Thursday, February 26, 2009

Medtronic Inc.- MDT

I was doing some homework poking around some stocks and came across this. Medtronic is a name many are familiar with. I have decided to post a longer term chart, a 20 year monthly (chart above) to be specific. It shows 2 potential scenarios. I am inclined to watch this much closer as it approaches $27.5-28 or takes out $35.50 to the upside.




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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $99.62/114.78
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $69.80/83.28
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $53.80/64.72
Short 1 unit Apple ticker AAPL @ $102.05 stop at $100.11
Short 1 unit Apollo Group ticker APOL @ $82.95 stop @ $82.95
Short 1 unit Microsoft ticker MSFT @ $19.20 stop @ $19.20
Long 1 unit Int'l Coal ticker ICO @ $1.51 stop @ $ 1.47

Random Thoughts

My apologies for not posting yesterday as I was doing some 'market homework' and lost track of time.

It seems to me that every move by the administration, the Fed and the Treasury only worsens our predicament. Anyone with half a functioning brain should realize the folly of the elimination or modification of mark to market. I even heard Larry Kudlow today call for a 5yr moving average to value these ' illiquid' assets. Sad to see Mr. Kudlow still deluding himself and others into thinking that these are still illiquid instruments. There are bids out there, problem is said bid is light years away from where the financials are marking them. Bid is 10 cents and the financials are holding them at 75-90 cents. At some point this will sink in (osmosis maybe?) even to the esteemed Mr. Kudlow. I believe that there are many tech stock investors who would love to have their broker value their illiquid tech stock holdings, re: no bid on the stock, at 5 yr averages.

Sheer brilliance as only Larry Kudlow can offer. Fully supported by many out there including Bill Isaac the former head of the FDIC. Is it quite easy to figure out why we are where we are when men like this are leading the discussion and debate on what to do. Enough already, someone please muzzle them so some clear thinking adults with some level headed ideas can be heard.

Instead CNBC continues to trot out the same zombies with the same schtick, men like Bob Doll, Paul McCulley, Bill Gross, Vince Farrell etc. Have we not heard enough from them? Have men of their ilk not reeked enough havoc on our financial system and society? I guess not as we have holdover and caretaker in chief at the Treasury Geithner. We have a former Goldman Sachs lobbyist as second in command at the treasury. (gotta hand it to Goldman on that one !)

God forbid fresh ideas make the light of day, god forbid the truth come out as that would be too negative. We need to be positive. We need to be upbeat. We need to ignore the facts and simply follow the yellow brick road, led by the nose, to slaughter, by the establishment zombies who have only their own self interest in mind.


As evidenced by some email I have received, it seems some out there are getting fidgety and looking for something to do. I would strongly counsel that you take a step back and remember the sage words of Jesse Livermore that "it was never my thinking that made me the big money but my sitting."

The developments coming out the White House regarding policy and intiatives is something I would counsel readers to pay close attention to.

I would also counsel you to pay close attention to what is happening in Eastern Europe credit markets.

I believe that the equity markets, remember now these are the short bus riders and hence the last to figure something out, are beginning to now price in these developments and not in a good way.

And before you even exclaim" we're down almost 50% in the market, isn't it already priced in?" My short answer is no ! And while I am on the subject of the equity market, stop fixating on it as it could truly become the least of our worries, if things, like the budget, continue down this road we might be faced with a credit event. Now that would really be something to worry about.

Housekeeping notes;

I want to lower my stop on my APOL short to break even at $82.95

I also want to raise my stop on my ICO long to $1.47

I was stopped out of my short GS position late Tuesday at $93 for a gain of almost 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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $99.62/114.78
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $69.80/83.28
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $53.80/64.72
Short 1 unit Apple ticker AAPL @ $102.05 stop at $100.11
Short 1 unit Apollo Group ticker APOL @ $82.95 stop @ $82.95
Short 1 unit Microsoft ticker MSFT @ $19.20 stop @ $19.20
Long 1 unit Int'l Coal ticker ICO @ $1.51 stop @ $ 1.47

Tuesday, February 24, 2009

Getting Long International Coal Group - ICO.


The daily chart (above) of International Coal Group, ticker ICO, looks very interesting as a long punt. As my notes above indicate, I realize we are in a bear market and in a bear market the vast majority of stocks decline we should not pass up opportunities like this.

I am getting long 1 unit of ICO here at $1.50 with a stop just below the recent lows. I like $1.37 as the number.


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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $99.62/114.78
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $69.80/83.28
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $53.80/64.72
Short 1 unit Apple ticker AAPL @ $102.05 stop at $100.11
Short 1 unit Apollo Group ticker APOL @ $82.95 stop @ $84.52
Short 1 unit Goldman Sachs ticker GS @ 96.95 stop @ $92.94
Short 1 unit Microsoft ticker MSFT @ $19.20 stop @ $19.20
Long 1 unit Int'l Coal ticker ICO @ $1.51 stop @ $ 1.37

Monday, February 23, 2009

"The" Twilight Zone

We are officially in the Twilight Zone. How else can one describe this.

Nationalization of the banks all set to go. Wait, hold on Propaganda Minister, errr excuse White House press Secretary Gibbs announces that there will be no nationalization. (Goebbels would be proud). News that AIG will report a $60 Billion loss, and yes before you ask that is billion with a B, loss.

Yeah sure, we'll make money on all these pieces of garbage we bought too. We can hang on to them cause we have deep pockers. Hang on all right, all the way to zero.

Just beautiful.

Absolutely textbook execution on how to instill confidence, right?

You know we're are not talking about some fly by night internet outfit with no sales nor are we talking about a crackpot banana republic. We are talking about the capital markets of the United States of America!

Pathological liars the lot of them. Former President Jackson was oh so correct, nothing but a den of vipers and thieves and they are going to take us all down with them.

But hey, don't fret. The brand new season of Dancing with the Stars is right around the corner! I wonder how the masses would react if it were not available along with Desperate Housewives and Survivor. Now then there would be someting to get upset about !!


I caught the news today that NY Attorney General Andrew Cuomo wants to get a court order forcing former NYSE chief and Merrill Lynch CEO John Thain to testify as to who received the ill gotten bonus's over at Merrill Lynch prior to the massive loss announcement. Cuomo is doing this as Mr. Thain is refusing to divulge this information.

I have some advice for the Mr. Cuomo on exactly how to make John Thain describe this bonus process in exquisite detail. It is called 'the rack' !

You see Mr. Cuomo, men like John Thain, Angelo Mozilo, Dick Fuld, Franklin Raines and their ilk do not understand decency, ethics and the law as they apply to men like you and I. So using something like 'the rack' is something I am 1000% positive Mr. Thain will eagerly and enthusiastically understand.

It should not have to come to this but it has.


Housekeeping notes;

I was stopped out of my short position WFC at $12.40 for a gain of about 7 3/4 pts on 1 unit.

I was also stopped out of my short position in DRI at $28.95 for a flat trade 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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $99.62/114.78
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $69.80/83.28
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $53.80/64.72
Short 1 unit Apple ticker AAPL @ $102.05 stop at $100.11
Short 1 unit Apollo Group ticker APOL @ $82.95 stop @ $84.52
Short 1 unit Goldman Sachs ticker GS @ 96.95 stop @ $92.94
Short 1 unit Microsoft ticker MSFT @ $19.20 stop @ $19.20

Friday, February 20, 2009

Ken Langone CNBC Interview

Regular readers know that I have the utmost respect for Art Cashin. He is, to coin a complimentary phrase from the biz, a brokers broker. He has forgotten more than most, myself included will ever know. A few days ago Art indicated that we need to basically heal, that we need to stop vilifying and stop the witch hunting and move on.

I must respectfully disagree with Mr. Cashin. The reason I do is that we cannot heal and move forward until the fraud, the deceit, the malfeasance, must be exposed and punished for all to see. This, in my opinion is the only way we can move forward and heal.

Art Cashin was glad to see Ken Langone on CNBC this morning as an adult bringing some sanity as Are called it. Okay. I agree. Langone, whom I do not know, seems reasoned, intelligent, and sane. I will overlook some of his positions on certain items, like mark to market, which I wholly disagree with but it was one of his comments shocked me.


Mr. Langone indicated his sons warned him this was all going to blow up. He says he ignored the advice and stayed the course. This comment is okay but it was him going on to also mention, I am recalling this from memory now, how a government official walked him through the whole mess, how bad things were and how it was gonna blow sky high or something to that effect as I recall.

My question to Mr. Langone is "who was this person?"Why was this not disclosed. Why do we not know who this was? How pervasive was this knowledge given the oft repeated alibi that "nobody saw this coming" ?

It obviously means that there were plenty in government, in positions to influence legislation, that were more than well aware this was going on, understood the implications and DID JACK ABOUT IT !

My question to Mr. Cashin is, "can we heal with this type of unfinished business lying in our midst?"

I humbly suggest that unless and until all the punishment has been meted out, until as Karl Denninger puts it 'until the swamp is drained' we are going nowhere fast. It pains me to no end to say this but it is what it is. I realize a man like Art Cashin does not want to fan any flames of unrest or anger but I believe until we take care of this unfinished business to prevent those flames of anger as they may spark on their own if we don't.




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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $99.62/114.78
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $69.80/83.28
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $53.80/64.72
Short 1 unit Wells Fargo ticker WFC @ $20.20 stop @ $12.36
Short 1 unit Apple ticker AAPL @ $102.05 stop at $100.11
Short 1 unit Apollo Group ticker APOL @ $82.95 stop @ $84.52
Short 1 unit Goldman Sachs ticker GS @ 96.95 stop @ $92.94
Short 1 unit Microsoft ticker MSFT @ $19.20 stop @ $19.20
Short 1 unit Darden ticker DRI @ $28.95 stop @ $28.95

Some Stop Management

Housekeeping notes;

I am moving my stop up on EFU to 1 unit at $99.62 and 1 unit at $114.78

I am moving my stop up on SDS to 1 unit at break even $69.80 and 1 unit at $83.28

I am moving my stop up on SRS to 1 unit at break even $53.80 and 1 unit at $64.72

I am lowering my stop on WFC to $12.36

I am lowering my stop on APOL to $84.52

I am lowering my stop on MSFT to $19.20


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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $99.62/114.78
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $69.80/83.28
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $53.80/64.72
Short 1 unit Wells Fargo ticker WFC @ $20.20 stop @ $12.36
Short 1 unit Apple ticker AAPL @ $102.05 stop at $100.11
Short 1 unit Apollo Group ticker APOL @ $82.95 stop @ $84.52
Short 1 unit Goldman Sachs ticker GS @ 96.95 stop @ $92.94
Short 1 unit Microsoft ticker MSFT @ $19.20 stop @ $19.20
Short 1 unit Darden ticker DRI @ $28.95 stop @ $28.95

Thursday, February 19, 2009

Charts of Interest. PG, JNJ and TLT

Given the carnage in the long end of the bond market (ticker TLT)I thought it time to take a look. The weekly chart above shows us at an interesting juncture.

The daily view of the TLT shows us testing the upper bound of the long term channel from the top side. I realise many think the bonds are a bubble waiting to burst. I also realize that the government is writing cheques it cannot cash, yet money continues to find its way into treasuries. I read somewhere a quote that said the dollar is backed by a bankrupt government while the Euro is backed by nothing. Interesting.

I also caught a note from Rick Ackerman who argues that much of the debt outstanding globally is in dollars and as the de-leveraging liquidation sale continues, assets are sold and dollars are bought as debts are settled. Yet something else to consider. I have no doubt where we finally end up but as I have said and as bubbles before have proven, you can go from $100 to 200 before you go down to 5.


I heard the oracle of Omaha Warren Buffett has liquidated some of Berkshire's holdings. Proctor and Gamble and J&J among the most notable.

Johnson and Johnson, ticker JNJ (chart above) is at an extremely interesting inflection point. The move out of the pennant should equal the length of the pole preceding it. In this case the pole is worth $20 points. Buffett may or may not be aware of this technical circumstance, (my guess is he most definitely is) but I am sure he is aware of this.......

Proctor and Gamble. P&G, ticker PG (chart above) has already broke down. There are multiple formations which overlap.



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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $89.80
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $66.15
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $47.18
Short 1 unit Wells Fargo ticker WFC @ $20.20 stop @ $15.16
Short 1 unit Apple ticker AAPL @ $102.05 stop at $100.11
Short 1 unit Apollo Group ticker APOL @ $82.95 stop @ $86.32
Short 1 unit Goldman Sachs ticker GS @ 96.95 stop @ $92.94
Short 1 unit Microsoft ticker MSFT @ $19.20 stop @ $20.71
Short 1 unit Darden ticker DRI @ $28.95 stop @ $28.95

Wednesday, February 18, 2009

Housekeeping Notes

Housekeeping Notes;

I was stopped out of my UGA position this morning at $20.30 for a loss of about $1.5 pts on 1 unit.

I am lowering my stop on WFC down to 15.16

I am lowering my stop on GS down to $92.94

I am lowering my stop on AAPL to 100.11


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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $89.80
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $66.15
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $47.18
Short 1 unit Wells Fargo ticker WFC @ $20.20 stop @ $15.16
Short 1 unit Apple ticker AAPL @ $102.05 stop at $100.11
Short 1 unit Apollo Group ticker APOL @ $82.95 stop @ $86.32
Short 1 unit Goldman Sachs ticker GS @ 96.95 stop @ $92.94
Short 1 unit Microsoft ticker MSFT @ $19.20 stop @ $20.71
Short 1 unit Darden ticker DRI @ $28.95 stop @ $28.95

Some Random Thoughts

I trust you all saw the American Express (ticker AXP) news that hit yesterday

"Defaults on loans packaged into securities rose to 8.29 percent from 7 percent in December, while payments at least 30 days overdue climbed to 5.28 percent from 4.86 percent the month earlier,"

I remind you that this is from Amex, not Capital One, or Discover, but Amex the Goldman Sach of the credit market. Speaking of Goldman.....

There are lots of rumors last night and now news today surrounding margin calls at the venerable firm of Goldman Sachs. Specifically it seems the most senior of senior partners are experiencing them. I would be remiss if I did not admonish these 'masters of the universe' the sage advice bestowed upon me long long ago. That being to never, ever, ever, under ANY CIRCUMSTANCES meet a margin call. It is the markets way of telling you that you are wrong.

I fully realize many may think it hubristic of myself to want to offer advice to these moneyed thinkers of Wall St. but given their track record I felt compelled. My work is now done.

I heard this morning that 'The Maestro' Allan Greenspan is now on the nationalisation of the banks bandwagon. I obviously must be the dummy in the room for advocating the stance of letting them all go under, thereby permitting many solvent banks of which there are many to take their place. As to why the leading lights of the administration, the Fed, the Treasury and academia are loathe to 'let them go under' can be debated ad nauseum but rest assured that if their solutions and recommendations till now is what passes for intellect and acumen I am proud to embrace and exhibit my ignorance.

Simply put they are idiots, the lot of them, for not being able to see and state the obvious.

And if they are not idiots then they are complicit in the looting and pillaging of the nations coffers. For some strange reason the word treason continually comes to mind.

Poor President Obama and his round table of economic priests want to stabilize housing prices. Does anyone see the insanity in the statement stabilize housing prices? It is completely understandable for academics like Susan Wachter, Professor of real estate and finance and the prestigious Wharton School of Business, and her ilk to believe their own blather but you Mr. Paul Volcker? Please tell me you do see the insanity in this, and you have voiced not only your opposition to it on moral hazard grounds but on the basis of fundamental economic laws.

It has been said before but where oh where are the adults ? We are in desperate need of some !

Professor Wachter can continue to enlighten her legions of zombies at the Wharton School about the need to meddle and interfere in order to avert "systemic risk". All because she says so ! All this as the poor marks that are the parents of her students, continuing to pay through-the-nose-tuition, emerging no better served than had they attended the local community college while working in the real world but once again I digress.

In the midst of all this there is an upside we can use.

I humbly suggest to our Joint Chiefs that we, as a nation, curtail all our military spending on missiles, tanks and standing infantry and instead in their place unleash the likes of Professors Wachter, Roger Farmer and Ken Rosen upon our enemies and their economies. The havoc and mayhem these 3 and their ilk would reek upon our foes economies and their populace would be unrivaled by traditional weaponry.



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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $89.80
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $66.15
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $47.18
Long 1 unit US Gasoline fund ticker UGA $21.85 stop @ $20.38
Short 1 unit Wells Fargo ticker WFC @ $20.20 stop @ $20.20
Short 1 unit Apple ticker AAPL @ $102.05 stop at $102.05
Short 1 unit Apollo Group ticker APOL @ $82.95 stop @ $86.32
Short 1 unit Goldman Sachs ticker GS @ 96.95 stop @ $96.95
Short 1 unit Microsoft ticker MSFT @ $19.20 stop @ $20.71
Short 1 unit Darden ticker DRI @ $28.95 stop @ $28.95

Tuesday, February 17, 2009

It's Sir to You


What to say about Allen Stanford, except to give him the benefit of the doubt as he has not confessed, (ala Bernie Madoff) so he does deserve the expectation of innocence until proven guilty. But more importantly please excuse the faux pas on my part as he should be more properly referred to as Sir Allen Stanford, as he was knighted by the British Commonwealth and carries the title.

Come to think of it, wasn't someone else who was knighted in a bit of a pickle before? Oh yeah ! I remember... Conrad Black. Good thing they were knighted lest any of the minions ever forget not only his station in life but how upstanding and honorable they are. Words simply don't properly describe the irony of it all but whatever you do at least address him properly as Sir !

Memo to the boobs and boobs at the pom pom network (CNBC) and their incessant, oft repeated question to guests as to how to restore confidence? I know that you cannot acknowledge China and their tactics but might I humbly suggest the guillotine or simple hanging if the firing squad unsettles you to much or ammunition prices make it uneconmical.

Whatever you decide over there at CNBC just keep on recycling the same ol' same ol' guests with the same ol' same ol' lines of thinking. You know the crew, Bill Gross, Mohommed El-Erian, Paul McCulley, Bob Doll, Vince Farrell, et al. More importantly, do not dare ask Mr. El- Erian any questions pertaining to the mushroom cloud above the Harvard endowment lest you impair your advertising revenue stream via Pimco, the authority on bonds.

Don't get me wrong the 3 boyz of Pimco are extraordinarily bright, BUT... they are not immune from criticism, they are not immune from having their ideas challenged, they are not immune from talking their book, and above all they are not immune from being wrong. The markets have a nasty habit of doing that to people, making them wrong to the point of embarrassment. The trick is the ability to STOP BEING WRONG before your reputation and account are left in tatters.

Memo to Dylan Ratigan: I had a dream the other night that you heeded my advice and for one evening only let the regulars of your show have the night off and had on a round table of the bloggers who saw this coming.

Mike Panzner at Financial Armageddon
Karl Denninger at Market Ticker
Mike Morgan at Behind Enemy Lines
Jim Sinclair at JS Mineset
Mike Shedlock at Mish's Global Economic Trend Analysis

You then went a step further and brought on the boyz from Comstock, Charlie Minter and Marty Weiner as special guests. Not all of these guests agree (inflation vs deflation) on their investment stance or outlook but they all have clear ideas and opinions.

Unfortunately I woke up, only to see the same ol' guests on your show recommending more stocks to buy in a bear market. Yup, just what to do, buy stocks in a bear market. I anxiously await them to tell me short stocks in the next bull market. Your crew is better than most but lets mix things up a little. Who know, the show if promoted properly, could be an ENORMOUS hit! Besides, it would also help distance yourself from your status quo, don't rock the boat, pom pom colleagues.

Now that the stimulus bill has passed and is to be signed the talk is now that the bill wasn't big enough. Heaven help us all as this is what passes for intellect. Pathetic.

As for the markets, what should one say that the tape is not already saying loud and clear. I hope those that read here on a regular basis have taken countermeasures or in the least necessary precautions.

Housekeeping notes;

I am lowering my stop on AAPL to $102.05

I am lowering my stop on GS to $96.95

I am lowering my stop on DRI to $28.95

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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $89.80
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $66.15
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $47.18
Long 1 unit US Gasoline fund ticker UGA $21.85 stop @ $20.38
Short 1 unit Wells Fargo ticker WFC @ $20.20 stop @ $20.20
Short 1 unit Apple ticker AAPL @ $102.05 stop at $102.05
Short 1 unit Apollo Group ticker APOL @ $82.95 stop @ $86.32
Short 1 unit Goldman Sachs ticker GS @ 96.95 stop @ $96.95
Short 1 unit Microsoft ticker MSFT @ $19.20 stop @ $20.71
Short 1 unit Darden ticker DRI @ $28.95 stop @ $28.95

Friday, February 13, 2009

Getting Short Darden Restaurants - DRI

The time has come to get short Darden, ticker DRI, yet once again. I am getting short 1 unit of DRI here at $29.05 with a stop at $30.56. Don't want to hear it? Okay, forget the chart for a moment and tell me how restaurant stocks as a sector fourish in what could be the worst recession most alive will witness? I am open to suggestions.


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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $89.80
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $66.15
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $47.18
Long 1 unit US Gasoline fund ticker UGA $21.85 stop @ $20.38
Short 1 unit Wells Fargo ticker WFC @ $20.20 stop @ $20.20
Short 1 unit Apple ticker AAPL @ $102.05 stop at $103.36
Short 1 unit Apollo Group ticker APOL @ $82.95 stop @ $86.32
Short 1 unit Goldman Sachs ticker GS @ 96.95 stop @ $101.61
Short 1 unit Microsoft ticker MSFT @ $19.20 stop @ $20.71
Short 1 unit Darden ticker DRI @ $28.95 stop @ $30.56


Getting Short Microsoft - MSFT

Microsoft, ticker MSFT, weekly view (chart above)

Microsoft daily view (chart above)

I am getting short 1 unit of Mircosoft, ticker MSFT, here at $19.30 as we rally into former support which is now resistance per my notes ont the charts above. Yes I know Microsoft is an institutional favourite and they have a wagonload of cash but one must remember the chart knows this and is still ominous looking.

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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $89.80
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $66.15
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $47.18
Long 1 unit US Gasoline fund ticker UGA $21.85 stop @ $20.38
Short 1 unit Wells Fargo ticker WFC @ $20.20 stop @ $20.20
Short 1 unit Apple ticker AAPL @ $102.05 stop at $103.36
Short 1 unit Apollo Group ticker APOL @ $82.95 stop @ $86.32
Short 1 unit Goldman Sachs ticker GS @ 96.95 stop @ $101.61
Short 1 unit Microsoft ticker MSFT @ $19.20 stop @ $20.71

Getting Short Goldman Sachs

Goldman Sachs weekly view, chart above.

Goldman Sachs daily views chart above.


The time has come for me to get short this "best of breed" stock. I am using the strength of the last 9 weeks to get short 1 unit of Goldman Sachs ticker GS here at $97.05 with a stop at $101.61. There is some expectation of a secondary offering from Goldman up here at these levels to raise money to pay off their TARP money. You can decide if that's bullish or bearish, that is Goldman selling stock.


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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $89.80
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $66.15
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $47.18
Long 1 unit US Gasoline fund ticker UGA $21.85 stop @ $20.38
Short 1 unit Wells Fargo ticker WFC @ $20.20 stop @ $20.20
Short 1 unit Apple ticker AAPL @ $102.05 stop at $103.36
Short 1 unit Apollo Group ticker APOL @ $82.95 stop @ $86.32
Short 1 unit Goldman Sachs ticker GS @ 96.95 stop @ $101.61

Wednesday, February 11, 2009

How To Restore Confidence in the Markets

I am not a marketing major but I would hazard a guess that news like this 'China Airport Executive Sentenced to Death' just might get the attention of your target market.

HONG KONG (MarketWatch) -- A Chinese court has sentenced the former chairman of a state-owned holding company overseeing 30 airports, including Beijing International, to death for bribery and embezzlement amounting to more than 100 million yuan ($14.6 million), according to a report late Tuesday by the state-run Xinhua News Agency.

The Jinan Intermediate People's Court found Li Peiying, 59, former chairman and general manager of Capital Airports Holding Co., guilty of seeking or accepting bribes totaling 26.61 million yuan during an eight year period from 1995, the report said.
Li was also found guilty of misappropriating 82.5 million yuan in funds for personal use during a three-year period from 2000.
In handing down its sentence, the court said Li's actions had resulted in large economic losses for that nation and that the amounts involved were extraordinary.
Capital Airports was formed in 2002 and operates airports in nine Chinese provinces.



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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $89.80
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $66.15
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $47.18
Long 1 unit US Gasoline fund ticker UGA $21.85 stop @ $20.38
Short 1 unit Wells Fargo ticker WFC @ $20.20 stop @ $20.20
Short 1 unit Apple ticker AAPL @ $102.05 stop at $103.36
Short 1 unit Apollo Group ticker APOL @ $82.95 stop @ $86.32

Random Thoughts

Hat tip to Jesse's Cafe Americain for bringing my attention to a great piece found over at Truth in Options regarding the bonuses at JP Morgan.

This article, which you can view over at Truth in Options surrounds J.P. Morgan's executives hard to understand bonuses. Just something to think about when the boobs and boobs on CNBC wax on and on about how wonderful JP Morgan CEO Jamie Dimon is.


I really have much to say but it seems I just repeat what I have said previously and risk earning the nickname Ambien. With that in mind I have some random thoughts on some of the characters that grace the stage.

Tim Geithner-the nickname says it all "tax cheat Timmy". Our new Treasury Sec. the golden boy, Tim Geithner., card carrying and lifetime member of 'the club'. His holier than thou oath to serve the people is almost comical if it were not so sadistic. Mr. Geithner is that kid the coaches love and play all the time (atta boy Timmy!!), but every player on his own team and the opponents' know he should be riding the pine. As I have said back in my post Geithner's Big Day;

"I want to touch on the mantra of emanating from D.C. that "he's the only man for the job". I have only one response to this line of bunk which is, if one of the greatest nations on this earth, home to some of the world's finest educational institutions, with over 350 million entrpreneurial and innovative inhabitants and all we have to offer for Treasury Secretary is Tim Geithner as a solution, well then heaven help us all ! "

John Mack
What more does one have to say other than 2 words.... Pequot Capital. While on the subject maybe the SEC should hire Gary Aguirre to run the SEC. Aguirre was the former SEC investigator who was fired for having the audacity to pursue a man of Mack's ilk. How dare he? He must have missed the memo where this type of endeavour was frowned upon by management.

China
Today we get the news that Yo Yongding, former advisor to China's Central Bank is agitating China to seek guarantees on its $682 billion of U.S. Treasury Holdings, so that these do not get eroded by "reckless policies." Gee, ya think ?

Russia
Getting ready to default on their debt. Just what the Global insolvent banks need. Absolute perfect storm, in the bad sense.

Mohammed El-Erian
The former head of Harvard Endowment and now #2 over at Pimco. Someone explain to me how his move from Harvard to Pimco and the disaster unfolding over at Harvard are not related. I am open to suggestions. Maybe one of the CNBC gang can slip that question in among all the hard hitting others they throw.

Vikram Pandit
What can one say about a guy who could sell his hedge fund to Citi for, if memory serves about $800 million only to have it shuttered shortly thereafter. Maybe the thought process to hire him by the board, that is if there was one, went something like this..... "man if he could scam us into a deal to buy his fund Old Lane think what he could do for our off balance sheet garbage."

Bill Ackman
Forget the fools with a capital F that would pay him fees (2 and 20) to be in a fund that owns 1 position, that being Target, ticker TGT. Did I mention his sophisticated and propriety analysis led to his buying the stock all the way down. Where is Nick Leeson and
Yasuo Hamanaka when you need them? Well, they most probably are on the analysis team at Pershing Square implemented their well honed strategy of averaging losers.


Alex Rodriguez
or A-Rod as he his known in the baseball world. Would you do roids for $45 million contract? Lets face it many out there would.

CNBC anchors
What let down for them yesterday. It was like Toto had finally let them in on the secret the there is no wizard and it was only Tax Cheat Timmy behind the curtain.

Gold and other precious metals.
Could it really become a medium of exchange?

Crude and distillates.
At least with energy (and the precious metals) it cannot be replicated via financial alchemy like so many Dr. Frankensteins on Wall St. dream about.

U.S. Treasury Bonds
At some point does compensation for profligacy becomes visible in yields?

Bill O'Reilly
I must correct you Mr. O'Reilly, many did see "all this" coming, problem is the mass media, both financial and mainstream chose to ignore then ridicule the bloggers, (shoot the messenger approach) rather than examine the message. Also, regarding your comment to Dick Morris the other evening surrounding the discussion that the Japanese tried stimulus leaving them with debt at 180% of GDP with nothing to show, that only he (Mr. Morris) and 3 other Japanese economists know this is either extraordinarily naive or inappropriately sarcastic. And before I forget, tell Laura Ingraham, she of tax cuts and tax credit news would goose the stock market for 1500 pts, that she would fit right in with the instant gratification crowd that inhabits Wall St. and much of the Fortune 500 executive suite and boardrooms.

Lloyd Blankfein
When is someone going to explain to me what he was doing in a closed door meeting, (with no material interest of course!), regarding the bailout of AIG? I am no ethics professor nor do I hold a J.D. but I know conflict of interest when I see it.

Henry Paulson
Has he left for Switzerland yet? Or was it Paraguay?



Housekeeping notes;

I am lowering my stop on AAPL down to $103. 36 from my original $106.36


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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $89.80
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $66.15
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $47.18
Long 1 unit US Gasoline fund ticker UGA $21.85 stop @ $20.38
Short 1 unit Wells Fargo ticker WFC @ $20.20 stop @ $20.20
Short 1 unit Apple ticker AAPL @ $102.05 stop at $103.36
Short 1 unit Apollo Group ticker APOL @ $82.95 stop @ $86.32

Tuesday, February 10, 2009

Short Apollo Once Again




The time has come to get short Apollo Group, ticker APOL, once again. I am short 1 unit of APOL here at $83.05 and as my notes indicate (chart above) I will use yesterdays intraday high as my pain threshold point with a stop just above it at $86.32


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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $89.80
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $66.15
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $47.18
Long 1 unit US Gasoline fund ticker UGA $21.85 stop @ $20.38
Short 1 unit Wells Fargo ticker WFC @ $20.20 stop @ $20.20
Short 1 unit Apple ticker AAPL @ $102.05 stop at $10.36
Short 1 unit Apollo Group ticker APOL @ $82.95 stop @ $86.32

Monday, February 9, 2009

Shorting AAPL


I am using the extraordinary strength in Apple, ticker AAPL to get short 1 unit here at $102.15 with a stop at $106.36

And before you even say it, yes I realize this is the best of breed, unasailable, Apple is different from all others Apple. Just in case you thought I didn't.

Housekeeping notes;

I am raising my stop on UGA up to $20.38 just to be a little defensive.

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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $89.80
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $66.15
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $47.18
Long 1 unit US Gasoline fund ticker UGA $21.85 stop @ $20.38
Short 1 unit Wells Fargo ticker WFC @ $20.20 stop @ $20.20
Short 1 unit Apple ticker AAPL @ $102.05 stop at $10.36

Monday Morning


I have my plate full this morning but I will post some charts of interest later today.

Housekeeping notes;

I was stopped out of DRI Friday at $28.75 for a loss of just over 1.5pts on 2 units short.

I was also stopped out of JPM on Friday at $27.35 for a flat trade 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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $89.80
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $66.15
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $47.18
Long 1 unit US Gasoline fund ticker UGA $21.85 stop @ $19.58
Short 1 unit Wells Fargo ticker WFC @ $20.20 stop @ $20.20

Friday, February 6, 2009

But the Market's Cheap

The cats over at Comstock Partners do excellent work. Their post this week, Earnings Are Collapsing, which I have re-printed below, addresses the fundamental argument that stocks are cheap on a valuation basis. Please read it and refer to it when someone comes on pom pom TV and tells you that stocks are the buy of a lifetime.


Comstock Partners, Inc.

Earnings Are Collapsing !!!
February 05, 2009

We believe that stocks will not begin a new bull market until valuations decline to levels reached at the bottom of past secular bear markets. In order to be able to make such comparisons, the method of tracking corporate earnings at this time must be consistent with the methods of previous periods.

At the risk of "beating a dead horse" we are incredulous as to why Comstock seems to be the only ones that are of the opinion that Wall Street is getting it wrong again by focusing on "operating" earnings. We were published in Barron's twice about the subject of "reported" earnings vs. "operating" earnings. As we have stated many times in these comments, "reported" earnings are Generally Accepted Accounting Principals (GAAP) earnings and "operating" earnings are GAAP earnings that "exclude write-offs". Isn't it clear which earnings make the most sense? Why would anyone continue to use earnings that don't include "write-offs" (especially when the write offs are so consistent) and the fact that they only came into existence in the late 1980's and gradually became the main earnings used by Wall St. (as stocks rose to more and more overvalued levels)?

By the late 1990's as reported earnings valuations reached unprecedented high levels, the switch to "operating" earnings became universal in order to justify the valuations. Also, the spead between the "operating" and "reported" earnings became wider and wider as more and more companies had "write-offs" that the CFOs were extremely pleased to not have to include in their earnings release. In fact, the "operating" earnings that "exclude write-offs", are now double the GAAP earnings (until yesterday and we will get into that later). Operating earnings estimates for 2009 were, until yesterday's revisions, around $80 a share for the S&P 500 and are around $40 for "reported" earnings (see the NDR attached chart). This essentially means that with the S&P 500 selling around 840, the market is trading at a very inexpensive 10 times "operating" earnings. However, on the basis of "reported" earnings which were used for the past 90 years we would be trading at close to a very expensive 20 times earnings. If you check out the charts on "Limbo, Limbo How Low Can it Go" on our home page you will see that using the last 12 months of "reported" earnings, P/E ratios generally bottomed at around 10 times earnings and peaked at around 20 times. These are all charts provided by NDR Research. The only exception to this occurred during the late 1990's where valuations reached double this level (and this is why almost all of Wall Street converted to "operating earnings" to justify the valuations). If Wall Street wakes up to focusing on "reported" earnings, we believe the market would decline substantially.

The reason we are dealing with this subject again this week is because the "operating earnings" estimates which can be verified by clicking on the following link
http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS shows that the latest "operating" earnings estimates were revised down to about $69 form the previous estimate of about $82. In addition the 2008 reported number was lowered to about $35. We wrote this comment earlier this week and predicted at that time that the earnings would be revised down since they were "under review" for the past two weeks. This downward revision, however, is probably the largest decline on record. The only way to observe these downward revisions would be to do what Comstock does periodically --- check out this same website and add the latest four quarters to see what the earnings estimates were at the time (excel speadsheet attached to see the downward revisions throughout 2008 of the 2008 and 2009 earnings estimates for both "operating" and "reported" earnings).

Again, we are trying to put the most optimistic light possible on a very dreary subject. If we were to put a trough multiple on trough earnings of say $40 (or even lower as we expect another downward revision) we could come up with a very low target level on the S&P 500 if the bottom occurred this year. However, since we want to put the most optimistic spin on the markets as possible, we are using our trendline "reported" earnings (a way of smoothing out the last 9 years of earnings over the past two business cycles). Our 2008 trendline earnings are now closer to $60 than the actual $35 estimated by the S&P analysts (the fourth quarter of 2008 was revised down to -$314 this past Tuesday from a +$6.85 estimate for a swing of $10---this is the first negative quarterly earnings on record), while our 2009 smoothed earnings are $64 compared to an actual $42 estimated by S&P.

Therefore, even on our conservative $64 trendline estimate for 2009, a trough P/E of 10 would result in the S&P 500 declining to around the 640 level-and it could be worse if investors ever focus on the actual reported earnings number.



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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $89.80
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $66.15
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $47.18
Long 1 unit US Gasoline fund ticker UGA $21.85 stop @ $19.58
Short 2 units Darden ticker DRI @ $27.15 stop @ $28.70
Short 1 unit Wells Fargo ticker WFC @ $20.20 stop @ $20.20
Short 1 unit JP Morgan ticker JPM @ $27.35 stop @ $27.35

Please Stop Helping

I cannot recall who said it as it has been said too often to attribute correctly but the phrase I am referring to is, "they learned from Lehman". With the 'they' being our omnipotent government, specifically Fed and Treasury and Lehman being the Lehman bankruptcy. This is spoken in the context that letting Lehman go under was a huge mistake which has caused all our problems. I would humbly counter that the Lehman bankruptcy is the ONLY thing they got right! But don't take my word for it, just look at the major market indices.

When you hear pundits and other shills claim that Lehman caused this or started all 'this', know that the person uttering the claim has absolutely no clue what caused it. I cannot stress this enough nor say it loudly enough;

" LEHMAN IS THE ONLY THING THEY HAVE DONE RIGHT ! "

But hey, don't take my word or the the markets word for that matter, just look at the wreckage left in their, (politicians, Fed and Treasury's), wake.

Lets start with Bank America.

You have a troubled lender like Bank America, an outfit that given the extent of downturn in the economy would have trouble getting through it on its own. You then merge this with a disease plagued outfit called Countrywide, a toxic ridden cess pool of fraud and malfeasance. Now if that was not enough to kill the healthy host, Bank America, you pile on another disease ridden basket case, Merrill Lynch and you end up with a formerly healthy bank in the intensive care unit, tubes down its throat, medicated up the wazzoo.

Countrywide + Merrill Lynch + Bank America = Death/Zombification


Now lets move on to Wells Fargo.

You start with a mushroom cloud in the making that was Golden West Financial, combine that with, lets just call it a bunch of empty suits and be done with it at Wachovia and then mash it all together on top of an already ailing lender, Warren Buffett endorsed or not Wells Fargo and.... hey wait a minute haven't I just seen this formula before somewhere.


Golden West + Wachovia + Wells Fargo = Death/Zombification

At least Dr. Frankenstein had the humility to only create one monster.

In the Washington Post yesterday, President Obama warned in an op-ed piece that; "This recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse," Obama wrote in the newspaper piece.

I think he omitted an important item while using the bully pulpit. He forgot to mention martial law is coming to a town near you or maybe he saved that for his next piece.

I want to state that while I have been writing this blog, I have written some extremely bearish forecasts, extremely negative outlooks, to the point where some could say I was all doom and gloom. But.... never, never, never, ever did I state that our circumstance was irreversible.
I have stated early and often that... EVERY ACTION THE GOVERNMENT TAKES WORSENS OUR SITUATION.

I am shocked our President has such little faith in the fabric and the backbone of this great country. Mr. President, this country will MOST CERTAINLY recover if only just left alone, it is the purported help that is distorted and disrupting everything. Stop trying to help the economy ! PLEASE STOP THE MEDDLING AND MANIPULATION NOW !



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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $89.80
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $66.15
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $47.18
Long 1 unit US Gasoline fund ticker UGA $21.85 stop @ $19.58
Short 2 units Darden ticker DRI @ $27.15 stop @ $28.70
Short 1 unit Wells Fargo ticker WFC @ $20.20 stop @ $20.20
Short 1 unit JP Morgan ticker JPM @ $27.35 stop @ $27.35

Thursday, February 5, 2009

Careful It's Contagious

There is a very dangerous flu out there that is sweeping across governments and bureaucracies the world over. You will not hear about it from the CDC as it is not on their radar yet. Needless I want everyone to take precaution to avoid being infected. You must be very careful out there as the virus is extremely contagious. It is called the We've Got to Do Something Flu".

The symptoms start out as simple tinkering and meddling for political and personal gain and mutate into full blown manipulation in an effort to preserve political and personal survival. Now this is always done with others money, in this case the taxpayer.

Did you happen to catch the CNBC interview with Michigan governor Jennifer Granholm today?

I thought she started off well and looked fine but then out of the blue she cried out "we've got to do something!" You must take precaution for as I have said earlier this virus is extremely contagious and can rear its head at any moment. Note that as things deteriorate further economically the virus becomes stronger and potentially lethal.

Gov. Granhom has fiddled while Rome (re: Michigan) has been burning for years and now is exhibiting symptoms that Philippine President Arroyo, OECD big shot Angel Gurria do, and countless others who attended the Davos sumit have.

Please know that this virus is not limited to politicians, as it can and has infected such notable 'former' free market capitalists as Steve Forbes of the magazine Forbes, John Bogle of Vanguard, Bill Gross of Pimco, to just name a few.

Do not fall victim to this virus no matter how impassioned the plea as it is fatal to our economic well being (bond market, currency) and is WITHOUT QUESTION much worse than our current state of health.

Housekeeping notes;

I want to lower my stop on JPM down to $27.35

I want to lower my stop on WFC down to $20.20

I was stopped out of my long UCO position at $9.35 for a loss of about $1.25 pts on 1 unit.

I was stopped out of my long MS position at $23.85 for a loss of about 2.5 pts 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:
Long 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $89.80
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $66.15
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $47.18
Long 1 unit US Gasoline fund ticker UGA $21.85 stop @ $19.58
Short 2 units Darden ticker DRI @ $27.15 stop @ $28.70
Short 1 unit Wells Fargo ticker WFC @ $20.20 stop @ $20.20
Short 1 unit JP Morgan ticker JPM @ $27.35 stop @ $27.35

Play Nice Now

I have mentioned previously that when the psychology turns things can get nasty and people stop playing nice. Today we are treated to yet another example of the cannibals turning on one another with Mark Haines going after Arianna Huffington calling her "clueless", most probably defending his co-worker Erin Burnett from Huffington's previous criticisms.

There is a phrase that is widely quoted by many athletic, business and military leaders which is "adversity builds character". I completely and unequivocally disagree as the more proper statement is "adversity never builds character it reveals it". We are witnessing character being revealed across a very broad swathe of our society. Govern yourself accordingly.

Signs of discontent in the Palace as Volcker and Summers seem to be at odds. Readers know my affinity for Paul Volcker and his ability as a central banker. I have no clue as to why he supported, fed yes man Geithner, but that is a story for an investigative journalist like Charlie Gasparino. Just as why it seems only Goldman Sachs alumni are the only ones qualified to run anything.

I can assure you that for a trained investigative journalist, with the stomach, resources and smarts, a thorough autopsy of Goldman would result in a blockbuster, generational best selling book.

There seems to be some concern as to the level of reserves for loan losses over at GE compared to its peers. Could GE not be everyone has believed it to be. In my opinion Jack Welch, may want to lay low for a while as we may just find out that the management world's diety, their emperor of emperors really wasn't wearing any clothes.

Recently I posited the following in a post;

"To those who continue to remain adamant that this is THE bottom and this is capitulation. I urge you do ask your friends, family, co-workers, neighbours whether they have sold out their stocks. Ask 20 people and my guess is less than 4-5 have done so. We will bottom when the vast majority, say 14-17 have done so."

A reader took time to drop me regarding that statement;

I think your comment (above) is absolutely correct. I am in my late 40's and the baby boomers I know (both friends and family) are sitting tight and hoping. Even my 73 year old dad is holding on. It is a repeat of the tech bubble. I only know of 3 people (in a circle of ~20 of friends, family, co-workers) who have sold including myself.

Shelley

Thanks for the note Shelley. Many would argue that she and I are by no means representative of the entire populace but I would counter that many out there will find similar results if they fish around.

This is the type of research that the high paid mavens on CNBC have no interest in nor clue about. It is the type of intel that, while not foolproof for nothing ever is, carries more weight than the overpaid shills, with their mantra of 'cash on the sidelines' for Wall St. ever could wish to.


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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $89.80
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $66.15
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $47.18
Long 1 unit Ultra Crude ticker UCO @ $10.60 stop @ $9.38
Long 1 unit US Gasoline fund ticker UGA $21.85 stop @ $19.58
Short 2 units Darden ticker DRI @ $27.15 stop @ $28.70
Short 1 unit Wells Fargo ticker WFC @ $20.20 stop @ $22.43
Short 1 unit JP Morgan ticker JPM @ $27.35 stop @ $29.54
Short 2 units Morgan Stanley ticker MS @ $21.30 stop @ $23.82

Wednesday, February 4, 2009

Crisis of Confidence


Karl Denninger of the blog Market Ticker had a great post/plea today entitled;

To Obama: Confidence Levels Critical.

He also included an attachment, of a mea culpa by a mortgage industry 'insider' that will truly turn your stomach. Please, please take the time to read it. I urge you to pass it on to friends and family as well, hell even your elected reprsentative and senators.

I have re-printed the later half of Karl's post below while the full content can be viewed clicking the link above.


Our government has utterly refused to address these issues at their root. The truth is that those banks and other institutions that were involved in this trash-passing have no meaningful way to survive. Government cannot guarantee several trillion in bad assets - it just can't. What's worse is that the "pumped" value of homes that was created as a consequence of this fraud is in fact false value. We are discovering this as home prices contract. This contraction in turn exposes the fact that those "assets" are not worth what is claimed and in many cases are worth nothing - whether "AAA" rated or not.

If government attempts to "guarantee" these "assets" it will in fact guarantee that monstrous, unacceptable, and possibly un-fundable losses will be taken by the taxpayer.

Instead of encouraging and even forcing that contraction, which will clear the market, our government is hellbent and determined instead to hide the fraud that occurred, along with its consequence. As a result we have turned what was a nasty housing correction into a near-certain economic Depression.

Worse, as our government has refused to call out those institutions that are responsible for this mess and close them down our citizens have lost faith in the banking system. Slowly at first, but now at an accelerating rate.

President Obama, passing "stimulus" bills that spend millions of dollars on birth control and analog TV converter boxes will not fix our economy. Nor will it shore up confidence in our financial markets.

No, in order to do that we must arrest the fraudsters, close the banks and other institutions that were complicit, transfer off the good assets to other, non-involved firms and take the bad assets (in receivership, costing the government nothing) onto the FDIC's balance sheet. From there we can recover that which is recoverable via an RTC-like process - although for fraudulently-procured and processed loans, recovery is likely to be small.

What we cannot and must not do is continue to lie to the American people. We have heard lies for more than two years Mr. President, going back to the winter of 2007 when the first Asian market selloff triggered this crisis. We have been repeatedly told that "the economy is fundamentally strong" and that "subprime is contained." We have been told by Sheila Bair that "our banks are strong" when the market says otherwise. And we have been told not to worry, while we see our neighbors lose their jobs and be foreclosed upon.

Mr. President, you can no longer snow the American People nor can you allow others in the government to do so. They've figured it out - that this was one gigantic layered Ponzi Scheme, and frankly, they don't trust their government any more. They don't trust the FDIC. They don't trust Ben Bernanke and The Fed. They don't trust a Treasury Secretary that you appointed and pushed through confirmation despite the fact that he cheated on his taxes.

I know you're out of touch Mr. President, as most politicians are, but here in the real America where people go to work for a living every day firearm and ammunition sales are off the charts, as are concealed carry permit applications. People are afraid. They're afraid that the government no longer exists to protect individual rights and prosecute wrong-doers, but instead now exists to steal hundreds of billions of dollars from them and their children and give it to a group of greedy banksters who willingly looked the other way while the nation was looted so they could pay their bonuses.

They have seen Bernanke take actions that have never before occurred, that are arguably beyond his lawful authority in The Federal Reserve Act, and which can (and have) exposed taxpayers to loss - hundreds of billions of dollars of loss - without Congressional approval or debate.

They've seen your first acts, which were not to address the greater fraud, but to pander to labor unions. It's all fine and well to repay a constituency that help elect you, but what good will having a bunch of signs taken down in union shops do when all those businesses close and the union workers wind up unemployed?

Bluntly, America doesn't trust Washington DC and they're not sure they trust you.

We need a leader Mr. President - someone who will discharge the Office Of The President in The Executive Branch. We need a tough CEO for this nation. If you're that man - the man we elected - then now is the time for you to stand up and prove it.

The American People have great hope, and great promise. We believe in our nation and we believe in ourselves. We can do great things - we put men on the moon, we mechanized automobile production, we invented powered flight, we developed the personal computer and we built The Internet. Unlike Al Gore, I really was a part of making the latter "real". I know what America can do, because I've seen it with my eyes and felt it with my fingers.

But we must have the rule of law Mr. President.

We must have wrongdoers punished, not rewarded.

We must both tell and hear the truth.

Government must stop trying to prevent asset prices from contracting to sustainable levels. The house prices of 2005 were driven by fraud; that "value" never really existed. Pretending that it did or does won't make it come back, but you can bankrupt America - literally - by continuing down that path.

Government must stop mollycoddling malfeasors and their enablers. Businesses who engaged in profoundly-unsafe or even crooked practices must be closed. This is a capitalist society - if we close one bank, another will rise to take its place. In addition, there are plenty of banks who did nothing wrong during these years, and they should be able to profit from the good loans and deposits that the bad actors are forced to disgorge. We have, over the last 20 years, refused to yank the licenses of malfeasing corporations; it is manifestly unjust that out of all the fraud from the 1990s to today only one firm, Arthur Anderson, paid such a price.

Those in Congress and other regulatory agencies, such as the SEC, who willfully looked the other way (or worse) must be ejected from public office, prosecuted when criminal wrongdoing can be shown, and safeguards put in place with full transparency to the public so as to insure that this never happens again.

The Fed must be prevented from attempting to make fiscal policy and guarantee asset prices. Monetary policy doesn't extend there, and Bernanke and his band of Merry Men have literally stolen that authority from The Executive and Congress. The Federal Government must take that authority back by whatever means are necessary, up to and including repeal of The Federal Reserve Act of 1913.

Treasury, if reports in the press are accurate, continues to insist that "bad assets" are worth more than the "market price" if held to maturity. You are being lied to by your own people in Treasury Mr. President; your Treasury Secretary, Mr. Geithner, was in part personallyand further, he was part of the "team" that ignored the risks of these institutions' 30:1 and greater leverage - one of the root causes of this mess. The market is never wrong on today's value, and it's the best guess we will ever have on tomorrow's. responsible for the "operations" performed on both Lehman Brothers and Bear Stearns The Dutch government just got scammed by ING on a similar deal to what your "bad bank" discussions would yield. Don't fall for it; the American People will not sit for being robbed again by the banksters, and Geithner is one of them. Read up above about the fraud in these products along with S&Ps recent ratings actions on similar assets and then tell us - how can you possibly believe these loans will perform?

Should confidence in our financial markets be lost in their entirety the consequences would be cataclysmic, and yet that confidence, today, is hanging by a thread. I see people on my forum and in my daily life talking about keeping in "The Bank of Sealey" daily - a clear reference to a refusal to trust the government, the FDIC and the financial system at its most-basic level. Precisely where the line is in the American psyche that leads to a feedback loop in our public consciousness culminating in the people refusing to trust any financial institution in any form is unknown, but that this line can be crossed is a certainty. My grandparents grew up during The Depression and to the day of their death they did not trust banks, they refused to invest in what they perceived as an intentionally-crooked marketplace and they did not believe a word that came out of government mouthpieces.

Our government must put a stop to this corrosive atmosphere, and it can only happen via true leadership, a new direction, a commitment to the truth under all circumstances and a demand that the law be enforced against all who have broken it.

You were elected to bring that our republic.

Now is the time.


Thanks for the post Karl.


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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $89.80
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $66.15
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $47.18
Long 1 unit Ultra Crude ticker UCO @ $10.60 stop @ $9.38
Long 1 unit US Gasoline fund ticker UGA $21.85 stop @ $19.58
Short 2 units Darden ticker DRI @ $27.15 stop @ $28.70
Short 1 unit Wells Fargo ticker WFC @ $20.20 stop @ $22.43
Short 1 unit JP Morgan ticker JPM @ $27.35 stop @ $29.54
Short 2 units Morgan Stanley ticker MS @ $21.30 stop @ $23.82



Adding More SRS

I am adding a 2nd unit long to my ultrashort real estate ticker SRS here at $56.15

Housekeeping notes;

I was stopped out of my FPL short position this morning at $53.53 for a loss of just about $2 pts.

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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $89.80
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $66.15
Long 2 units Ultrashort Real Estate ticker SRS @ $53.80 stop @ $47.18
Long 1 unit Ultra Crude ticker UCO @ $10.60 stop @ $9.38
Long 1 unit US Gasoline fund ticker UGA $21.85 stop @ $19.58
Short 2 units Darden ticker DRI @ $27.15 stop @ $28.70
Short 1 unit Wells Fargo ticker WFC @ $20.20 stop @ $22.43
Short 1 unit JP Morgan ticker JPM @ $27.35 stop @ $29.54
Short 2 units Morgan Stanley ticker MS @ $21.30 stop @ $23.82

Seppuku

I have never been a fan of Tom Daschle the former Senator from South Dakota, influential health care lobbyist and Obama nominee for Heath and Human Services Secretary. I am not here to trash the man for his past, he is a lifelong politician which should explain everything to anyone with a room temperature IQ.

I am most pleasantly shocked by his decision to stand down. Inherently we know, again anyone with a room temp IQ, that this is the right thing to do. Not only morally but figuratively for the country. No one trusts jack anymore.

Are you shocked when the county commissioner embezzles 50K, maybe only at the fact that it wasn't 5 million, or as to quote my old accounting professor, "if you're gonna do it(embezzle) make it worth your while!"

Are you shocked when the politician has 100k in cash in the freezer and has no idea where it came from.

Are you shocked when .... hey you get the picture. I could write book after book after book on the subject till you are numb to it. As many already are and we haven't begun to include the vast populace on the Prozac, or the Ritalin but again I digress.

Back to Daschle. I am going to operate under the assumption that he selflessly did the "right thing for the 'good of the country'. I know this is hard for many to believe given politicians track record, but I am so prepared this morning to offer him 3 cheers for his patriotism. We need so much more of this that a new bull market in sword manufacturers should develop ! Now if only golden boy Geithner would take a hint and do the same.

Back to the markets we got news yesterday the the Bank of Japan announced its intention to buy banking shares to support the banks. Laughable if not so stupid. I have a suggestion to the BOJ and that is to burn the paper Yen as at least you would get the heat generated by the fire as opposed to the purchase plan as absolutely nothing will be gained.

Harley Davidson is borrowing $300 million from the Oracle along with another $300 million private equity fund who already is in and is averaging down. Harley is getting the money at a rate that would make even Rocco and Bruno blush.....15%. Yup, its just a temporary liquidity problem with absolutely nothing to do with solvency. Those damn bloggers should be locked up for fanning fear and spreading lies.

Ryder earnings estimates going forward are 1/2 the current analysts estimates which should give you a good idea of just how tuned in the analysts are to the economy. Just keep this little tidbit in mind the next time a high profile shill comes on the pom pom network crowing about how the market looks dirt cheap on a P/E basis or tells you the economy will turn in the 2nd half of this year.

Did you catch the auto sales numbers out yesterday. I guess the state of the economy and whether or not you have a job is a little more salient decision input in buying a vehicle, as opposed to Larry Kudlow's argument that crude and gas prices dropping representing a stimulative tax cut.

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 2 units Ultrashort MSCI EAFE ticker EFU @ $89.80 stop at $89.80
Long 2 units Ultrashort S&P500 ticker SDS @ $69.80 stop @ $66.15
Long 1 unit Ultrashort Real Estate ticker SRS @ $51.30 stop @ $47.18
Long 1 unit Ultra Crude ticker UCO @ $10.60 stop @ $9.38
Long 1 unit US Gasoline fund ticker UGA $21.85 stop @ $19.58
Short 2 units Darden ticker DRI @ $27.15 stop @ $28.70
Short 1 unit Wells Fargo ticker WFC @ $20.20 stop @ $22.43
Short 1 unit JP Morgan ticker JPM @ $27.35 stop @ $29.54
Short 2 units Morgan Stanley ticker MS @ $21.30 stop @ $23.82
Short 1 unit of FPL Group ticker FPL @ $51.60 stop @ $ 53.51