Just Wait

With bubbles on everyone's mind from Markman to Fleckenstein to former Fed officials this past week, I can only recommend sitting on your pile until this thing blows up. The Fed has been trumpeting strong dollar policy while the greenback plunges to lows on a daily basis, bolstered by Fed minutes that read, "No way in hell are we going to raise rates anytime soon." Every day the market goes up buys these guys another day of hope that our service economy will magically return to 2006.

As Fleckenstein points out, whether it's Greenspan or the current oligarchy, the false belief that jumping from one bubble to another to prevent a severe economic crash has been disastrous for our country and how our financial system is allowed to operate. While your asthmatic child was waiting to receive their H1N1 vaccination, the boys at GS were loaded up so they could continue to make trades with stop losses at $200 million.....

Thanks to The Mixx for his call on 3Com more than a year ago as a company too cash rich to go under. Now with their tender offer from HP, they've risen from just over $1 to near $8.

How low can the dollar go before someone pulls the plug on our devaluation? I don't know, but with gold over $1,130 as I write, fear the sudden stop.


Thankfully for you, I have been remiss in posting my recent picks, although Monday night has treated us well. Steelers for an easy win last week and if the Ravens can't save their season against the once again Quinn-led Browns, they are truly dreadful.

What Do We Do Now?

Sorry for the recent absence, had something ready to go but shelved it for a more appropriate time. What do we do? Nothing. Nothing than what I've already told you, gold and oil and avoid stocks that cost more than $5. Up 200 Thursday, down 200 Friday. Up and down 100 yesterday and back up again. Any stock picking at this point is pure speculation. But with gold near $1100 today, having bounced back very rapidly from a brief plunge to near $1000 again, it's far from done. Every time someone has tried to call a top in the gold market for the last 10 years they've been left for a fool by year's end. Itulip certainly thinks there's hundreds, if not thousands of dollars left to go. They also think that the dollar is being shorted against oil, not other currencies, as the most recent government incarnation for dollar destruction.

Shorting and going long look expensive to year's end. Could we crash in the next 2 months? Sure. Could we get a string of bogus Buffettisms pushing us up over that time too? Sure. Hang on tight to your cash, unless you'd like to look way long into some commodities, silver and copper included here.

Wish the crystal ball was less cloudy, but I remain unconvinced about this market in either direction near term. Long-term we will tank again, but unless we can put a 3-6 month range on it, our money will be lost.

Inside Information

Would be good to have, wouldn't it? I mean, with Wall St. profits exceeding all expectations again, or still benefiting from the "not quite as bad as it could've been" reporting, the S&P will cross 1100 today and the Dow has exceeded 10K (again). As David Weidner points out in today's Marketwatch column (sometimes he gets it right), we continue to be the suckers in the great Wall St. Ponzi scheme, "what Wall Street calls the 'dumb money' never fail to live up to our reputation as suckers, chumps and easy marks. We keep putting our money in the market, diversifying and looking at the fundamentals of the underlying investments."

Look at the arrest of hedge fund manager Raj Rajaratnam, who will be going to jail for insider trading that netted him $20 million. He is worth $1.3 billion. So, for most people in this country, that we be the equivalent of going to jail for about $300. But this is the largest arrest for insider trading in U.S. history. C'mon!
It's interesting to see people like Weidner and Dylan Ratigan, so entrenched in the MSM, voicing their disgust recently over the current financial system. Disgusted by news such as Geithner's non-appointed trustees reaping million dollar consulting bonuses. No, we truly do not have a chance in this game.

But the bubble-blowing machine has its hamsters running at full speed. Oil hit $80/barrel yesterday, gold at almost $1070, and the dollar plummeting. Einhorn, one of our favorites here who predicted the Lehman collapse, is also waiting for the impending dollar collapse. Aside from hoarding gold, he loaded up long-term Japanese interest rate options with a 4-5 year window. So that's Itulip, Paulson, and Einhorn who are now waiting for the next collapse. I'll side with these guys.

Good thing I didn't post new picks for the weekend. Suffice it to say Donovan Mcnabb's championship game-like performance would have been a bad call.

http://www.marketwatch.com/story/einhorn-bets-on-major-currency-death-spiral-2009-10-19

http://www.marketwatch.com/story/taking-the-inside-path-to-wall-street-riches-2009-10-20

Gold and Golden

My apologies on my lack of blogotivity lately, but I have been updating both my investments and picks, which, more importantly than my analysis of the current shenanigans we call "the market" and "our government," have been right on point.

Gold has just hit it's all-time high of $1064 and our calls rolled to 2011 on GLD are up 40% in just over 2 weeks. The gross mismatches and lack of parody have been our NFL friends this year as blowouts have become commonplace. Teasing the Colts with the list I gave you last week led to an 8-2 week, with even a few college games coming through. The Texans came back from 21 points just like SD the week before to give us nice teaser-covers.

I promise more in the immediate future, just caught right now between old job and new with obligations to both for a few more weeks. But in celebration of football season and our new friend at The BBB, "The Mixx," check out his blog in our new list to the right at:

http://molecularmixology.blogspot.com/

Til' next time, when The BBB should have a big announcement in the next few weeks!

Jobless Non-Recovery

The stimulus is over. Job losses are back on the rise. And did anyone see car sales numbers for last month post clunker incentives? Ugly. Make no mistake about what this "recovery" has been about. Government infusions of capital. Without it every major industry would still be gasping for air. Even with it there are just too many holes in the dike to plug. The markets have had very little to do with economic reality for quite some time. We'll see if this week is an acknowledgement of that gap, or just a blip of consciousness prior to a coma relapse.


If the dam does burst, it will be interesting to note whether or not the gold rally unpegs to the market rally and resources pile into gold hoarding. We'll see if lack of bank reform coupled with new proposals to raise FHA down payment requirements will stir the ire of the jobless. It's great that 30-year mortgages are at all-time lows while nobody qualifies to get one except those being propped up by already delinquent FHA programs. Loan reserves are already at less than 2% of loans insured. Great. Combine that with a 128% increase in strategic defaults, homeowners just opting not to pay their mortgages as penalties become lax and the sheer inventory of foreclosures makes it virtually impossible to do anything about it. Think the housing crisis will get resolved anytime soon with the largest amount of ARM resets still to come next year?


If you have any doubts as to whether or not your government has any interest in your well being, look at the Vanity Fair article detailing the multiple scenarios in which GS officially took over the world, or was at least handed the rest of the banking industry on a platter. Someone had to remind Paulson that he used to run GS, and that the head of the Treasury couldn't set up a deal between his former firm and a distressed bank.


1-1 again last week, this is getting repetitive. Gonna stick with big losers and winners this week. Like the Bengals over the hapless Browns, Giants at KC and Colts against Seattle.


http://www.bloomberg.com/apps/news?pid=20601087&sid=apCiBvKN8DTU

http://www.vanityfair.com/online/daily/2009/09/andrew-ross-sorkin-too.html

Banana Anyone?

"Because the end of inflation automatically triggers an immediate depression, there's always pressure on politicians to inflate too far. Since no one can identify the point of no return precisely, it's easy enough for those in power to convince themselves that the next dose of inflation won't be too much."

You Can Profit From a Monetary Crisis, Harry Browne 1974

Personally, I love bananas. Bananas in my cereal, just ripe bananas, grilled bananas, and of course, bananas and peanut butter. I've even stolen my children's Gerber bananas to dip a big spoonful of peanut butter in. But a banana republic I could do without. When our government agencies just do whatever the hell they want, that's what you got. I believe we've already discussed what the Fed and the Treasury have been up to, with no legal or Congressional backing for much of their money printing and acronym creating actions over the last year. And they're not alone.


The SEC is a sham. In her scathing Bloomberg article yesterday, Susan Antilla references the recent settlement with BAC for a whopping $33 million. "Such outcomes are possible only in the bizarre place known as SEC-land, where financial firms or employees get accused of breaking the rules but almost never have to admit it. Settlements get signed, skimpy nuisance fines get paid, and the accuser and the accused pat themselves on the back for a job well done. To round out the absurdity, some of those at the agency doing the accusing land jobs at firms they once attacked. This time, a judge has called the agency on the farce of bringing a case in which no names were named (let’s have some actual people pay these fines, shall we?) and shareholders, not management, were expected to pay fines for the alleged cover-up of $3.6 billion in bonuses to Merrill employees."


She goes on to reference a report from David Kotz, the Inspector General, that 'calls into question the agency’s ability to fulfill its basic functions,' which sounds to me like a pretty good reason to put it out of its misery."


How's about the FDA? Yesterday I received a forwarded email prefaced with "my friend's a doctor" (I'm loath to believe these as your friend may be a dentist, a podiatrist, a Ph.D.) stating there had been a Children's Tylenol recall. So I went to the website today, no mention of a recall anywhere. But when I called Johnson and Johnson, I was informed, oh yes, there's a recall, you just have to go to the Tylenolprofessional.com website. Really? A product that millions of people take on a daily basis in this country and you can't list the recall or are not required to list on your main website? That is scary.

The Business Insider put out a list this weekend of our "most" corrupt Congressmen. Reps such as Vern Buchanan (R-FL), a two-term member of Congress representing Florida’s 13th district, "who pressured his employees to make contributions to his campaign committee. Rep. Buchanan owns several car dealerships in Florida and after he began his congressional campaign in 2005, in one seven-day period, he raised $110,000 from employees of his numerous car dealerships. Several employees have since alleged that Rep. Buchanan pressured them to make contributions to his campaign committee." See the rest of the list here: http://www.businessinsider.com/the-most-corrupt-members-of-congress-2009-9#rep-vern-buchanan-r-fl-1

These are our leaders, we elected them. And with the market heading to ear-popping levels, they hope that we'll forget the damage they've wrought.

1-1 last week. The Packers got pounded. Will post new picks on BOD today or tomorrow.


Got into SPY Dec. 115s this week, looking to add way OOM GS calls as well. Couldn't get filled on Monday and paid for it yesterday. Don't know if GS can be stopped.


http://www.bloomberg.com/apps/news?pid=20601039&sid=a903JQKwJEiY

Feels Bubbly in Here

The market has been going nuts. GE is up 17% this week. Remember Genworth, a stock that fell from over $30 to .60? Yeah, back up to almost $14. GS at 52-week highs. Daily back pats from Obama and Bernanke about the recession ending and a jobless recovery. Capital One, whose CEO said credit cards are a no growth business yesterday is back near $40. As Obama half-heartedly bangs for reform, we know the truth is that as stock prices go up, nobody, especially Wall St., cares.


Putting a time frame on this charade has been difficult. But gold has finally cracked $1k and I think will go much higher. Oil still hovers over $70. A WSJ article yesterday evaluated the impact of government intervention to date by saying, "Incoming data will reveal more in coming months, but the data available so far tell us that the government transfers and rebates have not stimulated consumption at all..." We lost $21 billion in consumer credit last month. Simon Property Group, our largest mall owner, said best case CRE prices would be an increase to 2004 levels.


But in the meantime, the market goes up on a daily basis. I have successfully hedged JPM with BAC 3x and will look to do it again today before close. Shorter-term, SPY calls appear to be a good hedge against any shorts you may have.


On the football front, USC disappointed me by not covering against a sluggish OSU team coached by "let's not lose until the last 2 minutes" Tressel. The Bengals, fresh off the worst loss of all-time, will get destroyed on the road by GB (-.8.5) and I don't expect the Colts to lose to a team that let Matt Ryan pick them apart last week (-2.5).


http://online.wsj.com/article/SB10001424052970204731804574385233867030644.html