Saturday, February 28, 2009

Ding Dong, Stocks are Dead

Oh, that's not me. That's Bill Gross, PIMCO's chief. "Stocks are dead for the rest of your life. That's the gist of my exclusive interview with the head of PIMCO Total Return -- the biggest bond fund you've never heard of," says Peter Cohan. Seller and buyer of bonds and consultant to the Fed on, uh, buying bonds. So it should come as little surprise that Gross declared last week with the specter of corporate defaults so high, that being a common shareholder puts you at the bottom of a long list to get paid. What might surprise you, is that Gross seems completely disconnected from his multi-bullish calls on the market during the bailout events of the last year. Now that we're near 7K, those calls don't look so good, right Mr. Buffett? I mean, Mr. Gross. As I've said many times, listening to any of these guys is poison.

I found it humorous this week (as every week) to watch some of CNBC's coverage of the Senate hearings with Mr. Bernanke. Following a sycophantic and softball questioning session by one of his fellow senators, Ron Paul immediately started throwing body blows. He essentially asked Bernanke that if he's been wrong on everything up until now, what makes him think that 5 years from now he won't look back at massive policy failures and have to apologize for them. Before he could really get nasty, CNBC cut to some breaking news which turned out to be a commercial pod. Nice coverage.

As much gloom as I bring, I was taken aback this week by Itulip's Eric Janzsen saying things are deteriorating even faster than his aggressive projections. He notes that the Dow/Gold ratio has fallen from around 15:1 in Sept. to 7:1 recently and thinks the ratio will hit 2:1 sooner than later. What does this mean? Dow 5K, Gold $2500.

After looking dead for months, our MCRI puts are showing what a late finisher can do. Dropping from $12 to near $7 yesterday, the race is on, 3 weeks to go.

Saks took an unexpected ride up this week when, despite a 60% decline in profits, their CEO bolstered shareholders by saying, "We're not going bankrupt." Thanks Dick Fuld....

Reports that USO might be involved with price manipulation kept me from adding more calls on the drop yesterday. Turns out USO buys about 20% of all forward-month contracts, so they may have some say in pricing. I'll keep you updated, but we had a nice run with our calls this week, with 1/11 $48s up 40%.


Tiger Coach said...

Ax... But wait, I thought the market ALWAYS comes back... Dollar cost average... invest for for the long-haul... Hey, everything's on sale right?

You are 100% in your analysis that the stock market may NEVER return to its' 14000 high of a year-half ago... at least no time in the next 5-10 years... as even the most optimistic on CNBC's damage control cannot hide the truth any longer. Wouldn't it be a shame if CNBC's credibility was casualty of on-going spin.

I'll be frank, I am shocked that the oil calls did so well... but I do believe there will be considerable turbulence on that side of things, especially with Obama's latest speech.
Just think of all the "guaranteed" government work that is now in question... could be a WILD ride...

AX said...

Oil is going to be extremely volatile, along with gold. But we're going up. Perhaps DXO is safer, but that too, has some strange pricing. How do they arrive at the currnet price of $2?