Referee Stops the Fight!

I am looking at snow in the morning then a move to all rain for about 2 inches of precipitation! Can you say New England flood? Nasty.

Tomorrow is Friday so get those requests in! I do music, film, books, science, and anything else you can think of. As of late I am reminded of a line from the film "Major League":

In case you haven't noticed, and judging by the attendance you haven't,....

Not many folks stopping in. What can you do.

Referee Stops the Fight!

"When you start comparing apples with peaches, you are not speculating, you are in the lemonade business"
-Famous Investor Jesse Lauriston Livermore

If the markets were a boxing contest the referee would have stopped the fight today. Wild gyrations and crazy action result in a mess where everyone is confused. I warned last night on plowing into oil and metals and today that was evident. Longer term, things may well work out (especially the metals!), but why join a mad crowd at an Best Buy Christmas early open ceremony?

For a great metals read, see Jesse (the other one) at the Cafe:
Silver Market Hit Hard With Bear Raid - The Infamous Dr. Evil Strategy

For oil, what can I say when a policy advisor advises intervention in Saudi Arabia should things get out of hand to keep the oil flowing:
Charles Krauthammer: All Hell Could Break Loose In The Middle East After March 11
Energy. Cheap Energy. Your I-whatever's need it, your Twitter accounts depend on it, your Facebook addictions demand it, your car cannot live without it. Now, how do you want to pay? Cash or intervention via military force?

For a thought experiment, check out Leigh Drogen's great essay:
Dictators Don’t Have Perfect Information
I left a comment saying "Great Points" but reading the item I was struck how our own Treasury and FED are the EXACT SAME THING Mr. Drogen wonderfully explains yet he does not mention them.

I had some more stuff, but I have some work to do.

Added: Going into the buzz saw with HSY and DAN.

Have a good night.

Take a Time Out

Take a Time Out
After the quiet of the past few months I guess a little crazy was due for a visit. No, not your old Auntie stopping in, but a schizo market all over the place.

There is so much going on right now I cannot even pick a place to start. Some things to keep in mind for longer term planning:
-FED member Hoenig put to words many of the structural problems now embedded in our system via FED intervention. I know it sounds crazy but at some point the FED will have to exit the markets. What will that look like?
-Saudi Arabia pulls a Bahrain and hands out big cash money to the little people. Uh oh.
-President Obama's speech on the Libya issue was about as weak as could be. Big miss.
-For a two day downdraft the run to Treasuries and the dollar was no place to be found. Write this one down if it is not an outlier going forward.

In the near term I am seeing many either:
-Wanting to really load up and buy the crap out of this dip
-Wanting to get into cash to plow into metals and oil

I was stopped out on all positions for my trading account. COCO (+3.9%), PRSP (+2.3%) and AMRC (-9.6%) are all closed. For my first 8 trades of the year I am 7 wins and one loss. I felt the itch to get involved again tonight, but what I did was take a time out. It was a good idea.

I am a long term gold and silver bull (long physical of both in my core holdings since a long time ago) so you know I am not anti metals. I have traded metals and metal miners for a long time and what I am seeing right now is not jumping out at me as a time to get more involved. Silver plays especially are all hitting the triple top area and only SLV (most closely mirrors physical) has made the big breakout. Gold has lagged silver here for a bit, and plenty of stalwart gold miners are still looking poor to me (KGC for one). In short, metals are harsh and they will break your heart short term. Be careful out there.

Energy as well looks too aggressive and I don't think oil can get to $140 this time. The last run up had the peak credit bubble behind it for gas money, this time no one has a job or home equity.

I do not give investment advice here, clearly! I just offer my take on things. What I am going to do is wait until tomorrow night to do some work on screens based on a couple of scenarios:
-Civil unrest in various places get better, QE3 talk hits the weekend discussion rounds, overall more quite environment
-All hell breaks loose
On Monday I will review market action against what positions I may want to enter and have at it, or maybe not if that makes more sense. I am cautious by nature.

I know, I am not making any real concrete near term prediction here. I simply do not have enough information to do that and I fail to see how anyone else could either in this mess. Offer any ideas in the comments section on what you are thinking about or looking at.

Have a good night.

GDP Will Be Fine, As Long as Consumers Buy Tchotchkes

Wild rain and heavy winds here last night. No damage to the plants however. The garden is looking strong indeed. Loyal reader Watchtower had asked if I had seen any pictures form the Mars Phoenix lander. I watched the whole thing on NASA TV live! I love space stuff, and the phoenix lander is amazing. Plenty of good photos out there with my two favorites being the lander being photographed during its descent by the Mars recon orbiter, and the picture of the camera shadow from the lander itself. Check out all relevant info here:
http://phoenix.lpl.arizona.edu/

Sudden Assault on Bubbles Obvious to All
It seems that the shear hypocrisy of the "some bubbles are bad" line of thinking is getting a fair amount of coverage. Mish has a good discussion going and Tim Iacono over at The Mess That Greenspan Made has the best one liner yet from one of his posts today:

"Aside from the remarkable surety with which many analysts are now able to identify a "commodities bubble" in real-time, a feat that seemed impossible for both the stock market bubble and the housing bubble just a few year ago, the one part of the "commodities bubble" discussion that seems most ill-reasoned these days is the eagerness to pop it."

I spilled a ton of virtual ink on this already. Tim's line is perfect as it captures everything that is so wrong with the entire system. You had to basically have every possible data point corroborate that there was a stock (2000) and housing bubble (2005) before the bulls were dragged kicking and screaming to see the truth, but now Oil and food are sure fire bubbles that need intervention. Ok I'll play.

Say oil is overpriced relative to some fundamental analysis by, for the sake of argument, by 50%. So oil should be at the $60-$65 a barrel range. No problem. I am sure the stock market would rally huge on that oil price collapse. Now reduce home prices by the 20-40% that they are still out of line with fundamentals and hows that action? Still like bubble popping? I sure as hell would! Vote on the new poll which asks which bubble is/was the most hurtful.

GDP Will Be Fine, As Long as Consumers Buy Tchotchkes
As you may know already, I am a huge fan of the major news outlets and their stories on finance. I think they are very revealing, not through insight or rugged analysis, but because they are the face the MSM wants to put on things. The facade if you will. Sometimes though you get a nugget that shows the underlining belief under the surface, and today was one of those days.

Faced with a durable goods number that was a bit better than expected, the market rallied, pulled back, and closed higher based on a line that a recession will not occur. Leave that debate out of it for a bit and check out today's Yahoo Finance lead headline story:
AP
Stocks rise after durable goods data
Wednesday May 28, 6:01 pm ET By Tim Paradis, AP Business Writer
Stocks rise after smaller-than-expected drop in durable goods, but oil weighs on investors
NEW YORK (AP) -- Wall Street managed to finish an erratic session with a moderate gain Wednesday as investors found some comfort in upbeat data on durable goods orders.
Oil prices, however, remain a big focus on Wall Street. Crude's recovery from its lows Wednesday ate into some of the stock market's enthusiasm over the Commerce Department's durable goods report; the government said orders for items including aircraft, machinery, cars, refrigerators and computers slipped 0.5 percent last month.
Wall Street expected a steeper decline. Excluding transportation, orders rose 2.5 percent -- the sharpest increase in nine months. And orders for electrical equipment and appliances jumped 27.8 percent, the largest-ever increase.
"There's a lot of commentary especially out of the Fed that the oil prices are rising because of basic demand as opposed to speculation in the market. I think that has a chilling effect on the stock market," said Kim Caughey, equity research analyst at Fort Pitt Capital Group.
A drop of more than $3 a barrel helped stocks finish higher Tuesday, the first day of trading for the week after Memorial Day. But last week, oil saw a fresh record of $135, and the major stock market indexes lost more than 3 percent as investors worried that a surge in oil and gas prices would dull discretionary spending and upend whatever growth the economy might manage.
"The consumer's behavior is changing. They're not getting in their car, driving to Wal-Mart and loading up on tchotchkes that they may or may not need," Caughey said."

I have to admit, I had to look up "Tchotchke", and here is the Wiki entry:
Tchotchke originally from Yiddish because there is no standardized transliteration; trinket, ultimately from a Slavic word for "toys" are trinkets, small toys, knickknacks, baubles, or kitsch. The term has a connotation of worthlessness or disposability, as well as tackiness. The term was long used in the Jewish-American community and in the regional speech of New York City.

Imagine this, consumers may not be buying up crap they do not need by the bushel going forward! Oh No! What will become of our economy if every single dollar made, and plenty more that are borrowed on debt, are not spent with reckless abandon?

If you are one of these type of people that are the perfect consumer, take a minute and look over that line again. You are counted on to be a damn fool and spend money on things you do not need to line the pockets of rich people. Too funny. I hope someday soon the severity of how screwed up things have become is somehow brought to bear on many US "consumers".

Until then, I have to open up an online "Tchotchke" business!

Have a good night.

Oil is all the Rage

Long weekends are good and bad. The good is the time away from your actual job, sleeping later than 5am, and time aplenty to do whatever you want. The bad is the first day back to reality. I really did not want tot get up this morning. Tough time.

Anyway, I had a good weekend. The dry aged steaks were amazing. The new fishing rod and reel setup work extremely well. My potato plants are growing like crazy now. I hope you all had a good holiday weekend as well.

Airline Bailout on the Way?
I read a story this morning (I can't remember where I read it or who wrote it; it was early this morning and I was half awake!) that was discussing the price of oil and how much it costs the airlines to buy fuel in the current high price era. The numbers were pretty scary and towards the end the writer remarked that the airline industry will be calling for their own bailout by years end if things do not moderate on the oil price front and fast.

While I am certain that the price of oil will "moderate in the coming quarters" this line of thinking certainly has become first response as of late. Industry in trouble? Bail them out! This is what happens when you ignore moral hazard.

So we are currently bailing out the following:

• Insolvent banks that caused the mortgage mess due to greed and poor management
• Insolvent home mortgage borrowers that chased prices up

Airlines a possible next bail? How about this list of possible bailouts that will be needed:

• Airlines broke from fuel costs
• American auto makers
• Home builders at some point
• Realtors and finance jobs that are being lost

At what point can we just bail on the USA? The speed at which we have arrived at complete acceptance of pure socialism is scary. No debate. No vote. Nothing but the FED along with the money folks screwing the taxpayer so they can stay rich. Ugly stuff.

Oil is all the Rage

I have about had my fill already of the oil stories. As I have said oil speculation is bad while speculating in housing is awesome. Oil speculation should be investigated by congress while home speculation should be encouraged by tax breaks and bills from congress. You get the idea.

The oil price angle, and the causes of the higher prices may be good in one way. Finally there may be a fair and objective look at what Greenspan/Bernanke easy money has done to the dollar and commodities as functions of excess liquidity. I would not hold on to that hope too hard.

Have a good night.

Oil is the Bad Kind of Bubble

Well it only dropped to 42 degrees last night and the plants in the garden seem to be ok. Lets go with the springtime temps already! Going to order some dry aged ribeyes tonight for dinner this weekend after I blog. I love the grill.

Massachusetts Senator Kennedy with Brain Tumor
My home state Senator, Ted Kennedy, has been diagnosed with a brain tumor. While I am not of the same politics as the esteemed Senator, I would like to pass along my best wishes for his health and a hopeful defeat of the tumor.

Fannie and Freddie Profits to Fund Housing Bill; What profits?
Some details came trickling out about the dumb housing bailout plan. Allegedly the plan will not cost the taxpayers any money because, get this, profits from the GSE's Fannie and Freddie will be used to fund the logistics of transferring the mortgage to the FHA or something. The plan is as convoluted and complex as any plan you would expect from the Senate.

FNM and FRE have had some issues first reporting correct earnings reports when they had profits, and now they have no profits anyway. Hard to see how mortgages guaranteed by the FHA are not going to cost the taxpayers any money, is the FHA part of the government or what? The crafters of this plan obviously think that home values are at THE BOTTOM and foreclosures are a thing of the past. What else can you expect from our leadership.

Oil is the Bad Kind of Bubble
The market had a rough go of it today. Most commentary attributed the drop to oil prices near $130 a barrel and a hot inflation number. Why oil at $100, $110, $120, or even $125 did not cause any issues is beyond me if oil at $130 is some mystic evil number. In fact, there was a quick jump in thinking that the major issue facing the economy going forward was now Oil prices!? Weird indeed. From Yahoo Finance:
AP
Stocks stumble on record oil, inflation worries
Tuesday May 20, 5:47 pm ET By Joe Bel Bruno, AP Business Writer
Investors retreat as oil passes $129 a barrel, more worries about rising inflation
Analyst Stephen Leeb believes escalating oil prices and their fallout have now replaced the health of the financial sector as the market's biggest worry. He said rising energy creates a "very vicious circle" through the economy, and thinks the government must take some kind of action to bring down prices.
Oh Man! Already we are going to start hearing calls for more government intervention, this time in oil prices? An oil bailout? Can Fannie buy oil futures? Don't laugh, anything can now happen in the new era of socialist America.

"Stock investors are watching oil, period," said Leeb, whose New York-based Leeb Capital Management focuses on crude and its impact on equities. "The events that moved the market before revolved around write-offs and foreclosures, but all that's changed."
When did the housing crisis and credit issues stop being the main problem? I guess at 2:30pm today when oil prices won out.

But some analysts believe the market's slide gave investors an opportunity to collect profits. Peter Cardillo, chief market economist at New York-based brokerage Avalon Partners, said Tuesday's decline doesn't change the market's long-term prospects.
"The oil price rise is being done by speculators and does not reflect market fundamentals," he said. "But, it still has an effect on the consumer -- and investor confidence is equal to consumer confidence, which has been having swings as of late."
And we see a familiar pattern once again.

You see Oil prices are in a bubble that is disconnected from any fundamental valuation of the commodity. This is bad. This must stop.

When home prices were in a bubble that is disconnected from any fundamental valuation of the commodity, that was good. Awesome in fact. So great that while home prices are now falling to better reflect their value based on fundamentals, there is a furious effort to try and stop that process from occurring.

Is oil more important than housing? Both are life needs. Why the differential treatment? Where are the ads and talking heads saying "Buy Oil Now or You Will Be Priced Out Forever!" How about "Stunning Oil Barrel for Sale, Recently Updated and now with a Granite Barrel".

Nobody cared much for the people getting priced out of housing when prices were doing the parabolic thing. In fact smug home "owners" often taunted and jeered at people that opted to wait or could not afford to buy in the bubble mania. These same aloof fools are now whining for help. Unreal.

In summation, I had posted on May 5th that Oil was approaching and important psychological point. I had ended that post:

" I am struck by how strong the desire is out there to be optimistic about various things. Oil is becoming a major threat to that mindset. With all the FED bailout plans and emergency lending tricks have created a new bubble, a bubble in sentiment? If oil at $120 means nothing bad in a macro sense, then you know folks are pretending hard. It is shaping up to be a LONG summer."

And today we see an AP article that says what I said, well kind of. One can dream that reality has come back to the market, but I imagine today's action will have no follow through. When the Oil price bailout plans start to circulate, you know it is time to kiss your money goodbye as the government is going to need all of it very soon. Vote in the new poll!

Have a good night.

Oil Prices Are Approaching Critical Psychological Levels

Cyclones blast tiny Myanmar, and a volcano erupts spreading ash over a large part of a Chile town. Natural disasters really show us surface dwellers who is the boss. Scary stuff.

Countrywide Deteriorating Rapidly
Even though the "worst is behind us" in all things financial, CFC's mortgage portfolio has still undergone substantial degradation since January? Now who would have guessed that one? From Yahoo Finance:
AP
Countrywide shares fall as analysts question deal price
Monday May 5, 6:00 pm ET
Countrywide shares fall as analysts predict say Bank of America may renegotiate buyout price
NEW YORK (AP) -- Shares of Countrywide Financial Corp. tumbled Monday as two analysts said Bank of America Corp.'s planned acquisition for the mortgage lender could be renegotiated to a lower price.
Countrywide shares fell 62 cents, or 10.4 percent, to $5.36 Monday. During the past year, shares have traded between $3.95 and $42.24.
Friedman, Billings, Ramsey & Co. analyst Paul Miller said in a research note Bank of America should walk away from its acquisition of Countrywide, or at very least reduce the purchase price, because of continued deterioration in the mortgage market. Miller pegged a new sale price at between $0 and $2 per share. He set his price target for Countrywide at $2.

CFC was a dirty company that will come to be seen as everything that was wrong with aggressive mortgage lending. I have always contended that BAC was not going to be happy with being strong armed by the FED into this deal. Now things are looking weak. I imagine the deal will indeed go through, but there is going to have to be some layoff of portfolio risk. Where is that going to come from? You guessed it! The FED and by extension, the taxpayers.

I am going to offer some advice to banking CEO's that they may want to write down:
BEWARE the FED. The FED's only interest in deal assisting is to provide a smoke and mirror show for wall street. The FED game is one of confidence. The FED does not have either the time or the ability to review in detail whether CFC has value for BAC, nor if Bear Stearns can be reasonably absorbed by JP Morgan. The FED just wants a headline. You, the buyer will be stuck with the residual nightmare. Now maybe the FED will help you out of the mess they got you into, but that balance sheet of the FED is looking ragged right about now. You have been warned!

More Hypocrisy From Washington and their Ilk
Presidential hopeful Hilary Clinton would like a gas tax holiday to help the "struggling consumer" ie potential voter get by the next few months. What a big heart. To pay for the tax break she has proposed big Oil companies pay the tax break from their record "windfall profits". Well there you go. At the same time that plenty of congress fools are trying to get tax breaks for home building companies so they can get the tax they did pay during housing's windfall run back, now we are supposed to grab oil revenues from Exxon and the like? Hypocrisy anyone? High home prices, record builder profits=GOOD, High oil prices, record refiner profits=BAD. You need both housing and energy, yes? So why the different treatment?

Capitalism is dying before our very eyes folks. And as the saying goes, it is dying to thunderous applause. Wall Street, especially the financials, have screwed up so badly that they are cheering on increased FED oversight and loss of independence. The mainstream media wants a recovery story so bad they are willing to allow poor decision making to go unchallenged. The elected official are so hungry for angry voters to vote for them, they are promising the world through money creation and bailouts to buy votes. Truly a sad state of affairs.

Oil Prices Are Approaching Critical Psychological Levels
Oil closed up again, going over $120 a barrel. This is starting to get pretty scary. My psychological test was at $90 a barrel. When crude went over that I remember thinking "oh man, this is going to cause a panic". Of course nothing happened. $100 came and went, and now $120 is staring at us. What would cause a panic? $200? $150?

If oil continues to be at the head of all the news casts and headlines, eventually confidence MUST be influenced. This is a strange time. Most economic indicators are solidly in areas where past panics and recessions have ensued, yet there is a visible attitude of "all is well" out there in financial land. Maybe it is just whistling past the graveyard. Maybe I have no idea what I am talking about. Both possibilities are about equally likely, but both cannot be right.

I am struck by how strong the desire is out there to be optimistic about various things. Oil is becoming a major threat to that mindset. With all the FED bailout plans and emergency lending tricks have created a new bubble, a bubble in sentiment? If oil at $120 means nothing bad in a macro sense, then you know folks are pretending hard. It is shaping up to be a LONG summer.

Have a good night.