Rhody Trader

Definitely a winter wonderland effect going on out there today – or at least it will be once the snow stops falling. It’s a wet, heavy snow that sticks to everything, so we’ll end up with everything covered in the stuff. Very pretty. And of course the snow is very sound dampening, so everything is kind of hushed. One of my favorite views is looking into downtown Boston when I leave work on a night like tonight is likely to be.

Of course getting to and from the office – or at least to/from the subway stop – can kill the enjoyment of it all.

On Monday I saw a release saying the Dartmouth volleyball coach was leaving after something like 17 years. I coached in the Ivy League, and have been feeling the urge to go back into coaching again after my now 4 year hiatus, so something like that gets me thinking “Should I put in for the job?”

The answer is “No”, of course, even though I certainly could do the job and always loved the Ivy League competition. For any number of reasons I’m in no position to do something like that right now. Even if I were, would I want to coach in Hanover, NH? That’s kind of isolated, and as much as I might like a snowscape from time to time, I’m not so sure I want to head further north than I’m already at.

After a very lengthy delay, I’m back to posting here once more. I’d drifted away for a while, then had a major issue upgrading WordPress. Next thing you know more than a year’s gone by!

Obviously, I was able to get the WordPress issue sorted out. I’m not entirely sure how, mind you. It works. I’m going to leave it at that for now.

So with that, be on the look out for some fresh updates outlining my thoughts on the markets, economics, politics, and whatever else I’ve got going through my mind. Trading education stuff won’t be found here, but just about anything else is fair game. Also, I like to use this blog to test out new functionality for use in other places, so sometimes you’ll see a bit of that too.

Last night I watched a movie titled Believe In Me. It’s something along the lines of Hoosiers in terms of basketball coach comes to a new midwestern town (Oklahoma in 1964 in this case), takes over a struggling program, and leads it to great heights. In this case, though, the coach is expecting to be coaching boys, but much to his chagrin ends up with girls. It’s a real-life story of a legendary coach who clearly figured out how to make the gender transition.

I’ll admit, I’m a sucker for these coaching movies. Can’t help it. I was a coach. Moreover, specific to this case, I coached girls and women primarily (volleyball, not basketball). Any guy who has ever coached girls will tell you how different it is from coaching boys. It’s a real challenge to make the adjustment. You have to handle individual players differently, and the team as a whole differently. You have to learn how to be tough on them, which goes against much of what is ingrained in us growing up. If you can do it, though, it’s incredibly rewarding.

Anyway, the movie is fantastic. Highly recommended.

Back in August I wrote about how the Commitment of Traders figures suggested that the uptrend probably wasn’t over yet on the basis of the fact that the notorious incorrect small speculators were short. Believe it or not, those Small Specs are even more bearishly biased now than they were 2+ months ago. Check it out.

You can see from the graph how the level of net shorts (Longs – Shorts) is at a low level it has touched a few times the last six months or so. What”s even more interesting to my mind is the 35% bullish (see the highlighted area in the table) indicating that 65% of the positions are short. That’s a big negative bias.

This sort of positioning suggests we may yet see higher highs in stocks.

Vincent Fernando at The Business Insider did a post comparing the current economic situation to that of the early 1980s. The upshot of the post is that when one looks at inflation, unemployment, and interest rates as they are now and as they were then things don’t look quite so bad right now.

Actually, from my perspective things now remind me more of the early 90s. That was the time of the RTC after all those thrifts were shut down across the country. In Rhode Island the governor shut down all the credit unions on New Years day 1990, which really did a number on the state economy for a couple of years. I was only a kid in the early 1980s, but I do remember it wasn’t a great time. The cities were in rough shape. I think anyone who was in NYC at the time would agree.

Seperate, former colleague Jamie Coleman at ForexLive posted  a fun look at the yen situation. The Japanese have always stood ready and willing to intervene in the currency markets, either directly or verbally. That, at times, creates some very interesting press and market action – as it did last night.

For a while during the height of the risk aversion action EUR/JPY and the stock market were very closely linked. This was reflective of the carry trade and how investors had a hair trigger getting out of it when they became worried. That relationship has been fairly choppy of late, however, as Zero Hedge observed today.

Here’s a chart of the 1mo rolling correlation between EUR/JPY and the S&P 500. Notice how at several points in the last year it’s been well short of strongly positive and has even gone well negative.

Last week it was reported that Dan Brown’s latest novel, Lost Symbol, had sold more than 1 million copies in its first day. Of course that will have included pre-order sales. CNBC just reported that in the first week the book sold a record 2 million copies. I am not included in that group myself. I’ve read both of Brown’s prior two books. Not sure yet whether I’ll read this one as well. I’m generally not the sort who feels the need to go out and get hold of a copy right away and Brown didn’t blow me away with the other novels in any case – not that they were bad, mind you.

But that’s beside the point. Let me just say that my eyes lit up at the number since I’m developing my own novel. It’s one which will share a genre and some other broad elements with Brown’s work, which means it will likely appeal to a similar market – a big one from the looks of it.

I just had a call from a woman at SFO Magazine asking if I’d be willing to be interviewed for a story on part-time trading, specifically trading for those who already have full-time jobs. I agreed. We’re going to chat tomorrow afternoon. I’m don’t know at this point when the article would go to print.

It’s interesting to be asked for an interview like this. I’m not talking about part-time trading. Personally, I’ve always considered myself a part-time trader. Yes, I work in the markets as a professional market analyst, but that’s not trading. In fact, most days I have to make a point of remembering to open my trading platform if I think I might do a trade. Besides, I’ve long found that my somewhat longer-term positions have been the most productive for me.

No, the thing I find interesting is how I’ve been asked for and interview rather than maybe asked to write an article on the subject. I’ve published three articles in SFO – Trading Coaches Needed!, Juggling Too Much? Trend Trading Simplifies Analysis, and What’s the Bandwidth?. Granted, it’s been a while since I wrote anything for magazine publication. Maybe this is their way of trying to draw me back in.

By the way, SFO published a review of The Essentials of Trading when it first came out.

There’s been talk in the markets about the increasing use of the dollar in carry trade strategies (even the pound is being thrown into that discussion as well). It’s interesting that we’re not just talking about banks and money managers and that sort involved here. Germany and Austria have taken advantage of the lower US rates by issuing dollar-denominated debt. As this Bloomberg article indicates, the swap rates are such that issuing in dollars is about 25bps cheaper than doing so in euros.

If you’re wondering what the big carry trade is right now, look no further than AUD/USD.

Here’s something to ponder. Back in 2007 when all of this global economic mess started unfolding 10 yr Treasury yields peaked in June. Stocks did not peak until October. Yields put in an initial bottom in January 2008, while stocks made their first minor low in March 2008. The major low in yields was reached in December 2008, while stocks hit their low in March of this year. That’s a pretty good case for stocks lagging bonds by a 2-4 months.

Now, bond yields made their most recent peak in June (again). Could we be in for another stock peak this month or next? If bonds don’t make a quick u-turn there’s going to be a strong case for it.