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Final Jake KoPG Post! What Hath the Yen Wrought?

I know, I know, you’re all weeping to see me go.  Especially our hot headed  “Commie Cadre” of dedicated (if deluded) Obamaniacs.

  Don’t worry, we will have ample opportunities to contine discussing the Obamessiah in future “Reg’lar Ole” Peanut Gallery Posts (I know, you’re thrilled).   But for my final posting, I promised the Fly I’d look more closely at this damn Yen Carry trade about which Calvino and myself are always squawking.

To describe it simply, the Yen-Carry Tradeis a well abused arbitrage where money arbs take a relatively low interest rate currency (in this case the Japanese Yen) and sell it short (ie, “borrow and sell”)  in order to purchase higher yielding assets in a separate currency (in our case, dollar assets).  

 Mostly, these guys keep it simple and just buy higher yielding U.S. Treasuries with their borrowed yen, but a good amount of this dough ends up in the equity markets as well.   So it’s not uncommon that you will see a an inverse correlation in the yen price and the [[$SPX]].   

The chart I’ve included above (click it twice to see it up close) is a weekly Japanese Yen to S&P 500 ratio, starting in August of 1994, just as the massive bull took off in U.S. equities.

Note the stunning plunge in the ratio as the yen depreciates against an ever increasing $SPX, mitigated only by the “blip” caused by the 1998 Asian Currency Crisis, which actually strengthened the yen while weakening the ratio for a brief period (note, you can see this yen strength even better in the stand alone Yen chart I’ve posted below).  

 When the bear market took hold in late 2000, however, one consequence was the unwinding of this yen carry trade, and you can see that in the rebound of the Yen/S&P ratio to a more positive bent starting towards the end of 2000 (when our markets began to crack for good) as the yen grew stronger against the SPX, and culminating at the end of the last bear cycle in 2003.  

But look at how the Yen signalled the carry was coming to an end more than  full year before the US markets actually peaked in March of 2000!   And note how the Yen has been “chuntering about” but generally moving higher ever since that bottom?  It’s been harder and harder for the carry trade to work, because it really only provides a return if the lower yielding currency stays cheap.  If that lower yielding currency starts getting expensive, the trade must be unwound.   Very important. 

Note also that since that final bottoming back in 1998, the yen has gradually been on a slow and steady uptrend, even as it’s been routinely sold down by the carry traders.   It remains on an uptrend to this day, and this means bad news for US equities, I believe.

Here’s my take:  In a period where pressure already being placed on our system by fundamental internal market forces, a reversal in the carry trade — or worse, a complete abandonment of it — can have disastrous effects on our equity  and bond markets.  I think our bond markets can withstand the shock (and as you might note, they seem to have done so), because they are much larger liquidity sinks than our equity markets. 

I’m not sure our equity markets can take it, however, and that’s why this last graph is the most foreboding of all.  It’s the last component of the ratio in stand alone form — the S&P 500 itself on the same 14 year weekly time view.  

Note how ugly the market got after we broke through the 200 week EMA back in early 2001?   Well, we are looking at a very similar chart formation today.  And with a yen that looks like it’s “tanned and rested” and getting ready to take off again, I think we might have the makings of our own very special equity market “Hurricane Gustav” coming this Fall, and nothing but the short ETF’s will be shelter in that storm.  Carry on… or off, as it may be.

Good luck everybody (especially my weather-beating successor Veritas), and thanks for “abiding me” — even at my most cantankerous — over this long hot month.   Look for updates in the PG, as warranted.  Ciao for now, Jake.

 

 

 

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The Case Against Obama, Part III– Socialist “Fairness” vs. A Healthy Economy

This is kind of an incredible clip , but very important to the investor who frequent this site, especially those of you who hide from the Fly that you are well over the 47.5 year old age barrier and are participating here “illegally.”   (I know who you are, but no fear, I am no “stoolie.”)

I say that because you are more dependent on your investment portfolio in order to keep your old asses out of the Asst. Fryolater Manager slot at McDonald’s.   I also say that because I like you old fuckers, even the increasingly “confused” ones, like Employee #8.

Listen very quietly as I set it up the following clip for you.  You Obama supporters, who I’ve got to assume are either as wealthy as Ted Kennedy and don’t really care,  or simply don’t have a firm grasp on market discount and time value calculations– I need you to listen closest of all. 

What Obama wants to do with both income and capital gains taxes will have a direct — and near immediate –impact on this economy and these investing markets we love.   If he’s elected, the discount, I believe, will come swiftly.  

You see, right now the market is pricing in the current 15% capital gains tax on long term gains.   Any announced increase, however,  will immediately be taken out of the market price via a selloff, as the future value of all a stocks free cash flows from that point forward will have to be discounted at a higher rate than that already priced in 15%.   

To understand this, think of what happens to a treasury bond sold at par (say $1000) when market interest rates rise higher than that rate stated on the originated bond.  The bond drops in value proportionate to the increase in the interest rate.  As well, if market (traded) interest rates drop, the principal value of that bond will go “above par,”  or over the $1000 principal value.   Simple “time value of money” finance.

The stock market experiences much the same effect when any single “universal” discount is applied to it from an external source, like a commodity shock or government interference.  In the case of a tax on capital change, that tax (usually) will impact every stock on the market equally, and the market will go up or down “en masse” as a result of that universal discount rate change. 

All of you remember the roaring bull market that spanned (with some drawbacks) from 1995-2000, yes?  Well, a large part of that increase resulted in the universal value increase derived from the capital gains cut of some 30% (from 28% to 20%) by Clinton and the GOP Congress in 1996.  

 Now you may remember Clinton complaining about that signing at the time, but the fact is, he would’ve never balanced the budget that one last year in office if the IRS didn’t reap the extra capital gains tax revenue windfall from that cut.  

What’s important to note, however is that even if you did not sell, the value of your portfolio rose (on average) simply because the future value of your cash flows was increased by that lower tax rate!   This is important because the opposite is guaranteed to happen should that rate increase!

Now Barack Obama either doesn’t know how that all works, or he doesn’t care.  He’d rather sacrifice the portfolio value of hundreds of million of Americans (and I include union pensions and insurace annuities in this mix) to his populist (although wrongheaded) idea of “fairness” — whatever the fuck that means (to me, it means “control”).  

 Note how in the following clip — even after being remonstrated by the moderator twice! — Obama hews to the tired socialist line, choosing to blame 50 lucky hedgies (like his patron George Soros)– who couldnt’ give a shit in a shinepot what he did with taxes, since they are rich enough that it will effect them little–  for his quixotic “quest for justice.”  

Pure theatrics, ladies and gentlemen.  The fact is, the Dems still don’t get it, God bless ’em.  They’ve got no clue how capital is formed, investments are made, and risk is weighed.   Nor do they understand that capital is mobile and can be chased away as easily as a fat sweaty rich guy looking for nickle bags on the wrong side of town.   Those nickle bags still need to be sold, mind you, but if the fat sweaty rich guy doesn’t feel comfortable buying, they won’t get sold there.

Perhaps Mr. Obama could do well by living a couple of years in a South American country, where capital is always at risk of flight, before he realizes that investment capital cannot be abused without an economy suffering as well.  These are lessons hard learned, and one would’ve thought they’d learned them in the Clinton era, if not the Carter era before that. 

 It appears, however, that rather than being the proposed candidate for “Change” as he claims,  Mr. Obama is the candidate for “Return” to the same failed socialist policies long dustbinned by history.  He’s a better looking McGovern, in other words.  Pity.

Enjoy the clip, and remember — this is from a Democratic Primary debate!  This is the real Barack, no matter how he morphs “his game” in the next two months… Beware, investors…

 [youtube:http://www.youtube.com/watch?v=WpSDBu35K-8 450 300]

 

 

 

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The Case Against Obama – Part II: Celebrity

(Note:Um, yeah, this is an actual Obama support poster, although the blog below it is not, I don’t believe, uhm…  think.)

My last post focusesd on associations with the Radical Left, and they go to the question “Who is the REAL Barack?”  Part of this confusion stems from the fact that there is very little discussion about what this guy really stands for.  Much of that is not really his fault, as he’s a good looking youngish man with an excellent speaking voice.  For many who are easily swayed, and who do not pay attention, this is 80% of the game.  

The fact that the media has gone insane — to a degree that eclipses even the man-love for Bill Clinton in his pre-Monica hey day — does not help matters for helping the voters get a grasp on what Obama stands for.   Of course, he’s also somewhat to blame with regard to some of his recent hard tacks to the right on the War (oops! I guess the Surge did work) and energy issues like drilling.    Still, I hope we are able to discuss his views a little bit more realistically in the coming months, and I beleive the debates will help that process.  

In the meantime, here’s a funny clip from the Jon Stewart’s Daily Show, who’s finally gotten around to poking some harmless fun at the Messianic aspects of the Obama campaign.    I figured this had to happen eventually, btw, as there was (as you will see) too much “comedy gold” to be mined over some of the over-the-top superficial aspects of the process thus far.  Enjoy (for as long as the vid remains viable):

[youtube:http://www.youtube.com/watch?v=lJEGmBlOTZY 450 300]

 

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Obligatory Political Post: The Case Against Obama, Part I

What?  You thought we’d go the whole month without me wielding the saw- toothed political blade of many salty and invasive incisions?    Dream on, non-committed independents and house-bound sofa leeches, for I am the King, and I shall take license.  

 ”Kill all the rich people. Break up their cars and apartments. Bring the revolution home, kill your parents, that’s where it’s really at.”  — William Ayers, spoiled rich kid, commie, and terrorist asshat

(Aside — Not bad for a terrorist bomb thrower, no?  She [Bernadine Dohrn]  was considered by the FBI in the early 70’s to be “the most dangerous woman in America” Ha-cha-chaa!)

Today’s topic will focus on newly Democratic Party-nominated Celebrity Ingenue Barack Obama’s relationship with this Silver Spoon, Ricky Schroeder-Gone-Bad Asshat, William Ayers, otherwise knows as the “el Capitan” leader, along with his wife(!), Bernadine Dohrn of the early seventies dirty hippy commie terrorist group, “The Weathermen.”   And to be clear, we are talking about real terrorists, here, people — with bombs, and killing people and shit.  Just not so much with the bhurkas or checkered scarves.

Of course the main take away from this post (and your review of the video below) should leave you questioning “the Obamessiah’s” judgment with regard to his close association with these people, among many others who have helped build his political career within the Chicago Machine.  For that reason, you will hear a lot about these commie scumbags in the coming months, I’m sure. 

  But after that, the real question in my book should really come down to, “Why the fuck aren’t these two asshats rotting in jail, their only hot meal a daily bowl of steam?”   Because that very question is finally being bandied about again,  I thank Obama for bringing these evil fuckers back to the “Ignonimous Surface” via his goofy “People Magazine” celebrity campaign which — as you know —  leaves people “tingling to know more!”

I mean, here’s the deal — Ayers & Dohrn admitted complicity in a number of bombings and various plots against the Pentagon, the police, and even a bunch of innocuous Army sergeants at a dance.  Some of these plots led to the deaths of innocents, and some  led to deaths within their own group, thanks largley (thank the gods) to their own incompetence. 

In one particularly hilarios episode, a group of Ayers-Dohrn’s thumb-fingered compatriots in Greenwich Village set out to put together a nail bomb to blow up the aforementioned Fort Dix, NJ non-commissioned officers dance — nice huh?  Luckily, the fools only blew their own unshowered hippy selves up, forgetting that the red wire should never be crossed with the blue wire.  Enjoying hell, hippy dumbfucks?  Send us a postcard.

Ayers himself only escaped imprisonment thanks to that friend of criminals everywhere “the legal technicality,” and an (allegedly) bleeding heart liberal judge.  Ironically, it was a wiretapping mishap.  Fucking Hoover must’ve been pricing dressed that day.  Ayers jigged out as a result, thumbing his nose at The Man (see quote below),  whilst his hottie bride did seven months.

So be it,  Ayers and Dohrn skated on minimal to no time, but you’d think they’d be cossetted hermits, now right?  Maybe living in a cave and dwelling on the shame and regret of their mispent murderous youth?

 Nope.  Not quite.  Actually, today they are upper level movers and shakers in the Chicago Liberal Establishment.  Ayers is actually a TENURED professor at Northwestern, while today Dohrn is a top gun for the Chicago Bar Association.   These days, while not regaling starry eyed New York Times reporters of their action filled pasts,  they spend Ayer’s inherited dough throwing parties for up and coming Illinois liberal hot shots like Obama.   Their bombing and shooting victims?  Still dead as of the date of this posting.

What’s most galling, however, is that they are totally unrepentant with regard to their past.   I won’t go on much more, but will leave you with two quotes (plus a summary vid).  The first is from right after Ayers’ acquittal, and the second more recently — right before 9/11, ironically enough:

Guilty as hell, free as a bird—America is a great country,”

“I don’t regret setting bombs” and “I feel we didn’t do enough”,  (note the DATE of this article! — ed.)

Oh, did I also mention that this avowed communist (Ayers) is also the son of the former CEO of Chicago’s Commonwealth Edison?  (What? You thought he got Dohrn in the sack with via his “kickin’ Freddy Mercury” stash alone? )Spare the rod, anyone?  Of course, who wants to associate with poor terrorists anyway, right Barry?

 This is a world gone crazy, I tend to think sometimes.  But maybe we’ll wake up from our torpor one of these days, and hold leftist terrorists as accountable for their bloody actions as the righty nuts who bomb abortion clinics.   But for now, at least, let’s hope we can keep these two away from the levers of power, or farther away than they’ve been with the Obermeister recently.  

These are dangerous times.  There’s no time to be “fucking around with communism” as a hobby, no disrespect to Dino and the four loyal housebound liberals that attend to his blog, slavishly. 

[For your viewing pleasure, I’ve included the following short vid on Barry Obama’s patrons, the Mayhem Twin (and no, it’s not “the commercial” he’s suing about)] :

[youtube:http://www.youtube.com/watch?v=VNkclbvuc9w 450 300] [youtube:http://www.youtube.com/watch?v=rxoiZdBSi-g&feature=related 450 300]

http://www.youtube.com/watch?v=

Ciao for now.

 

 

 

 

 

 

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Breaking: More Bad News for the Fat Fucks

Breaking news from the Progressive State of Alabama, birthplace of hot football cheerleaders and highly alcohol laden pink shooters of unknown provenance!  Apparently, the State is sick of paying for unhealthy lifestyles and has now decided to impose a $25 “Fat Fuck” Fee on fat bastids who are on their state employee health plan.   This is in addition to a plan already in place that penalizes cancer stick addicts for chimneying on state payroll time.

Contrary to what many of you might surmise, I love this idea.    You see, I’m a libertarian at heart, and I hate any kind of Big Brother shit — like Mayor Bloomberg telling private businesses it’s his decision whether they can allow cancer stick addicts to contribute to their fast approaching demise on said bidnessman’s property or not, for example.  Or telling New York restaurants what ingredients they can use to make their tasty products.  That shit I hate.   Since when did Bloomberg become the Fascist Surgeon General of New York, abrogating private property rights ovah heah in such a way?   Fuck him, and the questionably asexual horse he rode in on.

But this is different, you see, because Fat Fucks in the employ of the State are NOT PAYING FOR THEIR OWN HEALTH INSURANCE.   No, the good people of Alabamy, who dearly need their disposable income to fund shotgun weddings,  football tailgate cocktails and jumbo shrimp de-veiners and such, are on the hook 100% for these fat bastids.    That’s some benny!

I believe, therefore, this “additional payment,”  is a good start.   Don’t get me wrong.  I guess I don’t mind seeing free health insurance — an egregiously magnificent benefit, as anyone who runs a business is well aware — as an “enticement” to get competent personnel hired for state bureaucracy (okay, stop laughing, we are talking relativity ovah heah).  

But I don’t want to see that free privilege abused by greasy fat bastids who squeeze throught the door, thighs squeaking in protest, after “Second breakfast” at 9:25 am every morning.    Nor do I think it outrageous that the coffin nail hoovers are also forced to “pay a little something” for the insurance that will be stepping in for their upcoming lung sand-blast surgery.  It’s only fair, after all.

One addition to the egregiousity…  You will note from the article that there are Fat Fucks who are already “suffering” the plight of the additional payor because they also smoke like the Bethlehem Coke Mills in addition to their “glandular deficiency.”   And these bastards are whining like hell about “Big Brother” tellng them what to do.

Can you believe the nerve of these Vesuvian bastards?   Do they even see the team of patient white coats, standing nervously behind them, double enforced stretcher and “shocker paddles” grasped firmly in hand, whilst they “merry about” the water cooler,  cooing at the hot copy girls,  MrRib “Special Sauce” in one hand, Kool 100 Ultra in the other?  All at taxpayer expense?

I tell you what, Junior Sample, why don’t we pay you “market” to get your own fat fuck insurance out there in the private sector?  See how your “lifestyle choices” pan out in that environment.  Maybe you could get a credit card that will take care of the premiums while leaving a monthly stipend for two cartons of Kent Menthols.  Or some cawfee.

Hey, Alambammy — I’ve got an even better idea than an “additional fee”… howabout you fire those nicotine addled lipid bombs before you need to bring the special “piano case” coffin makers in to cart them out of their inadequately expansive cubicles?  Just a suggestion.

That’s my rant for tonight, off to check my BP.

 

 

 

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Watch for Skullduggery

A quick note before I get on yet another plane, ovah heah.  I think something’s going on with commodities (including the big three, oil, gold and silver)  and commodity stocks strengthening while [[SKF]] has it’s muttonchops shaved. 

Look for further Bernakean trickfuckery in either the “Save Fannie Mae [[FNM]] and Freddie Mac [[FRE]] ” Movement, or in a suprise rate cut to “save the bloody banks,” man.   Something is signalling further abuse to the already-in-need-of-Social-Services U.S. Greenback. 

I don’t like the smell of this.   Luckily, my biggest positions outside of my big three ( [[SKF]] , [[FXP]] and [[EEV]] ) are in various precious metal and energy names.   Specifically, I like Chesapeake Energy Corporation [[CHK]] , Transocean Inc. [[RIG]] , Occidental Petroleum Corporation [[OXY]] in the latter, and Goldcorp Inc. (USA) [[GG]] , Royal Gold, Inc. [[RGLD]] , [[GLD]] , [[SLV]] , and Silver Wheaton Corp. (USA) [[SLW]] ovah heah.

Extra special long term fat divvy play Natural Resource Partners LP [[NRP]] as well.   Stay well whilst I fly home to Flyover, USA.

Off to pay $9.26 for a regular cawfee at the airport Starbuck’s.  Ciao for now.

 

 

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