Pseudo-cation

Something happens when you move out. And marry. And have kids. Your parents and other members of your immediate (nevermind extended and the further outliers with whom you’ve an acquaintance by some nominal genetic coincidence) family become other. Their habits are not yours. Their preferences in food, music, film, topics and manner of conversation (or conversation inhibitors, e.g. television), how (whether?) the bathroom is maintained are not yours. At least, not any longer.

No longer living together naturally gives rise to a divergence in taste. But when did that divergence become a yawning chasm? For example: why the hell does my father only eat nacho cheese Doritos, Little Debbie Nutty Bars and the occasional turkey sandwich? Ever! And when did he begin to taciturnly acquiesce to every suggestion of his wife (stepmother, with whom we get along great) when she mentions she wants to visit yet another damn antique/craft mall that’s miles and miles away rather than go backpacking in the mountains, or even just a day hike? There’s an inverse correlation between the amount of hiking/camping gear accumulated and its use, apparently. And when did he become so sensitive about having his own bathroom when he stays somewhere away from his house? Last I checked, there’s aren’t any serious issues there. Wait, wait: I’ve never checked! But according to the stepmom, he’s good in those departments (glad I didn’t stumble into some kind of “oh, he had that bit of prostate cancer back last year. Doctor’s say he’s gonna be okay, though. We were gonna tell you, but we were so busy and you know how things are”, blah buh dee blah….). Then again, he’s only 57. Which begs the question of why we can’t discuss anything but the Amero (and it’s assocation with institution of a new world order) and that the next time we’re together he’s willing to pay the extra couple hundred a night for his own chalet with his own bathroom if that means he’ll have his own bathroom, as if he were some long-in-the-tooth rambling yammerer that’s out of his gourd. Bah!

Of course I love my parents and siblings; but spending a few days together always reinforces how different we can and have become. And why we’ve instituted a de facto 3-night time limit, which is really, really pushing the envelope. Regrettably, I’m glad to be home.

And Now, a Word from Timmy Geithner

“It’s going to be a while before we’re confident we’re going to have a strong, sustainable recovery in place,” U.S. Treasury Secretary Timothy Geithner said, according to a transcript of an interview with “CNN’s Fareed Zakaria GPS” show.

I’m sure it was a syntactical goof on Timmy’s part, but let’s break it down anyway, because these banker types aren’t usually slippery with their diction by happenstance.

“It going to be awhile” – unquantifiable, but not “a little while”.

Once “a while” passes, however, we’ll then be “confident” that “we’re going to have” – this present progressive + infinitive effectively states “we’ll be confident that we will have”.

What? “A strong, sustainable recovery in place”.

So, not only is it going to be awhile, but that thing that won’t happen for awhile is the point at which there’s reasonable assurance that sometime further in the future there will be a strong, sustainable recovery in place.

In other words, in the future of the future, we’ll be quite confident (though never certain until it’s all come about) something good is really happening.

Thanks for that mustard seed of hope, Timmy.

Unknown Returns

Rather than reciting the litany of reasons I’ve been MIA the past couple of months, I’ll simply note that the usual responsibilities of work, marriage, children, good weather and the more casual alternative to blogging that is Twitter all converged in late March to push me out of the blogging game for a spell.

That’s all true; but something else happened too. I owned up to the realization that most of the third-party analysis and forecasting I read (on the primary instrument I trade, anyway, which is the forex) clouds my own vision of the market, regardless of the value I attribute to that particular analyst’s POV.

Usually the obscurantist effect is detrimental to performance, so I decided to run my own experiment, scaling back my intake of what I’ll call “secondary source” material and commentary, opting instead to trade with minimal outside noise. FOMC announcements, economic releases, CB statements etc. and other raw fundamental input are on the other hand “primary” sources that I continue to monitor.

So the experiment was about reducing external suggestion, interpretation, turning the tap off on all the subjective dross that streams in from blogs, forums, emails, portals. In other words, clearing my head. That said, I haven’t applied – relegating their content to the “dross” bin – this to everyone (TLT, B2E, Jules and others come to mind as exceptions), but part of scaling back has been staying quiet.

And I’ve been trading during the silence: not without the challenges inherent to this market and those inherent to myself, but the first half of the year finished very well and I’ve covered significant ground toward attaining my annual goal (more on that in a later post).

I’ll stop there, before this becomes tragicomical and starts to sound like a trader vision quest.

Good to be back, and I look forward to catching up with each of you.

Retail Traders = Nefarious I-Bankers

At least, according to the tortured and dangerously ill-informed calculus of Rep. Peter DeFazio (D-Ore.)  As I mentioned a few weeks ago Defazio reintroduced a bill under H.R. 1068 on 02/13/2009 proposing a 0.25% “financial-transaction tax” that had fallen off the table when the previous Congressional session closed. In that post, I enjoined any U.S.-based trader (this may also extend to international traders that traffic in products or asset classes traded on U.S. exchanges) to write to their Congressmen/women to make their opposition known.

If you haven’t read the bill out of indifference or preoccupation and the above description is applicable to you (U.S.-based, or trade U.S.-originated instruments), think twice. You can find the bill here, a method for easily sending word to your Congressional representatives here, and important supplemental information blogged by Robert Green here.

As one of my favorite fellow bloggers TLT might note, I’ve done a pitiful job presenting both sides of the argument to this point; and that does the side I am a proponent of a disservice. Thankfully (this way I can salvage some intellectual integrity), Rep. DeFazio made a short circuit of the financial news channels last week, providing us with a concise formulation of the side he is championing:

Defazio on Fox Business

and

DeFazio on CNBC

Where does one even begin to begin? Anyone who trades multiple times a day is “churning”. Daytraders serve no economic function and add no economic value. Daytraders (or anyone trading on margin, apparently) are inherently gamblers. A comparable tax passed during the Great Depression didn’t impede the gains of the DJIA from 1932-1966 from 41 to 1000, therefore a comparable tax will not impede recovery now. China may ask for a refund. The number of people who trade at least once a day do not number in the millions. There is no sub-set of retail traders who aren’t destructive gamblers (because if there were, the argument would be blown to hell). This is an effective way to target Wall Street for recovery of TARP losses, lightening the already crushing load of the average American taxpayer. And on, and on: snarky replies, shoddy premises, frustratingly and staggeringly ill-informed.

There’s just too much to unpack and too many implications to state. A couple of things that do immediately jump out, though:

First, DeFazio is completely oblivious to the democratization of trading that has evolved since the last days of the Hoover administration. 80-year old quotes from a by-gone era do not carry compelling weight or serve as iron-clad justification for your bill just because they refer to a similar tax imposed in “bad” market conditions. Get a clue: the market has not stood still since your grandpa’s day.

Take this thing called “electronic trading”, for example, and the discount brokerage industry’s highly competitive commission structure. The number of retail participants has exploded in the past 10-15 years alone. Back then, the “little guys” were Jesse Livermore-types, hanging out in bucket shops. Today, everybody from that guy delivering cases of beer to your corner convenient store to your assisted living facility-bound great-aunt trade stocks, daily. The demographic has changed entirely, and so this bill’s impact will reach far beyond the nameless mass of “churning” denizens who sit around in front of their monitor banks at home in the den in their underwear all day, along with those slimy CDS/SIV/MBS-creating hyper-leveraging I-bankers…oh, and the short sellers, too. They’re all the same, a troika of financial terrorists; and now they’ll pay with a draconian tax. As DeFazio more-or-less puts it, to hell with that miniscule contingent of “daytraders” who may get snuffed out.

And how about mutual funds, since the holders of MF shares are who you’re truly worried about? Do you think fund managers do not trade large blocks of stock daily? Think the fund is simply going to eat the obscene expense this tax would generate? Not at all: maybe we’ll see the reintroduction of loads by all those families that got rid of them in the last 5-10 years, or a 5 or 10-fold increase in expense ratios. Or you could legislate a cap on those, too, to keep those greedy fund managers at bay – that wouldn’t be very obtrusive. Wolves at the door, everywhere!

Second: buy-and-hold investors good; traders bad. B&H contributes economic value because these are people who take stake in the ownership of a company, thereby helping that company raise funds to grow, compete, develop products and services, etc. Traders “churn” (DeFazio is evidently unaware of what the SEC definition of “churning” is); they gamble and as a class have now victimized countless homeowners and unemployed individuals. In other words: investing as DeFazio defines it is a civically responsible and thus meritorious practice, while trading is just the opposite, and – if we’re truly honest – a worthless, almost reprehensible act for which he shows pure disdain that ought to be taxed into oblivion because – let’s face it – it’s the damned traders (none of whom do their thing on “Main Street”, as we know) who are responsible for the mess that necessitated TARP in the first place.

I feel like DeFazio is leveling a moral judgement in there, somewhere; but it may just be me. Maybe we’ll all wear a scarlet “T”? And why not throw in some accusations of “financial witchcraft” to go along?

The Ayn Rand Bandwagon

In the habits of fragmentary treatment and erratic frequency characteristic of this blog – especially when I find myself here on Saturdays – we continue the analysis of whatever vaguely market-related subject happens to capture my attention within an indeterminate period previous to writing. This time, it’s Ayn Rand.

I alluded to Ein some weeks back as the posthumous perpetrator of a petty mindcrime against a former acquaintance of mine. Still an acolyte, Rand simply convinced him to light candles in front of his own mirror rather than the Pieta.

Those memories were evoked by a randomized turn-of-the-dial listen to conservative talk radio host Glenn Beck during the morning commute: what I heard was veneration of Rand, Atlas Shrugged and WSJ Op-Ed writer Steve Moore for his 01/09/2009 piece “‘Atlas Shrugged’: From Fact to Fiction in 52 Years”.    That column’s abject paucity of trenchant analysis, highly selective treatment of AS and Randian heroine worship were simply terrible.  Beck’s total lack of cognizance that the object of his adulation uniformly averred ethical premises – as sine qua non for the success of capitalism - I’m certain he’d find repugnant was embarrassing; but brought to my attention a fomenting undercurrent I’ve noticed among pundits on the Right and marginalized self-styled philosophers and…traders: that Ayn Rand was magnificently prescient, a grand prophetess and first-rate philosopher who had all the answers half a century ago. 

Goddess Ayn, Progenitress of the Objectivist Faith

I am not an irrational Rand-hater; I know better: nothing would be easier for an Objectivist interlocutor to belittle and neutralize in their customarily supercilious manner.  And yes: Rand’s critique of statism carries important observations.  She was intellectually formidable and a talented writer (though agonizingly loquacious and not gifted) and a fair philosopher in some regards.  

But in other areas (for her, those areas that mattered most), I think she fared quite poorly: epistemologically (UGH!), ethically (GASP!), logically (BLEH!), even (a)theologically (SHRIEK!).  I’ll not go into it, unless someone prefers that I did; but I hesitate to here, because I don’t invite nor do I accept invitations to engage in what amounts to the interminable pissing contests so typical of philosophical pedants on the Internet. 

Perhaps traders don’t care about all of that: they’re simply content to appropriate from and make lists of Rand’s pithy little truisms a la Nietzsche’s Beyond Good and Evil in support of their chosen profession.  As a recent, high-profile example, take Santelli’s “At the end of the day, I’m an Ayn Rand-er” comment during his one of his recent rants.  Really, Rick?  Just what are you actually talking about?  

Maybe intellectually irresponsible, but good because while I’m not out to alienate or anger anyone reading (mostly traders), I’m also going a bit out of my way to convey that as a formerly intensive student of the above philosophical sub-disciplines, I find most of the content of Rand’s oeuvre to be atrocious, and the quasi-apotheosis to which she has been subjected by her superficial admirers and obsessive Objectivist lackeys to be loathsome.  If you’re a big fan of Rand’s “novels” and non-fiction works, think of yourself as adherent of Objectivism, think Leonard Peikoff (or David Kelley, for that matter) are nigh-unto-infallible, believe implicit subscription to Rand’s ideas would revivify our politico-economic system, or are any other variant on the hopeless-sophist-Rand-devotee archetype, “obsessive Objectivist lackey” probably means you.

This all means that as of this moment I’m inaugurating a 30 minute cessation of the Eulogy to lament the decline of the market, which has brought about government intervention (about which I’m ambivalent) and the secondary effect of a resurgence in the popularity of Rand’s work.  Foreclosures, layoffs, and now, perhaps worst of all: increased sales of The Fountainhead by those who will never read it, or who will read it cover-to-cover and then cradle it in their arms as they sleep at night.  I guess we can blame all this on Obama, too.  

Now that I’ve gotten that off my chest, I’ll go back to enjoying a beautiful afternoon.

Lament over.

Chicago Tea Party!

I heard snippets of Rick Santelli’s…ecstatic utterances from yesterday last night on the way home from the office but didn’t catch up on the bruhaha until today.

I don’t watch CNBC (I don’t even subscribe to cable) but occasionally find a clip entertaining. I agree with Santelli in principle (assuming there’s a principle somewhere beneath Santelli’s rhetoric), even while I find his manner of speech is delightfully absurd. Kudlow, somehow, comes off as more of a buffoon, though. Mercifully – though satire is my favorite type of humor, so maybe I am missing out on something truly wonderful – I’m unfamiliar with the rest of the pundits and empty skirts on the channel.

One fascinating aspect of all this is the galvanization of the Right – Santelli’s rant tapped the disenchanted conservative zeitgeist with startling effectiveness, doing something off the cuff and with relatively no expense that McCain/Palin weren’t capable of during back in the Fall. Take this for example. Of course, they didn’t have a tanking stock market on a Democratic president’s watch or quite so many trillions of dollars of debt to rally around. Whether this will truly mobilize anyone and to what effect remains to be seen – but I’m highly doubtful.

The Late Winter Blog Moratorium

Is over. A looming tax season and the ongoing (equity) market turmoil have meant long days (psychologically, if not by the clock at times) and consequently some market-related blogging languor. Happens occasionally, looking back. The market evinces patterns; and so do I. Expect another mysterious disappearance around June, then. Or so. Put it in your iPhone. The reasons I’ve had for letting blogging (and anything else involving a computer that hasn’t been absolutely necessary) slip to the wayside aren’t going anywhere: so I’ll adapt, instead.

Trading is going relatively well these few weeks. The equity curve in my primary account has leveled off of the geometric-looking rise enjoyed in January with the choppiness characteristic of the past few weeks. Maybe the drudgery of muddling through the trackless waste of a range-bound market (I don’t trade off channel tops and bottoms intraday) has contributed to the malaise?

Whatever the case, the rambling morass that was these 2.5 weeks in February has been very beneficial. Massive trending movements are outstanding for the bottom line, but have an enervative and dulling effect on one’s trading abilities (well, for me anyway). Analytical acuity and the disciplinary rigor intrinsic to consistently successful trading can become lax. Even the wherewithal (which seems basic, but perhaps not) necessary to stay out of the market because getting in would mean getting hacked to pieces on whipsaw after whipsaw can be lacking.

No big blowouts on my part; as I said, though the EQ has moderated from January’s rate, the year continues to go very well thankfully. But as a breakout/momentum/trend-following trader, a ranging market reawakens the vigilance and brings back the leanness markets with a clear directional bias can lull one out of.

Stream-Of-Consciousness Saturday

So this is what Saturday night has come to with two young children just fallen asleep: slack-jawed, bleary-eyed with that just-plowed-over-by-an-oblivious-bohemian-driven-VW bus look, spacily following words as they line up in file across an excessively bright laptop screen, wondering how one who is relatively youthful, fit and healthy ends up almost trembling from exhaustion at 8:45 p.m.

 The answer: I’m an anguished white man harboring an ineffable, unquenchable anger, brought to the edge of a latent sea of rage brimming within me for hopelessly elusive reasons.  I’ve been figuratively emasculated by the contemporary urban-American mores of maintaining a well-coifed, dry-cleaned corporate appearance, delivering boisterous, cheesy and hopelessly sycophantic laughter at just the right moments in whatever social context appropriate, showing token concern out of interpersonal expediency but possessing a conscience mostly unflappable and impassive to all matters that do not affect me, and a dozen other reasons.  I’m sawn-off, sterile, part of the cultural castrati caste.  None of this is true.  For me.  

 As an undergrad I met a business major/philosophy major who shaved his head because of early-onset male-pattern baldness.  He was a lapsed Roman Catholic acolyte-type gone the way of John Galt because it was the brave, intellectually responsible and conscience-salving thing to do.  Did he ever love Ayn Rand and find sadistic gratification in arguing vociferously for his implicitly-held Objectivist positions.  He never did learn when to use the spelling “principle” v. “principal”.  The simple satire there mollified an otherwise annoying egotism.  Ironically, his behavior mirrored Lenin in the days between 1905 and the February Revolution, squawking about like a spoiled and coddled child full of ill-founded self-confidence in his words and ideas because his opinions were suffered in silence by his obsequious parents; and like any good member of the future Soviet politburo the baldheaded business major was willing to sacrifice friendship for obsessive adherence to an ideal.  Still an altar boy,  now before a different god doing what seemed fitting to be a righteous man.  How many psychological accoutrements that amount to only so much crap pile on top of a child’s unadorned mind with crushing weight.

I began to study Ayn Rand and Objectivist Philosophy.  This was instrumental in becoming a trader, paragon of the capitalist ideal.  I create no good or service; but I do create capital through ingenuity and strength of will.  This is not true.  I think Ayn Rand was a fanatical reactionary who created as much ideological tripe as those she wrote so passionately against.  Atlas Shrugged is among the most overrated novels talked about today.  I will buy a guinea pig any time this book is given to me as a gift so that a small mammal can soil the pages I’ve ripped out of it for cage lining.  This is true, but only if I’m given the book and end up in a petty, biblio-vindictive mood.  

And now my wife is out of the shower.  Game over.

El Toreador Delivers the Coup de Grace

Ernest Hemingway, F. Scott Fitzgerald and James Joyce (if you’d count him; maybe not) are my favorite writers among Une Generation Perdue, perhaps in that order. In his 1926 debut novel The Sun Also Rises, Hemingway vividly depicted the Running of the Bulls and now-famous bullfights at Pamplona. The matador, in the moment he delivers the coup de grace is El Toreador: the Bull Killer.

El Toreador

The terse yet elegant prose spun around thinly veiled semi-autobiographical narrative so distinctive of Hemingway is first shown forth here in full flower; this is fascinating writing that forswears elaborate filigree to lend all attention to the aesthetic kernel of the subject; and with the resulting acclaim for the book came significant notoriety for Spanish bullfighting.

Beginning with the current bear market, the swift and merciless dismantling of so many years of outsized bull market wealth creation has evoked the metaphor and myth of El Toreador as the invisible hand and looming specter draping his cape like a black pall over world markets, slaying the bull, administering the destruction.  It’s fitting that an almost methodical systemic breakdown like this seems to imply a cleverly insidious agent capable of unbottling economic famine.

Children have fear of the dark and what might creep from the closet as they lay awake in the night; modern paranoia induced by a culture of voyeurism, surveillance and random acts of violence make drivers and pedestrians suspicious of any going their way; willful ignorance, indifference and inertia contribute heavily to obesity, divorce, bankruptcy, poverty, pestilence and war. Our recession (globalism means we’re all in this together) is the progeny of countless culpable parties, policies and policy changes.

But, in just about every case (Bernie Madoff and those that slither along the ground with him aside) the malicious other isn’t out there lying in wait or targeting our tranquility; the bogey man is us. The myth is that it’s not and that individuals do not possess the terrible power and terrible responsibility that institutions and policies apparently do. As surely as panic-stricken sellers – fund managers, floor traders, housewives – are complicit in the great exercise of power that is driving equities down (a rational response if a stock is an instrument measuring value through forward-looking speculation), those same sellers have a collective responsibility (not because they sell, but because they are capable of the choice to sell) for what has happened: our bloated elected officials, our absurd mortgages, our varied stories of financial malfeasance, our acquiescence to corporate avarice, our at times selfish concern that gazes with indifference on the plight of others.  And then: there’s the responsibility – more to the point – for what happens from here.

I’m eulogizing again what has put so many through hardship and in some cases destroyed lives because of the galvanizing and renewing effect it can exact from people, companies and politicians who have for too long gorged themselves on the fat of the land, abdicating integrity, responsibility, industry and creativity for corruption, leisure, corpulence and bromides. In short, when things are bad enough (and usually it’s only then; otherwise I wouldn’t welcome the dismemberment of our economic strength), people act and they act in the interest of survival.

I’m not advocating for nor do I subscribe to Social Darwinism, and I’m not talking survival “red in tooth and claw”.  Society will wander off slouching into dystopia before it allows itself to become so abased that there is a reversion to nomadic hunter-gatherers and primitive feudalistic city-states.  That is my hope, at any rate.  

On the other hand, I am short the market and the economy out of a sense of moral and pragmatic necessity because creative destruction can bring about return to a unified vision of the democratic ideal.  This isn’t the only way that works, and certainly isn’t the best way, but is often the way chosen by fumbling, hubristic peoples too inebriated with the spirits of their own folly to notice the turn-offs and warning signs posted as they run out of track.  

Getting back on track means public servants who act without bureaucratic hindrance for the upbuilding of their community, whatever that means for them in terms of composition or scale.  Hopefully it means something local, immediate and unmediated by hundreds of miles, reams of red tape and tedious formalism.  And for the rest of us, the political demos and humans eikou tou theou, a return of basic virtue to our way of life: humility before others, fairness, integrity and honor. El Toreador will concede the field once we truly rise up in civic responsibility to action, with indignance toward injustice and with compassion toward one another to a mend a system that isn’t broken; just encumbered with so much lipidinous BS.

To this I’ll add an addendum: a couple recent posts from TLT (here and here) along the same general lines that are well worth reading.

And now time for a marginally related music reference. A song about the “pure magic matador”: Salvador Sanchez (who was, incidentally, a boxer) by Sun Kil Moon from Ghosts of the Great Highway.

The Worst Is Yet to Come

Idly musing in disgust, resignation, with a vague sour feeling in my stomach and a puckery taste in my mouth after reading some article this morning, I realized I’ve been almost wholly bearish for just about two years now. At some point, rather than wringing sweaty (figuratively: my hands don’t sweat) hands, donning preemptive sackcloth and ashes and bemoaning collapse I decided to (passively) embrace the destructive process.

In concrete terms, that has meant some dabbling in 2x-inverse ETFs (calling a technical breakout on QID from 42 was a highlight there), shifting my qualified plan holdings primarily to bond funds awhile back (don’t worry: I’ll reallocate when appropriate), and especially getting on-board with the malaise that began afflicting most base currencies versus the Yen, especially GBP. Study dedicated to becoming more adept at intermarket analysis has been very helpful in this environment.

That has all worked swimmingly, I’m happy to say, even if I haven’t (predictably) had anything approaching a flawless record; but with the Dow again at 8200, discounts everywhere present in equities (so the majority perception goes, anyway) and the pairs I typically trade along with others ranging or no longer dropping precipitately, it’s time to shake off the daze of hibernation (think Return of the Jedi with Han Solo in Jabba the Hutt’s palace after Leia frees him from the carbonite, just before Jabba bellows that well-metered laugh and that little gremlin lackey of his begins shrieking with laughter), if only to reassess and then drift back to sleep for the next leg of the downturn.

Is the worst yet to come? That seems possible; but if so I doubt it will be driven primarily by a cease-up in credit as we saw this past October/November. Instead we have this agglomeration of unemployment, diminishing residental and commercial real estate markets, a protracted decline in consumer spending/credit, slump in corporate earnings, the heightening potential China et al. abandoning their bid on US treasuries, contracting GDP and the specter of realized hyperinflationary pressures. Further disruption of credit markets is undoubtedly a ancillary function of this perfect storm. Admittedly, I’m generalizing and painting a bleak picture with broad, non-descript strokes; but there it is.

“Eulogizing the financial apocalypse” (a melodramatic phrase if ever there was one) is not about a celebration of the profits that can be reaped by shorting currency pairs or exploiting newer fund products to bet on continued pessimism. It’s the conflicted observation of, ambivalent feelings about, and ultimate sense of hopeful contentment with the excruciating process of economic contraction and attendant destruction of wealth that tears off and burns up the dreck of decadence, excess and indifference that are the irrepressible encumbrance of any society that enjoys prolonged (and in our case, now borrowed) prosperity. Once the carnage is mostly over, there would be great opportunity to rebuild with whatever’s left.

That may seem extremist or even farcical. Maybe that’s my affinity for vigilante movies coming out! It certainly isn’t any kind of manifesto or a call to arms. Only the modest voice of disenfranchisement from one industrious, middle-class trader/financial services industry employee with a family and aspirations looking toward an uncertain future.