All Hands To Station

So, Mrs Flashbang has deserted us and is currently somewhere between Cumbria and Northumbria cycling a coast to coast route. That's my girl. Now, that leaves us with something of a change of regime domestically but nothing dramatic, we've been here before and discipline and routine are the order of the day. Stuff gets done. That is, right up until we arrive at this place for food and drink replenishment.

and this is a baby one in comparison to some

For most men, the supermarket trip is an elite participant sport for which they have had little or no training since young childhood, when they were dragged around by their short tempered mothers who never understood the importance of a quick sugar rush at 9am in the morning. Actually, watching badly behaved children is pretty good entertainment up and down the aisles. Take care though not to become obsessively distracted less you be mown down by a pensioner on a high speed mission on his mobility scooter to get to aisle 14 where the girl with the discount sticker gun is busy reducing the price of the tea cakes with raisins. In fact, the supermarket is alive with threats to the unwary. They include, but are not limited to, the wandering Wildebeest I described in Fat Delusional Birds and the unplanned 'just bumped into,' meeting with people you'd rather not stand and talk about nothing to for 20 minutes.

Sorry about the quality but it's a funny clip nonetheless

Then we have the wretched bloody store managers who think it's clever to play grocery hide-and-seek by moving entire rows of condiments and ingredients every six weeks to the nether reaches of the store, the check out assistant who takes the instruction to 'greet the customer,' as a personal lifestyle choice and questions you on 'your day,' as would the Gestapo and of course the moment when you realise that you didn't bring 8 'bags for life,' like the Missus told you to and you're now going to shell out for 8 flimsy plastic bags while attracting looks of contempt and disdain from the queues left and right of you who stare at you as if you're either a complete fool or are personally responsible for the deaths of baby seals and dolphins across the world.

This map becomes inverted though when women shop in supermarkets. Men lose any natural GPS in those places.

Let's face it, rather like childbirth, men are simply not designed for supermarkets. Too much nonsense, distractions, frippery and all out marketing psychological warfare which attempts to get us to do things we don't want to do. That simply reminds most men of their marriages. Most blokes could get by with no more than 30 basic ingredients, and that includes all the home hygiene kit, go home and knock up a pretty spectacular dinner. All of which could all fit in a much smaller retailing space than the modern iteration many of which are built on the scale of American nuclear powered aircraft carriers. We could call it a corner shop. Women though are made for supermarkets. Their normal mode of operations when shopping, say for clothes, becomes inverted when they walk through the doors of a supermarket. They hit the fruit and veg aisle with the sense of purpose of a Russian tank commander storming Berlin and go through the place like a freight train. Woe betide anyone who gets in their way, especially dazed men feeling their way around what for them, is alien space. That I fear, would mostly be me

 

 

 

Markets; Walking on Ice

You certainty do.....

An opportune time for a distraction into markets which despite looking firm optically are a lot more fragile and shaky beneath.

A poor start to the week then with the G20 joining the IMF and BIS with bubble warnings and of course TSCO which says it has uncovered a “serious” issue, is investigating and has suspended a number of staff; "Principally due to the accelerated recognition of commercial income and delayed accrual of costs". Yep, £250m is serious all right. Something the now suspended UK CEO can reflect on. The fact that small chocolate supplier Moo Free Chocolate had to threaten the firm with a winding up order to receive a payment more than three months overdue is a tell on the internal culture. Tesco is many things but from a market point of view its like a bank, you simply don’t know what is in there because clearly the management don’t. Today’s announcement does though, come after a long period of shall we say financial flair during which return on capital employed deteriorated while EPS increased. Terry Smiths article in the FT earlier this month gave a good précis.

 The Alibaba IPO came and went. Its market cap of $168bn at the offering price made it the 36th most valuable company in the world which clearly wasn’t enough for the market which pushed it up another 50%. Buyers don’t of course get shares in the company. Instead they receive units in a Cayman Islands holding company. It makes most of its money in China, lacks transparency and there is no lock up period for the $8bn worth of units that can be sold. Think I’ve heard enough.

Taper will begin to have a deleterious impact on markets; it has to. In effect, the Fed is draining liquidity with its massive position in securities issued by corporations and government. As issues mature and coupons are due, money will flow to the Fed from the issuers withdrawing money from the economy. It’s tightening in all but name and its not a great time for that to happen. The Fed delayed a cathartic clean out with QE but having kicked the can down the road we’re arriving at the spot where it landed. Velocity of money slowing and tighter lending are not what equities like to hear.

Hindenburg Omen back again to cheer us up

Market participants should be braced for more negative headlines and by now be positioned defensively. The market is in a fragile and precarious place. Thursdays first Hindenburg signal was confirmed with another on Friday. That means that we have a 25% probability of a crash in the next four months. In itself that’s something we can manage but with the timing coinciding with the negative divergence in the NYSE cumulative advance/decline line and the 23 year maturing Jaws of Death Megaphone Top pattern we have a confluence of indicators bearing down which ought to make us sit up and take notice.

On Friday, New Highs were 128 and New Lows 102, the lower being 3.14% above the 2.20% threshold. New highs were not more than twice new lows, the McClellan Oscillator was negative and the 50 day moving average was higher than it was 10 weeks ago. With the exception of the mini crash of summer 2011, a HO has been present in every crash for the past 27 years but there hasn’t been a crash every time a HO signal has appeared.

 The divergence in the NYSE Cumulative Advance Decline Line started at the beginning of the month and is moving rapidly. The depth is similar to that last seen in 2007.  We also see negative divergence in the Russell and NASDAQ 10 day moving average Advance/Decline Line.

 Despite the record high close in the Dow on Friday decliners outnumbered advancers with a ratio of 1.4:1. As we discussed last week, many parts of the stock market hit highs months and months ago and have been in decline since. Yet we continue to see headlines typical of euphoric phases such as those alluding to luxury goods, residential and commercial property, art and tech. That the Russell 2000 is at a 22 month low ought to be a concern for investors. UK small caps are in a better place but for how long I wouldn’t like to speculate.

The original expectation of a 5-10% correction is still good but these other developments are telling us that while equities may look good optically, in fact market psychology beneath the surface is quickly turning negative. The expected correction could surprise to the downside.

The SKEW Index which we discussed on Friday closed at 146.08; that’s the highest reading since 1989. This index indicates that option traders are pricing in a near record probability of a large move in the next month.

European equities will also reverse this week. Quite simply, take nothing at face value; equities are displaying multiple exhaustion signs and are walking on ice.

Commodities meanwhile are not making life easy for anyone. On the one hand, multiple commodities are at multiyear support points; on the other the broad based commodity indexes are not a picture of health and vitality. At some point liquidity will flow from equities into the commodity complex but right now they are signalling deflation. If these already oversold assets are hit hard again there is a pretty simple message for equities there.

Gold, silver, Euro and Sfr all on support lines going back to the early 2000’s.

…. And the converse of those is the USD which is back at long term resistance and where bullish sentiment is plentiful.

Crude is back to 5 year support which really needs to hold.  It could drop rather a long way if it fails. Oil is probably waiting for the dollar to top but the rest of the commodity complex is unlikely to get a lift unless oil is leading.

Gold bulls need to be prepared. If they're not yet in the bunker they should be.

This week could be a bad one for precious metals. Fasten seat belts and cross check. Gold is sinking into its capitulation phase. It’s taken a while. I first decribed this in a piece called “Panic and Opportunity,” back in April. “A failure there, ($1280), will demoralise gold bulls but it will portend a more significant fall to the Dec low at $1180 with a possibility of the $1050’s beyond. A collapse to those levels would obliterate sentiment, create forced sellers and create the conditionality required for a final bear market cathartic cleansing thereby forming a firm base from which to move into a multi year bull market. That point of maximum pain will be the point of maximum opportunity but it will feel gut wrenching to pull the trigger when everyone else is racing round with their pants on their head.” Not much to add to that.

We can expect a reasonable bounce from daily cycle lows in the precious metals but most rallies will be met with more selling. We need to get through the cathartic washout to create the foundation for a long term rally.

In summary then, we’re about to see the kind of volatility usually associated with  the second half of September. Nothing unusual there but given the fragility of markets which has been largely ignored by the media surprise moves, and risk, therefore lie to the downside.

Unrest in Libya and Haslemere

Yvonne Fletcher.... murdered

With Gaddafi and his despotic regime on their last legs I shed no tears; but keep a thought for PC Yvonne Fletcher, murdered by his henchmen in St James Square and the many, many soldiers and civilians murdered by the provisionals and INLA with training and weapons supplied by Gaddafi. The brutal murder of 270 innocents on PanAm Flight 103 should have been grounds enough to remove this lunatic almost thirty years ago. Indeed, my old company was dispatched to clear up and the impact of PTSD on those men is still very much a live issue today. I hope the bastard swings.

Tony Blair

Well, it's good to see that appointing Tony Blair as a Middle East peace envoy is going as swimmingly as those of us in this country who know him so well could only expect. So far, we have most of North Africa ablaze, with growing protests as far East as China, (small and known as the Jasmine protests), as far South as Zim, as far West as Wisconsin and as far North as Haslemere when yesterday, as bad luck would have it, Mrs Flashbang went binky bonk Cloud 9 when the washing machine died. Trying to be helpful, I pointed out that "we used to handwash things all the time in the Army," which almost resulted in me going the same way as the LG direct drive washing machine. 
USS Enterprise (CVN 65) transits through the Suez Canal
In response to the turbulence, (in the Middle East; they haven't yet offered assistance to middle aged men in Haslemere under domestic duress), the Americans have sent what appears to be a very large bit of US Navy and parked it close enough for the Iranians to notice, lest the Iranians harbour intentions to exploit the unrest. The Royal Navy, (who's very role in life used to be to send gunboats at the first sign of uppityness), meanwhile has a somewhat smaller presence which probably won't be growing very much given there's not an awful lot of it left, as with yet more inspired planning, we've sold most of our ships to scrap metal dealers in Turkey and to Third World dictators........................ oh dear...
Actually, we don't have much of anything left in the cupboard. If the rumoured new cuts go through, by 2015 the Army will be exactly half the size it was when I joined. Still, we can always enlist the thousands of kids on YOP schemes who work for Tesco's on minimum wages which appears to account for an aspirational career these days,
from Think Defence

 

Falklands & Fatties

Obesity is, apparently, a growing crisis. Too many fizzy drinks and chocolate bars and not enough exercise. A good war helps to keep the lard off. I recall a Welsh Guards instructor proudly announcing to the course that, "The Guards had more than their body weight in Mars Bars with them on the ships to the Falklands." I enquired if that meant Guardsmen, "were worth their weight in Mars Bars," but he oddly didn't share my sense of humour. Anyway, I largely blame the relentless spread of supermarkets for the expanding girth of the population which brings me to one of my favourite topics, Sainsburys and Tesco's in Haslemere.

Our supermarkets are refreshingly sociable places. It's difficult not to bump into someone you know there and indeed, that's just what happened to me the other day. Now, we don't appear to have too many really large shoppers in Haslemere of the type I've come across elsewhere. The odd one of course but not too many. You know the type I mean, the ones who waddle along in herds until they get in close proximity to the iced bun shelves and start to perspire when they get a whiff of freshly baked bread. Ordinary shoppers and small children rush to the safety of the whole grain bread section as the tubbies develop a speed wobble, thundering toward the iced buns. You can see the manager twitching nervously as the man-made fibres they're wearing begin to smoke and he lifts his radio ready to shout on the tannoy, "heavy lifting gear to aisle 13," if they spin out of control. Mercifully, most of the time they make it and graze peacefully on eclairs, jaffa cakes and of course, the iced buns on discount.

Anyway, there I was the other day and bumped into a friend. I glanced at her trolley, (as you do), and saw it was piled up with chocolate. She then did a very Haslemere thing.

"It's not for me," she said. "It's for the boys. We're going skiing and you know how expensive chocolate is in France. The boys don't really like their chocolate anyway."

Right you are love............. your little secrets safe with me.....