weekly strategic plan 03192012

7/28/2019 Weekly Strategic Plan 03192012

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Liquidity Cycle

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The S&P Index closes above 1400 this week as bonds broke down and money ow to equities from somewhat reluctant investors in search

of yield. Volumes remain unimpressive but new and higher price prints and enormous central bank liquidity creation is producing more

positive sentiment. A nancing mishap and things will go pear-shaped but otherwise I expect the trend to keep t rying to advance through Tax

day in mid April. Beyond that time I am less condent.

The Liquidity Cycle Indicator surged higher as shown in the previous chart and the ECRI Leading Indicator weekly index reluctant keeps follow

falling behind.

Flows into tax deferred and retirement accounts are deployed pretty regularly till ling dates April 15th each year. These ows are so inuentia

see some seasonal tendency for prices to advance into that period and top out at least temporarily.

I believe this tax related seasonal tendency will hold again this year but then the market will need additional drivers to avoid at least a correcti


2/8


Heatmap from FinViz.com

The past week saw price action far more signicant than the breach of the 1400 level in the S&P. Late week break of support in the interest ra

support were far more signicant. Perhaps this move in the yields will not last but it cannot be ignored either way. This hints at the possibility th

of future ination may be growing stronger than the recent fear of debt deleveraging and deationary pressure.

Both 2 yr yields and 10 yr yields surged through resistance out of 6 month congestion ranges. The 2/10 rate curve also turned up which can me

economy is strengthening but with central banks actively holding rates down may also indicate a market signaling that enough is enough to mo

ease.
http://www.finviz.com/map.ashx?t=sec&st=w1http://www.finviz.com/map.ashx?t=sec&st=w1http://www.finviz.com/map.ashx?t=sec&st=w1


3/8


The overlay of 2 yr yields from US, UK, Germany, and Japan reveal 3 of the markets with potential turns higher. All of these 2 year rates are belo

not very attractive.

The German Bund future too fell through support down to its 200 day MA.

A quick glance at some of the 5 yr sovereign CDS in Europe reveals the steady calming of those markets under the inuence of LTRO money policies.

The exception is Portugal which is rapidly gaining the wrong kind of attention, even as questions begin to trickle in suggesting that Greece will need

even more attention later in the year.


4/8


Agricultural Commodities

Softs


5/8THIS COMMUNICATION IS INTENDED ONLY FOR THE USE OF INFINIUM CAPITAL MANAGEMENT, LCC AND ITS EMPLOYEES TO WHICH IT IS ADDRESSED AND CONTAINS OR MAY CONTAIN INFORMATION THAT IS PRIVILEGED, CONFIDENTIAL OR EXEMPT FROM DISCLOSURE UNDER APPLICABLE LAW. If the reader of this communicati on is not the intended recemployee or agent responsible for delivering to the intended recipient), you are hereby notied that any dissemination, distribution, or copying of this communication is strictly prohibited. If you have received this communication in error, please immediately inform Innium Capital Management, LLC and then disregard and delete this communication. Do nretain any copy of this communication.

The crude curve in both Brent and WTI moved higher as prices pushed higher by weeks end. The very back end price moved slightly more t

the front. That would seem to indicate that markets are raising long term f orecasts for average prices and trying to draw more supplies into lon

term storage. The spread moves were not large but as Gartman says attention must be paid.

Meats

Energies


6/8THIS COMMUNICATION IS INTENDED ONLY FOR THE USE OF INFINIUM CAPITAL MANAGEMENT, LCC AND ITS EMPLOYEES TO WHICH IT IS ADDRESSED AND CONTAINS OR MAY CONTAIN INFORMATION THAT IS PRIVILEGED, CONFIDENTIAL OR EXEMPT FROM DISCLOSURE UNDER APPLICABLE LAW. If the reader of this communicati on is not the intended recemployee or agent responsible for delivering to the intended recipient), you are hereby notied that any dissemination, distribution, or copying of this communication is strictly prohibited. If you have received this communication in error, please immediately inform Innium Capital Management, LLC and then disregard and delete this communication. Do nretain any copy of this communication.

Environment

The environment continues to give volatility readings that qualify as quiet or extremely quiet. Only cocoa this past week had a reading of volatile. The

news ow and the number of potential problems make it seem like all kinds of chaos is going on. But not in markets,yet. Many markets are exhibiting

trend characteristics but not volatility.

Supporting Information and Commentary

I received the following communication from my associate John Stotts and the comment and charts are quite pertinent so I am including John

Things are lining up to signal a top (permanent or temporary, I dont know)heres COT for managed money net longs...hitting highs for past 4

years.

Second chart is the COT vs. the SX2 charttalk about correlation. (SX2 in orange; COT data in white)

Lastly, I included the X2/X3 spread below t hat for good measure.

Thanks John

Note from BBL : This last chart is a bullish message but the message of the rst two charts is that the trade is already popular and may need a

correction to shake a few people out.
http://www.ft.com/intl/cms/s/0/e0edce8e-41e1-11e1-a1bf-00144feab49a.html#axzz1nUsUlRIm


7/8


A lesson to remember from Dennis Gartman:

We have learned few things that we can count upon in the world of trading but we count upon this: when the term structures of any

carry charge market move bearishly it is unwise to trade bullishly. It may not be wise to trade bearishly; but it is almost always unwise

to trade bullishly.

Consumer price ination still moderate

Ination according to the CPI remains moderate: no surprises. As the chart above shows, ination is running in the 2-3% range, regardless o

whether or not you include the contribution of energy prices. This level of ination is very close to what we have seen over the past decade. F

reference, on an annualized basis, the CPI is up 2.5% over the past two years; 2.4% over the past three years; 2.3% over the past 5 years; a

2.5% over the past 10 years.

GEOPOLITICAL GURU: Theres A Bigger Threat To Oil Prices Than Iran

(This is only a portion of the article and the presentation included go to the link at the end of this note to see the full article)

All the headlines seem to be focused on the threat from Iran whether it is Iran halting oil-exports, Iran threatening to cut off access to the Strait of

Hormuz, or other countries potentially striking on Iran.

But Alastair Newton, Nomuras senior political analyst thinks the real threat to oil prices may come from Iraq:

...Both the governance and security situation appear to us [to] have deteriorated further since the US withdrawal (the latter borne out by rising civilian

deaths from acts of terrorism), obliging us to stand by our earlier conclusion that, of all the countries in the MENA region, Iraq currently appears to be

the one most likely to succumb to civil war.

Total loss of Iraqi oil 2.7mbpd of which 1.9mbpd (equivalent to pre-crisis Libya and Yemen combined) would be a serious blow to global

oil supply. Indeed, if our assessment is correct that a military strike against Irans nuclear programme may disrupt global oil supply only

briey (see below), we believe that Iraq may pose a more signicant threat of a protracted oil price hike than Iran. In other words, for all the

headline attention which Iran is likely to continue to attract, we urge market participants to keep one eye over their shoulder on the Iraqi side of the

Gulf.

In terms of a sustained downturn in oil supply and related increase in prices, Newton argues Iraq could prove to be a bigger threat than an Israeli

strike on Iran.

Read more.With Rising Wages in China, Production is Moving

From Mark Perry at Carpe Diem

1.From the WSJ on Wednesday:

Global companies already have been facing higher labor prices in China over the past year, despite a weak global economy, as workers demand

a greater share of the countrys economic boom. In recent months, the pressure also has intensied in countries across Southeast Asia that havemarketed themselves as alternatives for companies seeking to escape Chinas rising costs, leaving those companies now with fewer places to move.

Over the past year, for example, U.S. menswear retailer Jos. A. Banks Clothiers has moved some manufacturing from China to cheaper locations in

Asia such as Indonesia, as the price of labor and goods increased.

2. And now even Chinese bicycle manufacturers are started to move production overseas:

Chinese bike manufacturers are beginning to look at expanding into new markets in Southeast Asia in the face of rising labor costs and restrictive

export duties to Europe.

Manufacturing has already begun shifting inland from Chinas coastal cities as labor costs have risen, and now producers are beginning to look

overseas to keep prices competitive on low-end mass production.

The Fact That Iceland Is Repaying Its IMF Loans Early Seems To Suggest Defaults Work

Weve talked multiple times about how unique Icelands response to the crisis was putting bankers and former heads of state on trial, and forgiving

13 percent of the countrys debts.

The prepayments of the IMF loan seem to suggest that these tactics, along with the defaults, have worked. While the IMF has said it has some

reservations, the Icelandic economy will grow 2.5 percent, and will be at 2.5 to 3 percent in the medium term.

So, are these tactics a viable option for Greece?

Read more

There is nothing alarming about this level of ination in any sense. No sign of a big ination increase, and no threat of deation either. The Fe

absolutely no need to engage in any further quantitative easing or easing of any variety. The Feds next move will likely be to increase rates,

the timing of that move is unfortunately still shrouded in mystery. Recent action in the bond market (e.g., a 20 bps rise in 2-yr Treasury yields

a 40 bps rise in 5-yr yields) suggests that the Fed will begin tightening sooner than was expected just a few months ago. I t hink its reasonab

assume that we will see more of this action in the months to come. From Scott Grannis

Dylan Grice Explains When To Sell Gold

Full article here

Here is the summary line: : Eventually, there will be a crisis of such magnitude that the political winds change direction, and become bluste

forcing us onto the course of scal sustainability. Until it does, the temptation to inate will remain, as will economists with spurious mathema

rationalisations as to why such ination will make everything OK. Until it does, the outlook will remain favorable for gold. But eventually, maj

opinion will accept the painful contractionary medicine because it will have to. That will be the time to sell gold.

Why does Grice own gold?

The reason I own gold is because Im worried about the long-term solvency of developed market governments. I know that Milton Friedman

popularised the idea that ination is always and everywhere a monetary phenomenon but if you look back through time at inationary crise

ancient Rome, to Ming China, to revolutionary France and America or to Weimar Germany youll nd that uncontrolled inations are ca

overleveraged governments which resorted to printing as the easiest way to avoid explicit default (whereas ination is merely an im

default). Its all very well for economists to point out that the cure for runaway ination is simply a contraction of the money supply. Its just t

you look at inationary episodes you nd that such monetary contractions havent been politically viable courses of action.
http://scottgrannis.blogspot.com/2012/03/consumer-price-inflation-still-moderate.htmlhttp://www.businessinsider.com/alastair-newton-iraq-threat-to-oil-price-2012-3#ixzz1pW0oVfxShttp://mjperry.blogspot.com/2012/03/with-rising-wages-in-china-production.htmlhttp://www.businessinsider.com/iceland-imf-loan-2012-3#ixzz1pW2W05Vchttp://www.zerohedge.com/news/dylan-grice-explains-when-sell-goldhttp://www.zerohedge.com/news/dylan-grice-explains-when-sell-goldhttp://www.businessinsider.com/iceland-imf-loan-2012-3#ixzz1pW2W05Vchttp://mjperry.blogspot.com/2012/03/with-rising-wages-in-china-production.htmlhttp://www.businessinsider.com/alastair-newton-iraq-threat-to-oil-price-2012-3#ixzz1pW0oVfxShttp://scottgrannis.blogspot.com/2012/03/consumer-price-inflation-still-moderate.html


8/8


I hate to sound like the local rabid conspiracy theorist and in truth I believe most conditions attributed to conspiracy can arise propelled only

by normal human self serving behavior but either way I suggest you read the article linked just below. I nd this very disturbing.

We Are This Far From A Turnkey Totalitarian State - Big Brother Goes Live September 2013

In its April cover story, Wired has an exclusive report on the NSAs Utah Data Center, which is a must read for anyone who believes any pri-

vacy is still a possibility in the United States: A project of immense secrecy, it is the nal piece in a complex puzzle assembled over the past

decade. Its purpose: to intercept, decipher, analyze, and store vast swaths of the worlds communications as they zap down from

satellites and zip through the underground and undersea cables of international, foreign, and domestic networks.... Flowing through

its servers and routers and stored in near-bottomless databases will be all forms of communication, including the complete contents of

private emails, cell phone calls, and Google searches, as well as all sorts of personal data trailsparking receipts, travel itinerar-

ies, bookstore purchases, and other digital pocket litter.... The heavily fortied $2 billion center should be up and running in

September 2013. In other words, in just over 1 year, virtually anything one communicates through any traceable medium, or any record of

ones existence in the electronic medium, which these days is everything, will unofcially be property of the US government to deal with as it

sees t... As former NSA operative William Binney who was a senior NSA crypto-mathematician, and is the basis for the Wired article (which

we guess makes him merely the latest whistleblower to step up: is America suddenly experiencing an ethical revulsion?), and quit his job only

after he realized that the NSA is now openly trampling the constitution, says as he holds his thumb and forenger close together.We are,

like, that far from a turnkey totalitarian state.

That will be all this week as I am being visited by my 3 wonderful grandchildren and I do not want to waste the opportunityg getting to know

them as they change so rapidly. Have a great week.

March 19, 2012 Bruce Lawrence
http://www.zerohedge.com/news/%E2%80%9Cwe-are-far-turnkey-totalitarian-state-big-brother-goes-live-september-2013http://www.zerohedge.com/news/%E2%80%9Cwe-are-far-turnkey-totalitarian-state-big-brother-goes-live-september-2013

weekly strategic plan 03192012

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