Friday, July 1, 2016

It Never Happened

"Now, understand, commander, that torpedo did not self-destruct. You heard it hit the hull. And I...was never here."
--Admiral James Greer (The Hunt for Red October)

In what has to go down as one of the more mind numbing turnarounds in recent memory, major indexes have rallied to regain all losses since Brexit just days ago.

There is no doubt in my mind that this is central bank intervention at its 'finest.'

position in SPX

Thursday, June 30, 2016

Mass Public Shootings

It's two am
The fear is gone
I'm sitting here waiting
The gun's still warm
--Golden Earring

The FBI defines 'mass murder' as "a number of murders (four or more) occurring during the same incident, with no distinctive time period between the murders. These events typically involve a single location, where the killer murdered a number of victims in an ongoing incidents (e.g., the 1984 San Ysidro McDonalds incident in San Diego, California; the 1991 Luby's Restaurant massacre in Killeen Texas; and the 2007 Virginia Tech murders in Blacksburg, Virginia)."

These are clearly headline grabbing incidents that usually take place in public places. The FBI defines situations where a gunman has the potential to commit mass murder in a public place as 'active shooter' situations. The consequence of active shooter activity has been labeled "mass public shootings," which per the FBI excludes shootings that result from drug or gang violence or that were part of some other crime (e.g., robbing a bank.

Studies indicate that nearly all mass public shootings take place in gun free zones. The rationale is straightforward. Mass shooters, like the one in Orlando, prefer targets with low capacity for self-defense.

Gun grabbers, of course, don't like this finding as it suggests that their gun-free zones constitute legal invitations for killers.

So what do you do if you're a gun grabber? Change the definition of a mass public shooting, of course, to make the numbers seem less damning.

Such pretense does not change the reality that gun free zones constitute serve as hunting preserves for killers on the rampage.

Wednesday, June 29, 2016

Silver Leading

I thought is was clear
The plan was we would share
This feeling just between ourselves

Silver beginning to outpace gold in the post Brexit world. The metal has broken out above a multi-month reverse head and shoulders pattern.

Silver miners are not leading this time. However, names like PAAS are chewing thru resistance on their own reverse dandruff patterns.

As July 4th approaches, seems appropriate that potential for fireworks in the metals is growing.

position in gold, silver, PAAS

Tuesday, June 28, 2016

Follow Thru

So glad we've almost made it
So sad we had to fade it
--Tears for Fears

We indeed got the downside follow thru yesterday with major indexes breaking decisively below intermediate term support.

This morning we're getting a lift out of the gate. While it might provide near-term gratification, would think the bulls would have preferred them opening deep in the hole this am.

Bears with technical proclivities will be prone to use the support-turned-resistance at ~SPX 1035 as a backstop for initiating more downside exposure.

position in SPX

Monday, June 27, 2016

Ignorant Voters

Jack Trainer: Power to the people.
Tess McGill: The little people.
--Working Girl

The Brexit vote demonstrates once again how statists' affection for democracy ceases when their side of the vote is the losing one. This time around we hear the elitist argument that issues such as Brexit should never be put to popular vote because the voters are generally incapable of deciphering all aspects of such a complicated issue and are therefore incapable of casting informed ballots.

Instead, the argument goes, the voting should be left to the 'experts'--i.e., the bureaucrats who have presumably been previously selected by the electorate to noodle over such complicated problems and render informed decisions.

The rub, of course, is explaining how those same voters who are ignorant on complicated issues such as Brexit are capable of identifying those representatives who can do their thinking for them. Those voters would also need to be able to identify related agency problems likely to arise and implement timely recourse to minimize them.

Pushing this train of thought to logical completion, the question becomes when should people be allowed to vote at all?

Sunday, June 26, 2016

Charlie Hustle

"Man, I did love this game. I'd have played for food money. It was the game...the sounds...the smells. Did you ever hold a ball or a glove to your face? I used to love traveling  on the trains from town to town. The hotels...brass spittoons in the lobbies...brass beds in the rooms. It was the crowd, rising to their feet when the ball was hit deep. Shoot, I'd have played for nothing."
--Shoeless Joe Jackson (Field of Dreams)

It is Pete Rose Weekend in Cincinnati. Although Major League Baseball has yet to officially welcome Pete Rose back into the game, it approved Pete's induction into the Reds Hall of Fame. It's happening the weekend. Cincinnatians, including native Westsider Pete himself, are relishing in the moment.

Reds baseball greats who played with Pete, including most of the Big Red Machine, joined him yesterday in celebration as the induction speeches flowed. Emotion was as thick as the temperature was hot on the field. It was wonderful.

What is everyone celebrating? Hometown hero, yes. All time hit king, yes. But anyone who knows baseball. and especially those who watched the game when Pete played, is also celebrating this: the possibilities that can result from sheer drive.

There is a case to be made that Pete Rose would never be drafted in today's baseball world--an environment dominated by analytics. No arm, no speed, no power. Rose would surely struggle to catch the attention of modern scouts who are prone to judge talent with stop watches, radar guns, and exit velocities.

What we learned from Pete is the lesson that effort trumps natural ability. Indomitable spirit overcomes deficits in God-gifted talent. What a sight Pete Rose was on the field. He was a lot like us, except that he played harder than all of us combined. He busted ass like few others before or since. Charlie Hustle.

And then there was his enthusiasm. Here is my favorite personal Pete Rose story. The Reds played the Boston Red Sox in the 1975 World Series. Despite being the odds-on favorites, the Reds struggled mightily in the first two games in Boston. After losing Game 1, they were fortunate to squeak out a late inning come-from-behind win in Game 2 before returning home to Cincy. My friend Rick and I had tickets for Game 3.

As was customary for us that year, we took the city bus downtown late in the afternoon, walked to Riverfront Stadium, and waited for the gates to open about 2 1/2 hrs before the game. Once inside, we snuck down to the field level blue seats behind the third base dugout to watch batting practice.

Unlike regular season BP session where just a few beat writers would be hanging around the batting cage talking to players here and there, media everywhere. Players were visibly uptight. To be expected, I suppose, as this was the World Series after all.

All except Pete Rose. You could here him laughing as he waited his turn for BP. He walked around the back of the cage slapping backs and joking with players and reporters. Pete would step into the case, stroke a few a line drives, then emerge with that smile on his face.

"Look at Rose," I said to Rick. "He loves it here. There's no place this guy would rather be."

Pete Rose went on to become the MVP of the 75 Series.

During his induction speech yesterday, Pete Rose said that he gave it his all because of the fans. That he was better because of us.

Well, Pete, we're also better because of you.

Saturday, June 25, 2016

Brexit Club

Will you recognize me?
Call my name, or walk on by?
Rain keeps falling, rain keeps falling
Down, down, down, down
--Simple Minds

Bulls weren't able to jam 'em higher yesterday and the major indexes closed near their lows. Dow was down over 600 points. Not real technical damage yet, however, as all major indexes close on intermediate support. For the SPX, that amounts to about 2035.

One sector that now looks broken are the banks. The bank index was off about 7% yesterday with many individual names considerably worse.

Next week should be interesting. Investors will have the weekend to ponder the meaning of Brexit. Margin clerks will also be busy this weekend informing clients to put up or get out.

If they are able to bounce early in the week, then I'll be looking for short side opportunities, particularly in the financials.

position in SPX

Friday, June 24, 2016

Yes for Brexit

V: Would with me?
Evie Hammond: Now? On the eve of your revolution?
V: A revolution without dancing is a revolution not worth having.
--V for Vendetta

In a dramatic vote that took many pollsters and experts by surprise, the British people voted yesterday by substantial margin to leave the EU. While what Britain does with its increased sovereignty remains to be seen, this is clearly a blow to statism worldwide and calls future solidarity of other EU members into question.

The news has roiled financial markets worldwide, as interventionary policies designed to hold the EU ponzi together suddenly appear less likely to work in the eyes of investors. Domestically, equity markets opened down 2%+. Banks in particular have been splattered, with many domestic names down 6% or more. British bank Barclays is off a cool 23%.

We'll see what happens after the bulls attempt to bounce 'em, which appears to be in process now. If they can't, then...

As my friend Toddo tweeted this am, markets rarely mark significant bottoms on Fridays. One reason: margin calls go out over the weekend.

Should also note that gold was up about $80 at one point but has since pulled back some. Still, it remains above the $1300 resistance level that has turned the metal back several times recently.

position in SPX, gold

Thursday, June 23, 2016

Government Power Spectrum

"Why should I trade one tyrant three thousand miles away for three thousand tyrants one mile away? An elected legislature can trample a man's rights as easily as a king can."
--Benjamin Martin (The Patriot)

Responding to some comments made by a House Democrat that the intent of the Constitution was NOT to severely limit federal government power, Dan Mitchell includes this spectrum of government power.

Not bad on a relative basis. The Constitution indeed expanded central govt power beyond boundaries set forth by the Articles of Confederation. And, indeed, that power expansion and where it might head over time worried many people, particularly the Anti-Federalists. The Bill of Rights was amended to the Constitution in large part to ease such concerns.

As Mitchell observes, however, it is difficult to argue that the framers did not intend to carefully limit what the federal government could do--as evidenced in part by the enumerated powers of Congress listed in Article 1. That intent is also clear from direct quotes from many of the framers.

The Constitution reflects a design aimed at minarchy, or toward the left side of the scale above. Toward the right side of scale are various forms of monarchy.

Of course, the Anti-Feds might suggest that those comments by the House Dem were easy to anticipate and help validate their 200+ year old concerns.

Wednesday, June 22, 2016

Molon Labe

Captain Nathan Algren: There was once a battle at a place called Thermopylae, where three hundred brave Greeks held off a Persian army of a million men. A you understand this number?
Katsumoto: I understand this number.
--The Last Samurai

The Battle of Thermopylae (480 BC) pitted a few thousand Greeks against 100,000+ invading Persians. The vastly outnumbered Greek force held off the Persians for seven days in one of the most remarkable last stands in history.

At one point, the Persians demanded that the Greeks throw down their weapons in surrender. The Greek commander responded, "Molon labe" ["Come and take them"]

Today's gun grabbers face similar prospects.