Short plays

This market is getting a little nutz and bullish, time to short stocks, again.
We have entered into the surreal, and reality will come back.
I posted on the 16th, some shorting ideas, and my friend Happy John has added some more ideas.
The new ones are really something to be amazed at. I wish I had 10x more cash so I could short the living heck out of these things.

In any event, lets update my grid, with the new plays, and below that some charts.
You can follow the history of this post chain for past and future posts by clicking here.
Also, pay for BullzAndBearz for shorting/long advice, he has many of these stocks mentioned, as well as others. He provides more detailed analysis, including stops to limit losses if wrong.

on my TWITTER on the 24th I tweeted i shorted DRI, for tracking purposes and easier grid, I put the value under the first column. Yes, I just blogged the phrase "I tweeted".
ALL of these stock plays assume you short the stock.

Stock	4/16/9	4/29/09	Percent Gain
AAPL	121.45	125.14	-3%
BAP	50.01	49.77	0.5%
BBY	38.53	37.53	2.5%
EAT	18.78	17.15	8.4%
DEE	82.72	86.39	-4.44%
DECK	62.33	57.30	8%
WYNN	33.47	38.16	-14%
new entries	4-24-09	-----	----
DRI	39.66	36.76	7.31%
DIN		30.09	%
CAKE		17.65	%
BWLD		40.60	%

I did a very small play of AAPL and DEE. I am dropping DEE from this chart for the future reference. It was an odd play that may pay off, but I just don't like it.

WYNN however has kicked my ass royally, and I'm holding on for now.

DIN, CAKE, and BWLD charts below. They are......unbelievable, especially BWLD. I am short none of these but I am looking to start getting into them ASAP. I may sell some resource longs to free up funds to get short.

In any event, shorting isn't for the faint of heart, but these plays look great, and patience is key. these stocks could run around for couple of weeks then collapse hard over night. So you gotta be in it ahead of time to win it. If you want lower risk of amount of loss if wrong, buy option puts.

From WebSurfinMurf's Financial Blog

From WebSurfinMurf's Financial Blog

From WebSurfinMurf's Financial Blog

Everyone is short of cash

Bank of America and CitiGroup were told that they both need more cash to meet government reserve requirements.

Bank of America needs 70 Billion more capital to meet requirment demands. My spin - Didn't BOA announce a profit of 2.8 billion last week? How can there be profit with 70 billion more cash is needed? I need to take a college accounting class to understand how this makes sense.

At least 17 of 30 regional banks that have less than $100 billion in assets may need to raise additional government or private capital, according to a report by Oppenheimer & Co. Inc. on Tuesday. My Spin Notice there is no mention that regional banks have a higher bar than national/global banks....

Italian authorities have seized about $300 million in assets of JPMorgan Chase & Co. (JPM), Deutsche Bank AG (DB), UBS AG (UBS) and Depfa, whose officials have been accused of fraud My Spin - This really opens up the door for an all out money grab by countries around the world, NOT good. How ironic ITALY is the country to call out and penalize the banks for fraud.

New York city saw personal income tax PLUNGE 51% in April year over year. NYC will finally feel the squeeze the rest of the country has been enduring.

The U.S. Treasury Department said on Monday it expects to borrow $361 billion of marketable debt in the April-June quarter, up $196 billion from earlier estimates.

IMF head says it will sell bonds to raise funds, World leaders meeting three weeks ago in London pledged to boost an IMF emergency lending facility by $500 billion

The U.S. Treasury Department will on Tuesday tap a $50 billion housing rescue fund to pay off mortgage investors and reduce monthly payments for millions of borrowers, said a senior administration official. - My Spin - JUST get it over with, give houses to people for free.

AIG takes action to try to avoid default on 234 Billion derivatives. My Spin: I got lots to say, but due to being an insurance company, I say nothing.

There is one notable exception, and that is China:

China reveals it has 1,054 tons of gold

Lets just hope China and the rest of the world never gets tired of buying US debt...otherwise the US can't operate at all.

Time to buy stocks or sell?

If you listen to the mass media, your stupid to not buy stocks. I am long stocks, but restricted to natural resource related sector. Think it is a good time to buy stock in companies like the GAP, Bed Bath, and Beyond, Netapp, etc?

Instead of listening to what people say about companies, look at what the "insiders" are doing with their stock, and that is selling. Read this article for more in depth explaination by clicking here.

The S&P 500 has jumped 28 percent in 33 trading days, the sharpest rally since the 1930s, on speculation the longest recession since World War II will soon end. This market rise has yielded the biggest insider selling level since 2007 .

Caught long? Consider selling 20% here TODAY! If the market goes up to DOW 9K, sell another 20%, 10K, another 20%. If today is the top for the next 10 years, you'll be glad you sold 20%, if the market rises, you'll be glad you have 80% left to capture the rise.

But make no mistake, the odds are we will see DOW 4K before we see DOW 14K.

Thanks to Bob for article.

There is no such thing as a sure bet on wall street

I have blogged many times that the safest, best long term investment is natural resource based stocks. I still believe this is true whether it be Gold Miners, other precious metals, Oil ETF's such as USL, Oil companies, and food companies and ETF's such as RJA and DBA.

However, there is no such thing as a sure bet. My view is basically based upon the financial crisis the world faces, and the current world policy of printing money to resolve the worlds problems. This will result in higher resource prices. Also, if I am wrong, and the world economy recovers, India and china (2.3 Billion people) will need more resources, again, resulting in higher resource prices.

However, keep in mind, other earth shattering events can happen to make this bet a bad bet. For example, in Mexico there is a possible pandemic brewing involving the Swine Flu. If the Swine, Bird, or other flu turns pandemic, and assuming you survive, natural resources may not be a good investment. With a severe decrease in population, resources may take years to become in demand. I obviously believe this to a be a low-risk possibility, but it's kinda like the green zero on the roulette wheel, a slim chance just enough to throw off the odds when betting on red or black.

In the last major pandemic in 1918, where 50 to 100 million people died in 6 months, the landscape of the economy today would shift in ways that can't be predicted. None of this has to occur, but the FEAR of it is enough to move the markets.

I do advocate not only being prepared for the financial firestorm, but also for personal/family preparedness. One thing to consider is buying N100 masks today, before a shortage can occur. May sound alarmist, but 50 buck investment for piece of mind is hardly throwing away money. Worst-case use some masks next time your painting. :)

Think the medical establishment can prevent a pandemic? The CDC has stated it would take months to get a proper vaccine for protecting from a pandemic. Considering the global travel profile, and that in 1918 the virus then hit 5% of the global population in under 6 months, it isn't hard to imagine that a vaccine just isn't possible once a pandemic starts.

UPDATE: 4-29-09 - can order Tamilfu clicking here
Blog on swine flu news click here, CDC Swine flu facts here

The moral of this story is always leave plenty of room for the unexpected, it always happens when you least expect it. :)

Will Stock market hit 200 DMA?

I blogged that I think the market may hit the 200 DMA, basically near DOW 9K, SPX 900-950 in the next few months.

I distinctly believe this still to be possible. But keep in mind the 200 DMA keeps moving lower, and its possible the S&P will hit the 200 DMA when its 850 in a few months from now.

So if your long, from before Q4 2008, consider lightening your position by some percentage.

Take a look at the S&P500 from the last 3 years, then from the last few decades.
The overall trend still looks down, and today may be highest you will see for decades.

From WebSurfinMurf's Financial Blog

From WebSurfinMurf's Financial Blog

Leveraged ETFs being front runned

A while back when I was hot on USO etf, it came to my attention that the pit traders where front running USO future contract buying/selling. This made USO lose value more than it should. It looks like the 2x and 3x ETFs are starting to be front runned now. (Trade ahead)

So be careful of FAZ, FAS, DXO, etc.

Quote from article: Further amplifying the ETFs' actions: Every day, trading desks at big banks and brokerage firms blast out customized spreadsheets to favored clients. These tools, linked to live data feeds, predict whether the leveraged ETFs will be buying or selling as 4 p.m. approaches. That enables hedge funds and other big investors to trade ahead of the ETFs. (click to read on).

The financial trading market in the US is a wonderful thing. As soon as "dumb money" enters the fray, the smarter and more nimble make money off of the "dumb money". To me, dumb money is where orders are placed in some sort of systematic way without the context of the events at that moment in time.

For USO, when that ETF closed out it's previous futures contracts, and bought the next months contracts, that set up people to trade around this automatic, LARGE, financial transaction. Now the same seems to be happening with the 2x and 3x ETF funds.

Unfortunately, there is no easy money in life. And the 2x and 3x ETF funds will have great returns still when the market really starts to move. But from reading the article above, it is clear to me the weekly/monthly/annual losses these ETF's will take because of people front running their orders will make them all losers.

Saturday Video Post 9

For video today, Jim Rogers has a new book being released April 28th, A Gift to My Children: A Father's Lessons for Life and Investing. He speaks briefly on the book.

Jim Rogers Presents his newest book
Uploaded by thejimrogers

Gerald Celente (click to read who he is) talks on the false recovery we will witness in the near future.

Will the US enforce the rule of law?

Mish has a great blog entry today commenting on the illegal activities by Treasury Secretary Hank Paulson and Ben Bernanke in the fall of 2008. During that time, Bank of America board and CEO was pressured to NOT do business with the shareholders interests. The government had it's own agenda, and that was to pawn off yet another bankrupt business, Meryl Lynch, into the private sector.

New York Attorney General Andrew Cuomo has written a letter to the SEC to this affect At heart is this issue:
The week after the shareholder vote -and days after Merrill Lynch set its bonuses Merrill Lynch quickly and quietly booked billions of dollars of additional losses. Merrill Lynch's fourth quarter 2008 losses turned out to be $7 billion worse than it had projected prior to the merger vote and finalizing its bonuses. These additional losses, some of which had become known to Bank of America executives prior to the merger vote, were not disclosed to shareholders until mid-January 2009, two weeks after the merger had closed on January 1, 2009.

Immediately after learning on December 14, 2008 of what Lewis described as the "staggering amount of deterioration" at Merrill Lynch, Lewis conferred with counsel to determine if Bank of America had grounds to rescind the merger agreement by using a clause that allowed Bank of America to exit the deal if a material adverse event ("MAC") occurred. After a series of internal consultations and consultations with counsel, on December 17, 2008, Lewis informed then-Treasury Secretary Henry Paulson that Bank of America was seriously considering invoking the MAC clause. Paulson asked Lewis to come to Washington that evening to discuss the matter.

At a meeting that evening Secretary Paulson, Federal Reserve Chairman Ben Bernanke, Lewis, Bank of America's CFO, and other officials discussed the issues surrounding invocation of the MAC clause by Bank of America. The Federal officials asked Bank of America not to invoke the MAC until there was further consultation. There were follow-up calls with various Treasury and Federal Reserve officials, including with Treasury Secretary Paulson and Chairman Bernanke. During those meetings, the federal government officials pressured Bank of America not to seek to rescind the merger agreement. We do not yet have a complete picture of the Federal Reserve's role in these matters because the Federal Reserve has invoked the bank examination privilege.

Bank of America's attempt to exit the merger came to a halt on December 21, 2008. That day, Lewis informed Secretary Paulson that Bank of America still wanted to exit the merger agreement. According to Lewis, Secretary Paulson then advised Lewis that, if Bank of America invoked the MAC, its management and Board would be replaced:

This of course, places Secretary Paulson at the heart of a charge of securities fraud. Notice that Ben Bernanke was also involved in pressuring this deal to go through. If you think this is just CEO Lewis trying to squirm out of taking responsibility for a bad deal, read on:

In an interview with this Office, Secretary Paulson largely corroborated Lewis's account. On the issue of terminating management and the Board, Secretary Paulson indicated that he told Lewis that if Bank of America were to back out of the Merrill Lynch deal, the government either could or would remove the Board and management.

Now if this isn't a CLEAR CUT CASE that DEMANDS action by the SEC, I don't know what is. This will be a test of the US Government signalling that under Obama rule of law exists, or chinese menu of applying the law, like Mr. Bush did, continues.

To gain the world confidence, indictments must fly to show the world Obama will clean up the USA. The mass media will spin it as some sort of partisan issue. Don't believe it. This is simply enforcing the law.

I for one still remain a pessimist and think that the Bush years are here to stay, the law applies when it suits the administration. Let's hope I'm wrong.

Recent Trades

Just as a reminder, I post greater detail of any trading I do on my Twitter account. (click here).
I don't post all trades, and I may not post promptly. I post when I remember and have the time.

So please don't use my twitter to shadow my trades, but use it to get ideas, and decide for yourself.

The market has been strong....very strong. Until two weeks ago I had no shorts since November 2008 (except DECK). Recently I have been selling some of my long positions to capture what I expect to be a pullback, after all the markets rallied 24% in 6 weeks. Then again, there is nothing to say it can't rally 40% in 8 weeks.

Back to my twitter trades. Gold miners is actually right smack dab in the indecision zone right now. Could be about to rocket higher or collapse. GDX has been holding firm between 29 and 32. So it isn't a bad spot to put some low bids in (27-31) to get into GDX slowly, but allow for GDX to hit 25 with your buying power. If your a long term investor, I truely believe GDX will hit 100 in a year or so, and probably go much higher. I am still a short term (1-4 month) pessimist on Gold and therefore I don't think the gold miners are about to rocket higher in the near term, but who knows.

For long term trades stick to just natural resource related stocks. Good luck.

Federal Stress Test Harder on Regional banks

From article:

The methodology "certainly penalizes those banks that are more involved in traditional banking, which frankly have been performing better in recent months," said Wayne Abernathy, a former Treasury Department official now with the American Bankers Association.

He said banks' loan portfolios have lost only about 5 percent of their value so far, whereas the value of complex securities are down 30 to 40 percent.

A spokesman for the Federal Reserve would not comment. A Treasury Department spokesman referred questions to the Fed.

Assuming that this is what will occur, why is the Fed harder on regional banks than national ones?

Lets ASSUME that the national banks, if the test wasn't skewed in their favor, are bankrupt. The US government would basically have to dissolve the top 10+ national banks. This would likely start some sort of panic and collapse, possibly globally. Also the government would immediately need additional funds to cover the immediate losses from these national banks. This would likely spike interest rates, causing the death spiral in interest rates I blogged about previously.

By being harder on the the regional banks, the more SOLVENT banks, these banks can be bankrupted by the US government. The assets, which have more value than the national banks, can then be absorbed by the national banks to prop them up.

This will "kick the can" down the road once again for the financial problems by giving the banks with greater issues the assets (deposits) they need to continue to operate.

The end result will be the banks determined "too big to fail" to have yet even MORE assets, making them 2x too big to fail. This will be continued consolidation of power by the US government. These national banks will be beholden to the US government because of TARP money already taken.

If this transpires, we are witnessing the nationalization of the US financial system. The US government will become not the lender of last resort, but THE lender, period.

In any event, I assume no one reading this blog will write their congressman, join a protest, etc. If the banks consolidate as described, it continues to bolster the view of buying resource stocks as these money games will not lead to a bright future for the US Dollar.

More Market Pontifications

The market bouncing up a little today, as predicted in the last post. I'm still expecting the week to end lower, however, still in a general bull trend for short term.

I reviewed the long term chart of SPX again. The slope also indicates the market will hit upward resistance around the 200 DMA 950-850 range, depending on when the market hits the slope. The slope line combined with 200 DMA will create a significant force, one which I believe the market will fail downward when hit.

The key point is this: IF the market is "destined" to hit the slope line, and the 200 DMA, the market should be pretty choppy for the next 1 to 4 months, until the slope line gets closer to the SPX index level.

Once hit, the market will likely fail quickly, due to the slope incline.

The "slope" of the current decline indicates to me that the market will have a "come to Jesus" moment around Christmas into Q1 of 2010, depending on how you draw the slope. When the market will hits the slope line AND the 800 level, it may be from the "bottom". (meaning market falls lower and rallies back to that point).
That level will be the final failure where the market tanks for its final swan dive.

Again, this is all pure pontification, take with a grain of salt. But the trend line down and the 200 DMA are both worth watching to see where resistance will appear for trending higher.

From WebSurfinMurf's Financial Blog

Monday Market Rumblings

The market fell pretty significantly Monday, not crash territory. I posted last week that this was due. Also, I called it to happen on Friday or Monday at the open, as part of stock option expiration games. The market may rally Tuesday, but I think we will see lower levels before the week is out.

Part of the downdraft is a rumor that the Fed "stress test" yielded showing "Of the top nineteen (19) banks in the nation, sixteen (16) are already technically insolvent." (Based upon the “alternative more adverse” scenario which had a 3.3 percent contraction of the U.S. Economy in 2009, accompanied by 8.9 percent unemployment, followed by 0.5 percent growth of the U.S. Economy but a 10.3 percent jobless in 2010.)

I for one believe this is true. However, I doubt the government will ever release such a report. Hence after the rumor was in the wild, reports from "credible" media sources was released, that banks are looking good, read here.

Anyway, that was todays fear news. Notice how far we have gone? Rumor that 16 of the 19 top US banks are insolvent, and its "whatever".

Lets take a look at some charts, first SPX from macro view, then 1 year, and finally gold.

S&P 500 since 1991, does this look like a bull or bear trend overall?

From WebSurfinMurf's Financial Blog

S&P 500 1 year chart, notice inded fell down to 100 day moving average back.

From WebSurfinMurf's Financial Blog

Gold Chart, just yesterday I highlighted gold breaking trend, today it moved up to 100 moving average

From WebSurfinMurf's Financial Blog

Notice when "Fear" returns, gold spikes. Gold may trend higher for next few days or couple of weeks, but I don't think its time to have the kind of fear we saw in fall of 2008.

Gold and Gold Miners, trend

Quick look at Gold and Gold Miners. I am still a HUGE backer of gold/gold miners in the next 3+ years. But in the near term I remain cautious. Take a look at gold and ETF GDX for gold miners on recent price action. Both have broken to the downside on trend.

Gold (GLD)

From WebSurfinMurf's Financial Blog

GDX (Gold Miners)

From WebSurfinMurf's Financial Blog

Bernanke, Geithner, and Obama

Currently, the US Government operates it's monetary base following Keynesian Economics. Prior to the Great Depression of the 30's, this was not the primary economic practice. Therefore Keynsian ecomomic model is NOT an absolute mechanic that is guaranteed to be the "Best" model to follow. By far the majority of all governments across the world follow Keynsian currently.

Keynsian economics, Loosely states that in economic contractions, the government must actively counter deflation with an inflation attack. Basically during the good times government "cools" off the economy by increasing taxes/paying off debt, and during economic dowturns government spend/cut taxes to stimulate the economy to minimize the cycle extremes. Unfortunately during 2000-2008, the "expansion" was funded by debt spending and tax cuts. Therefore the USA (and many governments) are not well positioned for this economic downturn.

The three main players driving the US recovery is Ben Bernanke of the Federal Reserve Bank, Tim Geithner of the US Treasury, and President Obama, are ALL Keynsian believers. Therefore what we have here is the US fate on a theory, that to-date, has shown cracks in the foundation. If interested in alternate theories, I suggest reading up on Austrian Economics, a great web site is the Mises Institute.

Ben Bernanke works for a quasi-private institution called the Federal Reserve Bank. This organization is NOT part of the US Government. Ben Bernanke's college thesis was on the US Great Depression in the 30's. Mr. Bernanke put forward that the US Great Depression problems could have been minimized if the Federal Reserve AGGRESSIVELY expanded the US monetary base.

Mr. Bernanke is not the only leader of the US actions in the current financial crisis, but he is the major key player. The actions of Mr. Geithner is often orchestrated with Mr. Bernanke.

Therefore the actions the US Government is doing to improve the economic crisis, by enlarge, is following one man's college thesis, Ben Bernanke. Obama has indicated he agree's with the actions by Mr. Bernanke. I believe Mr. Bernanke is now following his thesis to its ultimate end. Keep in mind, the US Democracy is in the hands of an unelected and non-government official.

I for one do not believe Mr. Bernanke thesis is correct, and will result in unintended consequences. In the years to come, you will hear defenses as there was no other choice but to do what was done. I for one disagree.

In any event, yet another reason why I prefer investments based on hard assets like food, metals, and energy.

Lets hope Mr. Bernanke thesis does better than a D+. See Mish's post for point for point on Bernanke failing at his thesis.

Saturday Video Post 8a

Karl of Market Ticker posted a video on the tax protests this past week. Adding to this weeks Saturday video post.

Saturday Video Post 8

A quick shout out to one of my blog readers, Milind Shah. He organized a fund raising effort for Doctors Without Borders around the new Star Trek Movie, read on.

If you haven't watched, watch Obama speech from Tuesday click here:

Pretty good video, critiquing doom-gloomers such as me, and interviewing Schiff & Celente.
And I hope that the video is right, that I am on this track because it makes me "feel smarter" rather than actually happening.
If it does happen, I'd like this guy to create another video saying "they where smarter", but of course, in life, that never happens. :)

Ron Paul critiquing Obama speech, and of course, I agree with Ron Paul....

News Roundup 4-17-09

Goldman Sachs beat earnings at 3.39
Goldman Sachs buries losses to beat estimates - Pretty amazing that the mainstream media (CNBC) don't look below the surface when GS beat estimates this week.
Wells Fargo may need 50 Billion in capital
MetLife Won’t Seek Capital Injection From Treasury
HSBC Finds Buyers for 97% of Record Rights Offering - 22% US Stock dilution with a 41% discount.
U.S. Planning to Reveal Data on Health of Top Banks
Treasury says some Life Insurers will get TARP money
Fed sees no economic recovery this year
Nationwide Mutual cuts 480 jobs and CEO steps down
Fed buys $7.37 billion in Treasury's - I have posted my opinion on this before, click
PIMCO U.S. Debt Holdings to Highest Since 2007 - I cannot comment, PIMCO is owned by Allianz
UK Debt to reach 12% of income - Opening act for the main show, USA.
Biggest recessionary output drop since World War II - Nothing to see here, the worst is behind us, move along

CHINA

China Slows Purchases of U.S. and Other Bonds
China moving into precious metals - Copper? - If the worlds largest country believes resources makes a good investment over treasuries, I won't argue with them!
China Loans, Money Supply Jump to Records on Stimulus
China 1Q09 - 6.1% GDP estimate - AMAZING how only 6% GDP growth is considered "bad" for China. I still contend China leads the US out.
China Mulls New Stimulus to Boost Consumption, Bolster Recovery

One of the reasons I am currently bearish on gold can be found in the comic below, since gold is the "popular" play with the masses.

Market direction one day before options expiration

This Saturday, stock market options expire. Historically this event has been a magnet for odd stock market moves. I wouldn't be shocked if the market opens up down big Friday or Monday, as part of the market manipulation games that are occurring.

In any event, lets take a look at the DOW chart:

From WebSurfinMurf's Financial Blog

The market has risen 24% in about 6 weeks, pretty far, pretty fast. Even though I do expect the market to go higher, possibly DOW 10K, the market usually doesn't make the move in a straight line. The market is over-due for a correction.

To give you an idea how significant 24% is, in 2003 from the recent market bottom, the market rose 24% in 24 weeks. And back then the world banking system wasn't under a possible crash scenario.
I won't bother posting the charts, but stocks I am (and most Happy John is also) shorting these stocks:

Stock	4/16/9	NA	Percent Gain
AAPL	121.45		%
BAP	50.01		%
BBY	38.53		%
EAT	18.78		%
DEE	82.72		%
DECK	62.33		%
WYNN	33.47		%

The ETF DEE is kinda a crazy one, so I am doing only 100 shares to watch. If DEE gets to 100+ I'm in big. I'll reprint the list above when I start to cover.

Happy Johns "high risk" play is buying FAZ. I have been raped by playing with FAS, so I'm not joining him.

So I expect a market pullback, few days or a week or two, before the Obama rally party resumes.

I am still in long resource stocks in Gold, Oil, Food, etc, but lightened up a little and added the shorts above.

Obama Speech on the Economy

Obama's speech on the economy today was refreshingly honest. Point for point, almost to a tee he is on target for what has happened and what this nation faces.

He defends, quite credibly, his deficit spending and bailout actions. I have fundamental issues with the USA's future health. For a good critique, read Market Ticker (click). Obama does seem to grasp the challenges, and he presents the case that he will lead the nation into the transformation required.

I would hope that his critics, including me, spend more energy in supporting transformation than critiquing. For if the nation stonewalls economic transformation, we will guarantee the outcome to be my worst case scenario.

I encourage you to watch Obama's Speech

Delayed Posts

I became a Father on 4/9/09, Joe Murphy born 11:52 am, 9lbs 7 oz.
So my posts may be erratic this week.

This post is a tad bit late for Monday (its Tuesday), but being neurotic, I want a post for each day.
The posts Since Thursday where all canned, Looks like I should have had a weeks worth ready to post.

Now onto my Tuesday post, delayed but actually posted on Tuesday!

Bonds is where the action is

Everyone is focused on equities. How their 401K is now a 201K, which may become a 101K. Also people have been focusing on bonuses to AIG executives, or GM executive expenses.

What REALLY matters is this nations debt spending. AIG exec bonuses are "seconds of interest" that the nation pay on its debt. GM executive or Labor union costs don't even register compared to the national debt.

As the government attempts to "stimulate" by spending at a record pace, there is a cost. Interest rates.

When the US government deficit spends, it doesn't just "print money" (yet). The US government issues US Treasury Notes (bonds) to finance it's debt. The interest the government has to pay adds to the debt. So the US government wants to issue US debt as cheaply as possible.

But there is a slight problem. Our creditors...the rest of the WORLD.... may want higher interest rates for throwing money at an obviously out of control spend-a-holic, the US government. If higher interest rates take hold, it will curtail the ability for the government to spend, and make credit (borrowing) more expensive, and in general, choke the economy as it tries to get its footing.

So what is the government to do? Since regaining control of the US finances is "crazy talk", the government has to create an environment where people WANT US Bonds more than a better return.

That has been happening with fear and stock market prices dropping. When fear/panic takes hold, or equities fall, money is moved into US Treasuries as a "Safety play". When people buy US Treasuries for safety sake, there isn't that much quibbling over 2.75% interest vs 3.4% for a 10 year note. People take what they can get.

What happens when the market does well, and the fear is taken out? Well the US government faces pressure to "compete" for better returns with other investments. Further the US creditors may demand higher return, out of fear that the world's largest debtor nation may someday fault on it's massive credit bill.

OK, so why does this matter? Well, the actions we have seen in the last 6 months, and the next year or so has this battle playing in the background and pulling the strings on what happens to US equities. The stock market has been rising, and so has US treasury interest rates. At some point, the US government may need to push the "create fear button" to get interest rates down.

If interest rates rise, as people refinance their debt, the costs go up. As costs go up, more people "Fail". As the spiral progresses, the system has greater failures.

Below is a graph of the US Treasury 10 year note, on 4/6/09, it's return was 2.95%. The TNX traded about 29.50 to reflect the interest rate change.

I have blogged on this before, lets hope there isn't a dislocation in the US Treasury sales, where interest rates jump higher due to lack of interest in US bonds. Such events can send shock waves of fear.

Today its Stock prices, 401k, tomorrow its currency valuations, interest rates, and cost of borrowing.

There is NO FREE lunch, as the government tries to manipulate the marketplace for a desired outcome, it will continue to find when one thing goes up, another goes down. The game is efficient, and cost will be realized in the system.

Saturday Video Post 7

Dutch Tulip Bubble

Throughout history, there have been many financial bubbles. There has been repeatedly an "irrational exuberance" of crowds sending investments soaring only to crash back to reality. One of the more odd ones was the Dutch Tulip Mania, where the price for Tulips exploded, sucking in huge investments only to crash.

The madness of crowds can be so powerful that during the Dutch Tulip Mania, certain tulip bulbs became the most expensive object on EARTH in 1637!

Reading history helps keep perspective on economic bubbles. I found this comic particularly funny, which inspired this short post.

From WebSurfinMurf's Financial Blog

Where AIG Money went

Today's post is short. An older graph I recently ran across showing where more than 170 Billion of AIG money went to.
Keep in mind Credit Default Swap guarantees where paid at full rate.

From WebSurfinMurf's Financial Blog From WebSurfinMurf's Financial Blog

How bad is the US Financial Situation?

Two pieces of news released today.

First, the US government under Obama has been reviewing the books of the banks, and putting the bank financial through a "stress test". This is good news, as a step (not a big enough one, but a step) to exposing the bad banks vs solvent ones, and regaining some confidence.

Banks will be releasing their earnings soon, and their earnings will likely be better than expected. How is this possible? Well the government announced a change to mark to market accounting, which basically means the government is changing basic math and reality to allow Banks to return inflated earnings.

To ensure that this good news is released without a hitch, the government ALSO announced they would delay the results of the "stress test" until AFTER earnings season.

Second, the US government announced intentions to extend TARP (money "lending") to Life insurance companies.

Lets recap. First just "sub prime", the financial woes are contained. Then there is no recession, just a problem with some isolated financial companies. Then it was said a short recession, eventually the D word has been mentioned, but the "worst" is behind us. Then the government has helped companies like GE, AIG, and GM. (all non-banks) Now the government will extend money lending to Insurance companies.

Does anyone see a pattern here?

As for market direction, maybe down more, but I still think we end up going higher. However, with the announcement of delaying "stress test" results, and TARP extending to Insurance companies, we will see if this will spook the market, or will it continue to ignore reality and move higher.

If fear returns, gold will appreciate. Time will tell. And no one cares about reality, its all about the grade, er stock price. But just like real life, you can change the report card, but the truth will eventually come out.
The gold/silver miners pulled back enough that if you have been itching to get in, now is a ok time. I bought some GDX, thanks to Happy John for telling me of his trade. Just slowly add to avoid getting caught too deep in the event of miners resume their slide.

Lottery Tickets - One Month later

This will be the last update on stock market lottery tickets. With returns now achieved, I consider these tickets success. I am now selling beyond 50% mark. At this point, you should put stop losses on ALL remaining shares on these lottery tickets. 150-200% profits are the lottery ticket jackpots. How greedy can you get for 4 weeks?

AA is reporting Tuesday after the close. Holding that stock to Wednesday is a high risk - high reward hold. If AA gets slapped down Wednesday to below 6 bucks, its a long term buy for your portfolio. Maybe the last great entry for a while.
If your already in it...best to lock in some profits. I am rolling the dice on this one.

The purchase price is assumed to be the day of the post, 3/5/09 . (posted at 12:01 am)

Stock	3/5/9	4/6/9	Percent Gain
AA	5.25	7.91	50.7%
F	1.81	3.77	108.3%
GE	6.66	11.19	68%
LVS	1.99	4.96	149.2%
MGM	1.89	5.53	192.6%
DRYS	3.54	5.11	44.4%
C	1.02	2.72	166.7%

MGM and LVS have some shaky news out. Citibank may eventually go bankrupt. Ford may be a long term hold. AA, GE, and DRYS I expect to remain volatile.

Shorting Stock Trade

One of the pay services I listen to is the bullz and the bearz.
http://thebullzandbearz.com/
He made a compelling argument for shorting a bunch of stocks at these levels.
I liked three of them. BBY, BAP, and SBAC.

I won't go into detail of where to short, what is the levels, targets etc.
To get that, please pay Kirk his pound of flesh, only 4.99 a month, a STEAL.
He has a video where he lays out his analysis. Good stuff. Dare I say it is better than my old standby Karl at the Market-Ticker blog for day-trading advice.

In any event, this blog is also to mark my trades. All 3 of these stocks I will roll into as a bigger short as the stocks move up, with an even higher ticket entered to cover if/when "Wrong".

Market Direction

I'm not going to graph, or do news. Just a summary of thoughts for Monday.

I'm still a huge bull on natural resources and related stocks. However, looking at the charts, Oil is a little "toppish", or perhaps is about to make a break for much higher territory.
DXO, UCO, USL, USO, are all showing near top resistance levels we have historically seen the last 4 months.
Gold (GLD) looks like another 3 bucks may come off gold ETF GLD, bringing GLD to around 84. Although gold may go much lower, at 84 GLD is starting to be more reasonable priced, and may be a good time to add slightly to the gold miners.

Food ETF RJA may move another 0.50 up before hitting hard resistance, as well as DBA moving another 2 dollars.

General point is, if your looking to buy into resources, it may be a good time to wait for them to retreat a little more first. Those already long, a little higher in oil/food may be a good time to lighten up.

If your in it for the next 5 years, every major resource stock is a buy and hold! Alcoa (AA) announces after close of business Tuesday. This one stock may set a trend for resource stocks to retreat or explode past these resistance levels.

The Best Way to Rob a Bank Is to Own One

A refreshingly candid video can be found on PBS web site, with Bill Moyer interviewing author William K. Black. (Click to watch) Mr. Black wrote about S&L scandal of the early 90's, writing a book called "The Best Way to Rob a Bank Is to Own One", 2005.

If you prefer, a transcript can be found by clicking here.

Mr. Black candidly point out several items about the current USA financial situation, echoing my previous posts, some highlights:
The section below, I marked in Italic, I didn't even know about. The FBI WARNED of the massive fraud of mortgages back in 2004!! So the next time someone says no one could see this coming, refer back to my previous posts from Peter Schiff, Jim Rogers, Marc Faber, and others, and the FBI record by clicking here!

WILLIAM K. BLACK: The FBI publicly warned, in September 2004 that there was an epidemic of mortgage fraud, that if it was allowed to continue it would produce a crisis at least as large as the Savings and Loan debacle. And that they were going to make sure that they didn't let that happen. So what goes wrong? After 9/11, the attacks, the Justice Department transfers 500 white-collar specialists in the FBI to national terrorism. Well, we can all understand that. But then, the Bush administration refused to replace the missing 500 agents. So even today, again, as you say, this crisis is 1000 times worse, perhaps, certainly 100 times worse, than the Savings and Loan crisis. There are one-fifth as many FBI agents as worked the Savings and Loan crisis.

BILL MOYERS: You talk about the Bush administration. Of course, there's that famous photograph of some of the regulators in 2003, who come to a press conference with a chainsaw suggesting that they're going to slash, cut business loose from regulation, right?

WILLIAM K. BLACK: Well, they succeeded. And in that picture, by the way, the other — three of the other guys with pruning shears are the...

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WILLIAM K. BLACK: To know everything. To know who committed the frauds. Whose bonuses we should recover. How much the assets are worth. How much they should be sold for. Is the bank insolvent, such that we should resolve it in this way? It's the predicate, right? You need to know the facts to make intelligent decisions. And they're deliberately leaving in place the people that caused the problem, because they don't want the facts. And this is not new. The Reagan Administration's central priority, at all times, during the Savings and Loan crisis, was covering up the losses.
BILL MOYERS: So, you're saying that people in power, political power, and financial power, act in concert when their own behinds are in the ringer, right?
I recently wrote about people acting in concert (no need for conspiracy) to reach common goals.
The entire speech is worth a read or listening to. I wanted to highlight those specific aspects of the interview. Thanks Lou for forwarding the video link!

Saturday Video Post 6

Extensive interview with Marc Farber

Gold Break?

Before I jump into gold, I found a list of commodity ETF's that may be worth looking at.
Do your own research to pick a fund you may like. I may toss a few bucks into DYY, double long commodities or GSG, general commodity funds.


I have been skittish on Gold, but long on resources
Today pretty much followed this pattern, Oil and Food advanced, while gold declined.

Just yesterday's post I showed a GLD chart, showing that if the trend stays in the lines, looks bullish.
Well, today we can argue that GLD broke below the trend, and therefore may be collapsing.
NOTHING goes in a straight line, I wouldn't be shocked gold goes higher between now and Monday back above the line before falling once again.

From WebSurfinMurf's Financial Blog

Notice in the next graph Gold vs Gold Miners (GDX). GDX is significantly outperforming gold valuations since the lows in 2008. This gives me hope that Gold Miners may get hurt as gold depreciates, but not to the same degree.
If GDX cracks below 32, I''ll get nervous on the Gold Miners.


For the most part, as happy John would say "Long and Strong" for my resource positions.
Daily funny

Trend Analysis

Today I am posting S&P 500 (SPX) index, Gold, and GDX (gold miners).


The S&P 500 (SPX) is valued about the "middle" between the recent low, and the highs of early January. Notice the 200 moving average is on a course to meet the S & P valuation sometime in the next couple of months, which is the target.

S&P500 (SPX)

From WebSurfinMurf's Financial Blog

Gold and Gold miners have some interesting resistance levels. The Gold Miners (GDX) clearly has a resistance level around 43, both from previous highs and previous lows.

Gold itself is actually a good buy here, unless gold breaks below the lower red trend line. In general gold is on an upswing. So even though I am a little skittish on gold, "the charts" show decent room for GDX to move up to 43, and Gold in general trending higher.

*WARNING* Any break below the trends depicted is a sell

Gold (GLD)

From WebSurfinMurf's Financial Blog

GDX

From WebSurfinMurf's Financial Blog

Warning to gold bugs

If you have been reading my blog, I have been a proponent of resources. One of them gold, but recently I have been skittish, and sold excessive gold positions back in February. I stated then, and repeat, no one wants gold to hit new high levels, except speculators (crackpots?) and gold mining companies.

This situation reminds me when I started shorting sub-prime lenders in September 2006. It took 2 years for the public to understand the disaster the US and the world faced and for the stock market to reduce it's excess valuation. No one wanted the markets to collapse, including me. But the math and reality made it impossible to avoid.

For 2 years every trick was done to avoid devaluation until the tricks no longer worked. I see gold to be under the similar political pressures. All normal sanity shows gold should break out at any time. The IMF announced more talk on selling gold to help poor nations. A "side" effect (benefit?) is this may help keep gold prices in check, keeping pressure off of fiat currencies. Eventually the IMF and world governments willing to dump their gold to suppress prices will run out of resources and gold will rise significantly as it should against fiat currency printing.

The question is when will gold start to break out? Next week, next year, or 2012? Make no mistake, reality will also be reflected in gold prices. It will take patience just like it did for me back in September 2006.

I have significant positions in various baby gold miners. But those positions I can take a 30% drop without too much pain. For me its wait and see for Gold.