Wednesday, September 24, 2008

Mid Week Thoughts

I caught Larry Kudlow's show last evening and his interview with former FDIC chair Bill Isaac. The Mr. Bill Isaac of mark to market accounting is to blame for the mess we are in. Remember this is a former FDIC chair. He believes the market is wrong and he is right! He claims the toxic securities everyone and their sister believes are garbage are in fact valuable and are trading at fire sale prices. To be precise "they are trading below their worth via an economic analysis".

Astounding. Truly astounding. Not exactly the kind of stuff that lets you sleep well at night. I would prefer he we the local JV basketball coach and not a former FDIC chair. My question for Mr. Isaac is that if his claims are true why is not the smart money, like himself in particular, buying em' up? Should not his insightful economic analysis show the value clear as day with everyone tripping over one another to buy them all up. Funny how Kudlow wouldn't even ask him this but unfortunately he cannot as that would demand unbiased analysis which is hard to do when you are jumping around cheerleader with delusional friends like Vince Farrell.

Vince seems to really like Buffet's 5 billion investment in Goldman with an option to extend it to 10 billion. Mr. Farrell was really excited about this to which I would add that if Goldman employs their standard 25 X leverage this investment could really be 250 billion Vince. I am sure Vince wishes the investment had been in one of his pets like GE but I am sure he will take this for sure. I must credit Mr. Buffett for putting his money where his mouth is and you can be sure the pom pom network will be out in front early and often, glorifying this move, egging you to get in this market. Almost to the point where they will make you feel stupid about not. I sure hope Mr. Buffett did his due diligence on the Goldman transaction and hopefully it involved a team of forensic accountants.

Also on the Goldman subject, funny how Goldman stock spiked the last few minutes of the day as the market was tanking. You think Chris Cox will investigate friends of Hank? Don't count on it.

It is my opinion that what you have on financial television, in particular CNBC, is a bunch of scared out of their wits, long of stock, can only function in a bull market, where is my Greenspan put, make believe money managers hoping and praying for a miracle. You see these guys and gals bought this market all the way down. They did this because like trained seals that is what they have been conditioned to do. It is that simple.

I also caught Rick Santelli on Kudlow's show where he said something I must repeat to you this morning. Poor Larry was looking for some good news, to which Rick replied,
"there is no good or bad news Larry, just the news."

This one line made watching Kudlow's show worth it. Remember it, memorize it, as it will serve you well.

Speaking of news, which you know I believe is built into the tape, we got news that Caterpillar (ticker CAT) went to the credit market yesterday to borrow 1.3 billion which they paid 325 basis points over treasuries. That is 3.25% higher than U.S. government would pay.

We also got news yesterday that the FBI is investigating Fannie, Freddie, AIG, and Lehman. As Mr. Santelli says, no good news or bad news, but just the news.

I was away on vacation when Morgan Stanley reported their earnings last week, essentially pulling a Lehman move in which they reported better numbers as a result of booking as a gain the falling value of their outstanding debt as their business future nosedives. There sure is nothing like financial transparency with which to base your trading decisions on. Hey, lets take Mr. Isaac's advice and lets suspend all the rules mark to market, FASB 157, laws of gravity, heck everything, that will make it all go away and everything will be fine.

Blogger would not upload charts for me yesterday but the problem seems to be resolved so I will have some for you today.

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 2 units of Ultrashort S&P ticker SDS @ 61.75 stop at $57.69
Long 2 units of Ultrashort Dow ticker DXD @ $57.85 stop at $53.79
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $126.36
Short 2 units of Apple ticker AAPL @ $178.05 stop at $177.76
Short 2 units ticker CRM @ $56.05 stop at $60.62
Long 2 units Hecla Mining ticker HL @ $5.20 stop at $3.89

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