“Woe to the land whose king is a child and whose leaders are already drunk in the morning. Happy the land whose king is a nobleman, and whose leaders work hard before they feast and drink, and then only to strengthen themselves for the tasks ahead”. (Eccl 10: 16-17)


"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat


Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput






Tuesday, April 8, 2014

Today's Bizarro Land Markets

I wanted to take a bit of time and give you an example of what we commodity traders are now having to deal with as a result of the unprecedented ( and getting worse by the day ) volatility in our modern commodity markets. When hedge fund computers are doing the buying and selling instead of thinking human beings who actually take some time to analyze a trade before placing it, this is what we get.

Here are two of the headlines from the Dow Jones Wire Feed on the same day ( today ).

Get ready - here is the first:
Tue Apr 08 09:18:55 2014 EDT 
Here is the second:

Tue Apr 08 11:24:29 2014 EDT
The first story came down around 9:18 EDT. The second one at 11:24 EDT, about two hours later. As you can see, the first one attributes the fall in corn prices to warmer, drier weather. The second one attributes the rise to weather delaying field work.

Down, then up. Tomorrow? Maybe up and then down. When some readers take me to task for pointing out the fallacies in the GIAMATT Crowd, this is what I am referring to. Computers are running our markets of today - not discretionary human beings. The result is maddening, more often than not, completely unpredictable swings in price that can have little, if any, connection with underlying fundamental realities. The reason they do not is because at one time fundamentalists dominated our markets. Not any more! We have been completely taken over by the systems trader. These guys would not know a butt cut from a hog from a belly cut and they do not care. All they care about is motion - if it moves they chase it.

The end result of all of this computerized idiocy is extreme volatility and both big spikes higher in price as well as sharp drops lower in price. It all depends on what the computers are doing at any given time and what those mindless black boxes happen to be looking at for that particular moment.

Quite frankly, a "long-term" trade has now morphed into a 60 minute time interval. Once upon a time, "long term" meant something significantly different.

This is the reason I tell traders to be careful about reading too much into the day to day gyrations in the markets anymore and not to load the boat as far too many in the gold community are prone to do after reading some bullish prediction after a day or two of upward price movement in the gold market.

If one cannot even get the same headline within two hours time, how in the world do some of these self-appointed and egotistical "experts" predict that the gold price "must go to this price" (apparently because they have commanded it to do so). The FORCE must be strong with them. It could be that but I would wager it is more a case of hubris and clever marketing to peddle their worthless newsletters that take advantage of unsuspecting novices who find themselves completely mystified by the baffling swings in price in far too many of our markets.

Human beings love clarity and seek certainty. That makes them easy dupes/victims to those who seem to possess it. All I can say is that it takes a conscienceless Cretan to bilk sincere but gullible investors out of their hard-earned money as they promise absolute certainty in an environment in which such is not possible, nor shall it ever be.


38 comments:

  1. Can't trust the Government, Can't trust the fundamentals, Can't trust Newsletters. The market is rigged. It seems like the only thing to
    now days is bury your money in the backyard so it will be eaten
    by the worms and rot. So I ask the Question? What is one to do
    with your money now days so you might have some for retirement?

    ReplyDelete
    Replies
    1. buy bullion.

      ps. I have my armor on.....

      Delete
  2. Cash in the ira sell the second house buy "good gold shares" and don't forget to take certificates.

    ReplyDelete
    Replies
    1. That advice will go down on record as the worst of all time. Anyone who loaded the the boat on gold stocks when everyone was screaming "This Is It!" and "It Is Now!" back in 2011 during the Arab Spring suffered from one of the most brutal bear markets in history.

      Worse, anyone who took direct possession of their stock certificates by taking delivery and removing them from their brokerage accounts were shellacked because they watched in horror as their gold shares got decimated and there was nothing they could do but clutch their certificates and watch the share price collapse.

      Delete
    2. And its not over yet i expect the hui to half from here.

      Good thing js sold most his shares and managef to raise 30 million si he could raise the salaries by 300% to 500% to well over 200.000 dollar for the secretary and a cool 550.000 dollar for the cfo.

      No wonder they call him santa clause.

      Delete
  3. "The FORCE must be strong with them. It could be that but I would wager it is more a case of hubris and clever marketing to peddle their worthless newsletters"

    For one of them, we'll know for sure by the end of 2014.
    If gold goes from 1400 mid december to 2000 end december and stops right there, I will not only believe in the force but in reincarnation as well :)

    I'm following this pitchfork for gold. The mlh inf is helping me raise my stop loss progressively.

    http://i60.tinypic.com/2ebs6wx.jpg

    http://i60.tinypic.com/2ebs6wx.jpg

    ReplyDelete
  4. Bill Murphy said it years ago already: "Price make comment"

    ReplyDelete
  5. Thanks Dan, the conflicting headlines and twisting of facts and data to sway sentiment is pretty amazing at times.
    The folks who read just the headlines and shape their world views or investment strategy around those brief snippets are getting played like a fiddle by the media/market machine that publishes misleading or incorrect headlines on purpose.

    "...I would wager it is more a case of hubris and clever marketing to peddle their worthless newsletters that take advantage of unsuspecting novices who find themselves completely mystified by the baffling swings in price in far too many of our markets."

    Certain blogs like KWN and others must rely heavily on the churn or turnover of newbs and novices because most of the older subscribers or visitors eventually wisen up and see some things for what they are after awhile.

    The folks married to a certain relentless train of thought (despite objective facts or trends) that willingly continue to gobble up the condtant perma-bull hyperbole get what they pay for.
    Fear mongering and sensational/eccentric personalities have always fascinated the darker more negative apocalyptic type who views the world or it's authorities as villians or sub-humans who must be brought to justice yada, yada, yada...
    Bottomline....you get what you pay for. Some people prefer villians, boogie men and spy novel-like scenario's in their semi-fantasy world where a hero or a battle against (fill-in-the-blank) is always underway. So be it, and good luck with that.


    Thank goodness there's no fear mongering doomers here. }:^)

    ReplyDelete
    Replies
    1. Dark, a million years ago we used to say, "tell me the price and I will tell you the news". Nowadays, since the media has been bought out lock, stock, and barrel, the news will only confuse, since some
      is true, some is false, and some is just false flag horseshit; take care, sparks
      s

      Delete
  6. I was just thinking the same. Fed, big bullion bank's, politicians and news media seem to be working honestly. Transparency is like the oceans off coast of Maui. Gov debt totally under control and all the citizens in the world have opportunities of lifetimes to secure their futures. I just received that insight. NOT

    ReplyDelete
  7. Great post. All the more reason why current market prices don't matter when it comes to the value of the underlying physical commodity. Might as well call the markets "Volatility Asset 1" ... "Volatility Asset 2".... Instead of Coffee or Crude. Am I right?

    ReplyDelete
    Replies
    1. Or.. bear trap 1' horse poop two, piggy poop 3, bull ding 4

      Delete
  8. financial whizzes on wall street have long known the price of everything, the value of nothing. but then came along HFT.

    ReplyDelete
  9. Great post. I agree. the currency market is EXACTLY the same way – which apparently is supposed to affect commodities. Example is last week and this; the NFP report misses by a measly 8K – and that is reason for the dollar index to tank and for gold to shoot up!? Of course the computers are ignoring the F’ing fact that the previous month was revised up by 20K and beat that month’s estimation after the revision. So, next month’s report will likely revise march up to above 200K (which means it actually was better than predicted). Will a March revision up make the dollar go up? NO, depends upon what the report says for April – which may or may not hit on the preliminary analysis for the predicted values. What’s really bizarre, is that 200K is roughly the average from 2003 – 2007, which saw wild swings – yet traders care not (or computers care not). But all that matters is whether the economic indicators hit upon those predicted values by the so called “experts”. But no where do we ever see analysis that shows uncertainty with error bars! As an engineer – this drives me crazy! We have no F’ing idea what level of uncertainty we are dealing with - yet the results seems to warrant these wild insane gyrations that appear to have no freaking basis on reality whatsoever!

    ReplyDelete
    Replies
    1. Bob, you have the same problem a lot of us has and that is that you are reasonable and clear thinking, looking for logic to show up at least periodically. Not gonna happen in this sewer; sparks

      Delete
  10. So if the machines have taken over and it seems like a can't win situation then why even participate in the madness? Is it stay away from certain markets that are more sensitive to this type of activity I guess? Is it the overall long-term trends in these markets that keeps people participating? What is the futures market mass psychology these days in light of this new trading world where the moves can be so erratic?

    ReplyDelete
    Replies
    1. Bob;

      sticking a position on and letting it ride for weeks and weeks is no longer much of a viable option because of the nature of the violent intraday price swings.

      I expect it will be like this until we start seeing much higher interest rates and a lot of the normal folks who are sick and tired of this near zero interest rate environment, can park their money in some safe CD somewhere and earn 5-6% and stop being a wild-eyed speculator, which is what the Fed and its policies have created.

      maybe then some of the hedge fund clients will drop them like a bad habit and go back to a safe, conservative investment option.

      The problem is that there is too much liquidity sloshing around the globe looking for yield and it is all pretty much being controlled by computers.

      Delete
  11. Eric, I meant last post for you also; sparks

    ReplyDelete
  12. Just wanted comment that this blog is truly a gem. No fear mongering, no hyperbole, no emotional outbursts, no sensational headlines from ZH or KWN, just facts presented in a manner everyone can understand and discuss. My favorite part is the way Dan destroys the arguments by doomers and "gold is always manipulated" crowd.

    I've been reading the blog for about 3 months and intend to continue doing that, and will probably occasionally comment going forward. Once again, thank you Dan for this great resource!

    ReplyDelete
    Replies
    1. I completely agree ... and I doubt Dan has any clue how much he is appreciated. Folks post links to this page on Twitter all the time - which is how I found this site.

      Delete
    2. Budfox and Eric;

      Thanks for the kind words...

      I must admit, there are times I wonder how much more hate email I can generate.

      When I get some posts like yours, it is very encouraging. Many thanks!

      By the way budfox - Blue Horseshoe loves Anacott Steel...:o)



      Delete
    3. How on earth do you get hate mail!? Personally, I think that must be a sign that you are doing a good job. You've made a name for yourself .... anyone that does so, becomes a target.

      Delete
  13. So, my problem is that I am too logical. To succeed, I need to put on a tinfoil hat and act like a lunatic; become euphoric when the numbers beat forecast and panic screaming AAHHHH! when the numbers fail to beat the forecast. So, is this an exercise in the psychology of whackos and alarmists, which have been adequately modeled by the software platforms of the large Hedge funds?

    ReplyDelete
    Replies
    1. eric, what do I know? I got the yen shoved up my freckled keyster the last 2 days, and because of kuroda's lame comments? come on; sparks

      Delete
    2. @ Steve ...OUCH....LOL...I'm sure you're not the only one

      Delete
  14. Dan
    Spot on as usual. I making a few bucks in the CORN ETF on a bit longer term trade. Have taken a small profit and moved stop to profit territory. I expect the artificial votility may take me out but then may give me a better entry point.
    Hate the game but got to play it as it is or get out.

    ReplyDelete
    Replies
    1. Mike;

      Good for you on that Corn trade... guys are talking up the weather ( too cold, too wet) as planting delays and expecting heavier corn usage. Hard to argue with the charts on both the corn and the beans because the funds are pouring into them. It is amazing how quickly they reversed from a massive net short position in corn to an ever-increasingly larger net long position.

      Good trading buddy

      Delete
  15. Appears the 14K on Nikkei is looking very susceptible. If breached Japan Inc. gurgling. The printing was hailed by Keynesians. I guess the destruction moves forward. Onward..heil Krugman, Lew, Geithner,

    ReplyDelete
  16. Well, here comes Jack Lew to open his pie hole and start yapping, and instantaneously U.S. and European stock futures start soaring and gold collapses in a heap. Once again, trillion dollar financial markets can be steered in the desired direction by uttering mere "words" to get the Algo/Robo/HFT players to stampede like a Wildebeest herd.

    Central banking has never been so easy. Without a doubt, it is assured that we will never ever again see inflation, and we will never see a stock market correction more than 10%. The Fed is now completely in control now that it leads the quadrillion derivatives market on a leash like leading a pack of greyhounds with a meatball.

    LOL....

    ReplyDelete
    Replies
    1. You had me at leading a pack of greyhounds with a meatball.

      Delete
    2. lol....you had me laughing with the Jack Lew's piehole comment.

      (Homer Simpson voice) "Meatballs...yum!

      Delete
  17. I found this tidbit from ZH interesting regarding Greece's (ECB's) first baby steps back into the bond pool.
    There's a template being laid here and what has transpired in Greece the past few years is possibly indicative of the path that Portugal, Spain, Italy etc. might follow at some point although much larger in scope.

    Higher rates in the U.S are a matter of time. There are schools of thought out there that believe rates can NEVER go up or the U.S. bond market and economy will implode, collapse etc.

    "Never" is a very long time and to fully believe rates can't go up without some type of game changing (a.k.a. USD death) collapse is silliness.
    Rates will go up at some point. When and how much is unknown and I eouldn't dare hazard a guess.
    No one knows anything with certainty and if they claim to they're full of it and themselves or they're just stringing people along.

    ReplyDelete
    Replies
    1. From ZeroHedge.com


      Greece To Issue First 5Y Bond Since Bailout At Lowest Yields Since 2009

      Submitted by Tyler Durden on 04/09/2014 - 09:41


      For the first time since the bailout/restructuring, Greece will issue long-term debt to the public markets. These 5 year-term English Law bonds (which is entirely unsurprising given the total lack of protection local-law bonds suffered during the last restructuring) are expected to yield between 5 and 5.25%. That is modestly higher than Russia, below Mexico, and one-sixth of the yield investors demanded when the crisis was exploding. The secondary market has rallied to this entirely liquidity-fueled level leaving onlookers stunned ....(cont.)

      Delete
  18. Hi Dan,

    Long time reader here, but first time poster.
    First of all, thank you for putting so much effort into maintaining such an informative and impartial blog - one of the only ones out there and a mine of information!

    I am in the Ags space and also follow PMs. I noticed today that June Hogs traded either side of limit .. whats up with that?? Are people finally realizing that the USDA figures are fishy, like you alluded to in your earlier post?

    regards,

    blue

    ReplyDelete
    Replies
    1. blue;

      Thanks for the post and the kind words.

      July hogs is also doing the same thing - limit down and now limit up. The hogs and pigs report did nothing except muddy the waters. No one knows what is going on out there in hog land at this point. the confusion is showing up in these weird price moves. we are all sitting around watching the data to try to get an actual read of what the truth is but we cannot get it. Even that data is conflicting - down one day and then sharply up the next,. etc.... it is one enormous mess.

      Grain reports from USDA is also causing an impact on the livestock markets....

      Our markets are essentially broken.

      Delete
    2. Thanks Dan. Interesting to see what comes next!

      Delete
  19. On another note cameras caught Lois Lerner out for a McDonald's lunch break
    Between hearings. http://video.foxnews.com/v/3449735462001/topless-womans-fast-food-rampage-goes-viral/#sp=show-clips

    ReplyDelete
  20. Michael Lewis' "Flash Boys", as seen on 60 Minutes does the explaining. Also, search Michael Lewis on YouTube. The Austrian boys have a good light on this skimming activity also.

    ReplyDelete