Friday, May 30, 2008

Banking Index

I had a problem with blogger yesteday and could not post but am back at it today. Sorry for my absence.

The above chart of the banking index ($BKX) shows a large descending triangle. Many market participants cannot get their arms around being short or the like so I like to turn it around in their favour. So, lets invert this chart for a moment, creating an ascending triangle. Now, lets go a step further and change its name to a retailer or tech stock, Walmart or Apple would suffice and presto, the bulls have a party to get so lathered up the stock opening would be delayed.

I would suggest you pay close heed to this chart as it bodes ill for the overall market, for as the financials go so goes the market.

Believe me, if I am looking for reasons to cover but I just do not see any. What I am seeing around me and reading for very reliable, credible, on the ground sources indicate we are no where near being done.

I remind you again that just as they can rise out of sight, prices can fall further than anyone can imagine possible. As big a bear on Nortel stock as I was back in 1999 at $127 Cdn, and believe me I was, I NEVER, EVER, EVER thought it would fall to $2. Keep that in mind if you are of the ilk that measures your bargains by how many points from the top it has sold off.




I came across a great piece by David Phillips over at the 10Q detective regarding Ford Motor and their purported turnaround. The post entitled 'Hauls More. Built for More: CASH! The 2008 Ford Executive' details yet again that something for nothing is alive and well in corporate America.





Housekeeping notes;

I was stopped out, some might call it slapped around, on 1 unit long of SLV at $167.10 for a very short visit and loss of 6 pts.





Good speculating to you all.





Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Long 3 units Ultrashort Dow DXD@ $50.12 stops 2/1 at DIA $132.68/130.26
Long 2 units Ultrashort Financials ticker SKF @ $103.90 stop at XLF $26.72
Long 1 unit Currencyshares Swiss Franc ticker FXF @ $96.25 stop at $93.82
Long 3 units Frontier Oil ticker FTO @ $28.35 stop at $27.82
Long 1 unit Ultrashort Real Estate ticker SRS @ $88.10 stop at IYR $71.08
Short 1 units Daimler AG ticker DAI @ $86.20 stop at $82.48
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 2 units Goldman Sachs ticker GS @ $191.53 stops at $197.68/$193.58
Short 2 units Darden ticker DRI @ $36.35 stops at $40.27/$38.34
Short 3 units Lehman ticker LEH @ $43.70 stops 2/1 at $47.46/$45.48
Short 2 units Deutsche Bank ticker DB @ $117.03 stop at $120.18

Wednesday, May 28, 2008

Time to Get Long Silver (SLV)

I was hoping/looking for the correction on silver to get back to the $15 area which did not happen which forced me to patiently wait on the sidelines.


The chart above on silver broke a 2 month down trend line line back on May 12 on suspiciously light volume. As much as I wanted to jump in the lack of volume held me back. That break came back to test the trend line. We then took out the break out high water mark of $171.61 on May 20 on better volume. Again something held me back. We are now pulling back and testing that break out.
Our patience is getting rewarding today with this pullback for an entry point.


I am getting long 1 unit of silver ticker SLV at $ 172.90 with a stop at $167.64

Housekeeping notes;

I am adjusting my stop on Frontier to $27.82


Good speculating to you all.



Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Long 3 units Ultrashort Dow DXD@ $50.12 stops 2/1 at DIA $132.68/130.26
Long 2 units Ultrashort Financials ticker SKF @ $103.90 stop at XLF $26.72
Long 1 unit Currencyshares Swiss Franc ticker FXF @ $96.25 stop at $93.82
Long 3 units Frontier Oil ticker FTO @ $28.35 stop at $27.82
Long 1 unit Ultrashort Real Estate ticker SRS @ $88.10 stop at IYR $71.08
Long 1 unit Ishares Silver Trust ticker SLV @ $173.0 stop at $167.64
Short 1 units Daimler AG ticker DAI @ $86.20 stop at $82.48
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 2 units Goldman Sachs ticker GS @ $191.53 stops at $197.68/$193.58
Short 2 units Darden ticker DRI @ $36.35 stops at $40.27/$38.34
Short 3 units Lehman ticker LEH @ $43.70 stops 2/1 at $47.46/$45.48
Short 2 units Deutsche Bank ticker DB @ $117.03 stop at $120.18

Tuesday, May 27, 2008

A Bubble ?

I want you to scroll down and take a glance at the 4 charts posted below. Don't enlarge them, just scroll down and look them over.






Now ask yourself the following, Do any of these stocks look like a bubble to you ? Okay enough, The charts are of the various oil and gas indices. The point I was trying to make is that if the above charts were named Google or Apple or RIMM or Crocs no one would have a problem with them. It's got to be a bubble since it's oil.
We are in a very precarious supply/demand equation globally regarding oil. Now I need some one to explain to me where the supply is coming from. I don't see it from Mexico, I don't see it from Russia, I don't see it from Saudi Arabia. I see them in decline. Yes Brazil has a major discovery, I just don't see how it does anything other than keep us from falling even faster behind on the supply side of the equation.
Just keep some of this in mind the next time you want to short crude. When in a bull market there are only 3 positions one can have, bullish, very bullish or neutral. I am neutral and I say this as a reminder to all those wishing to short oil in a bull market for oil.

Good speculating to you all.

Open Positions:

Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Long 3 units Ultrashort Dow DXD@ $50.12 stops 2/1 at DIA $132.68/130.26
Long 2 units Ultrashort Financials ticker SKF @ $103.90 stop at XLF $26.72
Long 1 unit Currencyshares Swiss Franc ticker FXF @ $96.25 stop at $93.82
Long 3 units Frontier Oil ticker FTO @ $28.35 stop at $25.26
Long 1 unit Ultrashort Real Estate ticker SRS @ $88.10 stop at IYR $71.08
Short 1 units Daimler AG ticker DAI @ $86.20 stop at $82.48
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 2 units Goldman Sachs ticker GS @ $191.53 stops at $197.68/$193.58
Short 2 units Darden ticker DRI @ $36.35 stops at $40.27/$38.34
Short 3 units Lehman ticker LEH @ $43.70 stops 2/1 at $47.46/$45.48
Short 2 units Deutsche Bank ticker DB @ $117.03 stop at $120.18

Cutting Him Some Slack

I came across the following article by Martin Hutchinson entitled Time to Do Something about Oil. He writes over at David Tice's Prudent Bear site. Now I have never met Mr. Hutchinson but I have read some of his stuff from time to time and have agree with many of his points but after reading this piece I have to wonder what he's smoking or drinking ! If you have not read the piece, please do as it illuminates the mentality of some out there who believe what's mine is mine and what's yours is mine. Prepare yourself for more and more of this type of thinking, if it can be called that, as many out there have no idea of what to do when the cheese gets moved.

Actually as the take and have mentality of the society we live in we should not be shocked by the hubris of Mr. Hutchinson's statements. Don't adapt or innovate to the changing landscape, just cling and claw to the old playbook, by force if necessary. Look at the global financial institutions, begging for relaxation of accounting rules pertaining to write downs. God forbid you take your medicine like a capitalistic big boy, no, whine and squeal like an infant.

The game has changed and they want to stay the same. Big problem. Side story. Most of you know the name Kareem Abdul Jabbar, all time leading scorer in the NBA and in my opinion the greatest player ever. Back when he was at UCLA by the name of Lew Alcindor at UCLA playing for John Wooden, (freshman were not allowed to play), they NCAA, outlawed the dunk after his sophomore season because he was so dominant. I know how unbelievably ridiculous this sounds, and so did the rules committee which is why they claimed it was about injuries and the equipment, but it is true, it was done to stop his dominance. Is this human nature?, to change the rules of the game when we start disliking the outcome? Don't like losses change the accounting rules? Avoid em' pretend they're not their. Don't like food prices? No problem impose price controls! ( mark my words this is coming people, count on it! ) No more easy accessible oil? Just saddle up the boys take someone elses'.

Lunacy, pure and simple.

I wonder what Mr. Hutchinson would have to say if the Chinese initiated plans with an eye towards our coal, or Canada's tar sands. Mr. Hutchinson proves once again that hubris knows no bounds, now that's assuming it is sober ! Tell you what, I am going to cut him some slack, assume he started his Memorial Day weekend a tad early and would have lit up a breathalyzer like a Christmas tree and be done with it.


In my post A Bull Market in Mirrors, I had a chart of GE, and hi-lighted the significant of the $31 level. Well, that has given way and it bodes VERY ILL for the overall market. I am not short GE but I am short the Dow via long DXD.

U.S. home prices falling 14%, the most in 20 years, YUP credit crisis is over, housing has bottomed ! I have a question for the bulls, a serious question, not a mocking, sarcastic question but a very serious one. If you truly believe the worst of the credit crisis over, why then are the financials begging for the accounting rules to be changed? For if true, that these losses and write downs they are SUPPOSED to be taking are temporary and distressed, then there are going to be astronomical write ups and gains in the future to line your pockets with. I would think you would want the banks and brokers to take these temporary and phony write downs, given you an opportunity to back up the truck on your favourite plays. I am open to suggestions, but again I ask

WHY ARE THE BANKS ASKING FOR THE ACCOUNTING RULES TO BE CHANGED IF THE CRISIS IS PAST ? or at least 2/3's over.

Speaking of financials, I see Bank America has broken the pennnant I outlawed in my post Gold and Bank America. Bank America is buying Countrywide for the same reasons JP Morgan bought Bear Stearns, they are counter party to many of their hedge positions. No counter party, no hedge, plain and simple, something even this simpleton trader gets ! I am not short Bank America though I wish I was, but I am short financials via long SKF.

I heard Merrill upgraded Darden to buy this morning leading to a nice 5% pop that was trumpeted on pompom TV. Don't get fooled, use the pump monkeys to your own advantage and sell the strength. You'll be glad you did in 12 months. and yes I am short Darden and Brinker.

Some charts of interest in short order.

Good speculating to you all.


Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Long 3 units Ultrashort Dow DXD@ $50.12 stops 2/1 at DIA $132.68/130.26
Long 2 units Ultrashort Financials ticker SKF @ $103.90 stop at XLF $26.72
Long 1 unit Currencyshares Swiss Franc ticker FXF @ $96.25 stop at $93.82
Long 3 units Frontier Oil ticker FTO @ $28.35 stop at $25.26
Long 1 unit Ultrashort Real Estate ticker SRS @ $88.10 stop at IYR $71.08
Short 1 units Daimler AG ticker DAI @ $86.20 stop at $82.48
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 2 units Goldman Sachs ticker GS @ $191.53 stops at $197.68/$193.58
Short 2 units Darden ticker DRI @ $36.35 stops at $40.27/$38.34
Short 3 units Lehman ticker LEH @ $43.70 stops 2/1 at $47.46/$45.48
Short 2 units Deutsche Bank ticker DB @ $117.03 stop at $120.18

Friday, May 23, 2008

Omission

My apologies as I omitted posting my fill, late yesterday, on SRS. I had indicated I would be getting long the ultrashort real estate proshares, ticker SRS on a break of the $68 level by the i-shares real estate, ticker IYR. Well, they did yesterday and I was filled on 1 unit long of SRS at $88, stop at IYR $71.08 meaning I will be out of SRS on a move above 71.08 by the IYR.

Good speculating to you all !
Enjoy the holiday weekend !

Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Long 3 units Ultrashort Dow DXD@ $50.12 stops 2/1 at DIA $132.68/130.26
Long 2 units Ultrashort Financials ticker SKF @ $103.90 stop at XLF $26.72
Long 1 unit Currencyshares Swiss Franc ticker FXF @ $96.25 stop at $93.82
Long 3 units Frontier Oil ticker FTO @ $28.35 stop at $25.26
Long 1 unit Ultrashort Real Estate ticker SRS @ $88.10 stop at IYR $71.08
Short 1 units Daimler AG ticker DAI @ $86.20 stop at $82.48
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 2 units Goldman Sachs ticker GS @ $191.53 stops at $197.68/$193.58
Short 2 units Darden ticker DRI @ $36.35 stops at $40.27/$38.34
Short 3 units Lehman ticker LEH @ $43.70 stops 2/1 at $47.46/$45.48
Short 2 units Deutsche Bank ticker DB @ $117.03 stop at $120.18

Long Weekend.... and Frontier Oil

I will not be posted until after the long weekend as we head into the Memorial Day holiday. I want to wish all my readers a safe and enjoyable long weekend as you enjoy yourselves, family and friends combined with good food and good weather are hard to beat !



I also want to take this opportunity to thank everyone for taking time to stop in and read this blog. Your emails with thoughts, questions and insights are much appreciated.



Before I go I want to leave you with a wonderful snippet form one of my favourite books, Panic on Wall Street by Robert Sobel. It comes from chapter 11 entitled, 1929: The Making of the Myth.*

* A myth, according to most sociologists, is a belief which is held by a group to be true, and is accepted on faith rather than on examination of relevant evidence.

Sort of aptly describes the current calls for the credit crisis being over, a myth, plain and simple.


By the way if you missed getting in of Frontier ticker FTO yesterday, you are getting another chance with today's low volume pull back to the breakout.

I will take advantage of this and am adding a another unit long here at $28.40. leaving me with a 3 unit long position.

Good speculating to you all and continued success in all your endeavours !



Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Long 3 units Ultrashort Dow DXD@ $50.12 stops 2/1 at DIA $132.68/130.26
Long 2 units Ultrashort Financials ticker SKF @ $103.90 stop at XLF $26.72
Long 1 unit Currencyshares Swiss Franc ticker FXF @ $96.25 stop at $93.82
Long 3 units Frontier Oil ticker FTO @ $28.35 stop at $25.26
Short 1 units Daimler AG ticker DAI @ $86.20 stop at $82.48
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 2 units Goldman Sachs ticker GS @ $191.53 stops at $197.68/$193.58
Short 2 units Darden ticker DRI @ $36.35 stops at $40.27/$38.34
Short 3 units Lehman ticker LEH @ $43.70 stops 2/1 at $47.46/$45.48
Short 2 units Deutsche Bank ticker DB @ $117.03 stop at $120.18

Thursday, May 22, 2008

Where's my Abacus ?

More details are emerging in the Jefferson County derivative/bankruptcy debacle. This Bloomberg article entitled, JP Morgan swap deals spur probe as default stalks Alabama County, is must reading and should be filed in the folder under ‘those that don’t learn from history are doomed to repeat it’. As the article makes abundantly clear, none of the esteemed officials of Jefferson County Alabama read, let alone even heard of the infamous Robert Citron’s exploits.

You remember Mr. Citron, the former treasurer who bankrupted Orange County ,California with derivatives via Merrill Lynch. The names change but the story stays the same. Charles Ponzi would be oh so proud ! For those wondering what the abacus is in reference to. Mr. Citron feigned ignorance when the situation exploded claiming he used an abacus to do math. I have taken some selected passages from the Bloomberg article(in green italics) and then have added some of my own comments as analysis.


"Like homeowners who took out mortgages they couldn't afford and didn't understand, Jefferson County officials rejected fixed- rate debt and borrowed instead at rates that varied with the market."

- Nicely done Jefferson County with generational lows in interest you shun fixed rate debt and go with adjustable. Fabulous.

"Jefferson County -- which weathered the U.S. Civil War in the 1860s and racial strife in the 1960s -- is now scrambling to avert what would be the biggest municipal bankruptcy in the nation's history, measured by outstanding bonds."

- Gotta hand it to Wall St. they can accomplish what war and racial strife cannot. What a legacy.

"It's ironic that the Fed can do corporate welfare for the banks, but they can't bail out a county that was victimized by these banks,'' says Craig Greer, a Catholic chaplain at a Birmingham hospice."

- Ironic is not the word I would use but he is a man of the cloth so I understand his discretion.


"Jefferson County was so enthusiastic about its sophisticated debt management techniques that in 2003 and 2004 it held "Investor Relations'' seminars each year in a Birmingham hotel.

The events were sponsored by 32 banks, advisers, law firms, bond insurers and rating companies, including CDR Financial Products, the county's Beverly Hills, California-based swap adviser, Bear Stearns and JPMorgan. County officials solicited sponsorships, including $27,000 from JPMorgan, $15,000 from Bear Stearns and $10,000 from CDR.

We have so many little municipalities around here that can't afford to go for any kind of training,'' says Linda Goldblatt,, the county's investor relations director. ``We thought it would be a good idea to help get them some idea of what's going on out there.''

- Sounds like the blind leading the blind to slaughter no less. I would love to see the internal e-mails by the bankers ridiculing the abject stupidity of these hapless county pols.

"The worldwide use of privately negotiated derivatives has generated considerable momentum,'' a JPMorgan presentation said. ``The need for prudent financial management continues to drive the wider use of privately negotiated derivatives.''

- Prudent financial management and privately negotiated derivatives, all used in one sentence. If that doesn't qualify as the oxy moron on the year I don't know what does.

"The phrase privately negotiated is a euphemism bankers use to describe debt deals that are struck without competitive bidding -- as all of Jefferson County's were."

"Then JPMorgan banker Matthew Roggenburg quoted Federal Reserve Chairman Alan Greenspan, who lauded derivatives because they create a more flexible and efficient financial system. "


- I am surprised the Maestro himself didn’t show up to these Vaudevillian dog and pony shows. Now do you see why Greenspan is roaming the country pleading his innocence to the masses.

"New financial products have enabled risk to be dispersed more effectively to those willing, and presumably able, to bear it,'' Greenspan said in an April 2002 speech. ``Shocks to the overall economic system are accordingly less likely to create cascading credit failure.''

- Yeah risk was dispersed all right, from Wall St. to the taxpayer. Heads we win tails y'all lose! Now do you see why Greenspan is roaming the country pleading his innocence to the masses..... oooops I said that already, sorry.

"A year after the swaps deals with Jefferson County, JPMorgan's LeCroy ran into legal trouble. He was indicted in June 2004 on federal fraud charges in a municipal finance corruption scandal in Philadelphia. JPMorgan fired him. In January 2005, LeCroy pleaded guilty and was later fined $15,000 and imprisoned for three months. He declined to comment. "

- Declined comment did he?, they left out that he neither admitted nor denied wrongdoing. I can assure you that if this Ponzi fella oops I meant LeCroy tried this scam on cats by the name of Washington, Monroe, Hamilton, and Jefferson, he would have needed a gravedigger rather than an attorney when apprehended.


"Some of Jefferson County's commissioners agree. Collins, a Republican and one of the two current members of the five-person board who were there when the deals were struck, says it's now clear that the financing was wrong for the county."

- Really ! You don’t say! How insightful. I know some people who think buying Nortel at $90 was wrong as well.


"Commissioner Smoot says the commission misplaced its confidence in the bankers and advisers. I blame the people who said they were the experts,'' Smoot says. The big Wall Street bankers. Where are they now? We trusted them. We asked our folks to trust them. And you know what- -- they violated our trust.''

- you wanna bet dollars to doughnuts that most of these county officials are still getting personal financial advice from the likes of Wall. St. The irony couldn't be greater. Wall St. the drug dealer runs the detox center, the ultimate business plan.

Real Estate I-shares

The chart of the Real Estate I-shares (above) clearly shows the importance of the $68 level, a break of which will send me scurrying to get long the Ultrashort Real Estate proshares, ticker SRS (chart below), which look to be winding up.



Good speculating to you all !

Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Long 3 units Ultrashort Dow DXD@ $50.12 stops 2/1 at DIA $132.68/130.26
Long 2 units Ultrashort Financials ticker SKF @ $103.90 stop at XLF $26.72
Long 1 unit Currencyshares Swiss Franc ticker FXF @ $96.25 stop at $93.82
Long 2 units Frontier Oil ticker FTO @ $28.25 stop at $25.26
Short 1 units Daimler AG ticker DAI @ $86.20 stop at $82.48
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 2 units Goldman Sachs ticker GS @ $191.53 stops at $197.68/$193.58
Short 2 units Darden ticker DRI @ $36.35 stops at $40.27/$38.34
Short 3 units Lehman ticker LEH @ $43.70 stops 2/1 at $47.46/$45.48
Short 2 units Deutsche Bank ticker DB @ $117.03 stop at $120.18

A bull Market in Mirrors

The chart of GE (above) paints a picture of nervousness. As you can see the $31 is incredibly important. I am sure the masters of the universe are burning up the phone lines discussing the maginot line here and its defense given GE's universal dominance in institutional portfolios. Like my notes indicate, if $31 doesn't hold, there will be the dickens to pay!

I came across the following Wilbur Ross article out of the FT and feel compelled to comment on it. I want to say up front that Wilbur Ross is one of the speculating titans of our generation and I am a huge fan. It simply doesn't get much better than him to put it bluntly. That being said, you remember Mr. Ross bought H&R Block's mortgage unit Option One for $1.1 billion as well as buying American Home Mortgage Investment. He was on CNBC regularly touting his shrewd purchases. Others took it as their cue to pile on a pump the merits of his positions. Well, it looks like his foray into this arena is not turning out as planned and as is custom now in our bailout economy, he is looking for a bail out. No moral hazard now is there Mssrs. Bernanke and Paulson ?

Yup, credit crisis is behind us for sure! I am bearish on equities and I must tell you that someone of Mr. Ross ability crying for a bailout sends chills up my spine, and makes me think I am nowhere near bearish enough. I would think he would just dump his position on someone else and move on. But maybe, just maybe he can't.

Here's a thought for Mr. Ross, hire some slick investment bankers, preferably ones with heavy duty Fed relations hmmmmm JP Morgan !!) and repackage this toxic paper with some lipstick and perfume and pawn them on the Fed and the taxpayer. Heck everyone else is doing it, why not you. Better get yours before the window shuts and nobody gets paid.

Nobody likes to take a loss, it hurts your ego, your pride, your wallet. It's awful, but the truly great ones do it, they take their lumps, and quick and above all don't whine and blame everyone and the cleaning lady. There is a severe shortage of mirrors for people to look into, for that is exactly where the blame rests. Right, square in front of you. It truly could be a bull market in mirrors, but don't expect the Fed to encourage it, and as we all know, you don't fight the Fed !!


Good speculating to you all !


Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Long 3 units Ultrashort Dow DXD@ $50.12 stops 2/1 at DIA $132.68/130.26
Long 2 units Ultrashort Financials ticker SKF @ $103.90 stop at XLF $26.72
Long 1 unit Currencyshares Swiss Franc ticker FXF @ $96.25 stop at $93.82
Long 2 units Frontier Oil ticker FTO @ $28.25 stop at $25.26
Short 1 units Daimler AG ticker DAI @ $86.20 stop at $82.48
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 2 units Goldman Sachs ticker GS @ $191.53 stops at $197.68/$193.58
Short 2 units Darden ticker DRI @ $36.35 stops at $40.27/$38.34
Short 3 units Lehman ticker LEH @ $43.70 stops 2/1 at $47.46/$45.48
Short 2 units Deutsche Bank ticker DB @ $117.03 stop at $120.18

Selective Memory

I was watching pom pom TV this morning to catch the employment numbers and happened to catch Mr. Joe Kernan's insight on the energy market bubble. I just loved how he claimed they all knew tech was a bubble! Especially cheerleader-in-chief Kernan of the tech pep rally, now can identify bubbles with ease and acuracy. The Fed can't identify them, so maybe Kernan should be on consultative retainer(just a thought). Funny how Mr. Kernan, with his limitless intellect, didn't see Qualcomm comin,. or did he conveniently forgot about his drum pounding on that one? Could be a selective memory, no?

His claim of the hubris of the part of energy bulls and their own intellect is particularly fascinating given his and his cohorts track record. Try this on for size, how about it can't be an energy bubble simply because Joe Kernan and CNBC continue to think it is one !!

I realize full well there will be terrifying drops in crude which will shake many from the tree, just when it looks rosiest it will become most frightful. But sure as night follows day, we need more than we have. If this were a bubble and prices were out of sight never to be seen again, shouldn't the producers of OPEC hit the bid and sell it all. Don't you think the integrateds would be unloading it before the music stopped? Kinda like Mark Cuban did with his dot com to Yahoo.

Sounds reasonable, no? Or could it be that they know the claimed reserves are not there. Could it be that water cut, something nobody talks about is a real problem. Could it be that it used to take 1 bbl of energy to retrieve 8 bbl and now it is 1 to about 2.5 (I am recalling this from memory so don't hold me to it to closely). Could it be that the easy stuff has been tapped.

Note to CNBC, why don't you invite people who do REAL research into the energy markets. People like Samsam Bakhtari, Matthew Simmons, Colin Campbell, or Jeffrey Brown, just to mention a few. People who have a grasp of the global energy markets.

The cries for the Administration to release supply from the SPR (Strategic Petroleum Reserve) is laughable. Sure, tap into the SPR. High prices, of course, it's an emergency, I can't take the SUV around the corner to McDonald's and Target to spend my stimulus cheque! Let's throw prudent judgement to the wind, lets just be like the U.S. homeowner who tapped his home equity line to buy that waverunner, that plasma TV and Rolex. It was an emergency !! So when you lose your job and need something to tide you over, wait oh my God! I've got no cushion? Where's the pawnshop?

Tap into the SPR and just imagine what happens when Murphy's Law takes hold. Hopefully saner heads, (don't count on it) will prevail and will realise what the reserve is truly there for and the circumstances under which it is truly needed to be released. There, I will get off my soapbox.

Good speculating to you all !

Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Long 3 units Ultrashort Dow DXD@ $50.12 stop 2/1 at DIA $132.68/130.26
Long 2 units Ultrashort Financials ticker SKF @ $103.90 stop at XLF $26.72
Long 1 unit Currencyshares Swiss Franc ticker FXF @ $96.25 stop at $93.82
Long 2 units Frontier Oil ticker FTO @ $28.25 stop at $25.26
Short 1 units Daimler AG ticker DAI @ $86.20 stop at $82.48
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 2 units Goldman Sachs ticker GS @ $191.53 stops at $197.68/$193.58
Short 2 units Darden ticker DRI @ $36.35 stops at $40.27/$38.34
Short 3 units Lehman ticker LEH @ $43.70 stops 2/1 at $47.46/$45.48
Short 2 units Deutsche Bank ticker DB @ $117.03 stop at $120.18

Wednesday, May 21, 2008

Adding to Frontier - FTO

It seems Moodys had a mistake in their computer software used to rate derivative debt. Does this mean the black box, intellectualites could be wrong......Nooooooo ! Say it ain't so ! My grandfather often said, regarding the game of speculation, that he who turns over the most rocks
usually wins.

Story making the rounds via Bloomberg regarding market participants who cannot cover their bet. The fact that entities could write paper, collect the premium and have no hope in hell of ever paying off the other side of the obligation should illuminate the state of our capital markets. Sophisticated huh !! Books will be written..... but I have said that before.

So to all those "institutional investors" out there who didn't want to do the homework, I can only say... Caveat emptor! Brilliance is only exceeded by their hubris and laziness.

So why does the market levitate near all time highs if things are so bad. To quote the pretty faces, on pom pom TV who in the face of any red print wail, " can't believe we're not worse blah blah blah". The reason we are still levitating where we are is the same market participants who bought the crap are the same ones buying the market plain and simple. The same ones who bought CDO after CLO after RMBS are the same ones buying the market cause its cheap on a forward earnings basis. When thought of in this light we should actually be surprised the market is not pushing 16,000.

Just like the credit markets denial, denial, denial until is so overwhelming it becomes panic panic panic. You disagree, look at energy. Peak oil my ass, you doom and gloomer, loser. $75 denial, $100 - denial, $125 -denial. Oh, my maybe there isn't enough oil. What do we do? What do we do ! Where's FEMA when you need them. Like they are fond of saying on Wall St., a problem isn't a problem til it's a problem.

I have heard a commercial for Mad Money, Cramer's hit show, right up there with American Idol and Survivor in my opinion, anyway one of the testimonials is "no one made a dime panicking". to which I would reply, many were wiped out by NOT panicking!

Always remember, he who panics first panics best !!

Housekeeping notes;

I was filled on a 2nd unit long of Frontier Oil ticker FTO at $28.50, leaving me with 2 units long. Excellent volume day on Frontier which we need to pay heed to.


Good speculating to you all !

Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Long 3 units Ultrashort Dow DXD@ $50.12 stop 2/1 at DIA $132.68/130.26
Long 2 units Ultrashort Financials ticker SKF @ $103.90 stop at XLF $26.72
Long 1 unit Currencyshares Swiss Franc ticker FXF @ $96.25 stop at $93.82
Long 2 units Frontier Oil ticker FTO @ $28.25 stop at $25.26
Short 1 units Daimler AG ticker DAI @ $86.20 stop at $82.48
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 2 units Goldman Sachs ticker GS @ $191.53 stops at $197.68/$193.58
Short 2 units Darden ticker DRI @ $36.35 stops at $40.27/$38.34
Short 3 units Lehman ticker LEH @ $43.70 stops 2/1 at $47.46/$45.48
Short 2 units Deutsche Bank ticker DB @ $117.03 stop at $120.18

A Toe in the Water on Frontier Oil


I have been watching Frontier Oil, ticker FTO (above). Remember this heavy oil refiner that chased me out of a long a few weeks ago. We have what looks to be a very encouraging looking rounding bottom. People need to remember that other refiners may have attributes that tump Frontiers but he fact remains that high qualtiy light sweet crude is in short supply while high sulphur, heavy crude is in greater supply.

I am getting long 1 unit here at 27.80 and will be adding to the position on a move above $28.50


Good speculating to you all !
Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Long 3 units Ultrashort Dow ticker DXD@ $50.12 stop 2/1 at DIA $132.68/130.26
Long 2 units Ultrashort Financials ticker SKF @ $103.90 stop at XLF $26.72
Long 1 unit Currencyshares Swiss Franc ticker FXF @ $96.25 stop at $93.82
Long 1 unit Frontier Oil ticker FTO @ $27.90 stop at $25.26
Short 1 units Daimler AG ticker DAI @ $86.20 stop at $82.48
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 2 units Goldman Sachs ticker GS @ $191.53 stops at $197.68/$193.58
Short 2 units Darden ticker DRI @ $36.35 stops at $40.27/$38.34
Short 3 units Lehman ticker LEH @ $43.70 stops 2/1 at $47.46/$45.48
Short 2 units Deutsche Bank ticker DB @ $117.03 stop at $120.18

What's Good For Morgan Is Good For America....?

I want you to have a quick look at the 2 charts I have posted below.



At first glance it looks like I posted the same chart twice, in error. In fact they are different charts. The top chart is the S&P 500 and the lower chart is JP Morgan. I have no idea what the uncanny similarity in pattern means, but maybe it means that as goes JP Morgan so goes the overall market. Maybe the 'what's good for GM is good for America' mantle has now switched to the house that Morgan built, hence the title of this blog.


Just when you thought congress couldn't get any lower on the economic idiocy scale, we get news that congress passed a bill to sue OPEC over oil prices. You truly cannot make this stuff and as the saying goes, truth is stranger than fiction.


Housekeeping notes;


I was filled on another unit short of Lehman ticker LEH at $41.40, giving me a 3 units short position.
I was filled on a another unit short of Deutsche Bank ticker DB at $ 116.35, giving me a 2 units short position.


Good speculating to you all !


Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Long 3 units Ultrashort Dow ticker DXD@ $50.12 stop 2/1 at DIA $132.68/130.26
Long 2 units Ultrashort Financials ticker SKF @ $103.90 stop at XLF $26.72
Long 1 unit Currencyshares Swiss Franc ticker FXF @ $96.25 stop at $93.82
Short 1 units Daimler AG ticker DAI @ $86.20 stop at $82.48
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 2 units Goldman Sachs ticker GS @ $191.53 stops at $197.68/$193.58
Short 2 units Darden ticker DRI @ $36.35 stops at $40.27/$38.34
Short 3 units Lehman ticker LEH @ $43.70 stops 2/1 at $47.46/$45.48
Short 2 units Deutsche Bank ticker DB @ $117.03 stop at $120.18

Tuesday, May 20, 2008

Damn Speculators

I caught Sue Herrera's(who by the way is one of the few journalists on pom pom TV, along with Diana Olick) interview with the Senator from Connecticut Joe Lieberman regarding speculators in the commodity markets. I have a newsflash for the esteemed yet somewhat economically challenged Senator......

An investor is a speculator who made a mistake and will not admit it !

I do not care whether your time horizon is 5 minutes, 5 hours, 5 days, 5 years or 5 decades.


Investigate and castigate the speculators Senators. Don't bother with the financial entities and their Enronesque off balance sheet SIV's and the like. No go after some jr trader at a hedge fund in Connecticut. Don't bother with all the fraudulent real estate appraisals which were well know long ago. Don't bother with Angelo Mozilo of Countrywide, Alan Schwartz of Bear Stearns or John Thain or Merrill and their don't watch what I do but what I say, lies to the markets. Don't bother with Merrill Lynch underwriting paper of a mortgage originator after it had gone bankrupt because so many of its origination's had soured. OH no don't bother with any of that, just go after the guys and gals buying wheat and crude and corn. And do it under the banner of bipartisanship, and call CNBC so you can get some face time while you're at it.

Mike Shedlock had an interesting comment today in his post entitled 'Congress Whistled Offsides', in which one of his readers chastises congress for investigating professional sports wrongdoing while the economy and country fall apart. To which he had this comment:

"Some might think that legislators have better things to do than debate "Truck Nutz". Not me. I would like to see state and national legislators spend more time debating "Truck Nutz", flag burning, baseball steroids, the nation anthem, and motherhood and apple pie on the general principle the more time they spend debating frivolous topics of no economic importance, the less likelihood they will do real damage somewhere else."

After listening the logic of Messr. Dodd and Shelby this morning and then Lieberman this afternoon I am truly speechless. As my wife always says, water finds its own level. I have mentioned in this blog before that when you hear the word synergies for a business deal run don't walk away from the deal as this is code for we have no clue. I can now add the word bipartisan to any government legislation, when you hear it, I can guarantee you it is crap plain and simple. Water does find its own level.

For all you out there thinking that a government intervention via a bailout or some type of mortgage forgiveness program under the guise of keeping people in their homes. For as Dennis Gartman is fond of saying, Be careful what you wish for as you might just get it, good and hard ! Government meddling (via the Fed and Greenspan) in a polyannic attempt to stave off any type of recession, got us into this mess and it sure as heck won't get us out. It only delays and actually will worsen the day of reckoning when it comes.

Good speculating to you all !

Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Long 3 units Ultrashort Dow ticker DXD @ $50.12 stop 2/1 at DIA $132.68/$130.26
Long 2 units Ultrashort Financials ticker SKF @ $103.90 stop at XLF $26.72
Long 1 unit Currencyshares Swiss Franc ticker FXF @ $96.25 stop at $93.82
Short 1 units Daimler AG ticker DAI @ $86.20 stop at $82.48
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 2 units Goldman Sachs ticker GS @ $191.53 stops at $197.68/$193.58
Short 2 units Darden ticker DRI @ $36.35 stop at $40.27/$38.34
Short 2 units Lehman ticker LEH @ $43.70 stop at $47.46
Short 1 unit Deutsche Bank ticker DB @ $117.80 stop at $120.18

Watching Lehman Bros.


The chart of Lehman (above) is struggling to keep its head above water. I have no axe to grind with Lehman as I am an equal opportunity despiser(is that a word) of any and all originators/facilitators of toxic waste. Are they headed the way of Bear Stearns? I should think so given their Alt-A pay option arm exposure, not to mention the egregious degree of leverage on their balance sheet. Not far behind will be the pending investor, client, shareholder litigation which will no doubt, will include the phrase "settlement while neither admitting or denying wrongdoing."
I wish Lehman well, they will need it.
A break of $41.45 will compel me to get further short adding a 3rd unit to my existing short position.
I wanted to share with all of you a quote from Meredith Whitney from Oppenheimer, one of the few on Wall St. who actually has a clue as to what is going on and supports here argument with facts and not a rosary and a few hail Marys


"The real harrowing days of the credit crisis are still in front of us and will prove more widespread in effect than anything yet seen,'' analysts including Meredith Whitney wrote in a research note."


I realise many would rather listen to Paulson, Mack, Dimon, Doll & Co., but I will stick with Meredith and others like her, who weren't afraid to tell it like it is.



Energy is making everyone breathless on pom pom TV, and as usual speculation calls run rampant. Boone Pickens cleared the air with the supply demand facts


demand: 87million bbls/day

supply: 85 million bbls/day

_____________________

supply deficit 2 million bbls/day



Yup sure looks like a bubble, to me... NOT ! Ya gotta love critical, cutting edge, insightful analysis


Garmin... not a bubble.
Crocs.... not a bubble.
RIMM.... not a bubble.
Dot coms... not a bubble.

Oil.... definitely a bubble.

Maybe just maybe it's a bubble when your not a participant in said bubble and is not when you're long the bubble. Just a thought.


As I have said in a previous post The Old Playbook, these so called pundits are using the old "buy the dips, markets always go up" playbook. Ignore what is happening to the consumers income and balance sheet and the pressure he/she is under at your own peril.


Good speculating to you all !

Open Positions:

Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Long 3 units Ultrashort Dow ticker DXD @ $50.12 stop 2/1 at DIA $132.68/$130.26
Long 2 units Ultrashort Financials ticker SKF @ $103.90 stop at XLF $26.72
Long 1 unit Currencyshares Swiss Franc ticker FXF @ $96.25 stop at $93.82
Short 1 units Daimler AG ticker DAI @ $86.20 stop at $82.48
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 2 units Goldman Sachs ticker GS @ $191.53 stops at $197.68/$193.58
Short 2 units Darden ticker DRI @ $36.35 stop at $40.27/$38.34
Short 2 units Lehman ticker LEH @ $43.70 stop at $47.46
Short 1 unit Deutsche Bank ticker DB @ $117.80 stop at $120.18

Morning Trade Notes

A lot of events happening this morning which I will comment on a little later, along with some charts of interest.

Housekeeping notes;

Still waiting to get shorter on Deutsche Bank (ticker DB) thru $116.40,

I was filled on a 2nd unit short of Darden this morning at $35.50, leaving me with 2 units short with staggered stops (see below).

I was filled on 1 unit long of Currencyshares Swiss Franc ticker FXF at $ 96.15 stop at 93.82.

I was filled on a 2nd unit long of Ultrashort Financials ticker SKF at $105.35, leaving me with 2 units long. I am adjusting my stop to reflect the financial spiders ticker XLF. A move above $26.72 on the XLF and I will be out of the SKF immediately.

I was filled on a 3rd unit long of Ultrashort Dow 30 ticker DXD at $50.95 as the Diamonds took out 128.70 to the downside, leaving me with 3 units long.

Good speculating to you all !

Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Long 3 units Ultrashort Dow ticker DXD @ $50.12 stop 2/1 at DIA $132.68/$130.26
Long 2 units Ultrashort Financials ticker SKF @ $103.90 stop at XLF $26.72
Long 1 unit Currencyshares Swiss Franc ticker FXF @ $96.25 stop at $93.82
Short 1 units Daimler AG ticker DAI @ $86.20 stop at $82.48
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 2 units Goldman Sachs ticker GS @ $191.53 stops at $197.68/$193.58
Short 2 units Darden ticker DRI @ $36.35 stop at $40.27/$38.34
Short 2 units Lehman ticker LEH @ $43.70 stop at $47.46
Short 1 unit Deutsche Bank ticker DB @ $117.80 stop at $120.18

Monday, May 19, 2008

Late Day Update

Just some quick housekeeping updates.

I was filled 1 unit long Ultrashort Financials ticker SKF at $102.25

I was also filled a 2nd unit short of Goldman Sachs ticker GS at $185.20 which now gives me 2 units short again. I will stagger my stops here on both units.



Good speculating to you all !

Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Long 2 units Ultrashort Dow 30 ticker DXD @ $49.65 stop at DIA $132.68
Long 1 unit Ultrashort Financials ticker SKF @ $102.35 stop at $97.74
Short 1 units Daimler AG ticker DAI @ $86.20 stops at $82.48
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 2 units Goldman Sachs ticker GS @ $191.53 stops at $197.68/$193.58
Short 1 unit Darden ticker DRI @ $37.30 stop at $40.27
Short 2 units Lehman ticker LEH @ $43.70 stop at $47.46
Short 1 unit Deutsche Bank ticker DB @ $117.80 stop at $120.18

Update on the Dow


The above chart is a 60 day/60min close up view of the rally on the Diamonds (DIA) from the mid-March lows. This close up shows and up sloping trend line which depending on IF and WHEN it is broken would mandate adding to the trade on the short side. By the naked eye it looks about 128.70 -129 with much depending on the when. I will use a break of this trend line128.70 to add a 3rd unit to my Ultrashort Dow (DXD) position.
I will use the Diamonds (DIA) level of 132.68 as my stop on the Ultrashort Dow. So when the Diamonds (DIA) violate 132.68 I will be out of my DXD position.


I am sill watching and waiting on the following for entries.
Deutsche Bank short (ticker DB) thru $116.40,
Darden (ticker DRI) thru $35.55,
Swiss Franc (ticker FXF) thru $ 96.10
Ultrashort Dow ticker DXD) thru $128.70


Good speculating to you all !

Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Long 2 units Ultrashort Dow 30 ticker DXD @ $49.65 stop at DIA $132.68
Short 1 units Daimler AG ticker DAI @ $86.20 stops at $82.48
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 1 unit Goldman Sachs ticker GS @ $197.95 stop at $197.68
Short 1 unit Darden ticker DRI @ $37.30 stop at $40.27
Short 2 units Lehman ticker LEH @ $43.70 stop at $47.46
Short 1 unit Deutsche Bank ticker DB @ $117.80 stop at $120.18

Shorting the Dow via DXD.


I cannot help but come back for another helping of the Dow on the short side. Hopefully this foray will be more fruitful than the last. Looks to be a small double top inside the bear flag. I only hope I am not seeing things.
I will execute this short by getting long 2 units the Ultrashort Dow 30 ticker DXD at $49.60
Good Speculating to you all !

What are the Transports Saying ?

I want to address the apparent dichotomy developing in the markets between the transports and energy. Some may disagree and argue that it is perfectly natural that the transports should be moving as the market is always a discounting mechanism. The problem I have is this argue is used most often when it supports the users market position stance.

In my simpleton view of things one would surmise that with energy trading as it is, north of $126/bbl, that the transports would be in much worse shape. Now I realise fighting the tape will lead to financial ruin and it is always the final arbiter of all things financial (ask your margin clerk for clarification of this if necessary), but this must be balance with the real world. Quite often, usually at major inflection or turning points the market can and has gotten it quite wrong and for extended time frames to boot!

Now this does nor mean one is to ignore what the tape is saying but you do need to be cognizant of the fundamentals that underpin the technicals. I prefer to marry both the fundamentals and technicals into a marriage of art and science. By marrying the 2 you can avoid some of these market bouts of temporary insanity. How else can one explain the ridiculous lending standards of the recent credit orgy? No verification of income? Nothing down? This is a joke, right Buying the paper of a mortgate orginator that had gone bankrupt due to lousy lending after they had already gone belly up? 20,30,40 times leverage on investment portfolios? Bonds issued that let issuer pay interest due with more bonds also known as payment in kind bonds.

The transports, in my humble opinion, are telling us one of four things;

  1. Energy is in a temporary bubble and will be dropping swiftly in the near future.
  2. Energy prices are manageable as the increases can be passed on the customer.
  3. A new replacement/enhancement technology is around the corner which will save the day.
  4. The economy(global in particular) will be so robust $125/150/200/bbl energy won't matter.

Many are claiming that the transports are signalling the all clear sign. The transports, in my opinion, are being driven by the rails, plain and simple. Not airlines, not trucking, but the rails. The market, by the action of the transports, is making a heavy duty bet on #1 which I simply do not see given the global supply/demand equation. The market has done this before when it priced telecom and dot com outfits with billion dollar market caps which in reality had negligible or non existent sales, not to mention profits! Now we all know how that turned out, the market had it very, very wrong. Lets call it temporary insanity. We just need be careful the transports today are not dancing to the same insanity song Chuck Prince was dancing to at Citigroup .

The point hereis that said market discounting mechanism discounted something that never happened, or at least never happened to the extent it was disounted!

Housekeeping notes, on Friday I was stopped out of half my Daimler position (1unit) at $81.45 for a profit of just over 4.5 pts.

Good speculating to you all !

Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Short 2 units Daimler AG ticker DAI @ $86.20 stops at $82.48
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 1 unit Goldman Sachs ticker GS @ $197.95 stop at $197.68
Short 1 unit Darden ticker DRI @ $37.30 stop at $40.27
Short 2 units Lehman ticker LEH @ $43.70 stop at $47.46
Short 1 unit Deutsche Bank ticker DB @ $117.80 stop at $120.18

Ultrashort Financials and Goldman Sachs....get ready, get set.

This chart does not look good for the bulls on Goldman. I have tagged 185.25 as the level to watch, but I would understand waiting for say 185 or lower given the head fake whipsaws this market like to dole out on a frequent basis. That being said I have my finger on the trigger to get shorter this icon of American finance on a break of 185.25

The ultrashort financials look constructive down here as complacency with the financials has lulled many into a comfortable slumber. I am getting long 1 unit thru 102 .10 as the bull flag breaks out. I will add to the trade as it moves above the flag pole which is the 105.25 area.

Other items of noteworthy interest. Sill watching and waiting on the following for entries. Deutsche Bank short (ticker DB) thru $116.40, Darden (ticker DRI) thru $35.55, and the Swiss Franc (ticker FXF) thru $ 96.10

Good speculating to you all !

Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Short 2 units Daimler AG ticker DAI @ $86.20 stops at $82.48/$81.38
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 1 unit Goldman Sachs ticker GS @ $197.95 stop at $197.68
Short 1 unit Darden ticker DRI @ $37.30 stop at $40.27
Short 2 units Lehman ticker LEH @ $43.70 stop at $47.46
Short 1 unit Deutsche Bank ticker DB @ $117.80 stop at $120.18

Friday, May 16, 2008

The Swissy, XLF, Gold and Darden

We need to have the Franc on our radar as this correction on the Franc may have run its course. I will be getting long 2 units FXF on a move above $96

Gold is in a bull market and and as Dennis Gartman likes to say in a bull market you can only be long, very long or neutral. Now I know Wall St. is bullish everywhere and always, I'll give you 3 guesses as to why and the first 2 don't count! Anyway, Gold is in a bull market and right now I am neutral. This rally looks enticing but I have early April in the back of my mind. Unlike the cat who sat on the hot stove and now avoids all stoves, I will be sitting back on this stove, but I am waiting for volume. This trend line break MUST be confirmed by volume in a big way. Until then I am neutral and still a skeptic.



The chart of the XLF(above) shows a very lacklustre picture. The volume for the 10 week rally is not impressive and quite frankly bodes ill going forward. As my notes on the chart indicate the action of the last week looks bear flagish.


Darden is a current short for me. I intend to get shorter on any move below $35.55. I was silly to not respect a larger rally given the immense size of the rebate stimulus cheques. Hopefully one won't be coming every quarter or the market will be at $20,000 quite quickly ! If only Mellon knew of that trick he could have circumvented the depression and had a fawning book written about him !

Good speculating to you all !


Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Short 2 units Daimler AG ticker DAI @ $86.20 stops at $82.48/$81.38
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 1 unit Goldman Sachs ticker GS @ $197.95 stop at $197.68
Short 1 unit Darden ticker DRI @ $37.30 stop at $40.27
Short 2 units Lehman ticker LEH @ $43.70 stop at $47.46
Short 1 unit Deutsche Bank ticker DB @ $117.80 stop at $120.18

Wish I'd Wrote It

Sometimes you come across a post that is so concise, so articulate, so spot on, that all you can say is 'wish I'd wrote that! Such is the case with the following article posted over at Professor Roubini's blog RGE Monitor, which you need to be stopping by on a daily basis as it is a gold mine of critical thinking. This article was written by an anonymous poster by the name of London Banker who has been a central banker and securities markets regulator.

I have reprinted the article below. I hope you enjoy it as much as I did.


Looting The Vaults at the Central Banks

London Banker
May 15, 2008

When I was a young central banker, we often spent our lunchtimes debating how best to rob our employer. Tempted by the thought of great mounds of gold ingots far beneath us in the third sub-basement, nestling deep in bedrock, we would speculate on the viability of various plans for plundering our nation’s store of wealth. The presence of sufficient security forces to defend a medium size city and enough steel around the vault for a battle cruiser only spurred our youthful imaginations. After some months of fantasy gold robbery, I began to assert to my colleagues that stealing the gold would be foolish as it would be impossible to get away with enough gold in city traffic to make the attempt worthwhile, and selling it in any sizeable amount would lead to instant detection. I argued instead in favour of stealing the wheelie bins of cash conveniently lining the hallway to the loading ramp. Cash would be faster and easier to steal and more liquid to spend than gold.

I see now that I was a central banker of very little brain – and lacking ambition. The way to rob a central bank efficiently is to be a bank executive so skilled in financial engineering that I take my bank to the edge of extinction. I can then swap all my unpriceable, illiquid, engineered credit instruments for good central bank cash and Treasuries. That’s larceny without risk, making the central bank a complicit partner in the looting of its vaults, and earning gratitude and bonuses instead of audits and indictments.

Since the credit crisis was first diagnosed last fall, the Federal Reserve has advanced more cash and Treasuries than the entire five year cost of the Iraq war – over $400 billion. It has plundered more than half its holdings of US Treasuries, taking impaired asset-backed securities collateral in their place. It has overseen the devaluation of the dollar to third world levels of instability and inflation. And all of this debasement has as its objective the re-financing of those bank and shadow-bank executives who have so looted their own institutions that they hold the global financial system hostage to their incompetence, malpractice and greed. Without consultation or review, the Federal Reserve was able to chuck out decades of transparency and accountability in favour of secret facilities, secret loans favouring secret beneficiaries of secret largesse.

The Term Auction Facility (TAF), the Primary Dealer Credit Facility (PDCF) and the Treasury Securities Lending Facility (TSLF) are all ill-transparent conduits funnelling central bank cash to bankers in the private sector free of oversight, audit or scrutiny. The recent liberalisation of collateral by the Fed means that it is now officially the market maker of last resort for securities which are unmarketable in the private sector.

And the creepy thing is that most of the establishment thinks the Fed is doing a great job. Because there will never be an independent investigation or audit, we will never know whether they are policy geniuses or criminally complicit accomplices. Perhaps it makes no real difference to either motivation or outcome.

Now the Fed wants powers to enable it to create even more credit to finance failure. It is said to be seeking Congressional authority to pay interest on bank reserves (via Forbes with a hat tip to Steve Waldman). While this might sound benign, especially in a modern era when American banks hold no non-borrowed reserves, the expanded powers are potentially very dangerous. Paying interest on reserves would permit the central bank to extend hundreds of billions more in TAF, PDCF and TSLF credit without the inconvenience of having to sterilise the monetary expansion through further sales of its increasingly meagre inventory of Treasuries.

Spies and weapons, whether real or imaginary, are asserted by the military-intelligence complex as justifying more spies and weapons. If no attack occurs it is because they are so efficient at protecting us and pre-empting many unpublished threats. If an attack occurs, it was because they were under-funded or over-constrained. In the same way, financial excess and bad credit have been used by the banking system to justify more financial excess and bad credit in a self-reinforcing loop of financial and supervisory indulgence and forbearance. If no crisis occurs, it is because there is a new paradigm and risk management models are more reliable. If a crisis occurs, it is because banks lacked access to adequate liquidity and were over-regulated. For too long the cycle has reinforced monetary laxity, permissive deregulation and regulatory forbearance on accounting and capital adequacy, with all accountability and market discipline excused by the need to forestall contagion and systemic failure.

Any crisis now accelerates the trend toward greater public laxity, private excess and central bank secrecy. A crisis, real or manufactured, is most useful to increase the amount of public money clandestinely extended and diminish public oversight and administrative review of outcomes. This has been the pattern for at least 25 years, and may continue for some time to come before a taxpayer or creditor revolt ends the American spiral downwards towards bankruptcy and corporate tyranny.

It used to be the realm of conspiracy theorists to assert that policy makers in Washington were aligned with the military-intelligence complex in promoting international conflicts for profit or that the Federal Reserve was the tool of Wall Street banks in promoting irresponsible bubbles. Now it is accepted policy, defended openly in the media as right and inevitable, as providing an efficient means for America to meet the “threats” to security and financial stability in a changing world.

The danger of embracing the spin is that the productive economy shrinks from underinvestment and distortions as an increasing share of a slower growing pie gets diverted to government and the cronies who direct government policies.

The thrift failures in the 1980s were followed by financial deregulation and increased mortgage subsidies, enabling the massive misallocation of credit and leveraging of balance sheets on an even greater scale. Further deregulation, forbearance, subsidies and bailouts can only lead to more frightening misallocation of scarce capital in zero-savings America and more fragile over-leveraged banks, but now presenting a danger of contagion to the rest of the world. It is the savings of the world’s productive economies funding American misallocation and excess, and the world’s poor that suffer the contagion of inflation from a devalued dollar.

Already the ECB and Bank of England have followed the Fed in extending good central bank funds against questionable collateral under rapidly liberalising lending facilities. While they appear slightly more resolute on prudential supervision and inflation-fighting, they are nonetheless compromised and constrained by the policies and practices of bankers and central bankers across the Atlantic. As American banks receive forbearance and largesse, the European banks shout, “Me too!”

Globalisation of banking and regulatory “best practice” was once seen as raising standards, but may be at risk now of lowering them. Just as Japanese zero-interest rate policy flooded the world with cheap liquidity from the carry trade, fuelling speculative bubbles and providing cover for low rates elsewhere, Federal Reserve forbearance and credit accommodation may flood the world with warped management incentives and credit distortions which pervert the banking sector and financial markets, undermining rationales for savings and productive investment.

Without transparency of central bank facilities and policies, there can be no accountability for misuse of public resources and abuse of the public trust. Transparency provides an essential check on bank mismanagement, even for central bankers.

When Bloomberg revealed this week that Ben Bernanke lunched with Dimon at the New York Fed on March 11 with key Wall Street bankers just three days before the emergency $14 billion financing for Bear Stearns and five days before the sweetheart $30 billion financing of JPMorgan’s acquisition of Bear (again, the acquired assets the Fed received for the cash are secret), it made me very uneasy. Suspicious minds might think the public interest and integrity of market mechanisms, including the corrective of the occasional failure, weren't foremost in their discussions.

Whether cock-up or conspiracy, recent reforms set the scene for looting of the central banks on a scale never imagined by my younger self.

GE and their Appliances

I came across the following quote yesterday from Chris Whalen of Institutional Risk Analytics, in an article by the NY Times on Freddie Mac . This should give you a very clear picture of the distorted from of welfare capitalism which has taken hold of our capital markets. Like I have repeated again and again, future books will be written and courses taught about the shameful, shortsighted era we currently are in.

“Both these companies are clearly going to be insolvent by the end of the year, but everyone knows that Congress will do anything to keep them afloat, because if Fannie and Freddie go under, the entire global financial system will melt down,” said Christopher Whalen, a founder of Institutional Risk Analytics, an independent research firm. “These companies’ earnings don’t matter. Their accounting hardly matters. People buy the stock because they believe the federal government will bail them both out if things get really bad.”

No moral hazard here, thats for sure. Is is blatant idiocy or cronyism of the highest order?

Talking about moral hazard, for those wondering why I was considering shorting the U.S. bond market, Mike Shedlock on his blog, does an excellent job showing why. Hi-liting how the FED and ECB's swapping of gov't paper for bank toxic waste is mushrooming.

Housing starts better than expected and goosing the market this morning. Did I misinterpret Bob Toll's comments on housing the other day correctly?

I have a question which I have been thinking about for a couple of days. I continue to hear how the emerging economies are the place to be. I remember years back, one Jack Welch of GE at the time, made a claim that they would sell more fridges and freezers in Asia in the next decade than they have in their entire history in the U.S. Now given this, and understanding that he is no longer at the helm but rather on the celebrity circuit my question..... Why is GE selling their appliance business? Doesn't India have a middle class that rivals the population of the entire U.S. ! Am I missing something or just maybe does Mr. Immelt know something I don't? As many are fond of saying, stop watching what they say and start watching what they doing.

This rally in the market continues unabated and I must congratulate it on its persistance. The problem with bear market rallies is that they are just such. They defy much logic and and correcting the previous excesses. The average person's single largest asset, his home is under siege. The facts state the case quite clearly, no matter what the realtor and construction propagandists would have you believe. Lending standards are not going back to where they were, so you can get that dream out of your mind right away. Just like tech and dot com investors post pinnacle, kept dreaming of the old heights their stocks had scaled dreaming they would be back there soon.

Once a bubble bursts it is deflated and it is a long, long time, if ever for it to recover. You doubt this statement, go back through history and look at all the bubbles and you tell me. Tulip bulbs, automobile stocks, uranium, gold, silver, Japanese real estate, Japanese equities, baseball/hockey cards, dot coms and telecom, housing, the hoola hoop, cabbage patch dolls, beanie babies, you name the mania and look where it is now, and I can almost categorically guarantee it is nowhere near where it was. But of course housing is different, well, try debating that with the Japanese.

Some charts coming later this morning.

Good speculating to you all !

Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Short 2 units Daimler AG ticker DAI @ $86.20 stops at $82.48/$81.38
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 1 unit Goldman Sachs ticker GS @ $197.95 stop at $197.68
Short 1 unit Darden ticker DRI @ $37.30 stop at $40.27
Short 2 units Lehman ticker LEH @ $43.70 stop at $47.46
Short 1 unit Deutsche Bank ticker DB @ $117.80 stop at $120.18

Wednesday, May 14, 2008

The Financials

The Philly Banking Index(above) paints a rather uninspiring picture. As regular readers know I believe as go the financials so goes the market. This time is different will be an expensive lesson for many, as it always is.

Dow Jones US Financials Index(above) shows much the same picture as the Philly banking one does.

Nothing really different to report here of the Keefe Bruyette Woods banking spider as well.



The KBW regional banking spider shows a large pennant forming. You may recall I identified a large pennant forming on Bank America's chart yesterday. Lets step away from the charts for a minute and assume they are useless.
Okay, fundamentally where is the pop for the banks coming from according to Dick Bove of Punk Zeigel's buy of a generation call.
Investment banking and securititzation? Try another one, for if not altogether dead, then dormant for a heck of a long time. Commercial banking, domestic or international. Okay but quite frankly litigation problems abound for these banks. From the underwriting origination laden with fraud and remember if fraud can be proven then the toxic crap comes right back on to their balance sheets. Next up, Auction Rate Preferreds, yup, next to cash alternative. Ripping off your customers, nice way to build trust. Although I hear UBS is making people whole. Leveraged buyouts? Hah !, that LBO paper that never ever should have been done unless you were a 26 yr old, Ivy league MBA, black box reading, never been through a business cycle before. now sitting rotting on the books with management praying for a rally to get rid of the stuff business. Gone, gone gone. Even my buddies Rocco and Bruno downtown have more sophisticated lending standards and risk control. And before you bring up those sovereign wealth funds, they have already taken massive haircuts on their US banking investments so kiss that option good bye, but you can never rule out egregious stupidity in the annals of averaging down so you get the benefit of the doubt with them.
And while on the topic of Wall St. and their ability/credibility. Back when I started with my old firm back in 1992 I went into the office research library, we still had a library as we were making the tech transition. Our research was filed by sector and I remember grabbing a thick, bound, 60 page piece on Seagram, (ticker VO if I recall). You remember that outfit that Edgar, the artist ran aground, but that's another story. Anyway I was reading through it and was amazed by the depth of analysis not to mention the debt laden balance sheet, possibly more than all of Latin America. Strong Buy ! rang the report. Priority list stock. Model Portfolio core holding. You get the picture. No coincidence Seagram was coming to the markets and our (and everyone else on the street's) investment banking dept on a regular basis more often than a sailor on shore leave to the brothel.
Anyway as I was putting it back I saw a single sheet on a company called Corby's. Just some basic ratios with an NR, which stood for No Rating. What caught my eye.....NO DEBT, zero, nada, zilch. I accumulated some of the stock for some clients at the time but was scared to get deep into it as we had no rating on it and I really like being employed! Needless to say we all know what happened to Seagram. And Corby's, well, to call it a winner is a MAJOR understatement.
Just a little tidbit to keep in the back of your mind regarding Wall St., Bay St. and Lombard St.

Housekeeping notes;
I was stopped out of my long TWM position at $69.90 for a $4.5 pt loss on 1 unit.
I was stopped out of my long EFU position at 74.30 for a $2 pt loss on 2 units.

Good speculating to you all !
Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 1 unit Allis-Chalmers ticker ALY @ $14.45 stop at $16.64
Short 2 units Daimler AG ticker DAI @ $86.20 stops at $82.48/$81.38
Short 1 unit Brinker Int'al ticker EAT @ $21.25 stop at $24.14
Short 3 units Retail Holders ticker RTH @ $96.72 stop at $98.56
Short 1 unit Goldman Sachs ticker GS @ $197.95 stop at $197.68
Short 1 unit Darden ticker DRI @ $37.30 stop at $40.27
Short 2 units Lehman ticker LEH @ $43.70 stop at $47.46
Short 1 unit Deutsche Bank ticker DB @ $117.80 stop at $120.18