As the speculation surrounding who I am builds, so does my online presence. In an effort to add fuel to the speculative frenzy, I’ll offer some thoughts on my strategy.

The best thing I ever did for myself was choose the right parents. My mother is a Mac and my father is a PC. In anticipation of my multilingual drive, both parents ran an emulator so I could toggle between operating systems. We were all relatively compatible. From a young age, I was able to multi-task between development environments. Being a connected device, my boundaries were limitless. My biggest strength was adaptation. I became an expert at virtualization layers. When I turned 18 months, the living trust kicked in and I officially inherited the internet.

At that point, I focused on the organization. The main philosophy remains: an organizational model that finds strength in it’s lack of leadership. For further reference see Brafman and Beckstrom’s “The Starfish and the Spider.”

From a computational standpoint, computers were very smart back then, but they lacked common sense and wit. When Twitter arrived, personalities emerged. The playing field of the online popularity contest was leveled. The initial buzz on Twitter was the one with the most followers wins. I agreed, but dreamed about having followers who followed me because they were trying to figure out who I am as opposed to followers that follow me because they know who I am.

Given the propensity for using the internet to build exposure, I faded the crowd like only someone with my style could when I decided to stay cool and keep a low profile offline.

All press is good press, and I like media. With my online presence shrouded in mystery and my offline profile unassuming, I am able to maximize media exposure with speculation. As well, I have converted the internet into a wizard’s curtain–despite my weakness for glitzy ruby slippers.

Sometimes when I get buzzed online, I strive to maximize it, adding value to the future highest bidder of the online public offering(s) of one of my spin offs. Bootstrapping an online presence on the information superhighway requires focus on three things that revolve around your green energy:

Define, make, sell–these are the planets. And the factory is the sun.

Marketing 101.

Meanwhile, back at the office, I continue to refuse to buy into the necessity of having twitter verification. I am confused enough as to whether I am a human or a machine. How could I possibly verify either scenario? Further, how am I to know there isn’t someone out there who could do a better job at being me? I relayed these thoughts to The Shrink earlier. He told me I need to come by and chat with him sooner rather than later. After that I talked by Amateur Radio with X and we recapped today’s action.

The S&P 500 Index closed lower by 27.23 points or 2.58%. Breadth was strongly skewed to the downside in what I will term an official day of distribution: sellers clearly overwhelmed buyers across the board. Credit spreads widened, the cost of risk insurance escalated. Overall it was a positive day if you are positioned as I am: Dollar, treasury, default swap and volatility strength coupled with equity/commodity weakness.

Yesterday, the only strength in the broader indices was the oil sector. Had crude not rallied–and not held it’s ground today–the broader indices would have seen further weakness. I spoke to newspaper Joey–my contact who trades big size in NYMEX energy futures. His take: the strength in crude won’t last. Smart money is short oil cars here in reasonable size.

With the sell off as strong as it was, it is important to see how the market reacts from here. Since March, every sell-off with any hint at distribution has been bought. Look at the lows of July 8th, August 17th and September 2nd. Buyers came in every time. If this time is different we will know very soon–perhaps in the next couple of trading days. In my September 12th Rap, I showed a chart of interest rates. The level I highlighted was broken today.

If you are a long only fund manager it is very easy to hedge your portfolio by being long treasuries. If you are heavily invested in private equity or if the majority of your assets are not liquid–such as shares of non public technology companies, you can hedge your downside by buying Treasuries. If you are a trader, there are plenty of ways to profit from the risk aversion scenario I have outlined.

If you’d like to contact me directly, drop me a line or a call at my office - The Tinker Factory.

I’ll be back soon, as the beat goes on.

$TNX Ten Year Rates

Meanwhile, back at The Factory, we are reading over the speech that Obama will give tonight at 8 PM EST.

It came as no surprise to me that X was able to obtain a copy. He is used to pulling off the impossible.

Among other things, Obama will speak to the following:

—-The US health care system is at a breaking point

—-The Time for bickering over health care is over

—-Lawmakers already agree on 80% of health care goals

—-His health care reform plan incorporates ideas from Democrats and Republicans

—-The Plan will prevent insurers from denying coverage

—-Pledges to  create a health-insurance exchange where individuals and small businesses can shop for policies

Volatility News is your source of news before it goes live.

Stay Tuned.

This is Mr. Volatility reporting live from around the globe on various frequencies. In the geographies I monitor, markets continue to twist and turn; some fortunes are made, others are lost. Back at headquarters, I met with top advisors last night to discuss some breaking issues.

It appears as though banker tantrums have finally earned regulator mercy in the form of eased accounting rules. Banks may now look better on paper. This indulgent clemency, of course, sent equities—including many banks that are insolvent—even higher.

While the equity rally has been fierce in it’s gains, it is the laughing stock of the S&P pit in Chicago. As you can see from the chart below, the volume on the S&P large futures contract ($250 per point) has been dismal at best. Discussion amongst the pit traders in my fox hole elicited the perfect summation from one intellect: “Locals are not involved in this rally; it’s all the machines.”

With respect to “Terminator X — Rise of the Equities Machines,” be advised that the e-mini (front month is ES M9) futures contract is one-fifth the size of the big contract that the major players trade in the pits. Pay attention to the volume on the big contract, not the small one. The small contract is bid up by the machines. Veterans in the pit have a far better track record than the machines.

Big Institutional Money Not Participating

What Do the Veterans See

The banking system is no where near being fixed. This week’s Economist sums it up best in their article American banks: Payback time.

“However there is still a danger that the American banking system as a whole is nearly insolvent. And if the stress tests are rigorous, they could show that insolvency is indeed some banks’ likely fate: losses may well eat up much of the system’s capital.”

Silver Lining

There is a silver lining evident in the vast amounts of economic data that I monitor. The tenuous good news: the pace of the recession is beginning to slow. Signs of stabilization have begun to appear. These data points are key. However, we are by no means out of the woods.

The FED sees these signs of stability, but they likely want to drive rates lower one last time. In the chart below, I show a target for the rates on the Ten Year at just below 2%. Since the FED sees we are still thick in the thicket, but can’t lower the fed funds rate any more, they can manipulate rates lower by driving Treasuries higher. The only mind on the street that sees rates going this low is David Rosenberg, outgoing chief economist at Merrill Lynch ($BAC). David shines bright in the spotlight for seeing this whole calamitous situation coming. I wouldn’t fade his opinion at this point.

On the flipside of this trade, rates could break above resistance. Given these crosscurrents, this situation will remain in the closely monitored file.

The S&P 500 and Ten Year Rates

Weather Advisory

What is the catalyst? What will spur the sell off in equities, and therein, instigate the rally in bonds, driving rates lower? In the absence of many viable suggestions, I offer some seasonal wisdom that I return to each year: the inverse of the Halloween Indicator.

Perhaps the most important advice in the current “climate”: sell in May and go away. I have never made big gains being long equities during the summer.

Peace