Tuesday, June 16, 2009

What Board Games Taught Us About the Economy

Some funny and not so funny just because they are true anecdotes from Slate.com's "The Big Money" - What Board Games Taught Us About the Economy.

Here we have been running around looking for root causes of our mess; after looking through the slides in the piece I see Hasbro / Milton Bradley has been the issue all along.

  1. Monopoly: Monopoly has taught us that financial institutions are invincible. The game's banker cannot go bankrupt, according to the rules: "The Bank never ‘goes broke.' (I especially love the next sentence!) If the Bank runs out of money, the Banker may issue as much as needed by writing on any ordinary paper."
  2. The Game of Life: In The Game of Life, anyone can buy a mansion! The size/price of your home isn't determined by how wealthy you are, the rules say: "Draw 1 House Deed at random from the deck. Pay the bank the price on the deed (not the insurance amount; that's a separate transaction). If you're short on cash, you must borrow from the bank."
  3. Acquire: (never heard of this game) In Acquire, the instructions say, "You make money by forming corporations, buying the right stock at the right time, as well as merging and expanding corporations in which you own stock." That sounds about right. But then again, is it smart to turn stock market investing into a kids' game?
  4. PayDay: (must of missed this one as well) PayDay teaches kids how to get wealthy. We're not so sure that this particular rule still applies: “As any financial advisor will tell you, the way to get ahead financially is to make Deals. It's the American way! So take advantage whenever you can. The time will probably come when you don't have enough money on hand to buy a Deal—or to pay your bills, pay a neighbor or make a charitable donation you are instructed to make. So, do what any red-blooded American would do: Take out a LOAN!” (oye!)
  5. Risk: Although the game is about war, it contains a lesson for the corporate world: Those who try to master the universe may end up in trouble. The rules say, “If you decide to take over the world in one turn, and fail, you will usually be so scattered that it would be easy for the next player to eliminate you.”
  6. Mall Madness: (frankly I am not only glad I did not know this was a board game, but am frightened that it is - replete with what appears to be a 10 year old girl on the box; her hairstyle is age 32 however) While Mall Madness players are encouraged to purchase items on sale, spending, not saving, gets rewarded in this game. The rules state: “When you move onto the bank space, insert your credit card into the bank slot. The Voice will tell you to take $50, $75, or $100 from the bank, or you will be told that the bank is closed. Once you get money from the bank, you can’t go back to the bank until you buy something. If you stop at the bank without buying something first, the Voice will say, ‘Bank closed.’ ” (classic Americana - you literally are barred from saving!)

As Euro Zone Unemployment Spikes; Job Saving Measures Emerge - Completely UnAmerican

It's remarkable with all the green shoots that abound we are still getting this sort of news out of Europe. Especially when you account for the fact that many of these countries are starkly "socialistic" and try to protect their workers ....
  • The number of people employed in the 16 countries that use the euro fell by 1.2 million during the first three months of the year, the largest decline since records began in 1995, data showed Monday.
  • The number of active workers in the euro zone fell 0.8% in the first quarter, according to data released by the European Union statistics agency Eurostat. It was the third-straight quarter in which employment fell, and marked a substantial pick-up in the rate of job losses. (2nd derivative NON improvement)
  • The unemployment rate was 8.6 percent in April, up from 6.8 percent a year earlier.
  • Of those euro-zone members for which numbers are available, Spain suffered the largest drop in employment, down 3.1% on the quarter and down 6.4% on the year. (another housing bubble country - welcome to the club)

Ah yes... old news. Employment is a lagging indicator - what happens to Main Street is inconsequential to recovery. [May 26: NYT - "Official" US Jobless Rate Likely to Pass Europe's] As we wait for China* to save us all ....let's see how the "socialists" with their inflexible business interests roll. Via New York Times.

*excluding the fact both their imports and exports fell 25%+ year over year as of the latest data

  • Rising European unemployment has business and government looking to offset the pain, and some of the solutions belie the region’s reputation for inflexibility.
  • ... analysts and labor experts say the figures would have been even starker without some of the job-saving measures used to combat the worst recession in decades.
  • Many countries have short-time compensation programs, tailored for the manufacturing sector, under which employers can apply for temporary state assistance to top up the wages of workers working reduced hours.
  • France has a publicly financed partial unemployment scheme, allowing companies experiencing difficulties to temporarily lay off staff and draw on state monies to pay those workers during those periods.
  • In the Netherlands, 223 companies had taken advantage of a similar program by mid-January.
  • Germany also has several measures to reduce working time, many of which are specifically framed as employment-saving measures. The federal “Kurzarbeit” system, which translates as “short work,” provides a state-supported backup for companies resorting to short-time working outside the provisions of collective agreements.
  • In France, as in other European countries, employers are not normally allowed to lower contracted salaries without employee consent. But if a business with operations in France has “serious grounds” to consider that its economic viability is in danger, and employees refuse a reduced salary, then a company could proceed to layoffs, according to Paul-Albert Vaillant, a lawyer at the Paris office of the firm Landwell & AssociĆ©s. Details like severance would have to be decided by a tribunal, he added. To avoid this kind of situation, some companies have tried to negotiate salary reductions.
  • The Finnish carrier Finnair announced in December plans to temporarily lay off 1,700 cabin crew members on a staggered basis this year to cut costs. The layoffs will last two to three weeks per worker. The move came after staff had rejected an offer of voluntary wage cuts of 5 percent or a freeze in previously agreed pay increases for 15 months to avoid the definitive cutting of 400 jobs.
It is quite a striking contrasts between the 2 continents... domestically it appears life is here so we can work; there they seem to work so they can live life. In return for the domestic ethos, workers here can boast of record profits at their company, supporting CEO pay at nearly 300x median worker (vs 7 to 20s overseas) and a booming stock market to reflect it all ... errr, ok scratch that last part. Overseas it appears workers could care less about having the most innovative, profitable companies on Earth - they just want a way to have a stable wage, raise a family, and then go enjoy the 6 weeks of vacation. (insert "lazy" chant here) Just different ideologies I suppose.

That ever eternal American carrot of one in every few hundred thousand reaching the summit in income strata seems to be enough for the other 90%+ to take the downsides (day to day stress, lack of job security ex government work, being considered a slacker if you take the full two week of vacation, ever larger proportion of people without benefits and being "temps", fretting if you get sick at the wrong time, lack of stability in retirement, et al). But Americans are finally starting to catch on - latest ABC poll
  • 51 and 50 percent respectively, think job security and their ability to afford a comfortable retirement will remain worse than before the downturn began.
  • Equally as many expect a diminished ability to afford things they want and need in general, and, in one particular, anticipate greater difficulty paying for health care.
Welcome to the Pooring of America... one day people will look back at my post here and see Nostradamus like features ;) [Dec 8, 2007: Do the Bottom 80% of Americans Stand a Chance?] Since the bottom 20% have been in a state of disrepair for a very long time, I'll assume most of that 50-51% seeing the light is in the 25-75th percentile. Lower, Middle, and bottom tranches of Upper Middle Class who are seeing the walls slowly but surely close in on them, and not really sure why. The first generation who are worried their kids won't have the same chances to "do better than their parents" like they did. They've been duped by (supposed) asset inflation replacing income inflation for about a decade now - and spending as if asset inflation is permanent. But their income has gone somewhere, trust me... see chart below.

Meanwhile - how the "socialist" sods overseas somehow struggle living the good life without 2.3 SUVs and 2800 sq foot homes is beyond me; don't they realize how many Coach bags the female in our homes has is the definition of success?... must be an unhappy scene over there in socialist land. [Feb 18, 2008: Denmark is the Happiest Place on Earth?] I will just be so interested what happens when the US eventually hits a level of taxes akin to "the socialists" to pay for our obligations while providing little of the same benefits for said tax rates. Should be an interesting discussion about how we've "transformed" a version of capitalism that worked for much of the middle class (although prone to boom bust cycles) since the 1970s to this new paradigm of 1920s like income and wealth distribution.

What's the name of this paradigm? Reverse Robin Hood... working hard (and longer) as a collective to give to a few at the top - it's strong and growing stronger here. It used to be called "feudal society" in the old days but in the US at least the serfs have ownership rights - and a 1 in 400,000 shot at becoming a lord, so they play along - we love our lotteries :) This chart clearly shows how trickle down economics has been "working" like a charm since the early 80s. I'm not sure if it accounts for inflation - let's pray it does.

(click to enlarge)

Hard to find the most recent statistics but we're catching up to even the Japanese who were the supposed slaves to work. (this is where I say "We're Not Japan" to fit the dogma of the day)
  • Pulling from government statistics, Time Day proponents say that Americans, on average, work 350 hours more each year than Europeans. That's 9 weeks of labor. "Europeans have made a tradeoff between quality of life and hours worked," said De Graaf. "We Americans have chosen to trade all our increases in productivity for more stuff. And to pay for it, we need to work even more."
  • "I would never try to pretend that our system doesn't cause us to have the highest production in the world," said De Graaf. "But it's also created a lot of very stressed out, unhappy people"
Just wait until they are taxed ever more on their long hours....

....and to those say this is the American Puritan ethic you lazy blogger, I ask... why then have hours worked jumped 13% since just the 1970s? Perhaps we lost our Puritan way in the 60s and 70s ;)

Working Class Heroes
Annual average hours worked in 2002, selected countries.
Country Avg. hours
South Korea 2,447
Japan 1,848
Australia 1,824
United States 1,815
Canada 1,778
Ireland 1,668
Sweden 1,625
France 1,545
Germany 1,444
Norway 1,342
Source: International Labor Org. (UN)

So more hours worked in return for little more pay (if any) for most, less stability, safety net seemingly working mostly for those who permanently stay there ("it's a lifestyle"), and massive gains for the tiny sliver of society at the top via the collective.

Anyhow off to the mall to support our dynamic economy - while I think about the root causes. (there's a joke in that statement) ;)

[Feb 23, 2009: WSJ - Elderly Emerge as As New Class of Workers - and the Jobless]
[Sep 1, 2008: Laboring Longer is Growing Trend for Americans]

MySpace Axes 30% of Staff [News Corp (NWS)]

It is not a huge number of people but it is remarkable that such a prodigy of the internet is cutting 30% of its staff; granted they now have corporate owners in News Corp (NWS) and Facebook has taken away some of their user base - but still! I guess the half life of dominant internet franchises not named Google are measured in 2-3 year increments. Than you are ... well just another struggling business tarnished by the suffering advertising market.
  • News Corp.’s MySpace social- networking unit fired almost 30 percent of its staff to save money in response to falling advertising sales and user gains by larger rival Facebook Inc. The cuts lower U.S. staffing at Los Angeles-based MySpace to 1,000, according to a statement today.
  • U.S. marketers will spend an estimated $495 million this year at MySpace, a 15 percent drop from 2008, according to estimates from researcher eMarketer.
  • Fox Interactive’s revenue declined 11 percent to $187 million in the quarter ended March 31 from a year earlier, primarily because of a 16 drop in advertising, while costs rose. A $300 million annual advertising agreement with Google Inc. expires next year. Renewal is unlikely to be “anywhere near” the current deal’s size and “dramatic” job cuts are needed to help reduce costs and spur growth, Richard Greenfield, a New York-based analyst with Pali Capital, wrote in a June 10 research note.
  • Facebook has 850 employees. The Palo Alto, California-based company, already the social-networking leader worldwide, surpassed MySpace in the U.S. last month, according to ComScore Inc. Facebook’s advertising sales are expected to rise 20 percent to $300 million this year, New York-based eMarketer said in a May report.
So 3/5ths of MySpace's ad revenue is with Google, and this renewal won't be anything like the old one. I wonder if young Mr Zuckerberg is having second thoughts about not selling Facebook say 1-2 years ago.

For those who don't know, Mark Cuban (who owns the Dallas Mavericks among other things) sold Broadcast.com to Yahoo (YHOO) a decade ago for $5 Billion. (that used to be a lot of money before bailout nation) If my memory serves the ticker was BCST - I used to trade that sucker every day.

How many times have you gone to Broadcast.com? Hold on ... let me ask this cricket that is chirping. You get the picture - bubbles are wonderful... when you are inside one & then get out at the right time. It's all relative, even a $300M payout for Zuckerburg would be more than most will ever dream of in 10 lifetimes... but then again at the age of mid 20s with a few billion he would probably be bored.

Today Could be the Day

It's been a long time coming but today could finally be the day the 20 day moving average is busted. Maybe spidey sense is beginning to work again after a month and a half hiatus; as I wrote earlier today it would be the probable course to buy at the 20 day moving average since that's what has been working, but this is the not the course I adopted.

It would take a major change in direction here in the last 2 hours... but we can't assume anything until 4 pm since so many rallies have been born 3:30PM or after each time we get to a point like this the past few months. Urgent buyer showed up again this morning happily pushing futures up in the 7 AM to 9 AM slot - so we have to look for "him" again in the afternoon - until he is overwhelmed by panicked lemmings he must be respected.

I am going to show both the "exponential" and "simple" moving average stories here since they differ quite starkly, with the caveat that I'm an exponential man living in a simple world. [Why I Use Exponential Moving Average]

The story in E(xponential)MA land ... a market that hit against 200 day moving average for 10 days, including yesterday's high before finally a reversal. We were "saved" last minute yesterday from breaking through the 20 day (which has been support) but now are below ... need to see 4 pm close to confirm this. If this breaks you don't see any real support until S&P 890ish which is the 50 day moving average.

The story in S(imple)MA land... a market that has for 10 days been above all key moving average but just hanging around (you don't see the resistance in this chart that the EMA chart shows) The exact same story on the 20 day moving average on this chart, but a key difference is "support" - on the chart below the 200 day is BELOW where the market trades today (but falling sharply by the day) and should provide support just under S&P 910.

Again it is quite remarkable on how different the two charts are... I still am sticking with what has worked for me for years (EMA) but potentially if we break down could have support at the 200 day SIMPLE moving average. Let's respect that case as well since so many use it.

Apple and Research in Motion are both still green so can't get too excited for the bear case here outside of that.

And now we wait to see if "urgent buyer" appears after 3:30 PM... personally I think urgent buyer might want the market to panic a bit here. Why? Because if I were the urgent buyer I'd want mortgage rates to fall back down. The only way to do that (on the cheap) is to panic the market, get them running back in US Treasuries (driving yields down) and get this overheated market back into a cage. This would allow the house ATM to re-open, and purchasing activity to pick up again. But this kind of talk would imply a very managed market which we don't have; I came upon that theory as I strolled past a grassy knoll so feel free to ignore it :)

Readers, It is Time to Begin Defaulting on your Credit Cards - Especially if You are a Renter

Bailout Nation mentality has hit critical mass. Just as we have walk aways from homes with "no sweat", we are now at the point our debts on credit cards are no longer an issue either. Just start failing to make payments and wait eagerly for the credit card company to call you to strike a deal. How they can afford to do this? They are backstopped by your taxpayer money of course... no major financial institution is allowed to fail.

See how it's circular? You are financing the bad behavior and defaults... your taxpayer money is the backstop that allows the credit card companies to settle. Because they can always raise more money with the government's implicit backstop. (Think Fannie Mae and Freddie Mac, but now extended to all our "too big too fail" financial institutions) Also don't forget all the new fees we are being subject to [May 29, 2009: Banks Find Ways to Boost Fees] Much like insurance, those who pay will subsidize those who don't - except this is financial insurance: the responsible pay for the irresponsible. So make sure to get that thank you note from Chuck for his boat; we all paid for it.

Most people won't go that far in the logic of it all - they will just say "finally a bailout for the little guy, we deserve one too." They don't understand that we are all paying these bailouts out of our pockets. Money does not go on trees contrary to popular belief in this nation.

Again, responsible people are simply suckers in America. If you are a renter it appears the credit cards are the thing to walk away from; if you are a homeowner the preferred choice of deadbeat-ism is the house. I am not even upset anymore about these sort of things - just charge it on my balance [May 29, 2009: In 1 Year US Taxpayerson Hook for $55,000 Per Household] I will never again question how people can spend so freely, buy whatever they want, empty out their home equity with loan after loan, and charge their cards as if their is no tomorrow. I see they were the brilliant ones in retrospect. Enjoy the trips, keep the toys, live above your means.... and send the bills to the rest of the populace. It's now an embedded national mentality from corporation to the citizen - I need to get on board.

NYT: Credit Bailout - Issuers Slashing Credit Balances
  • As they confront unprecedented numbers of troubled customers, credit card companies are increasingly doing something they have historically scorned: settling delinquent accounts for substantially less than the amount owed.
  • The practice started last fall as the economy worsened. But in recent months, with unemployment topping 9 percent and more people having trouble paying their bills, experts say this approach has risen drastically.
  • They say many credit card issuers have revised internal guidelines to give front-line employees the power to cut deals with consumers. The workers do not even have to wait for customers to call and ask for a break. “Now it’s the card company calling you and saying, ‘Let’s talk turkey,’ ” said David Robertson, publisher of the credit industry journal The Nilson Report. (don't call us, we'll call you - just do your job and start defaulting on payments)
  • Revolving credit, a close approximation of credit card debt, totaled $939.6 billion in March. The Federal Reserve reported that 6.5 percent of credit card debt was at least 30 days past due in the first quarter, the highest percentage since it began tracking the number in 1991. The amount being written off was also at peak levels.
  • After a balance has been delinquent for six months, regulations require the card company to reduce the value of the debt on its books to zero. If a borrower has not paid by this point, chances are he never will.
  • An example of how quickly the card companies are shifting their approach is in the behavior of HSBC, a major issuer, toward Mr. McClelland. Mr. McClelland’s credit card company was calling yet again, wondering when it could expect the next installment on his delinquent account. He proposed paying half of his $5,486 balance and calling the matter even. It’s a deal, the account representative immediately said, not even bothering to check with a supervisor.
  • In April, HSBC offered him full settlement at 20 percent off. He declined. A few weeks later, it agreed to let him pay half.
  • Traditionally, the creditors could play tough with any accounts that became delinquent because the cardholders had assets. The creditors could sue or place a lien on a cardholder’s house. As the recession grinds on, though, many cardholders have less to lose. Mr. McClelland, 42, is a renter. Since he is self-employed, he has no wages to garnish.
  • “Having this over and done with was appealing,” he said. He raised the agreed-upon $2,743 and sent it off electronically last week. He has spared himself the prospect of years of collection calls.
  • And there can be a Catch-22: those with the fewest assets are the likeliest to receive a settlement offer, but they are also the least able to come up with the cash for that final negotiated payment. Some creditors, though, are helpfully letting people stretch this out over months.
  • Still, a line has been crossed, credit experts say. During the boom, nonpayers were treated more harshly because, paradoxically, their debt was more valuable. Collection agencies were eager to buy bundles of old debt from the card companies for as much as 15 cents on the dollar. In a healthy economy, even the hopelessly indebted can pay something. In this recession, where collection agencies have little hope of collecting from the unemployed, that business model is suffering. Experts say 5 cents on the dollar is now the most a card company can hope to get for its past-due accounts.
Now let me ask you.... how does one NOT have enough money to make a MONTHLY payment on a $5400 balance... which at 2-3% is $100ish ($1200ish a year). Yet HAVE enough money to PAY OFF ALL AT ONCE a $2700 STIPEND? It's a rhetorical question folks ... you can figure it out.

Now on the plus side for the bulls - as more Americans have no home payment to deal with as they enjoy sitting in foreclosed homes that the banks are reluctant to take on their books (I live payment free for 9 months! 12 months!) and more Americans expunge their debt at 50 cents (or less) on the dollar, that frees them up to restart the whole cycle over. Always a silver lining....

Of course, no one could see this coming...

[Sep 15 '07: Consumer Spending Continues, Where is the Money Coming From? Credit Cards]
[Dec 10, 07 - Consumers Increasingly Turning to Credit Cards]
[Dec 23, 07 - Unpaid Credit Cards Bedevil Americans]
[Jan 10, '08: Credit Card Warnings Here, Credit Card Warnings There]
[Apr 10, '08: Americans Keep Piling on Debt]
[Apr 4, '08: Late Payments on Consumer Loans at 16 Year Highs]
[Jun 3, '08: Credit Card Usage is Surging, Risking Another Debt Crisis]
[Jun 22, '08: Americans Running Out of Places to Hide Debt - Now Credit Cards Go]
[Sep 23, '08: Loan Delinquencies Continue their Path Upward]
[Oct 21, '08: Moody's - Credit Card Chargeoffs Rising Rapidly]
[Dec 15, 2008: Capital One (COF) Updated us on Delinquency Rates]
[Apr 7, 2009: Moody's Credit Card Charge Offs Hit Record; While 8.2% of All Type of Loans are Delinquent or in Default]
[May 11, 2009: NTY - Credit Card Losses are Next Challenge for Banks]

Still Stuck in our Triangle; Industrial Activity in America Continues to be Poor; Best Buy (BBY) Weighs In

First, we once AGAIN bounced off the 20 day moving average (exponential) with the late day move from S&P 920 to 924ish in the closing minutes. Whew, another late day stick save. Color me shocked.

This is a tricky play because for months it has been "right" to buy any fall to the 20 day. Logic says to do it here as that is what has worked. However the upside is relatively limited on the indexes before we run into that 200 day, so it's a narrowing by the day triangle that will resolve one way or the other soon - keeping us on the edge of our seats for now. We'll see how the day goes - we are again hostage to Research in Motion (RIMM) on the 18th - apparently if you "listen" to the stock market, what happens in smartphones determines the fate of the U.S. Both RIMM and AAPL jumped off their 20 day moving averages and when you combine that with oil up, dollar down (reflation trade back on)... we're back to normal. I am sort of laughing at our A.D.D. market which now trades off daily comments on the dollar by Russia's president. It must be a hoot for all these countries to see they can affect our dollar and bond markets just by uttering a sentence here or there. But that's what happens when you are reliant on the kindness of strangers to subsidize your economy. They increasingly dominate your affairs. (as a side note $GLD just jumped enough to recapture its 50 day moving average so yesterday's fall through that level could of just been a headfake that caught me - still too early to tell; either way we replaced the exposure with another 'reflation' product in Bucyrus)

Unfortunately for now, smartphones don't make up enough of our industrial base to spare our factories (or their workers). On the plus side (cough) we've offshored so much of our production capability that industrial production is only 13% of the economy so even as the data comes in WORSE than expected and another case of 2nd derivative NON improvement, bulls can just avert their eyes and talk about housing starts or other such diversion. Manufacturing is only an issue for the industrial Midwest it appears. Remember, when the news is good its pertinent and a 2nd derivative IMPROVEMENT; when it is bad... ignore it, it is backwards looking. (i.e. have your cake and eat it too) Kool Aid. So despite all the green shootery May activity is worse than April activity... and of coruse April was revised down as almost all our economic data is now... pump up the market with number X (better than expected!) and then revise it down 30 days later when no one cares. :) Management of information is something we DO excel in.
  • Industrial production tumbled a larger-than-expected 1.1 percent in May as the recession crimped demand for a wide range of manufactured goods including cars, machinery and household appliances.
  • The Federal Reserve's report on Tuesday showed production at the nation's factories, mines and utilities has fallen for seven straight months.
  • The 1.1 percent drop registered in May was the deepest since a 1.8 percent plunge in March. Output also turned out to be weaker -- a 0.7 percent decline-- in April than the Fed initially reported.
  • The overall operating rate fell to 68.3 percent in May, a record low dating to 1967. The previous low was set in April, when operating capacity dropped to a revised reading of 69, slightly weaker than first reported. (so worse than April - where are all the 2nd derivative improvement champions today?)
  • Production in the manufacturing sector fell 1 percent in May. That was down from a revised drop of 0.6 percent in April, double what the Fed initially estimated. Output in mining fell 2.1 percent in May, down from a 3.2 percent decline the previous month. Production at utilities fell 1.4 percent in May, erasing a 0.7 percent increase in April. (America is now going really old school - we're losing manufacturing but we still got mining! It's so 1880s around here) Machinery production dropped 3.4 percent, after a 2.5 percent decline in April.
  • The pullbacks factored into a drop in the operating rate at factories, which fell to 65 percent in May, the lowest on records dating to 1948. The previous low was set in April. (2nd derivative non improvement)
  • Production of appliances, furniture and carpeting fell 1.1 percent, partly reversing a 1.5 percent increase in April. Production of home electronics declined 1.9 percent, following a 1.4 percent decline in the previous month. (all 2nd derivative non improvements)

So while "making stuff" is down to 13% of the economy (and falling by the year), "Shopping / Services" is now up to 70% of our economy (and growing). So in that vein we'll take a quick look at what Best Buy (BBY) reported this morning... and hey, they sell smartphones (see, I tied this whole piece together) Keep in mind that Circuit City has gone the way of the Dodo bird, so Best Buy's business should be surging as the US consumer has "green shooted".
  • Best Buy Co. Inc. reported Tuesday that its first-quarter profit fell 15 percent, even as its biggest competitor exited the market, as recession-weary shoppers cut back on items like appliances and digital cameras.
Well, not so much.
  • The earnings, however, beat Wall Street expectations, and the nation's largest consumer electronics seller maintained its annual profit outlook.
Boo yah! "better than expected" (yawn) Wait, the stock is down. You mean this better than expected, while absolutely horrible nonsense has ceased? Time to reboot the computer and go eat a green shoot - something is wrong here.
  • Revenue rose 12 percent to $10.1 billion as it opened 185 new stores and gained some market share from the shuttered Circuit City Stores. The company said it had gained 2 percentage points of market share in the quarter and that its gains accelerated after the March 8 closing of Circuit City outlets across the U.S.
  • Best Buy's same-store sales fell 6 percent. Best Buy said that the same-store sales decline was fueled by a reduction in customer traffic and a flat average ticket and reflected decreases in gaming, digital cameras appliances and movies. Such decreases were partially offset by sales gains in notebook computers, mobile phones and repair services. Best Buy added that same-store sales of flat-panel TVs were essentially unchanged from last year as increasing TVs sold offset price declines.

The last piece of economic news today was housing starts were up versus record lows reached in April. The absolute number is abysmal ... and multi family homes which are incredibly volatile swung from a 50% drop in April to a 60% gain in May. Single family housing rose 7.5%, but overall we sit at 45.2% below year ago levels. I am sure I can find Kool Aid within those numbers somewhere, mostly by just reporting the May over April improvement.

As always, the news does not matter until it matters. As we borrow from future generations to stoke demand today in so many ways I've lost count it is actually quite sad that all these trillions "invested" in stimulus, backstop, and creating easy money conditions has led to such limp growth. Oh well, we still have many hundreds of billions of government transfers coming to create more prosperity in the next few quarters. And I eagerly await the drumbeat of Stimulus 2.0 (2010 is an election year folks!) as we turn the corner into 2010.

I've called many months ago for a "double dip" technical recession - by that I mean what economists call "expansion" might technically be true (positive GDP based on massive government outlays later in the year) but it will feel like a recession for Main Street. And then we have another leg down into / in 2010... but all those calls assume we don't beg, borrow, and spend another $500B to a few trillion to show "prosperity" and bump up our GDP next year as well. All our economic data is so misrepresented by government spending now it's hard to tell what exactly will come out of the black hole of macro economic news. The Keynesians in government just appear willing and ready to spend as much as possible until the real economy comes back.

FT.Com: The 5% Rule in Securitization

We're harsh critics of so many of the now government institutionalized bad practices in these virtual pages, so let me be the first to say if the following does come true - as reported by FT.com, I'll be the first to applaud.
  • The US Treasury is planning a sweeping overhaul of the securitisation industry to require lenders to retain part of the credit risk of loans sold to investors and end the gain-on-sale accounting rules that helped spur the market’s boom. The overhaul aims to restore confidence in asset-backed markets and allow them to resume supplying credit to the economy without re-creating systemic risks. Securitisation of assets – such as mortgages and credit card loans – accounted for about half of the credit markets before the financial crisis struck.
  • Under the plans being discussed, originators will be required to retain at least 5 per cent of the credit risk of loans packaged into securities and sold to investors. The 5 per cent rule – which looks set to be applied in Europe as well – would ensure that lenders have what investors call “skin in the game”.
  • The proposed elimination of “gain on sale accounting” would prevent financial companies from booking paper profits on loans – packaged into securities – as soon as they were sold to investors.
  • A Treasury spokesman said that while securitisation had made credit more widely available, breaking the direct link between borrower and lender had “led to a general erosion of lending standards, resulting in a serious market failure that fed the housing boom and deepened the housing bust”.

We've spoken quite often of the disassociation between those who bear the risk and those who move the product in the financial world. This is not just with NYC firms, it goes all the way down to your local mortgage broker. When you are only paid on volume and not on performance, well you can apply that to your job or business dear reader... and figure out how it would eventually turn out. Your department or business would party for a while as volume exploded through the roof and everyone became wealthy off those faulty precepts. It would work like a charm .... prosperity on the surface while operations and financial degraded behind the scenes. Until said business collapsed on itself. We showed the daisy chain of fees specific to the mortgage game in [Jan 19, 2009: WSJ - Would You Pay $103,000 for this "Fixer Upper"?]

Less than two years ago, Integrity Funding LLC, a local lender, gave a $103,000 mortgage to the owner, (step 1) Marvene Halterman, an unemployed woman with a long list of creditors and, by her own account, a long history of drug and alcohol abuse. By the time the house went into foreclosure in August, Integrity had sold that loan to Wells Fargo & Co., (step 2) which had sold it to a U.S. unit of HSBC Holdings PLC, (step 3) which had packaged it with thousands of other risky mortgages and sold it in pieces to scores of investors. (step 4)

Her lender, Integrity, was one of a flurry of small mortgage firms that sprang up nationwide during the boom, using loans from big banks to generate mortgages to resell to larger financial institutions. Whereas traditional mortgage lenders profit by collecting borrowers' monthly payments, Integrity made its money on fees and commissions.

At closing, on Feb. 26, 2007, Integrity collected $6,153 in underwriting, broker, loan-origination, document, application, processing, funding and flood-certification fees, mortgage documents show. A few days later, Integrity transferred the loan to Wells Fargo, earning $3,090 more, Mr. Rybicki says.

So chop, slice, cut, divvy and package (i.e. financial innovation)... have the credit agencies slap a AAA, everyone collect a fee along the way (i.e. prosperity in a finance based economy) and we're all good. Just need to keep finding suckers to buy the snake oil and everyone wins. Except the end buyer.

And now since there are no suckers left and the shadow banking system has collapsed onto itself, we use the sucker (err, buyer) of last resort. Who? Go walk to the mirror and take a stare... you're backstopping it all. At your next cocktail party you can proudly proclaim you are now supporting the entire shadow banking system via your taxpayer prowess. Until you realize so is everyone else at the party.

Frankly we would not need these lame credit agencies if people who ORIGINATE snake oil actually had to participate in its ingestion. Then the free market would really work, instead of using asleep at the wheel credit agencies 'stamp of approval'. When your own business is at risk, trust me... the mortgage broker, the NYC investment bank, the commercial bank.... will ALL be actually checking to see if people can (wait for it) PAY BACK the loan. Groundbreaking. Innovative. Retro!

And by now you know the traditional retort, to which I say - yes maybe to account for RISK we need to have HIGHER rates and nearly free money is not a birthright! That's how it works in normal systems. Or even ours pre "innovation". Since you did NOT have to ACCOUNT FOR RISK, you could offer LOWER rates. But what happened? Our entire system imploded... so is it really worth 50 basis points of savings in terms of a lower rate to sacrifice a few generations of Americans to pay for the bailout? Did we "come out better" in the end for that short term savings? I think not... our collective financial obligations have now skyrocketed - but carry on with the tired lines that the lobbyists will be using incessantly to fight this.
  • Bankers warned that the new rules would reduce the incentives to package assets into securities, raising financing costs. “It is the beginning of the unwinding of the securitisation-for-sale model,” a senior Wall Street banker said. “By forcing lenders to keep part of the loans and scrapping ‘gain-for-sale’, the government will raise the cost of capital and put a dampener on the reopening of credit markets.”
The fact the mentality remains that the NYC crowd still believes they should make loans and yet take none of the credit risk shows you nothing has really changed in the mentality. And why should it - we've bended over front... err backwards for these fellas. It is bemusing at best that this is even a debatable point - what part of LENDER is not clear... "forcing lenders to keep part of the loans". You'd laugh if it were not so convoluted.

So I carry a little hope if this comes true - but it is just a proposal for now and by the time it runs through the gauntlet of lobbyists I expect loopholes the size of (insert bad joke here) to be spring loaded throughout any legislation. But at least it's a promising premise based on common sense. Rare.

Monday, June 15, 2009

Bookkeeping: Cutting Back on Gold Exposure

Gold many times trades in its own universe and I sometimes am suspicious of how useful charts are. That said, I am going to respect the fact the gold ETF (GLD) just broke its 50 day moving (EXPONENTIAL) average and cut back our stake to a large extent. (please note the simple moving average is $90.40 so still in decent shape there)

I sold 1/4 of our Powershares DB Double Long Gold (DGP) June 2nd to lock in some gains as the chart went parabolic over $22. I am going to cut 80% of the remaining position here around $19.70 and look to buy lower.

DGP June 2nd on previous sale

DGP today

Let's revisit when GLD gets down to the 200 day moving average, $88ish if and when.

We've been saying for a week or so now that the "dollar weak, bond weak" trade was getting very overcrowded - even if I believe those trends are correct in the long term. They were due for a technical correction. And this whole market right now is "dollar weak, commodities up" based. So we are hostages to a very simple relationship... which is reversing for the short term at least. We'll see how long lived it is; if it is very short lived one should be buying commodities hand over fist right now. But it would not surprise me to see the dollar rally for a bit more here as the chart below shows some easy upside before it hits resistance.

Long Powershares DB Gold Double Long in fund; no personal position

Bloomberg: Active Mutual Fund Managers beat S&P 500 By Most in 26 Years

What an interesting statistic from Bloomberg - the past few months have been a most excellent time for the fully invested, cash is trash, long is strong mutual fund mavens. After a major hemorrhage of money in 2008 and the first 2 months of 2009 they are 'reverting to the mean' and with May 2009 being a flat month while certain subsectors were still flying (technology, commodities) there was a pronounced trouncing of the indexes. All these things move in waves, so we'll see how long it continues. Mutual funds don't really deal with issues like "drawdown" like a hedge fund does - drawdowns are also something I focus on so it makes my style more like a hedge fund than a mutual fund in that regard.

The peak-to-trough decline during a specific record period of an investment, fund or commodity. A drawdown is usually quoted as the percentage between the peak and the trough.

Since new investors come each day in a real world environment in a mutual fund, protecting each one from a big loss is part and parcel of investment management in my opinion. But I seem to be in the minority in this approach. For example, even the greatly respected Ken Heebner - after posting 70%+ gains in 2007 suffered losses on the factor of 50% at his worst. So if you invested at the wrong time, the 70% gain the previous year was meaningless to your specific situation.

But when the market is churning upward or at least specific groups are - being 'all in' gets the hoopla. When the market drops... it's not quite as fun. For example, the top ranked fund cited in the Bloomberg story is up 39% Year to Date riding technology stocks. Not mentioned? It was down 44% in 2008. And knowing how retail investors react at tops and bottoms you can imagine many "locked in" those massive losses as they fled the market at most likely the exact wrong time. I think there is something to be said for tamping down volatility.
  • Mutual-fund managers who pick stocks are beating the Standard & Poor’s 500 Index by the widest margin in 26 years by buying shares of midsize companies such as Sun Microsystems Inc. and Seagate Technology.
  • Active U.S. equity funds returned an average of 7 percent through May, compared with a gain of 3 percent for the index, a benchmark of the largest U.S. companies. The gap is the biggest since 1983, when funds beat the market by 4.3 percentage points in the first five months, according to Morningstar Inc.
  • Diversified U.S. equity index funds declined 38 percent in 2008, less than their active peers, which fell 39 percent. That helped persuade more investors to move to passive investing.
Where was the beef? I'd argue "everywhere" but... generally smaller is better as you come off a trough.
  • Jeff Tjornehoj, a Denver-based senior research analyst at Lipper, said active managers benefited this year from holdings of mid-capitalization companies, those with market values from $3.5 billion to $9 billion.
  • Tjornehoj said active funds hold a smaller proportion of the largest 100 companies, as measured by market value, than represented in the S&P 500 and a greater amount of the bottom 300. Every company in the lower 300 has a market value of less than $9.8 billion.
  • Stocks in the bottom 60 percent of the index rose 12 percent through June 7, Lipper found. Stocks in the top 20 percent lost 4.79 percent. (that's actually remarkable) “When fear is increasing, people move up the capitalization scale,” he said. “When fear wanes, people will move down the scale and take more risk.”

Apple (AAPL), Research in Motion (RIMM), Google (GOOG) - the Holy Trio of NASDAQ

While there is a lot of fuss and muss about the NASDAQ this, or that - really the index can be broken down to the holy trio of Research in Motion (RIMM), Apple (AAPL), and Google (GOOG) much of the time. Every time there is a big performance either to the upside or downside I read about how these handful of stocks contributed 30,40% of the move.

As I wentioned in the weekly summary, Research in Motion reports this week... and Apple had pulled back to support. Relatively speaking Apple is holding up well today and it sits right at the 20 day moving average. Today's pullback has pushed RIMM to the same spot.

Google is slightly weaker intraday pushing below, but the close is more important then the middle of the day.

And since we live in a world where as Doug Kass says, institutional money worships at the house of prive momentum - here is the Chinese equivalent.

It's very tricky here because while I expect a nice story out of RIMM it's not a matter of the story; it is all about the story versus expectations and if enough good things are said to support a monster run. If RIMM goes rogue later this week, the NASDAQ will crumble with.... there is no way to know ahead of time so just be flexible and ready to roll with the punches.

If one believes the 20 day moving average on the S&P 500 will again provide support, one would jump into the Apple/RIMM/Google trio here - as they lead almost any bounce.

Long Research in Motion, Baidu.com in fund; no personal position

Bookkeeping: Closing Thoratec (THOR)

As I perused charts this weekend looking for new ideas, I saw a limited amount of stocks below their 20, 50, and 200 day moving averages. For well traded stocks (200K daily volume) over $10, with a market cap over $300M... there were less than 200 - unfortunately a few are sitting on our sheets. Thoratec (THOR) is one of them, and we see some quite extreme weakness after a very rosy earnings report. So I am going to let the charts decide this one and close the last smallish piece of the long position - we only had a 0.4% stake remaining.

While I questioned the valuation post earnings [May 8, 2009: Thoratec Executes Well in Healthcare Space]

I am still struggling mightily with this type of valuation (40x-ish forward estimates even with this beat), but again - this stock market seems not to care about valuation anymore so it's a tough call on what to do.

....the chart showed no reason to be wary. But in the past month the chart has gone from very good.....

.... to very troubling.

In fact with the 50 and 200 day moving averages as resistance lines, this would of been an excellent short candidate on Friday with 2 layers of insurance to backstop you.

[Feb 19, 2009: Thoratec Acquires Heartware]
[Feb 6, 2009: Thoratec Beats; Market Yawns]
[Dec 5, 2008: Thoratec with Positive Data]
[Oct 30, 2008: Thoratec Smashes Earnings; Somehow Guides Up]
[Aug 4, 2008: One for the Radar - Thoratec]

No position

Bookkeeping: Starting Position in Bucyrus (BUCY)

A limit order I've had in for about a week for Bucyrus (BUCY) hit this morning at $28.70 which is the 20 day moving average. I like this set up to begin a position because the 200 day moving average (which was the day's low) is right below at $27.70. (stockcharts shows the 200 day lower than my other chart sources) If this is just one of those very short term falls we've seen for weeks, I've snagged a solid play on the (crowded) reflation thesis. If this is the beginning of a more dramatic move down I have my stop loss to get out at $27.00 and limit my losses at 6%. I started today with a 2.7% position.

We've owned Joy Global (JOYG) any number of occassions but never Bucyrus.

Bucyrus International, Inc. engages in the design and manufacture of mining equipment for the extraction of coal, copper, oil sands, iron ore, and other minerals in mining centers worldwide.

Until proven otherwise the trend is still intact, and we sit now at our 20 day moving average which has served as our support for over 3 months now. But if we close below today, the bulls case begins to break down and we'll focus back on the short side. This is the first real test to the downside of the ascending channel in the market in 3 weeks.

Long Bucyrus in fund; no personal position

Morgan Stanley: Add Indonesia to BRIC

I see Morgan Stanley research is now a regular reader of Fund My Mutual Fund - they now propose Indonesia should be added to the B(razil)R(ussia)I(india)C(china). You heard it here first... ok, second. [May 22, 2009: Guest Post - Indonesia: A Must Own Emerging Market] So perhaps we are looking at IBRIC? Or BRICI?

I've invested over the years (via ETFs) in Singapore, Malaysia, India, Taiwan, and Hong Kong - as the "China will fix all the world's problem's" thesis plays out all these names, (along with resource based countries) have flown higher.

One country I admit to having not looked at until the past few months is Indonesia - when I did a lot of coal research in latter 2007 Indonesia kept coming up so it was on my radar but I never dug deeper. Much like the countries above there are a dearth of US based ways to get involved in the country ... but there is an interesting opportunity here. Little known is despite being a country made up of some 17,000 islands, it is the 4th most populous on Earth. (China, India, US ahead of it) So on "demographics is destiny" alone you have a compelling situation here. What caught my eye of late is while most of the smaller Asian countries I keep an eye out on are falling by double digits in GDP - Indonesia's actually rose.

Via Bloomberg
  • Indonesia’s economic growth may accelerate to 7 percent starting in 2011, providing a case for its inclusion in the so-called BRIC economies along with Brazil, Russia, India and China, Morgan Stanley said.
  • Political stability and buoyant domestic demand will help boost expansion in the $433 billion economy, Morgan Stanley said in a report dated June 12 that compares Indonesia with India. President Susilo Bambang Yudhoyono is expected to win the July 8 elections, polls show.
  • “What this means for the investor community is that they need to look at this asset class more seriously,” Chetan Ahya, a Singapore-based economist at Morgan Stanley, said in an interview today. Political stability, improved government finances and “a natural advantage from demography and commodity resources are likely to unleash Indonesia’s growth potential.”
  • Southeast Asia’s largest economy may grow 60 percent in the next five years to $800 billion due to a stable administration, lower capital costs and a government plan to spend as much as $34 billion to build roads, ports and power plants by 2017.
  • Yudhoyono may win an overall majority in next month’s election, avoiding the need for a second round of voting in September, polls show. Yudhoyono’s Democrat party won more than 25 percent of seats in parliamentary elections this year, becoming the only party to be able to nominate a presidential candidate without seeking outside support. The 2009 parliamentary election results “suggest continued stability in this democratic political framework and is a critical factor in unleashing Indonesia’s growth potential,” Ahya said. “Coincidently, the India story has also recently been given a ‘fillip’ from the strong political mandate of the Congress-led coalition in the 2009 general elections.”
  • The BRICs may overtake the combined $30.2 trillion gross domestic product of the Group of Seven nations by 2027, Jim O’Neill, the London-based Goldman Sachs Group Inc. chief economist who coined the term for the four countries in a 2001 report, has said. That is a decade sooner than he had forecast earlier.

The "emerging markets" theme is a replay of "decoupling" that was a 1st half 2008 thesis - which was that these countries could just continue to roll without major Western economies (or Japan) . That ended very badly. While on a RELATIVE basis some of these countries are doing well, and I think this is the right LONG term thesis, let me again say (broken clock) we seem very crowded on this trade as everyone is now doing it. It's just another extension of the commodity trade and much like commodities, all countries are being bid up together regardless of individual situations. That's "bubble like, lemming" behavior.

The news is not so good everywhere ....
  • June 15 (Bloomberg) -- Singapore’s retail sales fell the most in more than ten years in April as rising unemployment and the nation’s deepest economic slump in more than four decades led consumers to buy fewer cars and household equipment.
  • Singapore’s economy is forecast by the government to shrink as much as 9 percent this year, forcing companies to cut jobs and wages as demand slows.
  • June 15 (Bloomberg) -- Taiwan’s stocks fell, extending the benchmark stock index’s worst weekly performance this year, as investors judged a rally prompted by improved ties with China has overvalued earnings prospects.
  • The index, the world’s worst performer this month, has given up about half the 24 percent gains made since April 29, when Taiwan said it will let mainland Chinese institutional investors apply to invest directly in shares and futures listed on the island’s bourses.
As I stated in my piece [Jun 11, 2009: The Market in ETFs] watch those BRIC countries for any technical faults. China's market started turning before the U.S., so if there is any serious setback coming we'll want to watch these emerging market indexes lead. One conglomerate name popular in the institutional community is below.

No positions

Bookkeeping: Weekly Changes to Fund Positions Year 2, Week 45

Year 2, Week 45 Major Position Changes

To see historic weekly fund changes click here OR the label at the bottom of this entry entitled 'fund positions'.

Cash: 58.0% (vs 55.3% last week)
30 long bias: 38.2% (vs 35.4% last week)
7 short bias: 3.8% (vs 9.3% last week)

37 positions (vs 37 last week)

Weekly thoughts
Let's start with the squiggly lines which seems all to matter as we enjoy our 130 trailing PE market (we only look forward here at FMMF!). From an "exponential" point of view we're stuck in our triangle between the 20 day moving average which has provided support in this rally since the 2nd week of March, and the 200 day which the market has hit its head against for a remarkable 10 days in a row. The former number is now about S&P 925, and the latter in the low 940s. As they quickly converge I expect a meaningful move.

I think buyers emerge over the 200 day and sellers below the 20 day, as I've been saying for a few weeks.* Also as I've been saying this is one long winded rally, the likes of which I can only compare to one other since I've been around. And to finish as I've been saying... while I've been forced to play the 'reflation' trade to some degree - this is one crowded trade. When it reverses I expect the pain to be hard and fast. As that happens expect rebounds in the "dollar is weak, bond is weak" trades. At least for the short term.

* if you use simple moving averages, your chart is going to look very different than mine.

Folks this move is so egregious even bulls are anxious for some "healthy pullback"... but greed is winning out. What greed? The greed of losing a ton of money in the downturn, and then missing the "new bull market". While we escaped the whole "losing a lot of money in the downturn" the past nearly 2 years, and hence don't have yawning chasms of losses to make up, it is still unfortunate to have missed the 2nd half of this rally in the past 6 weeks. And while we look around the landscape we have to realize many peers after treating shareholders so poorly in 2008 and the first few months of 2009 cannot risk being left behind on a real move up, so they are restless and anxious to be involved. So a lot of counter trends that have little to do with fundamentals, and a lot to do with crowd psychology.

For the news, I'll spare you. Aside from government transfer payments of the likes we've never seen before, the U.S. economy is in bad shape. All we've done is gone from "worst since Great Depression levels" and "revived" to "bad like late 70s, early 80s". We disputed all the thesis of "recession" proof in many posts in latter 2007 and early 2008 - NASCAR recession proof? We said no. Las Vegas recession proof? We said no. High end affluent retailers recession proof? We said no. We were proven correct. Readers it is so bad that even one thing I thought was recession proof - video games - are suffering starkly. (and bulls will say, tough comparison period - and 2nd derivative improvement blah blah blah) Look gamers play at almost any price - when they have to cut back, it's serious.
  • Sales of video game software fell for the third straight month in May, as tough comparisons and the slowing economy continued to weigh on the sector.
  • Sales of video-game software in the U.S. slipped to $448.9 million during the month of May -- down 17% from the same period last year. Hardware sales fell 30% to come in at $302.5 million for the month.
But I don't want anyone to fear - the Federal Reserve is here and has deemed all video game makers too big to fail, and will support them. Uncle Tim agrees. So don't you worry - our future of being couch potatoes is secure - "they" don't want us to stop being distracted from what "they" are doing... our games will go on!

China won't save the world - it's sand blasting money through the system simply to save itself - and even then imports are down 25% year over year (exports worse). But I can talk facts all day... means little as I wrote in [Apr 3, 2009: The Current (and Coming) Disassociation Between Economics and Stock Markets] I only wish I had listened to my own advice and drank green shoots myself to a far greater degree.

This week we have Research in Motion (RIMM) reporting - like many charts this is extremely extended after a monstrous run and while "not chasing" has been "wrong", I am not going to pile in ahead of an earnings report. In fact Apple (AAPL) pulled back Friday to a support and I was going to add that back to the portfolio but then remembered RIMM's earnings coming, and it will affect (fairly or not) Apple. NASDAQ has led us up and if you are a NASDAQ fan all you need to know is RIMM, AAPL, GOOG, and then the ETF SMH (semiconductors). If those begin to break down the NASDAQ goes too.

Other indexes like transports and the CRB (commodities) are at key 200 day moving averages. Look at that big red rejection on huge volume Friday. (Danger Will Robinson)

While I lifted shorts away for the upteempth week and keep telling myself "this is the week my covering will mean capitulation - and the market will finally go down", I've been saying that for well over a month now. Maybe this will be the week? But don't take my positioning as bullishness, cash is the highest I can ever remember (basically my normal short exposure is now sitting in cash so the "urgent buyer" does not smack me upside the head) and I am just pulled back to stop taking the pain from rampaging lemmings. So we wait to see which way this resolves - the triangle is narrowing and complacency (in my judgement) is high. Bulls either believe the market is destined for higher levels or will be set for that conclusion after a cute little 5-10% drop off that allows them to get "in".

It's never so easy in the market and in the old days I'd say easy things never work. But until "urgent buyer who cannot wait until 9:31AM to buy so as to not push futures up 5-7 points premarket" stops showing up 8 out of 10 days, or "urgent buyer who loves to buy all at once, in the 3:30 PM 30 minute set" is defeated we have tens of billions apparently ready to buy this market at all opportune times - i.e. every time the charts are about to go bad. Only 1 entity has this much money and I always call him "urgent buyer" because if any real institution was buying like this on their own behalf and in their financial self interest, they would fire the trader(s) for getting such terrible prices by buying in huge swathes that distort prices. But on the other hand, when you want to distort prices it's an excellent way to purchase futures.

So as with almost everything in the US economy itself in our new era, the market is the battle of free market versus "visible hands". And away we go...

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