Friday, August 29, 2008

Broker Thoughts

I want to talk a little about the brokers for a moment. Many out there are arguing that they are cheap on a forward earnings basis, book value, and even better takeover basis. I try to be a very common sense thinker, if what I do can be called thinking, but I do notice that Merrill and Lehman's prize assets are their money management divisions. In particular Blackrock for Merrill and Neuberger Berman for Lehman. Regular readers know you do not sell winners you keep them but yet that is exactly what both Merrill and Lehman are considering doing with these 2 sub units.

I am thinking out loud here, so what do Merrill and Lehman bring to the table besides their sales and distribution network. Investment banking you say? Sure, but let's go back and see the value in these deals if there is any or is it deals to just do deals? Daimler, BMW and Toyota, don't outsource their car and truck manufacturing capabilities so why does Merrill Lynch or a Lehman need an investment manager? Do they manage money or not? If so why do they own a Blackrock or a Neuberger? Either they do it better or Blackrock and Neuberger does. So this begs the question as to what are we paying a Merrill or Lehman for? Investment advice? Should a Merrill trade for a multiple or a valuation similar to an Autonation (AN), Carmax(KMX), or Sonic Automotive(SAH)? A commission sales, staff with a service and repair department.

You may call this thinking crazy and maybe it is but I fail to see the difference. Now you factor in the fraud, the dishonesty, the duplicity, and where does this leave you with a Merrill. I would suggest the Merrill you see today is a far far cry from the Merrill that my grandfather under Charlie Merrill and my uncle under Donald Regan worked for. Back then Charlie Merrill went door to door taking sound securities and sold them to the retail public. Of course he wasn't sophisticated enough (not) to securitize toxic, debt paper and peddle it to our pension funds. He was a man of character. I wish no ill on the likes of Merrill but facts are facts and Merrill is reaping what is has sowed. It is a snake pit of unknown depths. I realise that your own broker is the face of Merrill and you may like him/her very much. But this retail army of brokers must follow orders or be courtmartialed. They must offer for sale what they are told to and anyone who tells you opposite has now idea how the retail brokerage firm model operates.

You disagree with this assessment? Then please explain to me how a firm of this magnitude, goes out and throws the bank ($$$) at an internet analyst, who by the way had a BA in English from Princeton, (now remember this technical qualification for an internet analyst mind you!) from Oppenheimer and who prior to being said internet analyst was a proof reader at Random House books. Further to this his only notable claim to fame, besides outright duplicity and DOCUMENTED fraudulent misrepresentation to clients, was an outlandish hail mary call on Amazon.com (AMZN).

For those interested, on Dec. 15, 1998, Amazon closed at $242.75 The next day, Mr. Blodgett made the prediction that Amazon would hit $400 in the next 12 months. Amazon surpassed the $400 price target in about three weeks.

Now this is the same Merrill Lynch that went out at the top of the housing market and purchased First Franklin. This is the same firm who purveyed auction rate securities on it's clients. I could go on but you get my point. Now I hear your argument already, everyone on Wall St. did this sort of thing. Yes, you are absolutely correct ! So what does that tell you about Wall St., those self proclaimed mavericks and trailblazers of financial innovation and engineering. They are fraudsters and thugs who merely copycat each other, no different than any criminal enterprise. The produce nothing, yet with enough bluster and pomp, with enough glossy graphs and fancy powerpoint presentations, they try and have convinced many that 1+1 =4. You see this is important because their bonus is calculated on this number so it is all that matters. Now don't forget that bonus's are paid to the architects of this frankensteim finance when things are great and when things fall apart as they are now, well, the shareholder has exclusive rights over the losses as bonus payments are non-refundable. Nice setup. No wonder the masses are flocking to MBA school rather than engineering, or geology, or medicine. Ya do have to give Merrill and Wall St. in general credit though, as they could convince an Eskimo to buy snow.

Housekeeping notes;

I was stopped out of my short Blackrock position yesterday at $218.25 for a flat trade on 1 unit. Frustrating you say, absolutely but we must trade this way. We must not let the boyz lunacy, no matter how bizarre, sink our ship. Believe me, the equity boyz and the product they smoke can alter their universe and in the process overwhelm our boat. We must step aside, hence adhering to our stops and not let losses run on us as this would be the absolute worst error we could make.

Why didn't I take my profits when BLK was trading $203-204, being up over 10pts you say? Well, sure I could have lowered my stop further down but this more often than not over the long haul, will cut your profits off at the knees and this is the 2nd worst error we could make.

I want to wish all my readers, a safe and enjoyable Labor Day holiday. I will be back at my post Tuesday.

Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 2 units of Powershare Agriculture ticker DBA @ $35.35 stop $34.79
Long 2 units of XTO Energy ticker XTO @ $45.40 stop at $44.48
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $90.68
Long 2 units Ultra Oil & Gas ticker DIG @ $84.65 stop at XLE $71.93
Long 1 unit U.S. Oil Fund ticker USO @ $96.95 stop at $91.38
Long 2 units Ultrashort S&P500 ticker SDS @ $64.65 stop at SPY $130.58
Long 1 unit Oil Service Holdrs ticker OIH @ $186.05 stop at $177.64
Long 1 unit Ultrashort Financials ticker SKF @ $123.65 stop at XLF $22.06
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $128.56
Short 3 units FedEx ticker FDX @ $87.10 stop at $88.16
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit Salesforce.com ticker CRM @ $57.05 stop at $60.62

Thursday, August 28, 2008

XLF and SKF Charts




Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 2 units of Powershare Agriculture ticker DBA @ $35.35 stop $34.79
Long 2 units of XTO Energy ticker XTO @ $45.40 stop at $44.48
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $90.68
Long 2 units Ultra Oil & Gas ticker DIG @ $84.65 stop at XLE $71.93
Long 1 unit U.S. Oil Fund ticker USO @ $96.95 stop at $91.38
Long 2 units Ultrashort S&P500 ticker SDS @ $64.65 stop at SPY $130.58
Long 1 unit Oil Service Holdrs ticker OIH @ $186.05 stop at $177.64
Long 1 unit Ultrashort Financials ticker SKF @ $123.65 stop at XLF $22.06
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $128.56
Short 3 units FedEx ticker FDX @ $87.10 stop at $88.16
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit Blackrock ticker BLK @ $218.50 stop at $218.16
Short 1 unit Salesforce.com ticker CRM @ $57.05 stop at $60.62

Getting Short the Financials via SKF

The time has come for me to test the water again being short financials. I will have some charts shortly but suffice to say I like what I see. I am getting short the financials via my favourite vehicle the Ultrashort Financials ticker SKF at $123.55 with a stop at the Financial Spiders ticker XLF $22.06


Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 2 units of Powershare Agriculture ticker DBA @ $35.35 stop $34.79
Long 2 units of XTO Energy ticker XTO @ $45.40 stop at $44.48
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $90.68
Long 2 units Ultra Oil & Gas ticker DIG @ $84.65 stop at XLE $71.93
Long 1 unit U.S. Oil Fund ticker USO @ $96.95 stop at $91.38
Long 2 units Ultrashort S&P500 ticker SDS @ $64.65 stop at SPY $130.58
Long 1 unit Oil Service Holdrs ticker OIH @ $186.05 stop at $177.64
Long 1 unit Ultrashort Financials ticker SKF @ $123.65 stop at XLF $22.06
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $128.56
Short 3 units FedEx ticker FDX @ $87.10 stop at $88.16
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit Blackrock ticker BLK @ $218.50 stop at $218.16
Short 1 unit Salesforce.com ticker CRM @ $57.05 stop at $60.62

Wednesday, August 27, 2008

Bits and Pieces

So Thornburg Mortgage had yet another margin call, this time in the amount of 219 millions. Not even news anymore, at least to the main steam financial gurus. Well, it is news to this trader as Thornburg didn't do subprime, they did jumbo paper and most of it was prime or close to it. Yet another tell as to what is going on in the credit arena.

Thornburg CEO Larry Goldstone's quote sums things up succinctly, “Whoever thinks [mortgage securitization] is being fixed or getting better out there, it’s not.”

Gee, ya think ?

I see Roger Mudd, errr excuse me, I meant his son Dan, the CEO at Fannie Mae is doing the time honored ritual of Seppuku and is falling on his sword and taking his medicine. Oops, who am I kidding. That would take honor, courage, and moral character, he instead is having his underlings fall on their sword for him.

We ridicule and mock the Asians when they screw up, realise it, resign, go out for a night on the town and commit this act. You need look no further than who is running corporate America and it is easy, frankly, blatantly obvious as to why we are in the pickle we find ourselves in.

I also see the SEC wants to let U.S. companies switch to international accounting rules. Another nail in the coffin of our capital markets. As it should be, at least then the player steps up to the table knowing the game is rigged, the dice are loaded and the cards are marked. At least then the charade would be over and we could then all call a spade a spade.

You disagree okay. Then read the article about Lehman wanting to create a new entity in which to dump the toxic paper they hold. I have some advice for Dick Fuld over at Lehman. Don't bother, save yourself the assorted set up fee associated with a move like this and just dump them on the Feds lap. Who cares? You got nothing to lose and if it doesn't work out you walk with a deca-million dollar severance package and can round out the join Jimmy Cayne, Stan O'Neal, and Chuck Prince golfing foursome.

Lots of laughs and giggles on the best golf courses the country has to offer. As you hack your way in the annals of business humiliation as you become case studies in the new mandatory MBA course , How To Implode a Venerable Iconic Financial Name and Get Outlandishly Wealthy in the Process. As my grandmother (god rest her soul) would say, "you should be ashamed of yourself young man".

You may think I am kidding but I would be wholeheartedly in support of such a program of study. Sour, bitter, too harsh you say. Well facts are facts and I myself look at past trading errors and try to learn from them. The phrase from Santayana of "those who don't learn from history are doomed to repeat it" comes to mind. An old coach of mine used to say "when you've learned what not to do, then you have learned what to do." I guess we can safely surmise that they didn't learn from Enron. Lets hope we learn from this. That's obvious you say! To which I would reply, based on current goings on, obviously not !

Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 2 units of Powershare Agriculture ticker DBA @ $35.35 stop $34.79
Long 2 units of XTO Energy ticker XTO @ $45.40 stop at $44.48
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $90.68
Long 2 units Ultra Oil & Gas ticker DIG @ $84.65 stop at XLE $71.93
Long 1 unit U.S. Oil Fund ticker USO @ $96.95 stop at $91.38
Long 2 units Ultrashort S&P500 ticker SDS @ $64.65 stop at SPY $130.58
Long 1 unit Oil Service Holdrs ticker OIH @ $186.05 stop at $177.64
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $128.56
Short 3 units FedEx ticker FDX @ $87.10 stop at $88.16
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit Blackrock ticker BLK @ $218.50 stop at $218.16
Short 1 unit Salesforce.com ticker CRM @ $57.05 stop at $60.62

Tuesday, August 26, 2008

Getting Short Salesforce.com Inc - CRM


I have hi lighted Salesforce.com ticker CRM (chart above). Please take a look at my notes for some details. Suffice to say it had a massive gap down last week (which is now open 3 days) which makes many traders shy away from shorting. This makes this a very tough trade, which regular readers know, I feel the hardest trade is usually the best trade. I am using the last 3 days, weak volume rally to get short 1 unit CRM now at $56.95 with at stop at $60.62


Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 2 units of Powershare Agriculture ticker DBA @ $35.35 stop $34.79
Long 2 units of XTO Energy ticker XTO @ $45.40 stop at $44.48
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $90.68
Long 2 units Ultra Oil & Gas ticker DIG @ $84.65 stop at XLE $71.93
Long 1 unit U.S. Oil Fund ticker USO @ $96.95 stop at $91.38
Long 2 units Ultrashort S&P500 ticker SDS @ $64.65 stop at SPY $130.58
Long 1 unit Oil Service Holdrs ticker OIH @ $186.05 stop at $177.64
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $128.56
Short 3 units FedEx ticker FDX @ $87.10 stop at $88.16
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit Blackrock ticker BLK @ $218.50 stop at $218.16
Short 1 unit Salesforce.com ticker CRM @ $57.05 stop at $60.62

Monday, August 25, 2008

U.S. Natural Gas and Gasoline Funds

The US Natural Gas fund, ticker UNG, (chart above) is worth keeping on your radar. I realise we made a slight new low today, on an intraday basis mind you, and closed above that. As my notes indicate, a move above $39.15 is necessary for UNG to get back in bullish mode. I have hi-lited "the box" which you will recall is the 50-62% retracement area of the immediately prior move, here it was the Jan-Jul move from 33.50-63. We have clearly blasted thru this box. Now you can see why, in my world price is paramount as this stubborn adherence to this indicator would have crushed you beyond words. UNG is atop my watch list currently.

The US Gasoline fund, ticker UGA (chart above), is a thinly traded vehicle and had a nice pop last week which it is giving back. Lets watch to see how far this corrects and if the $52 level can hold on a closing basis.



I don't know how many of you caught this news which came out over the weekend in which another bank was shuttered, Columbia Bank and Trust of Topeka Kansas. I realise you may find it shocking that pompom TV(CNBC) either doesn't know the bank went under or refuses to share the news of the story. This is completely understandable given they have allocated the bulk of their resources to hyping a bogus story surrounding a Korean bank wanting to buy Lehman every quarter hour. I trust you are starting to see a pattern here with regards to mainstream financial media.

I continue to strongly recommend the blogs listed further down on this page as regular reading. They are providing "the real skinny" on what is going on in the markets as opposed to the cheerleading charlatans on CNBC. I am at the point where I feel sorry for the likes of Vince Farrell in whose world everything is a buy. To his credit, its not his fault, for he is a product his environment. You want to stay employed on Wall St. you better be bullish. He also had quite a bullish wind at his back for the better part of 2+ decades. At least Peter Lynch of Fidelity Magellan fame was humble enough to give credit where it was due and acknowledged he had the good fortune to manage money in a great market. But I digress..... yet again!

"Are the financials a buy" day after day after day, is what seems to count as financial reporting on CNBC. That alongside a healthy dose of rumor mongering and I would counsel Jeff Immelt of GE to dump the unit ASAP while it is worth something before the bear market leaves it in a worthless heap.


Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 2 units of Powershare Agriculture ticker DBA @ $35.35 stop $34.79
Long 2 units of XTO Energy ticker XTO @ $45.40 stop at $44.48
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $90.68
Long 2 units Ultra Oil & Gas ticker DIG @ $84.65 stop at XLE $71.93
Long 1 unit U.S. Oil Fund ticker USO @ $96.95 stop at $91.38
Long 2 units Ultrashort S&P500 ticker SDS @ $64.65 stop at SPY $130.58
Long 1 unit Oil Service Holdrs ticker OIH @ $186.05 stop at $177.64
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $128.56
Short 3 units FedEx ticker FDX @ $87.10 stop at $88.16
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit Blackrock ticker BLK @ $218.50 stop at $218.126

Getting Long the Oil Service Holders - OIH

The Oil Service Holders Trust ticker OIH, (chart above) is one of the few sectors I can get excited about because it is in a bull market. I realise the overall markets are in bear mode, but we must remember energy, precious metals, and commodities in general are in a bull market.

As my notes indicate we are getting a correction after a breakout which I am going to take advantage of. I am using this pullback in the OIH to its breakout area to get long 1 unit here at $185.95 with a stop at 177.64



Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 2 units of Powershare Agriculture ticker DBA @ $35.35 stop $34.79
Long 2 units of XTO Energy ticker XTO @ $45.40 stop at $44.48
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $90.68
Long 2 units Ultra Oil & Gas Proshares ticker DIG @ $84.65 stop at XLE $71.93
Long 1 unit U.S. Oil Fund ticker USO @ $96.95 stop at $91.38
Long 2 units Ultrashort S&P500 ticker SDS @ $64.65 stop at SPY $130.58
Long 1 unit Oil Service Holdrs ticker OIH @ $186.05 stop at $177.64
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $128.56
Short 3 units FedEx ticker FDX @ $87.10 stop at $88.16
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit Blackrock ticker BLK @ $218.50 stop at $218.126

Adding to My DIG Position

I am going to use the weakness today in energy, which you can flip a coin quite frankly as to its cause or reason, better yet lets leave the reasons for it to the intellectual pretty faces on pompom TV to figure that out, to get longer the Ultra oil and gas ticker DIG. I got long last week as the XLE moved above the $74 level. Today we are correcting the break out on significantly lighter volume. I will use this weakness to get longer a 2nd unit here on the DIG at $84.80


Some may notice XTO acting the same, correcting its very impulsive move up last week back to the break out level. I will leave it alone and focus and DIG for now.

Housekeeping notes;

I am adjusting my stop on DIG, which is a derivative security, to reflect the underlying issue the XLE. The new stop on this position will be XLE $ 71.93. Which means that DIG will be sold if as and when XLE violates $71.93 on the downside.


Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 2 units of Powershare Agriculture ticker DBA @ $35.35 stop $34.79
Long 2 units of XTO Energy ticker XTO @ $45.40 stop at $44.48
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $90.68
Long 2 units Ultra Oil & Gas Proshares ticker DIG @ $84.65 stop at XLE $71.93
Long 1 unit U.S. Oil Fund ticker USO @ $96.95 stop at $91.38
Long 2 units Ultrashort S&P500 ticker SDS @ $64.65 stop at SPY $130.58
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $128.56
Short 3 units FedEx ticker FDX @ $87.10 stop at $88.16
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit Blackrock ticker BLK @ $218.50 stop at $218.126

Friday, August 22, 2008

Must Read

Karl Denninger's blog Market Ticket is an excellent daily read. He has been out in front of the shenanigans going on in Washington and Wall St. His writing is straightforward as he pulls no punches and calls it likes it is. His piece today entitled PIMCO, The New Face of Our Financial System, is absolutely spot on sensational and yet sickening at the same time in its implications and reflections on us and our capital markets

I wish I could say I wrote it, it is that good. I rarely post others work, as this is my blog, and only do so when it is something that is just too good not to share. In this regard, I have lifted his entire piece and posted it here for you. Please take some time to read it as it is well worth it.

Here is the link to his site Market Ticker which you should make a part of your regular reading list.

Thanks again Karl !


PIMCO, The New Face Of Our Financial System

You would have thought that PIMCO's McCulley was a 2-year old yesterday.

He was running his mouth all day long, along with Cramer and everyone else on CNBC, and the message was along the lines of:

  • Paulson has to "show the color of his money" in bailing out Fannie and Freddie (why McCulley? Are you getting nervous?)
  • "Its only going to get worse" (if Paulson doesn't act now)
  • "Agencies (Fannie/Freddie) need to be privatized" (I thought your problem with them is that they already are, they did unsound things, and now you're screaming for a bailout?)
  • "The situation is worse than a year ago" (no kidding? Who'd a thunk? You don't read The Ticker, do you?)

Now let's digest all of this, in light of the facts.

See, just a few months ago, PIMCO disclosed that it had gone on an incredible Fannie and Freddie paper buying spree over the previous few months!

That's right, into the eye of the hurricane PIMCO went out and intentionally bought debt they knew was distressed, issued by a company that might fail.

This was not done "blind". It was done by a couple of very intelligent men who have been investing in the debt markets for a very long time and are experts.

So what's all this really about?

Simple - its about twisting the arm of the government and robbing the taxpayer.

Not because they were bamboozled, not because an unexpected calamity struck these firms, not because of an error.

No, this was a calculated act from the top down - buy a boatload of this debt at distressed prices after the threat has been identified by THEM, then WHINE at the United States Treasury and demand a bailout "or the end of the world will happen while Paulson sits and watches Rome burn."

In truth if Paulson doesn't do what PIMCO wants PIMCO will be the one who burns and PIMCO directly bought into a known distress situation!

See, this is where we've come to. We are now beyond "moral hazard" and "too big to fail"; we've now transmorphed the entire financial system into a mechanism to literally rob the people as institutions intentionally place themselves in harms way and then demand that the government cover a bet they knew was bad when they placed it.

It is one thing to argue that someone is "too big to fail" and that they pose "systemic risk." We've heard that countless times over the last year, and it seems to be the justification for every bailout and proposal that is put on the table - and has been since LTCM collapsed.

But now we've seen institutions take it one step further, and intentionally purchase securities issued by firms that they allege are "too big to fail" yet in dire trouble, then scream for the government to come in and bail them out!

Do you understand what's going on here?

Fannie and Freddie have been running one gigantic hedge fund for the last couple of years. They bought about $500 billion worth of trash ALT-A paper in the 2005-2007 time frame between them, with a goodly amount of "Option ARM" and "Interest Only" loans included. In addition they took in over a hundred billion dollars more from Countrywide and Indymac, most of which was done using "automated approvals" and are in fact stated income loans, although they're called prime paper.

Institutions like PIMCO, The Chinese and Japanese Central Banks, and others all knew this. This is NOT a surprise to any of them.

They all invested knowing full well that these firms were running with leverage ratios far in excess of anything that could be reasonably called safe. In addition they knew these purchases of garbage mortgages had nothing to do with "sustainable housing" or any such claptrap. Fannie and Freddie were "levering up" and "chasing yield" just like the rest of these market participants and the buyers of their paper knew it.

But the award for "truly outrageous" is reserved for those firms like PIMCO that have bought increasing amounts of this debt since the beginning of the year, knowing full well that it is impaired and that the firms behind it are at risk of failure, purchasing it on the back of being able to FORCE the government to do that which the black print on the front cover of EVERY prospectus says won't happen.

Why do we put up with this nonsense?

As for Paulson, were I him I would do what I recommended over the weekend - order up full audits, document that there is no possible way they can survive with the losses that are both being hidden and the projected future path for credit quality, place the firms in conservatorship, and run down the portfolios.

Guarantee nothing of the present debt.

But - provide a funding path going forward that is guaranteed for new security issue, with the strict stipulation that, as noted, only true prime paper can be underwritten, and no "hedge-fund" like activities are permissible. And again, that's 20% cash down payments, 36% DTI, and 15 or 30 year fixed terms. I suggest using Ginnie Mae, which already exists, but if the government wants to re-jigger Fannie and Freddie, once they've run down their portfolios, the equity has been wiped out, and can be sold back off to the public, that's fine too.

This does all of the following:

  • Those who intentionally bought securities "in distress" thinking they were going to be able to blackmail or jawbone the Treasury into making them a profit will get it in both holes, as they should. Let their shareholders come after those clowns for their obvious and transparently bankrupt strategy. We must not let "moral hazard" morph into intentional acts of placing one's self in harms way so you can whine for a bailout!
  • Similarly, idiots like Bill Miller who have been buying GSE common stock of late on the very same premise - that they'd be "saved" by the government - will also take it in both holes. Again, we cannot allow firms to intentionally place themselves in harm's way and then scream for help.
  • It places the responsibility for the bad debt where it belongs - in the GSEs and those who knowingly and willingly bought it. Note that most of this debt is perfectly sound and as run down both coupon and principal payments will be made. For some of the more risky paper, there will be losses. This is as it should be.
  • It insures that going forward we will have mortgage liquidity for those loans that are made under sustainable guidelines, with an explicit guarantee, but only for soundly-underwritten paper.

The "new" paper will be marketable folks. It will have an explicit guarantee and be underwritten to sound standards. That is, indeed, the "gold standard" when it comes to debt sold into the market - that it represents loans made to qualified borrowers with collateral valued at or above the amount of the loan written.

Those who are screaming for bailouts of the existing paper and firms are not interested in mortgage liquidity or a healthy housing market.

Oh, and one of the screamers? China. Again:

"``If the U.S. government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic,'' Yu said in e-mailed answers to questions yesterday. ``If it is not the end of the world, it is the end of the current international financial system.''"

You lying sack of dogsqueeze.

You bought these securities knowing full well that they were not guaranteed, and like everyone else who did so, you were simply "reaching for yield." You, along with the rest of your cronies over in China, Japan and elsewhere, were fully aware that the GSEs were buying ALT-A paper stuffed full of liar loans made to hairdressers on $500,000 houses in California and Florida. YOU DESERVE WHAT YOU GET from such a purchase and, if this "is the end of the current international financial system", then IT NEEDS TO END RIGHT NOW, because that "current international financial system" has turned into one gigantic SCAM and YOU ARE THE WORST OF THE SCAMMERS!

These folks are ALL simply trying to force the government to cover a bet they knew was bad at the time they made it, in a raw act of arm-twisting.

Henry Paulson MUST SAY NO.

There is a fly in this ointment however - its that a tremendous number of banks have bought GSE Preferred and are holding it as part of their risk-based capital!

What? You mean to tell me that banks are holding stock as part of risk-based assets?! How the hell did that happen?

Oh, it happened because once again:

"Banks bought Freddie and Fannie preferred stock because they can be used as capital that regulators require to cushion against losses on loans. Banks also get a tax break on 70 percent of the securities, making them attractive to own, said Midwest's Wiest."

And guess what - those are the only two firms' preferred that this applies to.

What sort of criminally stupid "regulators" do we have in this nation when banks are allowed to hold risk-based capital in the preferred stock of firms that are levered up at 60:1 or more?

This whole mess is one gigantic scam from the top down.

We the people need to run all of these people - every last one of them, from Bernanke to OTS to OCC to Treasury - out of town on a rail. They have intentionally allowed banks and institutions to not only lever up to insane levels but also then allowed banks to buy and hold preferred stock, which is THIRD IN PRIORITY in liquidation, as part of their risk-based capital!

Oh, one more thing. Has Henry Paulson shot off his Bazooka pointed at Fannie and Freddie themselves? One has to wonder, given this:

"In July, Congress gave the Treasury authority to lend money to or acquire equity in the companies if needed to prop them up. That helped reassure buyers of Fannie and Freddie debt that the government would stand behind them in a crisis.

But the Treasury's authority may make it harder for them to sell equity because of uncertainty over how the Treasury would treat private shareholders if a bailout is needed."

You have to love unintended consequences.

Wouldn't it be ironic if Paulson's "Bazooka" turns out to be what kills the GSEs?

The next obvious question is was that Paulson's intended outcome all along?

Things that make you go "hmmmmm..

Getting Shorter the S&P 500 via SDS

Here is an updated chart on the Spiders illustrating the reasons for my entry into the SDS. I like the look of this very much. I also feel the need to have a bearish bet on the table as what is unfolding here in the capital markets is nothing short of historical. The need is such that I am getting short a 2nd unit of the Spiders via SDS here at $64.50 leaving my stop alone.

Regular readers know my thoughts that this was the mother of all credit bubbles and the ramifications are slowly spreading to the broader economy. I must have a bearish bet on the table for the moment when the short bus riding equity boyz wake up, either voluntarily (don't hold your breath waiting for this) or via an outside influence, like a margin call, client liquidation, lender fear or the like.


Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 2 units of Powershare Agriculture ticker DBA @ $35.35 stop $34.79
Long 2 units of XTO Energy ticker XTO @ $45.40 stop at $44.48
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $90.68
Long 1 unit Ultra Oil & Gas Proshares ticker DIG @ $84.35 stop at $79.68
Long 1 unit U.S. Oil Fund ticker USO @ $96.95 stop at $91.38
Long 2 units Ultrashort S&P500 ticker SDS @ $64.65 stop at SPY $130.58
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $128.56
Short 3 units FedEx ticker FDX @ $87.10 stop at $88.16
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit Blackrock ticker BLK @ $218.50 stop at $218.126

Getting Short the S&P 500 via SDS

We are getting quite the rally today. I have been watching the Spiders ticker SPY and they are now rallying into the broken up trend line. I prefer to short the Spiders via the Ultrashort Spiders ticker SDS. I am getting short 1 unit if SDS here at $ 64.55 with a stop just above the last reaction high on the SPY at $130.58



Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 2 units of Powershare Agriculture ticker DBA @ $35.35 stop $34.79
Long 2 units of XTO Energy ticker XTO @ $45.40 stop at $44.48
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $90.68
Long 1 unit Ultra Oil & Gas Proshares ticker DIG @ $84.35 stop at $79.68
Long 1 unit U.S. Oil Fund ticker USO @ $96.95 stop at $91.38
Long 1 unit Ultrashort S&P500 ticker SDS @ $64.65 stop at SPY $130.58
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $128.56
Short 3 units FedEx ticker FDX @ $87.10 stop at $88.16
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit Blackrock ticker BLK @ $218.50 stop at $218.126

Thursday, August 21, 2008

The Spiders S&P 500 - SPY

The Spiders (chart above) look very interesting at this point. They have broken a short uptrend and have now jobbed about for a couple of days. While it could rally and kiss the broken up trend line form underneath it looks like a break of $126 would seal its fate and get me active on the short side via my preferred vehicle, the Ultrashort S&P 500 ticker SDS (chart below).



I keep hearing the bulls telling me the market is a discounting mechanism and that all the bad news is discounted. So based on this I have a couple of quesiton for the "I'm bullish because the market is discounting all the bad news", and the "given all the bad news the market should be down a heck of a lot more" crowds.

Please explain to me how Musharraf's resignation in Pakistan is stock market positive?

Please explain to me how Russia, now basically occupying Georgia, controlling the Baku-Supsa pipeline is bullish for stocks. Remember now, they own the suppy and now the distribution vehicle.

Please explain to me how bailing out Fannie and Freddie's and expanding their balance sheets further to buy even more toxic mortgage paper helps the current credit situation, prevent falling home prices, and prevent escalating defaults?

Please explain to me where the likes of Merrill, UBS, et al are going to get the cash to buy back the billions in auction rate securities they have agreed to buy back via the settlement with the NY attorney general ? (neither admitting nor denying wrongdoing, I might add for all you Merrill Lynch commission paying customers!)

I see Dick Bove of Ladenburg Thalmann came out with an endorsement of BUY on Lehman on the possibility of a hostile takeover. Yup, another quality commission generating idea from the brilliant research minds that reside on Wall St.

I keep hearing from the steady stream of gurus on pom pom TV, that Fannie, Freddie and Washington Mutual are perpetual call options. How funny. I guess Nortel, JDS Uniphase, Level 3 Communications et al. are perpetual call options as well. Do many of you remember CNBC's stock picking contest and the popular stocks of the contest. All single digit stocks on a regular basis. Sirius was consistently a #1 holding, a $3 stock which is now a $1.50 stock. But like the experts continue to chant, a perpetual call option.

But just buy stocks as dips are buying opportunities. And that recession you think you see is not a recession at all but rather, according to former Texas Senator and McCain advisor Phil Gramm, just a a mental recession. Just like the esteemed congressman William Jefferson from Louisiana who the FBI dilly dallies with over $90,000 in marked bills in his freezer there seems to be a slight disconnect from reality by the Washington zombies.


Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 2 units of Powershare Agriculture ticker DBA @ $35.35 stop $34.79
Long 2 units of XTO Energy ticker XTO @ $45.40 stop at $44.48
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $90.68
Long 1 unit Ultra Oil & Gas Proshares ticker DIG @ $84.35 stop at $79.68
Long 1 unit U.S. Oil Fund ticker USO @ $96.95 stop at $91.38
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $128.56
Short 3 units FedEx ticker FDX @ $87.10 stop at $88.16
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit Blackrock ticker BLK @ $218.50 stop at $218.126

Long the U.S. Oil Fund - USO

I had mentioned that I would be getting long crude via the USO if USO could take out the $95 level. Well this morning it blew thru it gapping up and opening at $96.83 which is where I was filled on 1 unit long. I realise many out there find the concept of buying something which has gapped up and vice versa, shorting something which has gapped down petrifying. Remember the hard trade is more often than not the right trade. Which makes it stand to reason that often the easy looking trade is the trap, think Fannie and Freddie, which I will get shortly.

The thing you must acknowledge is that gaps are extremely powerful signals. I realise that this is the summer and some traders are away from their desks but they all have crackberrries and have their minions of underlings manning their post, so I do not put much credence in the "nobody's around" mantra.

I am now long 1 unit of USO at $96.85 with a stop at $91.38

I want to touch on the Fannie and Freddie talk that has been going on the last few days. I really get a kick out the so called capitalists on financial TV, screaming how they, Fannie and Freddie, cannot be allowed to fail. These are the same eternal optimists who believe everything, everywhere at all times is bullish now cry Armageddon if Fannie and Freddie are allowed to fail. I can assure you the failure of these 2 misfits, and that is being kind, would no doubt be painful, but we will most surely survive.

The longer we put off the day of reckoning the worse it will be. The big problem here is lots of purportedly brilliant, connected and influential heavyweights in the capital markets are up to their eyeballs in Fannie and Freddie paper, be it equity, subordinated or superior paper. And to a tee they are all scared to death of a default. They were smug as could be pontificating and waxing both public and private at their brilliance, the proverbial "no-brainer" trade they had put on with the implied government guarantee.

Ahhh the markets, tis why I just love it. They mete out their punishment not based on upbringing or background but rather on an unbiased, non partisan, truly impartial manner. The market cares not if you went to Harvard or Yale, cares not if Daddy bailed you out of every mess you've ever been in. Ya just gotta love it.

Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 2 units of Powershare Agriculture ticker DBA @ $35.35 stop $34.79
Long 2 units of XTO Energy ticker XTO @ $45.40 stop at $44.48
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $90.68
Long 1 unit Ultra Oil & Gas Proshares ticker DIG @ $84.35 stop at $79.68
Long 1 unit U.S. Oil Fund ticker USO @ $96.95 stop at $91.38
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $128.56
Short 3 units FedEx ticker FDX @ $87.10 stop at $88.16
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit Blackrock ticker BLK @ $218.50 stop at $218.126

Wednesday, August 20, 2008

Long the Ultra Oil & Gas Proshares - DIG

The XLE (energy spider) broke thru the $74 level I previously outlined, just prior to the inventory numbers, which compelled me to get involved. I am now long 1 unit of DIG at $84.25 with a stop at $79.68

I had a reader email (thanks PH) asking why I am going long energy stocks when I believe we are in a bear market for stocks and in a bear market all stocks go down. Excellent question. I prepared to go long energy stocks just as I am prepared, when the charts tell me, to go long any commodity stock, as we are in a commodity bull market. Yes, it is possible for certain sectors to be in bull markets while the broader tape is in a bear market.

The broader bear market must be respected because it's devastation can cause margin calls which then can have temporary, yet no less painful, negative setbacks for the stocks in sectors in bull mode. This is where investors have profits and they don't sell their losers like a real pro would but rather they sell winners in the gold and energy arena to cover the margin call and even more ridiculously buy more of their beaten up losers in the misguided attempt to get a bargain averaging down. Now you all know how I feel about this.

PH,I hope this clears things up for you.


Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 2 units of Powershare Agriculture ticker DBA @ $35.35 stop $34.79
Long 2 units of XTO Energy ticker XTO @ $45.40 stop at $44.48
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $90.68
Long 1 unit Ultra Oil & Gas Proshares ticker DIG @ $84.35 stop at $79.68
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $128.56
Short 3 units FedEx ticker FDX @ $87.10 stop at $88.16
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit Blackrock ticker BLK @ $218.50 stop at $218.126

Quick Look at Energy.

The oil chart has washed out many latecomers to the party. Many are watching and waiting for a mega volume washout which I suspect will never come. It will turn very quietly, covertly without many on board. USO (chart above) is one of my favourites as it is very liquid. A move up thru $95, which would take out a couple of prior reaction highs on the USO will compel me to get long an initial unit.

The spiders energy ticker XLE (chart above) shows a correction that looks to be completing. A move thru the $74 level will force me to get long and I will do it via my preferred trading vehicle DIG, shown below.

The Ultra proshares oil and gas ticker DIG (chart above) is my preferred "high octane" vehicle to play the energy sector.



Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 2 units of Powershare Agriculture ticker DBA @ $35.35 stop $34.79
Long 2 units of XTO Energy ticker XTO @ $45.40 stop at $44.48
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $90.68
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $128.56
Short 3 units FedEx ticker FDX @ $87.10 stop at $88.16
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit Blackrock ticker BLK @ $218.50 stop at $218.126

Tuesday, August 19, 2008

Recalibrating my Stops.

I am adjusting my stops up on some current positions. Some readers may ask why. Fair enough question. Well, I hate, absolutely just hate, no check that, despise letting a winner turn into a loser! I also am trying to have some conviction in my chart reading (or lack thereof) abilities and give my positions some room to move, with some accommodation for da boyz on the floor and in hedge fund world to play their daily ram job games.

You see, leverage lets you do this and can make the moves very violent and more importantly short lived. I have a friend who has been fading these intra day breakouts and breakdowns and been quite successful at it, as da boyz gun all the stop losses underneath and above certain levels, only to run it back the opposite way later. Fraudulent you say? Well, don't hold your breath waiting for Chris Cox and the Keystone Cops over at the SEC to do anything about it. They are much more concerned with matters of more import. As a matter of fact I hear they are on a major man hunt for the short selling manipulators who are crushing the crude oil market right now ! Egged on by the Cheerleaders at CNBC. The whole situation would be comical if was not such a serious matter with the rest of the globe watching.

This process of stop adjustment, helps preserve my physical capital ($$$) and more importantly more my mental capital. Therefore I am doing the following housekeeping;

I am moving my stop up on my 2 unit long DBA position to $34.79

I am moving my stop up on my 2 unit long XTO position to $44.48

I am moving my stop up on my 1 unit long FXF position to $90.68

I am moving my stop down on my 1 unit short IBM position to $128.56

I am moving my stop down on my 3 unit short FDX position to $88.16

I am leaving my stop on 2 units short AAPL position alone for now.

I am moving my stop down on my 1 unit short BLK position to $218.26 for a risk free trade.

Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 2 units of Powershare Agriculture ticker DBA @ $35.35 stop $34.79
Long 2 units of XTO Energy ticker XTO @ $45.40 stop at $44.48
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $90.68
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $128.56
Short 3 units FedEx ticker FDX @ $87.10 stop at $88.16
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit Blackrock ticker BLK @ $218.50 stop at $218.126

Invest vs Speculate

I received an email from reader WN asking the following. "What books do you think/recommend as absolutely essential reading for success in investing." I want to thank WN for reading this blog and for taking time to drop me a note. The question got me to thinking about a few things so here goes. First off, lets turn to the always reliable Webster's dictionary to get some definitions out of the way. Let us start with 2 essential words, those being the highly popular (especially with politicians) words invest and speculate.

in-vest v.t. to put (money) to a use expected to yield a profit or income.

spec-u-late (spekjuleit) pres. part. to undertake commercial transaction involving serious risk for the sake of possible large winnings, esp. to buy and sell in the hope of profiting from fluctuating price, sometimes in an antisocial way.

Is it me or is invest the good word and speculate the big bad word? Now I turn to Websters on a regular basis for enlightenment and enlighten is exactly what Webster does but I can assure you he never traded the capital markets! The use of the phrase antisocial way (short sellers) is not lost on this writer and most assuredly is not on the politico zombies who inhabit the nations capital.


Now, many are familiar with my daily admonishment, that an investor is a speculator who has made a mistake and will not admit it. In my view, an investor is someone who has places a bet, it has gone against him/her. Firmly believing the investment to be of sound basis, continues to hold said investment, and most probably is buying more of it (averaging down) via encouragement and prodding from his quota driven friendly neighbourhood investment advisor, excuse me, investment salesperson.

I firmly believe everything is a speculation, whether it be in the capital markets or in life. I read an interesting article in the Canadian daily, the Globe and Mail recently, in which the boom in the oil patch their was having a detrimental impact on high school graduation rates. Basically, demand for labour has been so high they are dropping out of school to go to work. To me this is a speculation on the opportunity cost of staying in school, going on to college etc, while your buddy drops out in 11th grade and starts working earning a decent income.

Compare this now to the physician who goes undergrad and then medical school and then yet maybe a specialty school. 12 to 14 years of school, all done while that kid who dropped out of high school has been earning money. Maybe we should try some future value calculations to see how long it takes the physician to catch up with the fella who dropped out and went to work. How long does it take the Doc to catch up? Can he catch up. I have done the calculations, it's not pretty.


I would suggest to reader WN to go out and rent the movie "The Sting"with Paul Newman and Robert Redford. Besides, you wife/girlfriend will enjoy the both of them at a young age. A classic movie that is a wonderful training tool for speculation. I would also suggest the movie Boiler Room as this paints the clearest picture available of Wall St.

That being covered I can most assuredly tell you that you can put down and burn 90% of the investment books out there. No offence to the TV and media favourites out there. The must read books on your list should be; Reminiscences of a Stock Operator by Lefavre, One Way Pockets, Panic on Wall Street by Sobel, A History of Crashes by Kindelberger, and Extraordinary Popular Delusions and the Madness of Crowds by Mackay.

You may ask why the doom and gloom books? Well, I remember turning 16 and chomping at the bit to get my drivers licence. First you received your beginners and then graduated up to your full licence. The province(state) made you take the requisite courses, where they taught you to check your blind spot, where they made you watch the gory drunk driving videos etc. Pretty necessary but yet basic stuff. At NO point was I ever schooled in crisis management. What does this mean? I call this real world driving. I have heard the Chinese get their driving lessons on an enclosed private driving course. You tell me how this prepares you for driving in the zoo that is Beijing?

My father was the one who taught me, for example that if a deer runs in front of you, you DO NOT swerve, you keep driving straight ahead. It was my father that taught me that in the ice you pump your break you do not slam it down and hold it there. I could go on but I think you get the picture.

So again, why the doom and gloom books? I have written in this blog numerous times and will continue to do so that, as my grandfather said, you don't appreciate your pilot, skipper, surgeon, etc, until the shit hits the fan. So notwithstanding Websters definitions, I remain unequivocally convinced that
"an investor is a speculator who made a mistake and will not admit it".


Open Positions:
Long 2 units of Powershare Agriculture ticker DBA @ $35.35 stop $32.79
Long 2 units of XTO Energy ticker XTO @ $45.40 stop at $42.28
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $89.27
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $130.54
Short 3 units FedEx ticker FDX @ $87.10 stop at $91.18
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit Blackrock ticker BLK @ $218.50 stop at $226.18

Monday, August 18, 2008

Shorting more Fedex - FDX



Fedex has penetrated the $86 level and as I have outlined previously, I have added a 3rd unit short of Fedex ticker FDX at $85.95 leaving me with 3 units shorts. Please don't lose sight of the much larger head and shoulders pattern developing on FDX (chart above).


Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 2 units of Powershare Agriculture ticker DBA @ $35.35 stop $32.79
Long 2 units of XTO Energy ticker XTO @ $45.40 stop at $42.28
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $89.27
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $130.54
Short 3 units FedEx ticker FDX @ $87.10 stop at $91.18
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit Blackrock ticker BLK @ $218.50 stop at $226.18

Getting Longer Powershares Agriculture - DBA

I know many hate to chase things but we have taken out the rally high from last week at $35.96. I am adding a 2nd unit long here at $36.05 I am now watching the $37 area as this is the next obstacle for DBA to overcome.



Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 2 units of Powershare Agriculture ticker DBA @ $35.35 stop $32.79
Long 2 units of XTO Energy ticker XTO @ $45.40 stop at $42.28
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $89.27
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $130.54
Short 2 units FedEx ticker FDX @ $87.70 stop at $91.18
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit Blackrock ticker BLK @ $218.50 stop at $226.18

Ready to Add to Fedex Short

The jobbing around that Fedex is doing here looks to be winding to a close. As my notes on the FDX chart (above) indicate, I am prepared to add another unit short on a violation of the $86 which is Fridays low.
I have been watching the US. Gasoline fund ticker UGA and I believe the time has come to watch this even more closely. It is not the most liquid of vehicles so one last further shakeout could be fast furious and most painful.




Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 1 unit of Powershare Agriculture ticker DBA @ $34.50 stop $32.79
Long 2 units of XTO Energy ticker XTO @ $45.40 stop at $42.28
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $89.27
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $130.54
Short 2 units FedEx ticker FDX @ $87.70 stop at $91.18
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit Blackrock ticker BLK @ $218.50 stop at $226.18

Friday, August 15, 2008

End of the Week

I have a very busy day today and wanted to get a quick note out.

There is lots of chatter in the credit markets regarding counter party solvency. Please remember what I have always said, that the bond and credit market guys (traders, not the hacks plying the phone with mortgages) are much smarter, risk sensitive and alert than the equity guys could ever hope to be. Pay attention to what is going on in the credit arena. What is that you may ask? We are at worse levels now than we were back in July and at any time previously for that matter.

Things are worsening, I wish they were not but they are. Strength in the market is to be sold, that means using rallies to get out. Do not listen to the shallow, hollow arguments on CNBC which are starting to sound more like pleas. This market is in VERY SERIOUS trouble.



Housekeeping notes;

I was stopped out of my LEH position at $17.15 as it gapped up this morning for a gain of $2.5 pts on 1 unit. I will definitely be back on board this one on the short side.

I was stopped out of my SLV position at $13 as it gapped down for a loss of $1.60 on 1 unit. Such is today's environment where everyone and their brother, banks brokers, hedge funds are all levered 30:1. Leverage upon leverage exacerbates any move in any direction.

I was also stopped out of GLD at $78 as it gapped down as well for a loss of $3.5 pts on 1 unit. Don't whine about why this is happening, don't argue with the tape. Save that for the shills on CNBC. What I do know is heavily leveraged players are getting wrung out of this market. Margin calls are abundant and when you cannot sell what you want to sell you sell what you can.

Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 1 unit of Powershare Agriculture ticker DBA @ $34.50 stop $32.79
Long 2 units of XTO Energy ticker XTO @ $45.40 stop at $42.28
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $89.27
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $130.54
Short 2 units FedEx ticker FDX @ $87.70 stop at $91.18
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit Blackrock ticker BLK @ $218.50 stop at $226.18

Thursday, August 14, 2008

Getting Longer XTO Energy - XTO

I had mentioned that I would get longer XTO Energy on a move above 46.82, the recent rally high. I have done so buying a 2nd unit long at $46.85

Housekeeping notes;

I was stopped out of TBT at $67.25 for a loss of just over 1 pt on 1 unit.



Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 1 unit of Powershare Agriculture ticker DBA @ $34.50 stop $32.79
Long 2 units of XTO Energy ticker XTO @ $45.40 stop at $42.28
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $89.27
Long 1 unit SPDR Gold Trust ticker GLD @ $81.55 stop at $78.68
Long 1 unit ishares Silver Trust ticker SLV @ $14.60 stop at $13.64
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $130.54
Short 2 units FedEx ticker FDX @ $87.70 stop at $91.18
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit Blackrock ticker BLK @ $218.50 stop at $226.18
Short 1 unit of Lehman ticker LEH @ $19.65 stop at $17.11

Shorting Blackrock Inc.- BLK

Wish me luck as I may need it as I am now short 1 unit of Blackrock ticker BLK at $218.60 with a stop at $226.18

As famed trader Jesse Livermore always said, you can never tell unless you bet !


Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 1 unit of Powershare Agriculture ticker DBA @ $34.50 stop $32.79
Long 1 unit of XTO Energy ticker XTO @ $43.85 stop at $42.28
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $89.27
Long 1 unit SPDR Gold Trust ticker GLD @ $81.55 stop at $78.68
Long 1 unit ishares Silver Trust ticker SLV @ $14.60 stop at $13.64
Long 1 unit Ultrashort 20yr Treasury ticker TBT @ $68.35 stop at $67.29
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $130.54
Short 2 units FedEx ticker FDX @ $87.70 stop at $91.18
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit Blackrock ticker BLK @ $218.50 stop at $226.18
Short 1 unit of Lehman ticker LEH @ $19.65 stop at $17.11

Blackrock - BLK, Broadening Top ?

Here is that broadening top on Blackrock (BLK)I mentioned earlier. Let me know what you think.

Thoughts on Blackrock - BLK

I want to bring Blackrock, ticker BLK (chart above) to your attention. Their recent moves, which I outline below got me to thinking about them. The tape shows a significant run of late with the latest rally in financials. I want to draw a broadening top on this chart but I hesitate as it is not really clean. That being said a violation of yesterdays low of 218.9 with some vigor will draw me to the short side on BLK.

Some Facts.

Bloomberg reported yesterday that Blackrock is in talks with Lehman to buy a significant chunk of Lehman's real estate portfolio. About 15 billion out of a total of about 40 billion. Do remember that Blackstone also bought 15 billion in mortgage bonds from UBS back in May. Blackstone is reported to have doubled it's stake in Lehman common stock sometime in the second quarter this year.

Now these guys over at Blackrock, guys like Larry Fink and Bob Doll and very sharp market operators. I have taken Mr. Doll to task for his proclamations that the credit crisis being over and the propagandists at CNBC playing his comments over and over again, in the futile employment of the theory that if you repeat something often enough people will believe it. Kudos to Larry Fink, he of telling Merrill Lynch to go fly a kite, when offered their CEO job and requesting to see their books only to be told by Merrill no way. What does that say about John Thain but I digress.

Even with this formidable brain trust at Blackrock, which by the way Merrill owns 49% of and PNC Bank owns 34%, there are some cracks in the veneer. They seem to be very early in buying these mortgages as I, and others believe we are no where near to being over. That being said They bought a bushel of paper in May and are looking to go back to the trough again here in August.

Equally important is the doubling of their Lehman stake with their purchase in the 2nd quarter. the mortgage buy could be an average down but the Lehman common move is undeniably an addition to a losing position. Have we not enough empirical evidence to show us where this leads.
Let us learn from the mistakes of Mr. Yasuo Hamanaka of Sumitomo copper fame (flame), Nick Leeson of Barings Bank, Jerome Kerviel of Societe Generale and hope to not make their mistakes.

Now Mr. Fink and Mr. Doll may have unfettered access to the most reliable and precise information on the street. Maybe they believe Lehman is untouchable. If that were the case, I would own the debt and surely not he common.

My other issue is that quite frankly we have entered a bear market in paper. No not pulp and paper but rather paper financial assets. Just as many believed best of breed like Goldman Sachs were unassailable, even in the face of a fierce bear. Anyone worth any salt in the market know this to be folly of the first order for in a bear market, all succumb, just that some do it sooner rather than later. Blackstone and Goldman are of the latter category.

It is my belief that Merrill will regret selling Bloomberg and wish that they had sold Blackrock.

Is this long winded dissertation proof that I should not short this name? Possibly, for I think of my buddies political dictum that states, 'when you're explaining you're losing.'

Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 1 unit of Powershare Agriculture ticker DBA @ $34.50 stop $32.79
Long 1 unit of XTO Energy ticker XTO @ $43.85 stop at $42.28
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $89.27
Long 1 unit SPDR Gold Trust ticker GLD @ $81.55 stop at $78.68
Long 1 unit ishares Silver Trust ticker SLV @ $14.60 stop at $13.64
Long 1 unit Ultrashort 20yr Treasury ticker TBT @ $68.35 stop at $67.29
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $130.54
Short 2 units FedEx ticker FDX @ $87.70 stop at $91.18
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit of Lehman ticker LEH @ $19.65 stop at $17.11

Wednesday, August 13, 2008

Existing Positions Housekeeping Update

Some housekeeping notes;

I am adjusting my stop on LEH down to $17.11 as this position has run very fast very quickly. I realise the boys could easily take me out and then run LEH down to the 5-6 level without me aboard. Such is trading in a world of 20 and 30:1 leverage, and 60:1 if you include government sponsored entities like Fannie and Freddie.

I am also moving my stop down on IBM to the $130.54 level, if for no other reason than to trim my loss threshold.

We are getting a nice rally on DBA today but don't get too excited for we all know what happened to those poor retailing souls who chased the recent pop only to get punished. Lets watch this move on DBA, let it back and fill and test the lows again. This rally high should give us a level to watch going forward with an eye to getting longer.

Regarding XTO Energy I am bumping my stop up to the $42.28 level, again just a defensive loss limiting measure.

I am moving my stop up on GLD to $78.68 and my stop on SLV to $13.64

Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 1 unit of Powershare Agriculture ticker DBA @ $34.50 stop $32.79
Long 1 unit of XTO Energy ticker XTO @ $43.85 stop at $42.28
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $89.27
Long 1 unit SPDR Gold Trust ticker GLD @ $81.55 stop at $78.68
Long 1 unit ishares Silver Trust ticker SLV @ $14.60 stop at $13.64
Long 1 unit Ultrashort 20yr Treasury ticker TBT @ $68.35 stop at $67.29
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $130.54
Short 2 units FedEx ticker FDX @ $87.70 stop at $91.18
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit of Lehman ticker LEH @ $19.65 stop at $17.11

Getting Shorter Apple - AAPL

I had another look at the chart in an attempt to 're-check my homework' so to speak. I wish I had not done that as I am more enamored than before with this chart so I must do what that calls for. I am getting shorter AAPL with another unit short here at $178.

Shorting Apple Inc. - AAPL

I know that Apple ticker AAPL (chart above) is a fan favourite and yes I have seen the crowds at the stores. But do you really believe AAPL is immune from a consumer who is on the ropes. We have a nice flag forming here on the chart and I am prepared to punt this stalwart on the short side. With the recent rally highs as my uncle point.

I am short 1 unit of Apple here at $178.25 with a stop at $182.76


Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 1 unit of Powershare Agriculture ticker DBA @ $34.50 stop $32.79
Long 1 unit of XTO Energy ticker XTO @ $43.85 stop at $39.62
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $89.27
Long 1 unit SPDR Gold Trust ticker GLD @ $81.55 stop at $75.82
Long 1 unit ishares Silver Trust ticker SLV @ $14.60 stop at $13.28
Long 1 unit Ultrashort 20yr Treasury ticker TBT @ $68.35 stop at $67.29
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $131.54
Short 2 units FedEx ticker FDX @ $87.70 stop at $91.18
Short 1 unit of Apple ticker AAPL @ $178.15 stop at $182.76
Short 1 unit of Lehman ticker LEH @ $19.65 stop at $20.76