Rhody Trader

I’m looking over the Obama budget stuff that was released in the last hour. Get this. The federal budget deficit projections for the next 6 years are

• 2009 $1.75 trillion
• 2010 $1.17 tln
• 2011 $912 bln
• 2012-2015 each under $600 bln

Add this all up and you get a cummulative budget deficit for the next six years of around $6 trillion. That means $6 trillion in new debt.

Ummmmm….Where’s the fiscal responsibility?

Getting the budget deficit down to $600 bln by 2012 sounds great in a speech - Yeah! We cut the deficit in half! - until you understand what it really means. The stimulus package will have worked it way out of the budget (at least mostly) by 2012, but we”re still going to have a deficit of $600 bln? Where’s all this cost savings Obama’s talking about? If he were really cutting out the fat, I should think he’s be able to get the deficit down further.

The bottom line is that baring a major upturn in the economy to massively improve tax receipts, it looks like Obama is just going to leave the country in much worse debt shape than it already is.

This, by the way, is a big part of why I like the short Treasury trade.

You may have heard that famous Elliot Wave guy Robert Prechter has taken off his short signal and advised folks to cover. If not, give this a read.

I found out today that my mentor – the guy I give a good deal of credit for my early market understanding development – told his readers that it’s time to buy. He’s basing that on “…key supports having been hit on long-term charts of the DJIA, S&P 500, QQQQ and the SOXX.”

He’s generally pretty good at picking the interesting points, so this will be worth watching.

We get Humphrey-Hawkins testimnony today!

Any time the Fed chief goes to Capitol Hill it’s great theater. The questions – and in some cases rants – the Representatives and Senators through at Bernanke are highly entertaining. Well, in some cases you could call it sad since these are the folks making the decisions impacting our lives.

Speaking of our friends in Congress, it’s worth chiming in on the subject of the so-called Trader Tax that has been proposed. I wrote about it myself in the post Trader Tax proposal in Congress. Others have posted their thoughts as well:

Robert Green of Green Trader Tax tackled this issue on his website.

Tim Sykes wrote Why Peter DeFazio’s Plan Stinks.

Brett Steenbarger posted Punishing the Wrong Group.

John Lee’s take is at Seeking Alpha:  Trader Tax:  A Bad Idea.

And Corey at Afraid to Trade authored Trader Tax Bill and Petition.

One of the great blogging resources out there is ProBlogger. I’ve got the blog in my RSS feed reader and almost every day find something of use. Articles they’ve published have given me loads of ideas and tips for improving my own blogging, both here and on my trading education blog.

If you’re blogging, or even thinking about blogging, definitely give ProBlogger a look. And don’t feel like you have to be trying to blog for a living either. There’s plenty of stuff for “amateur” bloggers.

There’s a considerable amount of talk among economists and market participants of late about the inflationary implications of all this stimulus and whatnot that’s being put out there. Some people are looking at the steepening yield curve as evidence that this is being worked into market expectations. The chart below shows how the spread between 2year and 30year Treasury yields has moved over the last 6+ months.

I’ll accept that inflationary pressures are probably a part of the recent upswing in the slope of the yield curve. I think that’s not really the big issue at the moment, though.

Stay with me here.

Inflation is a monetary thing – too much money chasing too few goods. If the argument is that production of goods will decline, and that will lead to inflation, then fine. But I haven’t heard that argument to this point. It’s always the other side – expanding money supply.

But are we going to get massively expanding money supply? You might think yes because of all the federal spending for stimulus and bailouts and such, and because of the massive expansion of the Fed’s balance sheet. Here’s the thing, though. If the Treasury borrows to fund all that spending then that will actually drain all that spending back out of the system. The net effect would be zero. Money supply won’t stay elevated. As for the Fed, most of the lending they are doing is very short-term. They can shrink their balance sheet very, very quickly.

I think the bigger consideration in the rise in longer term Treasury rates is much more to do with the expectation of increase supply.

This, of course, is something I’ve had in mind for quite some time now, as you can see from my Playing for a rise in interest rates post I wrote back in October.

There’s an article on the Time website I found interesting. It’s Is Genius Born or Can it Be Learned. As the title suggests, it talks about the whole nature/nurture debate.

Of course this is also the subject of one of the classic trading movies, Trading Places. In the film the Duke brothers place a wager of whether they could turn a petty street hood into a premier trader and at the same time turn a great trader into a homeless person (basically). Hilarity ensues.

The time article doesn’t really resolve the issue. It just highlights the points of view on things. They run from genius being exclusively genetic to it being learnable and points in between.

I recently became a member of Mensa, which is the organization for folks with an IQ in the top 2%. I’ve known for a while that I’ve got a bit more than average intelligence, but never really got around to finding out how far it went. Since joining Mensa, though, I’ve found myself looking back in life to recall times when others have identified me as being smarter than others. I never really thought much about it along the way, though. It was kind of like the guy who is completely oblivious to the crush a girl has on him while all of his friends see it plain as day.

My own personal view on the nature/nurture thing is that genius probably requires a base intelligence starting point, but also requires stimulation to properly develop. It’s kind of like a premier athlete. They may be able to run fast and jump high, but without specific training and experience they will never become a star.

I’m back in action!

It’s been a while since I posted here. Sorry about that. The complexties of what was going on with my job and other things made it very difficult to dedicate any time to this blog. That’s changing, though.

As of this week I am no longer covering both the stock and forex markets. I’m down to just forex moving ahead. By the looks of things, that’s going to end up allowing me more time for my external ventures, though it’s early days yet. I’m going to be moving in a few weeks, so I won’t be sure of what my full workday looks like until I have the new commute sorted out. Hopefully it will be shorter, but since I haven’t actually decided where I’m moving to yet, I don’t know.

Part of the plan for my new place is to have a proper home office. My current set up is sub-optimal to say the very least. Once I get myself a spot I can actually spend some time working in I’ll be able to be much more productive both where posting to this blog is concerned, and where developing and expanding my trading education efforts are involved.

One of the major upgrades to what I’ll be able to do is to once more comment on the markets. While I was working on the equity product I was under the somewhat oppressive constraints of the SEC Registered Advisor rules. Shifting to forex, though, I’m out from under all that, so I can write to my heart’s content.

Look for the sharing to being shortly. I have a lot of stuff bottled up!