a simple order: clarifying the myths of confusion and chaos

One very basic issue is the idea that life is complex and confusing and chaotic and terrifying. Of course, life includes patterns that are complex, such as the following chart of 8 things.
hui wtic gold silver spx crb ust usd
However, to view a chart of just one thing (see below) is much simpler already, right? So, simplicity or complexity is about experience, perception, attention. Do we attempt to focus on simple patterns in which we can easily recognize order or do we focus on complex patterns that we find unfamiliar, incomprehensible, perplexing, chaotic, confusing?
tlt

We can analyze that shape and notice a few patterns in it, such as counting how many times that measurement approached 110 and then reversed:  

tlt nears 110

I put 3 little pink ovals around those 3 points. We may not even know what that line represents, but we can easily notice the 3 times that the measurement approached 110 and then reversed. (By the way, I will tell you what the above chart measures in a moment).

tlt w trendlines

First, let’s analyze the pattern of geometric shapes a bit further. I connected the three pink circles in to a flat line of pink. I also made a few other flat lines in brown, plus two orange lines.

Consider that if I showed the above shape to a 2 year-old or 3 year-old, they would probably analyze the shape by saying it has two notable bumps. They might even compare it to a camel.

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If they could read the timeline at the bottom of the chart, they might say “there was a little bump in the middle of the shape at 2009 and then a bigger bump toward the right.” A small child might not automatically see the numbers 2009 and think “oh, that refers to a year,” but most people have seen charts like the above chart and are familiar with the system of counting time that calls this year 2013 and labels four years ago 2009. So, some people recognize not only the two bumps, but recognize the numbers at the bottom as a time sequence of years.

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Above is a chart that is closer to what a child may see when they look at the top charts. They really do not see all the other data. They filter it out or ignore it- for sake of simplicity!

This chart has less than 2% of the information of the charts higher up the page (showing year-end prices instead of weekly price range). This last chart does not even show the range of prices for the year, but just the end-of-year price- just 12 pieces of information.

It represents a truly tiny amount of information compared to the other charts. However, part of why that black shape is so useful is because it only has about 1 dozen measurements (year-end prices).

It is simple! It could be leaving out a lot of data that might be important, but you may not even know what we are looking at yet, so it may be “a relief” to look at a very simple shape that shows just 12 measures in a line (compared to the above charts which shows over 600 weekly measures of high and low prices- totaling way over 1200 measurements).

tlt nears 110

Now, I ask a question that may seem odd: do we worship simplicity and order or do we worship complexity and confusion? Worship is an unusual word, but we know it refers to consistently giving attention to a particular thing, like making it sacred or unusually important.

We can find both simplicity or complexity anywhere. Which do we focus on habitually?

Simple

Simple (Photo credit: Lougan Manzke)

For instance, when we look at a shape, do we LOOK FOR the simplicity of what is in the shape or do we LOOK FOR something else? Maybe we look for colors and maybe we look for bumps. Maybe we do not look for anything in particular.

Maybe we FIXATE on the 3 pink ovals and the 110 price level. Fixate implies a habitual or reflexive focus on something.

Or, maybe I am looking for something that will be useful to me in some way. Maybe I am looking at a chart with an interest in making huge profits off of a clear and orderly comprehension of the information in the chart’s shape.

So, what is shown in the chart? The chart does show some prices, but what are prices? Do you think that you already know?

In a way, you know what prices are. In a way, it could be useful to be even more precisely clear about what prices are. If you are confused about what prices are, then it may not be very useful to know information about prices.

Prices are measures of human behavior. Did you know that?

A list price (or asking price) refers to what an owner of something is willing to accept as payment. A transaction price refers to the price of an actual transaction, with a seller acting to sell and a buyer acting to buy. It is about the behavior of those two parties. It is about an agreement between the two.

So, a few times recently, a bunch of buyers and sellers agreed to exchange something at a price ratio of 110. They also agreed on prices higher than 110 in recent years.

Their evaluations of the value of something fluctuated. Their behaviors fluctuated.

Simple

Simple (Photo credit: kevin dooley)

So, the above charts measure the behavior of buyers and sellers. It measures their values or priorities which are evident in their behaviors.

$10 and the US Treasury

$10 and the US Treasury (Photo credit: zieak)

In particular, it shows the willingness of people to lend money to the US Treasury for long periods of time. We could say that it is a measure of their confidence in lending money to the US Treasury (the government) to be a better investment than other investments that they could do with that same money. They could lend it to another government (Greece or the state of Arizona or the public sewer project of Jackson, Alabama), to a large or small company, or spend it on starting a business or to go on vacation, right? They chose to lend to the US Treasury a lot in recent years, but valued that opportunity less and less in the last year.

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Here is a quarterly chart of prices for the last two years. The pink line again shows the “shelf” above 110.

So, why have investors been slowly moving away from lending to the US Treasury toward other investments? Why have lenders been driving interest rates up (forcing the US to pay higher interest to borrow their money)?

(Note that the Federal Reserve does not control how willing investors are to lend money to the US Treasury. The Fed does not set open-market treasury rates / yields/ prices/ buying / selling. Like all other central banks, the Fed FOLLOWS the patterns of the free market… usually.)

English: United States Department of the Treas...

The Great Temple of the United States Department of the Treasury Washington, D.C. Deutsch: Finanzministerium der Vereinigten Staaten von Amerika Washington, D.C. (Photo credit: Wikipedia)

The reason why lenders have been lending less includes a few factors. One factor is that the baby boomers are retiring and want to spend money instead of lend it for 20 or 10 years to the US Treasury.

So, selling is driving the price decrease (the increase in the interest rate). The flow of lenders offering money to the US Treasury is smaller than the flow of former lenders who are offering to sell the debt contracts (treasury bonds and treasury bills) owed to them by the US already. Instead of new lenders going to the US Treasury directly, they had been going to current owners of bonds and saying “hey, I will buy that US Treasury bond from you for a price ratio of 115” (or 113- whatever).

Now, sellers are flooding the market with existing bonds that they want to dump early. They do not want to wait another 15 years or 8 years or whatever is the remaining repayment period. They want cash.

Why do they want cash? They want to spend it on housing or food or whatever because now they are retired.

So, is there a political solution to the retiring of the international baby boom (the fact that many countries like Japan and Germany and the UK and US had a surge of babies born in the mid 1940s right after the conclusion of a world war)? Can the Fed stop all of those people (not just US citizens) who have been lending money to the US Treasury from selling so many bonds for cash for living expenses?

Simple German Potato Salad and Wiener Wurst

Simple German Potato Salad and Wiener Wurst (Photo credit: Sofie Dittmann)

That would not be easy, right? There are just a lot of people that already own bonds!

The Treasury !

The Treasury ! (Photo credit: Wikipedia)

So, the free market is driving up interest rates in the US. The Fed never controlled the rate at which people lent money to the US Treasury or the rate at which they sold existing bonds. Again, when people who already have bonds want to dump them or exit them, that means that those who are willing to lend to the US Treasury do not actually lend new loans, but buy old loans from existing creditors who are attracted by the bid prices of those wanting to enter the market.

Water pattern

Water pattern (Photo credit: @Doug88888)

Of course, a lot of this could be new information to you. Why? Because perhaps you have been to lots of public schools and watched lots of mainstream media.

Maybe you have “tuned in” to programming which is specifically designed to confuse you and distract you from simplicity. Maybe you have been programmed to aggressively speculate in real estate borrowing and in stocks. Maybe there are commercial interests that want you to behave in certain ways and create commercial advertisements and school curriculums that train you to focus or fixate on particular information in particular ways- to worship chaos and confusion and irrelevance.

Is it useful to know that interest rates in the US are being driven up by the open market? Is it useful to know that investors are dumping even their “safest” bonds for cash? is it useful to know that there is such a thing as the baby boom and that they are retiring?

The reconstructed Treasury of Athens, built to...

The reconstructed Treasury of Athens, built to commemorate their victory at the Battle of Marathon (Photo credit: Wikipedia)

If you wish to make an enormous profit off of the decrease in bond prices in the US, then knowing what is going on is useful. Knowing how to clear and simply interpret a clear order can be very useful. (It also can be very useful to some people for the masses to be fixated on particular issues and confused about the simple order of things.)

Here is another chart of something that investors have recently been dumping in favor of other investments (such as cash to use for living expenses and to pay mortgages and so on): gold.

gold

Here is a similar chart of a market that has been even weaker (according to the behavior of investors: more selling than buying):

silver

To me, these charts represent an opportunity to make ENORMOUS profits.Most people do not know how to make hundreds of percent profits off of small, easily predictable moves, but that is a topic that I will leave aside for now.

Again, the mainstream forces of directing or controlling or governing the attention and behavior of the masses do not focus on how these price moves are enormous opportunities. In fact, the programming does not even focus on the simple, orderly patterns of how it is easy to predict price movements? Why? Because those institutions of programming are specifically for confusing the masses.

Simple Silhouette

Simple Silhouette (Photo credit: guidosportaal)

For instance, look at a long list of PhD Economists who did NOT openly predict the major changes of the last decade and yet still are on TV or teaching in colleges. Notice that people who did publish predictions (even those within academia) are largely ignored by the mainstream media (not even ridiculed, but simply ignored).

Instead, the programming continues of “real estate always rises” and “we are in a period of inflation, which explains the rising interest rates on US Treasury bonds.” That is false. We are in the acceleration or capitulation wave of deflation. In deflation, lenders dump even high quality debt because they prefer having cash to having promises for later payments of cash.

I have been publishing accurate interpretations of market fluctuations since early 2003. In 2004, I emphasized why fuel prices would rise dramatically within the next few years and what the consequences would be. I detailed the shift in the mortgage market before it happened, and the resulting shift in real estate prices, and the resulting plummet in the stock prices of publicly-traded companies like FNMA (Fannie Mae) and Merrill Lynch because they approached bankruptcy due to “bad” (high-risk) investments in real estate.

gold

So, again, consider that the drop in price of gold and silver in early April is measuring an orderly pattern of behavior among investors. It was easy to forecast.

All markets are orderly. All prices measures human behavior and all human behavior is orderly. The sacred doctrine of mainstream schools and mainstream media that human behavior is not easy to predict is mythology, propaganda, indoctrination, hypnosis. The masses of human resources are being confused to make it simpler and easier to manipulate their perceptions, to govern their behavior, to exploit them.

If gold prices (and silver prices) get much lower, then a huge wave of selling is predictable. Likewise, if bond prices get down to 110 again, a plunge is likely.

Fractal pattern

Fractal pattern (Photo credit: @Doug88888)

Why? One factor is the sentiment of investors. When investors are extremely optimistic already about a market, then that means there are not very may investors left to go from pessimistic to optimistic (to go from being sellers or neutral to selling other things in order to buy in to that market).

Those who currently own bonds or gold will increasingly join the snowballing waves of people who have been optimistic but begin to get concerned and turn conservative. The massive optimism of the masses is the essential pre-requisite for a long-term selling panic. They have to already own something to sell it. They have to have an extreme level of confidence in order to deny what is simple and obvious and clear: markets are predictable, at least sometimes, because human behavior is predictable (at least sometimes).

As a final note, I remind readers of the recent series of articles in which I detailed the weakness of the recent rise in US stock prices. I forecast a drop in price, which happened, then a rebound, which has been happening, as well as emphasizing the probability (but not certainty) of one more new high in prices (for most major indexes like the DJIA and S & P 500) before a dramatic plunge.

Many US stocks are within 1.5% of a new high, but today is the day of a well-publicized commentary from Ben Bernanke, who many people think of as someone who they trust to guide their investment choices. So, a new high could happen today or tomorrow.

Attention

Attention (Photo credit: wajakemek | rashdanothman)

However, note that when lots of people are waiting for the comments of someone else to guide their investment choices, that indicates a lack of comprehension of what may be simple and obvious. As I have pointed out many times, when Merrill Lynch announced that it was exploring bankruptcy, that was not based on a new financial strategy, but the public recognizing that the prior strategies of Merrill Lynch were quite poor.

The strategies had not changed. All that had changed was public perception. The public went from blind optimism to a tacit admission of blindness, ignorance and confusion. Their selling panic was their behavioral admission that they had not already been clear about the high-risk and imprudence of the prior strategies.

So, the masses have been trained to wait for Ben’s words. They have been trained to worship those words. They have been programmed to act in accord with those words.

Those who already know what is in Ben’s speech know what to buy and what to sell prior to him giving that speech. (They know what will quickly and perhaps briefly gain or lose value based on the words of his speech.) The ability for insiders to profit is proportionate to the dependence of the masses on the words of their leader, the words that they worship.

In contrast, contrarian investors are not as interested in the words of any spokesperson or figurehead. We are interested in noticing patterns in the behavior of the masses and profiting off of those patterns. We may be attentive to short-term fluctuations like within a day or a week, but we are getting in position for predictable plunges. We can be patient. We can ignore the words that the masses worship and simply watch the behaviors of the masses as measured by prices.

Priced Out Of Lingerie, Milan

Priced Out Of Lingerie, Milan (Photo credit: flatworldsedge)

_____update____

As gold began to plummet today (as referenced in the article this morning), I made $37 for each $87 that I invested (in under 2 hours- from 2:08 EST to 3:55 EST ):

——————————————————————————————–

Order ID Order Date Action Symbol Order Price Status Links

142610933 06/19/201315:55:11 Sell to Close GLD 13JUN22 P 131.00 $1.24

142608880 06/19/201314:08:46 Buy to Open GLD 13JUN22 P 131.00 $0.87

gold1

—new update—

and… gold plummeted overnight sending those positions that I bought yesterday for less than $100 each to over $600 each! 

gld

gold

—new update—

and the treasury positions that I got for $32 yesterday are now up to $172 (though I sold them at $65 early this morning).

— Friday update —

They got up to about $240 today as selling continued in US treasuries today.

tlt

tlt

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