Thursday, November 27, 2008


You may have noticed I have not been posted as I have started my Thanksgiving holiday a tad early this year. It is my absolute favourite holiday and besides there is plenty to be thankful for. I want to wish all my readers a safe and enjoyable Thanksgiving.

Please take a moment to look around at all you have to be thankful for. We truly are blessed.

That said, lots of little tidbits of items abound as the bulls enjoy the holiday activity. They deserve it. Maybe this is the start of the "rip your face off rally" that Steve Grasso off the floor of the NYSE keeps waxing so eloquently about. No mention about the rip your %#$% off drop we have experienced to the tune of a 45% drop in the market.

Just to put Mr. Grasso's perspective on the markets into some kind of context. Lets go back to Oct 11 2007, the day the Dow peaked at 14,198. 3 days later we were at 13,912. Did Mr. Grasso call the market top? Did he mention the market was over bought and at any time prior mention the potential for a "rip your face off decline"? Of course he didn't. Because like Sherman McCoy in the Bonfire of the Vanities, he is living off the crumbs of others. Vested interest in being positive if for no other reason than to be positive. Analytical, NO WAY ! Insightful, what a joke! Duplicitous shill, you bet !

I am not trying to pick on Mr. Grasso as I do not know him and hope he has a wonderful Thanksgiving but it seems to me he mentioned something about mutual funds buying with both fists about a month ago. Enough already CNBC, enough already!

Okay Toyota has its credit rating downgraded to AA from AAA by Moodys. Besides the fact that this is Moodys talking here, this is Toyota we are talking about. One of the most well run companies on the planet. Which leads me to my next point the domestic auto manufacturers.

I have purposely refrained from commenting on the auto bailout, specifically due to the fact that having grown up in an auto town in Canada having basically been immersed in the auto economy for the majority of my life. I held off to make sure any comments I might make would not be emotional and instead be thoroughly thought out. You know like the TARP plan from the treasury, thoroughly thought out, but I digress. I apologise now for any meandering I may do in writing this post.

Up front you should know that I am a constitutional libertarian at heart.

I believe that the strong should survive and the weak should fail. I opposed the Wall street bailout because at the heart of it I believe it was inherently wrong and upsets the natural order of things. I NEVER believed Paulson and Bernanke's lies that there was systemic risk. I believe the decision to bail out Wall St. was based on personal friendships and personal self interest. I believe in time this will become clearer and that men like Hank Paulson, Alan Greenspan, Bob Rubin, Ben Bernanke among others will be exposed for the scoundrels they truly are. Imagine an old auto exec at the helm of Treasury and you get the picture. For the record I oppose the auto bailout just as vehemently as I did the Wall St. one. It is wrong fiscally and morally.

That said, now that Pandora's Box has been opened with the bailout of the financials, quasi financials, and anyone who wants to be a financial, I am inclined to believe there is no going back. You bail out one, you bail them out all. Moral hazard in action. This seems to not be getting through to the simpletons on CNBC like their leader in chief Dennis Kneale, who could play the role of dumb and dumber for an Oscar, as no one can be that stupid, can they?

The auto industry is a major employer. You think we have a housing problem now, wait till these unemployed auto workers, tier 1, 2, and 3 parts supplier workers, and attendant service workers stop making house payments and enter the ranks of delinquent mortgage holders. I say this because Hank Paulson ensconced the bailout for Wall St. as posing systemic risk to the system. Well this definitely is systemic risk to the employment picture of the U.S.

Don't bail out the autos and the perception of inequality becomes more than evident to even the most elementary of layperson. When you bail out Wall St. and don't bail out Detroit and effectively the midwest, the seeds of unrest are sown because the perception grows you are bailing out white collar jobs and turning your back on blue collar ones is obvious. Forget the fact that many congressman and senators from southern states oppose the bailout yet bend over the table for the likes of Toyota and Honda.

Remember now absolutely NO ONE should be bailed out but this is the hand our politicians have dealt us with the law of unintended consequences is in full effect.

I am in no way defending the Big 3. Regular readers know how I feel about the missile engineers over at Cerberus who now are in charge of Chrysler. The parade of clowns who have mismanaged Ford and GM, men like Ron Zarella, simply speak for themselves and will live in infamy in the management hall of shame. The domestic automakers did not do enough when times were good to weather a downturn in the most cyclical of cyclical industries. Shortsighted does not describe if aptly.

Lets turn to executive compensation. First off it is completely off its rocker. Just like professional sports athletes being paid tens of millions of dollars Rick Wagoner has earned over $40 million since 2000 at the helm of GM. I agree his compensation should be the decision of the stockholders and the board, but given the composition of the board at GM and their collective IQ, we get many of our questions answered.

Do you really believe our country became what it is because of WalMart or McDonalds or because of Ford, Chevrolet, Dodge, U.S. Steel, et al. In this simpletons views it seems that you need to make something instead of what one CNBC guest recently commented " we run around selling insurance to one another".

We have a man who earned in excess of $40 million since 2000 presiding over a company who has seen its stock decline from $70 to $3. Is it me or am I missing something here? Is the board at GM privy to something I am not aware of? Brain dead or in cahoots, you decide.

This is a bear market rally, nothing more. Commercial real estate is a mushroom cloud. I am watching the IYR very closely and expect to get re-acquainted with the SRS very soon.

Again, may you all have a wonderful Thanksgiving with friends and family. And yes, even at 0-11 I am still rooting for my beloved Detroit Lions today.

Housekeeping notes;

I was stopped out of my short DIA position Monday at $83.75 for a loss of about 4pts on 2 units.

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:
Short 1 unit Apple ticker AAPL @ $110.90 stop @ $100.53
Short 1 unit ticker CRM @ $56.05 stop @ $32.56

1 comment:

john said...

Very, very good post.