Wednesday, July 9, 2008

Time to Pay the Piper

Mike Panzner had a great piece the other day called "In the Second Inning". I suggest that any of you who haven't already read the piece to please do so as it is an interview by the Wall St. Journal with Ted Forstmann. The article is well worth your time whether or not you are still drinking the denial Kool-Aid or have already realised the obvious facts of what is transpiring around you.

I have a question for the bulls who have kept repeating how the market is going to fly to the upside when crude sells off...... What is your plan if the market doesn't?

I encourage you to not get caught in the slippery slope of wishful and hopeful thinking, like the tech/internet bulls did in the 80% wipe out of Nasdaq. I would also emphasis you to focus on the thinking part as opposed to the wishful and hopeful part, Save that for your favourite sports team, as I do with my beloved Detroit Lions!

Could it be there is something else amiss besides the high price of energy. You have to hand it to the short bus riding equity trading community. They will believe in anything and I mean anything bullish of stocks, right up until the final strike of the ballgame they will continue to place their bets. Fascinating the psychology of it all.

Regarding a market bottom, I will say this again for the 500th time. You want a bottom, we will get a bottom when EVERYONE and I mean EVERYONE gives up looking for one. This is the nature of things, just as the Internet mania could not top and roll over until all the naysayers had been discredited and had given up trying to catch the top.

I wish I had something more positive to provide for you but quite frankly this is what you get when you have an absolute suspension of sanity. The Fed along with congress and the senate believed that by their infinite wisdom they could tinker and meddle, thereby repeal the law of economics, and banishing the dreaded recession.

Is it possible that now we will pay the price for this meddling by having something far worse than a run of the mill recession? Maybe a depression. I don't know but I wouldn't bet against it given we are exiting the greatest credit bubble of all time. The piper is here and he is looking to be paid, no exceptions.

You think you are being a contrarian right now by being long stock? Well, I have news for you, you're not really being a contrarian as many if not most have yet to liquidate their stock holdings yet. Many will sit tight, afraid of panicing, listening to the shills and purported-to-be pundits on pom pom TV telling you how stocks go up in the long run.

A true contrarian buys stocks when all and I mean ALL around him/her including professionals are shunning them.

I caught a bit piece yesterday on CNBC with David Tice, aka Cassandra (the Greek mythological character who always told the truth but was cursed to never be believed). He drew the parallel that when you throw a frog in a pot of boiling water he just jumps right out, but if you put him in the water and slowly heat it up, the frog slowly boils to death. Mr. Tice believes that this is exactly what is happening to retail investors in this market.


So you think the activity of late is despair and capitulation? I would humbly suggest that, "you ain't seen nothin' yet!"


Good speculating to you all and always remember that "an investor is a speculator who made a mistake and will not admit it".


Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 3 units Ultrashort Dow DXD@ $50.12 stops $62.22/60.49/58.62
Long 2 units Ultrashort Financials SKF @ $103.90 stops $146.47/139.46
Long 3 units Currencyshares Swiss Franc ticker FXF @ $97.35 stop at $93.82
Long 1 units Ultrashort ReEstate ticker SRS @ $88.95 stops $92.72
Long 1 unit Ultrashort QQQ ticker QID @ $37.05 stop at $41.91
Long 1 unit Ultrashort S&P ticker SDS @ $57.20 stop $61.57
Long 2 units Hecla Mining ticker HL @ $8.50 stop at $7.16
Long 2 units Kinross Gold ticker KGC @ $18.93 stop at $17.56
Short 1 unit Daimler AG ticker DAI @ $86.20 stop at $65.94
Short 2 units Brinker Int'al ticker EAT @ $20.07 stop at $19.64
Short 2 units Darden ticker DRI @ $36.35 stop at $35.36
Short 1 unit Lehman ticker LEH @ $43.70 stop at $24.43
Short 2 units Deutsche Bank ticker DB @ $117.03 stops at $93.37/88.34
Short 1 unit of Visa ticker V @ $86.25 stop at $80.16
Short 1 unit HSBC ticker HBC @ $83.23 stop at $80.53
Short 2 units of Netflix ticker NFLX @ $30.35 stop at $29.43
Short 1 unit of IBM ticker IBM @ $122.80 stop at $126.14

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