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Financial news I consider important, with my opinion, which is worth as much as you paid for it.
Please click HERE to read a synopsis of my view of the financial situation.

Saturday, February 28, 2009

Saturday Video Post

I have two items for Saturday. One is an interesting article on the currency Krone.

For your viewing pleasure, I have two videos. One from Jim Rogers youtube channel, from Marc Faber youtube channel. and finally video from Peter Schiff youtube channel.

Peter Schiff Video on Obama proposals (EXCELLENT)

Friday, February 27, 2009

Rally Failure Thursday

The market opened up strong, only to end yet once again at the November lows for the S&P.
I won't even bother with the graph, its just too depressing. See previous graph, close enough.

What broke the extremely short rally? Some news, take your pick from the list below. One bullish thing from my perspective is I'm surprised the market didn't free fall on some of the news.

Goldman Sachs Cuts 2009 S&P 500 Forecast, Sees ‘Near Term’ Drop - My Spin - This should guarantee a rally. When does Goldman predict accurately a huge downturn?
Moody's predicts default rate will exceed peaks hit in Great Depression - My Spin - Really? This is news? I thought this was a basic assumption by now.
S&P downgrades life insurers on 'stressed assets', including Conseco, Genworth Financial, Hartford Financial, - My Spin - As per usual for Insurance Industry, NO COMMENT
Fannie to Draw $15.2 Billion From Treasury After announcing 59 BILLION dollar loss - My Spin - Freddie/Fannie will be a continual infinite drain on the US government. Wake me up when the totals exceed 2 trillion.
Spin on Obama budget being 1.75 Trillion as estimated (can be sure to be more) is starting to get bad press - My Spin - Where was the bad press the last 7 years on deficit spending at historic levels?
Obama plans mortgage-deduction cut - My Spin - This will hurt the NYC metro area, as well as CA, where houses are normally between 400k and 1M. These houses will have significant interest rates.
Weekly unemployment rates hit 667,000 - My Spin - Wake me up when it hits 1 million.
Durable goods drop for 6th consecutive month

And Drum roll for the two big winners today
US Government may backstop (cover) AIG Credit Default Swap exposure - My Spin - NOTE: Not commenting on AIG specifically, in GENERAL: You got to be kidding me. CDS is NOT regulated by the US or any government in any meaningful way. If the government is going to cover CDS losses directly, it better step up to the plate and regulate the CDS market ASAP. CDS world wide exposure is somewhere about 62 trillion dollars. AND this is a guess since its not regulated!
FDIC report released today , - My short take - Basically states that loan losses continued to weigh on earnings, troubled loans rising trend continued in Q4, The FDIC's Deposit Insurance Fund reserve ratio fell.

Marc Faber comments on US Equities, and general advice to buy resources.
Entertaining reading on Marc Faber quip of how spending in the US packs a punch ONLY if spent "on prostitutes and beer".

Thursday, February 26, 2009

Yawn...another day

I'm not going to bother with another spin of "near doom", blah blah blah. The market is still in the range of disaster, but higher than the recent lows.

It is and will remain a wait and see until the market gets some significant distance from the recent lows, or we penetrate with conviction across indices. If we do break down past the recent lows, probably at that point people will throw in the towel.

In the news:
Citi, U.S. Government Closer to Deal: Report - My Spin - Whats the delay? The government should mandate to take cash it gets 51% control of the company until it can clear its own valuation issues.
HomeBuilder Choice Homes to shutter operations - My Spin - Need about 50 more of these to help curb available homes, and slow down the real estate bust.
Bernanke Says There May Be Benefit to Uptick Rule - My Spin - You change the rules of the game, the players will punish you.......with a collapse How quickly they forget the result of short ban for financials.
Jefferson County, Alabama unable to make $636 million sewer debt payment due Friday - My Spin - Just a hick county that can't pay its obligations. My concern is the tital wave that follows them.

And for your viewing pleasure, Great information/viewpoint from Jim Rogers. Good view on Oil (hence USL), farming (hence RJA), central bank interference, and Russia. There is implied slant on investing in assets, and therefore "gold" also.

Tuesday, February 24, 2009

Obama Address to Congress

I just finished watching President Obama lay out his agenda for the years to come, to address not only the short term needs, but also long term for America. It was the best Presidential speech I have seen as an adult. Only Reagan may have been a president who could inspire confidence like Obama. Clinton was excellent, however Reagan and Obama both walked into office with a nation under financial turmoil.

I'm almost sold that Obama will pull improve America's prospects for a 10 year recession, and put America on a better path. Only time will tell if the talk will be followed up with the required action.

With that said, for trading, none of this matters. What matters is the reaction of the markets tomorrow and the months to come. My disposition is FINALLY we will get an Obama rally as the world has now heard Obama willing to take the reigns of this run-away train.

But, we will have to see how the next few days end in the market. The Market Ticker blog has stated the futures have decided Obama has failed to provide enough details to turn around the market selling, see his blog here.

Today I dumped more gold miners, and bought more "higher risk" long positions. Many I dumped only last week, mostly at higher prices. I did double up on FAS, a pretty stupid high risk play in an attempt to regain some losses in that play. Bought more UWM, UNG, USL, QLD, OIH. Shorted DXD and Dominio's pizza. Still more than 1/3 cash.

So we will see how the markets react. Gold miners (GDX) I am *hoping* pull back to 30 to 27 dollar range. If so, I'll reload for the long haul. Since no matter what Obama says or plans, one thing is for certain. The currencies of the world is about to "double up" on debt, and put governments, including the US into higher risk. That should eventually result in higher gold prices, and higher profits for gold miners. And I'm guessing any rally that does start (if it starts) will last month(s), before our final depth plunge into new lows.

I will update and add video here when available.

Political commentary Please skip if not interested in my two cents.
We will hear from Republicans how irresponsible it is to deficit spend. In the last 6 years of "economic growth" the government under Republican leadership spent more than a generation. So although, in principle, I 100% agree with the criticism, I am a little put off by the double standard for a Republican administration under prosperity vs America under financial woes. (caused by numerous corrupt acts in the last 8 years). But I admit, the deficit spending will yield a negative backlash, and I'm still looking at Gold Miners for that safe haven.

Obama to talk Tuesday at 9pm

On Tuesday the stock market may get a "Time out" as it waits for Obama to talk to congress Tuesday at 9pm. This doesn't change the situation, but should delay the doom-and-gloom of the market decline for a day. What remains to be seen is if Obama can convince the nation there is a sunny side, and a reason for the market to rise.

The current theory is Obama may announce an ADDITIONAL spending bill of 400 Billion, ontop of the 800 billion already passed, and ontop of the trillions spent already to shore up the financial system.

And a entertaining----and TRUE---cartoon trying to quantify the money involved in the bailout bill.....
(Thanks to Lomba for sending)

Confidence Breakdown

I talk to a friend of mine, Happy John, who is optimistic we are close to a bottom. I am starting to believe we are witnessing the collapse I had feared for the last 3 years would come to pass. But I still have hope!

The stock market is extremely oversold, and is looking for any reason to rally. Anytime there is optimism with a minor intra-day market rally yet another bad headline comes across the wire.

Today the market started SOME move upward around 2-2:30pm, then AIG announced it lost 60 BILLION dollars in the last 3 months. Yes, you read that right. 3 months. AIG is under government oversight, and was able to achieve such staggering losses. To give some sort of magnitude how much this is. If you where to spend $100,000 dollars a day, it would take 1,643 years to achieve 60 billion.

Basically, all market indicators, not just the DJIA are on the edge of all out failure. Even though I believe there still may be a rally, I am more convinced we are prime for a failure. In any event, I will stay in cash, I can't bear to bet more than I already am. I still have hope, but there is very little left.

Lets look at where we landed today. Unfortunately, there is NO SUPPORT left. we are in new territory.
DJIA & S&P 500 support levels have been broken. According to most chartists, we are now positioned for a collapse.
From WebSurfinMurf's Financial Blog

Look over last 15-19 years

From WebSurfinMurf's Financial Blog

Marc Faber, Author of "Gloom, Doom, and Boom", and he is actually thinking we may have a new bull in near term:

Other news today.
Citigroup's Parsons spotted at White House (speculation of CitiBank Government intervention)
Switzerland Could Go Broke
AmEx Offers Some Holders $300 to close account
Janus Downgraded to 'BB+/B' (Janus has many mutual funds it runs.....)

Monday, February 23, 2009

Monday Failure?

I blogged that around options expiration games would be played, and the market move would happen Friday/Monday time period. Well, we got our Friday move, a decent move down, breaking "decisively" from DJIA to the down side. From S &P 500 however, that index did not break "decisively" down. With basically means going into Monday the direction is still up for grabs.

On Friday, I got rid of some of my riskier positions, some probably at the near term low "locking in" my losses. I also sold some of my winners, such as a little of GDX and a little of some baby miners.

I am now about 50% into cash, something I'm not normally in. There are so many extreme scenarios on the table, I can't take the risk in any direction.

Some thoughts of what is possible.
1) Monday we open UP 100+ points. This jump starts a reversal and we will experience a multi-week up move, not in a straight line, but generally up.
2) Monday has "issues", looks like its game over. The government steps in yet again with another announcement the result is:
a) go to step 1
b) 1929 style crash, its time to cash in your chips.
3) Move volatility, indecision, and day by day bleed of the market being bi-polar into the week.

If the market gets ANY strength, to the up side, it is quite possible GOLD and gold miners will be losers. Gold to me is three different "plays".
1) gold as a resource and as it gets used its scarce, used in jewelry, etc.
2) Gold as a fear play, people "dump" into gold when they have no clue where else to put their money.
3) Gold as an inflation/storage of wealth play. It's not fear but speculation, a hedge, or other financial type use.

Right now, I can't imagine #1, being used for normal business use is driving gold up. After all, people are not spending like they used to. So I am dismissing #1 as a factor in the next 1 to 5 years.
If the market gains some strength, it is quite possible demand for gold as an investment for #2/3 are reduced.

Bottom line? I'm going to sit in cash, keep some positions and wait. Market goes up, market collapses, I'll bide my time for when to jump in more. If you want to track some of my riskier trades, sign up for my Twitter account (see link on right).

From WebSurfinMurf's Financial Blog

Below is a mildly entertaining critique of Keith Oberman who "bashed" CNBC Rick Santelli.

Sunday, February 22, 2009

Weekend News Roundup

RBS and Lloyds close in on £500bn Treasury deal - Spin - any company that needs 500 Bn in handouts should be regarded with suspicion.....
RBS to sell off fifth of business - Spin - and they STILL need 100's of billions in socialized money
HSBC trying to raise $20 Billion Cash ahead of earnings - Spin - No comment
China eyes record $139 bln deficit in '09 - Spin - If the USA is a debt nation, and the Chinese are one of our main financial buyers of our debt, and THEY are running a debt.....how does this all work? Notice its billions, not trillions! And they have 1.4 billion people to USA 300 million. its peanuts.
Dubai to take up $10bn United Arab Emirates Loan - Spin - just MAYBE Dubai over-shot with development..just maybe...
Taxpayers Could Own Up to 40% of Citi's Common Stock, Diluting Value of Shares - Spin - Who needed this deal, the taxpayer or Citi? And why not get 51%? If not 100%?
Fannie Mae Rescue Hindered as Asians Seek Guarantee - Spin - Why doesn't the government just get it over with and guarantee ALL DEBT! After all, everyone deserves help!
Latvia's government collapses amid economic crisis - Spin - One of my 2009 predictions came true..and its only February!
George Soro's sees no bottom - Spin - Of course there's a bottom! Have some imagination George...say Dow 0? Military Rule in US?
Credit crunch may only have just begun, S&P warns - Spin - #$%#@$%#holes! Where where you back in 2005-6 when the writing was on the wall. Any moron can jump on the doom and gloom bandwagon now! And it was your JOB TO RESEARCH into financial risk assesment, and you FAILED. No time to get honest now, stick with AAA ratings on junk debt. This is blatant CYA for the wave of lawsuits that will put this company out of business.
Ireland continues to have financial issues - Spin - If it wasn't a member of European Union, Ireland would be toast

Saturday, February 21, 2009

ZeitGeist, the movie

A third movie in the ZeitGeist series is being released soon (link). The information in general is truthful and informational. But it is set to ominous tones and doom vibe. It does make it more entertaining, otherwise even I think I would go to sleep watching this movie! But like anything, truth can be spun together to paint the picture it wants. If you have two hours to kill, watch it.

One thing to learn from this, is money is DEBT, its not a real asset. Also how our economy is based upon FRACTIONAL reserve system. This is not an "absolute" and "only" system that the universe must be based upon, its just the current methodology. Only true assets are Gold/Oil/Land/Food, and only in physical form. Buying GLD, GDX, USL, RJA or other financial instruments are representations of such.

So, if you watch, try to strip away from the drama, and listen to the analysis, it does point to out how the system does have some basic issues. Click the icon in bottom right corner to go full screen. Thanks to Aldo for the video. In "honor" of Swan, notice that this movie spin applies to Republicans and Democrats. :)

What I find REAL annoying is implication of a global conspiracy. That is just ridiculous. Any "global conspiracy" can be explained (and IS) caused by common actions among a large group of people. People serve themselves, not others, and that's a common theme in mankind.

Information (spin) at 50 minutes in the film is extremely compelling. At 52 minutes, even I was lost and refuse to follow the spin!

NOTE: The movie in its spin is a bit over-the-top, try to ignore the spin, and end at 52 minutes :) and at past 1:13, i am 100% against the leap they paint, don't associate it with me! It goes commie beyond 1:13 :)

At 1:24:30 is a BASIC principle of automation that is occurring. My own goal is to remain relevant to remain employable as this transition occurs.

The movie sets the foundation by quoting "Modern Money Mechanics", a publication by the US Fed of Chicago, that is out of print. You can read more from this government document by clicking on the link above.

Friday, February 20, 2009

Countdown to all out market crash

The stock market has now made new lows, lower than the previous lows in November of 7,552.
Stock market is prime for all out crash. If Obama administration is going to throw a hail mary, it better get cracking in the next 12 hours. However, the DOW has closed above 7,400, at 7,465.95. My earlier post stated on a closing basis I need to see the DOW close below 7,400 for me to flip into panic mode. If new to this blog, please read this post for the last 3 days view.

I have stops in, to protect some of my portfolio from a collapse. We are talking a lifetime changing event is now on the table, ready to start. Everything points to a crash now, time will tell if it will just follow through.

What needs to be done?
Obama needs to get righteous and have a heavy hand against corruption to restore faith in the system. Also all assets that cannot be priced, need to be priced. Need to eliminate immediately any reservations on valuations of assets. Pouring money into a system that is perceived (right or wrongly) as corrupt will not restore confidence. Anything short of the appearance of the government about to "fix" the businesses involved in questionable accounting and business practices will result in one thing: Collapse of US economy.

General News
CitiBank, JPMorgan, Bank of America, Wells Fargo, credit spreads widen significantly
Wholesale inflation takes biggest jump in 6 months
Worst Job Losses in 50 Years Ahead: Fed Economist
US authorities 'had been investigating Allen Stanford for 15 years' (Yet another Ponzi scheme)

Insurance Company News
Fitch Downgrades Prudential Financial Ratings; Outlook Negative
Nationwide Mutual CEO Jurgensen leaves company

Video from Karl on what "illiquid assets" are, and the basic main issue facing the market today

Thursday, February 19, 2009

Moment of Truth....day 2?

Tuesday DOW ended at 7,552. Wednesday Dow ended at 7,555.

There isn't anything new to print to add to yesterday's post.
I can still tell you this, I think we will see a significant move between now and Monday, lets see which way we end up. I have a feeling once we start moving, I'll have plenty to print about.

Today I tightened my stop-losses (mostly ADDED them) on most of my risky positions. If we fall apart, and I'm at work, I just can't take the chance I return from a meeting to find Satan sent me an email stating I have a margin call.

GDX/Gold miners are a win, not matter what happens, in next year. I'm looking to add to miners once gold pulls back to 900 an ounce. Probably gold hits old high first ($1,014) before a pullback.

Below is an hour long video on the current economic problems.

Wednesday, February 18, 2009

Moment of Truth is here.....AGAIN

I have been ranting for months about how critical DOW 7.552 is. And today once again, the market closed EXACTLY on this level. What this means is, the market is as close as can be to start a freefall down 25-50% in short order. DOW 4,000 is quite possible.

I'll hold my panic off until DOW crosses below 7,400 on a closing basis. At that time, you must get protective of any longs you have losing, as they can lose much much more. Gold is unstoppable, and aiming for the sky. GDX is in full rally mode.

All of this can change on a DIME, with significant news from the White house. But the White House cannot wait for DOW 6,900 to try to reverse, it needs to do so in short order.
My belief is, if we don't reverse by Monday of next week.....we won't. The cascade failure is here. I of course, reserve the right to change opinion with additional news. :)

OK, to some charts, first, lets look at the recent 6 month trading chart, see below. Notice how the market closed EXACTLY on DOW 7,552? Really unbelievable, if not plain manipulated.
From WebSurfinMurf's Financial Blog

I have posted this picture before, but look whats very possible the next level of support.
From WebSurfinMurf's Financial Blog

The one savings grace here is Saturday is options expiration. Miracles do happen around this Saturday, at any time. As Karl of Market ticker says Unicorns do exist that crap skittles. (well they don't, but they want them to)

If your in cash, great, don't touch this at all. If your doom/gloom, buy some GDX even at 37, its a pit stop to 100. If your an optimist, buying a little of index funds for a rebound is not a bad play. But there is only one safe play......just don't play keep in CASH.

I could puke each day now, knowing how close to outright disaster the world sits right now. This is more nerve wracking than watching Dawn of the Dead the first time.

The news that will start to affect the markets tomorrow is "Bank nationalization gains ground with Republicans" My god. our first step towards communism is here. If this event happens, it will become one of my Financial Ground Zero moments. (click).

Tuesday, February 17, 2009

Value of Gold, in USD

As my avid readers have noted, I have been obsessing over GDX when to buy and hold. One thing I find interesting about my own torn commitment is I truly believe GDX will hit 100 if not 200 a share in the next few years. Friday's price is about $35. So selling at any price is pretty much the wrong play.

But what I want to do, is to buy into gold miners to the point of I'm comfortable holding for the long ride up. And what I may be foolishly trying to do is get in at a near term bottom. Even with my belief GDX will go much higher, it would be hard to go 90% into miners then endure a GDX correction from 35 to 25 or lower before regaining value.

In any event, I wanted to share with you one perspective on gold. If you pull up a chart, it will show that gold hit a "high" of $850 an ounce in 1980, and more recently a high of over $1K an ounce in summer of 08. To most, this looks "topish", like gold has hit its old high, so how much higher can it go?

Well, one concept I explained is a previous post is there is NO such thing as absolute wealth. All wealth (assets) are relative to each other. Therefore, it must be asked, what are we using to "judge" gold to be worth $850 an ounce in 1980?

Answer: 1980 dollars, NOT 2009 dollars. To understand how much gold was worth back in 1980, you need to take 2009 dollars and adjust for inflation back to 1980.

So how much was gold worth back in 1980 in 2009 dollars? About $2,320.00 dollars, using Government US inflation statistics for US Retail Price inflation between 1914-2008.
Therefore, in current US Dollars, gold has not even come close to reaching "new highs" in absolute gold valuation. In these fearful times, to me it isn't unreasonable to expect gold to approach, if not pass it's old highs.

Some skeptics reading this may say "US government inflation numbers are not to be trusted". I agree. US Government inflation has been sub-categorized to core inflation, and other sub-inflation categories. Politics has influenced how inflation is calculated. A web site called "shadowstats.com" has it's own metric to record inflation. Using shadowstats.com US Retail Price inflation 19702-2008 metrics, the number of 2009 dollars to buy 1 ounce of gold in 1980 is $7050.00.

There are numerous tools on the web for calculating inflation, click here for the one I used.

In any event, this clearly shows gold has a much higher potential before reaching significant resistance to price acceleration. About $2,000 an ounce is when to start considering getting protective.

And hence why my own nervousness to commit to GDX at $36 is pretty much foolhearty. I will keep my GDX position, and attempt to hold stead fast, and slowly just add no matter where the price goes to. In addition the small gold miners I have I will remain rock solid and not sell.

Monday, February 16, 2009

Gold Note

I am nervous on Gold and Gold miners in next days, weeks, perhaps months.
I am not adding to gold, may lighten up.

If gold falls to 800 an ounce and/or GDX hits 25-30 range, I will start to buy in.
I am looking to dump 1/2 my GDX left tomorrow (Tuesday).
I will be looking at gold prices Monday night, from over-seas trading.

Noteable Blog Entries

Since the stock market is closed monday, figure I would highlight some great blog entries by other bloggers. All of these blogs are worth looking at daily.

Mish's Global Economic Trend Analysis
Mish's is a MUST read by everyone.
Wealth does not pass three generations
You Can't fool gold
Stimulus spending over time
Employment Cycles during Recessions
Inadequate Loan Loss Reserves At Numerous Minnesota Banks
Fed Overwhelmed, Calls Emergency Consultants To Untangle AIG
The Game Is Up
Currency Intervention Madness
No Transparency In "Stress Test"

The Big Picture
Can wall street do basic math? (GREAT bank chart)
Fair Value for S&P 440 (Pretty close to my target 400)
Listening to mass media for market timing investing, interesting graphs.
Buffets buy metric
Bail out rate of return
Florida's Jumbo load issue....
Post WWII recession job recovery (GREAT Graphs)

The Market Ticker
Karl tends to rant, but his basic points are dead on
Fraudulent Nation
Do they really think we are this dumb?
To the Republicans (independent of party, the list of what must be done is good)
The point of my two fed posts

The Smart Money Tracker
Gary's pay service is a must for precious metal investors
Gold Sentiment and the Dollar
Oil vs Gold
Confused yet?

Worst decade yet

Slope of Hope
UltraShort Real Estate (Aah..SRS, like moth to a flame)
Gold Bear
Retails Fantastic recovery
Shorting commodities (Note my recommendation for SLOWLY roll into commodities over next year)

The Bullz and the Bearz
Are we forming a mini gold bubble? (Good video)

Sunday, February 15, 2009

Biggest game of chicken in a century

The stock market has various level of "players". There is the basic person that blindly dumps cash into the market, where "professionals" move the money into investments on the behalf of the person. Then there are the shades of basic player to expert, with various strategies. At the professional level, there are myriads of companies and strategies that are done. However, there is ONE basic strategy above basic player through the highest levels of professional, and that is "stock chartists". A stock chartists reads the stock market "graphs" generated over time and theorizes the future moves based upon the graphs generated.

Personally, I don't believe in the graphing, to me its like palm reading. However, I pay close attention for chartists for one simple reason, its a religion. And like all religions, with enough believers, they can create their own reality or affect reality. So when chartists see a "Death cross" or other events, a movement starts that will carry the rest of the market. Hence, to me, chartists are self-fulfilling prophecy. But the really really smart money knows this, and will deliberately generate "false" chartists signals to capture money from the believers.

It is in a way, a den of thieves all strategizing how to fake out others while being on the right side of a trade themselves.

For the last week or so, the market has teetered on crossing a fatal line, that once crossed, will trigger an avalanche of selling........Or so say the chartists.

Enter, another strategy play, "stock options". This Saturday is stock options expiration. Stock options is where the true professionals play. Mere mortals play in stocks, but option traders are the high rollers of investing. With much less money, they can control and influence larger blocks of stocks.

Through the last year or so, I have witnessed outright collusion with the US Government to move the markets in an advantageous way to market makers close to stock market expiration. How you may ask? Release news that shifts the market violently in a direction. Using options, and advanced knowledge of the direction move, place very large bets to reap the trade.

I wish I had blogged all the events that occurred, to show a pattern of abuse. But I can recall one. On January 19th, 2008, options expired. On January 19-20th, very bad news was announced (I can't remember what). On January 21st, the market opened up much lower. I believe 600 DOW points down. Then the US Government announced it will save the world. (Paraphrasing). Various trading desks shut down preventing the common person to sell that day in computer glitches. The market by mid day recovered, and at end of day was up.

So, how did someone benefit? Well, market makers where able to settle trades using "much cheaper" stocks than the closing bell price on Friday January 18th, and pocket the difference. Since by EOD Monday, everything was back to normal, except the cash influx captured by those lucky few that morning.

This week is setting up to be the mother of all cash outs. Maybe it won't happen, but I'm mentally preparing for some serious game playing. It's possible for the market to break lows this week, or come close to it. Then, there will be "the" announcement, and it will be off to the races, either to the moon or all out collapse.

In any event, I'm avoiding doing anything. I believe it will be an up swing, its just too soon to let the S&P go to 400. There is much more money to be milked out of people if it can be dragged out before collapsing.

Monday the market is closed, Tuesday Obama administration is set to make announcements. Lets just hope the people who control big money play this game right, and it doesn't backfire and collapse.

I can tell you this, one of these games will not work according to plan, and that is when we will collapse down to S&P 400. I just don't think this options expiration is the time.

Holding onto the Gold miners, and not adding to oil until it hits 25 bucks a barrel or cracks above 48. Still keeping RJA and looking for other food plays.

Friday, February 13, 2009

Thursday Stick Save

The market today flirted with all out collapse. Lets take a closer look, shall we? In the past posts I used the DOW as an example, today I'll use S&P 500. Its basically the same story, but S&P is what I was looking at today.

Lets look at the index for S&P 500. First lets look at historical support for SPX. since 86, its "about" 800. With freefall down to 400 if 800 is broken with conviction.

In the "recent" history, basically fall of 08 to today, the support level was about 805, with next stop at 750, then freefall. So if 805 was broken through today, really only one more support level until freefall down. See diagram:

So lets take a look at the action during 9:30 am to 4:00 pm today. Notice, the SPX hit 408 and then the White House issued a press release to spend money to help the mortgage situation.
Coincidence? If you where CEO of a company and pulled the same stunt with your companies stock, chance are you would be brought up for stock manipulation.
Do I care this stunt was pulled? Yea, from the point of view of people losing faith in the "big people" manipulating markets. But my personal account was helped,but I'm about 1/3 in cash now, so its all good. The white house announced U.S. Housing Plan to Fund Interest-Rate Reductions.
I'm not going to dive into the news report since, it really doesn't matter. Anything but cleaning up the accounting and properly valuing companies is just smoke screens.

What matter is, will the market continue momentum at the open Friday, and gain steam into the close? This weekend is a 3 day weekend, which then leads into a short week, and options expiration on Friday.

So if we open up, and can hold it first couple hours, looking like a good entry point on the long side.

Gold and GDX where ROCKS today, barely giving up any gains, and quickly recovering after the news is released. GDX likely to go to 40-45 now. If we open with any sort of strength in the AM, I may add to my GDX. See Mish's blog entry on "You can't fool gold".

Thursday, February 12, 2009

Continued Market Uncertainty

The market keeps skidding along the bottom of near disaster, as per graph from previous blog entry. A break of S&P below 810 will likely indicate disaster, below 790ish likely to start all out panic sell.
The government is actually making progress on passing stimulus bill, but the items in the bill keep changing. One that may cause markets to rumble for the worse is the removal of a tax break for companies that "lost" money in the last two years, excerpt:

"House and Senate negotiators all but eliminated the biggest tax cut for businesses in the compromise agreement on an economic stimulus bill, Senator Max Baucus of Montana said.

The provision, a top priority of business groups including the National Association of Manufacturers and the U.S. Chamber of Commerce, would let companies convert losses into tax refunds.

Baucus said today that the provision, under which companies could have claimed an estimated $67.5 billion in tax refunds this year and next, was sacrificed to help keep the final package under $800 billion. "

In effect, companies that are losing big money the last year or two would have gottem a nice cash influx. I actually agree with cutting this provision, morally.

A BIG plus is a Chinese official signaled China will continue to buy US debt. A plus that this significantly reduces the risk of a world wide "run" on selling US Treasuries, thereby allowing the USA to fund massive debt spending.

A quote in the article I love is:
Mr Luo, director-general at the China Banking Regulatory Commission, added: “We hate you guys. Once you start issuing $1 trillion-$2 trillion [$1,000bn-$2,000bn] . . .we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.”

How great is that? A Chinese high official stating that the USA sucks, since it's acting recklessly for long term dollar valuation, but China is in a deadlock where it has no choice but to buy debt it knows will lose money over the long haul. This ties back to my previous blog entry where I said China has no choice but to continue to finance the USA with its crack...I mean debt. The day China says "no mas" is not going to be a nice day.

China's announcement is just in time as America announces its first FOUR months of the new fiscal year already has generated a 569 billion dollar deficit! To put this in perspective, 2008 fiscal deficit for the entire year was 455 billion.

Ireland has the dubious honor of being one of the first countries to break rank and take control over it's own major banks. This is what I believe will also happen in the USA, socializing the financial sector, effectively gutting capitalism in the banking industry.

England announces it will start to "print money" to fight deflation, which of course, is opposite of what it should do. This "Quantitative easing" is a shell game masking as outright fraud printing of cash.

What can I say about gold and gold miners? Strong as hell. My portfolio would be much better if I was 100% in these two items. I can't complain, I do have significant holdings. But everything else not in gold/gdx right now is hurting. GDX hitting close 36.45, it was below 34 just yesterday! GDX could be poised to make a run for 40 bucks.
The baby gold miners did VERY well today, up 5-15% in one day each, can't complain again.

I can complain about oil. I will not add to any oil positions, and switching to USL.
Lets see if we can eek out the week with the DOW staying above 7,500.

Next week is options expiration. I could see the market teetering on disaster into next week, then the "big move" (up or down) starting Mon/Tues/Wed timeframe, just in time for "big money" to make huge plays on cheaper options. Time will tell.

Wednesday, February 11, 2009

Market Volatility

Market fell hard Tuesday. Government announced "TARP II", the Obama rescue package. Apparently none of this is impressing everyone.

Unfortunately, the market is near "doom scenarios" once again. Safest play is and has been CASH. Gold, Oil, Stocks, Bond, everything is moving around violently. Wednesdays open may be positive, but the real test if the market turns down is if it can hold DOW 7,500 range. If at any time, the market closes convincingly below 7,500 (say 7,300), its time for gates of hell to open. Talking some serious market collapse, making the Fall of 08 looking like a warm up.

The way this market has been playing, I could see the market closing at 7,300. Everyone starts to dump and THAT is the real bottom, setting up for a multi-month rally. But I really doubt it.

Once the stock charters see support is broken, it will likely trigger a cascade sell off that won't be stopped easily.

For a refresher, posted the long term view once again.

I just cant buy anything here. Matter of fact, this may be a stupid play, but I sold some of my GDX, and on any gain tomorrow I may sell more longs "thanking god" for the bounce. It's brutal. And I doubt I'll buy any oil for a while, even if it manages to start rallying. I'll consider adding to OIL using ETF USL if/when Oil cracks below 30 bucks a barrel.

I have been on the brink of disaster so many times with this market, it almost seems not possible to be here again. I no clue where this is going.

As for news, frankly, the Obama administration is showing they are "green". They did not deliver the hard punch that Paulson would do selling their snake oil. I understand that the Obama plan will not save the USA, I just continue to hope they sell it so others believed it will........

From WebSurfinMurf's Financial Blog

Tuesday, February 10, 2009

Jim Rogers on Gold & Oil

Interesting video of Jim Rogers on gold and oil. Jim Rogers is co-founder of the Quantum fund with George Soros.

Pretty interesting comment from Jim Rogers over the "overall trend", which aligns with mine that we are witnessing China taking lead over USA.

In December 2007, Rogers sold his mansion in New York City for about 16 million USD and moved to Singapore. This is due mainly in his belief that this is a ground-breaking time for investment potential in Asian markets. Rogers' first daughter is now being tutored in Mandarin to prepare her for the future, he says. "Moving to Asia now is like moving to New York City in 1907," he said. Also, he is quoted to say: "If you were smart in 1807 you moved to London, if you were smart in 1907 you moved to New York City, and if you are smart in 2007 you move to Asia." In a CNBC interview with Maria Bartiromo broadcast on May 5, 2008, Rogers said that people in Asia are extremely motivated and driven, and he wants to be in that type of environment, so his daughters are motivated and driven. He said during that interview that, this is how America and Europe used to be. He chose not to move to Hong Kong or Shanghai due to the high levels of pollution causing potential health problems for his family.

Of course, I hope he didn't plow money into China investments, since they completely fell apart. He may be right long haul, but its all in the timing.

Anyway, Jim Rogers Video comments on Gold/Oil

Oil investing USO vs USL

Trying to invest in Oil is extremely difficult. Unlike a stock, or commodity gold (GLD), you cannot buy something that represents oil price, like a stock, and hold it as long as you want to capitalize on oil price in the future.

The only thing that represents oil is commodity futures contracts. However, Futures are a completely different investment vehicle than stocks, that has different constraints including a time component for each months futures contract expiration. Maybe in a different post I can elaborate.

Purchasing the ETF "OIH" will allow you to buy a swath of oil companies, which can be influenced by oil prices. To buy "oil" as a stock, there are multiple ETF's, first there is USO, and I recently learned of USL.

USO's price is based upon the "next months" future contract of OIL. USL is based upon the next "12 months future contracts of OIL. Click here to read an indepth article on how this works.

The bottom line is, since fall of 2008, because of the difference of USO vs USL works with future contracts, USO has been a "loser" of an ETF compared to USL.

NOTE: UPDATE of Charts as of January 2010, click here

Below are two graphs, the first one shows USL vs USO since December 2007 to Feb 2009. Both ETF's represent oil, but notice USO started to deviate significantly from USL about when OIL collapsed. The variance is significant, USL is down -40%, where USO is down -60%!

The second graph shows since 1/1/09 to this month, USO (oil) is down -14.8%, where USL (oil) is UP 0.4%, and OIH (oil companies) is up 13.4%, and GDX (gold miners) is up 4.54%

Because of the significant difference in USL/USO prices, what I do have invested in USO I will immediately split 50/50 between USO and USL, and probably eventually sell 100% of my USO in favor of USL.

To be fair, USO could appreciate faster than USL in the near term, because of the differences in the way each ETF works off of future contracts. However, since Oil is a longer term play, USL currently looks like a better choice.



UPDATE: Still, gold over all and GDX looks even better, see Garys blog post (click)

Special thanks to Steve for forwarding the article.

Click on each image below to get a clearer picture.

From WebSurfinMurf's Financial Blog

From WebSufinMurfs FinancialBlog2

Monday, February 9, 2009

Market Trend for the week

Just quick note, "Happy John" two cents on market move is:

"The big money that missed Friday's rally is going to want in as cheap as possible if the tide is really turning....therefore they tank the futures Monday and buy near the open"

"Big money moves the futures in order to get things cheap or get out on the open"

Who knows, but two cents for all the longs on Monday open

Stock Trader Stories, Part 1

A friend of mine, Greg & Happy John, submitted to me some "day trader" stories. I'm been a bit of a depressing blog read, figure I'd throw in a humor post on "penny pinching". All names have been changed.

Day-Trading True stories, Part 1
1.) A billionaire fishing golf balls out of the water trap to save on buying new ones.
2). The same billionaire bought a Yugo that is small enough to fit behind a truck to get a free ride over the bridge from EZPass.
3) The same billionaire telling people how to exit the Parkway and drive on Rt. 9 for for 5 minutes in order to avoid the Parkway toll (which at the time was either .35 or .25!).
4) A multi-millionaire stated he would only buy a Mercedies E320 if the dealership put the E500 decal on the back of the car.
5) Multi-Millonaire brothers going out for extravagant meals then waiting for the check to come. After the check has arrived order something small like a coffee and try to get it for free since the bill was already on the table.
6) A day-trader was paying $36 dollars a ticket as a prime trader in 1995 asked the day-trading company owner for a $3 ticket decrease. The owner looked him in the eye and said "If I lower your ticket by $3 I will be losing money". Within a year tickets were universally $10, and somehow, the owner stayed in business....

Thanks Greg & Happy John for these "cheapskate" stories.

This isn't your typical recession...

Below is a graph of number of job losses per month, for this "recession" as compared to 1990 and 2001 recessions. It is a startling picture. Yea, we have more people now than 1990, but not enough to really dent these images. And these images DON'T count the illegal immigrant explosion who can't find work.
From WebSurfinMurf's Financial Blog

The above was taken from this post at .gov (click) See Mish (click) for more commentary.
Click here for more cheery job graphs.

Combine this with some Federal reserve graphs, and hopefully you can appreciate why I am panicking early into resources. Click on pictures for better views, and click here for source.

Federal reserve graph of the increase in monetary base.
From WebSurfinMurf's Financial Blog

Total "borrowing" from Federal Reserve..

From WebSurfinMurf's Financial Blog

Don't worry, "deposits" are up at Fed. This graph is very misleading, institutions are borrowing from fed, then depositing to get "interest" payments from fed greater than the borrow, yielding free cash from the government.

From WebSurfinMurf's Financial Blog

The important take away is, this downturn is MUCH worse than the public media is discussing. Click to read what Brittan had to say about their state of affairs last year, as independent confirmation.

And even the BEST optimists are now saying recovery in 2010, not 2009. I am assuming a 5 year recession, if not longer. (10-15 years?) But it all depends if losses are recognized vs continue to hide through public taking on debt.

How did it get this bad you may ask? Well, during 80s through start of the 90s, the government "devalued" (borrowed/printed) its way into prosperity. During the 90's, under Clinton, the dollar APPRECIATED and the economy ramped up. During Bush, the economy devalued the dollar to new lows, artificially creating the Stock market boom.

What we are seeing now is the artificial inflation that occurred under Bush popping, and the dollar "appreciating" (deflation).

So now the government is trying to REPEAT what Bush did, but stating it will end differently this time. Do you believe?

See graph from "Gary" of the Smart Money Tracker below (PAID SERVICE, GET IT!, tell him I sent ya) In his email, he discussed a wide variety of topics on Jan 22nd. The purple line shows valuation of S&P 500, the Black line the USD valuation. This graph shows to me shows that the last 7 year "boom" was a farce. Reality must come back, and congress can't re-create the 2001-2007 boom through repeat spending and expect a different outcome. That is why I believe a Great Depression worse than 1930's is our future if we try to spend our way out.

From WebSurfinMurf's Financial Blog

UPDATED: 2/10/09
Watch this video from 2:20 on youtube. The extrapolation out from 550B to 5.5T run on the banks is not valid, since, you can't say the electronic run on the banks would have kept up at that pace.

Sunday, February 8, 2009

Stimulus plan losing its luster

Obama save-the-world through a spending spree is starting to get criticized. Although I am a critic too, what amazes me is, where were the critics when Bush & Congress "gave away" 350B dollars with. Now that Obama is in, the critics are getting some air time.

The government is truly clueless as they argue over finer details that WILL NOT MATTER in the events to unfold. Right now the Senate has changed the bill, quote:

To reach that deal -- pegged at about $827 billion -- $40 billion in aid to states was nixed as was $16 billion for school construction, among other spending. But it still differs from the $819 billion bill that passed the House on January 28.

Talk about egos. a 800+ BILLION spending bills getting held up over 40B in aid to states and 16B for school construction as the big ticket items? They are arguing over 5-10% of the 800B+ spending?

There are some heavy politicians determined to "get their" cut for their favorite stuff, while the world loses faith DAILY over the Obama rescue package. What these clowns will learn is, they can't buy back the faith lost. The whole point of this thing was to get optimism out there, as it gets dinged daily, it just increases cynicism.

So what's the solution for Obama? Congress already approved 700 Billion, 350 Billion already spent. So now, this administration will ask for 1 TRILLION more to help the banks tuesday-ish. That is IN ADDITION to the 350 Billion left in the TARP from last year, in addition to 800+ Billion Stimulus and the Nations Debt spending over 500 BILLION annually, and in addition to each state debt spending in the Billions. Finally this is in addition to the Billions companies are debt spending, and the US individuals maxing out credit cards. Boy, am I sorry I sold ANY of my TBT, this may be the play of the year. US Government issuing 3.6+ TRILLION in bonds may "jump the shark" for US Debt in one year. AND this assumes NOTHING else goes wrong in the next year needing more cash....
Click here on how all this translates into 10 Trillion in government risk. That is 1.3k per human on the planet!

Enough of this rant, time for another. UPDATE 2/9/9: See more from Mish on "stimulus" spending (click), Rant from Karl (click) I got a few more in me. :)

Everyone doesn't get it. The solution isn't to freak out and spend 3x more debt. Its to get control of ourselves and accept that the US needs to cut back and stop debt spending. Yes, more companies will fail, yes, unemployment will continue to rocket, but the bottom will get hit sooner and be less severe. UPDATED 2/9/9 Gary's email service (click to buy) on Feb 7th lays out that total world wide losses easily surpass 60 TRILLION. Spending 2 Trillion is a rounding error, and can't stop the monster.

This massive debt spending will facilitate an impressive USA implosion beyond my own vision if the US continues on this track of spend and deny reality.

So this week may be "mega disappointment" week. I can see the US cracking to new lows, below DOW 7.552 won't shock me. This all depends on the announcements of successfully getting funds to delay reality. Also the market rallying for best Market performance for the year wouldn't shock me this week. Hence why I'm just watching.

I'm will continue to sell my market longs, slowly, (over next few weeks) and get more cash to be able to withstand a possible implosion of the market. I'm still loving gold miners, GDX, but trying to not get too optimistic and resist buying here. Maybe I'm wrong. But I can't risk more, unless there is a pullback to "reduce" my risk of buying.
Matt Bors

Friday, February 6, 2009

Fearful Friday

Here we are, another weekend upon us. What makes this weekend so special? The threat (not promise here) that Obama administration will unveil the master plan to save the financial future of the US, and by extension, the world.

So I expect Friday to be a bit odd with the moves. I'm guessing here that the short sellers may get a bit nervous and cover some of their exposure, resulting in a Friday up day. I am also fearful that if something is announced, it won't meet expectations as being such a huge event as everyone is expecting. Kinda like going to see Star Wars The Phantom Menace was doomed, the movie could not meet geekdom expectations.

In any event, I still like GDX, but I'm not a big buyer here. At EOD Friday, I may buy a little bit of calls to better catch any pop that may happen next week. Gold if/when it hits 1,025 an ounce may get some resistance, but if Gold passes 1,025 with any sort of conviction, watch out, expect gold and gold miners to fly.

The army of news is so brutal, I just don't have the heart to compile it. Check out Mish. At this point, only one news story matters, the Obama administration save......for a day or months, but not years.

Check out this Minyanville article on Gold and Gold miners.

Comedic video on Obamania, lets hope Obamamania lasts for quite a while...

Thursday, February 5, 2009

Madoff as clear example of government complacency to corruption

A concerned US citizen, Mr. Markopolos repeatedly brought to the SEC 9 years of complaints that Madoff must be "cooking the books". He brought with him an army of industry experts to the SEC to assist in proving there was something wrong with Madoff accounting.

In the madoff case, the SEC didn't have to go looking for Madoff as a ponzi-scheme, a private citizen repeatedly brought information about Madoff issues over 9 years. The SEC's job was to take this information and investigate to uncover the Ponzi Scheme.

The absolute incompetence of SEC, and absolute impunity Madoff ran their ponzi scheme, even after SEC was "alerted" of the Madoff suspected issues by Mr. Markoplos.

So why is this important for trading? Consider this, information with industry experts brought "reasonable proof" that Madoff was supporting fraud, and the SEC was unable to "prove" the fraud. How many other companies are out there without a Mr. Markopolos out there? If the SEC is handed to them information sufficient to prove "suspect" accounting, and is unable to "prove" fraud, what chance does the SEC have to catch any skilled company?

Also, where is the "incentive" for SEC to do a vigilant job? SEC officials are frequently hired by private companies after their service to the US government. Who is held accountable for SEC failings?

This is a smoking gun to how rotten the US financial systems operations are likely to be from ground up. This very system now exposed, is being "Solved" by throwing more money after these executives and companies to avoid bankruptcy.

I find it odd how, blatant fraud, like Madoff, does not deserve the US to "cover losses". But sophisticated fraud involving multiple companies is. Bank loans made to people with no substantial credit rating, income level, or sane mortgage structure was made in the trillions. Rating agencies, banks, Investment banks, bond insurers, government agencies, all acted in unison systematically without questioning the operations being performed.

This, of course is worthy of a bail out, but Madoff, is not. There is a difference, but the difference is not as great as news media would suggest. And this is yet another reason why I do not believe the market bottom is even close to being realized, until all the Madoffs, AIG, Countrywide, DSL, Indy Mac, Freddie & Fannie Mae, Citibank, and other corporations can prove with honest accounting that the worst is past.

I will also believe a bottom is near when this type of news catches the attention of America in greater force, than who was kicked off American Idol.

I strongly recommend watching this video of Mr. Markopolos testifying before congress, he is a true patriot, and outstanding citizen. Click here for 4+ hour Cspan discussion on the topic. Or here for NYT spin.

Wednesday, February 4, 2009

Mind Shift Revisited - Play for next 2 years

I'll repeat myself for "context". From Sept 2006 to Oct 2008, almost 100% of my investments where "shorts". Around then is when I turned to resources to start looking at plays, my friend John coached me to join the GDX/Oil bandwagon. I joined GDX "In force" when it was 17-19. Oil I do think for next 2-10 year is a great play, but frankly, I don't have the patience to sit on oil for a decade "hoping" for a payoff. It could come next week, all is needed is instability and/or dollar collapse. And of course "food" is the other resource play (RJA).

Unfortunately for me, I jumped in a little early and too heavy for the "Obama rally" that hasn't materialized. The markets are set to break up or down any day now. I lean towards up, just for the simple thought that the market went from DOW 13k to 7.5K in a couple of months, then "recovered to 9K", now we are back to 7.5-8k range.

Some of the plays that I am in are too risky, and after giving it some long thought, I'm going to start dumping all positions except gold miners. I'll also keep an eye on SRS as a buy if it gets REAL cheap, and DECK if that stock climbs back to 70 range, and keep a small position in oil plays.

Why? Couple of reasons, I consider myself "lucky" in the last 2 years to have made the return I did, and I have heard of too many people who "give it all back" to the market. I don't want to be one of those people.

Gary of the Smart Money Tracker in one of his PAID service (go and pay for it!, worth every penny) emails said "remember when shorting, the most one can make is 100%. Bears are at a mathematical disadvantage when it comes to investing. When there isn’t a bull market to be had then by all means we should consider shorting. However if there is a bull market, and especially if there is a strong one, then one is just shooting themselves in the foot by trying to play the short side of the market. Shorting takes excellent timing and let’s face it, probably a certain amount of luck. "
The next is by timing the market. Again, with this one, you are back to competing with the pro’s. I have to wonder how many people would want to take the field and face the Pittsburgh Steeler front line. That’s basically what you are doing if you think you are going to be able to time your way to riches in the market. Maybe 1% of investors can do this and again it’s probably only going to happen with a good bit of luck and a liberal amount of excessive risk taking. Not exactly the recipe for long term success. That’s probably why only 1% will ever get rich this way. (I’m probably being generous when I say 1 %.)"

That sentiment is accurate, and I really shouldn't be stupid enough to think I'll be the "one guy" who gets it right.

Now that the financial problems are recognized outside of the blogsphere, the market moves are much less certain. The attempts to prevent world financial collapse is going to be more extreme market moves over the next few years. I don't want to get caught on the wrong side.

If I short or go long, either a rocket short rally or doomsday collapse could detroy all my savings if caught in "too deep".

And here is the key thing. I KNOW with every fiber of my being ,just like I did years ago that the market would collapse, that gold/gold miners will hit a high note never seen before.

And if I "know" this, why the heck should I risk any money on plays I have less conviction on?
I'm not sure what this will do to my blogging, I may become some crazed gold bug, ranting that the only thing that defines wealth is if you have Flavor Flav teeth and a gun to pop a cap in someones arse if they try to take it.

I really doubt it. :) I never liked the idea of "gold" as a play, for the simple sake that everything has relative value, and gold, as a "utility" really isn't that great. Food is. Oil is, need it for war, collecting food, etc. Gold? Eh Jewelry? Some niche manufacturing?

But what Gold does have in its corner is some odd-god like reverence by man-kind as the play of all plays since the pharaohs that gold has "value". And if the next two years gets worse, it's only logical that paranoid lunatics and insolvent governments will turn to gold as an instrument for stability. Also governments are determined to devalue their own currency, which should help gold.

Also, as a very long term play, frankly, I should need to spend maybe 1-5 hours a week on stocks. I am about to have my first child in April, and from what I hear, kids soak up every last minute of your time. So I may as well position myself so I can "earn" money in the market and have time to have a normal job, be a husband, be a father, and eventually dabble in looking into buying bankrupt houses pennies on the dollar.

I wanted to share my own direction change, since, my discussion on investing may start to get into a rut or one track mind, gold plays either miners or if gold gets cheap enough, buying gold itself.

I still have some pretty risky plays, I am still hoping for a rally where I can eventually sell those positions and buying miners (hopefully they go down a little). As for oil, I'll keep my toe into it, but I'll be hard pressed to go into it with force. My main secondary play will be food, right now RJA, but I may expand into other items.

As for my gold miner plays, as an income stream, I may start selling puts in GDX or gold miners monthly instead of buying the miners. If I am wrong, I'll end up owning the stock anyway. If I am right, pocket the cash and repeat. So in effect, I will get "paid" to buy the miners when I'm wrong.

My transition won't happen over-night, although every fiber of my being wants to dump everything and move over today. :) I'll add slowly over time.
As for other blog reading, I can't stress enough how important it is to read Mish's blog, out of all blogs. Mish has always done a great job, but this year he has pulled no stops and deserves some sort of journalism award.

Tuesday, February 3, 2009

Investor Dinner

Monday night, I met with 1 hedge fund guy, 1 professional self employed day trader, 2 professional day traders, me and my bro (we are the pity invites).

Unfortunately, there was no "invest in plastics" moment like The Graduate. There where various opinions on
  • if we would rally with Obama announcements
    > Split decision on 1 day, 1 week, 1 month, 1 year rally on announcements
  • What is the best investment vehicle "all things considered" (wow, GDX, imagine that)
    > Pretty much no dissent on GDX as one of the safer plays in next year or two
  • What countries will implode (CORRECTION on order)
    Eastern block sovs (lithuania, latvia, poland, estonia, hungary, bulgaria, etc) , Ireland, Britain, Japan and others)
    > Few of us had the insight to contribute, but Japan was the shocker for me. Apparently the Yen has rallied hard AND Japan has seen the worst decline ever of any industrialized nation in a decline in a short period of time. Plays discussed where short Yen vs Canada or Yen vs USD
  • The long term view of USA banks
    > Majority will be owned by US government, either outright or through "backdoor games" creating zombie banks, like Japan
  • Several of us had bad things to say on Wells Fargo (note to self, buy long term lottery ticket puts)
    > Previous post I states WFC was insolvent, I should have shorted it when it was 32 and rode it to zero, for that matter ALL of my plays came true and then some in 5 months!
  • Pretty much no direction on the new world financial power that emerges AFTER this is over with. (China/USA/other was topic)
  • Everyone agreed that OIL in "long term" is a no-brainer, but no one had a strong opinion of OIL hits a low of 35, 30, or 25, bucks a barrel and when it recovers.
  • And finally, some very entertaining stories on multi-millionaire stories
For the last bullet I have asked for the stories in email form, and I'll publish each of them. I count myself as lucky to have heard over the past decade countless people who have multi-millions from trading only to go bankrupt, to help keep me grounded into reality.

I am more torn than ever if an Obama rally will happen or an Obama spike then a sh*t the bed happens. As one of the guys said, if you look historically, every great decline has had a short term rally before rolling over. One thing I can say about the last year, I am hard pressed to say this has been a direct repeat of history.

Monday, February 2, 2009

Manic Monday

I expect Monday to be ugly, violent mess. There is still no clear direction on Obama saving the world, so the markets will "cry" and it will be violent. To add salt on this wound, the markets are near critical levels, and I expect the market to break DOWNWARDS through those levels in the next day or couple of weeks.

The result will be market chartists seeing utter doom, and S&P from 840 down to 200, utter collapse scenarios will become the "greatest probability".

And here is where it gets dicey, above IS what will happen, there is no choice. Well, there is one thing to stop the financial markets from a collapse, the USA lead the world into this sh*tstorm, it needs to lead it out.

Like it or not, the rest of the world is not positioned to take this BEAR by its nose and lead it into Bull territory.

So the question was, and is, WHEN will this administration announce & pass a concrete plan of action that gets the world excited that we are not all going to heck in a hand basket? Will it be done before and thereby preventing "doom" scenarios appear on stock chartists screens, or after?

That is the question. If they announce Tuesday, the S&P won't have enough time to enter doomsday territory.

However, I suspect that the world has to come to the brink of disaster...YET AGAIN, to get Washington to "justify" flushing the USA's last tatters of fiscal responsibility down the toilet cloaked in the justification that they had to or the world was going to collapse.

Where I find my daemons on investing with the current environment is, can the GDX mining indec stay above 27? Will fear make it rocket to 45?

EVERYTHING other than GDX I have is hurting me to various degrees except GDX & RJA (food). My next bet is these two are the commodity leaders, and it has been my bet for months.

I strongly suggest buying Gary of Smart Money his news service. He and my views are once again aligned and all is well. ;)

Conversely, Karl of the Market ticker sees Gold as about to reverse. Even if gold pulls back, there is no reason why GDX can't remain strong and rally into earnings later this month.

For all those who are wondering why I'm so obsessed with resource stocks, as compared for the last 2+ years on shorting financials, look at Iceland. The US isn't Iceland, but it does show what CAN happen.

Icelands Currency "Krona" free-falled downwards, along with Iceland's stock market, resulting in Iceland's' government collapsing. So in "US Dollar terms" the collapse was across the board in Iceland.
That is one possible outcome in the US. Do I think it's likely? No, if I did I'd be trying to leave the country to live abroad. But itsn't isn't about likely, its about preparedness.

Remain prepared. I still like GDX & RJA for long term. Oil is a heavy buy as it gets closer to 25 bucks a barrel, and may be great now! Hard to say where bottom is. Gold miners announce later this month, if GDX dips low again, all things considered, a good hedge.

Time for me to go to bed, and see what tomorrow brings. One-of-these days I'll put my news round ups and blog summaries up. Its been too busy recently for me to do this blog justice.
Always visit the blogs linked on the right for good information on current events.