Thursday, August 16, 2007

The Yen and Some Random Thoughts

The yen is moving as we thought. These are not Yen bulls pushing yen higher rather it is yen bears covering. This unwinding of carry has MUCH further to go than many of you out there think possible. The yen bulls are going to show up on the scene later and will help our cause. I want any of you who are long yen (FXY) to thank the powers that be for educating all these hedge fund valets, (who may be auditioning as lemmings in the next Lion King musical as we speak), into conformist, safety in numbers, follow the leader mentality. They all thought they would be the one who could find the chair when the music stopped. Arrogance mixed with hubris, a lethal cocktail. The gap on the yen(see prior charts) is powerful and should be treated as such, mind the gap, as they say in the tubes of the London Underground. Corrections will come, do not fear them as they are necessary and restore health to overbought/sold markets. Once you are insulated you can set your stops and move on to other areas for due diligence.





Merrill finally puts a sell (yesterday) on Countrywide. Are YOU still listening to these guys. It takes a move from 45 to 25 for them to make that call. Did you not learn anything from Henry Blodgett and the tech bubble ? When will people learn that SELL SIDE (Goldman, Merrill, Lehman, Morgan, et al) of the street investment advice cannot be trusted. They have their own proprietary book of investments and are selling those positions to you. They ALWAYS have a reason to sell or they would hold and it is most definitely not your infinitesimal commission that drives the trade. Your sales rep(yes they are sales reps nothing more) may be a very nice person but he MUST peddle what he/she is told to peddle. One visit to a morning sales meeting/conf. call and you would run, not walk from your broker. Remember this and please protect yourself.





Why is it everyone is whining and crying for help when market goes down yet when market goes up beyond reason everything is okay? Is it unpatriotic for markets to go down. Is it unpatriotic to let other citizens, who borrowed what THEY KNEW they could not afford, now default and lose their homes. Aided and abetted by unscrupulous mortgage brokers, pandering politicians promoting home ownership for everyone. I think everyone should have a Cadillac and a Rolex, why don't we promote that as well. Read the Constitution and Bill of Rights I do not see home ownership anywhere in there or maybe my copy is missing a page. The time to pay the piper may be upon us. Dennis Gartman has often said the duty of the Fed is to take away the punch bowl just when the party is getting started. Unfortunately, we had a Fed Chairman, (Greenspan) who not only did not take it away, but rather like a mischievous college frat boy, spiked it with a gallon of tequila(cut rates to 1% in the wake of the tech bubble).





My grandfather often told me that the stock market is the only business in the world where you can hang a 50% OFF sign in the window and nobody shows up. Just as the market was disconnected from fundamentals on the upside, and oh yes they most definitely were, this market will disconnect on the downside. Psychology and sociology have more to with it than economics. Mike Panzner had a great piece on his site Aug 14th by David Leonhardt about P/E ratios which I recommend you read so you are prepared when Abby Cohen tells you the market is cheap on a P/E basis. Now this is from the same woman who were P/E's were in the stratosphere they conveniently did not matter. The fact that she is still employed and worse, many still listen, is a reminder that this is the land of the opportunity and anyone, and I mean anyone can make it !



Sell your losers and add to your winners. Good trading to you all.

No comments: