Thursday, August 21, 2008

Hello Out There!

It certainly has been a while! Sorry for the LONG delay, but I finally dove into the den/library room construction and as with most things it was a bit more involved than I would have wanted. The room is looking totally awesome right now, and I should be wrapping up the finish work over the next week. Good Stuff.

Are you enjoying the wild markets and things economic? I must admit being away has been tough with all that is going on that I would like to discuss, but I cannot match the fine writing and up to the minute coverage the blogs in the blogroll supply. Us them. Often. I have a few macro points to make to get some ideas out there. Thanks to all that keep checking in, hardcore fans are the best and Kevin, G, and Watchtower are some of the best readers a writer can ask for.

Who's Brilliant Idea Was This?
A while back a truly amazing mind came up with the following theorem:

"Right now the major banks/brokerages are in fact insolvent, and their stocks are zeroes. The possibility of a FED/Treasury led bailout puts some kind of value on these firms and the market action is torn between a price of zero and some other small sum."

I know, it was me of course! After a long month it has become apparent that many firms are now basically zeroes (LEH, MER, FNM, FRE) but the possibility of missing a wild 50% move up on a bailout set price is too much for many to pass up. Sad stuff which leads me to.......

Fundamentally Strong Stocks Do Not Gyrate 30% on an Almost Daily Basis
Newly formed or newly "discovered" markets in merging counties tend to have crazy volatility due to there being so little information about there particulars. Market gyrations of 30% are common as momentum players and speculators rush in and out. This is expected. The US financial system should not be one of these markets. When a stock as widely held (and I empathizes WIDELY HELD) as Fannie Mae can move 30% down one day, 25% up another, and move 80% in 6 months something is seriously wrong. The US financial stocks right now resemble a banana republic market. I do not care about the money making possibilities here (there are many) but instead want to focus on the fact that there is no tether to any reality right now for these entities. Penny stocks behave this way, not cornerstones of a financial system. This is ugly indeed.

Lowe's and Home Depot Throw in the Towel
To me the stunning drop in business at HD and Lowe's shows that finally the consumer is giving up. Drops of 25% on a yearly basis is big time stuff here. Turnaround clowns are still pinning the tail on the early 2009 donkey recovery, but secular changes do not change direction so fast. Again, an important data point.

Fall is Upon Us
As predicted here and elsewhere this has been a LONG summer. The data is deteriorating for the US economy. The housing story is getting worse. The banks are out of cash and out of time. There are things in motion that cannot be stopped (Alt-A meltdown, Bond refinancing at terrible terms, overseas funds saying "No Mas" to debt offerings). The FED and the Treasury have been exposed ass clueless and powerless. While the overall market has been ok so far, it is still vacation really. The fall is going to be wild, and volatility is going to be bad. I will have more to say in a future post, but my basic premise is that by the end of October we are going to know if we are just screwed (which stinks but can be overcome) or totally f#cked (game over). Care to place a bet?

Good Video
This is a great ultra slow motion video of a lightning strike, check it out:

Have a good night.

Friday, August 8, 2008

Friday Pot Luck

Another crazy weather day here. Rain, hail, and then sun followed by thunderstorms and more rain. It's like living in southern Florida here in Massachusetts! I blame global warming of course! Then I heard that Russia was invading Georgia and I thought that film "Red Dawn" was coming true! Turns out it is a former Russian republic. Right at the Olympics start huh Putin? New Russia, same as the old Russia.

Book List
In addition to the multitude of new Star Wars books out this summer that I will not bore you with, I picked up a couple of interesting looking titles you may want to check out. Up front when I say a book was a good read it means for the reasons I highlight. I am not vouching for the entire political position, religious beliefs, sexual behavior, or or issues any writer may have. I don't really care what their deal is, only if a piece they write offers insight I think is useful. So no messages about "I can't believe you agree with so and so" maybe I do and maybe I don't. See what the material I highlight is saying and that is all.

First up is "Reinventing Collapse" by Dmitry Orlov. This book chronicles the swift collapse of the old Soviet Union and extrapolates that to the USA. Think rapidly increasing trade deficit, crazy blow up of national debt, and public loss of faith in the government and you see many parallels. I am almost done this book, and while the politics are a bit much for me, the financial aspects bear analysis.

Second up is "World Made by Hand" by James Kunstler. This book is a fictional piece set against the technical book by the same author called "The Long Emergency". The end of oil access means many things and it looks like a good read. As a footnote, I have zero position on peak oil and all that so do not get excited.

John Edwards News
I mention the John Edwards affair news here not because of what he did (had an affair with a campaign worker, while his wife is dying of cancer) because I have zero interest in Mr. Edwards' private life. I offer it here in that the mainstream media had full and clear knowledge that he had this affair and chose to pretend otherwise. Democrats get a free pass from the media while Republicans are destroyed over even minuscule silly things (witness Trent Lott's demise due to a stupid comment taken wrong). I am no fan of Republicans, but when the press is so blatantly biased it pays to keep it in mind.

Fannie Mae to Stop Alt-A Loans
Fannie Mae is faced with an Alt-A loan book that is going south quicker than Paris Hilton, and in perfect form of a retard will NOW stop funding those loans. Class act those guys, right on top of things as usual. Hope that housing turnaround works for you in 2009, NOT!

Stock Market Now Adrift on the High Seas of Volatility
You get whiplash with these 250 point plus swing days on the DOW happening almost every day. This kind of wild swinging means nobody knows what the f#ck is going on, and do not listen to anyone that says they do. The markets are now fully unhitched to any real fundamentals (upside or down) and thus should be avoided unless for a real short term trade. Be careful out there and remember Minyanville's fight theme "It is the return OF capital, not the return ON capital" in a market like this.

Friday Night Entertainment
A new site I like for fun is found at, it is the Weird Universe site. This site rounds up weird (obviously!) news and pictures form all over and present s them to the audience. Good site overall. Today they had a piece on a megaphone out somewhere in Norway that you can call on the telephone and your voice will be broadcast over an empty meadow out in western Norway. Fun stuff, right?:

Comic Relief
Funny picture that reminds me of all those "Don't touch that button" lines from the James Bond films:
more cat pictures

Rock and Roll Ain't Noise Pollution
A classic song I really dig is "Break on Through" from The Doors. Great on many levels:

Another classic is Blue Oyster Cult and "Don't Fear the Reaper":

Final tune for the night. Take a listen to Meatloaf (and hot lady friend) and "Paradise by the Dashboard Lights":

Have a good night.

Thursday, August 7, 2008

Does the FED and Treasury Have a Plan B? Do You?

Hello to one and all. I am sorry for the very light blogging, but I have been playing tennis, setting up contractors for various projects, busy at work, and just trying to enjoy the last month of summer. I know there are no hard feelings. I do miss writing material almost every day though. Times are very exciting indeed!

Honestly, there is so much good stuff out there I could not even offer much anyway. Things are developing so fast that by the time I get home issues have been covered 10 times till Tuesday and better than I could have. I still try though!

Brett Favre Drama
I know, sports are usually left out here, but I just do not get all the ruckus over Brett Favre wanting to continue playing. Aaron Rodgers has been groomed to be Green Bay's next quarterback for like 5 years. The Packers pay him well, and the assumption was that Favre would be done at some soon point. He kept playing, and playing, and playing well I might add. After a brutal cold game in the NFC title game that he lost, Favre "retired". He later felt that was a bit quick and wants to play.

So whats the problem? If the Packers want to go with Rodgers, release Favre outright. It is fair to Rodgers and Favre that way. All the baloney about training camps and the like was dumb and hurt both Favre and the Packers organization. Favre is now set for the Jets, and I wish him well. Ask Chad Pennington how good that offensive line of New York is though, and I think Favre will want to retire somewhere around week 10!

Does the FED and Treasury Have a Plan B? Do You?
The basic plan of the FED and treasury has been fairly well fleshed out through analysis, statements by officials, and old fashioned guessing. The basic plan the geniuses came up with was:
-Manipulate stock prices of selected financial companies to bolster those stock prices so that those firms could then sell tons of stock (diluting hopelessly current shareholders) in order to raise capital (not that they need it mind you, ask them and they will tell ya!) to shore up the bottom lines in the face of more loan losses.
-Crush oil prices to at least $100, hopefully more (are they targeting ruthless oil shorts I wonder??) to assuage the public about energy prices.
-Make statements about inflation fighting and try not to laugh out loud while doing it.
-Extend until forever total access to the FED lending windows (too many to name) to any bank still open (sorry BSC and IMB, our bad!) so money still flows.
-Pray for a miracle.

So far the oil price trick seems to be going well, but the other points are failing. Bank stocks, while sometimes rallying strong, are still in firm downtrends. Window lending is problematic as Citigroup has already had to take back some toxic stuff they stashed there. I have advice for the FED, MOST of the stuff you get is the worst of what is out there, hahahaha! The miracle may come, but time is running out.

So in the face of accelerating Alt-A loan losses, higher unemployment, bla bla bla. I don't think I need to hash out the data in bit by bit fashion. Numbers only matter at this point as trading points, the trend is now firmly in place. Deflation is at hand and the particulars of a jobs report, home sales, or gas inventories makes no difference.

So from where I sit, I ask does the FED and Treasury have a plan B? I mean are we going to be treated like adults at some point and have the real deal laid out along with a responsible plan of action? One can dream. With an election at hand I fully expect more government intervention gymnastics and even outright data manipulation. Call me a lunatic, but if I told you last year that some short trading would be outlawed and the Treasury would be authorized to buy UNLIMITED stocks of certain companies you would have called me much worse. Of course you would have looked stupid and foolish now, but time is a harsh mistress, ya know?

So what is the plan B? I am sure they do not have one. So now I ask, do you? Now may be a good time to review options and strategies for severe disruptions in money matters. I am not calling for the end of the world, but a little prudence now may make you able to sleep later.

It is getting ugly, and under the surface you can feel a new palpable fear amongst the upper echelon of leadership. Stay smart!

Have a good night.

Saturday, August 2, 2008

Insolvency on Steroids

The tennis match went very well this morning. I can remember when I was a younger man and I could play tennis all day long. Now 2 hours of playtime and my feet are killing me! When you are young all you want to do is get older. When you are older all you dream about is how you were physically when you were young. I know this is a well known fact, but today reminded me of it. Strongly.

General Motors: The Unthinkable
It is a terrible thing to see GM (or Ford for that matter) face issues so severe that going forward may not be possible. Friday's rather blinding "earnings" report was so bad the stock of GM went to levels not seen since the year 1954 (corrected for splits, etc). This is telling us something, but what is it?

Could GM close up shop? I would say that will never, ever happen. But the current operation of the company also cannot continue much longer. A complete overhaul is on the way, and of course it is going to require government sponsorship and tax dollars. Wonderful. Perhaps a "Hope Now" program for the American auto makers will get passed by the super smart congress.

I have no position in GM (or any carmaker) and I would very much like to see them get to a better place, but things look pretty bad. What is good for America is good for GM, or so the saying goes. If there is a correlation we are in worse shape than we think.

Insolvency on Steroids
Nouriel Roubini gave an interview to Barrons (you can see video at The Big Picture site, and Barry has a TON of great material up this evening so check it out) and he gives some dollar amounts for banking losses that shocked even me. Mr. Roubini estimates losses on various credit instruments to reach 2 TRILLION dollars over the next 18 months or so. 2 Trillion, wow.

The US banking system right now is effectively insolvent, so what does another 2 trillion down the hole mean? There is going to be bank failures. The FDIC is going to be very busy. How the dollar makes it out of this stretch will be interesting to see. Deflation certainly is in the cards, as deflation is a contraction in credit. Banks cannot loan money they cannot even pretend to have anymore.

So what does this mean? Quite a bit I would think. As a homework assignment I want you the loyal readers to sketch out what 2 trillion in losses will mean for this country going forward. I want to get some feedback and ideas that I will then collate and put into a longer post on this topic as I think it is very important. One will need to position themselves in a way to stay safe and maybe even get ahead. You can only make money by correctly identifying a macro environment ahead of time and positioning for it before it happens. Lets try to get some ideas going. A blog is a great tool to put my own ideas out there, but I would also like it to function as a sounding board for solid thinking from around the world. Do not be shy! Use the comments section to get started.

Saturday Night Entertainment
Comic relief as it relates to the presidential election:
more cat pictures

Try out Iron Maiden and the great song "22 Acacia Avenue":

From the obscure, here is Armored Saint with "Can U Deliver" complete with terrible video:

I remember how visually wild this video was when I first saw it, and the song itself is pretty heavy duty. Here is Tool with "Sober":

Final song for the night. I was thinking about this song I had heard a LONG time ago, and I was able to find it on YouTube. Listen to this oldie by Commander Cody and the song "Hot Rod Lincoln". "Son you're gonna drive me to drinkin if you don't stop driving that hot rod lincoln" too cool:

Have a good night.