The bad weather has come to Massachusetts with some wet snow falling a bit west of here. It will not be long now.
How Much Room to Run? I have been looking at markets quite a bit as of late and wanted to touch upon a dynamic that should be coming into play fairly soon.
By now most are aware that huge runs in equities, metals, and commodities have been reflected in a weakening dollar. The QE 2.0 talk that started this summer initiated a melt down in the buck and assets soared. It may be helpful to take a look at where we are. Here is a dollar index chart going back to 2008: It should be readily apparent what we are looking at: -the March 2009 lows in stocks were a top in the dollar -the dollar was smashed during the run up in asset prices -the buck was king kong again at the height of the Euro concerns and the summer slowdown -QE 2.0 hopes have taken the dollar down once again
That's nice, but what does it mean?
Looking at the charts the dollar has found a continual bottom around 74, and maybe has touched 72 a few times over the years. I have seen discussions about the dollar breaking down under 70 and what that may mean. While I have little doubt the FED could lose control, I just do not see it happening. 74 or 72 will hold and by then the Euro mess may come back to the front pages.
Recent history has shown that a stronger dollar will be bad for stocks and most everything else. We are sitting at about 77 right now, so another 5% move can be expected to the downside for the dollar. This may not correlate to a 5% upside in other assets, it may well be more than that. What I am trying to show here is that the upside will be limited going forward. Unless.....
Asset classes decouple from the dollar dynamic that has been in play for some time. This is not impossible but I do find it unlikely. Still, this is something I am watching right now and will make plans accordingly. You will want to be watching at the 72-74 range for the dollar if a shift occurs. Many trades right now are very crowded and upon a reversal the exits could be jammed.
I am Not an Alarmist My long held vision that the world will be over run with robots is not new, yet I am sure we have never been as close as we are now! Take a look at this wishful thinking from long ago: News Article from 80 Years Ago Warns of the Impending Robot Age Here is the scary vision from way back: I think this was a bit premature. Now, not so much!
New Tool Now in Play I have been impressed with iBankCoin's Chessnwine since starting to read him on a hat tip from Josh Brown of The Reformed Broker. After watching this guy make uncanny calls for months I wanted to learn a bit more about the PPT, a trading tool and screener based on their own program.
I signed up today and I am impressed already with everything the PPT can do. There is a TON of useful stuff there and it will take me a bit to figure it all out and do some testing before I start using it to support my own secret way of picking out positions. I think it is going to be fun. I will update in a while when I am ready to start getting to work.
College Band CD Find The wife found a CD with songs from a band some members of my college program (biotechnology) had made way back in 1997-1998! I was so excited because I knew there was a particular song I used to love and I have not heard it in years!
The band was called Man Bites Back, which was funny. I have no musical ability so I was not involved, but some of my best college friends were in the band. They played all kinds of stuff and got to play local clubs in Lowell. They even scored a show at T.T. and the Bears in Cambridge! That was a wild time!
For a bunch of scientist hopefuls, they could really play! Here is my favorite song by the band titled "Ghetto Starlight". This song is about 1000% better in a live setting when the singer can really let it rip, but the recorded version is awesome as well. I spent about an hour figuring out how to put it on YouTube and so here it is:
"She took me by the hand on a rocket ride! Into the sky! And I don't know why!"
Thought I would share a great memory from the old days. I hope you like the song.
Reader Submission I was going to write about a few things tonight but I am tired and the week has had enough written on it. All I can say is I already see serious discussion about how and when QE 3.0 will happen and I know that I will be proven right that the FED is now a permanent part of our markets. Here is a picture for you to think over: see more Very Demotivational
Alas, a reader left a sharp comment the other night in the post on 11/1/2010. I am including it here because I think it has real value when thinking about how far we are going to go to attain the old levels of blow off top spending after a huge bubble collapse. From reader Watchtower:
Could the US have a currency crisis?
I say yes, and all the fallout that goes with it. This is my main thought when I think of things financial. On the surface it seems ludicrous to think the US won't continue in it's 'Pax Americana' tradition but even Rome finally crapped out.
Personally I don't think the US will have hundreds of years to wind down like Rome. Why? Everything is going faster at this point in history, we now have instant global communication for one. Who would have ever believed such a thing as the internet for example, or that ordinary people from most western civilizations (and elsewhere) would have access to it?
It appears that mankind has made huge strides in the past 100 - 150 years, but one thing that never changes is human nature. And a part of human nature is greed. And out of greed usually comes deceit. And to my way of thinking that is where we are at, living in a stinking sarcophagus of fraud. Not a house of cards as some say, but a burial tomb in which the first stone was laid around the turn of the last century for our nation. Some say that they won't kill the goose that lays the golden eggs, but it's just human nature to do so, whether they want to or not.
There was a program on 60 Minutes that showed a movie crew filming in San Francisco just a few days before the big earthquake in 1906. http://tinyurl.com/2eyvshc
People were going along their merry way, no thought of imminent disaster or that their world was about to be violently shaken. I sometimes get that feeling when going about my daily routine of meeting and greeting this person and that. Sure they know that things have changed, but do they really have a concept of the precipice that we are on? Not in my opinion. I would love to believe that everything is going to turn out OK but I just can't. I've been raised to believe that the piper has to be paid, and to my reckoning there is one hell of a bill coming due. It's coming. "...and the wind began to howl"
A thoughtful comment that I am thankful for.
Friday Night Entertainment I know I need some distractions, how about you?
Jack Finney I do believe that Jack Finney's special novel "Time and Again" has a new fan! Who wants to go ice skating in front of the Dakota Hotel?: One of my favorite novels.
Win or Fail, it is Funny Some selections from Failblog.org?
We usually went to the zoo or the Lowell Library for field trips but this would have worked: see more funny videos Nice.
Star Wars Travel Posters Amazing and original work by Steve Thomas! Check them all out but here was my favorite: That is so going on my wall in the den.
Clips and Stuff Some items worth a look.
It seems ALL of the episodes of the series "The Highlander" are now full length on YouTube. Yes, I know I am an addict. This show was what really great TV could be, I only wish it was an HBO series with a proper budget. Oh well.
In any case, take a few minutes and watch this clip from the episode "Finale part I" and the scene I love starts at the 12:17 mark. Follow through to the 19:50mark and tell me it was not special:
Great stuff.
Speaking of HBO series, No more "Rome" and no more "Carnivale". At least "True Blood" looks like it will be on forever....
Chilling.
Rock Blogging Time for the tunes. With no requests I am on my own. You have been warned!
I like this song and I guess I have no idea why, but lets go back to 1965 with Billy Joe Royal and "Down in the Boondocks":
Old music is wonderful.
From old to new, here is Pink's new song "Glitter in the Air":
I like that one.
Set aside the theatrics and the make up! Alice Cooper's "I'm 18" is a great tune:
WISH I was 18 again. Thought I knew everything. Such a waste.
On a lighter note, try Primus and "Winona has a Big Brown Beaver"; sure to get a chuckle:
So very wrong, but strangely funny.
In case you missed the million times I played it, here it is again! "Two of the Lucky Ones" by Droge and Summers Blend (with lyrics):
A little romance song for you all! Take a ride back with Whitesnake and "Is this Love":
The song is good too!
Last call! Last tune, last chance for what? Redemption? Absolution? Revelation? Who can say.
All I can say is if you leave me with no requests, you get a live Randy Rhoads tune to close! Rock out with "Children of the Grave" and I triple dog dare you to listen to the whole thing and not get a little amped up. I dare ya!:
While there was some turnover last night in the elections, not as much as would have been needed to really scare the politicos enough. Still, one can hope a message got through to D.C: The economy stinks, the FED and the bailouts help the banks, and we are all getting pretty sick of it.
Another QE Term Another terrible candidate won again today, Quantitative Easing. QE 2.0 as it is known now (later QE, WOW! That was a long time ago!) won another stint at the plate for the next 8 months. The FED will work hard to monetize almost all Federal debt and this is a good thing in some way. Fine, it is what it is.
Some have argued this may ignite a currency war but what do we care, we are the reserve currency and thus cannot concern ourselves with the problems (real or perceived) of others.
QE has been ineffective in much of anything useful. It has set a real bid under commodities and equities, but those are not reflected in the CPI anyway.
The yield curve will remain steep which will aid the banks in case mortgage losses and putbacks end up not being solved through legislation due to the new makeup of CONgress.
So what does this all mean?
Short Term (next 8 months or so) -equities will rise -commodities will rise -gold and silver will rise -junk yields will soar
Basically what you have seen for a while will continue on. I can see a scenario where a monster move up occurs in stocks to a blow off top, but I think it will more of the stair step 1% days as far as the eye can see kind of thing. Commodities may see a more violent surge. This is not a good thing but it may support aggregate demand if folks try to stock oil in tanks under their home. You have heard of contango, right?
What can you do? Well, savings are trash and cash is dead. It has been and I had hoped for a more sane policy and reform but then I am a fool. Some ideas: -Past a POMO day schedule near your desk and if you can day trade move with the POMO schedule as detailed many places like Zero Hedge. One note: this has been so obvious and written about the real players may try and move this around a bit but the vicinity will remain. -Buy broad equity indices and hold them. -Buy junk bonds -Buy bad muni bonds This is almost Tepper-esque in the "can't lose" sense.
This is not advice. Here is what I aim to do.
I am going to really spend some time looking at buys that I can stomach. This will exclude broad indices and in particular anything financial, housing, or US automotive. I am looking to start trying to get some return on my money that I can play with, plus it would be more fun.
To this end I am using my own way of looking for buys and I will be buying and testing the iBankCoin PPT as another tool. I will test some ideas out on the thing and see how it fits my way of trading. I hope it proves useful.
Long Term (who cares, we are all dead right?) This move serves as a start of a long term commitment by the FED to markets for support without end. While this did not work well for Japan, things are a bit different here. Nothing over the next year will really get much better in the real economy, but that hardly matters when banks are making serious coin, corporations can get money on the ultra cheap to buy back shares, and expansion overseas where much of the free cash will be deployed will prove a hit. So what if we have no job growth here and consumer attitudes and spending stay low. Who needs them anyways, rail traffic is through the roof!
Do not despair or take this blog the wrong way. I am interested in getting involved on a limited scale to see if some things I have been working on play out and make a few bucks off it. Am I doing what Bernanke'e FED wants me too and being a robot? To a degree perhaps, but then I know the specific plan I have in mind for gains (hopefully) I am going to make and it does not involve buying BAC secondary offerings.
Never fear, the same material will still remain on macro issues, sarcasm, endless whining, and assorted fun. Use the comments to let me know what parts of all this you find most interesting.
Voted tonight and there were more people this time then when Scott Brown won here in Massachusetts. We shall see what this all means tomorrow, hopefully.
Tonight will be a blow off night as most are looking for election news or getting set up for the big QE 2.0 speech tomorrow. A few notes and then some fun stuff.
I Have Always Said the Stock Run Up is Not Helping Most People Barry Ritholtz over at The Big Picture covers a point I have made time and again, most "normal" people really do not have much money in stocks and the money they do is parked in hard to get out vehicles like 401k's and other retirement plans. From Barry: Home Equity as a Percentage of Household Net Worth Key metrics:
Two other factors to keep in mind when discussing the wealth effect: 1) The vast majority of Americans have very little money tied up in equities. The median family’s portfolio is worth well under $50k 2) The biggest investment remains real estate, with a median value of $200k. At 20% down, it still reflects 10 to 1 leverage. Hence, why nationally, the wealth effects of real estate are far more than stocks . .
Now I am aware many writers out there have big bucks. I am glad many of you have friends and family that are smart and have worked hard and may have large holdings that they use well. The fact remains most Americans do not. The QE 1-50 HFT FED pump job on markets has been for the benefit of traders and banks. It also makes a nice talking point "Look the markets are UP huge! You know what that means right?" The tech wreck was the last time regular folks chased stocks, not anymore. After being wiped out on real estate I doubt gold, silver, cotton, sugar, or oil will soon become favorites either.
Financial Blog Wars Downtown Josh Brown of The Reformed Broker (Ha, reformed from what I wonder....?) must have spent hours putting together the coolest grouping of finance blogs of all time. Set with the backdrop of "Star Wars" we get a breakdown of a monster list of names. The categories in the post are:
Jedi Masters - Macroeconomics, Capitalism, Big Picture Wisdom Droids - Technicals, Trading, Charting, Options, Quantitative Analysis Jawas - Distressed Asset Salvage, Value Investing, Fundamental Research, Stockpicking Death Star - Mainstream Media Blogs, Commentators for The Empire Rebel Alliance - Misfits, Rebels, Originals & Wild Cards Galactic Senate - News, Multiple Voices, Aggregation Bounty Hunters - Mercenary Journos, Newsletter Authors, Pundits for Hire - not necessarily financial bloggers but definitely part of the conversation
If you click on over you will notice Economic Disconnect has made the list in the Rebel Alliance - Misfits, Rebels, Originals & Wild Cards category! I have to admit, this made my whole week and it is only Tuesday! Thanks so much Josh!
P.S. That category is the best one, IMO.
None of the Above the 1985 film "Brewster's Millions" is a favorite of mine. Starring Richard Pryor and John Candy the film's summary notes:
Brewster is challenged to either take $1 million upfront, or spend $30 million within 30 days to inherit $300 million. If he chooses the former, the law firm becomes the executor of the estate and divides the money among charities (after taking a sizable fee). In the latter case, after 30 days, he may not own any assets that are not already his, and he must get value for the services of anyone he hires. He may donate only 5% to charity and lose 5% by gambling. Neither may he buy expensive goods and destroy or give them away. And he's not allowed to tell anyone, even Spike. Monty decides to take the $30 million challenge. A paralegal from the law firm must accompany him to keep tabs on all spending.
Seems easy but it is quite hard. Brewster finds innovative ways to spend the money including mailing a million dollar collective stamp as postage and running for Mayor of New York.
Well, not really. One of the best ways to burn cash is a political campaign, and thus Brewster runs on the platform of "None of the Above" which aims to have no one win the mayor race! It is very funny and almost sadly true that candidates are usually bad and slightly less bad to chooses from. Here is a clip:
Of course we cannot vote for none of the above, but I do hope plenty of incumbents get shown the door tonight. Banner from the film: Nice.
McRib? Who Cares! Bring Back the Old McDonald's Chicken Sandwich! I saw this headline today and it got me thinking: The McRib Returns Who cares? The McRib is actually pretty good, but the limited time thing is a drag. From the article:
It's like running through a field of four-leaf clovers. It's like finding a unicorn chillin' at the fountain of youth. It's like a hundred Christmases slathered in barbecue sauce. It's the return of the McDonald's McRib sandwich. And, to many people, it's an event to get excited about.
The McRib phenomenon is something special in fast food. It's an incredibly popular pork sandwich (cut to look like a short stack of ribs) that only appears once every so often. Despite fans clamoring for it to become a full-time member of the McDonald's menu, the folks at the Golden Arches unleash its pork-flavored fury only once in a while. That time is now.
That was too funny.
This put me in mind of two McDonald's items that deserve their own letter writing campaign to bring back as soon as possible.
McDLT This thing was cool because it came in two halves that you put together. It was fun! You could even make the sound that the robot Transformers make when they transform when you did it, not that I EVER did that! Here she is: We need this to come back, it will support aggregate demand I promise!
Ok, now the main point of this post,
The Original Fried McDonald's Chicken Sandwich Oh, childhood!
What was better than a fried chicken sandwich from Mickie D's? Not much, not at all! This thing was just pure awesome and it condensed perfection on the styrofoam packaging.
Made with a little lettuce (who cares) and a ton of mayonnaise this baby was just the ticket. Report cards were maintained at straight A's (except handwriting!) by Economic Disconnect on the promise of McChicken dreams coming true. Here is a picture of the now extinct holy grail of fast food:
Economic Disconnect actually invented the "double stacker" idea KFC seems to like over twenty years ago. You get two of these bad boys, get rid of the bun from one, and stack the two McChicken's together and now you are really in business! It was a double stuffed thing of desire. It was what was best in the world. It was safety and warmth in a box. It was all this and so much more.
Please join me in my campaign to get both the transforming McDLT and the old school McChicken sandwich back on the menu. In these troubled times, we need all the help we can get. We can even skip the styrofoam I guess.
Glad the Prime Rib cook was a hit! It was a great cook indeed.
Randy Moss Finds a Way I will be honest, I was pretty pissed when the New England Patriots let Randy Moss go to the Vikings for a 3rd round draft pick. I have always thought Moss is maybe the single most dangerous man in the NFL. After what happened in his stint at Minnesota I just have no idea what is going on.
Here is where things are; Moss was waived today by the Vikings after just 3 games there. The post game press conference was very strange as Moss went nuts talking about how great the Patriots are and how much he misses the team. It has never been clear what drove the breakup between Moss and the Pats, but maybe he was becoming more unhinged and they saw that. I don't know.
The major issue for Moss now is that he is looking for a contract and he wants big time receiver money, maybe 8 million a year. No one in their right mind will pay him that now, no one. Not even the Raiders or Redskins (well maybe). I have always been a fan of Moss and I can only hope he can get his head on straight before it is to late. What the heck is going on here?
Election Eve Before I became a hard core financial junkie, I was once very into things politics. I followed everything and read tons of stuff. I remember when Instapundit was my first and last stop on the computer. I remember emailing the author on several occasions telling him the the biggest issue coming up was the housing bust (2006-2008) but only after it broke was there coverage! Anyways, what I am saying is that I used to be all gung ho about politics.
Looking to tomorrow's election you will hear that this is "the biggest election maybe ever" or until the next one or the next one. Is it big? Yes and no.
Look I want to tell you if the Republicans win big tomorrow things will change. I don't baloney my readers so I cannot write that. I want to say a whole slew of old time incumbents will get the boot, but I think the hype has been overdone on that angle.
US politics will never change as long as voters cannot correctly identify the major issues and then make sure candidates face them. Items like gun rights or unlimited abortion at 7-11's pale as issues next to the reckless spending and nasty economic issues facing this country. The last 2 years have seen the biggest frauds in financial history and never before has the taxpayer been on the hook for losses so large it makes one dizzy. The FED and the Treasury operate without law and without oversight. Theses things are issue number one, the rest is background. If one cannot be sure of their future security, what does all that other stuff really matter?
I don't want to get all political here. I will leave at I suggest you vote out anyone that voted for any bailout and anyone really in office Dem or Rep. Change as many seats as possible. Just don't expect the new guys to be much different from the old guys (or girls). At least we could scare them a little!
What Passes for Monetary Policy Things will be flat until the elections are over and the FED makes their big splash (or splat?) on Wednesday. There were some words out today about an investigation into JP Morgan regarding their Magnetar dealings but look for a smallish settlement to occur on that. Ambac (ABK) is going bust in what was the slowest motion wreck ever (No worries MBIA rallied on the news!) but again such things matter little when free money is around. Kid Dynamite covers an important item about the Wilmington trust bank selling itself today at 1/2 off Friday's price. All the time I spent on the evils of mark to myth are covered here; when the rubber meets the road the banks are in trouble.
One other note was a Paul Krugman item that reminds me why I call him "The Krugmonster". In an opinion blog post The Krugmonster offers this dandy of an item:
The End Of Western Civilization Gauti Eggertsson writes in to follow up on my piece on quantitative easing in the Great Depression. He points me to a 2008 paper (pdf) in which he shows that the coming of FDR, combined with America’s exit from the gold standard, was seen by markets as a huge regime change; it was, said FDR’s own budget director, “the end of Western civilization.”
This regime change immediately shifted expectations of future inflation, well before there was any actual surge in monetary base. That, rather than the quantitative easing per se, is how monetary policy — or more accurately, expectations of future monetary policy — gained some traction in the 30s liquidity trap.
Again, an important lesson — but how relevant is it to current circumstances? Bernanke, unfortunately, cannot convince people that he’s bringing the end of Western civilization.
Understand?
Clowns like The Krugmonster would prefer you panic and buy 10 tons of rice and 5 houses out of fear your money will be worthless just to support "aggregate demand" on one of his stupid equations. This kind of thinking shows how dangerous thinkers like this can be. No care is given to imbalances or whether this kind of thing is a long term solution. When I read something like this I wonder how far Bernanke will go to scare people into blowing their cash. A Yahoo Finance story has this gem: Fed Puts Stamp of Approval on Riskier Assets You can read the whole thing, but the ending is the best line:
Here's the key to understanding QE2's impact: Don't think of it as a stock movement. Instead, think of it as a risk movement with a seal of approval from the Federal Reserve.
Wow.
Maybe it is time to get stocked up on rice, toilet paper, and some shiny metals.
Running a little late due to the evening game, but I had to get this post up!
New England Patriots at 6-1 I have no idea who switched football teams with the New England Patriots of the last year and a half, but this team is winning games by doing all kinds of things! Another impressive wins versus a Vikings team that played their best game of the season is almost unreal. Great job guys!
Prime Rib Sunday I have had a stomach bug since we returned from vacation and I have had no appetite at all. After having maybe one sandwich on Saturday and a full 7 hour yard work tour I felt I needed something to get me hungry. What about a prime rib? why not indeed?
The butcher at the supermarket cut me a fresh 5 pounder and it looked very nice:
No special treatment for something like this, just salt, pepper, and some rosemary to coat. Brush on some olive oil and you are good to go.
I set up the Big Steel Keg for indirect heat. I added some potatoes on the top grate as a side, but who cares about the side, it's PRIME RIB! Here it is after an hour at 350 degrees:
I lowered the temp down to 300 after the first hour and cooked at 300 for another 2 hours. When the internal temp right in the middle was measured at 125 degrees I pulled the roast and placed in a pan with tight foil wrapping for 30 minutes. This allows the meat to continue to cook to a target of 135 degrees or so. The ends will be medium while the middle will be medium rare. I like medium rare, but the ladies of the house like solid medium. If you do this right you can have some for every taste. Here is the roast after the foil step: NICE!!!!!!!!!!
Here is about the third slice in: Ready to eat!
I had a thick slice from the middle and it was really great. Just what I needed to get back to feeling a bit better. Prime rib sandwiches for lunch? Indeed.
