Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

The Magic of Inflation

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The majority see inflation as rising prices, primarily in the necessary
things we need to survive and/or live a functional life. The minority –
schooled in Austrian economics – see inflation for what it really is,
an increase in money supplies relative to 'things' that money would buy.

Some
people read this blog,
sense a negative tone and automatically think 'another perma-bear'. But
that is not the case. I am bearish on the system yes, but not on nominal prices of many assets.
How can I be when I am what some would call an 'inflationist', meaning I
believe inflation is a systematic and willful tide designed to lift as
many boats as possible with some boats rising much more than others.
Hence my strong bull status with regard to the precious metals markets,
and in the most intense phases of the great and ongoing inflation
regime, commodities, resources and other areas vital to modern life.

Then
there is the stock market. Under-performer that it is, the market
defied those with a net bearish stance from 2003-2007 and it was all due
to the need for newly created money and credit to go somewhere. The
conventional financial services industry generally offers its clients a
choice; stocks and bonds. Hence, a huge portion of new money was
allocated to conventional stocks. As most precious metals and commodity
traders know however, the highest percentage of funds go to those
assets that stand to benefit the most by inflation born of policy.

The
bull market out of Armageddon '08, which NFTRH originally
projected to be nothing more than a powerful rally to reset
unsustainably negative sentiment, has dragged on much longer than
anticipated. But I want to quote NFTRH13 (dated 12/27/08) for
perspective:

"At this point, my
personal plan holds that a bear market rally is beginning as the
markets grind out a bottom. The rough
target for the S&P500 is in the 1200 area. The plan holds
that the gold miners have begun a new bull market; one that may
eventually make heads spin."

Specifically, what interests
me is that I could so coldly target 1200 on the SPX and then allow
ongoing noise to interfere with such a nice, clean and early projection.
Such are markets, and such are human beings. We all should take every
day as an opportunity to learn. For the record, NFTRH is and has
been carrying forward two primary scenarios, one of which calls for a
significant decline to major support well above the 2009 lows, before
new highs for the cycle above 1200.

The current chart shows the
situation. We have been watching a 'bull trigger' point on the SPX for
many many months now in NFTRH. The broad
market continues to hold above this point. MACD is above zero and the
slower TRIX smooths things out and provides a clear picture of a
cyclical bull market.

Spxweekly

Yet still, I must caution that risk is very
high right now (on a risk vs. reward basis) even as money creation
(inflation) continues to float this boat. The above excerpt was written
when I was bullish and every contrary bone in my body was saying "FADE
THE FEAR". Things are wildly different now and the down-triggered TRIX
argues a correction (within a cyclical bull) can come at any time.

But
in an age of inflation by policy, a net bearish case is iffy at best.
We are not going to experience a genuine deflation and now, with the
t-bond threatening to break down, for the first time in decades there is
a viable chance that inflation is going to break down the barn door in
what would be a return to the casino mentality that drove the 2003-2007
cycle.

So yes, a correction can come at any time, as we await
sentiment readings that should once again come in line with the very
bearish levels that registered in January. Pending this correction
however, it will be wise to set up for investment in the areas that
usually benefit from too much manufactured money, devoid of productive
origins, and seeks its way into assets. In other words, the next inflation problem is likely to
be a whopper.

US Stocks & Bonds (by Gary)

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I received a bit of criticism yesterday about a segment in NFTRH74 with
regard to personalizing the motives of the Fed and policy makers or
more specifically, with regard to writing as if I know what
'Gentle Ben' is thinking with regard to inflation/reflation (or lack
thereof).  This criticism came from a subscriber who has many decades
of experience running some pretty big trading desks going all the way
back to Paul Volcker.  So of course, I listen… as I do with any and
all constructive criticism.

The intent of the segment is to illustrate the myopic nature of the general financial services industry as it tends to err, forget to highlight the reasons
we may have projected economic rebound and buoyant markets; namely,
inflation of money supplies in various aggregates and through various
means.  The premise is that if you want to under-perform, you just buy
the S&P 500 and if you want to out-perform, you buy the most
intense beneficiaries of the inflationary regime.  Of course, this
assumes that reflation will be successful – no given.

So really, Bernanke/Geithner/Summers hyperbole aside, I am focused on what IS, and what IS is represented in this chart.

Now, cases for deflation and inflation can be argued (are argued by
some very smart people) with regard to interim swings, but the big
picture monthly chart – correlating the US long bond to the S&P 500
– cannot be argued.  So let's forget the name Beranke, tune out the
media and avoid the inflation/deflation debate for a moment.  Let's
just look at the chart.

Spxmo

It is striking to me that during a secular bull market US stocks and
bonds rose together, as capital was sucked in to a still-productive
enterprise as it headed for its secular top, conveniently right to the
round number of 2000.  Now, when I spout about 'inflators in high
places' I am really just trying to illustrate the meaning of this chart
while expressing myself as a human.  That is because as a human, it
pisses me off that the country has resorted to such a bald-faced method
of funding its ventures.  As a human it pisses me off to see the
financial media not reporting the whole story.  A headline I would like
to see on Bloomberg:

US Sells More T-Bonds as China Blinks, GDP to Benefit By Direct Infusion of Proceeds

But as a cold chart and market watcher, I simply go about what I do. 
The chart does not lie and its message is that the conclusion of the
major bull market, beginning at the secular top (2000) and leading into
the cyclical bull (2003-2007) ushered in an era of ever more intense
inversion of the relationship between US stocks and US bonds (debt).

It is no secret that the US funds itself through its ability to pile on
more debt to the $Trillions high dung pile.  So, again as a human, it
scares me to see a bearish looking pattern in the nominal $USB chart (potential
head & shoulders) and the proximity to the monthly EMA 100 that I
often write about.  That is because that moving average represents a
secular (many decades long) thing and while I am not sure what will
happen if it breaks, I am not eager to find out.

In summary – and depersonalizing the players in the macro drama – the
chart implies that a continued stock (and commodity) rise could bring
about its own destruction as inflation fears break down the barn door. 
The secular containment of interest rates below the monthly EMA 100
(bond above its own EMA 100) has been vital to funding in an era
(post-2000) where such funding is ever more vital to the pretense of
economic rebound.

We will have continued economic rebound, which will be attended by the
thing that birthed it (inflation) or we will have a double dip (or
worse) as the system attempts to purify itself through natural,
deflationary means.  Conventional financial media obsessions like
'consumer spending' and 'GDP' are just ephemera overlaid on top of the
macro big picture.–Gary (Biiwii)

Uncle Buck

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USD Daily:  MA 50 crosses above 200, MACD well above zero, AROON trend up and support at 79.50.

Usddaily 

USD Weekly:  EMA 10 supportive, MACD on verge of big time bull signal and AROON trend up.

Usdweekly 

USD Monthly:  Dealing constructively with strong resistance, MACD okay and will be flat out bullish if it gets above zero. AROON trend up.

Usdmonthly

So tell me, where are the 'Dollar Collapse' cultists now?  You know,
the smart guys making a living out of touting the destruction of this
intrinsically worthless currency in favor of other more 'sound'
currencies?  Give me a break.

It's all a confidence game and right now confidence is ping ponging
around the globe from the trying to be all things to all people debt
note in Europe, to the reserve currency debt note of America to the
commodity/resource currencies of Australia and Canada.  FOREX jocks are
having a blast but most Americans probably think the dollar is still in
the tank.

The boring old blogger will simply remind that it is long past time to begin securing your future against these rackets. —Gary(biiwii)

So, Is Mr. Bernanke… ?

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Hi all.  The following is a copy of an email update sent out to NFTRH subscribers this morning, pre-market.  Ultimately, it represents one guy's view Keynesian's and their manipulation of all things paper with inflationary policies along a continuum to the moral hazard we now find ourselves stuck within.  Bernanke is seemingly disregarding the treasury market and its demands… or does he know err, more than we do about the ill-health and lack of sustainability of 'the recovery'?

So, is Mr. Bernanke…

a)      Stupid?
b)      Desperate?
c)       Out of touch?
d)      In total control?

a)      No
b)      Yes
c)       Possibly to a degree, given the dimming effect academia tends to have on Keynesian types
d)      Yeh, right

Still, all the man had to do was utter some gentle words on interest
rates and the markets complied for a day at least, with the dollar
down, gold down, stock market up and commodities up.  You do know that
these inflationists WANT commodities up don’t you?  That is why I call
these people desperate; they know full well that any hoped-for recovery
is going to be attended by rising prices and costs given its origins in
overdriven money printing.  This obviously gives the lie to the Fed’s
“Price Stability” mandate.

The attached chart shows the parameters on the short term stock market
recovery that we had expected.  The SPX along with gold, gold miners,
commodities and China all remain at or near resistance levels from
which they can turn back down, as expected.  I say “can” because my
black box, the one with the remote market controls, is shorted out and
in the shop for repairs.

Spxdailyupdate

Getting back to point a), he is not stupid and the reason I believe he
is desperate is that on the surface it seems outrageous that he
pretends to be able to control interest rates at near Fed Funds zero. 
What does he know about the sustainability (lack thereof) of ‘the
recovery’?  What does he know about the Treasury’s ability to fund
itself despite the long bond near crucial biggest picture support?  Why
dare he not upset the markets at a time when ‘the recovery’ is
obviously in play and commodity (and gold) prices have been rising?

It is obvious that Ben sees a strong dollar and intends to play off of
that.  But what is the dollar recovery other than a reflection of
scared money knee jerking out of the suddenly unsound euro.  NFTRH you
will recall, never considered this alternate confidence note as being
sound.  It appears Bernanke is playing around in the slop between the
global public’s continued confidence in these and other paper debt
notes and the day when said confidence hits critical mass to the
downside.  That will be the day that gold, still looking constructive
in most major currencies, is gone for real in a bull market across the
board.

Dialing it back in to short term events, review the attached chart. 
There’s the resistance.  Let’s see if hope has some power left or if it
will continue to wane.

Regards,

Gary
http://www.biiwii.com
http://www.biiwii.blogspot.com

Why are Indicators Important? (by Gary Tanashian)

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Hi Slopers, this is a post I just put up at my regular blog, and thought some people here might appreciate the message.  Although I am sure my geekoid status is probably more information than you want or need to know. :-) 

Here on SOH, you have seen me ramble about the importance of the Chinese FXI as it led the SPX southward, the gold-silver ratio as a measure of liquidity (or lack thereof) and other things I use as indicators to try to get a leg up.  Looking at the nominal SPX chart, I do not see a whole lot of difference from the June/July event.  But this time I expect a very different eventuality after some upside relief to around the SMA 50.  Anway, the post…

Why is it so critical to watch indicators like leading market ratios,
sentiment, the ratio of gold to silver, money supply, etc.?  Well, one
look at this nominal SPX chart provides an answer; trying to figure out
the nature of a similar downturn to that of last June/July devolves
into a mere guessing game if all you go by is straight technicals on
the SPX daily chart.

SPX dumped the neckline of a small H&S topping pattern, spent 4
days below it and then said screw this, time for hope and greed to make
a triumphant return.  It was right around that point that I began to
realize that my projections for the duration of Hope '09 might need to
be expanded.  Boy, did hope and denial ever expand… right into this
latest break.

Spx 

 

But it is more complex than simply watching indicators.  The
gold-silver ratio for example rose strongly in June/July (implying
market downside), but broke out of its weekly downtrend line for only
one week before falling back.  Current weekly GSR has now completed two
full  weeks of breakout from its most recent downtrend line, has
constructed a good looking MACD and formed an inverted H&S bottom
pattern.

Yes I know, you have to be a total geekoid get-a-lifer to be into this
stuff.  Well, if you knew me in real life you would see that I am not
very cool and do not display a dynamic personality.  But I am into this
shit because – call me weird – I just love to make money or at the
least, preserve capital and remain as detached from convention as
possible.  It's the secret recipe of succeeding in the financial
markets.

Sorry for the self-involved last paragraph but you must understand,
you, the blog reader are all I have got (aside from NFTRH subscribers
who actually assign a monetary value to my opinions) when it comes to
communicating these things.  In real life nobody but nobody wants to
hear it.  Now that's
weird if you ask me.  Most people want to make and protect money, but
when it comes to the necessary work to do so, it's not happening.

Thus ends another technical analysis post that jumps the track.