Tuesday, October 14, 2008

Worth Reading

Mike Panzner over at Financial Armageddon brought my attention to a recent Barrons interview with Jeremy Grantham over at GMO partners. The article is worth your time as anything Grantham has to say about the markets you ignore at your own peril. That said, one particular quote from Mr. Grantham caught my eye,

The terrible thing -- after all this pain -- is that the U.S. equity market is not even cheap. You would imagine that, given the amount of panic, that it would be. But it started from such a high level in 2000 that it still has not yet worked its way down to trend, although it is getting close. But the really bad news is that great bubbles in history always overcorrected. So although the fair value of the S&P today may be about 1025, typically bubbles overcorrect by quite a bit, possibly by 20%. That is very discouraging.


I posted some work by Jason Zweig yesterday which speaks to this exact situation but in more obvious fundamental valuation levels. As I have said before and will repeat again today markets can and do swing much further in either direction than we can ever dream imaginable. What we also know is that just as markets swing to euphoric optimism, they can reasonably be expected to swing to despondent lows. The point is they OVERSHOOT. To expect otherwise is to, well, lets just say you could anchor CNBC's daily broadcast. The one caveat is that you have to be beautiful.

I a question for readers both here in the U.S. but more importantly overseas. First off, thank you for taking time to read my small contribution to the speculating community. I stay in contact with a very sizeable local coin and bullion dealer on a regular basis here in Michigan. In the last 6 weeks, a situation has developed where they have nothing for sale.

No Krugerrands, no Maple Leafs, no Pandas, no Gold Eagles, no Buffalos, no British sovereigns, no Kangaroos, no 100 oz silver bars, no nothing. Now I am no rocket scientist but something is going on. There are no lines there, other than those hawking possessions for cash given the economy, but it seems to me something is up.

My question to my readers, is this happening in your locale? Germany, UAE, Philippines, Argentina, Mexico, Britain? Please let me know. I would respect your anonymity and not reveal your name but would appreciate any "on the street" help. Thanks in advance.


Housekeeping notes;

I was stopped out of my SDS position at $92.35 for a gain of just over 30 pts on 1 unit.

I am moving my stop up on my TBT position to $60.19.

I am also moving my stop up on my AU position to break even level of $17.94.

I am also moving my stop up on my GFI position to $7.57

I am also moving my stop up on my CBI position to $11.79

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 20yr TBond ticker TBT @ $60.10 stop at $60.19
Long 1 unit of Anglogold ticker AU at $17.90 stop at $17.94
Long 1 unit of Goldfields ticker GFI at $8.60 stop at $7.57
Long 1 unit of Chicago Bridge/Iron ticker CBI @ $11.55 stop at $11.79
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $97.71
Short 1 units Salesforce.com ticker CRM @ $56.05 stop at $42.12

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