Wednesday, November 12, 2008


trea - son

American Heritage Dictionary

- noun
  1. Violation of allegiance toward one's country or sovereign, especially the betrayal of one's country by waging war against it or by consciously and purposely acting to aid its enemies.
  2. A betrayal of trust or confidence
1175–1225; ME tre(i)so(u)n < class="ital-inline">traïson < class="ital-inline">trāditiōn- (s. of trāditiō) a handing over, betrayal.

Well, what can one say about the Paulson speech other than to be left speechless. I wish I had something insightful to offer regarding the speech but I don't but Rick Santelli sure did. In case you missed it, Mr. Santelli, when asked what he thought of the speech, held up 2 pieces of paper onto which he had written the words BAIT and SWITCH. Couldn't have said it better myself. We have been lied to, we have been stolen from and we have been sold out for a buck. Actually I do have something insightful to offer regarding the speech and I will do it in only 1 word..... treason. Yes the word treason comes to mind.

Terrorists often take hostages and threaten the unthinkable if their demands are not met. Very similar to the game plan employed by the Fed and Treasury in their trip up to the hill for the bailout package. Threaten systemic risk to the system and scare the willies out of room temperature IQ senators, and congress folk. Pathetic. Systemic risk if we don't bail out this or bail out that. If I hear systemic risk again I am going to throw up. You want systemic risk, watch the credit and in particular the treasury market as the cost to insure government paper against default continues to rise.

I had someone ask why I watch the pompom network when I constantly complain about it so much. Well, besides the odd guest worth listening to, which come along as often as often as finding a needle in a haystack, here are a couple reasons I do, Rick Santelli, Art Cashin, Diana Olick, and Phil Lebeau. Rick and Art should be self explanatory and Diana and Phil are the only journalists on the network plain and simple as they report the facts as opposed to pimping and cheering them. Mike Morgan over at Behind Enemy Lines had a fantastic line about CNBC the other day,

"I was on the treadmill this morning listening to the headache producing chatter on CNBC. I feel like I’m sitting in on a bunch of high school girls yapping about their boyfriends. There are smiles and giggles and boobs (both on the chest and in the chairs). "

Well put Mike.

What we have is a complete and utter fiasco going on and the lights are going on even among the dimmest in our midst. The Best Buy news might even convince Larry Kudlow and Brian Westbury that we are in recesssion, but who knows they might haul out some productivity chart that says otherwise so be warned.

I keep hearing about how we must do something to stop the housing decline. This is not being uttered by some boob on the street but by the leading lights of finance and industry. Think about the statement for a second...


Do you now see the sheer stupidity in the statement? Do you truly believe it is possible to stop the decline? If so you need to give your head a shake for if you do you must believe it possible to stop the wind, the tide, the laws of gravity and mother nature. It is futile to even attempt this folly as the history books will most certainly document as they ridicule our limitless ignorance.

Housing prices, like tech stock prices, like tulip bulb prices, like uranium prices, like cabbage patch doll prices must correct to levels that are sustainable. Of all the above housing prices have wonderful historical metrics based on income levels. Denial most assuredly is alive and well, in particular in the nation's capital.

I realise the Maestro a.k.a. former Fed chairman Alan Greenspan may have confused many out there that the Fed was in control everywhere and always.

I am not short the long bond right now, but to say I am itching to get so could be the understatement of the year. Karl Denninger over at Market Ticker, which by the way if you are not reading you are truly missing out, brought my attention to the bid cover ratio on the most recent government auction of paper. The risk of a massive debacle in our bond market has never been higher. We are so reliant on foreigners to fund our day to day operations, that if they were to walk we would be in a heap of trouble that would make the current circumstances look like a walk in the park. The protection of the credit rating and ability to continue as a going-concern of the Federal government, (re: me and you the taxpayer), should be the guarded at all costs and be of primary concern of the Fed, the Treasury, the congress, the Administration, lame duck or elect.

I was stopped out of my crude trade quite quickly and thankfully as crude has plunged even further today. I hope you are starting to see the reason and benefit for stops !! That said, let us not lose sight of crude as the something big, on the upside, could be in store. No not on the demand side either which is collapsing, but rather on the supply side. Let us watch the energy complex closely going forward for when the time comes it will be the place to be long rather than the 'nifty fifty'. I surmise energy will lead us.

Housekeeping notes;

Yesterday I was stopped out of my long position in COF at $33.15 for a loss of about 2.5pts on 1 unit only to watch it collapse later in the day and much further today. Such is trading and I will not whine and cry like so many on TV as my mental capital is needed elsewhere. For the record I should have been back on board as it broke down once again. Hard trade to do when the market is extended or overdone in either direction but once again the hard trade is usually the correct trade.

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 of Capital One ticker COF @ $30.70 stop @ $33.11
Short 1 unit ticker CRM @ $56.05 stop @ $34.31

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