"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.