Apr 25

Decisionpoint.com Free Trial

Posted by Kristjan Velbri | Posted in Markets | Posted on 25-04-2010

decisionpoint free trialCarl Swenlin of DecisionPoint was interviewed this week by Jim Puplava on his weekly Financial Sense Newshour. During the interview, Mr. Swenlin gave his perspective of where he thinks the market is heading as well as provide a free trial username and password for the listeners of the show. I’ve had a look into DecisionPoint once before and it’s full of useful information. There are so many custom charts to give you ideas for a whole range of new trading systems. Market breadth indicators (new highs vs new lows, up volume, down volume etc) are what interest me the most, but there is a lot more to it that just that. In any case, if you are interested in the free trial, listen to the interview with Mr. Swenlin or send me an e-mail at kristjan[at]kristjanvelbri[dot]com (you have to make the e-mail address usable, the parentheses with sharp corners are to keep away spambots, who browse the web for e-mail addresses).

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Feb 05

Another Dollar Shortage?

Posted by Kristjan Velbri | Posted in Currencies, Markets | Posted on 05-02-2010

money_managementNow that the Federal Reserve dollar liquidity swaps are out of the way, there is no buffer left holding the market together. In 2008, amidst one of the worst financial crises, the US dollar became very sought after. In the preceding years, non-US banks had accumulated hundreds of billions worth US dollar denominated claims. Their dollar claims grew at a much faster pace than their dollar deposits. Murphy’s Laws dictate that if something bad can happen, it most certainly will. Case in point: during the financial crisis, the market prices of banks’ dollar claims fell much faster than banks could come up with new dollar deposits to back their leveraged positions. The Fed ran to the rescue, throwing billions of dollars at foreign central banks so they could assure their members banks had the necessary liquidity. Of course, this did nothing to solve the underlying problem of too much risk and imperfect information (derivatives, anyone?).

Which brings us to today. As is evident, the dollar swaps did everything they were supposed to do. But now that they’re gone, there is a possibility that the dollar shortage will return. The dollar has been gathering momentum for quite some time. Those that look at charts had to have seen the massive divergence between the price action and most of the indicators (MACD is a good example) that first appeared in the spring. Now that the dollar is back in an uptrend with negative news from the Eurozone supporting it, we are looking at what could possibly be the second phase of the dollar shortage. It’s on the brink already and it only needs one little push.

Where could the push come from? A number of sources, really:

1. Higher interest rates
2. Negative news that would dismiss the validity of the recently published GDP gain of 5.7%
3. Second wave of home mortgage resets
4. Commercial real estate

Any one of these would have the effect of plunging asset prices. Given the huge amount of dollar claims amassed by the European and other non-US banks, it does not seem reasonable to assume that they have managed to sell those assets or hedge away their risk completely. The situation is quite a bit different from what it was in 2008, but there are a number of disturbing similarities. The Libor-OIS and TED spreads are both looking calm right now (this was not the case in 2008), but volatility is starting to pick up. Derivatives also pose a problem as there were $604 trillion worth of derivatives as of June 2009, according to the Bank for International Settlements. This is $79 trillion less compared to June 2008, but $57 more compared to December 2008.

If the dollar shortage were to return, equities as well as futures would get hammered just like they did in 2008. Some claim that gold is a safe haven during a liquidity crisis, but there is no proof to back up that claim*. During a liquidity crisis, all assets get sold. Even if gold and gold equities were to hold up for a while, they would be sold soon enough just because they could. Don’t be fooled into thinking that fully funded clients are different from those on margin – a plunging asset loses value regardless of leverage, some just get wiped out earlier than others.

*Gold is definitely a safe haven in the long term, but there is nothing to protect short term holders in case of a fire-sale.

Disclosure: Long physical gold and silver (long term)

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Dec 20

Financial Sense Newshour – Best of 2009

Posted by Kristjan Velbri | Posted in Book Reviews, Economy, Energy, Markets | Posted on 20-12-2009

As this year draws to a close, it would be appropriate to take a look at the best of 2009. Since the last months of 2008, I’ve been a follower of Jim Puplava and his excellent weekly financial news talk show. The second hour of each Financial Sense Newshour features an author of a book written about economics or finance. Here’s my top 8 for the year that was. Enjoy!

1. Inflation vs. Deflation debate – 2009 was a year of endless debate for inflationists and deflationists and it seems that neither side has settled down yet. In the previous show Mr. Puplava hinted that there would be another inflation vs. deflation debate in January 2010.

2. Trend of 2009 – interview with Gerald Celente, the trends forecaster.

3. Fallen Giant: The Amazing Story of Hank Greenberg and the History of AIG – this is the story of how AIG grew to be such a large institution and what undid the company.

4. Oil 101 – the best guide to the oil industry: from the well to the pump.

5. Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy - if you like Barry’s style, you should check out his blog at www.ritholtz.com

6. Where Keynes Went Wrong: And Why World Governments Keep Creating Inflation, Bubbles, and Busts

7. “The New Market Wizards: Conversations with America’s Top Traders - an excellent interview based on the best-selling book by Jack Schwager

8. “Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse” – another great book by Thomas Woods. There are more interviews and presentations with Thomas Woods at the Mises Institute.

The full list of 2nd hour interviews is available here.

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Dec 04

Sideways Movement is Not Fun

Posted by Kristjan Velbri | Posted in Markets, Video | Posted on 04-12-2009

BKX - RUT - SPXFrom the middle of November, the stock market has been very akin to a staring contest – nobody wants to be the first one to blink, but then again, nobody wants to go on the offensive either. The banking index and small caps have been weak for quite some time now but they are still holding on. In fact, their charts look eerily similar. Even Bank of America’s bailout return failed to spark enthusiasm among investors. Truth be told, the market has had quite a run-up from the lows of March, putting in gains of over 60%. The failure to make new highs and the lack of economic data to confirm the price level of stocks is quite worrying. The outlook is still pretty confusing and making any predictions without a clear technical formation is difficult.

I’ll leave you with this – a video of a staring contest from the BBC (comedy is one thing that the Brits are really good at).

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Nov 19

What Does Bill Gross Think?

Posted by Kristjan Velbri | Posted in Economy, Finance, Markets | Posted on 19-11-2009

This is from Bill Gross’s Investment Outlook for the month of December, published this morning. I recommend reading the entire article, but here is the punchline:

“…before moving on, let me state the obvious, but often forgotten bold-face fact: The Fed is trying to reflate the U.S. economy. The process of reflation involves lowering short-term rates to such a painful level that investors are forced or enticed to term out their short-term cash into higher-risk bonds or stocks. Once your cash has recapitalized and revitalized corporate America and homeowners, well, then the Fed will start to be concerned about inflation – not until.”

Mr. Gross publishes his Investment Outlook every month and it is always a worthwhile read. Sometimes his letters seem sort of like stating the obvious, but that is actually not a bad thing. Mr. Gross works for PIMCO, which is said to be the biggest bond fund in the world. The people at PIMCO are as professional as you can get – people all around the world would pay thousands, and indeed they do, to get some idea of what people like Bill Gross, Warren Buffet and Marc Faber think about the markets and the economy*. They’ve been in this business far longer than most investors and as a consequence, they know more and it pays to listen to what they’ve got to say.

You can sign up for e-mail updates. In addition, there are other contributors worth reading at PIMCO – check them out!

*These three names are just an example, they are by no means the only geniuses out there.

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