One Thing At A Time

Mondays can be rough. Today was one of those Monday's. Either I need a 4 day work week or I need the day to be 30 hours long instead of 24. Not likely!

Bearer Bond Media Note
I am not going to let this story die off, so i will try and find at least one mention of it daily.

Clusterstock's Joe Weisenthal was on the Glenn Beck show and did a small discussion. See video here.

Inflation/Deflation - Another View
An interesting take over at Accrued Interest on the -flation debate:

FED: Deflation? Over My Dead Body
But will we see CPI print below zero? Only if the Fed fails. In other words, sustained deflation remains a remote possibility. But sustained Fed interference in the markets in attempt to avert deflation is a strong probability.
So the bet should be not on deflation outright, but on the fallout from attempts to fight it. Weaker dollar. Higher commodities. Low short-term rates (including buying 2-year bonds as opposed to holding cash). Flat yield curve. Lower mortgage rates (at least from here).
That's is how I'm playing my deflation view.

I left a comment chiming in that would it be possible for deflation to take hold AND have a weaker dollar? An interesting thought experiment. The author seems to be closely aligned with my theorem that in the course of peeing their pants about deflation, the FED will cause all kinds of other damage trying to stop it. Leading to inflation! Eventually.

Dick Bove Sighting
I have spilled pixels on Dick Bove many times over the past 2 years, so I thought I might give the guy some more attention:

Dick Bove: Bank of America Faces “Horrific” Loan Losses (BAC)
"In the second quarter, (Bank of America's) position as the largest lender in multiple sectors of the American financial system will haunt the company as its losses expand," Bove said.
Nonetheless, Bove rates the company a buy, and raised his price target to $19 (from $14). He expects the price-earnings multiple on the stock to rise, and thinks confidence in the bank and its management are improving. This reminds us, of course, of our thesis from this weekend: the government’s guarantee against bank failure is driving up stock prices.

As an investor I try very hard to isolate companies who will "be haunted by expanding losses" and then load up on their stocks. NOT!

One Thing at a Time
Markets took a hit across the board today, with losses reaching their worst sizes since April. There was a ton of noise out there today, so I want to touch upon some things I was looking at.

It seems almost like the same players that are responsible for the two month gunning of futures right before the market close are unable to do two things at once. Today mission number 1 was to get a dollar rally. Helped by the Russian communication (so soon after the 135 Billion in bearer bonds was reported) that the US dollar was King Chit of Turd Mountain (KSTM) spurred the buck higher on the day. Of course a higher dollar is bad for stocks, oil, metals, well everything so everything fell.

As far as specifics, I will likely be stopped out of my SPY position taken a while back if there is further weakness. I have removed stops of my buys of SLV, GLD, and PAAS even though they are looking a bit weak here. Yes, I am a metals addict.

I should know better, and Tim Knight lowers the boom with Broken GLD:

"My precious metals shorts have done well for me; GLD now has broken a major trendline. Precious metals could be in serious trouble now."

Tim is a sharp player and I respect his call. Still, this is the 17th time in the past year that GLD and SLV have broken down on their way to zero and yet they still hang tough. We will see.

It seems the relationship between the dollar and stocks/commodities/metals has become super sensitive. The dollar only moved up from mid 79's to low 81's on the index so the aggressive move on the other end seems a bit overdone.

This relationship is a major contributor to my view that the dollar will have to weaken for any stock rally to continue. There will be one day wonders where the concentrated efforts to push it up occur, but the general market puking reaction will snuff that out.

It is a wild interconnected mess we have here. Balancing the buck and foreign interest in it with the need for a recovering market is a delicate dance. The folks in charge of the music think they can do this without a serious dislocation in one or more of the parts. Who has such a high opinion of their own abilities? From 10 years ago:

I submit the Committee to Save the World. Rubin and Summers are once again at the helm, and while Greenspan has since sailed on, we now have Ben Bernanke in the same position as Greenspan in this picture: The public face while the two behind him hold knives to his back.

I am sure this will all work out well.

Have a good night.

Glad The Worst Is Behind Us

I tried once again last night to get the wireless booster thingy I bought to work, but no dice. I must be honest when I say I HATE computer related stuff. It always seems to me that the design of all of it is complicated, not because it has to be, but because the loser geek types that make this crap like to make it that way. Whatever. I will have to decide this weekend what to try because my patience level is at absolute ZERO with this spotty internet deal. For only $120 a month you too can have useless internet usage! Thanks Comcast.

Richard Bove Still Making Sure He Stays in the News
There is a school of thought that any publicity, even bad, is good if it gets your name out there. While one can debate such thinking, one of Economic Disconnect's favorite analysts was out again today with a call on Citigroup (C):
UPDATE 1-Ladenburg's Bove widens 2008 loss view for Citigroup
Ladenburg Thalmann analyst Richard Bove widened his 2008 loss estimate for Citigroup Inc and cut his price target on the stock, after the largest U.S. bank said it could have substantial subprime write-downs in the second quarter.
Bove widened his 2008 loss estimate for the company to 36 cents a share from 19 cents and lowered his price target on the stock to $25 from $31.
The analyst said he sees another multi billion write-downs of Citigroup's super senior CDO (collateralized debt obligations) portfolio, which was marked down by about $6 billion in the first quarter, due to widening of spreads
More marks are expected on the subprime portfolio," Bove said, adding the $1.5 billion write-down due to the rating downgrades of monoline bond insurers might be matched by a similar write-down in the second quarter.
"Finally, there will be higher losses on the credit card portfolio and these losses will mount all year," said Bove, who maintained his "buy" rating on the stock based on the improved performance of Citigroup's core business and positive longer term outlook.

Richard Bove, welcome to reality. Mr. "financials are the at a generational buy" is singing a new tune. If the BSC guys can get indicted for lying, why not this dude? I have no idea. Compare the new Bove with the old Bove here:
http://economicdisconnect.blogspot.com/2008/03/fed-cannot-spawn-qualified-borrowers.html

Israel and Iran; What is Going On?
The buzz over the last week or so has involved a possible strike by Israel on Iranian nuclear facilities. What is my position on such a thing? Glad you asked! While I really do not understand why countries like Iran (or the former Iraq, Pakistan, North Korea) think a nuclear weapon is some amazing thing. Perhaps as a bargaining chip I guess they could be. Iran is run by crazies, is full of crazies, and is crazy after that. So my position is if it is at all possible, they should not have a nuclear bomb. So is it possible?

Iran must have known that a US or Israeli strike would be forthcoming when building their reaciors, centrifuges, bomb centers, etc. These structures are likely hardened and underground. I fail to see a way that an air strike can get rid of them. On top of that, with the US intelligence agencies so great at getting things correct (joke obviously) how in the world are they gonna know where to hit? IS the Israeli intelligence THAT much better? Who knows. I say hit it if possible, but I don't see how it is possible. All this is likely noise and bluster. Lets hope so. I used to use the Stratfor page ans the Strategy page for military analysis, but both sites are so heavily full of adds and require subscriptions to view the good insider material that I hardly check them any more.

Glad The Worst Is Behind Us
Another rough one for the stock market today. The DOW fell below 12,000 again and this was a big fear for those technical analysis types. Aren't ypu glad the worst is behind us? I am kicking myself for not putting money to work on several short funds I wanted to try, I would have been up pretty good. Oh well I am a chicken, I mean I am good at CAPITAL PRESERVATION.

So what does this mean? Well, with the monoline insurer downgrade, there stands to be another 100 Billion to be written down in the near future. The housing situation is going to get worse over the summer. Banks are goingf to have a tough time of it. We know all of this, though it is fun to see some in the mainstream finally getting a clue! What is the action going forward?

I would hazard a guess that things may be sort of stuck for the summer. I would say range bound between 11,500-12,300 on the DOW seems about right. Certainly there is no reason to be in stocks, but there is way too many people that will want to play bottom catcher for a big downside risk. The upside will be capped as news flow will be just terrible. Volatility will continue to be high, but I feel pretty good about those ranges. If the DOW gets to the 11,500 area, I will buy some upside bets.

Friday Night Entertainment
It is the weekend, so let's get relaxed, or excited, or just entertained, yes?

Great BBQ Smoking Site
I came across this guy's smoker site today, and his process is so simple and the food looks so good it makes me want to buy a smoker and get to work. Check it out here:
http://www.kickassbbq.com/index.html
I wonder what smoked prime rib tastes like? Anyone ever try it?

Science Corner
Cornstarch and water make a cool non-newtonian fluid that can behave as a solid under impact force, but liquid as ground phase. Check out these crazy guys:


Recombinant DNA technology is my job, it is what pays the bills for me. Here is a quick little video sombody made that is pretty good at shoing what I do:


Have a good night.

Thursday Musings

The dry aged steaks arrived today. They look amazing, definitely nothing like grocery store meat. The dry aging makes a deep red coloring, not the bright crimson of non aged meat. I will try to wait until Saturday to make them. My fishing gear also arrived. Two tidbits; first I highly recommend a pair of good polarized sunglasses. While perfect for seeing underwater objects up to 20 feet deep in clear water, they also provide excellent sun protection and no glare. Point two is for Watchtower. I got the St. Croix premier 6 foot one piece medium power rod, and paired it with a Shimano Sidestab reel (seems like the ONLY rear drag reel made now!) on clearance from Cabelas. The rod was $70, but the reel was only $30. For $100 you can have a bullet proof, sensitive, world class set up. Not to shabby.

Market Ticker Hit Dick Bove Again as Well
In last nights post I recounted the saga of analyst Dick Bove who thought as recently as March that the financials were a "once in a generation" buy. Now Mr. Bove is backing away from that call, and I was all over him. Market Ticker's Karl Denninger also has a good memory and hits on Bove as well:
http://market-ticker.denninger.net/2008/05/thrombosis-thursday.html

I love this kind of thing. Maybe Mr. Bove is just early on his call and I will look like a fool next year, but that's the name of the game.

If I Only Had the Time
One of the hard things about trying to run a real time blog covering things financial is having enough time. To write a good post that has the kind of content I am proud of and that I feel adds some value for readers takes a while. It is also hard to have all the needed data put together in a reasonable amount of time to be a current event. With the summer approaching and a decision needing to be made concerning my living conditions (buy the mom in laws house we are in, add an in law suite for her vs. having to buy in a collapsing market), fishing season, the yard work, regular work (yes I have a job), cooking dinner (yes I do all the cooking, my wife has it all!), and trying to read and watch some sports....well you get it. It can be hard.

I am so jealous of masterful writers like Mike "The Mish" Shedlock. If I had the time I wish I could do proper research quickly and write a post that has so much detailed information that is so very relevant that YOU MUST READ IT NOW! Here is a prime example concerning how the older members of our working society are increasingly facing tough times and tough decisions:
http://globaleconomicanalysis.blogspot.com/2008/05/pink-slips-hit-older-workers.html

Mish blends today's headlines with his demographic post from the other day in a way that really shows you where things are headed. Great stuff.

Now I really enjoy doing this blog and I am going to keep up with it, but try to remember that I am just a hack trying my best, not a pro. I still think my Friday Night Rock Blogging simply has no peer on the Internet, or Internets if you are the president!

So to better serve you, the reading public, try to leave some story ideas in the comments section. Sometimes, like tonight, I am short of post ideas. I can just copy your idea, do a little research, and post a blog and call it all mine. Let me know what topics you want to have discussed here. I am open to all ideas, but keep it reasonably clean, HAHA.

I leave you with a clip from "The Outlaw Josey Wales" a great film based on the novel "Gone to Texas" by Forrest Carter. If you buy the book, included is the story "The Vengeance Trail of Josey Wales" which is an excellent story as well. Maybe they can make a part II?

Anyways this is where Josey meets Ten Bears:


As always, I am taking film, music, or "other" ideas for Friday night's post.

Have a good night.

The FED Cries "No Mas, No Mas" and Throws in the Towel

Another crappy weather day here. Friday things should improve, and this weekend should see temps in the low 80's! I have Monday off and I get out of work at noon om Friday when my company closes for the weekend. Too sweet.

Reader Watchtower wanted to know my opinion of the G-Loomis rods as well as my impressions of the St. Croix line. Well, I exclusively use St. Croix Premier rods for my fishing in sensitive situations. I fish Senkos in extra clear water a lot, and subtle pickups are best transferred along a solid graphite blank. I can feel the senko bait wriggle and fall by touching just above the rod handle. I can even feel a fish mouth the bait and spit it out at times! For $65-$90 dollars there is no finer rod available. The cork handles are extra nice as well. G-Loomis is comparable, but more expensive. Still a fine rod. I use the good old shakespeare "Rhino Rod" when I go Carp fishing because I am always afraid of hooking a huge carp and the rod snapping in two, as has happened on 3 occasions in my fishing career.

Anecdotal Evidence Warning
I love anecdotal evidence because it is so amorphous in value. So many "maybes" can be attached that they either offer a cutting edge insight, or a worthless one off observation. I offer the following item I saw this week for inspection.

On Monday, Tuesday, and today I saw a car pulled over in the breakdown lane and the Massachusetts highway assistance truck pulled over behind it. Nothing weird there, as those puke green vans stop to help flat tires, overheating radiators, etc. In the three instances I saw this week, the mass highway worker was at the gas filler cap putting gasoline into the car!

I realize that cars run out of gas, and I do remember seeing this about 4 other times, but that was over the past 2 years. 3 times in 3 days? Right as gas prices are climbing? Coincidence? You be the judge, but I think folks are trying real hard to stretch the gas as far as possible. Anyone else see anything like this?

Mainstream Media Stories Almost Reflect Reality
If the current trend of reasonable news stories continues, this blog might wither and die. I saw no less than 5 stories that actually asked a few questions and made some basic observations. What a concept, I know. Check out this one of the many that stood out to me, full link here:
http://www.bloomberg.com/apps/news?pid=20601039&sid=aLklP1rkra7w&refer=home

The article goes over the Freddie Mac mythical earnings report from a while back. Good reporting overall on the balance sheet shenanigans. At the end the author, Jonathan Weil, hits it out of the park and resonates just like this humble blog with this quip:

"While the accounting-rule makers can't fix Freddie, they can fix the rules, by treating all securities the same and counting all gains and losses in net income. That would render the meaning of the word ``temporary'' irrelevant, eliminating the opportunity to abuse it.
Until then, we're left with a system in which the only reason Freddie Mac is now solvent is that everyone who matters has agreed to believe it's true. That can't last forever, either."

Perfecto! Welcome to the "pretend, deny, delay" club!

Dick Bove Already Squirming Away from his Ridiculous March Call
Loyal readers may remember my favorite clueless shill, Dick Bove formerly of Punk Ziegel, now Ladenburg Thalmann company. My March 20th post can be reviewed here:
http://economicdisconnect.blogspot.com/2008/03/fed-cannot-spawn-qualified-borrowers.html

Basically Mr Bove said that the US financial crisis was over. Done. No uncertain terms, no ifs ands or buts (butts?). Here was the quote from then:

The U.S. financial crisis is over but problems facing the economy are not, said Richard Bove, financial analyst with broker Punk Ziegel, adding that this was a "once in a generation" opportunity to buy bank stocks."I do, in fact, believe that the crisis is over. There will be more negative developments but they will be meaningless," Bove wrote in a note to clients."This comment sounds ridiculous given the conviction on the part of most commentators that the worst is yet to come; the extent of the decline is unknown; and that the length of the decline is similarly unclear," Bove wrote."An environment has been created that will pump profits into the American banking system," Bove said

Certainly a gutsy call! How is Mr. Bove doing on his rosy forecast? Well, let's take a looky loo:
AP
Shares of Lehman fall amid hedging concerns
Wednesday May 21, 4:52 pm ET
Lehman shares fall amid speculation hedging losses and severance will hinder 2nd-qtr results
NEW YORK (AP) -- Shares of Lehman Brothers Holdings Inc. fell Wednesday as an analyst said less-effective hedging strategies, and severance costs, may hurt the investment bank during the current quarter.
Lehman's shares fell $2.44, or 5.8 percent, to $39.56. Shares have traded between $20.25 and $82.05 during the past year.

Try to guess which analyst! Try hard!

"The company's hedges which worked so well to blunt the impact of markdowns in the first fiscal quarter may not be working so well now," Ladenburg Thalmann analyst Richard Bove wrote in a research note. "Plus, Lehman has begun the process of laying off personnel."
If hedging strategies failed in the past three months, Lehman could post a quarterly loss when it reports fiscal second-quarter results, Bove said. Lehman's fiscal second quarter ends May 31.
The amount of money Lehman must pay out in severance as it slashes jobs is also unclear, Bove said. The size of the cuts and severance is likely to hurt financial results during the current quarter, he added.
Bove cut his price target to $38 from $48 and his fiscal 2008 earnings estimate to $2.36 per share from $3.87 per share. Lehman's fiscal year ends Nov. 30.

Well there you go. A once in a generation opportunity to buy financial stocks! Well maybe he meant it would take a generation to get your money back. HAHAHA. If you bought LEH on Mr. Bove's great call on March 20th at $48 bucks a share, you are looking at $40 bucks right now, a sweet 20% haircut. The worst is over crowd just got one smart ass smaller it seems. Way too funny.

The FED Cries "No Mas, No Mas" and Throws in the Towel

Fight fans may recall the rematch fight between Sugar Ray Leonard and Roberto Duran. Leonard was running around the ring, jabbing and clowning, and frustrating Duran so much, he tirned his back and said "No Mas, No Mas" (No More) to the referee and gave up the fight.

It seems the FED is at the same point. Embarrassed (hopefully) by the repeated "inflation is expected to moderate in the coming quarters" statement being disproved on a daily basis; Wrong about the whole "growth will rebound in the second half of the year" line that is trumped by Home Depot and Lowes saying no freaking way; and loss of all credibility in their craven attempt to bail out wall street, the FED has come to an inflection point.

The minutes of the last FED meeting were released today, and as soon as they were read, the markets had a fit. Barry Ritholtz at the blog The Big Picture had it perfectly summed up as thus:

"FED: Sorry Our Bad. FOMC minutes were released at 2:00pm this afternoon.
Upon reading the release, Candide suffered a fatal heart attack.
The reset of the cheerleading squad of pollyannas simply lost their arguments -- along with their lunch -- that growth is fine, inflation modest, the credit crisis contained.
The FOMC lowered their growth forecast, raised their inflation and unemployment forecast. The only omission in the announcement was their new policy, for the first time ever, of buying Index Puts to pay for all of the new Credit Lending Facilities.
Markets, which were positive, rolled over and fell 250 points."

The news that Moody's may have a computer issue that incorrectly valued certain debt instruments also did not help matters.

What to make of today's action? The FED minutes were pretty rough. Either it is time to buy guns, or it is time to load up on stocks! The FED is always wrong. Always. What we need to figure out is to which extreme is the FED wrong? On one hand we have a real recession that morphs into a major downturn (Depression, major recession?). Or a huge rebound occurs pushing markets to new highs. What is it going to be? Hard to say for sure, but I am going to go with the pretty terrible recession idea. Thought I do expect "the worst is over sentiment to moderate over the coming quarters". Bank on it!

Have a good night.