My 2 Cents on the Dollar

Originally posted on Asymmetry Observations:

The U.S. Dollar ($USD) has gained about 20% in less than a year. We observe it first in the weekly below. The U.S. Dollar is a significant driver of returns of other markets. For example, when the U.S. Dollar is rising, commodities like gold, oil, and foreign currencies like the Euro are usually falling. A rising U.S. Dollar also impacts international stocks priced in U.S. Dollar. When the U.S. Dollar trends up, many international markets priced in U.S. Dollars may trend down (reflecting the exchange rate). The U.S. Dollar may be trending up in anticipation of rising interest rates.

dollar trend weekly 2015-04-23_16-04-40

Chart created by Shell Capital with:

Now, let’s observe a shorter time frame- the daily chart. Here we see an impressive uptrend and since March a non-trending indecisive period. Many trend followers and global macro traders are likely “long the U.S. Dollar” by being long and short other…

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Absolute Return as an Investment Objective

Originally posted on Asymmetry Observations:

Absolute Return objective fund strategy

In Absolute Return: The Basic Definition, I explained an absolute return is the return that an asset achieves over a certain period of time. To me, absolute return is also an investment objective.

Absolute Return as an investment objective is one that does not try to track or beat an arbitrary benchmark or index, but instead seeks to generate real profits over a complete market cycle regardless of market conditions. That is, an absolute return objective of positive returns on investment over a market cycle of both bull and bear market periods irrespective of the direction of stock, commodity, or bond markets.

Since the U.S. stock market has been generally in a uptrend for 6 years now, other than the -20% decline in the middle of 2011, we’ll now have to expand our time frame for a full market cycle to a longer period. That is, a full market cycle…

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The Untapped $140 Trillion Innovation For Jobs Market

Originally posted on TechCrunch:

Editor’s note: David Nordfors is the co-chair and co-founder of the i4j Innovation for Jobs Summit together with Vint Cerf. 

It’s a popular sport nowadays, discussing if tech is going to kill or create jobs. The answer is simple if you ask me. If we care more about tasks than about people, then tech will replace people. If we care more about people than about tasks, then tech will leverage people.

Think about it this way: I work in your company, I wash the dishes. You buy a dishwashing machine. You can either say “David, good luck!” or you can say “let’s rock!”

“Good luck” is the task-centered economy. You replace me with a machine. You lower the cost and raise the efficiency. In the innovation economy, this is the race against the machine.

“Let’s rock” is the people-centered economy. You buy a machine so that we can do…

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The carry trade’s bond doppelganger

Originally posted on MKTSTK:

The carry trade is an integral part of global financial markets. While in the past we highlighted the relationship between the Yen and the stock market, the simplest form of the carry trade consists of borrowing money at a low interest rate in one currency and investing it at a higher rate in another currency.

Given it’s deep liquidity, the US Treasury curve is a favored destination for flows related to the carry trade. When interest rates rise in the US it becomes increasingly attractive to borrow money in a cheap currency (such as the Yen) and use the proceeds to finance the purchase of a Treasury bond. For example, late last week yields on the US 30 Year Treasury bond rose above 2.5% for the first time since mid-January. At the same time the value of the Yen fell sharply against the dollar.

The relationship between the Yen and…

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Traders violently revise their expectations for interest rates

Originally posted on MKTSTK:


Look at the heatmap above: it shows the 1 minute correlation matrix for the US interest rate futures complex including the first 16 Eurodollar contracts and the Treasury curve. Unlike heatmaps of the stock market, this matrix is smooth from cell to cell: note the beautifully sloping gradient from the front end of the curve (GEH5) to the back (UBH5). No one would blame you for thinking that any market with such an ordered correlation structure must be one of the most efficient in the world.

As the second chart shows, however, the market has a funny way of shattering consensus opinion. Buoyed by the prospect of QE from Europe and stagnant prices at home, US Treasury bonds had begun to enter bubble territory. Short term interest rate traders bid up the price of Eurodollar futures, pushing back their expectations for the date of the first rate increase.

But early this week the…

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What You Need To Know About Zero Knowledge

Originally posted on TechCrunch:

Anonymity? Privacy? How quaint. We live in a world bedecked with ever more cameras, ever more sensors, ever more drones, ever more data, ever fewer things that can be hidden. TLS and Tor can hide your online browsing, true — but, realistically, everything important you do, online or off, can easily be audited and tracked.

True, you can still send private messages. Signal/RedPhone/TextSecure from Open WhisperSystems are the gold standard for secure messaging, and Dark Matter looks interesting. But if you want to go beyond messaging into transacting, your luck runs out.

Consider Bitcoin. It’s infamous as the currency of choice for dark markets — but it’s also, “in a sense, the least anonymous money that has ever existed, since every transaction is observable by anyone with a bitcoin account,” to quote economist David Friedman. Just ask alleged Silk Road kingpin Ross Ulbricht, who had 700,000 bitcoin on his…

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Update: Now transitioning to and private hosting

As of this weekend, I’ll be posting to having moved this blog to private hosting as I prepare to make changes to Rooster360 going forward from November 2014.

Trades in 60 Seconds for week of 10/27/2014


The market’s daily chop, decline and “V” have made short work of shorter time frame traders who were overexposed or didn’t size and time in their favor. Utilities ($DUK $SO) come out on top, consumer related plays ($NKE $MJN) continue to climb (We need to feed the kids and run to work) and depending on where your tech business is, you’re either riding high like $PANW or continue to break like $CVLT (which plays out in oversimplified terms as “Security” beats “backups”. Price followers doing a long/short pair trade of over the last 12 months would have felt like geniuses). $SWN and $GLF show how little esteem energy has at the moment, so much for the super-spike of 2008. $P would be appealing only to investors tone-deaf to price action.


short 45, stop 52.1


long 80.3, stop 75.4


short 28, stop 34.7


long 9.3, stop 6.1


long 103.3, stop 91.4


long 90.9, stop 83.8


short 20, stop 24.9


long 108, stop 88.1


long 47.4, stop 43.5


stop 31.6, stop 37.1


short 17.7, stop 21.8

Futures/Macro update for week of 10/20/14: it’s easy as ABC or $FXA $FXB $FXC + $IWM

The USD rally has hit everything… else, including in recent weeks.Using the same weekly price bar time frame and methodology, find below the stock market version, since most traders out there are stock traders. $FXA $FXB $FXC or $6A_F $6B_F $6C_F $AUDUSD $GBPUSD $USDCAD


short 87.6, stop 90.9


short 158.1, stop 161.5


short 88.1, stop 90.5




and “bonus” chart and sell idea $IWM and/or Russell 2000 futures

short 107.4, stop 116.1


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Ninety percent of US families are no wealthier than they were in 1986

Originally posted on Quartz:

The long-simmering issue of economic inequality in the US got moved to the front burner yesterday, with Federal Reserve head Janet Yellen noting in a speech that the effects of income and wealth disparity “greatly concern” her.

One key distinction in the debate is whether economic inequality is transient or permanent. Rising income inequality may be a temporary phenomenon, where skilled people earn high compensation without permanently distorting the distribution of wealth in the economy. But economists like Thomas Piketty worry that these super high-earners could catalyze a cycle of accelerating inequality.

Now, a working paper released this month by Gabriel Zucman and Emmanuel Saez (economists at the London School of Economics and the University of California, Berkeley, respectively) shows that growing income inequality is fueling a commensurate disparity in total wealth. The two economists used tax data to build the most complete picture to date of US wealth. Their findings are…

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