Thursday, October 8, 2009

The Waters Warm.... Come on In !

I continue to sit here and listen and watch the markets. I am trying not to think as it makes my head hurt. This is nothing new though, as we have gone through bouts of this collective disconnect from reality in the past and will continue to do so in the future.

I continue to listen to the talking heads of the financial mainstream media, telling you and I to close our eyes, plug our collective noses and just buy. Remember now this is institutional money that probably is managing a piece of your retirement portfolio. It is called buying for their bonus, heads they win, tails you lose. This is all so staggeringly unbelievable I don't know what to say.

Sidenote: I have a friend back in Canada who manages money, smart cat and a good guy. He was calling me, lets just say on a higher than previous frequency back in late 2008 and early 2009 as the market was tanking. Ironically I have not heard from him lately. It seems the phone calls have an inverse correlation to the market. Calls rise as market falls and vice versa. Are you in this camp?

I continue to hear the drumbeat of the U.S. dollar's death.

I continue to hear the about the fear of bonds, the bubble in bonds and the love of equities.

I heard one intellectual on CNBC, one Brian Shactman, remark how Las Vegas Sands (ticker LVS) was trading $18 plus since it move from its lows of around a $1.50. Mr. Shactman furthered this with the gambling analogy of "imagine if you went all in there". This is exactly what hollow, cup is always half full cheerleaders do. He dare not mention LVS has fallen from a high of $145 to its current position of $18 plus, to which I would humbly counter in a instance of balance, imagine if you had gone all in there !

This is how it all unfolds. The desire to participate trumps the fear of loss. Everyone is invited into the water for a swim as it is nice and warm. Problem is the cats doing the inviting are standing in front of the sign that says, Danger ! Shark Infested Waters!

I continue to bet with the side of the bond boyz and girlz preferring to be "left behind" if you will. The bonds have broken out and are telling this trader deflation is the play no matter how much the equity lovers and strategists on Wall St. pound the "reflation trade".

Do not simply assume gold is telling you inflation for gold can speak out of both sides of its mouth. It can speak fear, safety, inflation, deflation, liquidity, insurance, etc. You name the need and one can make a valid, cogent argument that gold can satisfy it.

My point is that just because gold is running doesn't necessarily portend inflation. Gold ran in the deflationary depression of the 30's (Homestake as the proxy) even though inflation was no where.

Commodities can spell inflation and they can spell economic growth (doesn't copper have a PhD in economics with nickel possessing a Masters?) but they could also spell scarcity? Could they also spell fear, fear of financial alchemists creating paper assets into Frankenstein monster. No matter how much the brain trust at Goldman may have tried, as I surmise they have, they not been able to turn cattle dung into a pound of copper.

Housekeeping notes;

I was stopped out of my long COST position at $60.11 for a loss of $2 1/4 pts, as it gapped open yesterday and peaked within a few minutes of trading, only to deteriorate as the day progressed.

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

Open Positions:
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
Long 1 unit i-shares Barclay 20yr ticker TLT @ $97.80 stop @ $94.94
Long 1 unit US$ Index bullish ticker UUP @ $22.75 stop @ $22.44
Short 1 unit i-shares Russell 2K ticker IWM @ $61.70 stop @ $63.80
Short 1 unit Vornado ticker VNO @ $68.30 stop @ $70.71
Short 1 unit Bed Bath ticker BBBY @ $37.75 stop @ $38.41
Short 1 unit Spiders ticker SPY @ $106.00 stop @ $107.06

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