Trading Blog: TnT Group

At what point is the Fed and Bernanke going to realize that we and the world are experiencing higher inflation?

It seems as if the rest of the world is beginning to realize it and we are late to the party. The UK is close to raising rates, India recently raised, China is looking to cool growth, and the ECB and Trichet are becoming increasingly hawkish with their rhetoric driving the euro up and in turn making inflation in the US more relevant.

Why does the Fed not see what is plainly on the wall? It is because they are all economists and do not stray away from their “models” that they were taught at their ritzy schools. They believe that CPI ex food and energy is the correct way to look at inflation. How is that the right way to look at things? Food and energy, in my opinion, are two of the key and crucial aspects of peoples lives. Everyone knows what is happening with food prices and commodities in general. No matter if it is cotton, beans, corn, oil, gold, etc. Everything is increasing in price and becoming more expensive to buy.

The problem is that the people who make decisions on whether or not we have inflation do not stray away from the models. The perfect example of this is Rick Santelli and Steve Liesman on CNBC. Liesman, who is an economist, always argues that the Fed is doing things right by not looking at food and energy. He is in the same boat and does not step outside of the box to look at prices and inflation. Santelli on the other hand is a trader, has been in the markets for years, and does not have certain models to follow. He understands how things actually work in the real world. He understands that at some point these increases in commodity prices will eventually get passed along to consumers and we will ultimately begin to feel the effects of inflation.

I was listening to Warren Buffett this morning on CNBC and he began rattling off all of the commodities that he uses in the companies that Berkshire owns or is involved in. He then told everyone to go and buy their underwear today because soon enough people are going to feel the pain of increased cotton prices. This is the exact take the the Fed needs to take. Buffett is not an economist and he is not restricted to “models”. Buffett is a business man and investor who is out their in the world, buying these commodities to produce goods, and realizes their increased costs will ultimately be pushed through to the consumer.

At what point will the Fed begin to realize this? Will it be too late? Hopefully not and hopefully they step outside of the models and look at these markets and realize these prices are beginning to be a problem and a concern for everyone.

Hello all.

Andrew here. The inverse oil to equity trade has nearly vanished and was only a good trade for a few days. It is amazing how fast those type of trades go away. The trade has become farely confusing intraday looking at the net changes. We have mentioned this before and have talked about it within our office, it feels like the only way you can make money some days is if everything is lined up. By that I mean if you want to sell equities, in this current middle east crisis, you must have bonds rallying or positive, oil rallying or positive, gold rallying or positive, as well as  yen and swiss rallying or positive. Wihout that perfect type set-up happening it is hard to put a trade on and things do not entirely make sense.

Looking at a longer term picture and trying to flush out that intraday or intra minute junk you can try andget a feel for what you what to do or how to attack things. Looking at all these markets I am starting to look to be bearish gold. You have bond which are staying weak and now you have the risk type currencies finally making a turn lower like we were talking about before with the yen and swiss.

Looking at a daily chart (click on charts to see larger view) you can see the swiss has come off from 10869 to 10680 since March 2nd. Same goes for the Yen over the same time period. It has gone from 12261 to 12036. You are also gettign an equity market that will not stay down. it is a resilient piece of garbage that makes you want to beat your head against the wall. I have given up on trading the equity markets. I am bearish them which is an impossible stance to take because you are fighting the FED pumping them up. I had two options, stop trading them completely until all the QE nonsense is over or like our friend Tony LaPorta over at www.nakedtrader.com says, “Just close your eyes and buy them.” I cannot do that when i have a bearish stance so my only option is to stay out of them completely.

We heard a think tank come out and say that some FED officials are becoming restless with rates so low. This coupled with the safety currencies beginning to turn slightly lower makes me start looking at being bearish gold. The only problem I have with being short is that we still do have tons of problems in the world and that could ultimately put and keep a bid in that market. But looking solely off of other markets (Swiss, Yen, Bond)  I am starting to get a bearish mindset.

Good luck the rest of the trading day.

Hello all,

None of us here at TnT have posted a blog in some time. Sorry for this. We have completely moved offices from the Board of Trade in downtown Chicago to Homer Glen, a southwest suburb of Chicago. So that has taken most of the time that we have had the last week or so. We are all completely set-up now, and wow, what a couple of days to get back into the action.

Also, I am no longer trading overnight, so there will not be any overnight recap webcasts up anymore. I will however put up some daytime ones and will also begin to put some “tweets” up on twitter. Because of the move I will be trading during the daytime session.

Let’s get to the markets and the world for that matter…..

and what a nutjob of a world it is right now. It is hard to really understand and trade off of everything that is currently happening in the world.

-Numerous oil producing countries governments being overthrown

-Wisconsin (where I was born and raised) holding protest over government’s anti-union stance

- ECB beginning to throw around rate hike talks

-Federal Reserve may cut QE2 short

-Eurozone countries still facing problems

-China trying to cool their growth

-Inflation? Deflation? Commodities through the roof

-Iranian warships (Warships and Iran!) crossing through Seuz Canal for first time since 1979

As a trader, and as a group that is looking at these markets through a macro scope, it is becoming increasingly difficult when you have so many different scenarios pulling and playing tug of war with eachother.

We are finally, however, starting to see some volatility in these equity markets, which is always welcomed. These anti-government protests going on in the middle eastern countries, including Egypt and especially Syria, have really thrown some chaos into equities and the oil markets.

Libyan leader Muammar Gaddafi, who in my book is officially a lunatic, spoke on the national television station there. It was thought that he was going to possibly give up some control, which he somewhat did, but he also went on a tyrant that makes you shake your head. Below are some quotes from Reuters (Click for Reuter’s Article) which makes you believe that these protesters will not be done trying to push their will on the government:

“I am not going to leave this land, I will die here as a martyr….I shall remain here defiant.”

“Chase them, arrest them, hand them over to the security (forces),” he said of the protesters. “They are only a few, they are terrorists.”

“No sound person has taken part in these actions, they are all children.”

“”From tomorrow, families collect your children, leave your homes, all of you who love Muammar Gaddafi, go out the streets, secure the streets, don’t be afraid of them.”

To me those sound like fightin’ words, and I find it hard to believe that these protestors, are going to curl up into a ball and stop fighting just  based off of some words that Gaddafi is letting fly out of his mouth, especially after he called for air strikes on his own people!. But hey that’s just me.

That leads me into my next couple of  rants, why isn’t this dollar rallying? If people think the dollar is a safe haven, and it was during some trying times, then why isn’t it rallying right now? Is S&P down 25.50 handles today and 30 year bonds up nearly two points not enough to strike some fear into people and buy the dollar?

Couple of thoughts on this….First, I get the ECB may begin to speakabout raising rates in the next meeting, which would rally the euro  and ultimately hold the dollar offer. Brian and I talked about this a  little bit and it got brought up that shouldn’t high 150.00 to 160.00 levels in the euro already be a level in which a rate hike should be priced in and thus allow the dollar to rally on fear concerns?

Next thought on this…Are eurozone countries out of the shit-hole that they were in? I believe they still are in a pretty deep mess and have not solved any issues over there (a.k.a. Ponzi scheme…give Greece, Ireland, Portugal, etc some money to pay off debts even though they now just accrued even more debt…might as well have Maddoff be running the show). With this being said this euro should ultimately sell off on those type of worries.

But wait! The eurozone may begin to raise rates and that should keep the euro bid. Fine, I wont disagree with that, but wouldn’t raising rates right now on a bunch of, still, shitty countries still result in shitty countries and ultimately be bad for the euro?

Lastly, and then I will let you go, my final thought on why the dollar should rally but maybe isn’t. Maybe, like we said before with the tug and war, all the automated systems out there that were trading dollars off of commodities may still be turned on. In this case they see oil and gold skyrocketing and they want to be short dollars, no matter if it should go up on safe heaven buying. Now you just start to see a tug and war between the automated systems selling it off of commodities and those who want to buy it for safety and fundamentals.

All goes back into the nonesense that this world is in and how difficult it is to get a read on _____ (insert: some, most, all) of these markets.

With all of the news that Axel Weber will not become the heir apparent to Jean Claude Trichet there will be continous speculation and rumors of who will take Weber’s spot as the top choice for the European Central Bank’s presidential position. Trichet’s eight year term non renewable tmer will expire this coming October and from what I have read the decision to name his predecessor will come during the Summer months.

It is crucial to begin to learn about the possible candidates now as the rumors will undoubtedly start flying around. Why wouldn’t they? Today, like I said in my webcast, there were rumors of the Saudi King, Abdullah, being dead. Turns out they were just rumors. So if it’s possible for rumors to start about a King being dead then it is not out of the question for the rumor mill to start throwing these gentleman’s names out there sooner than later.

I didn’t go into any detail about any of these possible successors. I basically gave the bare minimum; picture, residence, stance on rate (from what I have read), and a link to more information about them. So if you happen to find out more about them or find contrary information please let me know. Or if there happens to be more candidates out there please leave a comment and I will try to get them up there.

Not a ton of info on here, but it is solely for the purpose to begin recognizing these names and understanding whether they are hawkish or dovish. When the news broke that Weber would not be in line to become the next president at the ECB, the euro made some fairly violent moves. It may do the same when it comes to these names being thrown out on the wires, whether another super hawk, such as Weber, will be in line for the position, or a dovish candidate may push to the front of the line.

– Mario Draghi of Italy

– Stance on Rates: Moderate

- Click For More Information on Draghi

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- Yves Mersch of Luxembourg

- Stance on Rates: Hawkish

- Click For More Information on Mersch

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- Erkki Liikanen of Finland

-Stance on Rates: Moderate to Hawkish

- Click For More Information on Liikanen

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- Vitor Constancio of Portugal

- Stance on Rates: Dovish

- Click For More Information on Constancio

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- Klaus Regling of Germany

- Stance on Rates: N/A

- Click For More Information on Regling

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- Didier Reynders of Belgian

- Stance on Rates: N/A

- Click For More Information on Reynders

Hello everyone,

Sorry for not posting a webcast or writing on the blog this week so far. I had a meeting to attend in the suburbs on Monday and now Chicago has been hit with one of the worst snowstorms in recent memory: 65 MPH winds, 19 inches of snow and snow drifts up to 6 feet tall. So a lot of Chicago is currently shut down. Hopefully I can get back into the office tonight and get the webcasts as well as twitter updates flowing again.

As for these markets….equities will just not give. Does not matter if the Middle East is in complete turmoil right now with violent protests happening in Egypt. The first day that everyone really focused on Egypt, which was Friday January 28, we saw equities get hit very hard off of its highs after U.S. GDP figures and we saw oil (Nymex) make a large (over $3) move higher.

Now equities are right back, with S&P settling over 1300.00 and the Dow settling over 12,000. Nymex crude oil has stalled out a little bit after its initial rally up with Brent Crude, which is the oil benchmark in Europe and Asia, now holding above $100 a barrel.

The first reaction day that I mentioned above was what I believe was mostly off of the news that people were becoming increasingly worried about the Seuz Canal possibly being shut down. I feel like this news was the biggest factor in these markets. The talk of the Seuz being shut down has now subsided and we now see equities back higher and Nymex Crude holding steady and not pushing to that $100 mark.

Equities are not worried about any of the protest, even when becoming violent, over in Egypt. It seems as if the latest news is that Egyptians are now attacking each other based on whether they are against Mubarak or for him. Seems like the only time equities poked their heads to the bearish side was when there was the Seuz Canal talk.

Until these equities start showing that they care about what is happening or there is further talk concerning the Suez Canal you have to look at the equity markets as if they do not care right now because that is how they  are trading.

It is hard for me to say that as I am still overall bearish equities and the world in general, but for months and months now nothing has stopped the bullish push higher. Not quite sure what, if anything, will push any of these markets lower.

Well the highly anticipated nonfarm payrolls number and unemployment rate came out.

A word that I think describes the majority of feelings about this number is shitty….

Let me explain:

Shitty Number 1.There was a ton of talk of a seriously higher nonfarm payrolls number. The initial estimate was for +140K but once the sizzling ADP number came out on Wednesday there was a ton of  ”market talk” increasing that number, some talks even of a +400K number! So to get a number that barely scratched +100K is well shitty. Yes, the unemployment rate went down to 9.4% from a previous 9.8% but people care about how many jobs we are adding monthly. Very very disappointing addition of jobs after such a highly optimistic number was expected. Shitty

Shitty Number 2. I made money off of the initial call of +108K, sold S&P Minis…got out as soon as the 9.4% came out. That was the bottom of the equity markets, because now people are like well 9.4% is a good number, which will lead into shitty number 3 when I get there. The point I am trying to make here is that these markets are going to be confused again on what is going on…was it a good number? Was it a bad number? Should we chop around constantly again? These two numbers are going to lead back into shitty trading markets where things are very unsure and its just back and forth.

Shitty Number 3. This doesnt affect me all that much and doesnt affect my trading much at all but it just is annoying. The talking heads on TV are now going just jabber back and forth about this number and how the 9.4% was good so lets say everything is fine. Just annoying, thats all that is really shitty about it. That is just me though.

I got out of my last trade at 7:32:51… after that 9.4% came out I kind of threw my hands in the air and thought we were just going to see a chopfest the rest of the day. I thought that was what we were going to see last night and I was wrong, so maybe I will be wrong about this too, but I don’t really want to bang my head against the wall if it does happen.

Have a good weekend everyone, and let’s hope all of this nonsense doesn’t cause shitty markets going forward.

I receive Bill Gross’ Investment Outlook in my email every time he comes out with a new one on Pimco’s website. The newest one he put out is an amazing piece on his thoughts about numerous topics including Americans blindness towards the ever increasing deficit, the ultimate destruction of our future generations due to our selfish spending, and how we do not realize the effects of a lower dollar on our wealth.

Click on the link below to see the entire article.

http://www.pimco.com/Pages/OffWithOurHeads.aspx

Bill Gross is very forthright in his views. Brian and I have had many conversations about the exact notion Bill Gross is explaining when he goes into the fact that we think we are all richer when the stock market goes up by 10% but the dollar is depreciating at the same time, basically wiping out that appreciation in the stock market.

People (because it is not that visible to most) tend to forget that when the dollar goes down we are losing wealth and purchasing power. Because we got into the mess of becoming much more of a service country instead of  the manufacturing country we once were we need to import most of our items which adds to the problem.

I am glad someone, especially someone with such a strong name as Bill Gross, came out and said our future is in trouble. Everyone wants to get out of this mess right now, including Washington, because it does not look good on them if we are in this for a while. No one is taking into account the absolute shit storm we are creating for future generations. Trillions of dollars in the hole is going to take its toll, and it is going to to hit hard at some point.  If not now, then our children and possibly their children will.

I am moving to Canada…

Good morning all. I hit on this a litle bit in my webcast. I wanted to go a little more in depth about it though. When I left for vacation over the holidays I left a gold and S&P market that seemed to be somewhat correlated. To say it was a great correlation would be an absolute lie. However it seemed like gold was being traded solely as part of the commodity basket and was rising with oil, copper, rubber, etc which was also followed slowly but surely by equities and the free money that was being pumped into them.

Now after my first day back from vacation and stepping back into these markets it seemed as if there was a definite change of scenery. Overnight gold was getting hit harder than Brett Favre’s head on the frozen field in Minnesota while equities, continuing there impressive day from yesterday, gradually rose higher (as I type S&P 500 Minis are up 4.25 trading 1269.50 while gold is down 14.7 trading 1408.2). This was not a small divergence from what had been happening before I left. This was a farely large change of thought. Are people or the markets now thinking, more than we have in a while, that the economy may be on track?

Below is a daily chart showing the somewhat correlated gold and S&P markets and the slight divergence over the last few days.

The overnight session really made me think that way. We had a ton of risk on trading happening. Minis up 4.25, euro trading up 30 some pips, yen getting hit farely hard down 87 pips, debt (both US and European) down a good amount, and gold getting clobbered. Oil had a tough time doing anything overnight. I understand it. Do they want to rally it because of equities rallying and a slight sell off in the dollar or is it confused because gold is getting pounded. It eventually rallied slightly, as it should if the markets are showing signs of adding risk and the outlook being somewhat positive.

Below is a 5 minute  chart of last night session and the distinctive inverse relationship of gold and Minis.

I am not coming out and saying that our economy is back on track and let the jobs rain down from the heavens. I still whole heartedly believe we are nowhere near where we need to be. My point is to keep an eye out for this inverse type relationship as it will tell a story as to risk on or risk off trade. It is hard to deny how these markets moved last night and is something to pay close attention to moving forward into this new year.

All of us here at TnT Group wanted to wish everyone a happy holiday. Thanks to all of our readers and followers for continously checking into our blog and adding to it.

I believe it was a tough year for most traders. All of the uncertainty in the world coupled with the continued rise of automated systems and high frequency trading, and billions of free money from the government  made it difficult to have any consistancy in the markets. With all of that TnT Group was able to budge forward and get through a very tough trading year. And once we get through the holidays maybe Obama Clause and the Bernank Clause will stop giving out gifts of free money and instead give the gift of JOBS!

We want to know how to improve upon our blog and what you may want to see on it. If anyone has any suggestions please post a comment on this post with your thoughts, opinions, scrutinies, etc. We would be grateful for any feedback that could help improve on what we have started.

Also, if you haven’t been to the site yet please check out Automated Trader Magazine’s website at www.automatedtrader.net over the holidays as well as the beginning of next year. TnT Group was fortunate enough to be interviewed for the 1st quarter edition of their magazine. We will be posting the interview in its entirety on our blog and website once the edition of the magazine is published in the beginning of this coming year.

Once again we hope everyone has a wonderful and safe holiday. Here’s to good trading and hopefully next year isn’t a dump!!

Andrew Turner here.

Market is digesting the Obama deal for extending the tax cuts.  Seeing the dollar rally all day and the stock markets give up their gains makes me think this was largely priced in and now were coming into a fair value.  I remain bullish above 1204-1206 in the S&P mini.  This tax cut should not benefit the dollar and I see it trading flat to lower into the end of year and then getting hit in January.

Debt is sharply lower again and signaling to me that EVERYONE except for Bernanke and his ilk sees inflation looming in this market.  Precious metals are  taking it on the chin right now.  A recent article in the Guardian brought up JP Morgan’s supposed large short silver position.  Supposedly the precious metals markets have been manipulated for years and today’s late action in them makes me lends me to believe this theory.  JP Morgan is also said to have bought an estimated $1.5 billion of copper (to back an ETF fund).  I hope they realize its not fungible into the silver contract. If silver gets back to $25 I am buying more.  Looking to sell rallies in debt.