Wednesday, November 5, 2008

Back to Our Regularly Scheduled Programming.

Well we have a new President Elect which is quite the cause for optimism. A truly historic moment in the history of this nation. For what it is worth, I thought both speeches, victory by Obama and concession by McCain were excellent.

Lots of talk about who will be the next treasury Secretary in the new administration. Lots of talk surrounding Tim Geitner, Larry Lindsay, and former Goldman Sachs CEO and current New Jersey Governor Jon Corzine. Recycling the same brain dead zombies over and over and over. Albert Einstein once said “The definition of insanity is doing the same thing over and over again and expecting different results”. Think about this quote for a second and ask yourself, does this quote apply to the way monetary and fiscal policy is run in this country?

The same old playbook, Lets cut rates, lets print money, lets make money artificially cheap, lets relax accounting standards, lets lend to people and businesses that can fog a mirror without any hope in hell of paying it back. Sounds like insanity to me. Recycling the same policy responses over and over again, the same brain dead zombies over and over and over.

Do you remember the movie "The Negotiator" starring Samuel L. Jackson and Kevin Spacey? It wasn't much of a movie but the story line was. In an attempt to prove his innocence, a police negotiator accused of corruption and murder (Samuel L. Jackson) takes hostages in a government office to gain the time he needs to find the truth. He requests another negotiator (Spacey) whom he does not know and is from another jurisdiction to help him as he cannot trust anyone around him.

The point here is aren't there any other remotely qualified individuals to take these position outside of the existing circle of same old same old. Ya think Ron Paul might make a good treasury Secretary? You disagree? Might I suggest he couldn't be half as bad nor inflict a fraction of the damage as the clowns that have held that seat have so far.

Needless to say, the new President aside, the problems that were here last week last month, last year, still remain. We can sugarcoat it any way we like, the fact remains that current incomes cannot support housing prices. Talk of supporting housing prices is akin to stopping the tide against the shore. I caught an interview between Mark Haines of the pompom network and Peter Schiff, an outspoken critic of current policy. Schiff has been bang on with his calls, but the thing that caught my attention was the discussion of the need to leave things alone and let the market (re: housing) correct to its own level. Haines laughingly dismissed this a socially and politically unpalatable. This in a nutshell is the nail in the coffin for this economy.

The solution to this mess, is simple in its elegance for it is to do exactly the opposite of what has been done in the past. Or taken a step further, to simply do nothing. Let the market clear, let the market work. Years ago my cousin, who loves to fly fish, was heading out to Montana and had the opportunity to go through Yellowstone Park after the devastating fires that occurred there years prior. He said you could not tell a fire had happened as the forest was regenerating incredibly.

Do not lower rates. Do not print more money. Do not bail out industry. Do not pass stimulus packages. Do not facilitate and encourage reckless borrowing. Do I need to go on? Something to think about.

Libor keeps dropping yet mortgage rates are rising. Ya think maybe the Libor market is a bunch of BS. Yeah they're gonna punish institutions misrepresenting. Sure they are. I think Chris Cox should get a job with them, he would fit in perfectly.

Housekeeping notes;

I was stopped out of my SDS position at $78 as the underlying SPY violated $100.81. for a loss of just shy of 4pts 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 1 unit of Ultrashort Russell 2K ticker TWM $93.10 stop @ IWM $56.31
Short 1 unit Apple ticker AAPL at $110.90 stop @ $113.53
Short 1 unit ticker CRM @ $56.05 stop @ $34.31

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