Thursday, March 27, 2008

Truth is Stranger than Fiction

You guys want to make sure you read this article. Bankruptcy examiner claims auditor may have aided in New Century fraud? You can't make this stuff up folks and as the saying goes truth is stranger than fiction. Tom Clancy should be stocking oodles of material for his upcoming books!

Oracle came out with their numbers last night which you are all aware of by now. The part that caught my eye was the comment by one of their executives reported on CNBC, I cannot remember which, who said to the effect we need to stop talking about recession as it affects orders. Remember what I said about corporate execs who use this line. Run don't walk as fast as you can from the stock. Just like when a retailing exec blames bad business on the weather, again run don't walk.

We got the news today that the commodity exchanges are raising margin requirements on various ag contracts. Nothing wrong with that. Make sure the players are real playas' and not wanna be's.

And speaking of commodities, it is my personal opinion that we are not in a bubble but that this is truly a demand outstripping supply story. I heard Maria quip that BHP Biliton has a higher market cap than Citigroup. Well money honey, I remember the day when Microsoft was worth more than the entire gold stock universe. Oh yeah, that's right you were hyping MSFT with all the other TV gurus. The caveat here, mines don't come online overnight, they take years so in the meantime....

Now having said this, any sell off in commodities is in my view a margin call, de-leveraging exercise, nothing more. It is my hope to get gold back to a mid 8 handle, I think it would be a gift. Crude still holds par, so that should show you its strength.

How many of you caught the Meredith Whitney interview on CNBC tonight? If you missed it I suggest you watch it. It is worth your time but a word of caution, it is not for the faint of heart. She minces no words and actually talks and acts like a buy side analyst. Oppenheimer ought to lock her down before she bolts.

Listen, I don't have any idea who the next Bear Stearns is. What I do know is that these guys all have paper on their books that they have continually screamed is worth more than the value the street is bidding. Basically they don't like the bids they see. They are hanging on and hanging on as the price continually erodes, hoping for better prices. As Ms. Whitney says, had they sold months ago, taking their medicine, they would have received much better prices. Now they are on sitting on the same junk and she expects it all to come to market at the same time exacerbating the problem. My take is that selling months ago would have destroyed their bonus packages so therein lay the reason. But what would a cynic like myself know.

Oh how fitting this all is. Remember my admonition that he who panics first panics best. Even now it still applies. I was always taught no matter how much it hurts the wallet and the psyche your first loss is your best loss ! We all would do well never forget this. I repeat those calling a bottom in financials and the markets are in for a rude shock. This financial cess pool is only now unravelling, it is going to get far uglier before it gets better.

Today's market action was interesting in that it was a day where the market rolled over with out the yen leading the way. Normally a declining yen has portend a stronger equity market. I don't know what to make of this yet but my gut tells me that selling like this without the aid of the yen carry-trade (de-leverage) unwind speaks of out and out selling.

Good speculating to you all.

Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Ultrashort China25 ticker FXP @ $84.55 stop at $84.85
Long 4 units Ultrashort Dow 30 ticker DXD @ $58.00 stop at $53.10
Long 2 units Ultrashort Real Estate ticker SRS @ $92.85 stop at $89.65
Long 2 units Ultrashort Financials ticker SKF @ $102.20 stop at $98.70
Short 3 units of Deutsche Bank ticker DB @ $117.15 stop at $119.40
Short 2 units Citigroup ticker C @ $23.45 stop at $25.40
Short 2 units AGCO ticker AG @ $61.00 stop $62.75

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