Dick Clark and the long bond yield

A popular investment platitude is “The trend is your friend, until it ends.”

The above chart shows the yield of the US 30-yield treasury bond. For the past twenty years, buying the bond as its yield approached its 100 month moving average has been a winning strategy. Right now, that strategy demands a purchase of bonds — with a stop-loss a little bit above. (Remember that bond yields and bond prices move in opposite directions.)

However, if the bond yields more than 4.75% when Dick Clark rings in the New Year, this long-term “secular” trend will have ended. Historically, broken secular trends are dangerous beasts, and the first leg of the reversal can be violent.

[Disclosure: Rocky is agnostic about whether Dick Clark should have retired 20 years ago. He is also agnostic about the short-term direction of the bond market. Because he accepts that “the trend is his friend,” he may buy a few bonds — before he leaves his office to buy his New Year’s Eve party hat. When Rocky wakes up in 2010, he’ll find out whether the 20-year-long bond bull market remains alive — or has joined Guy Lombardo in heaven. See: http://www.last.fm/music/Guy+Lombardo/Christmas+Through+the+Years/Auld+Lang+Syne]

The Yule Log: clean, renewable energy or hoax?

For New York City apartment dwellers, Channel 11’s TV Yule Log may be their only fireplace. But is it also a solution for Global Warming?

The day-long video of a burning log always intrigues Rocky. Despite its continuous combustion, the log never decreases in size.

Rocky spent many a Christmas day staring at the Yule log (in-between bites of leftover Chow Mein) — unsuccessfully looking for evidence that the film was a continous loop.

During the 2009 baseball season, Trophy Wife bought a 55″ HDTV, and Rocky just parked himself in front of the huge new TV. He hopes that HD will either show the video to be a loop — or more likely, that the Yule log is a source of permanent, clean and renewable energy.

[Disclosure: Happy Holidays to all! Internet news reports that the video Yule log has gone national. Check your local listings for time and channel! See: http://www2.tbo.com/content/2009/dec/24/fireplace-yule-log-becomes-ubiquitous-holiday-tv-o/news-breaking/ . ]

What’s for dinner? It’s “X”

After breaking a fingernail 15 years ago, Trophy Wife swore off cooking, leaving Rocky as Chef de Cuisine in the Humbert Family.

For Tuesday’s dinner, Rocky prepared Roasted Duck Breast; a cold diced cucumber and tomato salad; and X (see picture above.)

Rocky discovered X in an ethnic food store last weekend. The knowledgeable and friendly store owner convinced Rocky to give X a try. Things went downhill from there….

Trophy Wife pushed X to the side of her plate without even a nibble.

Rocky’s daughter said, “Dad, you gotta be kidding! This looks like a microscope slide of bacteria colonies from my biology class.”

[Disclosure: The first reader of Rocky’s blog who either correctly identifies X or provides a decent recipe for X will win a Unique Prize of Dubious Monetary Value. Hint: The owner of the ethnic food store was Armenian.]

Sorry, but we’ve run out of dollars

Just a few weeks ago, the Dollar was tanking and gold was spiking. Now, speculators want to bet on a rising Dollar, but the vault is empty.

This morning Bloomberg News reports, “The Powershares DB US Dollar Index Fund suspended distribution of new share baskets after exhausting its capacity to create stock under a registration statement with the Securities and Exchange Commission.” The ticker symbol is UUP, and it moves with the Dollar Currency Index. That is, when the Dollar increases against the Euro and Yen, the UUP goes up in price.

Translation: Sorry folks, we’ve run out of dollars!

[Dislosure: Rocky recently bought a “slug” of UUP calls as a trade. If the UUP trades at a substantial premium to it’s net asset value because of this “shortage,” Rocky will gladly sell his UUP dollars to the hungry buyers for more than a Dollar. This is a temporary technical/arbitrage condition. Rest assured, the Federal Reserve’s printing press is still running 24/7.]

Turning a sphere inside-out

Rocky thanks his daughter for finding this strange and interesting video about turning spheres inside-out without puncturing them.

Warning: Only click on the video if you like math puzzles.

Weathering a relationship with Stormy Kromer

Every December, Rocky reunites with his old best friend Stormy Kromer. But not this December.

Stormy and Rocky were both engineers, inventors, mediocre baseball players, and according to Stormy’s website, “generally tough characters.” Their symbiotic relationship was based on mutual need and respect:  Stormy’s legendary trademarked Flexible Fit hat kept Rocky’s bald head warm. In return, Rocky defended Stormy’s hat against ridicule from his teenage daughter and other fashionistas.

The hat was so ugly that when people walked past Rocky on his local Main Street,  they would turn and whisper, “Was that the real Elmer Fudd?” (Note to town residents: Unlike Elmer Fudd, Rocky does not usually carry a 12-gauge shotgun. But he may have a concealed flashlight.)

The insults pounded Rocky like heavy rain on a duck’s back. Rocky, warm and happy, didn’t care.

But something had changed as he donned the red plaid adornment last week. Oddly, it was too tight and small. Unbearably tight. Either Rocky’s head had grown over the past nine months — or the hat had shrunk.

Rocky’s daughter jumped up-and-down with glee. “Hurray! No more Stormy Kromer!”

The fashionistas may have won this battle, but not the war. The Stormy Kromer website says Rocky’s Flexible Fit remains available in size 7-1/2 — with next-day delivery.

[Disclosure: Rocky admits that he has a “big head,” but that doesn’t detract from Stormy Kromer Inc., which is a privately-owned company in Michigan. Stormy still manufactures in the USA — which is a good reason to take a closer look at their product line. In addition to employing Americans, Stormy may have prevented more cases of pneumonia than the Centers for Disease Control! See:
http://www.americanprofile.com/article/20775.html ]

Chocolate Chip Cookies & Financial Markets

Forrest Gump famously said, “Life is like a box of chocolates.”

Rocky Humbert counters, “Life is like a rack of homemade chocolate-chip cookies.”

To celebrate the first snowfall of the season, Rocky baked three racks of chocolate-chip cookies using the Nestle Toll House Recipe. A trained scientist, Rocky weighed the ingredients precisely; he used an ice-cream scoop to size each cookie; he timed each tray’s bake time to the nano-second. The oven and rack temperatures were kept constant and carefully monitored.

Nonetheless, the cookies had a mean size of 6.93 cm with a standard deviation of 0.93 cm. The smallest cookie diameter was 5.5cm and the largest cookie diameter was 8.5cm.

This is a statistically improbable dispersion — and it jibes with Rocky’s view of the apparent randomness of markets.

[Disclosure: Rocky’s only explanation for the size dispersion is the cookie dough temperature as it entered the oven. Rocky’s daughter offered a mathematical explanation that uses fractals. Any reader who offers a better hypothesis will win a unique prize of dubious monetary value. The Blackberry model (as shown above) did not go in the oven.]