Friday, September 25, 2009
Where Do You Stand On .....
A reader asked me to have a look at Statoil, ticker STO (weekly chart above). As my notes indicate I truly hope it is only coincidence that the shill personified, Jim Cramer, is touting it. Regardless I would counsel extreme caution with this name as the obscenely sage and wise Art Cashin would say, volume equals validity. In this case there is an extraordinary lack of it, govern yourself accordingly.
Judging by some of the questions I have received in my email box, it seems I have quite a few new readers to the blog. First off, thank you for stopping in and visiting and more importantly taking the time to ask my opinion and question my conclusions. It is much appreciated !
The emails cover many topics and various items surrounding the capital markets and my positions on them. I will attempt to touch on them all, keeping it brief and to the point. Feel free to agree or disagree just make sure you do your homework, stay informed and remember that when you look around the poker table and don't see the sucker, leave post haste, as you are the sucker!
I am not a perma-bear or perma-bull. I am a mercenary who wants to fight for the winning side and not on a day to day basis either! Sorry if this disappoints the ADHD clowns on CNBC's Fast Money, who want everyone playing chicken with the market on a day to day basis.
I trust the charts everywhere and always but I want to marry the technicals with the fundamentals on the ground.
News conforms to the tape not the other way around. Wall St. loves people who trade the news as it keeps them in good humor as well as in the Hamptons every summer.
I am a political atheist, believing in neither. It is all a charade just like WWF wrestling. I am a libertarian and believe wholeheartedly in the constitution.
Big Picture - I believe we are only just exiting a credit bubble that dwarfs all other bubbles. The "mother of all bubbles" so to speak. We don't correct this type of excess that has been brewing for decades in a span of 18 months, no matter what the Bob Dolls, Vince Farrells, Bill Spiropolous' , and other assorted shills and book talkers of the world may say.
Among many indicators I watch 2 indicators I follow religiously are tax receipts and electricity usage. No other indicators tell me more about an economy than these 2. (In china, which I'll get to later, these numbers don't jive with their published economic numbers but why let facts get in the way of a great story!)
I believe we are in a deflationary depression, much like the U.S. circa 1929 or Japan 1989 (take your pick).The Fed and Treasury are printing 1x money when the credit and debt losses are in the 10-12x area. The boat is sinking (deflating) faster than they can bail the water (print) out hence the deflation call. Much of the factual data in this area like wages, rents and real estate values validate this. (for what its worth Nintendo is cutting the price of its popular WII game by $50)
To believe in inflation or hyper inflation means you think your house value will double or that your wages from your employer will double or increase dramatically. I will be kind and simply call this "quite a stretch" in my opinion.
Insider selling is outpacing buying somewhere around 35:1 right now. They are not perfect nor are their utterances to be believed but they do speak with their pocketbooks and if stocks are such a screaming buy why are the hitting the exits?
I believe the FDIC is broke or on the doorstep of being broke. The FHA is now doing the same crap the private sector was doing before the shit hit the fan. The same can be said of the Fannie, Freddie et al. Govern yourself accordingly. Oh yeah, they are all very well capitalized. Gotta keep confidence up, right?
Banks are not lending, in some extreme cases no matter impeccable credit history and worthiness. The wounds are so great they are just hunkering down. I wish the people, who believe banks can "earn"their way out of this mess with the positively sloped yield curve, all the best, as they will most surely need it.
Small banks you never ever heard lent money the old fashioned way, they got to know you, checked you out and lent based on the 4 C's. Now those same banks are being asked to pony up FDIC premiums that will wipe them out. I know not why they stand for this. We should all be patronizing these banks and they are our future of banking. Count on it.
The "too big to fail" banks are sitting on massive portfolios of foreclosed properties they are holding back (shadow inventory) petrified that if dumped on the market it would further depress prices, geee ya think? Many out there are still living in homes having gone months (8-10) without paying their mortgage with no word from the bank!
I believe the vast majority of the "too big to fail" banks are insolvent and are playing the extend and pretend game. Bear Stearns and Lehman were not anomalies as banking and finance are the biggest copycat game on the planet. Once again I repeat it is insolvency not illiquidity.
These same banks continue to play games with accounting tricks and yet your pension fund manager buys them because he wants his bonus and needs a job.
The official unemployment rate is a joke only a politician, a CNBC anchor or commissioned financial employee could love. The unofficial rate is closer to 16% and even that might be on the light side.
The FIRE - finance, insurance, and real estate economy we have become accustomed to is finished as we knew it.
I prefer calling FIRE,
Wall St. is full of chemical engineers who are extraordinarily adapt at turning money into shit.
I would be ecstatic if I could find an ETF to short hedge fund managers, investment bankers, stock brokers, financial planners, etc. Conversely an ETF on securities litigation lawyers would be a wonderful long for any portfolio. Please let me know if you know of this, I will be in your debt.
I believe the Fed should be abolished, shut down immediately. They have been at the root of the cancer not the solution. What more can you say about an institution whose charter was passed on a late evening session of congress right before Christmas.
I believe the perpetrators of the debacle must be held accountable for their actions. The list includes politicians, executives, bureaucrats. Allan Greenspan, Hank Paulson, Franklin Raines, Angelo Mozilo, Chris Dodd, et all just to mention a few. People rob banks when there is no consequences. Case study; just provide a 6 yr old with no consequences and watch his behaviour.
I believe if you peel back the onion on the pension funds you would be horrified at what you see. Commercial real estate up to the eyeballs for starters. The phrase 'institutional smart money' is the biggest oxy moron around, just listen in on an institutional conference call once. You will want to laugh but then realize they are running your retirement money and you will then want to cry. Institutional money is really going to lunch and finding out through the grapevine what others are buying, also known as follow the leader money as no one wants to be left behind.
I believe commercial real estate is a mushroom cloud, most just cannot or will not recognize it. I base this on the data out there like cap rate data, rents, and more importantly with discussions I have had with local people directly and indirectly involved with commercial real estate. Besides just drive around and look at what is going on.
China - I believe it NOT to be the miracle many claim it to be. (circa Japan 1989.) and may end of being the biggest charade of all! Yes I know this flies in the face of men like Jim Rogers and others who believe China is THE place to be. I just have a had time reconciling the numbers they keep putting out which scream of a make-believe story. I believe their financial chemistry and chicanery would make the likes of Bernie Madoff, Angelo Mozilo, and Franklin Raines blush. Time will time but for now I am taking the under.
Bonds - I have been short the bonds in the past with the TBT's as this game of borrowing money you cannot pay back cannot go on forever. People forget how low rates went in Japan. Look at a 5yr CD rate now. Can you envision 0.5%? I fully realize the debt the government is running up will end in tears. The problem I have is that in the valley of the blind the one eyed man is king. U.S. federal paper is that one eyed king. This line of thinking I have might have something to do with the U.S. fleet of aircraft carriers but I digress. Hence I am bullish on bonds. tentatively so but yes bullish. So is Gary Shilling so one has good company here.
Side note, I saw Julian Robertson on CNBC yesterday in which he said rates could go to 15%. One can make the argument for either 0.5% or 15%. Might credit quality factor into this in some way? Where are Japanese 10 yr rates today? just a thought. Oh yeah they're at 1.35%
Precious Metals - I own physical gold and silver. It is the ultimate insurance that will always pay its claim. I am worried that in an environment of deflation people will be getting liquid and precious metals is the ultimate liquidity. The other side of the coin is that gold could get smashed first as people sell it to sustain themselves and then as fear take over and it recovers as money. So yes, I am bullish and bearish. Bullish as I own it and bearish as I can easily envision it trading at $600-650.
Energy - I like energy as it is not subject to the Frankensteinian experiments of ivy league squash players like paper assets. Yes I believe in peak oil. Yes I believe we have found all the easy oil. Yes I believe hybrid and battery power is there but I fail to see how it moves an 18 wheeler loaded with goods. I can easily envision oil trading triple digits again simply because the economies of going 20,000 feet below the sea level to find it dictate it. I am bullish and bearish.
U.S. Dollar - Yes I do realize all fiat currencies go to zero. Yes I realize who is running the show here. Yes I realize Richard Russell's mantra of "inflate or die". I also recognize that the vast majority of global debts are in dollars and they either are repaid or defaulted upon. Currently the daily sentiment index numbers show U.S. dollar bulls at 3. Everyone and their brother is dollar bearish. Hence my bullish stance. Cash is king as everything will be on sale in a deflationary world. Think of it as a global garage sale. Again, I am bullish.
Equities - I do not see how this global corner of equities, and yes dear reader what we have witnessed is a corner last done by the infamous Hunt brothers. You see dear reader when the government runs a scam it is fine and dandy but when you or I do it they put the coals to us. Equities will be a buy when no one and I truly mean NO ONE wants them ! I am bearish, have been proven wrong and am yet bearish yet again. Stupid or stubborn, you decide.
Having said all this, as a speculator I must remain flexible and not remained married to a position leading to big losses. You must admit one is wrong quickly and head to high ground taking lots of little losses, living to fight another day and the big winner ! One must change one's position as the facts and the charts dictate. My apologies for the long post and you're quite welcome if this piece serves as a cure for your insomnia.
Good speculating and please remember to never forget that "an investor is a speculator who made a mistake and will not admit it".
Long 1 unit Ultrashort Russell 2K ticker TWM @ $27.50 stop @ $26.40
Long 1 unit Ultrashort Financials ticker SKF @ $24.55 stop @ $23.49
Short 1 unit I-shares Russell 2k ticker IWM @ $61.70 stop @ $63.80
Short 1 unit Costco ticker COST @ $58.00 stop @ $60.11
Short 1 unit Vornado ticker VNO @ $68.30 stop @ $70.71