My apologies as I omitted posting my fill, late yesterday, on SRS. I had indicated I would be getting long the ultrashort real estate proshares, ticker SRS on a break of the $68 level by the i-shares real estate, ticker IYR. Well, they did yesterday and I was filled on 1 unit long of SRS at $88, stop at IYR $71.08 meaning I will be out of SRS on a move above 71.08 by the IYR.
Good speculating to you all !
Enjoy the holiday weekend !
Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Long 3 units Ultrashort Dow DXD@ $50.12 stops 2/1 at DIA $132.68/130.26
Long 2 units Ultrashort Financials ticker SKF @ $103.90 stop at XLF $26.72
Long 1 unit Currencyshares Swiss Franc ticker FXF @ $96.25 stop at $93.82
Long 3 units Frontier Oil ticker FTO @ $28.35 stop at $25.26
Long 1 unit Ultrashort Real Estate ticker SRS @ $88.10 stop at IYR $71.08
Short 1 units Daimler AG ticker DAI @ $86.20 stop at $82.48
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 2 units Goldman Sachs ticker GS @ $191.53 stops at $197.68/$193.58
Short 2 units Darden ticker DRI @ $36.35 stops at $40.27/$38.34
Short 3 units Lehman ticker LEH @ $43.70 stops 2/1 at $47.46/$45.48
Short 2 units Deutsche Bank ticker DB @ $117.03 stop at $120.18
Friday, May 23, 2008
Omission
Long Weekend.... and Frontier Oil
I will not be posted until after the long weekend as we head into the Memorial Day holiday. I want to wish all my readers a safe and enjoyable long weekend as you enjoy yourselves, family and friends combined with good food and good weather are hard to beat !
I also want to take this opportunity to thank everyone for taking time to stop in and read this blog. Your emails with thoughts, questions and insights are much appreciated.
Before I go I want to leave you with a wonderful snippet form one of my favourite books, Panic on Wall Street by Robert Sobel. It comes from chapter 11 entitled, 1929: The Making of the Myth.*
* A myth, according to most sociologists, is a belief which is held by a group to be true, and is accepted on faith rather than on examination of relevant evidence.
Sort of aptly describes the current calls for the credit crisis being over, a myth, plain and simple.
By the way if you missed getting in of Frontier ticker FTO yesterday, you are getting another chance with today's low volume pull back to the breakout.
I will take advantage of this and am adding a another unit long here at $28.40. leaving me with a 3 unit long position.
Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Long 3 units Ultrashort Dow DXD@ $50.12 stops 2/1 at DIA $132.68/130.26
Long 2 units Ultrashort Financials ticker SKF @ $103.90 stop at XLF $26.72
Long 1 unit Currencyshares Swiss Franc ticker FXF @ $96.25 stop at $93.82
Long 3 units Frontier Oil ticker FTO @ $28.35 stop at $25.26
Short 1 units Daimler AG ticker DAI @ $86.20 stop at $82.48
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 2 units Goldman Sachs ticker GS @ $191.53 stops at $197.68/$193.58
Short 2 units Darden ticker DRI @ $36.35 stops at $40.27/$38.34
Short 3 units Lehman ticker LEH @ $43.70 stops 2/1 at $47.46/$45.48
Short 2 units Deutsche Bank ticker DB @ $117.03 stop at $120.18
Thursday, May 22, 2008
Where's my Abacus ?
More details are emerging in the Jefferson County derivative/bankruptcy debacle. This Bloomberg article entitled, JP Morgan swap deals spur probe as default stalks Alabama County, is must reading and should be filed in the folder under ‘those that don’t learn from history are doomed to repeat it’. As the article makes abundantly clear, none of the esteemed officials of Jefferson County Alabama read, let alone even heard of the infamous Robert Citron’s exploits.
You remember Mr. Citron, the former treasurer who bankrupted Orange County ,California with derivatives via Merrill Lynch. The names change but the story stays the same. Charles Ponzi would be oh so proud ! For those wondering what the abacus is in reference to. Mr. Citron feigned ignorance when the situation exploded claiming he used an abacus to do math. I have taken some selected passages from the Bloomberg article(in green italics) and then have added some of my own comments as analysis.
"Like homeowners who took out mortgages they couldn't afford and didn't understand, Jefferson County officials rejected fixed- rate debt and borrowed instead at rates that varied with the market."
- Nicely done Jefferson County with generational lows in interest you shun fixed rate debt and go with adjustable. Fabulous.
"Jefferson County -- which weathered the U.S. Civil War in the 1860s and racial strife in the 1960s -- is now scrambling to avert what would be the biggest municipal bankruptcy in the nation's history, measured by outstanding bonds."
- Gotta hand it to Wall St. they can accomplish what war and racial strife cannot. What a legacy.
"It's ironic that the Fed can do corporate welfare for the banks, but they can't bail out a county that was victimized by these banks,'' says Craig Greer, a Catholic chaplain at a Birmingham hospice."
- Ironic is not the word I would use but he is a man of the cloth so I understand his discretion.
"Jefferson County was so enthusiastic about its sophisticated debt management techniques that in 2003 and 2004 it held "Investor Relations'' seminars each year in a Birmingham hotel.
The events were sponsored by 32 banks, advisers, law firms, bond insurers and rating companies, including CDR Financial Products, the county's Beverly Hills, California-based swap adviser, Bear Stearns and JPMorgan. County officials solicited sponsorships, including $27,000 from JPMorgan, $15,000 from Bear Stearns and $10,000 from CDR.
We have so many little municipalities around here that can't afford to go for any kind of training,'' says Linda Goldblatt,, the county's investor relations director. ``We thought it would be a good idea to help get them some idea of what's going on out there.''
- Sounds like the blind leading the blind to slaughter no less. I would love to see the internal e-mails by the bankers ridiculing the abject stupidity of these hapless county pols.
"The worldwide use of privately negotiated derivatives has generated considerable momentum,'' a JPMorgan presentation said. ``The need for prudent financial management continues to drive the wider use of privately negotiated derivatives.''
- Prudent financial management and privately negotiated derivatives, all used in one sentence. If that doesn't qualify as the oxy moron on the year I don't know what does.
"The phrase privately negotiated is a euphemism bankers use to describe debt deals that are struck without competitive bidding -- as all of Jefferson County's were."
"Then JPMorgan banker Matthew Roggenburg quoted Federal Reserve Chairman Alan Greenspan, who lauded derivatives because they create a more flexible and efficient financial system. "
- I am surprised the Maestro himself didn’t show up to these Vaudevillian dog and pony shows. Now do you see why Greenspan is roaming the country pleading his innocence to the masses.
"New financial products have enabled risk to be dispersed more effectively to those willing, and presumably able, to bear it,'' Greenspan said in an April 2002 speech. ``Shocks to the overall economic system are accordingly less likely to create cascading credit failure.''
- Yeah risk was dispersed all right, from Wall St. to the taxpayer. Heads we win tails y'all lose! Now do you see why Greenspan is roaming the country pleading his innocence to the masses..... oooops I said that already, sorry.
"A year after the swaps deals with Jefferson County, JPMorgan's LeCroy ran into legal trouble. He was indicted in June 2004 on federal fraud charges in a municipal finance corruption scandal in Philadelphia. JPMorgan fired him. In January 2005, LeCroy pleaded guilty and was later fined $15,000 and imprisoned for three months. He declined to comment. "
- Declined comment did he?, they left out that he neither admitted nor denied wrongdoing. I can assure you that if this Ponzi fella oops I meant LeCroy tried this scam on cats by the name of Washington, Monroe, Hamilton, and Jefferson, he would have needed a gravedigger rather than an attorney when apprehended.
"Some of Jefferson County's commissioners agree. Collins, a Republican and one of the two current members of the five-person board who were there when the deals were struck, says it's now clear that the financing was wrong for the county."
- Really ! You don’t say! How insightful. I know some people who think buying Nortel at $90 was wrong as well.
"Commissioner Smoot says the commission misplaced its confidence in the bankers and advisers. I blame the people who said they were the experts,'' Smoot says. The big Wall Street bankers. Where are they now? We trusted them. We asked our folks to trust them. And you know what- -- they violated our trust.''
- you wanna bet dollars to doughnuts that most of these county officials are still getting personal financial advice from the likes of Wall. St. The irony couldn't be greater. Wall St. the drug dealer runs the detox center, the ultimate business plan.
Real Estate I-shares
The chart of the Real Estate I-shares (above) clearly shows the importance of the $68 level, a break of which will send me scurrying to get long the Ultrashort Real Estate proshares, ticker SRS (chart below), which look to be winding up.
A bull Market in Mirrors
The chart of GE (above) paints a picture of nervousness. As you can see the $31 is incredibly important. I am sure the masters of the universe are burning up the phone lines discussing the maginot line here and its defense given GE's universal dominance in institutional portfolios. Like my notes indicate, if $31 doesn't hold, there will be the dickens to pay!
I came across the following Wilbur Ross article out of the FT and feel compelled to comment on it. I want to say up front that Wilbur Ross is one of the speculating titans of our generation and I am a huge fan. It simply doesn't get much better than him to put it bluntly. That being said, you remember Mr. Ross bought H&R Block's mortgage unit Option One for $1.1 billion as well as buying American Home Mortgage Investment. He was on CNBC regularly touting his shrewd purchases. Others took it as their cue to pile on a pump the merits of his positions. Well, it looks like his foray into this arena is not turning out as planned and as is custom now in our bailout economy, he is looking for a bail out. No moral hazard now is there Mssrs. Bernanke and Paulson ?
Yup, credit crisis is behind us for sure! I am bearish on equities and I must tell you that someone of Mr. Ross ability crying for a bailout sends chills up my spine, and makes me think I am nowhere near bearish enough. I would think he would just dump his position on someone else and move on. But maybe, just maybe he can't.
Here's a thought for Mr. Ross, hire some slick investment bankers, preferably ones with heavy duty Fed relations hmmmmm JP Morgan !!) and repackage this toxic paper with some lipstick and perfume and pawn them on the Fed and the taxpayer. Heck everyone else is doing it, why not you. Better get yours before the window shuts and nobody gets paid.
Nobody likes to take a loss, it hurts your ego, your pride, your wallet. It's awful, but the truly great ones do it, they take their lumps, and quick and above all don't whine and blame everyone and the cleaning lady. There is a severe shortage of mirrors for people to look into, for that is exactly where the blame rests. Right, square in front of you. It truly could be a bull market in mirrors, but don't expect the Fed to encourage it, and as we all know, you don't fight the Fed !!
Good speculating to you all !
Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Long 3 units Ultrashort Dow DXD@ $50.12 stops 2/1 at DIA $132.68/130.26
Long 2 units Ultrashort Financials ticker SKF @ $103.90 stop at XLF $26.72
Long 1 unit Currencyshares Swiss Franc ticker FXF @ $96.25 stop at $93.82
Long 2 units Frontier Oil ticker FTO @ $28.25 stop at $25.26
Short 1 units Daimler AG ticker DAI @ $86.20 stop at $82.48
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 2 units Goldman Sachs ticker GS @ $191.53 stops at $197.68/$193.58
Short 2 units Darden ticker DRI @ $36.35 stops at $40.27/$38.34
Short 3 units Lehman ticker LEH @ $43.70 stops 2/1 at $47.46/$45.48
Short 2 units Deutsche Bank ticker DB @ $117.03 stop at $120.18
Selective Memory
I was watching pom pom TV this morning to catch the employment numbers and happened to catch Mr. Joe Kernan's insight on the energy market bubble. I just loved how he claimed they all knew tech was a bubble! Especially cheerleader-in-chief Kernan of the tech pep rally, now can identify bubbles with ease and acuracy. The Fed can't identify them, so maybe Kernan should be on consultative retainer(just a thought). Funny how Mr. Kernan, with his limitless intellect, didn't see Qualcomm comin,. or did he conveniently forgot about his drum pounding on that one? Could be a selective memory, no?
His claim of the hubris of the part of energy bulls and their own intellect is particularly fascinating given his and his cohorts track record. Try this on for size, how about it can't be an energy bubble simply because Joe Kernan and CNBC continue to think it is one !!
I realize full well there will be terrifying drops in crude which will shake many from the tree, just when it looks rosiest it will become most frightful. But sure as night follows day, we need more than we have. If this were a bubble and prices were out of sight never to be seen again, shouldn't the producers of OPEC hit the bid and sell it all. Don't you think the integrateds would be unloading it before the music stopped? Kinda like Mark Cuban did with his dot com to Yahoo.
Sounds reasonable, no? Or could it be that they know the claimed reserves are not there. Could it be that water cut, something nobody talks about is a real problem. Could it be that it used to take 1 bbl of energy to retrieve 8 bbl and now it is 1 to about 2.5 (I am recalling this from memory so don't hold me to it to closely). Could it be that the easy stuff has been tapped.
Note to CNBC, why don't you invite people who do REAL research into the energy markets. People like Samsam Bakhtari, Matthew Simmons, Colin Campbell, or Jeffrey Brown, just to mention a few. People who have a grasp of the global energy markets.
The cries for the Administration to release supply from the SPR (Strategic Petroleum Reserve) is laughable. Sure, tap into the SPR. High prices, of course, it's an emergency, I can't take the SUV around the corner to McDonald's and Target to spend my stimulus cheque! Let's throw prudent judgement to the wind, lets just be like the U.S. homeowner who tapped his home equity line to buy that waverunner, that plasma TV and Rolex. It was an emergency !! So when you lose your job and need something to tide you over, wait oh my God! I've got no cushion? Where's the pawnshop?
Tap into the SPR and just imagine what happens when Murphy's Law takes hold. Hopefully saner heads, (don't count on it) will prevail and will realise what the reserve is truly there for and the circumstances under which it is truly needed to be released. There, I will get off my soapbox.
Good speculating to you all !
Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Long 3 units Ultrashort Dow DXD@ $50.12 stop 2/1 at DIA $132.68/130.26
Long 2 units Ultrashort Financials ticker SKF @ $103.90 stop at XLF $26.72
Long 1 unit Currencyshares Swiss Franc ticker FXF @ $96.25 stop at $93.82
Long 2 units Frontier Oil ticker FTO @ $28.25 stop at $25.26
Short 1 units Daimler AG ticker DAI @ $86.20 stop at $82.48
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 2 units Goldman Sachs ticker GS @ $191.53 stops at $197.68/$193.58
Short 2 units Darden ticker DRI @ $36.35 stops at $40.27/$38.34
Short 3 units Lehman ticker LEH @ $43.70 stops 2/1 at $47.46/$45.48
Short 2 units Deutsche Bank ticker DB @ $117.03 stop at $120.18
Wednesday, May 21, 2008
Adding to Frontier - FTO
It seems Moodys had a mistake in their computer software used to rate derivative debt. Does this mean the black box, intellectualites could be wrong......Nooooooo ! Say it ain't so ! My grandfather often said, regarding the game of speculation, that he who turns over the most rocks
usually wins.
Story making the rounds via Bloomberg regarding market participants who cannot cover their bet. The fact that entities could write paper, collect the premium and have no hope in hell of ever paying off the other side of the obligation should illuminate the state of our capital markets. Sophisticated huh !! Books will be written..... but I have said that before.
So to all those "institutional investors" out there who didn't want to do the homework, I can only say... Caveat emptor! Brilliance is only exceeded by their hubris and laziness.
So why does the market levitate near all time highs if things are so bad. To quote the pretty faces, on pom pom TV who in the face of any red print wail, " can't believe we're not worse blah blah blah". The reason we are still levitating where we are is the same market participants who bought the crap are the same ones buying the market plain and simple. The same ones who bought CDO after CLO after RMBS are the same ones buying the market cause its cheap on a forward earnings basis. When thought of in this light we should actually be surprised the market is not pushing 16,000.
Just like the credit markets denial, denial, denial until is so overwhelming it becomes panic panic panic. You disagree, look at energy. Peak oil my ass, you doom and gloomer, loser. $75 denial, $100 - denial, $125 -denial. Oh, my maybe there isn't enough oil. What do we do? What do we do ! Where's FEMA when you need them. Like they are fond of saying on Wall St., a problem isn't a problem til it's a problem.
I have heard a commercial for Mad Money, Cramer's hit show, right up there with American Idol and Survivor in my opinion, anyway one of the testimonials is "no one made a dime panicking". to which I would reply, many were wiped out by NOT panicking!
Always remember, he who panics first panics best !!
Housekeeping notes;
I was filled on a 2nd unit long of Frontier Oil ticker FTO at $28.50, leaving me with 2 units long. Excellent volume day on Frontier which we need to pay heed to.
Good speculating to you all !
Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Long 3 units Ultrashort Dow DXD@ $50.12 stop 2/1 at DIA $132.68/130.26
Long 2 units Ultrashort Financials ticker SKF @ $103.90 stop at XLF $26.72
Long 1 unit Currencyshares Swiss Franc ticker FXF @ $96.25 stop at $93.82
Long 2 units Frontier Oil ticker FTO @ $28.25 stop at $25.26
Short 1 units Daimler AG ticker DAI @ $86.20 stop at $82.48
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 2 units Goldman Sachs ticker GS @ $191.53 stops at $197.68/$193.58
Short 2 units Darden ticker DRI @ $36.35 stops at $40.27/$38.34
Short 3 units Lehman ticker LEH @ $43.70 stops 2/1 at $47.46/$45.48
Short 2 units Deutsche Bank ticker DB @ $117.03 stop at $120.18
