Friday, July 20, 2007

Some Thoughts

Given my take that:

A) the economy is already in a recession if you compare GDP to population growth ,
B) that interest rates have had a tectonic shift from lower rates to higher, and

C) that crude (energy) is in long- long term bull market mode.

D) that companies have taken a page out of the private equity playbook of borrowing money to buy back stock only to leave the company saddled with even more debt (refer to B).

Why are they buying back stock with borrowed money when they can just increase the dividend if they are that bullish in their business. Why? Because stock buybacks help their stock/option grants immediately that's why. Like a good friend of mine in the political consulting business always tells me politicians never do whats right they do what will get them re-elected and the same goes for CEO's.

I think a very vulnerable stock in this environment would be Federal Express (FDX 2nd chart) This stock has been a bull market darling for some time and with good reason. If you look at the weekly chart you can see a bearish engulfing candle back in February of this year, the high of which has not been bettered. The stock is in no man's land right now but I bring it to your attention as something you should keep on your radar with particular interest in the $110, 104 and $96 levels.

As I have mentioned before, heads are gonna roll over at Wachovia regarding the buyout of that cancerous entity that was GoldenWest Financial. Just like the rocket scientists over at Merrill that talked Stan O'Neal into buying First Franklin. They don't get fired rather,they become part of the walking dead, guys/gals whose careers are dead ended. If I heard correctly Wachovia tripled their loan loss reserves, which I have no idea as to why they would when Greenspan, Bernanke, and Paulson have repeatedly told us sub prime is contained. Seems like a waste of productive capital to me that could be more prudently used buying inverted yield, Swedish Kronar denominated, collateralized Zimbabwean debt obligations. On margin of course! Imagine the fees !

For those of you that may have came away from yesterdays post, The Rails, thinking, man that cat needs therapy or he's plain ol' jealous, or maybe just sour grapes. Well doggonit if I don't stumble across across this (for those that needed empirical evidence) from the always entertaining site Naked Shorts outlining how disgraced NY comptroller Alan Havesi steered state pension fund money to his sons hedge fund. Like the prefect in Casablance " I am shocked, shocked to find their is gambling going on in here!' Where the heck is Seargeant Schultz when you need him.

Could we finally be breaking thru on the Yen(top chart)? Could be. Today some acceleration along with some volume coming in. Its early but this is encouraging. We need some separation here before we can relax some. A move thru 83 would make this fella feel much better. Good luck and good trading.

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