Tuesday, August 12, 2008

America Doesn't Have Problems

That's right, that's what W. told Bob Costas during his Olympic interview, as if the question itself was crazy. No, no problems. All of our major banks are under investigation, unemployment is at a 5-year high, and the housing bubble is puking over most Americans. But hey, our basketball team is really good, so we don't have any problems.

Well, let's see. JP Morgan and Wachovia just said that they lost billions since the beginning of July. Even the Fed came out with a survey that said 50 of the largest commercial lenders had significantly increased loan requirements and standards and that credit was becoming unbelievably hard to come by.

The temporary short-selling restrictions end today unless the SEC has an emergency meeting to extend things. However, it does appear as if they'll attempt to put permanent rules in place next month. Could lead to a short-term panic sell, which would be sweet.

Oil is for dummies. It's the fact that global economies are dying, not speculation, that has led to a decline in prices. "Price increases are sometimes associated with economic recessions, but oil price declines have never been followed by an economic boom," said James Hamilton, an economist at the University of California, San Diego, who studies oil price shocks. That's right. At $115, a price that would have sent us scrambling a mere 6 months ago, the market has become all giddy that the economy will somehow miraculously turn. Never mind the bankrupt and broke masses, who have maxed out their only source of income, credit cards and home equity. Another reason AmEx might get downgraded and why Morgan Stanley got knocked down 2 ratings pegs yesterday.

Global commercial property sales have been cut in half, and this includes a huge rise in sales from BRIC nations. "U.S. sales dropped 63 percent. UK sales were off 57 percent and Germany slid 65 percent."

Keep the faith though, bulls. When this bear market rally ends, probably in a GSE bailout or Lehman going under, the turn will be swift and the shorts will make their run.

http://www.reuters.com/article/ousiv/idUSN0843417620080808?pageNumber=2&virtualBrandChannel=0

http://www.bloomberg.com/apps/news?pid=20601087&sid=afsoLfPkNU08&refer=home

http://www.cnbc.com/id/26140776

7 comments:

Tiger Coach said...

Ax... Survey 1/3 of Americans owe more on their house than what it is worth! Think of how deeply burried these people are who have H.E. loans and credit cards to boot!

Or day is coming...Watch FXB.

Tiger Coach said...

"our"

DCNorth said...

I've seen one coackroach (bank), looked under the rock and see many many more scurrying around. The pop for the financials was quite puzzling, but ultimately these liars and their liar loans will surface.

Some options got hurt in the pop, but that was an opportunity to double down. Looking at putting some stops in at 50%. Ax and Tiger, do you have a stop on your options?

AX said...

DC, I personally don't have any stops at this time. With that said, wish I had put some in on Citi, STI, and COF at even better rates of return. If you're just getting started with options, and I'm no seasoned vet, I would take some gains to cushion your confidence going forward into bigger and more out of the money positions. Good luck.

Tiger Coach said...

DC...

I am letting my puts roll...as of now. However, I will put some safeguards in again...50% would be a number ANYBODY would be proud of... Ax... and I can both give testimony to that! I like your double-down strategy... I hope like !#$% it pays off. Beware that the SEC...Treasury...and Fed can manipulate the market like a....

Hey AX... with gnw and ggp... I think the first round is on you:)

AX said...

TC and DC, again, we are put to the test with options, a position we all looked forward to, but once it presents itself, challenges us as investors. TC is right, I'm sitting up 75% on GGP and 80% on GNW while Citi is up slightly and back to dead even on STI. I'm not hopelessly holding out for my July 15th highs, but there might be a nice window here while short sellers suck all they can from financials on top of continued terrible economic news.

I have a lot of contracts on GNW and I believe there will be some catastrophic REIT or commercial real estate news in the next 5 months that could bring GGP under 20. I will selectively sell my financial holdings, but these holdings have huge potential. Good luck boys. Remember, the market is down 15% this year. A gain of even 10% is killing it in this environment.

Tiger Coach said...

Gentlemen,

Lead story... equity prices increase while credit markets deteriorate. This suggests that there will be a tremendous swing to the downside. Or...there will be a lot of borrowing from that discount window propping up stock prices.