Wednesday, July 30, 2008

Back at Work

Big down day on Monday, big up day on Tuesday. No shortage of volatility, which is what speculators and traders crave.

I want to touch quickly on 2 items of interest. The Merrill Lynch news along with the covered bond market news recently that seems to have been the catalyst for the hedge fund valets to jump aboard the financials again. First off, the covered bond market news, as far as I can tell, is the way the debt market should be working. You make a loan, you hold it on your books, it goes sour you eat it. Imagine that ! Now, given the state of the banks and their life and death struggle to re-trench and re-capitalise, you cannot preach morals and chastity once you are pregnant. So for those hedge fund gurus who think this is the panacea for the credit markets, I have a nice patch of swamp land for you on the cheap. By the way find your own financian as I will not float you a loan for the purchase.

Speaking of finding your own financing, funny how Merrill Lynch claims to have sold off some toxic paper of the 2005 vintage, which, if you have studied the housing cycle should scare the pants off you given that this confirms how far the housing mess is spreading. The older the vintage of paper the supposed better quality? Yeah sure !

Anyway, Merrill has sold off this toxic paper at a substantial discount, lets call it 25 cents on the dollar, and drum roll please..... has financed 75 % of the purchase price. Lone Star somebody hedge fund.

As regular readers know. I am no Ivy league thinker but if you sell an asset and finance the bulk of the sale price, have you really sold the asset? I guess Mr. John Thain, former chairman of the NYSE, figures it does. I need to check his resume and see if he worked at Enron.

Are you starting to get the picture of what is transpiring on Wall St.?

By the way, I owe an apology to the hotel and parking valet attendants of the world, for my arrogant smearing of their good name by comparing sheep like hedge fund managers to these hard working individuals. These valets bust their butt and use their brain, unfortunately the same cannot be said of the hedge fund industry. Seems to me that going to an Ivy League school is an expensive way to hand a piece of parchment on your wall. Buy hey, it will impress your golf league buddies, while you call all of daddies friends drumming up money for your latest brilliant endeavour.

Junior: Hey Dad!
Daddy Warbucks: What, junior?
Junior: Where is the country club directory?
Daddy Warbucks: Why?
Junior: I'm starting a hedge fund.
Daddy Warbucks: But you don't have any experience?
Junior: You're so old school dad, I just need some trading software and the CC directory, charging 2 and 20.
Daddy Warbucks: atta boy junior!, I just knew the $300,000 in tuition plus the $500,000 alumni donation we gave to Harvard would come in handy, make it 3 and 25.
Junior: got it Dad, thanks! What should I call the firm?
Daddy Warbucks: just find that Greek Mythology book you never opened in college and find a name.
Junior: we're the best Dad !
Daddy Warbucks: I know !

I hear Temasek, the Singapore sovereign wealth fund, is participating in the Merrill Lynch capital raising, AGAIN. What can I say, throwing good money after bad. Some never learn from history. How does that saying go, fool me once shame on you, fool me twice shame on me.

Housekeeping notes;

I was stopped out of my short position on V at $75.45 for a gain of about 10.75 pts. on 1 unit.

I was stopped out of my NFLX short at $29.50 for a measly 85 cent gain on 1 unit, which is better than a loss.

I was stopped out of my WFC short position at $30.28 for a loss of 50 cents on 1 unit.

I was also stopped out of my BAC short position at $31.45 for a $1.25 gain on 1 unit.

Good speculating to you all and never forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 6 units Currencyshare Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Ultrashort Dow DXD@ $50.12 stop at $58.62
Long 4 units Currencyshares Swiss Franc ticker FXF @ $97.70 stop at $93.82
Long 1 unit Ultrashort QQQ ticker QID @ $37.05 stop at $42.87
Long 2 units Hecla Mining ticker HL @ $8.50 stop at $8.09
Long 2 units Ultrashort 20yr Treasury ticker TBT @ $67.85 stops at $69.24/68.32
Long 1 unit SPDR Gold shares ticker GLD @ $91.55 stop at $89.19

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