Gold and Google

That's about all I own, along with cash and my oil calls until 2011. Google has risen from the dead around $275 back now over $620. Gold has obviously suffered lately as oil has risen $10 in the last 2 weeks and the continued "strong dollar" optimism is about as realistic as a jobless recovery.

2009 has been a strange year. Perhaps Black Swan author Taleb had it right in March when he said the unforeseen scenario would be for the market to go up. And perhaps Abbey Joseph Cohen, who hadn't been right about a call in 3 years, was granted the reversal switch by GS when she predicted S&P 1150 by the end of the year. Pretty close.

As for me, my belief that the markets would experience a second crash cost a wild ride back up. However, having destroyed the market last year, I was not chasing a retracement of my losses, but a way to enhance those gains.

Fortunately, I was right about 2 things. One, that when gold fell below $700 after buying in at around $860, I said buy more, a lot more. Gold eventually cracked $1,200. And, the stress tests. Buying OOM calls on stress-tested banks in retrospect, may have been an even easier call than the financial collapse of last year. Fifth-Third calls yielded a 2,000% rise in 2 weeks. The mistake I made, and hopefully the rest of you to a lesser degree, was not putting a lot more into this trade. This was not a 50/50 scenario. Geithner was never going to let these results look bad.

Heading into 2010 I advise caution. I have no conviction in this market, but a continued belief that we have done something systemically horrible by allowing banks to hoard printed cash and yieldless treasuries. I believe gold will still win out this year, and perhaps several other commodities as well. Hang tight, a lot can happen in a year as the last two have proven.

Happy New Year! I will be sure to fire up a bet against Manning when it counts signal depending on who their second round opponent is.

You Don't Have a Chance

"Caus' if there's one thing I can't stand, it's standing next to my fellow man...."
About to Break, Third Eye Blind

Fresh off of eating stuffing, twice-baked potatoes, and assorted pies every meal for a week, I feel spry enough to offer up another entry. Between Thanksgiving and working on a series of essays about the joys of fatherhood (ironically as my daughters have croup again), I've been content to sit back and watch gold gather steam while the market continues to rise. This, in light of the Dubai crisis, anemic sales, and the doldrums of unemployment drying up credit faster than at any point in history.

If more collapse is waiting in the wings, we'll be the last to know, at least sudden collapse. Sixty billion dollars of debt really isn't that much to fuss about, given the monthly totals the U.S. is racking up. Given the daily demise of the dollar as a premeditated solution for keeping our goods viable. Given the grave this market has returned from. And the right to predict sudden collapse has become too expensive. Buying puts on the indices carry ridiculous premiums even at 20-25% OOM.

So, what are we left with? I still say metal and oil, and in the not-too-distant future, all commodities. But as The Mixx recently asked me when I pointed to the success of gold, why? Where is the money coming from? As Caroline Baum points out in her Bloomberg piece yesterday, it sure as hell doesn't look like new money.

"There is no sign of excess credit creation on U.S. bank balance sheets. From October 2008 through October 2009, bank credit fell 5.3 percent. That reflects an 8 percent decline in loans and leases and a 3.4 percent increase in securities. Within the securities category, Treasuries were the clear winner, with a 13 percent increase......When I hear folks like New York University Professor Nouriel Roubini talk about asset bubbles and “money chasing commodities,” I want to ask, what money? Where is all the money chasing stocks, commodities, high-yield bonds and emerging- market stocks coming from if it’s sitting in banks’ accounts at Federal Reserve banks?"

So it's sold-assets that are acquiring gold and silver, not the fresh flow of credit. And I see no reason for this paradigm to shift given the helium-high U.S. market.

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

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