I told you so : SKF halted trading

Previously I said that some kind of options market related accident will occur. ("with so many planes in the air, a collision is inevitable")

SKF was halted on friday because of the new short rules. Finally I figured out a bit more of how the internals work on these gadgets.

http://news.morningstar.com/articlenet/article.aspx?id=253823&pgid=rss

ProShares does not buy or short shares, they trade only in options, forwards and futures. So they need counterparties to these agreements, and those counterparties would almost certainly want to actually short the shares to gain the desired effect so that they can fullfil their end of the contract. So at the moment nobody can do that (especially GS MS MER show are ...whoops... were the primary writers/buyers of these contracts).

This means that when I scalp the frakking QID I am having no actual effect on the marketplace. You know I'm really concerned that my little 100 shares should stand up and say (as in a democracy) "you suck!" and everybody watching their screens would see the cumulative emotional cry of the land and the market will have spoken.

but no, it doesn't work like that. Everything is distributed in time in uneven ways through layers and layers of derivitives. So often times its these layers of obligations that occasionally burp because they have to and then stupid shit happens like buying up the financials as though the nightmare was over.

everybody down

Does anybody think the massive commodities sell off is meaningful ? It seems like the machines that got stuck going up are now driving it down. Are they making money dragging it all down ?

I don't buy the "global slow down" therefore oil follows grains, gold follows oil. I get the feeling "THEY" are trying to kill gold just because it will prop the dollar up, and that's their last hope.

I don't see any basis for the big dollar rally. I wouldn't be surprised if a deal was struck with the Big Holders of US Debt that they would buy dollars (and why wouldn't they want the buck propped ?) in exchange for the US protecting Fannie and Freddie.

Now it isn't for share price that those holders needed to be protected, because the share holders got killed. Its the debt of F & F, right ? That's what the Chinese hold in weight.

None of this is good for nobody.

Market of Noise

The momentum driven hedge funds have turned the market into a huge statistics and probability experiment. 60% + of trading is program driven. Many trades aren't even about the company in question; they are part of pair trades, index and ETF buys and sells. Hedge funds put together correlations expressing their ideas about relationships and this massive complex matrix is let loose on actual companies and investors. There's a lot of noise because many of the trades aren't direct statements of bullishness/bearishness regarding a specific stock, its just reactions to other shit firing off into the data space.

Everybody is feeling like the market has no memory day to day. Logical ideas and carefully considered thoughts about where capital should be moved are no longer rewarded. There is no such thing as a long trade; I don't even swing trade anymore. I sold every mutual fund and I don't like to hold ETFs overnight. I stubbornly hold gold, but the paper value via futures trading has totally abstracted the historical "gold is money" argument. Its a huge crapshoot.

That said I've been doing ok, and that's damn tough.

Well right now everything is going down, so that makes things easy. I scalp, sometimes both sides of the market (that is until I got caught on a QLD downdraft and decided to only scalp the QID dammit). DIG and DUG. I proudly extracted small change from LEH. QQQQ is below July lows today. March lows coming soon ? A bounce ? Seems logical, but logic hasn't been of much use lately.

I watch the components, TRIX, TRIN, VXN, oil, currency. Some day I will code up my ideas into cross market indicators. Or spend it all on a herd of yaks and return to the mountains where I belong.

The nature of holding investments has been steadily changing. Buy and hold is disapearing, we just scalp it as if to say in passing "yes, this guy ! great company !" or "due for a hair cut here" and then we are gone by the end of the session. We aren't going to get in a relationship. OK, that's a small segment of the capital. Retail investors (mom and pop) should leave already.

Maybe the next age of finance will be like cloud computing: money is allocated to investment vehicles and it swarms around in the most evolved and logical fashion. Humanity acheives an unsurpassed efficiency of application of capital.

Or more likely, the greedy are going to keep trying to suck the alpha out of the whole planet. Then they will leverage it further and suck the alpha out of the future (erm... aka debt) and then maybe progress to sucking the alpha out of yet to be discovered worlds and universes.

The age of human traders will soon draw to a close. It will only be algorithms. Now I would like to see algorithms with more meaninful inputs than momentum. It seems like once something starts to move it keeps going with a lot of force ("hey Long Oil Short Financials isn't working ! reverse hard !!!!").

I look at Oil and Gold and Solars going back up. Forget logic, the holdings and programs and churnings of hedge funds are more significant. We might as well direct all of our financial analysis to what THEY hold and when THEY are going to have to liquidate or reverse.

Did the PPT start the dollar rally ? Yes, and they pushed at exactly the right moment.

America turns on a dime

Don't forget that America is a dynamic country that turns on a dime. It likes trends, and as they always say: America loves a comeback. While we all know there is more downside coming (after this little [how little ? most important question] rally), it is slowly sinking in that perhaps the world won't end.

I foresee the coming of a very enthusiastic alternative energy bubble ... erm I mean trend.

TRAVERSE CITY, Mich (Reuters) - Chrysler LLC on Wednesday outlined plans to launch a new car-based SUV modeled after the Jeep Cherokee, as other major automakers took the spotlight at an industry conference to pitch their own hurried responses to the surging demand for more fuel-efficient cars.

http://www.reuters.com/article/businessNews/idUSN1331201920080813

Which reminds me, Americans are cowards who will only do what the market says it wants. If the customer wants fat stinky cars, then we got 'em priced to move until the oil is gone.

The United States now leads the world in the amount of electricity it generates from wind energy, according to the American Wind Energy Association (AWEA). The trade group's second-quarter market report, released on August 5, finds that the wind industry installed a total of 1,194 megawatts (MW) in the second quarter, bringing the total installed U.S. wind capacity to 19,549 MW.

http://media-newswire.com/release_1070628.html

Yeah, but you can't fuck with the Dutch for style.










and I'm still shorting the shit out of the US every single day until the finance industry is bled dry (and into the hole) and we stick all of that capital into new energy. then and only then may you resume shopping.

and don't think that we don't know that the dollar will resume down (maybe later) and oil and commodities will resume back up.

again I will say : the best thing about the short term exuberant top in oil (part of its bull run) is that it woke everybody up to the need to invest in alternatives now.

Solar will probably resume very shortly. In the last "oh we don't have to worry about oil" pullback Solar has been hated and I've been elsewhere. An industry like solar needs many phases of boom and bust in order to shake out the weak companies and to keep the brutal analysis trained on them to see who will become MAJOR producers.

MOO ! GROWL ! MOO ! GROWL !

What a hilarious week in the market. We have some determined cows out there. Nobody can tell which way its going to run. This sideways movement : bear trap or is it going to get some traction ? The dollar is the same thing : rally to uh... 1.50 ? before we resume ?

Seems to me its not ready for a real run up (before the inevitable fall back). But I remain hedged both ways. In fact I've been fairly well by simply collecting moves in either direction. Eventually (like right now?) I'm going to get caught holding something the wrong way.

In scalping you learn certain movements. Quivering, lurching up and then selling off hard. Some call them head fakes, and if the market is controllable (small float, big money) then it could be a real head fake by a real person. People love to personify the market or say that smart money will do this or that. And they will, but its also true that its a lot of guys staring at computer screens desperately trying to figure out which way it will go.

There is an attitude now that we should just get the selling over with sharp and quick. OK, are we done now ?

The US appears very rich what with all the developments and shopping centers and displays of corporate wealth . Now we have to imagine/realize that a large amount of that HAS to go under and physically disappear before the accounts are balanced. Cause its borrowed and fictitious. And that will take much longer than 2008. Bennigans/Steak-and-Ale just went down. The look of the country will change by the time its over.

Its a game of musical chairs. The smartest players will still have chairs when the music finally stops, but we go through these rounds. The realization is spreading that there are less chairs than was assumed.

Traders don't mind this. People and banks holding significant amounts of worthless paper would like another round to maybe shift some of this into somebody else's pocket.

Look at the market after 2001. What is now started cannot possibly be less than 4 years. Look at the sideways 70s. That's the optimistic turnout.

what happens when the shorts really getting going ...

For once I'm going to agree with The Cramer on this one. What exactly is going to happen when more and more of middle class America all start piling into short funds ? (oh right, by then we will have sold off enough for a good rally) Its creating a nasty environment, although the current market does need to be sold down (still). There's a lot of fictitious wealth in there. I'm just trading, making money up and down during the day, so no, "I don't care" or to be more accurate I'm disconnected from the underlying businesses that I'm several layers of abstraction away from.

I think the shorts are now heavily favored because they can instill fear and panic that the longs don't have the ability to do. They can destroy businesses -- the ultimate goal -- and the longs can't. I don't like that, I don't like it because the great history of the stock market shows that it works better if we regulate the shorts, to make it so they can't overwhelm the longs. The creation of wealth, not the destruction of wealth, is what the market is supposed to be about, it is why it is worth participating in at all, otherwise the mattress or bonds -- only good for the most solvent of operations -- make more sense.

http://www.thestreet.com/s/cramer-shorts-are-not-and-should-not-be-equal

But the Uptick rule is irrelevant in this day and age. A short ETF, in its internal implementation, can simply be programmed to sell harder on the first uptick. (I really wish I knew exactly how these things execute their buys/sells of the underlying)

And how exactly is the entire or frightened America going to sell dollars for GLD ? Many of these new fangled ETFs are constructed with derivatives and futures strategies. What happens if the derivatives market undergoes a major collapse due to parties not being able to pay ? With this many robot driven planes in the sky, eventually something is going to collide, no ?

High Oil Price a very good thing for earth

The good thing about high oil prices is that its spurring attention towards peak oil and alternative energies right now.

I also think its inflated and pushed and now maybe even peaked. I don't have the guts to short it right now. (any trader that thinks that's guts is just stupid. and people that stupid deserve to lose. I'm not that stupid.)

The talk in Mom and Pop-ville is that those damned oil speculators have caused the price to go so high and now The Damned Congress is going to do something about it. But the speculators didn't do it, they were just along for the ride. Its Big Oil itself that did it.

And as I said, its not a bad thing. Its made people think and it may get the US to reduce consumption. And it will probably come back down, maybe to the 90s (but what do I know).