Wednesday, September 23, 2009

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 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:

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.

Thursday, September 17, 2009

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).

Saturday, September 5, 2009

Football is Back!

Aaargh, with all of the pennant races essentially decided, my hometown Indians having given away their two best players for a box of crackerjacks, and memories of a great Super Bowl starting to dwindle, football is back. I will now list for you the greatest fantasy draft ever made, especially from the 5th position, and also remind you that I should have reminded you to bet against OSU as 17-pt. favorites against Navy. OSU never plays well in their first game and has even trailed teams like Ohio University at the half. I hope the Tiger Coach is watching as I advised his readers of the same, and look forward to USC faceplanting the Buckeyes next week and reminding everyone that the Big 10 stinks.

Rd. 1-Deangelo Williams
3-Anquan Boldin
4-Kurt Warner
5-Pierre Thomas
6-Braylon Edwards
7-Ray Rice
8-Bernard Berrian
9-Antonio Bryant
10-Ahmad Bradshaw
11-12 Chargers D and somebody who will never play
13-Matt Hasselback
14-Owen Daniels

The only rule of mine I broke was drafting a D before the 2nd to last round, but as everyone had already broken arms overreaching for TEs too early, I knew Daniels was available forever. How did I accumulate not only superstars at all positions, but backups who are good #1s on their teams? It all comes down to discipline. While others were busy drafting Willie Parker in the 1st round, Peyton Manning always too early, and defenses in the 8th round, I was busy accumulating an all-star team. Should be interesting, unless Warner comes down with a case of oldmanitis (just like you Anon) and ruins my season.

Florida did not cover as predicted. Even Urban Meyer won't run it up on a cupcake by 73 points. 1-0.

Thursday, September 3, 2009

We've Suspended Our Suspension of Disbelief

"According to the theory, suspension of disbelief is a quid pro quo: the audience tacitly agrees to provisionally suspend their judgment in exchange for the promise of entertainment."

The last few months have certainly been entertaining. Stocks catapulting 50% off of their lows (this still leaves them down 30% from 2007 highs I remind you), GSEs comprising 30% of the trading volume with losers like AIG soaring 300% in a month, and talk of a jobless recovery spurring global optimism have certainly seemed at the far ends of reality. But with gold bumping its head on $1K again, abysmal retail sales even in a back-to-school month, Obama's ratings plummeting, and the S&P hopscotching over 1000 as well, investors don't seem quite as convinced all of a sudden.

Congrats to my current state, Florida, on having the highest muni-bond default rate in the country! With property values plunging and people leaving in higher numbers than they're coming in, revenue is down, way down. While I'll take the reduction in property tax, I'm waiting on an assessment to make up for all of the delinquent HOA members I've been carrying. But fear not. Your state may be next if you live in Ohio, Cali, Indiana, Michigan....

The rest of September is cloudy. When data points like flat ISM surveys and jobless claims hovering in the 600K range fail to spark a rally, perhaps reality, and even worse, fear of a second collapse may return. In the meantime, it's time to stay hedged in financials for the next few weeks and hope that you held onto/added some GLD or physical gold.