Soothsaying and Moneymaking

[CrackSmokeRepublican]

Soothsaying and Moneymaking

Lookout below!  (Remember: The Crash Window is open, yeah?) Every so often I'll get a note from a reader wondering "George for such a good economics and markets site, how come you waste so much time on woo-woo, web bots, and crap like that?"  I would think the answer is obvious, but at the risk of sounding redundant (again, LOL) let me spell it out for you...

 

Investors and speculators share one common trait:  They each build a mental construct of the future which - if it comes to pass as they think - will make them some money.  However, the reverse is also true:  If their construct fails to appear within the right timeframe, they either don't make money, or worse, lose money.  It goes without saying that a speculator is someone who is expecting a quick change of events and the timeframes used by the investor class are a little longer, but in the end, both eye the future, build their vision of it and pray for profits - which is to say - their vision of the future.

 

Oh, sure, there are other reasons to study the future, like not being in harms way when it arrives with mal-intent.  Or, the avoid the end of life for a while by not being under a mushroom clouds; that goes without saying.

 

So it's in this spirit that we look at a wide range of future predicting technologies which have the potential to do as well as my friend Clif's radial linguistic shift approach, or the more seasoned technical analysis approaches (including Elliott Wave theory), astrology, and to an extent, fundamental analysis.  Oh sure, I'm aware of the 'new kids on the block' who are getting into the space, too; among these, www.recordedfuture.com has gotten some funding from Google, while Lyric Semiconductor which is especially interesting with their  statistical probability / best-fit chip path.

 

Being something of an agnostic, each has pluses and minuses, strengths and weaknesses if you SWOT them out, but to date, only the radical linguistics seem to be able to pull out the 'turn dates' for 'game-changers' with some degree of repeatability, and even here, I think the biggest claim Clif's made is that the web bot project is only better than chance by a factor of two, although in certain areas, it's way beyond that.

 

Unlike television with its Nielsen ratings, or the web with its web log analyzer programs, figuring how these emergent technologies, as a group, will impact not only investment, but also 'life as we knew it' is something of a crap shoot.  First, all rely on the Internet, so anything in the future that could take down the net is problematic, and the, since the whole point of investing is making a buck, any failure of the market's settlement mechanisms (little goodies like a functional international banking system being alive with fund transfers working) are use-case assumptions which no one likes to think about because if more people did, the investment and intellectual property developing population of America (and other centers of financial monomaniacal behaviors) would be far more geographically dispersed on land and sea,  and be far more focused about issues of systemic reliability and catastrophic failure recovery modes.  But you probably figured most of this out on your own.

 

Out here in the East Texas Outback. it's with this framework in mind that we gather here each morning to set "the morning line", to put it in gambling terms, which the future always is when one takes a clear-eyed look at the beast.

 

To do this, I use Clif's work (a lot) because it foretells the outliers so well (quakes in advance, that kinda thing, or the Nov. 8-11 period) and on a rule-out basis, we can use other sources, such as the NY Times piece this morning under the headline "US Assures Israel that Iran Threat is Not Imminent" which gets me to the starting point of this morning's discussion, at last.

 

A skeptical reader notes:

    "...Of course, if I were the Prime Minister of Israel, I'd have to be asking myself why should I believe the President when he assures me that Iran is still more than a year away from a nuke when this is the same President who was just proven to have lied to his own people about the persistence of the spilled oil in the Gulf. If I were the PM, I'd have my strike planners keep on working...."

In broadest general terms, Clif's work has a 'cloud' over things from the middle of next week on into early next weekend.  Take that with the Times' Middle East piece today and it seems forecast set up (when I read it, but click here and buy your own copy for $10-bucks) more of a financial kind of event than attack on Iran.

 

Which is not to say that I'm reading his work correctly, it's just that the way the market is acting, wee could very well be setting up for another "Flash Crash".  All that remains to be defined would be a 'triggering event'.

 

Much of what happens in the synthesis of multiple inputs around here should get even better for Peoplenomics.com subscribers next year, since I'm cobbling up an interesting synthesizer' which will attempt to take Clif's timing marks and use them in conjunction with planned news events.

 

As you may be aware, 80-90% of what passes for 'news' on a daily basis is predictable because most news events are timed./  Next week, for example, the 'news budget' for the week includes home sales Tuesday, Durable Goods on Wednesday, and so forth.

 

So if you take the market  wave counts from a fellow like Robin Landry, then add in the news budget, maybe option cycles from Robin Handler's Option Signal Service, some input from the astro-econ crowd, and top it all off with a sharp dart, the guessing could be pretty good.  In fact, if you asked me right now what I think will happen next week, I'd have to guess at a hugely disappointing weekly employment number again, but more likely any Flash Crash would be caused by intermarket arbitrage accentuated out of control by front-running/HF systems.

 

Got an interesting theory on this front:  The advent of HF trading seems to have had the effect of over-emphasizing a move in a security or index.  The analog in electronics would be to make a filter that expresses more gain as it becomes more and more sharp, as the bandwidth is reduced, which is algorithmically what's happening.

 

My theory is that the Flash Crash  phenomena will repeat at some point because when too many filters in a radio get 'too tight' the whole circuit can fall into oscillation...another way of saying runaway feedback.  Which means, in practical terms, that when enough humans are taken out of the decision-loop the HF trading platforms could entrain such that the whole collapse of the global finance system could be accomplished completely "hands off".

 

Damn, what a long winded exposition. How about we distill it down to a PowerPoint slide?

 

1.  Market in today's trading has a line in the sand of 10,303 (last week's close) and if that happens, then a Flash Crash is in the cards next week.

2.  Clif has a cloudy in the date mid-week next.

3.  The Iran War may not start until the Nov 8-11 period, in which case, the global economy, death of money concept rotates into highest probability.

 

There, easier to digest?  Makes more sense than muttering  P3 entrains minute 3 entrains minuet 3 at sub-minuet 3 on the wave count, doesn't it?

 

I just thought I'd give you the long version talking around that slide, since that's the kind of thing on the agenda this weekend when I go up to Oklahoma to talk with Robin Landry in more depth about his count.

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Market direction may change about a half-hour into this morning's trading when the Leading Economic Indicators come out.  Just remember the initials for this could be viewed as an anagram.  Gee, wonder what that might be?

 

As the Week Wraps Up

A reader summarizes it this way: "Did we just avoid WW 3?"

    "Hi George! Wow, what a day. Three BIG stories. Firstly we have the story that the Obama Administration has "Assured Israel That Iran Threat is Not Imminent"

    Thats pretty close to the US saying it will not support a military campaign of aggression against Iran.

    The second story is about Obama himself. You would think that if someone just spent a week deciding whether to listen to The Masters, or save Humanity, that they would deserve a bit of time off. So,where is Obama? Thats right. Marthas Vineyard. For 11 days with the Fam. Sounds like someone is beat. How is the media covering the story, though? 'Obama family to begin their 6th holiday of the year.' Looks like Obama is about to be thrown under the bus.

    The third and final story shows that maybe the message has already been received by Israel and they are backing down. Titled, "Israelis and Palestinians to Resume Talks, Officials Say," the article says negotiations will return for the first time in 20 months!

    Mr. Ure... Did we just avoid WW3? Or is the propaganda too perfect?

Ask me around Thanksgiving.

 

Bundled Troubled

Another potential cause of another flash crash could be the story develop0ing about the Mortgage Electronic Registration System which keeps record of which properties go in which bundle of mortgage-backed securities.

 

A good background article here goes into speculation that 62-million mortgages could be 'off the hook' (or maybe not) but the key thing to keep in mind is this:  If we see a major change in expectations about delivery in derivatives, could that ripple through to other derivatives, too, such that the whole hundreds of trillions worth of paper-based debt all goes up in smoke?

 

Oh, sure, that gets us deeper into the Depression.  What changes is the rate of work-out.  I won't even try to summarize all the moving pieces in the derivatives world right now, but it all comes down to one thing:  Sudden change is possible and anything that quickly changes future expectations is a bad thing when markets are on the technical edge of the abyss.

 

My long-tail MBS bundling friend has, in the past, expressed high confidence in MERS but I expect the people in Dresden during WW II thought they had a good fire department, too.

http://urbansurvival.com/week.htm