Friday, April 4, 2008

Recession.... duh?

Okay here goes. They say the hardest trade is the best trade. How hard is it to be short right now. The bulls are rocking and rolling right now. Let me get this straight. Stocks are forward looking so according to pundits, we are moving up on the indices so that means the market is looking past the bad? employment numbers and any other numbers that are bad. Okay, answer me this, when the markets were dropping were they telling you the market was forecasting recession? Oh no! of course not, the markets then had it wrong but of course now have it right. Are you starting to get the picture about these TV pundits. Almost comical if it were not so tragic. Truly !

All things are bullish. Bad news hey can you believe we are only down 50, we should be down 500 that sort of stuff. For those not paying attention to what the Comstock boyz are saying here is a snippet of what these very bright fellas have to say about current goings on:

The credit markets are still fragile and are there are hundreds of billions of dollars of debt not yet written off, some of which may come as major surprises as has been happening since August. An estimated 40% of subprime mortgage loans may default in the next two years in addition to defaults on non-subprime loans subject to rate resets. This will throw millions more homes onto the resale market forcing further major price declines. Additional defaults in other areas such as commercial real estate, auto loans, credit cards and student loans are also a strong probability. Today, in his testimony before the U.S. Senate, New York Federal Reserve bank President Timothy Geithner said "Nevertheless, we still face a number of challenges ahead. The seeds of this crisis took a long time to build up, and they will take some time to work through.Liquidity conditions in the market are still impaired and the process of deleveraging remains underway. And this will amplify the headwinds facing the U.S. and global economy."

In our view the market is not only discounting the end of the credit crisis, but a second half economic recovery as well. This is not likely to happen. The greatest credit crisis since the depression and the biggest housing bubble in history will not end with a piddling little recession and a mere 20% decline in the stock market. The economy has already stalled out and plunging home prices and deleveraging of credit will make the recession either longer or deeper or both. The rosy view of the consensus is amply illustrated by S&P's tally of analysts' bottom-up operating earnings estimates for the S&P 500 index. Simply put, they are looking for second-half earnings to jump an astounding 42% from a year earlier. These estimates are sure to be slashed substantially, and the market reaction will not be pleasant.

These guys are a lot smarter than me and have been more right than wrong. Take it for what its worth.

I was flushed out of the majority of my positions so the hardest thing to do right now is get back in. And so I shall, starting small. I am getting long 1 unit each of DXD, TWM, QID, SKF, SRS. Call me stubborn but the facts have not changed and the market always always does what it's supposed to, just never when.

Getting long the following:
1 unit of DXD at $53.10
1 unit of TWM at $74.70
1 unit of QID at $44.55
1 unit of SKF at $102.10
1 unit of SRS at $86.30

I will have some stops posted later with some charts. Continued success and good Speculating to you all.

Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 2 units US Gasoline Fund ticker UGA @ $51.25 stop at $47.84
Long 1 unit Ultrashort Dow ticker DXD @ $53.20
Long 1 unit Ultrashort Russell ticker TWM @ $74.80
Long 1 unit Ultrashort Nasdaq ticker QID @ $44.65
Long 1 unit Ultrashort Financials ticker SKF $102.20
Long 1 unit Ultrashort Real Estate ticker SRS $86.40
Short 2 units Daimler AG ticker DAI @ $86.20 stop at $88.05

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