Archive for March, 2012

Black Swan Incubators

Saturday, March 31st, 2012

File:Liberty Bell 2008.jpg

Q: What happens when you cross John Locke’s Two Treatises On Government with Isaiah Berlin’s Two Concepts Of Liberty?

A:  You get a two-colored swan and a crack in your bell.

If you are one, or if you work for or support one of these entities, then according to Nasim Taleb and George Martin , you are a “responsible party” for the global financial crisis.

a)  You are a government official.

b) You are a banker or a company executive.

c) You are a risk vendor or you work for are participate in a professional association.

d)  You teach at, administer  or are a student at a business school or are a member of the financial economics establishment.

e)  Any “agent” in the realm of business whose justification for our circumstances and the abdication of common sense would be “there was nothing else to go on.”

f) You are a regulator – I guess he is referring to Bart Chilton of the CFTC.

g)  You give or receive the Nobel Prize In Economics.  I guess that takes Nasim off the candidates list.

 

To summarize, Mr. Taleb claims that anyone who uses a normal bell curve distribution is to blame.  Dave never did like when teachers would “curve the grade.”  It just didn’t feel right.  Well, according to Nassim, the new normal is that we’re abnormal and any attempt to impose the nice Gaussian bell curve to school grades or anything else for that matter is flawed and doesn’t allow for the black swan.

In footnote (24) of the paper, the authors basically channel Bart Chilton’s statement as documented here on Dave of “I love speculators.”  Here’s how it reads:

Speculators using their own funds have been reviled, but unlike professors, New York Times journalists and others, speculators (especially those without the free option of society’s bailout) directly bear the costs of their mistakes. 

Here’s a link to the complete paper:  http://www.fooledbyrandomness.com/sais.pdf

As a sort of verification for items (a) and (b) on the list above (the government official and the banker) and their contribution to the crisis, here’s what Barry Ritholtz had to say about the causes of the financial crisis:

When Bear Stearns starts to wobble, a few people said, “Hey! We can’t let Bear Stearns go belly-up.” That’s where the mistakes start.

So they should have just been left to go under?

No, no. Here’s what happened. Jamie Dimon [the chief executive of JP Morgan] completely outplayed Ben Bernanke. Dimon went to Bernanke and said, “Look, we’re a counterparty with Bear Stearns, we could probably absorb them – but why should we step up? Normally we wouldn’t do this in a shotgun wedding, it would take a year to negotiate. I have a weekend to make this decision, so you have to guarantee $29bn of losses.” And the Fed did that.

It is Dave’s understanding that this action by the Fed, along with other actions was the origin of the phrase as coined by the animated TV series South Park that is known as the meme   “….. and,  it’s gone.”  For the fully animated audio mashup of what happens when when you’re in the black swan incubation business, here’s the soundtrack: http://www.youtube.com/watch?v=4TlPo0yCSa4

Here’s the link to the rest of the Ritholtz interview:  http://thebrowser.com/interviews/barry-ritholtz-on-causes-financial-crisis?page=full

 

Bars Of Gold

Friday, March 30th, 2012

Ready or not jail bars ain’t golden gates for Buster Keaton and the Fugees as they reach their Nash equilibrium. 

If you’ve been following the news lately, everybody and their brother has had something to say about the price of gold.  You see it’s at that price where it’s expensive for people who haven’t bought it and maybe too late to get in.  It’s been profitable for people who bought it and maybe its time to get out and take their profits.  When this happens people get nervous and when people get nervous as Joe Friday of the 1960′s TV series Dragnet will tell you, Buster they talk. 

Here’s just a sampling of what 14 forthcoming folks had to say about the barbarous relic and its future on the global stage of fiat finance where the Greek tragedy of central planning is playing out for all to see. 

Chris Martenson:  the price of gold is manipulated downward but it may be going upward: http://www.chrismartenson.com/blog/gold-manipulated-thats-okay/72892

According to Thomson Reuters Goldman Sachs calling for $1,940 gold within year :  http://www.resourceinvestor.com/2012/03/28/goldman-gold-bullish-1940-oz-in-12-months?t=precious-metals&page=2

According to Eric Sprott gold and silver will continue to appreciate in value: http://sprott.com/markets-at-a-glance/the-%5Brecovery%5D-has-no-clothes/

According to the Wall Street Journal, the Turkish Government tries to persaude citizens to transfer their gold into the country’s banking system:  http://online.wsj.com/article/SB10001424052702304636404577295582725596106.html?mod=googlenews_wsj

Jewelers who work in gold go on strike in India to protest gold taxes: http://www.marketwatch.com/story/indias-gold-jewelers-strike-for-12th-day-2012-03-28

Mr. & Mrs. Evelyn de Rothschild remind us that gold isn’t money, it’s technology: http://tradewithdave.com/?p=9629  http://tradewithdave.com/?p=9714

According to Tim Price, Director of Investment at PFP Wealth Management; We have entered the most favorable era for gold prices in our lifetime:  http://www.zerohedge.com/news/tim-price-we-have-entered-most-favourable-era-gold-prices-our-lifetime%E2%80%9D?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

Paul Brodsky said;  ”Has anyone asked why so many powerful people are going out of their way to discredit an inert rock? We think it comes down to maintaining power and control over commercial economies. After professionally watching Fed chairmen cajole, threaten, persuade and manage sentiment in the markets since 1982, we argue this latest permutation is understandable, predictable and, for those willing to bet on the Fed’s ultimate success in saving the banking system (as we are), quite exciting…. Gold is no longer being ignored and gold holders are no longer being laughed at. “The Powers That Be” seem to have begun a campaign to discredit gold.”  http://www.zerohedge.com/news/annotated-paul-brodsky-responds-bernankes-latest-attempt-discredit-gold

Tungsten filled gold bullion bars show up in the market:  http://ausbullion.blogspot.com.au/2012/03/tungsten-filled-gold-bars.html

Paul Mylchreest formerly of Chevreux issues 57 page report detailing the massive manipulation in the precious metals market: https://docs.google.com/file/d/0B3MkIMeosHr3SG1UbW9fNlJTdm1hZWYzNnpHc2t0QQ/edit?pli=1

 Will Brown’s Bottom become Osborne’s top as the U. K. hints at increasing gold reserves: http://www.marketwatch.com/story/the-next-leg-of-golds-bull-run-2012-03-28   http://www.economicpolicyjournal.com/2012/03/is-uk-government-about-to-launch-gold.html

Correction:  U. K. Treasury says no plan to increase gold reserves.  Osborne wasn’t “gold specific”: http://uk.finance.yahoo.com/news/uk-treasury-says-no-plan-135424251.html

Charles Neener says gold is going to bottom in mid-April and if you don’t catch this next rally you need to be “educated”: http://www.businessinsider.com/gold-2500-2012-3

In other news Citigroup says gold prices may advance to $1,802, near the November high, before climbing to near September’s record of $1,921.15:  http://www.zerohedge.com/news/iran-oil-flow-slows-price-fears-rise-%E2%80%93-risk-war-support-gold

Please allow Dave to recap: 

a) The gold is going down and then going up camp:  Chris Martenson, Charles Neener

b) Gold is going up:  Goldman Sachs, Eric Sprott, Citigroup

c) Please give us your gold… now:  Turkey

d) We quit buying gold because of taxes:  Jewelers in India

e) Gold isn’t money, it’s technology:  The family Rothschild

f) Gold miners are embarassed (huh?):  Tim Price

g) Powerful people are discrediting gold:  Paul Brodsky

h) Someone put tungsten in their gold and gold in their tungsten:  Probably the folks at Reese’s

i) Gold is manipulated… what else is new?: Paul Mylchreest

j)  We’re buying gold.  Cancel that.  We’re not buying gold: George Osborne

 

So that’s a lot to take in.  Nobody really said that gold is going to go down.  If you read Dave, then you know Dave has written a lot about gold.  Dave is seriously considering making a call that gold is going down.  Dave’s been saying all along that gold is going to go up.  Dave’s starting to sound like the other folks on this list. 

What’s Dave trying to say exactly?  Dave is saying that what we have here is a prisoner’s dilemma as it relates to the price of gold.  Let’s say that there are two prisoners.  One prisoner is the central banker (representing probably less than 50 people in the world) and the other prisoner is everyone else (representing something like 7 billion people… most of which don’t have any gold).  How does a prisoner’s dilemma work?  Allow Dave to explain. 

For example, let’s say two criminals conspired to commit the crime of robbing Ron Paul of his gold coin collection following the congressional hearing and Bernanke bash-fest.  The criminals are apprehended following the act and interrogated in separate rooms.  If the two prisoners  stay loyal to each other and keep their secret, then they go to jail for only one year.  We’ll measure this outcome by saying that the purchasing power of their Ron Paul precious metals collection will be divided by two to let’s say $850 each in current dollar purchasing value (eight tanks of gas for your Hummer).

If one prisoner rats out the other prisoner, while the prisoner that is ratted out remains loyal to his co-conspirator then the ratting prisoner sees their coins maintain their current purchasing value of $1,700 (a one year jail term equivalent) while  the prisoner who is ratted out sees their value divided by 8 or $212.50 (an 8 year jail term equivalent).  The same would be the case for the other prisoner if the roles were reversed.  

Finally, if both prisoners rat out each other, then the purchasing power of both of their Ron rounds is divided by 5 or $340 (the equivalent of a five year prison term for both).  As you can see, if the two prisoner’s are loyal to each other, they can walk out in two years scott free or their crimes and collectively have coinage with buying power of $1,700 (half of their original pirated booty).  If one is them is disloyal and the other loyal, then the disloyal player keeps his full $1,700 (one year in prison) and the patsy gets $212.50 (8 years in prison) for a collective total purchasing power of $1,912.50.  In the third and final scenario they are both rats and receive $340 each plus five years in prison and a money supply worth $680. 

According to Professor John Forbes Nash, one of these scenarios is the dominant outcome.  Can you guess which one it is?  If you’re in the money supply business, it seems obvious that the biggest money supply outcome is $1,912.50.  The problem with that scenario is if the central banker walks away with $1,700 in purchasing power, then the other player (you in this example) gets shafted out of  $1,487.50 and is left with only $212.50 and eight years in the Federal Austerity Prison.  The central banker on the other hand keeps his original $1,700 and spends a year in Butner, North Carolina at the Bernie Madoff Tennis and Country Club. 

How do you know which of these scenarios is being played out by the central bankers?  It’s simple.  Look for the cashless solution.  When you think like Dave, you have to think real simply.  Cashless.  Less… cash.  As you move towards the cashless society and banking system model, you become cashless at $212.50 and the central banker becomes cashmore at $1,700.  How does this work exactly?  It’s about the velocity of money and technical accounting jargon like vostro and nostro and other Latin terms that only Larry Summers would understand. 

With the globally connected financial system we’ve gone from a system that reconciled itself inter-day to a system that reconciles itself intra-day.  That’s what all this new surveillance and clearing house arrangements are about for the over the counter swaps market.  It’s not good enough to wait until the end of the day (think Greenwich mean time at midnight) to reconcile your standing.  In a world where money moves as SWIFTly as the speed of light (or not at all in the case of Iran) a continuous state of reconciliation for electronic money (i.e. money as a technology) is the order of the day.

First you had real money and then we passed the Federal Reserve Act.  Then we still had gold-backing and then Nixon closed the gold window and your Dad got a credit card and a collateralized debt obligation (i.e. the mortgage on the house you grew up in before Bedford Falls Building and Loan went the way of Long Term Capital Management).  Now you’re going to have an iPhone with one of those square glyphs on the screen and that’s how you’re going to launch your overpriced cupcakes as a sweet salvo in the Jim Rickard’s currency war for one. 

What Nash taught us about the equilibrium of cupcakes is simple.  When you’re served up cupcakes where the dominant strategy that is baked into the dilemma is primarily beneficial for a party for one (i.e. $1,700 vs. $212.50), we already know the outcome.  When money goes from being a store of wealth to simply being a means of exchange all you have left at the end of the day (which never ends by the way in the new vector-based/fiber optical velocity model for money) is one of those paper cupcake wrappers and a few crumbs.  There would be significant risks to the central planning model if they took the Antoinette-ian approach of simply telling society to “eat cake.”  That could get messy.  However, if they can simply serve individual cupcakes to the prisoners who are locked in a relationship with their mobile phones and Siri, they can maintain the all-important Groupon equilibrium known as “The Daily Deal.”

$2.3 Trillion Lottery

Thursday, March 29th, 2012

If you bought a Mega Millions lottery ticket, then Dave would suggest that you DO NOT watch this video because you wouldn’t understand how odds function anyway.

hat tip to EconomicPolicyJournal.com

Coins of Summer (same theme different station)

Thursday, March 29th, 2012

The Technology As Money meme gains steam with more high-powered hot air courtesy of Larry Summers.  

“Bitcoin is one of many innovative technologies that are going to seek to take friction out and provide services to people. You can make a priori arguments about how it will work very well, and you can also raise concerns a priori. And I think if we know anything about new technologies, you just have to wait and see what happens in the marketplace.”  Larry Summers

http://www.technologyreview.com/business/39962/

Dave on friction: 

The business of currencies is the business of disintermediation.  Whether a government or  a private enterprise when you launch a currency you’re getting in between the buyer and seller and you’re essentially reducing the friction associated with the double coincidence of needs.  You make it easier for two people to do business without having to engage in a perfect match game of needs and abilities.  The currency lubricates and circulates the economy.

The original Latin word for coin is the same as the word for wedge.  What is particularly interesting to Dave is that not only was a wedge type device used to stamp the first coins, the coin themselves are a wedge that forces themselves onto the community in the form of a lubricating spacer or ball bearing between the wheels of  commercial transactions.  To stay in circulation it was important for a coin to also maintain relative value when compared with other currencies.  According to Gresham’s law if the money becomes too good (say a pre-1965 Mercury 90% silver dime) that it is disintermediated by bad money (a non-silver 1966 dime for example) within the context of legal tender laws (more on this later).  Since 1971 and the elimination of the gold standard we’ve been at odds with currency as both a store of wealth and as a coincidental solver of our needs.

http://tradewithdave.com/?p=6628

Dave on the reversibility of Gresham’s Law: 

Many people view the introduction of such network utilities as Bitcoin as a scam.  That’s the problem however when you’re dealing in a peer-to-peer environment that is backed with PGP level encryption and resting on a trust network similar to E-Bay, the fundamental integrity of such a system is a direct reflection of the integrity of those in the network which will be essentially everyone.

For those of you who are particularly knowledgeable about both legal tender laws and Gresham’s law, you might just be in a for a big surprise if you keep reading.  For you see, it’s a proven fact that Gresham’s law is reversible, but only in a near friction-free environment which in the past was not an option.  Due to the rapid growth of mobile communications, a new and possibly unexpected shift is nearly upon us.  You know those credit card machines that sit on the counter at every retailer, well you have one in your pocket now and I’m not talking about Jack Dorsey’s Square project.  I’m talking about The Bank of Dave, or The Dave Bank & Trust.  I’m not sure which name I like better.

http://tradewithdave.com/?p=6628

Larry claims the futility of the Latin a priori as the basis for his argument in his interview… Dave not so much: 

That’s the basic problem with economics as a science.  It’s not one.  It’s an assumption based on a theology that denies a priori.  It’s based on the same cornerstone as existentialism, radical Islam and more modern ideas such as choice architects.  They are all claiming the same truth which is that there is no calling on man, there is no calling on you before your existence and that rather than being in dominion over your backyard garden or the universe at large, the opposite is the case,” Dave wrote. 

http://tradewithdave.com/?p=3721

Multi-Dave on Bitcoin: http://tradewithdave.com/?s=bitcoin

For all you muppets out there, this week of Trades with Dave were brought to you by the “money as a technology” meme and the letters $, CNH and EDR.

http://tradewithdave.com/?p=9716

http://tradewithdave.com/?p=9714

http://tradewithdave.com/?p=9629

 

If Socrates Was A Black Swan

Wednesday, March 28th, 2012

3 lbs. 10 oz. of scrap computer parts for gold recovery available on E-bay $73.00.  BUY IT NOW! 

http://www.ebay.com/itm/3-lbs-10-Ounces-Scrap-Computer-Parts-for-Gold-Recovery-/230701213095?pt=LH_DefaultDomain_0&hash=item35b6dd25a7

 

All men are mortal.

Socrates is a man.

Therefore, Socrates is mortal.

That is a famous syllogism based on a three-part inference.  This is a classical form of reasoning known as modus ponens.  A lot of folks would be surprised to learn that we don’t use this form of reasoning anymore for the advancement of science.  Instead we use something known as modus tolens courtesy of Karl Popper which is focused on falsifiability rather than reason.  For example:

If Socrates is a god, then Socrates is immortal.

Socrates is not immortal.

Therefore, Socrates is not a god.

Why is this so important?  If you don’t use this approach your science may look like this: 

All apples are fruit.

Bananas are fruit.

Therefore, bananas are apples.

Let’s use a bit of Hegelian dialectic to go from a thesis versus antithesis to synthesis:

The Fed’s mandate is price stability.

The Fed is shorting volatility.

Therefore stability has a price measured in volatility.

 

If gold is money, then it can short volatility

Gold isn’t money.  (only Benjamins are, at least according to Ben Shalom)

Therefore gold cannot short volatility.

 

If the Fed shorts volatility to buy stability,

The Fed receives dollars in return for increasing the future supply of volatility while reducing the supply of stability to the market.

As the Fed’s balance sheet grows so does the future supply of volatility contained within the perceived stability (i.e. low inflation).

 

If money is a technology

And the Fed controls the supply of money

As the money supply increases so does the supply of technology

 

As the Fed increases the money supply, its balance sheet grows.

As the Fed’s balance sheet grows so does the implied volatility

As the Fed increases the supply of technology it increases the supply of volatility. 

 

Money is supposed to be two things; a store of wealth and a convenience tool to satisfy the double coincidence of wants.

Technology is a tool and a craft or in this money is a technology example it is both hardware and software.

If money is solely technology, then the hardware portion of the value of the money supply will be subject to Moore’s Law.

(i.e. it will expand by a factor of two every 18 months which is estimated to slow to every 3 years by 2013)

If you divorce fiat money from its sovereign basis, you can turn a single unit of money into a separate unit of gold and technology.

If money was solely based on technology, inflation would expand at the combined prorata amounts for hardware advancements of Moore’s law and for software which is advancing even faster (see below). 

So, here’s the question Dave would like to ask.  If “money is a technology” meme (which obviously the folks at the Economist Magazine and the Rothschild husband and wife team are so diligently promoting) is true, then will the implied volatility being buried within the Fed’s balance sheet as a form of money be released at a later date in the form of gold?  Would it be fair to say that the more effective the Fed is at sinking volatility into its balance sheet in the form of technology the more suppressed the market value of gold (as measured in US$) becomes relative to alternative forms of money and measurement?

If however, the Fed is unable to contain this implied volatility and should it escape from within their policy and/or the execution thereof would it be fair to say that the value of gold as measured in dollars would be equivalent to the total amount of volatility that had been created through the advancement of technology?   

Is this the basis for the projections in the video posted yesterday of gold being worth either $300 or $6,000?  Is it based on the value of the equivalent of a black swan meltdown of the financial reactor core in a Fukushima like Federal Reserve volatility meltdown, or is the plan to steal your soverign gold while you’re busy staring at Apple’s stock chart on the screen of your Iphone? 

A Grand Unified Theory of Market Manipulation:
http://www.precisioncapmgt.com/wp-content/uploads/PCM-A_G.U.T._of_Market_Manipulation.pdf

On going short on volatility… The Inequality That Matters: http://www.the-american-interest.com/article.cfm?piece=907

How Moore’s Law is even faster when it comes to software than hardware: http://bits.blogs.nytimes.com/2011/03/07/software-progress-beats-moores-law/

Dave on divorced currencies and vector gold: http://tradewithdave.com/?p=9457

http://tradewithdave.com/?p=9629

Potatoe Potaaahto

Tuesday, March 27th, 2012

You say tomatoe…. I say tomaaahto.  You say money, EDR says technology.

Dave stumbled across this video on gold this morning.  As of this posting, I haven’t been able to figure out who produced it.   Dave’s going to stick his neck out and say that it is somehow connected with the new book underwritten by Evelyn de Rothschild via their Economist Magazine under the title “In Gold We Trust.”  Here’s the video and the link to the Dave blog post suggestsing the concept of money as technology is linked below. 

http://tradewithdave.com/?p=9629

For those of you who would prefer to just use a gold standard by simply calling the whole thing off, Dave will allow Ira and George Gershwin to explain what happens if we call the whole thing off and how we would have to part and how that would break the heart of the central banking cartel. 

 

 

Silly Rabbit, VIX Aren’t For Kids

Sunday, March 25th, 2012

Way back when on April 29, 2011 James Altucher made a call for Dow 20,000.  Here’s the video:

 
http://finance.yahoo.com/blogs/daily-ticker/james-altucher-dow-going-20-000-don-t-142821798.html
 
At the time the Dow was at 12,800 approximately and today it is at 13,080 and has been on a tear since a bottom of 10,771 on September 19th approximately.  This particular post is a bit technical and Dave’s no technician so there’s a good chance I may be wrong which would be nothing new.  Then again it’s not like I’m putting my neck on the line like James did with his call, but this past week there was an event in a structured product called the TVIX which is an exchange traded note (i.e. bank promissory note) which is based on market volatility.  People like to call it the fear index.
 
Well what seemed to happen was that the price of the TVIX ran up due to the fact that it decoupled from the net asset value of the underlying security (that is assuming a promissory note from a Eurozone Too Big To Fail bank would be considered a “security”).  The conventional wisdom would seem to be that a bunch of people bought the TVIX that didn’t understand that it was overpriced.  Dave’s not buying that theory. 
 
The gist of what Dave’s been able to gather is that since the market has run up, supposedly a bunch of novice investors ran out and bought the TVIX exchange traded note because they were looking to hedge against market volatility or in this particular case probably a huge market correction.  Dave’s fairly sure that there is no such thing as novice investors in the market anymore.  If there are, then they’re not there for long in this algo-driven high frequency trading, segregated account stealing, flash crashing environment.  Just like there are fewer folks at the gas pump, there are fewer folks at the pump-and-dump stock market because people don’t like being front run by a computer and scalped on every trade. 
 
So what happened exactly that caused the TVIX to run up so high and then to collapse in just a couple of days?  How can an exchange traded mechanism which is essentially designed to be a tracking stock (in this case one the is promised to go to zero eventually – see the prospectus if you don’t believe me) decouple from the underlying security that it is linked with, or in this case “slinkyed” with?

When Dave read that Credit Suisse had halted the issuance of TVIX on February 21, it reminded Dave of a central bank currency tightening.  It’s a product that they created that they sell via the CME and then the product gets so popular that it decouples from its underlying asset so the bank stops issuance of the product most likely due to some risk management metric.  Think about that for a second.  You have a product that you make money on and its so popular that you can’t keep up with production so you stop production.  Wouldn’t such an action actually increase risk because it would drive the price even higher due to a shortage of the product? 

So the TVIX drops  $277 million in market cap and falls from $18 to $8 in one day.  Then Credit Suisse  announces they are going to begin reissuing the product.  While people are dumping the product, the bank announces they are going to issue more of the product.  That sounds like a plan for driving from one ditch on the side of the road into the other ditch on the other side of the road if you ask Dave. 

What does the man who created the VIX have to say about the VIX?  Well here are two excerpts from Robert E. Whaley’s paper Understanding Vix

In regard to “Normal Range”:  Aside from looking at VIX levels, we can attempt to characterize what is normal and abnormal behavior.

In regard to “The Quick and Ready Method” for interpreting the level of VIX:  The figure makes two simplifying assumptions: (a) the rate of return on the S&P 500 over the next 30 days is normally distributed, and (b) the expected rate of return on the S&P 500 over the next 30 days is zero. Neither assumption is unreasonable.

When I read that second one about the reasonableness of assumptions, all I could think about is the unreasonable one… James Altucher.  When I read the one about normal range, all  Dave could think about was Pimco’s Mohammed El-erian’s “New Normal.”  Dave’s thinking about what a market melt-up might look like if all that hot helicopter money baked into the balance sheets of corporation like a hot apple pie decided that the large cap multi-nationals were a safe haven for avoiding dollar debasement.  Then Dave’s thinking about Jimbo’s $20,000 dow and if that might just be the new normal. 

The author of the VIX formula said it himself; “We can attempt to characterize what is normal and abnormal behavior.”  Are you kidding me?  So tell me do you think James Altucher is normal, hairstyle withstanding?  Is Mohammed El-Erian (the co-manager of the largest bond fund in the world) calling his wife during the Lehman Bros. collapse and telling her to go to the bank and draw as much cash as she can get… normal?  If we have another round of quantitative easing, where’s the money going to go if not into mattresses and into the stock market?  Dave’s not so sure Apple could even cram their stockpile into a California king, so where else will it go?  How about gold, the non-money of central bankers?  Dave doesn’t think so. 

What is the VIX and more specifically the TVIX trying to tell us?  Besides the fact that you’re doing business with COMEX which Dave has been blogging about regularly, what does volatility look like in a one world currency world?  Think about it?  If you don’t have foreign exchange risk and the S & P goes Altucher on you, where’s the volatility once you break out of Whaley’s ”Normal Range?”  Dave’s not so sure that Whaley’s “Quick and Ready Method” is going to be contained within the standard deviation of a 30 day range based on historical performance even if you include the crash of ’87. 

Speaking of melt-ups, wasn’t it the CEO of General Mills who claimed this week that his inputs were up 11% but the bureau of labor and breakfast cereal statistics is claiming that we are not in an inflationary environment?  It doesn’t take as long to count your lucky charms, green clovers, pink hearts, yellow moons and orange stars now that the cereal boxes are downsized, french fries are off the dollar menu and new normal ”tall” Starbucks cafe’ latte is how do I say it?… short.  If you feel like the prices are silly at the supermarket or you’re not sure buying a warehouse full of Trix cereal is a good way to earn 11% on your money, then don’t forget it’s a multi-polar world.  The only problem is that we have to pole vault over the other asset classes that are decoupling from their exchange traded notes too (namely silver, platinum and natural gas) before we can settle into the new and improved International Monetary Fund’s Special Drawing Rights.  Would someone please tell Ron Paul to put his hands where we can see them and step away from the silver dollar.

If they Chinese are not going to loosen their capital controls on the CNY and the CNH is exposed for what it really is, then what else is there but for commodities to become currencies?  The premium to NAV on Sprott physical trust just hit 23% this week.  Will it be TVIX’ed?  Don’t count on it.  Dave just has one question.  If agricultural products are the main input for cereal and nitrogen fertilizer is the main input for agricultural crops and natural gas is the main input for nitrogen based fertilizer (via Haber Bosch process), then who is it exactly that is ending up pocketing that 11%.  It couldn’t be the Koch Brothers wrestling over your wallet like they’re wrestling over the CATO Institute… or could it?

For more detailed explanations on the math behind the VIX, here are papers from both the creator of the VIX and black swan promoter Nassim Taleb:

ssrn-id970480 - Taleb on what you don’t know about volatility

 ssrn-id1296743 - Whaley on understanding VIX

Per JC’s Direct Instructions

Saturday, March 24th, 2012

… and it’s gone.

http://www.scribd.com/doc/86538643/MF-memo

Here’s the video… literally.

 

Closing Ranks On The “Open” Society

Saturday, March 24th, 2012

File:JYongKim.jpg

Jim Yong Kim

At the 2 minute mark of the following video, here’s what President Obama’s nominee to replace Robert Zoellick as President of the World Bank had to say.

“The high point was when we started receiving support.  First from George Soros.”

http://www.charlierose.com/view/clip/12242

If this makes you wonder how George Soros might be using his money to influence the White House and global economic policy, then it’s time to Trade With Dave.  Here’s a link to every blog post on Dave that mentions George Soros:  http://tradewithdave.com/?s=soros

 

 

 

Help Me Help You

Friday, March 23rd, 2012

Bart Chilton gets choked up as he explains the CFTC’s Jerry Maguire method for extracting money with the simple statement: “We’re not as dumb as people think we are.”  Viewers would be wise to remember that just such acting won Cuba Gooding, Jr. an Oscar from The Academy.  Dave has just four words and only one of them rhymes with muppet.  Show me the mullet… you too Rickards.