A dear and close friend of Tim’s passed away recently. Jennifer Jaff was the founder and director of Advocacy for Patients with Chronic Illness. Market Geometry along with Eddy Vedder from Pearl Jam were among her biggest supporters. Tim had the pleasure of speaking to Jennifer the day before her sudden death. Her death has [...]
December 13, 2012
In a very special outlook event, I will look at long term price market structure to pinpoint the markets I feel are most likely to have significant moves in 2013. I will discuss techniques I’ve used for more than 25 years when long term portfolio trading.
I will focus on the major markets and highlight themes, including:
- US T-Bond Futures – Will the Super Rally in Bonds Finally End?
- Euro FX Futures – Can Pure Price Patterns Tell Us If the End is Finally Here?
- Grain Futures – Buy in May and Go Away?
- Gold Futures – If the Fundamentals Say $2200, is Gold Headed to $1200?
A dear and close friend of Tim’s passed away recently.
Jennifer Jaff was the founder and director of Advocacy for Patients with Chronic Illness. Market Geometry along with Eddy Vedder from Pearl Jam were among her biggest supporters. Tim had the pleasure of speaking to Jennifer the day before her sudden death. Her death has deeply affected him.
More information is available in this New York Time’s article from the Health section.
If you’re interested in learning about what I do and how I do it please join me at my next free seminar. Hosted by Interactive Brokers and sponsored by the CME Group I will present my unique method for reading price chart data and turning that read into profitable trades.
Remember, this is free and you don’t have to be a client of Interactive Brokers to attend.
Hunting Major Turning Points in the Grain Markets
This Wednesday, August 22, 2012
12:00 pm New York
11:00 am Chicago
9:00 am San Francisco
5:00 pm London
Each Spring, I use market structure and Andrews’ Median Lines, along with surgeon-like money management, to identify high probability buy areas in the grains. Relying on a vast knowledge of the seasonal tendencies of each of the CBOT Grain futures markets for that particular year, something I call “Biologics”, I find the help I need to confirm buying or selling opportunities.
I will show you how, once in a long term grain position, I use money management tools to greatly improve my trading. I will demonstrate how to ‘frame’ a potential long term trade in the grains and share with you the ‘engine’ that I use to drive a series of long term grain trades: Risk-Reward, as taught to me by Amos Hostetter. I will explain how and why I collapse risk as a trade begins to unfold, and how I choose logical profit targets for my grain trades.
“Market intervention of any type may have short term effects, but over time, it is a waste of time and money. And worse, it is a waste of time, something the U.S. Economy does not have. If Washington does not wake up soon, we’ll soon quit talking about double dip recessions and instead, be wondering how to dig ourselves out of a second Great Depression.
A ‘Twist’, which shortens the length of bonds and notes held by the Treasury, pushes liquidity from the short term to the long term. If you think about this, it is the opposite of what an economy that is dead in the water needs. I clearly remember Paul Volcker’s actions when he so successfully turned things around in the 1980′s, after the abysmal Carter years. He not only lowered short term interest rates to banks, but more important, he publicly repeatedly warned banks and lending institutions that if they did not pass on this short term cheaper money to the public, he would lock them out, no longer allowing them to borrow cheap money at the Fed Window. This type of carrot and stick, along with clear vision, is missing today. Instead, Washington, from the President on down, has tried gimmick after gimmick, moving aimlessly back and forth.
This economy does not need to be twisted and it does not need more gimmicks. It needs banks and lending institutions to lend to individuals and small businesses and it needs intelligent tax reform and an end to the trillions being wasted on the latest twisted idea.”
Let’s add a few more facts to flesh out my thoughts. The Pound had been pegged to gold prior to World War 1, but like most Western economies, Britain had abandoned the gold standard.
With the British economy already slumping, Winston Churchill convinced the British Parliament that pegging the Pound Sterling to gold would help bring back confidence to the Pound and the British economy. Unfortunately, they pegged the Pound to gold at the pre-war rate of 4.86 dollars. This did make the Pound convertible to its value in gold, but at a level that was completely unrealistic to the changes in the world after the war-the peg was much too high. This had the effect of immediately worsening the economic problems in Britain, and in the long term, it continued to pull down the growth of other Western economies: By pegging at such a high rate, Britain was causing a liquidity crisis.
The United States was affected by the pegging of the Pound at the high pre-war rate because the peg was literally convertible to gold at a U.S. Dollar rate. Once the British pegged, the United States had the option of leaving the gold standard to relieve the contracting pressure of the liquidity crisis but both the President and the Federal Reserve refused. In 1928, the United States passed the Real Bills doctrine, requiring that all currency or securities have material goods backing them. This policy forced a contraction of 30% of the US money supply. The enforcement of the True Bills doctrine caused runs on banks in 1929.
My mentor at the University Of Chicago Graduate School Of Economics, Milton Friedman, is the most notable and celebrated scholar of the Great Depression. Friedman said that if a policy similar to 1907 had been followed during the banking panic at the end of 1930, perhaps this would have stopped the vicious circle of the forced liquidation of assets at depressed prices. Consequently, the banking panics of 1931, 1932, and 1933 might not have happened, just as suspension of convertibility in 1893 and 1907 had quickly ended the liquidity crises at the time.
Milton Friedman and Anna Schwartz wrote in their 1963 book “A Monetary History of the United States, 1867-1960″, that the Great Depression, in the monetarist view, was caused by the fall of the money supply. Friedman and Schwartz write: “From the cyclical peak in August 1929 to a cyclical trough in March 1933, the stock of money fell by over a third.” The result was what Friedman calls the “Great Contraction” — a period of falling income, prices, and employment caused by the choking effects of a restricted money supply.
Now flash back to our current economic crisis: Washington threw literally trillions of U.S. Dollars at floundering firms, especially targeting bank and investment houses. But the missing link in this process is the distribution of this money, OUR money, into the hands of the people that truly need it: the citizens of the United States. Many Bank profits were up over 130 percent in 2010. Bank lending was up a mere 9 percent. Where did the money go? Many banks and lending institutions are simply sitting on the cash or trying their hands at odd investment schemes [leasing tankers and filling them with oil in the hopes oil will double in price, for example]. And of course, we’re now seeing that even with all the cash they received from Washington, many of the largest banks are still in trouble.
What about some of the other recipients of OUR money? President Obama hailed a great new ‘Green’ initiative at a firm named ‘Solyndra’, and then gave the firm $500 million in cash. Solyndra recently shut its doors. Where’s the cash? Where are the jobs?
In an even stranger twist the Swiss Franc literally erected trade barriers by pegging the Swiss Franc to the Euro at 120. To put all of this in perspective, while the Europeans have been busy writing down their bad debt, we have kept our eyes closed – even though by their actions, the Europeans are ‘front running’ the necessary devaluation of the U.S. debt. They had their bargain basement sale before we did. Add the Swiss Franc pegging and this all smacks of an economic war. But what was Washington’s response? In an even stranger waste of OUR money, the Federal Reserve and the Treasury have agreed to open the United States lending window to the European Union, so they can take OUR cash and bail out the failing banks in the European Union. The day after the announcement of this arrangement, the Swiss bank UBS admitted a ‘rogue’ trader had lost between $2 and $6 Billion U.S. dollars [UBS was already in dire straits, but by pegging to the Euro, the Swiss, now a de facto member of the EC, are now able to prop it up with OUR cash].
What are the effects of all these gimmicks on our economy? We the People need liquidity right here, at the individual level. We need someone like Paul Volcker to stand up and bang on the table and demand banks and other lending institutions to lend AT LEAST a dollar for every dollar they have received and will receive from the Fed and the Treasury. And the same person needs to demand that corporations that have been hording the cash that trickled down to them from these injections of liquidity get back to business right here in the United States. Apple Computer is sitting on over $150 billion dollars in cash. They are creating jobs alright – in China! Caterpillar Tractor is quietly cutting the majority of its U.S. manufacturing jobs [even though they got lots of OUR cash to help them through the tough times] and they are moving them ‘closer to their end users’, meaning China and India. And let’s not forget General Electric and their largest shareholder, Warren Buffet: They just cut a huge deal to not only move the bulk of their manufacturing jobs to China; they are also willingly going to transfer industrial and military knowledge that will rocket China to the cutting edge in the airline industry. The President of GE said the deal was ‘too good to pass up’. I guess OUR cash was too good to pass up, but once they got as much as they could from the U.S. Treasury, they looked for a better offer and took it.
These are ‘pillar’ companies taking advantage of OUR cash. Washington is writing blank checks and then letting these firms walk away. Remember Ross Perot’s famous quote? “Do you hear that giant sucking sound?” Well, this time it’s the rats abandoning the ship for a ‘better deal’. There’s no loyalty here, there’s no patriotism involved. What has this country become?
Is anyone listening in Washington? More important, is anyone thinking coherently in Washington? If not, will you please turn out the lights so we can at least lower our electric bill?
The President is trotting out Warren Buffet again today, trying to sell the idea of higher taxes on the rich. I have no particular axe to grind on this issue because, honestly, the rich don’t pay taxes. But Warren apparently has to appear X amount of times with the President for all of the ‘government assistance’ he got to float his investment portfolio.
But let’s suppose they did. In fact, let’s come down hard on the rich! After all, Warren Buffet’s investments looked pretty good the past few years, since We the People gave him huge stakes in GE and saved several other firms of his. So Warren is now standing next to the President, begging for higher taxes. Let’s play a numbers game: If we confiscated all of the INCOME of the top two percent of the wealthiest Americans, allowing them no tax breaks, it wouldn’t even begin to pay for the President’s new jobs proposal.
People look at Bill Gates and Michael Dell and some of the other top ten or twenty wealthiest Americans and think the answer is to tax them more. But they confuse net worth with net income. And that’s a huge difference. Throw in a competent tax attorney and raising taxes on the rich just changes the choice of investments they make-and that can be a very bad thing!
The bond market here and in Germany tells us what’s likely to happen: More of the same. Problems here in the Heartland and in the Eurozone are going to continue and probably escalate. I know it sounds like a lot of money, but the $300 or $400 billion that would be raised if we took away ALL income from the richest Americans pales compared to the current budget deficit and debt. Smile and wave, boys…