Popping Bubbles

Bubble Myths – Economics

Nations with More Deregulation Grow Faster


The rhetoric – Campaign mantra of the right wing  is to cut regulations and the economy will grow and jobs will be created.

Let’s Pop This Bubble

Stephen Gandel from this week‘s Time magazine (sorry no link to the charts in Time) has an excellent short editorial on this. Using IMF & OEDC data he shows.

  • The USA is one of the most business friendly countries (lack of regulations, taxes, time to start a business…) In fact we are rated #4 of 183 countries.
  • USA GDP has grown +15% over the last 5 years (ending in 2010 & compounded)
  • China is one of the least business friendly countries  - biggest bureaucracy in the world – it takes 311 days longer to build a warehouse there than the rest of the world and the communist party has its hand in every transaction.
  • Companies spend 2600 hours a year complying with Brazil’s tax code. Another least friendly business country.
  • China’s compounded growth rate for the last 5 years is 160%, Brazil’s 135%
  • The list goes on and on -Least business friendly countries – Russia,Indonesia, India, Brazil, Argentina etc all have significantly higher growth rates than business friendly countries like the – USA, UK, South Korea, Canada, Germany.

Deregulation has, at best, a miniscule positive impact on Jobs and Economic growth. Just compare China and Brazil to the USA.


PhotoEssay from We are the 99%


I am a 24 year old disabled=

He’s not Alone – From CNBC

50% of all US Mortgages Effectively Underwater.



The Super Computer from Space Odyssey


An HFT Super Computer

“What’s behind That Wild Final Hour of Trading” The answer from CNNMoney’s Maureen Farrell is “rebalancing of leveraged ETF’s” Something Paul has warned us about. Let’s expand on this to understand the full dynamics of what’s happening.

  • US markets open in big volume, (first 1/2 hr.) focused on events that happened since the close. Currently the Euro Zone is creating the most significant events.
  • Trading, volume, in general, dries up during the day
  • A little after 1:00PM EST many stock traders (based in NYC) come back from lunch and an afternoon trend starts to establish itself.
  • This is when the algorithms of the High Frequency Traders Stars to kick in.
  • All the managers of the leveraged ETF’s see they are out of balance.  So do the super computers of the HFT’s. The race is on and the volume explodes sending stocks on meltups or meltdowns.

The Below chart is from Dave Fry’s ETF’s Digest

Yesterday’s Market

He gives more credit to HFT’s reacting to news (Italy) and I give more credit to imbalances. Whose right? You’d have to know all the different algo’s HFT’s use.  Fry also has an HFT Alert



Reading The Tea Leaves

Our #1 technical forecasting tool, the McCellan Oscillator fell to +38.61. 50DMA at +24.61.NEUTRAL

Some sort of bad news from Europe this AM.



Many of the traders in the comment section have a Put Call  option trade on GMCR.  .  Some details. Most of which were mentioned by folks in the comments section o blog. Thanks to Critic for bring trade to our attention.

  • GMCR today
  • Calls were bought at 72.5 or 75. Puts at 67.5 or 65.
  • Expiration – end of 11/11 or 11/19
  • This is an event driven trade based on GMCR’s earnings report today.
  • If GMCR moves big time in one direction we (I’m in on this trade too) win. Example PCLN close +8.61% higher after its report yesterday.
  • Reasoning – There a huge battle between investors on the direction this stock will take. The earnings report (this evening) will give an indication what will happen. The wrong side will be forced to sell or buy to cover potential losses. So it should have a big move. If not we lose.


Hopefully Longer term positions.

SPY –  stop/loss order at  moved up to 123.6. We will keep moving this stop loss order higher as the SPX moves up. SPY has reached a 5% gain, the time Investors411 takes 1/2 the profits.

Unfortunately, forgot to announce this yesterday so we still have a whole position. Will sell 1/2 position anyway today (see UCO/USO) below

GLD –  DGP is the more risky double long gold ETF. 1/2 position added at 173.85.  Will add more on 2/3+% dip.

FXI – From Yesterday - “It will be added to our portfolio today. Hopefully on a dip.” Added on dip yesterday at 38.12.

GMCR – See above

Considering – oil ETF USO (2x oil prices ETF UCO riskier) This would be a replacement for SPY.

Oil prices will move higher with stocks. Stocks and commodities are closely price correlated. Owning oil also gives you a hedge against an oil supply disruption. Example – gambling site Intrade has about a 25% chance of USA or Israel bombing Iran in the next year. This would send stocks into a meltdown and oil prices into a meltup.

Therefore, an oil ETF is better to own than the SPY that tracks large cap stocks.


Longer Term Outlook

3+ months


NB – There has been a slight, but significant change to this section. Long Term Outlook has been changed to LongER Term Outlook. The Time period reduced from 3 to 6+ months to 3+ months.

Reasoning –

  • Equities have become more event driven. Euro crisis is the on the surface cause, but the deeper cause is a corrupted over leveraged global financial system that privatizes gains and socializes risk.
  • Both technology and High Frequency Trading (60+% of all trades) have significantly altered trends. HFT’s volumize a trend in either direction. Many trends (not all) have become compacted.

Investors411 has 5 different valuations - BULLISH, CAUTIOUSLY BULLISH, NEUTRAL, CAUTIOUSLY BEARISH, and BEARISH.

Everything written in BROWN is a repeat from a previous day(s)




  • Share/Save/Bookmark