Markets Continue To Melt (higher!)

IMG_20170722_062043_633 Macro   The Bank of Japan (the central bank) left rates on hold at -0.1% and also revised its timetable for achieving 2% inflation to 2020. There is a quote that goes something like “inflation is the easiest thing in the world to create, except when you need it.” Before the financial crisis, the only concern was that of inflation. The crisis was a deflationary event that fortunately did not create a deflationary debt spiral but global GDP has not really gotten going, for developed countries anyway, and countries are struggling to get inflation to levels that would go with healthy growth. The Great Depression from almost 90 years ago cast a pall over the country for decades and that appears to be a possibility with the Financial Crisis. One difference (there are many) is that developed countries have demographics working against them, moreso Japan and Europe. If
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Is A Minsky-esque Moment Coming?

The weekly Market Update is posted and includes the following; In several previous weekly updates we have talked about volatility in political headlines increasing but not being matched by equity market volatility as measured by the CBOE Volatility Index. In addition to the above mentioned volatility in the slope of the yield curve, WTI has become more volatile as measured by the VIX for crude oil which can be tracked through symbol OVX. Since March 1st it has increased 19% while the VIX has declined 26%, closing last week at 9.51. Please click through to read the entire update. The rear of a Type 4 engine that I believe is from the Tonto National Forest in Arizona. Forest Service trucks usually are usually numbered with a state abbreviation like AZ or CA, then a three letter code for the forest like TNF in the picture and then the engine
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Even The “Experts” Get It Wrong Occasionally

My latest post for Alpha Baskets is published and includes the following; The best example of why this is, comes from the tech wreck. For a while, the options market appeared to be giving money away, you could sell a semi-deep out of the money put on a $300 stock and easily bring in a couple of thousand dollars. This worked for a time and then the crash came and put sellers were paying $250 for stock trading at $80 on their way to much lower prices. That’s permanent impairment of capital, Holmes. Please click through to read the entire post. Mendocino National Forest parked along side Goodyear AZ Fire Department 19984072_1972669693014474_2512660207258284605_o Private contractor type 4 engine 19944544_1972072786407498_899255900746100764_o Bureau of Land Management law enforcement 19800728_1970712076543569_5993159684632831630_o

Do Investors Want More Correlation?

The weekly Market Update is posted at Alpha Baskets and includes the following; The history of earnings recessions was that they lead to economic recessions but this did not happen (yet?). This is one of several supposed to’s in the aftermath of the crisis that did not pan out as people expected. Another one was maintaining a zero percent interest rate policy would cause extreme price inflation and obviously CPI has been floundering for years, the bigger risk to ZIRP arguably was deflation and luckily things didn’t play out that way either. Please click through to read the entire update. A couple of pictures of Klamath National Forest Water Tender 17 filling up at our station house during the Goodwin Fire. 19956671_1970615489886561_7828923903476050722_o And 19956661_1970615533219890_6778878720455516007_o Finally a type 6 from Timber Mesa Fire 19800711_1970649433216500_5894785373895201289_o

The Goodwin Fire

On June 24th a fire broke out southeast of Walker that was quickly named the Goodwin Fire (pretty much any fire bigger than a smoldering stump gets a name). The terrain was very thick with manzanita and chaparral at the lower elevations (about 5000 feet) and Ponderosa pine higher up. This was what the smoke looked like from my house around 4-5pm on June 24th. 20170624_180022 backlight At around 6pm on that first day I went out with one other firefighter to scout the fire. 19956699_1969625279985582_607584234805462602_o There really wasn’t much to do or worry about for a couple of days in terms of an immediate threat but we knew very early that it was going to be declared a Type 1 incident, the most serious, because of how tricky the terrain was and the massive values at risk (houses). I got a call on Sunday from the Type 1 Incident Management Team (IMT)
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The Unfightable Wildifre

My latest blog post for Alpha Baskets looks at the overlap between wildfire behavior and stock market behavior with inspiration taken from the Goodwin Fire which for a time was unfightable. We caught a huge break with the weather last Thursday. From the post; There are certain fire behaviors that need to be understood as basic building blocks of understanding. Much like with markets, these building blocks aren’t infallible but do account for the vast majority of fire behavior. Understanding the basics is likely to reduce panic. As an example, at night, fire crews will conduct burning operations. Fire is less active at night because the temperature is lower and the humidity goes up. Fire tends not to rip at night so burning out removes fuel that it might otherwise rip through during the day. This night burning creates smoke that tends to hang low in the morning, trapped under
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Jawboning Works?

The weekly Market Update is posted at Alpha Baskets and includes the following; The yield on the Ten Year US Treasury Note jumped 16 basis points to 2.30%. To the extent a flattening curve leads to an inverted curve, the FOMC was in a bit of bind but for now, anyway, appear to have steepened the curve giving them more flexibility to hike later, assuming the recent steepening sticks.The euro jumped above 1.14 which is the highest it has been against the US dollar in 14 months. The steeper curve should be good for bank stocks and it was, with one of the larger bank stock ETFs rising 3.8% for the week versus a slight decline for the S&P 500. Please click through to read the entire update. The last week has been one of the most amazing of my life for both good and bad
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