Tuesday, July 28, 2015

Unbigoted Irony

Too many shadows
Whispering voices
Faces on posters
Too many choices
--Pet Shop Boys

Strange thing about many people who view themselves as unbigoted while frequently labeling others as racists. They are unable to evaluate opinions and behavior of others unless they know the others' skin color.

Suppose an on-line editorial about a controversial social issue is written by an individual for whom a name but no bio is given. It is likely that most of the self-proclaimed unbigots who are interested in the editorial will search the internet et al for background info on the author. In particular, the unbigots will want to know what this person looks like.

If the unbigots desire to weigh in on the issue in, say, the comment section underneath the editorial, then it is also likely that their responses will differ depending on the editorialist's appearance (i.e., gender, skin color, etc).

Monday, July 27, 2015

All the King's Men

Are young but getting old before our time
We'll leave the TV and the radio behind
Don't you wonder what we'll find
Steppin' out tonight
--Joe Jackson

Approximately eight years ago to the day, I was in NYC visiting my good friends at Minyanville. Early tremors were shaking markets as subprime derivatives were beginning to fall apart.

I remember thinking two things. One was that few people in The City seemed aware of the danger ahead. Real estate was flying. $1000 dinner tabs were common. Limos filled the streets.

The other was that the Bush administration and Republicans were going to have their hands full trying to keep the markets together ahead of the 2008 election. They couldn't, of course, as the SPX sank by about 50% over the next year.

Here we are eight years later and the shoe is now on the other foot. Early tremors are once again shaking markets--although with less effect so far as the markets have been heavily medicated. The Obama administration and Democrats are surely thinking about what they can do to prop prices up for the next year.

One problem that they face is that they have already moved heaven and earth to jam markets higher for the past few years. As bad as they were, the Bush people applied nowhere near the preemptive interventionary force currently being administered by the Obama group.

The question is whether this administration has any interventionary capacity remaining. What tricks the Obama administration might still be able to pull to keep those limos cruising the NYC streets in the months ahead?

position in SPX

Sunday, July 26, 2015

Individuals Act

"A king may move a man. A father may claim a son. But even if the men who move you be kings or men of great power, your soul is in your keeping alone. When you stand before God you cannot say, 'But I was told to do thus,' or that 'Virtue was not convenient at the time.' That will not suffice. Remember that."
--King Baldwin IV (Kingdom of Heaven)

Axiomatically, only individuals act. Groups, races, classes, nations etc exist but they can only act through individuals.

For example, Japan attacked Pearl Harbor on December 7, 1941, but only because certain individuals flew airplanes and dropped bombs on US ships. The US declared war on Japan on December 8, 1941, but only because certain individuals in Congress voted to declare war.

Yes, social pressure can persuade action. And herding tendencies can drive like-minded behavior.

But this does not alter the truth that when analyzing human action, the core unit of analysis is the individual.

Saturday, July 25, 2015

Operation Ajax

"There may be honor among thieves, but there's none in politicians."
--T.E. Lawrence (Lawrence of Arabia)

Operation Ajax was a CIA operation to overthrow the government of Iran in 1953. Two years prior, the democratically elected Mohammad Mossadeq had pushed for nationalization of Iran's oil industry, thereby removing it from the clutches of England who had been enjoying a sweetheart oil deal rooted in Sykes-Picot decades earlier.

Reluctant to lose its cheap oil supply, Britain convinced the US that the Iran regime had communist inclinations. The Americans, gripped in Cold War mania, were drawn in.

The CIA op, led by Theodore Roosevelt's grandson Kermit, used classic methods of subterfuge. The CIA hired Iranian goons to pose as communists to instigate riots and vandalize property. The majority of Iranian citizens demanded that the Iranian military intervene. By that time, the CIA had turned many Iranian military leaders into CIA operatives. When the moment came, the military operatives deposed the Mossadeq regime in the name of saving the country from communism.

The corrupted military leadership returned power to the Mohammad Reza Shah Pahlavi, who had previously been king. In exchange for the throne, the Shah was at the service of the US and UK. His dictatorship reigned for the next 25 years.

Although many Iranians suspected US involvement, the coup was kept secret from the American people for many years. The CIA, of course, considered the coup a resounding success.

In 1979 a revolt overthrew the Shah and Islamist forces headed by Ayatollah Khomeini prevailed. Takeover of the US Embassy in Iran and the ensuing 'hostage crisis' punctuated the period. The Islamist Republic of Iran was born, alongside anti-American animosity that has endured for decades.

The lineage of this creation traces straight to Ajax.

Friday, July 24, 2015


"One minute you're up half a million in soybeans and in the next, boom, your kids don't go to college and they've repossessed your Bentley."
--Louis Winthorpe III

Many commodities, including crude, gold, and silver, have been getting jack hammered. Many are now trading at or below their 2008 credit market meltdown lows.

Just sector rotation? Perhaps but I don't think so.

This action jibes with all sorts of incoming data points that global growth is slowing quickly. Falling raw material prices reflect producer weakness.

Accordingly, leveraged speculators in this area are now facing margin calls...

position in gold, silver

Thursday, July 23, 2015

Control Points

"The government's been in bed with the entire telecommunications industry since the forties. They've infected everything. They get into your bank statements, computer files, email, listen to your phone calls. Every wire, every airwave. The more technology used, the easier it is for them to keep tabs of you."
--Brill (Enemy of the State)

A tenet of social control and institution theory involves reducing the number of points or entities to monitor and adjust. This often leads to increased size and concentration of control points.

Thus, one roadblock such as Checkpoint Charlie that all traffic passes through for inspection. One spokesperson to represent a negotiating group. Boycott or seek sanctions against a few large producers rather than many small buyers.

Socialism, particularly fascism, is built on the few large control point notion. How better to influence production than through state endorsed verticals comprised of a few large producers? These verticals are the control points, the transmission mechanisms of state policy.

Contrary to popular belief, large corporations are not inevitable outcomes of capitalism. Under competitive conditions, size threatens adaptation as bureaucratic burdens hamper change. The natural state of affairs is one of fragmentation and diversity. The variation within, as observed by Darwin, provides the basis for adaptation.

Size and concentration are friends of the State. They strengthen capacity for control.

Wednesday, July 22, 2015

Lincoln's War Money

"Secesh has to be cleared away by the hand of God like the Jews of old. Now I will have to burn this town."
--Col James Montgomery (Glory)

Prof Williams asks the question that few ask: If Abraham Lincoln was frequently on record as supporting slavery and state's rights to secede, then why did he lead the US into civil war?

The answer: Follow the money.

Tariffs amounted to 90% of federal revenue. And Southern ports paid about three quarters of all tariffs collected. The federal government could hardly let that revenue stream go.

Add to that Southern plans to build an economic system around free markets--a plan that promised to crush Northern manufacturing concerns as captive Southern customers found cheaper resources on the market.

The straightforward conclusion is that the Civil War was fought to preserve the American System for crony beneficiaries.

Tuesday, July 21, 2015

Bad Breadth

Through the hour glass I saw you
In time you slipped away

Breadth assesses the degree to which all stocks are participating in an advance. If all 500 issues advance as the S&P 500 index climbs higher, then breadth is strong. This is considered bullish.

Shouldn't market advances always be associated with strong breadth? In a word, no.

Because equity indexes are usually market cap weighted, it is possible that price increases in just a few mega cap stocks can pull indexes higher even when most stocks are declining in value.

John Hussman notes that we're seeing just this phenomenon currently in US equity markets. For example, the NASDAQ composite has been recently marking new highs, but these increases have been due to just a few large issues such as GOOG climbing higher. When the index value is recalculated so that the price movements of each of the 1000 stocks in the index are weighted equally, then the NASDAQ has been falling sharply.

As Dr J observes, index increases on narrowing breadth are considered bearish, as optimistic investors pile into fewer and fewer stocks that are 'working' in order to keep their successful trend following winning streaks alive.

Advances on narrowing breadth are associated with most major stock market tops.

position in SPX

Monday, July 20, 2015

Textbook Dandruff

When it gets too much
I need to feel your touch
--Bryan Adams

You'll struggle to find a more textbook-looking head and shoulders set up than the current Intel (INTC) chart. Pattern matches a fundamental story of over-investment, earnings manipulation, and channel stuffing. After popping after hours last week after the company's earnings report, the stock has since given back those gains.

If the neckline of the pattern at 29ish breaks, then the breakdown intuitively 'works' to 26ish (which corresponds to both intermediate term support and the 200 day moving avg).

Actually have my first put project on in quite some time...

position in INTC

Sunday, July 19, 2015

Defense Free Crime Zones

Computerized information booth: Gun. Noun. Portable firearm. This device was widely used in the urban wars of the late twentieth century. Referred to as a pistol, a piece.
Simon Phoenix: Look, I don't need a history lesson. C'mon Hal, where are the god damned guns?
Moral Statute Machine: You are fined one credit for violation of the Verbal Morality Statute.
Simon Phoenix: What? Fuck you!
Moral Statute Machine: Your repeated violation of the Verbal Morality Statute has caused me to notify the San Angeles Police Department. Please remain where you are for your reprimand.
Simon Phoenix: Yeah, right.
--Demolition Man

This past week, we were once again reminded of defense free crime zone nature of no carry zones when 5 military personnel were shot and killed in Chattanooga. Bullet holes riddled the glass surrounding the gun free zone sign pasted to the entry door of Marine recruiting center where some of the murders occurred.

Gun violence researcher John Lott notes that, coincidently, the Batman shooter who killed dozens in a Colorado theater three years ago was convicted this week. The perp's diary indicated that he passed on other potential sites because of their 'substantial security' and settled on the Aurora theater because it banned self-defense.

Gun free zones attract mass shooters like magnets because of the conditions of weakness that are created. 

Although the straightforward logic continues to escape the gun grabbers, aggressors generally target unarmed victims.