Monday, November 30, 2009

Back from Thanksgiving

I hope everyone out there had a safe and joyous Thanksgiving holiday ! We are all truly blessed and have much to be thankful for every day. My apologies for my lack of posting as my wife and I have had a house full of family.

The news that has everyone's angst up is from the Middle east that Dubai World cannot pay its bills. The news broke Thanksgiving day and most are probably fully apprised of it by now. This news was a shock only to those that worship at the alter of the Fed and their all-knowing omnipotence. Too funny.

Couple of interesting notes on the subject of Dubai. First that the debts are equal to their GDP, that is if you EX-clude the off balance sheet items. Boy, was Enron a trailblazing maverick or what. Secondly did you notice that Art Cashin was at his post, on the floor of the NYSE on Black Friday morning (I saw him on CNBC). Forget what Art said that day and let us take special note of the fact that he was in on a day most take off. This is a big tell for me. Lastly, the implicit government guarantee of Dubai World debt everyone believed in and which we now learn this morning is worth about as much as a name dropping, D list, celebrity from the bottom of the Hollywood bucket.

Yup, markets sure are rational aren't they. They always foresee everything. Yes the music is playing so one must get up and dance. With others money of course !!

Have you been paying attention to the yield curve over here, in particular the short end.

Here's the gig and it's simple. It is the bond crowd vs the equity crowd. Regular readers know which one is Paris Hilton and which one is Albert Einstein and right now the Einstein crowd (hint: bonds) is scared witless. You think the Paris Hilton crowd (equities) has even taken a moment to wonder why this is. Keep watching short rates as they continue to drop.

Further, I urge you to punch up 1 month, 3month, 6month, 1year, and 2year yields. Please note
that 1 yr notes have broken their old lows in yields. As I said before, why so scared, what do they see that the polyannic stock boyz don't. Remember the equity boyz ride the short bus for a reason, they dance not because they want to or because they can. They dance simply because the music is playing. Kinda like that really drunk girl at the wedding. Gee where's Chuck Prince when you need him.

Back to the Dubai story and this implicit guarantee which really is not there and is just a carrot one can use to pound toxic waste, garbage debt paper down the throats of those lower on the financial food chain. Ya just gotta love global Frankenfinance !

I all has really just become one big, global Charade !

Cha - rade [shuh-reyd; especially Brit. shuh-rahd]

1. charades, (used with a singular verb) a game in which the players are typically divided into two teams, members of which take turns at acting out in pantomime a word, phrase, title, etc., which the members of their own team must guess.
2. a word or phrase acted out in this game.
3. a blatant pretense or deception, esp. something so full of pretense as to be a travesty.

I kinda like #3. But I can be a bit particular.

Let us look around and count the ways we see.... charades.

  • AAA rated mortgage backed securities = charade
  • AIG counter party guarantee = charade
  • FASB rule changes for bank accounting = charade
  • Greenhouse gas climate change = charade and outright fraud.
  • Acorn = too funny, kinda like psychedelic charades or charades hippies
  • U.S. econ. numbers, re:unemployment numbers but take your pick = charade
  • Stimulus job creation numbers = charade or rather outright farce
  • Housing market recovery in the face of rising delinquencies = charade
  • Commercial real estate = more like a game of Marco Polo for now but charade no less
  • Chinese auto sales in the face of declining fuel consumption = charade
  • FDIC $250,000 deposit insurance guarantee = charade
  • FHA solvency debate = charade
  • and now Dubai debt = charade

Next up we have the IMF. Regular readers know I am not a big fan of blood sucking entities like the World Bank and the IMF (Int'al Monetary Fund) but sometimes a blind squirrel can find a nut once in a while. It is along this vein that the comments by a Dominique Strauss-Kahn managing director of the IMF were that all that more shocking.

About a week ago at the CBI conference of business leaders, Strauss-Kahn had the following to say;

another huge call on public finances by the financial services sector would not be tolerated by the “man in the street” and could even threaten democracy. "Most advanced economies will not accept any more [bailouts]...The political reaction will be very strong, putting some democracies at risk," he told delegates.

But don't you worry over incidentals like the above, things are so much better than a year ago. Keep repeating this to yourself to make sure you don't let any doubts about it creep in.

Good speculating to you all 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 Direxion Large Cap 3X Bear ticker BGZ @ $19.34
Long 2 units Direxion Small Cap 3X Bear ticker TZA @ $12.06
Long 1 unit Direxion Emerging Mkts 3X Bear ticker EDZ @ $6.05
Long 2 units Direxion Financial 3X Bear ticker FAZ @ $19.65
Long 1 unit Ultrashort Xinhua China ticker FXP @ $8.32
Long 1 unit Ultrashort Real Estate ticker SRS @ $9.82
Long 1 unit Direxion Tech 3X Bear ticker TYP @ $10.68
Long 1 unit US Dollar Bull ticker UUP @ $22.52 stop @ $21.97
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

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