Tuesday, October 21, 2008

Tuesday Morning Thoughts

I am looking to add to my short S&P position (via the ultrashort proshares ticker SDS) on a move above the 90.60 level. I will have some charts asap.

I want to touch on this absolutely comical claim by many on financial television about how the market is not trading on fundamentals. Oh really? And it was trading on fundamentals over a year ago? Or better yet, was it was trading on fundamentals back in 1999? Of course it wasn't but in bull markets we don't mention that little secret because bull markets are fun. But in bear markets we parade out many shills claiming the market is not trading on fundamentals and ergo is inherently ultra cheap on a valuation basis.

Just don't pay attention to companies like Texas Instruments or Sun Microsystems. Gotta love American Express this morning. Is there a new degree out there I am not aware of called financial engineer. I know about chemical, geological, physical, and electrical but am not aware of financial. Hold it! Wait a minute. Yes I am familiar with the designation of financial engineer, but under its more commonly known name called the MBA.

I would think the buyers of AXP this morning are going to wish they had sold into this strength in the very near future.

Yesterdays low volume rally was my clue to test the short waters again and while I may be early amidst all the claims of "the market holding up well amidst all the bad news", earnings need to be drastically reduced and until that happens this market is by no means cheap.

So what happens when all the chirping about credit markets "getting better" passes? What are we left with. Yes those fundamentals all those buy, buy, buy shills keep talking about. Do you really think the pros out there are not aware of the stunning deterioration in those same fundamentals, in particular earnings. Do you think the pros are buying the fiscal stimulus news or selling into it?

Maybe these are some questions you should ask yourself when your friendly broker calls to tell you to buy Wells Fargo because because it is cheap, Buffett owns it and it is on the protected, survivor list.

I noticed Mr. Ratigan of CNBC, whom I applauded the other day, go after Mr. Paulson in a rant late yesterday afternoon. Dylan you are getting warmer now. You are definitely on the right track. Who'd a thunk the guy who made 500 million orchestrating the fiasco would not only get a free pass but be asked to fix the mess. Now we still have the apologists like Maria" money honey" Bartiromo, claiming we should grovel at Paulson's shoes as we are lucky to have him at the helm.

You know what's lucky Maria, is that Paulson is not on the rack right now, which we can thank Desperate Housewives, America Idol, Survivor and America's Got Talent, along with abject ignorance of all things financial as sufficient diversions of the masses.

And for the last time, this is not a liquidity crises. This is a too much debt, too much accounting chicanery, too little transparency, too much lying, crisis of insolvency. I will not lend to you if I suspect you are cooking your books, or if I even have an inkling you cannot pay me back. And if and this is a big if I do decide to lend to you, it will carry a heavy premium a.k.a. higher rates, to compensate me in case you flake out.

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 1 unit of Ultrashort S&P ticker SDS @ $90.35 stop $84.34
Long 1 unit Japanese Yen ticker FXY at $97.15 stop at 96.72
Long 1 unit of Ultrashort 20yr TBond ticker TBT @ $60.10 stop at $60.19
Long 1 unit of Chicago Bridge/Iron ticker CBI @ $11.55 stop at $11.79
Short 1 units Salesforce.com ticker CRM @ $56.05 stop at $42.12

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