Thursday, November 27, 2008

Thanksgiving

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Housekeeping notes;

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


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

Open Positions:
Short 1 unit Apple ticker AAPL @ $110.90 stop @ $100.53
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop @ $32.56

Thursday, November 20, 2008

Dow Short

I shorted a 2nd unit of the Diamonds ticker DIA at $79.45 as it broke $79.50


I will sit tight for now and leave my stop alone at $83.71


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

Open Positions:
Short 2 units Diamonds ticker DIA @ $79.80 stop $83.71
Short 1 unit Apple ticker AAPL @ $110.90 stop @ $100.53
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop @ $32.56

Ready to Get Shorter the Dow

I am getting ready to short a 2nd unit of the Diamonds ticker DIA on a break of $79.50.


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

Open Positions:
Short 1 unit Diamonds, ticker DIA @ $80.30 stop $83.71
Short 1 unit Apple ticker AAPL @ $110.90 stop @ $100.53
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop @ $32.56

A Few Thoughts

I thought it worth the risk to take a punt shorting the Dow here on the new lows being made across the major indices. As mentioned in my prior post we not only violated those lows we closed there yesterday which is truly ominous indeed. I have decided to just short the actual Dow tracking stock the Diamonds and not use the Ultrashort proshares ticker DXD as has been my usual M.O. Call me afraid, call me gun shy or the like, I just feel more comfortable doing it this way given current conditions.

The bounces in the markets of late have been anemic, nothing more than violent short covering via panicked shorts who have it ingrained to take quick profits, which truly shows how sick and weak this market. More importantly you must remember that as oversold as we are in the broader indices, this is the type of environment, extreme oversold levels, where crashes occur from. I do not say this lightly.

Please beware of this as I am absolutely sick of hearing of this Hogan bottom. That the worst is over, the lows are in courtesy of the shameless pom pom network. No offence to Art Hogan, whom I know nothing about other than he took a stab at a call on a low. This is absolutely useless drivel as the hosts and majority of guests on CNBC try to fill air time as they have nothing of substance to contribute to a legitimate market discussion which is in SERIOUS trouble.

You think they do? Really? Then why, might I ask, has no one come on to tell you 3 of 4 major indices have broken and closed below their prior lows? That we are extremely oversold, and with feeble bounces a crash could be a legitimate possibility?

Of course not. Too busy telling us we are off the lows of the day and rustling up the next shill to tell us that a new and improved bottom in the market is upon us.

Bob Pisani telling us how the traders he talks to cannot believe GE is at $14. I have no idea who these traders are but they might want to prepare for GE trading at $8.

Citi trading at irrational levels according to Charlie Gasparino? Well, C is insolvent and the market is finally getting it's arms around that fact. CNBC will when the stock is trading under $2, just as they figured out AIG, FNM, GM et al. After the stock had imploded.


Pathetic, truly pathetic.

The credit markets are flashing extremely dangerous signals which market participants ignore at their own peril. I keep hearing the shills on TV say the markets are cheap, the selling is irrational. That this is all a capitulation panic induced selling. I would counter that the decline has been quite orderly, bids have been withdrawn, the smart money is selling rallies and if they aren't selling, they sure as heck aren't buying.

Further, I would counter that the general public has not even come close to panicking yet. Their advisers have been counselling them to sit tight, to hang on that equities always go up. When that happens and the public does throw in the towel we will see 4-5000 on the Dow. I hope I am wrong but I fear I am right.



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

Open Positions:
Short 1 unit of Diamonds, ticker DIA @ $80.30 stop $83.71
Short 1 unit Apple ticker AAPL @ $110.90 stop @ $100.53
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop @ $32.56

Getting Short the Dow

I am using this relief rally to get short 1 unit here of the diamonds ticker DIA at $80.40 with a stop at $83.71 We have not only broken prior lows on the S&P and the Naz and the Russell, we closed there last night.



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

Open Positions:
Short 1 unit of Diamonds, ticker DIA @ $80.30 stop $83.71
Short 1 unit Apple ticker AAPL @ $110.90 stop @ $100.53
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop @ $32.56

Tuesday, November 18, 2008

Mexican Peso and Petrobras






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


Open Positions:
Short 1 unit Apple ticker AAPL @ $110.90 stop @ $100.53
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop @ $32.56

Monday, November 17, 2008

More Weekly Charts.

The spiders technology tracking stock, ticker XLK, looks very, very sick. Remember now, this is a weekly view.

The above is the semiconductor holders ticker SMH. What can I say that the chart doesn't. Yup, sure wish I had listened to those shills on CNBC on gotten long tech as a safe haven. Or as they would say on Wayne's World......NOT !!!!

I am still short AAPL and intend to stay that way. The ultimate discretionary consumer stock still has a long way to fall.

Apple's competitor Research in Motion (ticker RIMM) is faring no different.

I neglected to include the financial spiders ticker XLF in my earlier post this morning, alongside the KBE and KRE charts. So here it is.

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


Open Positions:
Short 1 unit Apple ticker AAPL @ $110.90 stop @ $100.53
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop @ $32.56

Financials



Some may ask why I have hi-lited the financials once again. Simply put, as the financials go so goes the market. I realise this may or may not hold as much water as it used to but it still applies no matter how you cut it. For all the fanfare the financial media showers on the financials they have gotten weaker not stronger. Do not lose sight of this as it bodes further ill for the market no matter what the perpetual bottom callers may say.

The above 3 charts show a weekly view which should help clear up the picture.



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


Open Positions:
Short 1 unit Apple ticker AAPL @ $110.90 stop @ $100.53
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop @ $32.56

Friday, November 14, 2008

How Much Further Can They Fall ?

I came across this article recently which documents how the locusts have descending upon Washington for a piece of the bailout pie. This is a great employment program, as it should really address the unemployment issue going forward. Create a bailout, then employ the unemployed to fight over it. So many bright minds in Washington I cannot count that high.

I have received quite a few email inquiries on various topics but a recent one I feel compelled to address publicly. The one in particular from reader R.W. (thanks for the note), asked the following...

With so many large cap well known, household names plummeting and now trading in the teens or single digits, how much further can they fall, I mean zero isn't that far away?

This is a wonderful question to which I would only ask that we look back to the tech bubble for some answers. Back in the tech mania, stocks were running 30 and 40 pts per week doubling and tripling in the span of a quarter. So what did the management do, they satisfied the market and started splitting their stocks, twice the shares at the half the price.

Remember all the splits Nortel (among others) did on the way up? Well, back in December of 2006 Nortel, after falling from a high of $86 and resting at about $2, executed a reverse 10 for 1 split. This means that if you had owned say 1000 shares of NT at $40 you would now have 100 shares at a cost base of $400. I would counsel that you NOT look at a chart of Nortel since this reverse split as it has had no effect as the stock now resides at $0.56. Yes you read that correctly, 56 cents.

I fully expect Nortel to come back once again to do another extremely ineffective reverse split most probably in the order of a 1 for 25 or 1 for 50.

This all leads me back to the original question. I fully expect companies like Motorola, GE, Citicorp, among many others to start the process known as the reverse split. This will make it palatable once someone breaks the ice. I expect GE to reach it's target about $8. At that time GE may make the move to reverse split say 1 for 5 which would get a stock of GE's stature back to a level they deem more appropriate.

My thoughts on stock splits, regular or reverse are just like ordering pizza. You can order a large pizza and see it come in say 8 slices. Now you can slice in into 16 slices but the question is do you have any more pizza? Of course you don't. Can you believe people bought tech stocks ahead of splits thinking it was bullish? Self fulfilling prophecy into one day it simply wasn't anymore.

As for the generalization that a stock can only fall so far. Many thought GM and Ford (Kirk Kerkorian) a bargain in the high single digits. GM resides around $3 and Ford about $2. These are drops of 60 and 70% on stocks that used to be $50/share. Something to consider when someone tells you a stock is looking really cheap based on how far it has fallen from it's highs. It would be wise to remember the sage advice from the greatest trader ever, Jesse Livermore who often remarked that a fool measures his bargains by how many points off the top it has sold. Wise counsel indeed.

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


Open Positions:
Short 1 unit Apple ticker AAPL @ $110.90 stop @ $100.53
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop @ $32.56

Hypocrisy


American Heritage Dictionary

hy·poc·ri·sy

noun. plural. hy·poc·ri·sies
  1. The practice of professing beliefs, feelings, or virtues that one does not hold or possess; falseness.
  2. An act or instance of such falseness.

Did you happen to catch some of President Bush's speech yesterday? Sure, he's a free market guy. He's also a fiscal conservative. And if you believe any of that I have a bridge in good shape you might want to buy, good cash flows. Well, just as with Treasury Sec. Paulson's speech I have one word for Bush's.... Hypocrisy.

Yesterdays action has become very encouraging for the bulls. Just remember that they are hoping and praying for a bottom so they really are not as objective as one would like. That said, the volume was so so, would have like to see much more volume on an outside reversal, or bullish engulfing day.

We are in no mans land right now and the smart thing would be to trade small, keep stops tight and do not give to much back as this market tortures both bulls and bears. Trench warfare is being waged as each side gains ground and then gives it back. In these circumstances it is always wise to step back and look at the bigger, longer term picture. I will have some charts later today.

For those inclined to trade the long side be very very very careful, but for those watching the markets closely the last 6 months know this already. But just in case, I trust I have made myself clear. We have still not seen capitulation nor do I think we will as it will just be a slow bleed as former closely held beliefs buy and hold, stocks always go up, real estate is always local, slowly die a miserable and painful death.

Housekeeping notes;

I was stopped out of my long TWM position yesterday at $113.05 for a gain of about $20 pts on 1 unit.

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


Open Positions:
Short 1 unit Apple ticker AAPL @ $110.90 stop @ $100.53
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop @ $32.56

Thursday, November 13, 2008

Short Covering Rally?

Short covering rallies can be very powerful. That said you must respect the movement as it will only later reveal itself. Just tightening up my stops given todays action. Who in their right mind would be buying stocks here is the question I would ask.

Housekeeping notes;

I was stopped out of my 2nd unit short of AAPL put on this morning at $92.25 for a loss of $2.5 pts on 1 unit short.

I am lowering my stop on my TWM position to $113.64

I lowering my stop on my original unit of AAPL to $100.53

I am moving my stop on CRM to just above the recent reaction highs just above $32


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


Open Positions:
Long 1 unit of Ultrashort Russell 2K ticker TWM @ $93.10 stop @ $113.61
Short 1 unit Apple ticker AAPL @ $110.90 stop @ $100.53
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop @ $32.56

Getting Shorter AAPL

I am now short a 2nd unit of AAPL here at $89.95 as we are now breaking $90 for the 2nd time today. I will place my stop at $92.21 on this 2nd unit.


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


Open Positions:
Long 1 unit of Ultrashort Russell 2K ticker TWM @ $93.10 stop @ IWM $56.31
Short 1 unit Apple ticker AAPL @ $110.90 stop @ $113.53
Short 1 unit Apple ticker AAPL @ $89.85 stop @ $92.21
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop @ $34.31

Watching AAPL


I want to bring your attention to the chart of Apple, ticker AAPL (chart above). Remember the pennant formation that got me short against the upper boundary, well, we are now testing the lower boundary of it. Eyeballing the pennant, it looks to be worth approximately $36 give or take a buck. A break of $90, which looks likely at the open, given Intel's earnings news, would signal another leg down with a target of $54 (90-36=54).

Some may argue to get long against the lower boundary, which is quite logical. The problem here is that we are in a bear market and if this market has proven one thing it is that things can get much worse than any of us think possible at the time. Hard trade to get short on a darling stock that is severely oversold on a gap down? You bet but we must respect that the hard trade is usually the right trade. Hopefully this is not an exhaustion gap.



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


Open Positions:
Long 1 unit of Ultrashort Russell 2K ticker TWM $93.10 stop @ IWM $56.31
Short 1 unit Apple ticker AAPL at $110.90 stop @ $113.53
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop @ $34.31

Wednesday, November 12, 2008

Treason

trea - son

American Heritage Dictionary

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


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

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

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

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

Well put Mike.


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

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

"WE MUST DO SOMETHING TO STOP THE DECLINE IN HOUSING VALUES."

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

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

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

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

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

Housekeeping notes;

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

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


Open Positions:
Long 1 unit of Ultrashort Russell 2K ticker TWM $93.10 stop @ IWM $56.31
Short 1 unit Apple ticker AAPL at $110.90 stop @ $113.53
Short 1 unit of Capital One ticker COF @ $30.70 stop @ $33.11
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop @ $34.31

Tuesday, November 11, 2008

Capital One Charts.

Here are the charts on Capital One, ticker COF, that I promised. Had some trouble loading them to blogger but finally have them. The chart above is a 12year weekly view, while the one below is about 16 months daily. I realise many of the technical analysis literature supports the formation of a triple bottom or top. I have no faith in fading this pattern as many are wont to do. Triple tops and bottoms rarely hold and I am trading the violation of it as COF seems to have broken once again to the downside. I am sure credit card receivables are a shambles right now. They have just not begun to admit such, thought the tape most surely has.

AMEX now a bank. Chinese stimulus package amounting to 20% of their GDP, if you believe their GDP numbers that is. Fannie Mae net worth now about $9 billion down from $40 billion again if you believe their numbers. Bloomberg suing the Politburu, excuse me I mean the Fed, for informational details on the 2 trillion with a 'T' bailout.

Boy oh boy, considering all this, along with downward earnings, hello Starbux, it sure is vexing why the stock market is completely and totally irrational in its selling off day after day. Stocks must truly be a bargain now shouldn't they Mr. and Mrs. Wall Street shills, hacks and pimps.

Housekeeping notes;

Well that was a short date with crude as I was stopped out less than 3 hours into the trading day at $49.20 for a loss of about $1.25 pts on 1 unit.


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


Open Positions:
Long 1 unit of Ultrashort Russell 2K ticker TWM $93.10 stop @ IWM $56.31
Short 1 unit Apple ticker AAPL at $110.90 stop @ $113.53
Short 1 unit of Capital One ticker COF @ $30.70 stop @ $33.11
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop @ $34.31

Getting Short Capital One Financial - COF

I am getting short 1 unit of Capital One Financial ticker COF here at $30.80 as it has now broke a triple bottom which as we should know really do not exist. I will post a chart in short order.


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

Open Positions:
Long 1 unit of U.S. Oil Fund ticker USO @ $49.45 stop @ $48.24
Long 1 unit of Ultrashort Russell 2K ticker TWM $93.10 stop @ IWM $56.31
Short 1 unit Apple ticker AAPL at $110.90 stop @ $113.53
Short 1 unit of Capital One ticker COF @ $30.70 stop @ $33.11
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop @ $34.31

Now Long Crude

As indicated in my earlier post this morning, I am now long 1 unit of the crude oil etf, ticker USO, here at $49.35 with a stop at $48.24



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

Open Positions:
Long 1 unit of U.S. Oil Fund ticker USO @ $49.45 stop @ $48.24
Long 1 unit of Ultrashort Russell 2K ticker TWM $93.10 stop @ IWM $56.31
Short 1 unit Apple ticker AAPL at $110.90 stop @ $113.53
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop @ $34.31

Energy and Harmony.

The chart on the crude etf, ticker USO (chart above, in particular the descent, looks more like something out of a Warren Miller ski movie than a price chart. That said, devastation often provides opportunity. I took the time to looks at a longer term chart and low and behold notice where the old neckline from that EXTREMELY profitable inverted head and shoulder formation
currently resides. Barring something crazy happening on the open, I expect to be long USO very soon after the market opens.

The chart on the Nat Gas etf ticker UNG (chart above) looks very appealing. I intend to get long UNG on a move above $31.45

The chart on unleaded gasoline etf ticker UGA (chart above) got my interest peaked by the volume spike on it. I realise it is thinly traded with only 138K shares volume but still could be worth watching.

The view on Harmony Gold ticker HMY (chart above) is quite interesting. The chart goes back over 30yrs so it should smooth out the bumps so to speak.





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


Open Positions:
Long 1 unit of Ultrashort Russell 2K ticker TWM $93.10 stop @ IWM $56.31
Short 1 unit Apple ticker AAPL at $110.90 stop @ $113.53
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop @ $34.31

Monday, November 10, 2008

More Stimulus huh.

This mess just keeps getting deeper and deeper. You just cannot make this stuff up as the Bloomberg article 'The Fed Defies Transparency Aim in Refusal to Identify Bank Loans' makes abundantly clear.

Further we get news the AIG bailout is now topping 150 billion. If you are buying stocks on this news, you truly deserve what is in store and I can assure you there will be no bailout for you.

$600 billion stimulus plan out of China you say? Yeah that will fix everything now won't it? Comical if it were not so juvenile in it's thinking. Sure buy stocks on the news, like trained seals. Did I mention you deserve the pain that is coming for buying stocks on hope rather than rational sound basis. Just keep listening to the shills like Bob Doll from Blackrock, who is loaded to the gills with stocks and worse yet, illiquid private equity speculations. Yup, he needs a buyer, question is are you gonna be the sucker. Yeah we need stimulus like a hole in the head, but hey just give the addict (the economy, the consumer) more heroin (cheap money, cheap credit. cheap interest rates) that will surely fix everything.

We are so far off our collective rocker I have to pinch myself to make sure Rod Sterling is not next to me with the theme music playing as we have entered the Twilight Zone. Many may laugh at this but this has become no laughing matter as I truly fear for what is ahead. Financially, socially, and economically.

How long will the masses continue to stand for what is transpiring. The founding fathers most surely are rolling in their graves at the spinlessness of the minions.

I came across a website called Envast Gold recently and had a chance to poke around it. They have an interview with Eric Sprott, of Sprott Securities out of Canada posted. If you click on the link above and go the the November 1 interview entitled Eric Sprott talks about gold. I bring this up because in the interview Mr. Sprott, who is worth listening to, brings up the Argentinian nationalization of private pensions along with the disaster going on Iceland.

His comment on both situations was this, " in both cases if you had held gold (physical) you would have been okay". As my open positions indicate I have no position in gold but I do own physical gold and silver. I would think it PRUDENT to hold such given global circumstances and the men at the helm such as Paulson, Bernanke, Greenspan, Frank, Dodd, et al.

As I mentioned on many previous occasions, the phrase govern yourself accordingly has never rung truer than it does now. Well, are you?

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

Open Positions:
Long 1 unit of Ultrashort Russell 2K ticker TWM $93.10
stop @ IWM $56.31
Short 1 unit Apple ticker AAPL at $110.90
stop @ $113.53
Short 1 unit Salesforce.com ticker CRM @ $56.05
stop @ $34.31

Wednesday, November 5, 2008

Profit Taking vs Distribution

I feel the need to address the incessant repetition of the phrase. This is profit taking, this is profit taking. Enough already!!

Try this on for size, instead of profit taking could this be what is known as distribution? Distribution happens post top, that is after a peak of significance. This is when stock is distributed from strong hands to weak hands. The necessary ingredient in this equation is strength, this serves as cover for the smart money so it can sell into any and all rallies in a bear market just as they buy into any and all dips during bull markets.

This process has been occurring after each and every leg down of this bear market. Just something to consider when pundit/shill #136 comes on pompom TV with the earth shattering revelation that this is profit taking.


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

Open Positions:
Long 1 unit of Ultrashort Russell 2K ticker TWM $93.10 stop @ IWM $56.31
Short 1 unit Apple ticker AAPL at $110.90 stop @ $113.53
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop @ $34.31

Back to Our Regularly Scheduled Programming.

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

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

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

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

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

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

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

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

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

Housekeeping notes;

I was stopped out of my SDS position at $78 as the underlying SPY violated $100.81. for a loss of just shy of 4pts on 1 unit.


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

Open Positions:
Long 1 unit of Ultrashort Russell 2K ticker TWM $93.10 stop @ IWM $56.31
Short 1 unit Apple ticker AAPL at $110.90 stop @ $113.53
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop @ $34.31

Tuesday, November 4, 2008

Recent Comentary from Satyajit Das

Regular readers know I am a big fan of Satyajit Das. His recent piece "Confusing the Cure and the Disease" is another must read. I have posted his piece in its entirety or you can click on the above link which will take you directly to the article.

I remind that he is one of the leading derivative experts globally and is not afraid to mince words, which as always are well worth your time invested.



Confusing the Cure and the Disease

In the Arabian Nights, the beautiful princess Scheherazade buys one day of life at a time by recounting fantastic fables that entrance the King who has condemned her to die. Investors and traders are currently telling each other fairy tales to buy one day at a time to stave off the inevitable.

Dramatic recent events are not symptoms of the disease but the cure. The “disease” is the excessive debt and leverage in the financial system. The “cure” is the reduction of the level of debt (the great “de-leveraging”).

The initial phase of the cure is the reduction in debt within the financial system. The overall losses to the financial institutions (net of re-capitalisation via new equity issues) are $400 to $600 billion and may well go higher. This requires reduction in financial sector balance sheets through reduction in lending and asset sales.

The second phase of the cure is the higher cost and lower availability of debt to the real economy. This forces corporations to reduce leverage by selling assets, reducing investment and raising equity. This also forces consumers to reduce debt by selling assets (where available) and reducing consumption.

Feedback loops mean reduction in investment and consumption lowers economic activity placing stresses on corporations and individuals setting off defaults that trigger losses for the financial system that further reduces lending capacity. De-leveraging continues through these iterations until overall levels of debt reach a sustainable level determined by lower asset prices and cash flows available to service the debt. The process of destruction echoes W.B.Yeats’ words: “All changed, changed utterly: A terrible beauty is born.”

Fairy tales in financial markets focus on the “superhuman” abilities of regulators and governments to avoid the de-leveraging under way. Central banks and governments have taken progressively more aggressive actions to try to influence events.

Central banks have aggressively supplied liquidity to the money markets accepting an increasing range of collateral. Central banks may soon accept football cards and Lehman, Bear Stearns and Washington Mutual (“WaMu”), Fortis and Dexia memorabilia (mugs, stress balls, desk-decoration cubes that open up to reveal Lehman Brothers’ key operating principles. - “demonstrating smart risk management”).

Government and central banks have also “bailed out” a number of financial institutions using a variety of strategies to limit contagion. Most recently governments have resorted to injecting equity into selected banks and providing extensive guarantees supporting bank borrowings.

The actions have been increasingly directed at three areas. Banks are being forced to write-off bad loans without delay. Bank capital needs are being addressed by forced mergers and restructuring, new equity issues and (in the absence of other options) nationalisation or liquidation. Central bank guarantees of all major borrowings and other transactions to reduce solvency risk for banks are designed to enable normal transactions between parties in the financial markets to resume. The necessary coordinated global action appears at last to be under way though significant differences in the doctrines and details have emerged.

Lower interest rates and increased government spending have also been used to try to reduce the effects of the financial crisis on economic activity in the “real” economy.

The initiatives are sensible short-term measures to stablise markets. In the longer run, they transfer the problem onto the government and taxpayer balance sheet. For example, US Government support for financial institutions in this financial crisis is already approaching 6% of GDP compared to less than 4% for the Savings and Loans crisis. The bailout of Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) has almost doubled US national debt. This will ultimately place increasing pressure on the US sovereign debt rating and vitally the ability of US to finance its requirements from foreign creditors.

It remains to be seen whether these global initiatives achieve the required re-capitalisation of banks improves the normal supply of credit to sound borrowers and also reduces fear of default allowing normal activity between institutions to resume.

The key issues remain availability of capital and liquidity. The perceived abundance of liquidity was, in reality, merely an illusion created by high levels of debt and leverage. As the system de-leverages, it is becoming clear unsurprisingly that available capital is more limited than previously estimated.

Central bank reserves and sovereign wealth funds are often cited as evidence of the amount of available capital. These reserves are invested in US dollar denominated US Treasury bonds, GSE paper and highly rated securities. It will be difficult to mobilise the funds and convert them into the home currencies of the investors without large losses.

The risk of a severe dislocation in global capital flows remains a real risk in the present environment. Some have called for a global conference (along the lines of Bretton Woods) under a respected chairman (Paul Volcker is the obvious choice) bringing together all the major players to address key structural issues within the global financial system. Any such conference would focus on economic reforms (capital flows, currency policies, fiscal disciplines, trade barriers) necessary to find a resolution to the crisis.

A principal objective of this conference would be ensuring supply of funding for the US in the transition period. Recent comments by China about US responsibility for the crisis and its resolution miss the point. As China’s Premier Wen Jiabao observed the U.S. financial crisis may “affect the whole world”. As Wen noted: “If anything goes wrong in the U.S. financial sector, we are anxious about the safety and security of Chinese capital…” All creditors have much to lose if the de-leveraging process becomes dis-orderly.

Ultimately, “all the king’s horses and king’s men” cannot prevent the de-leveraging of the financial system under way. The extent of de-leveraging is substantial and likely to take time. In recent years, money was cheap and other assets were expensive. As each of the global economy’s credit creation engines breaks down and systemic leverage reduces, money becomes scarce and more expensive triggering substantial adjustments in asset prices in a reversal of the process.

David Roche of Independent Strategy, a consulting firm, estimates that $4 to $5 of debt is now required to generate $1 of economic growth. As credit creation slows and debt levels fall, the sustainable level of global economic growth may fall as well.

At best, the government and central bank actions can smooth the transition and reduce the disruption to economic activity in the transition to a lower debt world. The risk is that well-intentioned steps prevent the required adjustments from taking place, delay recognition of problems and discourage action that must be taken by financial institutions, corporations and consumers.

Like a giant forest fire the de-leveraging process cannot be extinguished. Thoughtful actions can create firebreaks that limit preventable damage to the economy and the international financial system until the fire burns itself out.

The Arabian Nights had a happy ending. The King after 1,001 night of enchantment and three sons pardons the beautiful Princess Scheherazade who becomes his queen. Despite the fairy tales that investors are putting their faith in currently, the de-leveraging that is at the heart of the current financial crisis may not have such a happy ending.

© Satyajit 2008 Satyajit Das is a risk consultant and author of Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives (2006, FT-Prentice Hall).


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

Open Positions:
Long 1 unit of Ultrashort S&P500 ticker SDS $81.85 stop @ SPY $100.81
Long 1 unit of Ultrashort Russell 2K ticker TWM $93.10 stop @ IWM $56.31
Short 1 unit Apple ticker AAPL at $110.90 stop @ $113.53
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop @ $34.31


Getting Short the Spiders and Russell 2K

The Russell 2000 tracking stock, ticker IWM (chart above) looks ripe to roll over and I am punting it on the short side via the Ultrashort proshares ticker TWM here at $93 with a stop at IWM $56.31

I am using the strength of late and especially today as an opportunity to get short the Spiders ticker SPY (chart above). I will use the ultrashort proshares ticker SDS as the vehicle to do so. Volume has noticeably waned on this week long rally of the Spiders.

I am long 1 unit SDS here at $81.75 and will use any violation of SPY $100.81 as my stop on the SDS position.



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

Open Positions:
Long 1 unit of Ultrashort S&P500 ticker SDS $81.85 stop @ SPY $100.81
Long 1 unit of Ultrashort Russell 2K ticker TWM $93.10 stop @ IWM $56.31
Short 1 unit Apple ticker AAPL at $110.90 stop at $113.53
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop at $34.31

Monday, November 3, 2008

Thoughts on Goldman.



I have heard many talk about 'best of breed' stocks to which you must hitch your wagon. In the financial sector few would argue Goldman is not exactly that and who would even attempt to with a littany of former partners in congressional, senate, gubernatorial, and central banking seats of influence across the globe. Throw Mr. Buffett's buying in to the mix and you have a jaggernaut of finance, the pinnacle of 'best of breed', not to mention connected up the wazoo.

If memory still serves me Mr. Buffett is in his GS position at $124 which leaves him down 25% to this point. A not inconsiderable sum for even a man of Mr. Buffett's means. Small consolation to the lemmings who followed the man with the midas touch into Goldman paying close to $140 the day the news broke.

The chart of GS (above) shows a series of lower highs being made and Buffett followers had better hope the lows of Oct 6, be they closing or intraday hold. What is disturbing of GS further still, is the action of the tape recently. On Thursday, last week Goldman sank as the market rose close to 200 pts, with Goldman closing near its lows of the day with the lowest closing low since that Oct 6 debacle. Friday was not much better as the Dow rose 140pts and GS was up a buck and change. Funny how the Goldman shills who are all to happy to cheer on days when Goldman is up and the market is down yet they disapprear when any type of negatively divergent tape action rears it head.

The question I would pose to the Goldman bulls is, what can of earnings can Goldman earn when 50-1 leverage is removed from the mix and further, what kind of multiple will those earnings command?


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

Open Positions:
Short 1 unit Apple ticker AAPL at $110.90 stop at $113.53
Short 1 unit Salesforce.com ticker CRM @ $56.05 stop at $34.31