Crazy George’s Playbook

With the futures down about 45 points, after closing up 76 Dow points on Thursday, I’m just sure that our colleague in doom will be placing trades this morning on this last day before Schmita (Sunday, Elul 29) on the short side.

You see, that is when the market is supposed to hit the fan.

The way I figure it, the TRUE believers in such pap would be buying short positions by the bushel basket this morning.  IF Schmita were a useful/tradable indicator, how else could they play it?

No, I doubt they will lay on the Big Catastrophe Shorts because we won’t know until after the Fed announcement Wednesday afternoon how the market will really react.

Of course IF the Fed decision in not “in bounds” they will claim a victory.  Or, if we really just go down Monday/Tuesday otherwise predictable turning points, they will say the “Schmita has inverted this year.”  Vape-o-nomics.

However, if they are not fully invested in the downside by the close of business today, I have have to remind you of the dictionary definition of the word charlatan:

“…a person falsely claiming to have a special knowledge or skill; a fraud.”

As Peoplenomics readers will attest, our Trading Model has been short every week except one since the week ending July 3, and the other week was neutral/cash.  Our model is still on the short side.

And we would not expect the market to spin on a dime here.

In my view the current period is likely to continue down to as low as 1,740, but like 2008 (when the Peoplenomics Model turned short 12-weeks in advance of Schmita which missed 22% of the decline) I would expect the same kind of thing this time.  Since 2008-2009 was 41-weeks short on the model, and since we are only 11 weeks into this decline, could we go lower?  Sure.

As I have said going into this morning, if the Schmita prompters really believe, they would go all in on the short side today.

In our Model, we will simply remain short and wait for a possible Monday/Tuesday decline as the market waits for the Fed decision Wednesday of next week.

Sadly, the Fed has a real problem – and now we get to the serious part:

If the Fed doesn’t raise rates, people will think “Oh my God…things are SO BAD the Fed can’t raise rates.  I should be short!”

On the other hand, if the Fed raises 10-25 basis points, I think people might panic the other way.

Robin Landry an d I were talking about this at dinner last night..  Robin calls it the “Glass half full” problem.

His point being that it’s very hard to tell when optimism (half full) hits a tipping point and becomes pessimism with the glass “half empty.”

What would I personally like to see?

In the equivalent period in 1928, the Fed raised 25 basis points.  But the prevailing discount rate was at 3 1/2 percent.

When the rate is down 2%, or whatever, there is a strong case that a very firm “hand on the tiller” would be for the Fed to do something shocking:  Like a 10 basis point raise.

I have never seen anything mandating even quart point/25 bips raises.  And psychologically it would be the best move in history.

To the Bears in the “Oh my God they can’t raise” camp, it would say “Sure we can.”

To the Bulls in the quarter to half raise camp it would say “We are independent minded”.

Around here, we will remain as we have for 11 weeks in the cash or short position.  I like cash.

And we pragmatically await the outcome of next week since the data will make the decisions for us.

A reminder for the two couples with us on this cruise (Peoplenomics readers), we will meet in the Windjammer Bar area at 2 PM (ship’s time/Central) and watch the market close and you can see the the Trading Model before we put it out for subscribers on Saturday morning.

Robin should be there, too…so Aggregate and his Gann-Elliott trading work.  That as a 3 PM toast to the market close.

Crazy Guess?  Modest decline today, further decline Monday, spike low Tuesday and stabilizing until Fed data.  Support levels on the S&P:  About 1,860, around 1,820, and 1,.740.

After that…well, let’s just say the Wave 4 then Wave 5 rally into the election aftermath in 2016 would be off the table.  My work says no, that won’t happen.

I had a problem once handicapping the ponies though:  The horse didn’t “read the Racing Form.”

Markets like the ponies can get’cha sometimes.

Papering Over

We suspect the only reason the Federal Debt Ceiling hasn’t been busted is by refi’s and book switching.  The Federal Debt to the penny hasn’t really changes in months and months.

And this morning we read this with 6 ounces of suspicion:  Treasury’s Lew says US can still borrow through late October.  Yeah.

Producer Prices

Hot off the press release:

The Producer Price Index for final demand was unchanged in August, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today.

Final demand prices rose 0.2 percent in July and 0.4 percent in June. On an unadjusted basis, the final demand index moved down 0.8 percent for the 12 months ended in August, the seventh straight 12-month decline. (See table A.)

In August, a 0.4-percent increase in the index for final demand services offset a 0.6-percent decrease in prices for final demand goods. Within intermediate demand, prices for processed goods moved down 0.6 percent, the index for unprocessed goods fell 4.4 percent, and prices for services advanced 0.7 percent. (See tables B and C.)

Final Demand Final demand services: The index for final demand services moved up 0.4 percent in August, the third consecutive rise. In August, three-quarters of the advance can be traced to a 0.9-percent increase in the index for final demand trade services. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand services less trade, transportation, and warehousing moved up 0.2 percent. Conversely, the index for final demand transportation and warehousing services dropped 0.7 percent.

Again, I think a case for a 10 basis point Fed move…but that would be too logical.  Sorry I mentioned it.

Slightly Suspect

Alleged terror plot aimed at 9/11 anniversary foiled.  Perpspect named Goldberg?

More on 9/11 marketing continuation in the Coping section below.

Not to Diss Indian…But…

Court convicts 12 over 2006 Mumbai train blasts.

I have worked with a fair number of people in India and I have to tell you the ones I worked with were the most bureaucratically challenged people in the world. 

Apparently, that Georgieoptyping wasn’t that far off:  This trial result is something like 9-years on from the train blast event.

Dear Leviathan Gas Field

I hope you are well-read on the Leviathan gas fields, much of which lies off  Lebanon and maybe Syria?  It’s a useful thing to keep in mind as we arm insurgents trying to kick out Assad (write checks, changes governments, eh?). 

Especially useful thing to know when you read stories like Russia Calls on Other Nations to Help Arm Syrian Government.

Right, then.

USA has fracking and Russia wants to bring more gas under its wing.  Easy way in?  Own Syria, “Influence” Lebanon.  Or disrupt from next door.

The Russian naval base at Tartus, Syria is 17-miles north of Lebanon and yes, this is part of the manufacturer’s Resource Wars paradigm.

Do You Love Your Kids?

Then here’s a list of the best places to send them to college.

Trust me:  College means more when they pay themselves and you don’t stick your head in the FAFSA noose.  (Free application for student aid) That way, you will have money to bail them out later, OR if they learn capitalism, you will have a retirement after all.