Tuesday, February 17, 2009

Race to the Bottom

WalMart aside, the rest of the world and its companies are competing to see who can blow up first. Will it be Ireland and their failing bonds? Perhaps Japan, on pace for about a 15% reduction in GDP this year. England's not looking too good, and they are an anytime announcement away from nationalization and massive layoffs. California will have to cut 20K jobs and Kansas will not be giving income tax refunds while they struggle to balance their budget with massive cuts.

New administration, same game. It was interesting to watch Taleb and Roubini roast the CNBC lunchtime chefs over questions of an improving global economy. Taleb suggested Roubini should be president if we want any real change, otherwise, prepare for more catastrophe. David Carr of the NYT even wrote about how ridiculous the CNBC crew looked as they battered the panel with sticky sweet suggestions of optimism. It was some of the most pathetic "journalism" you'll ever see:


So, is it too late to short now that we've taken another 1,400 point swoon? For the most part, I say yes. Bets not already in place a few months ago may not find great footing now. I'm still amazed that homebuilders are trading above $1, let alone in the teens. Retailers have been punished an rightfully so, and I would not fault an aggressive investor for shorting these overlapping purveyors of credit and fads to zero.

I continue to like USO as it drops again today. Gold is almost to $1K. But our markets aren't the only ones. What if England doesn't make it, or Ireland. Does it hurt to hedge against this? I'm looking at the EWU ETF, English stocks only, as a possible replacement for my VGK suggestion (recommended shorting at $64, now $31). If the FTSE fails, why not gain from England's demise. Puts only go out to July, and while I'd like the rest of the year for disaster to strike, the $9s or $10s might do just fine.


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