You Always Take The Blue Pill

131 views

Let’s get something out of the way.

Yes, this is all an illusion. But why should that matter?

So what that the entire structure of the market right now is fake? That without rigging the system, we would be much lower? Why should I let that get in the way?

The things I’m going to buy with all these gains are going to feel real enough.

I hate to break this to you pal, but life is an illusion. What, you were attached to this nonsense? Birth. Death. It’s all a veil of deception.

And when, long in the distance, this raindrop of a Universe we’re trapped in smacks the pavement and contorts itself into a Gödel Space and wakes the dead, this is all going to look pretty stupid. But for the moment, rather than “Zerohedging” myself into hyper-analyzing micro-variations of white noise in Fed data, I’m going to embrace the illusion.

Because the reality sucks, champ.

To Be Clear, The Fed Dropping Guidance Was A Big Deal

542 views

So here we are the week after the Fed announced on April 9 that they’re just going to throw out that guidance that they’ve been spending the last three years meticulously articulating to the public, and we remain in a down market.

End of the world?

Hardly.

This is exactly what happened following the announcements of QE’s I, II, and III. The market continued to be slaughtered following the announcement, market “professionals” and “experts” lamented the end of global civilization and then…it stopped.

No, it didn’t just stop. It lampooned the detractors, dragging anyone short equities into obscene losses, while making those with blind faith quite wealthy.

What the Fed is really communicating here is that the game will remained rigged for as long as it takes. And since what the Fed is doing doesn’t seem to be making a difference (free money tends to get doled out to those closest to the trough, not those that actually need it), well then that’s just a another way of communicating that the game is going to be rigged forever, isn’t it?

Forever or until the guns come out.

So we’re seeing the monthly POMO purchases dropping another $10 billion and people are ever so afraid – but think about this rationally. From $80 billion a month, we were buying up $960 billion annually in effectively newly issued currency. That’s idiotic, QE I levels of program. I mean, QE II was only a $600 billion program, not counting the reinvestment of proceeds (which was really going to happen anyway, they just publicized it).

So $55 billion in new asset purchases are still on the table, which is for the moment still $660 billion every year. After the next $10 billion drop, we’ll still be at an annualized $540 billion every year. I mean, look, the numbers being thrown around here still equate to another QE II every 12 months.

I do some quick back of the envelope math and pretty quickly work out that QE III, from its inception on September 13, 2012, was somewhere in the neighborhood of $1.5 trillion.

So I’m supposed to lose my grip now that that’s being slowed to a “paltry” $600 billion? Let’s be straight here, just winding down QE III is going to be another QE II.

You know, because we’re winding it down permanently, really.

Or not, really.

Whatever…

And – oh yeah – your expectations that interest rates were rising next year are also premature. In a $17.4 trillion economy, a 1% rise in interest rates NOT materializing by itself is good for probably $150-200 billion a year worth of market forces. Multiply that by every percent financial institutions were expecting.

My point is this; right now everything is super scary, market short sellers are behaving like gigantic dicks, and The Fly’s comment section is haunted hourly by scum. But I’m thinking this is just the same story we’ve seen play out on at least three separate occasions already.

The fear is drawing everyone in. But the victory blow has already been struck – point Yellen.

But you can’t have a fox hunt without a fox; so we’re pressing downward. Make no mistake though, death awaits all short sellers. Before this is over, even just having too much cash on the sidelines will be grounds for humiliation, and short sellers should just actively start picking out that special “last rights” shotgun now.

First The Good News, Then The Bad

302 views

Most of my portfolio is now solidly shrugging off Yellen’s slip of the tongue. Our good bankster friends over at JPMorgan said it best – Yellen is fresh and inexperienced, and she still needs to learn how to speak without actually saying anything.

It will come. It will come.

Despite my state of shock at watching Yellen crack the market like an egg yesterday, I didn’t react. I want to watch a few more days before I make a move, even if they should lose me money. With a +14% year going, I have buffer room.

Now, the good word here is that CCJ and BAS are both moving higher. I suspect HCLP will join in soon as well (that position can be rewarded a little breather, it’s come a long way). The energy themes are solid and intact.

The bad side of the coin is that fear/reality of higher interest rates is going to just ravish the REIT and associated housing space. Check out VNQ over a five day period, and you can almost sink the cracking point up with Yellen’s comments. My current position AEC is breaking down again this morning, and an old position MAA is following.

This has to be treaded carefully. If you’re juggling garbage like NLY, I’d say you’re one four day panic away from another round of 30% losses.

I’ve said well before today, back when I never imagined Yellen would spook interest rates higher, that I was interested in rebuying MAA. This is sort of a blessing in that regards. I’d venture a guess that long term damage to multifamily REITs from higher interest rates will hover somewhere between “negligible” and “not damaging, actually positive”.

But well before that point, there will probably be a lot of indiscriminate selling from emotionally driven fund managers. The climax of that, if it should materialize, is the buying opportunity.

Between then and now, it’s important to keep a wary eye on reform efforts to Fannie and Freddie. There’s been some “bipartisan chatter”. Mortgage origination is >70% dominated by the government backed mortgage giants, and the entire housing market is totally dependent on them. A poorly thought out reform effort could rain chaos. But there’s no sense even having a discussion about that just yet. First things first, interest rates.

BAS Is Returning 7% Today Alone

137 views

Although my 40% cash position may create the illusion that I am missing out, such a view would be misplaced. Careful allocation and selection on my part is gifting me full participation in today’s excess in spite of recent reservation.

BAS is up 7.29% at the time of this writing, as the natural gas cycle makes full leaps and bounds forward. As I told you it would transpire, this is where your money must be at for the next 10 years. Companies and partnerships like BAS and HCLP will grow at unprecedented rates, facilitating the United States of America back to Her rightful status as Greatest Country and Loan Superpower on planet Earth.

HCLP is also up 2% and taken altogether, my portfolio is up .9%.

As for the excitement about Yellen, I don’t fully understand the sentiment. If you go back and read or listen to anything from Yellen, it’s pretty clear she has been consistently more in favor of Federal Reserve supporting markets and the economy than Bernanke was.

Despite that, there is good reason to believe a deep pullback may come soon enough (first half of 2014). We can’t all be millionaires.

UPDATE If you followed my initial purchase of BAS on 8/16/2012, you are presently up 65% on the position. If you’ve been trading along with me inside The PPT, you are up far more.

Ben Bernanke Deals Out One Last Rally

164 views

Hate on the man all you like, Ben Bernanke will go down in history as the greatest Federal Reserve chairman who ever lived. He played this market like a fiddle, and bent even the most staunch opponents to his will. All while sporting a ridiculous beard and a speaking voice that would make a rhetorician cringe.

You are nothing next to the legacy of The Bearded Clam.

This guy smote the short sellers effortlessly at a time when they had all the momentum and benefit of the doubt needed to sink the indices as low as they wanted to go, then kept the market running higher for five years on nothing but empty promises and that devilish smirk.

The guy pulled more than three trillion dollars worth of asset purchases out of his hat, meaning greater than 75% of the Federal Reserves balance sheet was hand selected by Bernanke alone. His predecessors have nothing on his influence.

Bernanke is king. Meanwhile, forgotten media favorite Greenspan doesn’t have two shillings worth of reputation left to rub together.

It’s been just an astounding five years. This is the most fitting end to the Bernanke era I could possibly think of.

You Always Take The Blue Pill

131 views

Let’s get something out of the way.

Yes, this is all an illusion. But why should that matter?

So what that the entire structure of the market right now is fake? That without rigging the system, we would be much lower? Why should I let that get in the way?

The things I’m going to buy with all these gains are going to feel real enough.

I hate to break this to you pal, but life is an illusion. What, you were attached to this nonsense? Birth. Death. It’s all a veil of deception.

And when, long in the distance, this raindrop of a Universe we’re trapped in smacks the pavement and contorts itself into a Gödel Space and wakes the dead, this is all going to look pretty stupid. But for the moment, rather than “Zerohedging” myself into hyper-analyzing micro-variations of white noise in Fed data, I’m going to embrace the illusion.

Because the reality sucks, champ.

To Be Clear, The Fed Dropping Guidance Was A Big Deal

542 views

So here we are the week after the Fed announced on April 9 that they’re just going to throw out that guidance that they’ve been spending the last three years meticulously articulating to the public, and we remain in a down market.

End of the world?

Hardly.

This is exactly what happened following the announcements of QE’s I, II, and III. The market continued to be slaughtered following the announcement, market “professionals” and “experts” lamented the end of global civilization and then…it stopped.

No, it didn’t just stop. It lampooned the detractors, dragging anyone short equities into obscene losses, while making those with blind faith quite wealthy.

What the Fed is really communicating here is that the game will remained rigged for as long as it takes. And since what the Fed is doing doesn’t seem to be making a difference (free money tends to get doled out to those closest to the trough, not those that actually need it), well then that’s just a another way of communicating that the game is going to be rigged forever, isn’t it?

Forever or until the guns come out.

So we’re seeing the monthly POMO purchases dropping another $10 billion and people are ever so afraid – but think about this rationally. From $80 billion a month, we were buying up $960 billion annually in effectively newly issued currency. That’s idiotic, QE I levels of program. I mean, QE II was only a $600 billion program, not counting the reinvestment of proceeds (which was really going to happen anyway, they just publicized it).

So $55 billion in new asset purchases are still on the table, which is for the moment still $660 billion every year. After the next $10 billion drop, we’ll still be at an annualized $540 billion every year. I mean, look, the numbers being thrown around here still equate to another QE II every 12 months.

I do some quick back of the envelope math and pretty quickly work out that QE III, from its inception on September 13, 2012, was somewhere in the neighborhood of $1.5 trillion.

So I’m supposed to lose my grip now that that’s being slowed to a “paltry” $600 billion? Let’s be straight here, just winding down QE III is going to be another QE II.

You know, because we’re winding it down permanently, really.

Or not, really.

Whatever…

And – oh yeah – your expectations that interest rates were rising next year are also premature. In a $17.4 trillion economy, a 1% rise in interest rates NOT materializing by itself is good for probably $150-200 billion a year worth of market forces. Multiply that by every percent financial institutions were expecting.

My point is this; right now everything is super scary, market short sellers are behaving like gigantic dicks, and The Fly’s comment section is haunted hourly by scum. But I’m thinking this is just the same story we’ve seen play out on at least three separate occasions already.

The fear is drawing everyone in. But the victory blow has already been struck – point Yellen.

But you can’t have a fox hunt without a fox; so we’re pressing downward. Make no mistake though, death awaits all short sellers. Before this is over, even just having too much cash on the sidelines will be grounds for humiliation, and short sellers should just actively start picking out that special “last rights” shotgun now.

First The Good News, Then The Bad

302 views

Most of my portfolio is now solidly shrugging off Yellen’s slip of the tongue. Our good bankster friends over at JPMorgan said it best – Yellen is fresh and inexperienced, and she still needs to learn how to speak without actually saying anything.

It will come. It will come.

Despite my state of shock at watching Yellen crack the market like an egg yesterday, I didn’t react. I want to watch a few more days before I make a move, even if they should lose me money. With a +14% year going, I have buffer room.

Now, the good word here is that CCJ and BAS are both moving higher. I suspect HCLP will join in soon as well (that position can be rewarded a little breather, it’s come a long way). The energy themes are solid and intact.

The bad side of the coin is that fear/reality of higher interest rates is going to just ravish the REIT and associated housing space. Check out VNQ over a five day period, and you can almost sink the cracking point up with Yellen’s comments. My current position AEC is breaking down again this morning, and an old position MAA is following.

This has to be treaded carefully. If you’re juggling garbage like NLY, I’d say you’re one four day panic away from another round of 30% losses.

I’ve said well before today, back when I never imagined Yellen would spook interest rates higher, that I was interested in rebuying MAA. This is sort of a blessing in that regards. I’d venture a guess that long term damage to multifamily REITs from higher interest rates will hover somewhere between “negligible” and “not damaging, actually positive”.

But well before that point, there will probably be a lot of indiscriminate selling from emotionally driven fund managers. The climax of that, if it should materialize, is the buying opportunity.

Between then and now, it’s important to keep a wary eye on reform efforts to Fannie and Freddie. There’s been some “bipartisan chatter”. Mortgage origination is >70% dominated by the government backed mortgage giants, and the entire housing market is totally dependent on them. A poorly thought out reform effort could rain chaos. But there’s no sense even having a discussion about that just yet. First things first, interest rates.

BAS Is Returning 7% Today Alone

137 views

Although my 40% cash position may create the illusion that I am missing out, such a view would be misplaced. Careful allocation and selection on my part is gifting me full participation in today’s excess in spite of recent reservation.

BAS is up 7.29% at the time of this writing, as the natural gas cycle makes full leaps and bounds forward. As I told you it would transpire, this is where your money must be at for the next 10 years. Companies and partnerships like BAS and HCLP will grow at unprecedented rates, facilitating the United States of America back to Her rightful status as Greatest Country and Loan Superpower on planet Earth.

HCLP is also up 2% and taken altogether, my portfolio is up .9%.

As for the excitement about Yellen, I don’t fully understand the sentiment. If you go back and read or listen to anything from Yellen, it’s pretty clear she has been consistently more in favor of Federal Reserve supporting markets and the economy than Bernanke was.

Despite that, there is good reason to believe a deep pullback may come soon enough (first half of 2014). We can’t all be millionaires.

UPDATE If you followed my initial purchase of BAS on 8/16/2012, you are presently up 65% on the position. If you’ve been trading along with me inside The PPT, you are up far more.

Ben Bernanke Deals Out One Last Rally

164 views

Hate on the man all you like, Ben Bernanke will go down in history as the greatest Federal Reserve chairman who ever lived. He played this market like a fiddle, and bent even the most staunch opponents to his will. All while sporting a ridiculous beard and a speaking voice that would make a rhetorician cringe.

You are nothing next to the legacy of The Bearded Clam.

This guy smote the short sellers effortlessly at a time when they had all the momentum and benefit of the doubt needed to sink the indices as low as they wanted to go, then kept the market running higher for five years on nothing but empty promises and that devilish smirk.

The guy pulled more than three trillion dollars worth of asset purchases out of his hat, meaning greater than 75% of the Federal Reserves balance sheet was hand selected by Bernanke alone. His predecessors have nothing on his influence.

Bernanke is king. Meanwhile, forgotten media favorite Greenspan doesn’t have two shillings worth of reputation left to rub together.

It’s been just an astounding five years. This is the most fitting end to the Bernanke era I could possibly think of.

Previous Posts by Mr. Cain Thaler