CDS, energy and freight. As a clearing house, LCH.Clearnet sits in the middle of a trade, assuming the counterparty risk involved when two parties (or members) trade. When the trade is registered with LCH.Clearnet, it becomes the legal counterparty to the trade, ensuring the financial performance; if one of the parties fails, LCH.Clearnet steps in. By assuming the counterparty risk, LCH.Clearnet underpins many important financial markets, facilitating trading and increasing confidence within the market. Initial and margin (or collateral) is collected from LCH.Clearnet members; should they fail, this margin is used to fulfil their obligations. The amount of margin is decided by LCH.Clearnet’s risk management teams, who assess a member’s positions and market risk on a daily basis. LCH.Clearnet Group is regulated as a Compagnie financière by the Autorité de Contrôle Prudentiel (France) and as a Recognised Clearing House by the FSA. LCH.Clearnet is 83% owned by its users and 17% by the exchanges that it serves.

Ladies and gentlemen…the EURO has failed

Today marks the beginning of the reign of terror that will plague the EURO. The patterns in the EURO from a chart perspective are now complete and the cycle will be reverting back to the slow motion bank-run that will become the fast-motion one in but a few hours.

Post MF Global Account Transfer Bump

Well, there you have it…the markets were given their dope, junkies that they are, and we have pretty much what I expected…sharks are circling as the bait feeds on its scraps.

We have building strength in the dollar, weakness in the euro and an out of control equity market. The patterns on equities suggest a little more push up…the dollar however, is consolidating bullishly and is about to begin an epic move…much of which will likely occur in a matter of just a few days of trading. I will post some charts shortly…any rally in the ES is likely to remain below 1278…additionally,it should be noted that as I had indicated the buy signals in the 30 year UST triggered in 137’s and second in the 135’s…UST’s are now 141 and likely going much higher (lower yield)…Gold and Silver and Oil are getting in their last highs for a VERY long time…I believe that among the best shorts around are going to be in the energy complex as I have stated many times before. I had covered my Oil shorts in the low 80’s. CL, YI/SI and YG/GC are ideal shorts up here. One other comment about the Equity indexes. the EMD (Midcap 400) has been significantly under performing the last few days intraday…this is usually a pretty reliable warning sign that the market has worn out its welcome. Of course it did outperform on the upside initially during the beginning of the last bounce.

Meanwhile, Goldman Sachs, Morgan Stanley and others like them are scrambling to look solvent…when its obvious that they are not…there are no good Christmas presents coming in the next months…only coal in the stockings this year.

Some more charts...

We have islands (indicated in yellow) with head and shoulder pattens combined with hanging men candles...not pretty...unless you are short and there are not that many of them left.

Niall Ferguson speaks on TED

G-Pap spreads diarrhea all of the modern world...

Now G-Pap is dressed in a nice suit and walking through the beautiful sunset for his action shots…he wants us to believe that he will form a consortium - by Monday!...yet his work is more grotesque than that of the lowliest sewage worker. The thing is that I actually respect a sewage worker…he does not pretend to be something he is not…he is really working in the sewer. However, our politician friends work several levels beneath the sewer and pretend that they are sailing on pristine fresh water lakes in 20 knots of wind - at their backs no less. 

G-Pap has spread his venom to Europe and to the US via the incompetent regulators and officials that are supposed to keep us and the fincancial system safe and in order. Even more disturbing is that G-Pap has been afforded this opportunity by even higher level leeches like Ben Bernanke, Alan Greenspan, Robert Rubin and Larry Summers and their assorted cronyists who thought that Trichet and the ECB were actually a good idea and who believe that the only way to fix the problem of spending too much, is by borrowing more and the only way to fix the problem of borrowing too much is to borrow more and spend more. These are not really very complex problems but they have gained their circular logic due to the nature of politics and the surreptitious nature of compensation of officials and cronyists. 

G-Pap has now exported to the US, via the MF Global disaster, the concept that the way to fix too much risk is by granting even more risk and then closing the eyes. All of the big futures exchanges have granted risk waivers of sorts by reducing margin rates to maintenance margin on all futures products supposedly to handle the smooth transition of accounts from MF Global to their new FCM's. Anyone who believes that a harebrained plan like that coming from a regulating body will work as planned is smoking something pretty potent. These same regulators watched as MF Global (and who knows how many others) used their client money to trade…and did nothing for years…but NOW they have an interesting plan and idea and its REALLY going to work. NOT! 

The reality is that when there is blood in the water the sharks will be circling…especially when the prey is wounded and weak. The regulators are weak, MF Global investors are tired and weak and the market and the system as a whole is weak…I think the answer as to who is the hunter and the hunted is easily answered. The regulators have now succeeded in taking one disaster and magnifying it into the beginning of the biggest capitulating global liquidity crisis in history. 

If regulators wanted to deal with this issue, they could have granted specific credits or options on futures/buying power to MF Global customers not all of wall street. Publishing that the MF Global situation was such a debacle that they are willing to change policy and risk protocol dramatically is rife with its own unforeseen risks. Those risks are going to be watched VERY closely by the sharks quietly circling the pending disasters. What’s more is that anyone trapped does is only getting what they deserve, there have been plenty of warnings. Capitulation of the prey and of the regulators by the great white market sharks should not be far off.

The reality is that the government has now once again demonstrated that its answers to problems of over leverage and risk taking are more risk and more leverage. As we know the problem of being pregnant can not be solved by being more pregnant - so the problems of MF Global and the European system can not be solved with such a circular and catatonic approach any better.

Regulators and investors subscribing to this perspective are committing suicide and their demise will be brutal and swift.

Liquidity crunch is on - deception continues everywhere but in the charts...

G-Papsmear is lying his butt off…chaning his story and his government and some magically he is going to have a consortium by Monday AM…I think not. Additionally, the liquidity crisis continues to accelerate and the shortage of dollars is more and more evident in the charts as of friday…I will post more details later today.