Forget Las Vegas, Atlantic City, or even the Native American casinos that we’re fond of. There’s a more interesting set of odds evolving accessi8ble from any secure online device and a trading account…
Right up front: This is NOT INVESTMENT ADVICE. This website only talks in generalities about the economy and tosses out ideas that might be – how to say this? – interesting.
Here’s the set up:
Last month, Options expired on July 19th and 20th. We look at our Aggregate Index for that period and we see that on Thursday the 19th of July, our Aggregate closed at 23,924.96. Thursday is when index options expire.
The commercials will sometimes drive a change in Friday’s markets during options week to cover their index options commitments (and a little something for lunch, eh?) that expire Thursday. So, July 20th, the Aggregate closed at 23911.06. Not enough to be a big deal, but covering wasn’t too painful.
Now look at where we begin this week: Our Aggregate closed last Friday at 24081.56 after hitting a short-term high last Tuesday of 24293.24.
Now we sit back, have the cocktailer bring us a libation, and consider some data points we half-way remember from reading UrbanSurvival over the years (and maybe subscribing to Peoplenomics) where we are unabashedly infatuated with the art of making – and keeping – money.
- There is a weak tendency in the data for monthly highs to happen around options expiration.
- Conversely, there’s a weak tendency for monthly lows to come in around end/beginning of a month.
- We also see in the data (Peoplenomics subscribers can refer to our recent notes on probability quadrature) a tendency for there to be a roughly 3-percent gain and a similar loss monthly which makes it “easy” (on paper, lol) to see how to double our money in a year playing extremes of market sentiment.
- That said, playing the stock market must be approached more like gambling than anything else. The late Paul Samuelson’s work demonstrated this (which is why he racked up a Nobel Prize in Economics) The book by Burton Malkiel (A Random Walk down Wall Street: The Time-tested Strategy for Successful Investing) is at least in part based on Samuelson and the MIT Econ Department’s work showing how statistics work out in practice.
- Oh,, and we also know at the market tends to perform a bit better than inflation…
Next, we step into the kitchen where our big herking Vitamix blender stands at the ready.
How far up should out Aggregate Index go this year? As a dart-toss, how about 10%? Through the end of July, the M1 *primary cash) in the economy was up 4.2% thanks to the Fed’s orders from the money-printers while M2 is up an even 4 percent.
At the same time, GDP is going up 4 percentish, too. Since the Fed has not overprinted – and is “holding” on rates, they want rates to go up.
Problem is, as of Friday, the 10-year Treasury Note was around 2.86 percent and this morning in the futures it looked like it still wasn’t buying the hype about “raising rates.” This has to be tossed in the blender, too.
Last week, I told subscribers that “ideally” we would have a decline in the latter part of last week beginning Wednesday and then carrying through the end of the week and now it looks like we will open on the downside but less so than earlier. That goes into the blender. Turn-around Monday, maybe and then she blows to the upside?
Finally, we have the output from our “Golem spreadsheet” which offers an interesting “delta avg1 divided by delta avg2” approach as a trading signal (when compared with delta avg1, lol) and it says (but this is not advice) one more high to go this summer.
The last thing into the blender is the “Stock Trader’s Almanac 2018 (Almanac Investor Series)” Just toss in August, since we’ll need the rest book for guidance later in the year.
Now fill with ice (because all serious investors “chill” fon Monday’s) and then hit frappé for about 3-minutes.
What comes out is the idea of a wild buying in at the lows today. A run-up and maybe records late this week. MAYBE.
We’ll be watching the clock, closely. That’s because the day’s low MAY come in between 5 and 20 minutes into the trading session. If it does, then we’ll be thinking “Aha! Rally!” But, we will await confirmation (1-hour and 13-minutes into the trading session, or 10:43 Eastern, 9:43 here in Central) when the Big Money eventually shows up for work. The inflection points in this time-frame vary – which we chalk up to weather, cabs, and traffic.
Still, this is about an even-money bet. But the idea with markets is they move in the direction that seems to take the most money from the most people….and that’s what makes this a horse race.
End of last week was meant to scare the Chicken Little’s of the world. We will find out how good a job it did by Friday.
Long-Term: Bad Metals Advice
Speaking of non-advice: I happened to pencil out some long-term results of precious metals because I’ll periodically get notes from Silver Bulls who assure me their assorted junior minors will be going to the moon just any minute. Toss in a quote from non-economic soothsayers about how there’s huge upside for silver and “What can you tell us about THAT, Ure?”
You won’t like my answer. But, here it comes again, tea leaves of futurtans aside…
When we recommended gold (and bought our lone golden round) it was $279 – back in 2001. Today, Gold is around $1,200. Divide the latter by the former and we see Gold’s price is up 4.3 times. What’s more, compared to CPI inflation since 2001, the inflation-adjusted cost basis is $394.63. Which means, the REAL (Pre-tax) RETURN is around 3 times.
Silver is a different kettle of fish. We bought our “lone round” in 2005 when it was $7.02 for the ounce. Working out the inflation to present-day, just breaking even on inflation would price silver at $9.01 per ounce. So the REAL RETURN on silver has been (based on futures at $15.22 this morning)? 1.689-times. Oh, also pre-tax.
Is there a lesson here? Sure: Despite all the HS&J about silver (that’s hype, shuck, and jive) the Reality Check is that on the basis of how many cheeseburgers it will buy, silver has been a long-term (pardon the pun here) fool’s gold.
Not saying it won’t turn around over time but remember that while there are certain medical uses, the popularity of things like colloidal silver and so forth, the reality is that for now, the gold silver ratio is more than twice what it was back when. It was about 39 to 1 back when and it’s up nearing 80 to 1 now. At some point, it’s just “bound to get better” but that’s like betting on when a lucky streak in a casino is likely to end. MIT Econ department back in Samuelson’s day would be skeptical of any system trying to call the turn with such advice.
And then we have Bitcoin. Back down to $6452 when I looked, a far-cry (and a 75% decline) from it’s all-time highs. I know a certain radio show host nationally who has become a True Believer in the crypto “something for nothing/free lunch is real” mem, but I just don’t see it in the charts. When Bitcoins exceed the old high, there will be plenty of gains left overhead to be harvested but let me tell you a story.
A really good electrical engineer I worked with once told me the classic story of statistics. He was fairly fresh from “big projects” at Los Alamos…top of his game.
So up comes the Washington State Lottery and despite being an avowed lottery skeptic he bought exactly one ticket.
“How could you do such a thing? After all the bad-rap you’ve given lotteries?” This was back in the old day, mind you.
“George, if I buy zero lotto tickets I have no chance of winning. But, if I buy ONE ticket I have a greater than zero chance. However, in order to have a significant chance, I would need to buy several million tickets. I would rather have SOME CHANCE than NO CHANCE, but more than one ticket? That’s how the Lotteries are essentially a tax on stupid people….”
The word to study is “innumerate.”
Or, for $10 bucks, the 1986 paperback is still in print: “Innumeracy: Mathematical Illiteracy and Its Consequences/”
To spin off the classic Yogi Berra quote “Investing is 90% mental and the other half is looking at the data.”
Trump N Mouth Disease?
Oh my, here we go again “Omarosa claims she heard Trump N-word tape after book’s publication.” Walking back?
What we really want to know is A) “Did someone really secretly record Trump using the N-word?” and b) “Who recorded and when AND WHO RELEASED IT?” You don’t think the Intel community can make up tapes on demand? You haven’t been around recording studios much, lol.
The N-word is used by what the lefties call “comics” who get a “pass” from “correctness police.’ It’s also an everyday term on “the street.” This all circles back to the problem we outlined a while back in a Coping article: America has run out of “shock language” See “America’s “Hot Language” Crisis” from mid July…
Language for lefties and legitimate social victims only. The left is where the linguistics are, lol.
Drop the emotional hooks and stick with non-emotional metrics, please… (won’t happen, but we can hope).
Mean-Times in Media
We are struck by the Boston Globe’s emerging leadership in the bash-Trump movement. As you may know, the BoGlo editorial board is trying to coordinate an editorial anti-Trump-rising by in papers all over the country. (To think I once worked for their broadcast division in news….my, oh my…)
Remember, the Boston Globe endorsed Hillary’s bid for the White House. Seems their support of anything democrat – like the NY Times which recently added a white-hater to their editorial board – and other Northeast power papers – has never wavered.
Despite the Election.
Ah,, but it’s all the essence of Digital Mob Rule’s Attempted Coup. Divide and conquer.
The overarching, real agenda here continues to be the taking-down of Trump…and as we call it, Omarosa’s got as good a shot as Hillary, Strzok, Page, Podesta, Clapper, Rosenstein, Comey, and even Mueller et al. Because she’s got deeper emotional hooks into the mainstream.
We’ve been looking for a quantum computer for ‘ol Grady, chief programmer and whiz of the Nostracodeus software project. Damned if we can find him one, though.
Notwithstanding, however, the hype machine is running flat out already: Enterprise Quantum Computing Market to Reach $2.2 Billion by 2025, According to Tractica. Get back to us when we can by one of the ‘Zon and when the Windows-19 service pack finally runs it BSOD-free…
We Know the Answer
As NASA spotted a vast, glowing ‘hydrogen wall’ at the edge of our solar system, we had the divine inspiration:
It’s the Prison Wall.
We have been watching the situation involving Round-Up with concern for years. Now that it’s being linked to cancer risks – in legal proceedings (and may be legislated away, see Germany aims to end use of glyphosate in this legislative period: spokesman) there’s an intriguing question for our staff of highly unpaid legal advisors:
“What’s the extended liability of farmers who planted glysophate-ready crops? How is that house of cards going to fall? And, on whom?
Korea’s “Little Detroit of the West?”
Empty shipyard and suicides as ‘Hyundai Town’ grapples with grim future. Welcome to cyclical economics. Can K-Pop save an entire nation?
SNH: Monopolistic Practices?
(Sick Newsroom Humor): 313 People Injured as Boardwalk Collapses at a Festival in Spain. No word on injuries at nearby Park Place.
And speaking of properties on the dark blue finishing line, up in Traverse City, Michigan the old Park Place Hotel is being refurbished. Take a gander at the picture – that’s what a hotel on Park Place ought to look like.
We;ve always been fans of 1920’s-era art deco buildings…Let us know when it’s ready. We;d love to play a game of Monopoly there.
Consumer expectations mid morning today. Import prices tomorrow. Wednesday comes retails sales then Housing Starts Thursday and Friday wraps up with consumer sentiment and leading economic indicators (its an anagram)…
Hardly exciting, but our Golem says onward and upward, so we shall see…
Moron the ‘morrow...