While it has been a while since my last post, the holidays have come and gone. President and the U.S. Congress acted to avoid the fiscal cliff with new tax increases for most Americans. Granted the payroll tax cut would continue to hurt Social Security funding if left at the old rate for individuals.
The main issue for investors is an age old question. What asset classes or investments give me the best chance to earn a real rate of return and avoid risk? As I have mentioned, I believe we are in a "virtual economy" with no answers to the problems that exist in the real economy. Major structural imbalances will take many years to correct, as the economic conditions have taken many years to develop. As investors explore the uncharted waters, I think we need to step back and look at some long-term investments to consider. Problems can create opportunities and I believe longer-term trends to be more appealing then to play the hourly changes in stock prices. Many institutions are now involved with high frequency trading strategies. I am sorry, but my computer is not fast enough.
What long-term areas do I find appealing?
Natural Gas and the potential for exporting the fuel.
Natural Gas engines
Facilities to export Natural Gas
Pipelines
Heath Care and Pharma
Long-term Senior living facilities REITS
I am interested in other long-term areas they find appealing. Feel free to send me a note.
Monday, January 14, 2013
Sunday, November 11, 2012
In Uncharted Waters
As I have mentioned before, the United States is in an economic environment we have never witnessed before in the history of our country. While I have discussed the major economic imbalances in my blog that have developed over a long period of time (such as trade, budget, and currency issues), the necessary economic adjustments remain elusive and obscure.
In my opinion, the world's central banks have printed trillions of dollars of currency and tripled their balance sheets to support the debt currently outstanding around the world. As the assets that back the record amount of debt continue to deteriorate or are written off in some cases, the debt imbalances will need to be worked out with more consumer, government, and corporate defaults. With the removal of debt stimulus polices, the potential toxic combination of defaults and budget cuts that have been offsetting the deflationary drain of debt servicing on economic growth now look to be a long-term issue. The health of the world financial system is at risk.
The developing issue is now governments cannot continue to borrow from bond investors and now subject to the same debt servicing problems as citizens and are subject to further austerity. Leaders in the United States want to deal with the “fiscal cliff” by announcing budget cuts and tax increases. The combination will detract from any chance of economic growth for the United States near-term. Corporations around the world continue to hoard cash in advance of the potential falloff in economy activity and as a result unemployment remains at crisis levels.
The major question of how the excessive imbalances will work out remains. What should we do to protect our own financial future? One possible answer is I think we need to treat this economic environment as an explorer did many years ago.
As we learned from history books, explorers set out to prove the majority view wrong that the world was round and not flat. They had vision and wanted to find new lands with potential riches for the Kings and Queens that supplied the necessary financing for voyages. The explorers “sailed off into uncharted waters” and were very brave and did not want to tell the leaders they failed. They relied on ships that were supplied with a significant amount of men, food, and the best materials to try to account for any problem along the way. Still, many died on the voyage to find new lands and riches. While they tried to be prepared for any event, many still lost their lives on the journey. Those who survived came back heroes and brought back new riches.
Yes, I believe we are in uncharted waters and plan accordingly.
In my opinion, the world's central banks have printed trillions of dollars of currency and tripled their balance sheets to support the debt currently outstanding around the world. As the assets that back the record amount of debt continue to deteriorate or are written off in some cases, the debt imbalances will need to be worked out with more consumer, government, and corporate defaults. With the removal of debt stimulus polices, the potential toxic combination of defaults and budget cuts that have been offsetting the deflationary drain of debt servicing on economic growth now look to be a long-term issue. The health of the world financial system is at risk.
The developing issue is now governments cannot continue to borrow from bond investors and now subject to the same debt servicing problems as citizens and are subject to further austerity. Leaders in the United States want to deal with the “fiscal cliff” by announcing budget cuts and tax increases. The combination will detract from any chance of economic growth for the United States near-term. Corporations around the world continue to hoard cash in advance of the potential falloff in economy activity and as a result unemployment remains at crisis levels.
The major question of how the excessive imbalances will work out remains. What should we do to protect our own financial future? One possible answer is I think we need to treat this economic environment as an explorer did many years ago.
As we learned from history books, explorers set out to prove the majority view wrong that the world was round and not flat. They had vision and wanted to find new lands with potential riches for the Kings and Queens that supplied the necessary financing for voyages. The explorers “sailed off into uncharted waters” and were very brave and did not want to tell the leaders they failed. They relied on ships that were supplied with a significant amount of men, food, and the best materials to try to account for any problem along the way. Still, many died on the voyage to find new lands and riches. While they tried to be prepared for any event, many still lost their lives on the journey. Those who survived came back heroes and brought back new riches.
Yes, I believe we are in uncharted waters and plan accordingly.
Thursday, October 25, 2012
The Developing Problem with ETF's
Exchange traded funds have exploded to the investment scene over the last few years with many different sectors, types, and even volatility based ways to benefit from market trend changes. The main issue is that many of the funds are becoming less liquid and in some cases are closing.
My concern is with a market crash, that the liquidity in these funds may dry up and become more difficult to sell in an extreme market event. Keep an eye on your ETF's and check the trading volume. Make sure it is active enough to provide liquidity for entry and exit points.
The market appears to be starting a major leg down, and liquidity will be important as this trend develops.
My concern is with a market crash, that the liquidity in these funds may dry up and become more difficult to sell in an extreme market event. Keep an eye on your ETF's and check the trading volume. Make sure it is active enough to provide liquidity for entry and exit points.
The market appears to be starting a major leg down, and liquidity will be important as this trend develops.
Saturday, September 29, 2012
Are Corporate Cash balances too high?
A look at the over $2 trillion in cash at U.S. corporations has been an economic concern and debated about by politician's. Should the money be put to better productive use to spur domestic economic growth?
First, a number of large multi-national corporations hold significant cash balances outside the United States. While the rules for a two year period were changed that offered corporation's tax advantages to bring the funds back to the United States, the plan did not work. The main reason is that major multi-national production facilities are now offshore and used in the normal cash flow cycle in the country of production.
The second issue is that the collective debt level of companies have surged to over $6 trillion from $2 trillion few years ago. In effect, management teams have decided to borrow funds instead of using cash to invest in productive assets. The cash on hand will now be needed to payoff creditors in case of a reduction in demand.
While borrowing rates continue to be at record lows, many management teams are too concerned about end demand to enter new markets or acquire other companies to secure their competitive position. Management teams appear to be building up a significant cash war chest to prevent any liquidity issues as leveraged companies find it more difficult to access the credit markets.
First, a number of large multi-national corporations hold significant cash balances outside the United States. While the rules for a two year period were changed that offered corporation's tax advantages to bring the funds back to the United States, the plan did not work. The main reason is that major multi-national production facilities are now offshore and used in the normal cash flow cycle in the country of production.
The second issue is that the collective debt level of companies have surged to over $6 trillion from $2 trillion few years ago. In effect, management teams have decided to borrow funds instead of using cash to invest in productive assets. The cash on hand will now be needed to payoff creditors in case of a reduction in demand.
While borrowing rates continue to be at record lows, many management teams are too concerned about end demand to enter new markets or acquire other companies to secure their competitive position. Management teams appear to be building up a significant cash war chest to prevent any liquidity issues as leveraged companies find it more difficult to access the credit markets.
Monday, September 17, 2012
The Grand Illusion Continues
A number of announcements were made by Central Banks and others and confirmed that government leaders and Central Banks "Will Do Whatever It Takes" to avoid an economic collapse. Wait just a minute; Prevent? Today marks the four year anniversary of the Lehman Brothers/Bear Stearns collapse and "The Great Recession of 2008". For most people, it has been a long and painful experience. As a number of my business associates already know, the economic collapse was not avoided and has continued.
What we have now is a "Virtual Economy" not a "Real Economy". Video game players should know that a number of computer programmers can create a "virtual world" in which you explore, fight, and conquer enemy's. The Fed and the governments around the world have created a similar game called the "Virtual Economy" and left the "Real Economy" in shambles. Let me explain:
What has always been the reality depends on which side you are on. You are either in The Have Camp or Have Not Camp. In the Have camp (or virtual reality economy), the outlook is bright as bond prices, mortgage backed securities, and the stock indexes have rebounded on trillions of dollars of capital market purchases by Central banks/Governments that have propped up asset prices. The Virtual Economy has rebounded and wealth has returned to the Have Camp.
In the Have Not Camp (or the real economy), the majority of citizens have been left to fend off the collapsing housing prices, lack of jobs/high unemployment, and soaring food/gasoline prices as the "Real Economy" remains in a depression.
Just what is the end game here? Will the "Virtual Economy" players come out of their world and back to the "Real Economy", or will citizens around the world be drawn into the new "Virtual Economy Bubble Game"? After all, virtual games are fun for the winners! However, in the Virtual Economy will need more players, or the Central Banks will need to print more money since the "Real Economy" has none. In the Virtual Economy game, the rules are that Government's and Central Banks issue bonds or the Central Banks print money to replace "Real Money".
The disconnect between the economy and the capital markets is as wide as I have ever seen it. The difference between the "Virtual Economy" and the "Real Economy" is frightening to me as the game continues.
When will the Have Camp come out of the "Virtual Reality Economy" and realize that it is just a crazy game that cannot be won? The virtual economy game cannot be won by the Have Camp, unless new players are drawn into the bubble.
The real game here is called a Ponzi scheme. Please don't fall for the new bubbles being created in the "Virtual Economy" or we may end up like Lehman Brothers or Bear Stearns who ended up being in the Have Not Camp. Sorry, the game is over. Time to come back to reality!
What we have now is a "Virtual Economy" not a "Real Economy". Video game players should know that a number of computer programmers can create a "virtual world" in which you explore, fight, and conquer enemy's. The Fed and the governments around the world have created a similar game called the "Virtual Economy" and left the "Real Economy" in shambles. Let me explain:
What has always been the reality depends on which side you are on. You are either in The Have Camp or Have Not Camp. In the Have camp (or virtual reality economy), the outlook is bright as bond prices, mortgage backed securities, and the stock indexes have rebounded on trillions of dollars of capital market purchases by Central banks/Governments that have propped up asset prices. The Virtual Economy has rebounded and wealth has returned to the Have Camp.
In the Have Not Camp (or the real economy), the majority of citizens have been left to fend off the collapsing housing prices, lack of jobs/high unemployment, and soaring food/gasoline prices as the "Real Economy" remains in a depression.
Just what is the end game here? Will the "Virtual Economy" players come out of their world and back to the "Real Economy", or will citizens around the world be drawn into the new "Virtual Economy Bubble Game"? After all, virtual games are fun for the winners! However, in the Virtual Economy will need more players, or the Central Banks will need to print more money since the "Real Economy" has none. In the Virtual Economy game, the rules are that Government's and Central Banks issue bonds or the Central Banks print money to replace "Real Money".
The disconnect between the economy and the capital markets is as wide as I have ever seen it. The difference between the "Virtual Economy" and the "Real Economy" is frightening to me as the game continues.
When will the Have Camp come out of the "Virtual Reality Economy" and realize that it is just a crazy game that cannot be won? The virtual economy game cannot be won by the Have Camp, unless new players are drawn into the bubble.
The real game here is called a Ponzi scheme. Please don't fall for the new bubbles being created in the "Virtual Economy" or we may end up like Lehman Brothers or Bear Stearns who ended up being in the Have Not Camp. Sorry, the game is over. Time to come back to reality!
Tuesday, September 11, 2012
9/11 Tribute
While we await some major economic events, I think we should take time today to pause and reflect on our lives. I had a few friends who survived the 9/11 attack and know how grateful they are to still be living today.
As we all know our family, friends, citizens and first responders were victims of multiple acts of terror on that day. We all know other Americans gave their lives and perished trying to prevent further attacks on this country on 9/11.
As my friends who survived the terrorist attacks told the stories of first responders who went up many flights of stairs going to save others while many where exiting a building, or discussed some other event that occurred that day that saved their lives we must remember to all be grateful we live with other Americans willing to help us.
My own story is small compared to the other stories that day. I had a flight scheduled to leave in the afternoon on September 11th. While watching the events unfold before my eyes on the television, I knew I was fortunate that my flight was not earlier in the morning or in the airport of the planes that were a target of the heartless killers.
I had also borrowed a book from the Market Technicians Association library, which was destroyed in the World Trade Center that day. I waited long enough for the association to relocate and rebuild. Then I sent the book back that I borrowed with a special note. Somehow that book had a very special meaning to me as it survived the attack and the library was rebuilt.
I will take a walk tonight around a local lake with my family to pray and honor the victims of this event. I will also pray that world leaders avoid conflicts in the future and strive toward peace. I have learned in my life it is far easier to destroy than to build.
As we all know our family, friends, citizens and first responders were victims of multiple acts of terror on that day. We all know other Americans gave their lives and perished trying to prevent further attacks on this country on 9/11.
As my friends who survived the terrorist attacks told the stories of first responders who went up many flights of stairs going to save others while many where exiting a building, or discussed some other event that occurred that day that saved their lives we must remember to all be grateful we live with other Americans willing to help us.
My own story is small compared to the other stories that day. I had a flight scheduled to leave in the afternoon on September 11th. While watching the events unfold before my eyes on the television, I knew I was fortunate that my flight was not earlier in the morning or in the airport of the planes that were a target of the heartless killers.
I had also borrowed a book from the Market Technicians Association library, which was destroyed in the World Trade Center that day. I waited long enough for the association to relocate and rebuild. Then I sent the book back that I borrowed with a special note. Somehow that book had a very special meaning to me as it survived the attack and the library was rebuilt.
I will take a walk tonight around a local lake with my family to pray and honor the victims of this event. I will also pray that world leaders avoid conflicts in the future and strive toward peace. I have learned in my life it is far easier to destroy than to build.
Tuesday, September 4, 2012
Actions Speak Louder than Words
Around the world investors, consumers, and citizens are waiting on the "magic announcement" from either political leaders or Central Bank heads to solve the problem of weak economic growth, high unemployment, and the risk of capital flight.
Recent articles suggest that savings/money is leaving Spain at a rapid percentage of GDP. When money leaves the economic system, economic activity will contract and not expand. The money contraction is being replaced by Central Bank or government purchases of bonds to continue to support a failing economic system or a depression. As most citizens know, the United States is in a depression. Most economic statistics keep coming in weak or weaker. Investors, consumers, and citizens are starting to ask the most important question; Will economic activity or the economy ever get better?
While Europe is suffering, the U.S. announced the ISM factory activity index is now below 50. Most economists consider the economy is contracting when the index falls below 50. The European Central Bank heads will meet again September 6th trying to float the idea of unlimited bond purchases in the E.U. to prevent the wide credit spreads between higher rates of Spain and Italy compared to Germany. While the major issue remaining is the pending court ruling in Germany due at the middle of September to allow the ECB to purchase any bonds at all.
As most citizens now know by now, the magic announcement is just an illusion.
Recent articles suggest that savings/money is leaving Spain at a rapid percentage of GDP. When money leaves the economic system, economic activity will contract and not expand. The money contraction is being replaced by Central Bank or government purchases of bonds to continue to support a failing economic system or a depression. As most citizens know, the United States is in a depression. Most economic statistics keep coming in weak or weaker. Investors, consumers, and citizens are starting to ask the most important question; Will economic activity or the economy ever get better?
While Europe is suffering, the U.S. announced the ISM factory activity index is now below 50. Most economists consider the economy is contracting when the index falls below 50. The European Central Bank heads will meet again September 6th trying to float the idea of unlimited bond purchases in the E.U. to prevent the wide credit spreads between higher rates of Spain and Italy compared to Germany. While the major issue remaining is the pending court ruling in Germany due at the middle of September to allow the ECB to purchase any bonds at all.
As most citizens now know by now, the magic announcement is just an illusion.
Tuesday, August 28, 2012
A Happy Birthday!
Well, I just turned 54 today. I know the people in the Gulf do not like my birthday as another hurricane is coming ashore.
Gas prices continue to rise along with food prices. As far as deflation, consumer confidence dropped sharply. I find it interesting that the headlines are positive and the consumer is getting more negative. I think we know who is right as the consumers need to pay the bills everyday and are more exposed to the "real economy" than analysts on Wall Street.
Be safe and Good luck!
Don
Gas prices continue to rise along with food prices. As far as deflation, consumer confidence dropped sharply. I find it interesting that the headlines are positive and the consumer is getting more negative. I think we know who is right as the consumers need to pay the bills everyday and are more exposed to the "real economy" than analysts on Wall Street.
Be safe and Good luck!
Don
Thursday, August 23, 2012
The Main Problem In America
Do not look for the Federal Reserve or Central Banks to help much over the next year. The problem has taken a long time to develop and now needs a long time to correct the imbalances in the Economic system. While many people have been focused on other events, the main issue is Germany's court will need to rule on further use of the EFSF or ESM facility by mid September.
Please look at the look below for the main issue in America today. I found the comments interesting.
http://finance.yahoo.com/blogs/daily-ticker/middle-class-broke-pew-study-reveals-real-problem-155018682.html
Tuesday, August 7, 2012
I sound like a Broken Record
The stock market is a rigged game as far as I am concerned for short-term traders. Do not get into believing short-term news events. Short sellers continue to get squeezed out on any new news of ECB or Federal Reserve stimulus plans either real or perceived by investors. Usually the market moves up before any Central bank action and then falls sharply on the "actual event". Time and time again any further action has not worked. Continue to hold VIX and UUP as fundamentals have not changed. My opinion is that further central bank action is a long-term negative for the stock market as investors continue to "hope".
While we are waiting for some real economic change, I am looking for some positive groups or sectors for some long-term investments. Some real investment potential is ahead and as long-term investors you may want to take a look at Senior Living REITS, Heath Care REITS, and natural gas for potential positive areas once the major top is in place. The market has been prone to a sharp collapses in a short period of time so be ready when the drop occurs. The recent move up is not a surprise as Central Banks continue to manipulate investor sentiment. What is a surprise is most trading investors continued to be drawn into investing at peak prices by these actions.
While we are waiting for some real economic change, I am looking for some positive groups or sectors for some long-term investments. Some real investment potential is ahead and as long-term investors you may want to take a look at Senior Living REITS, Heath Care REITS, and natural gas for potential positive areas once the major top is in place. The market has been prone to a sharp collapses in a short period of time so be ready when the drop occurs. The recent move up is not a surprise as Central Banks continue to manipulate investor sentiment. What is a surprise is most trading investors continued to be drawn into investing at peak prices by these actions.
Thursday, August 2, 2012
ECB comments to save the Euro are coming up short
A few weeks ago I made a comment about how a court ruling snag in Germany would prevent the Eurozone from using the EFSF or the future ESM to be able to buy Spanish and Italian bonds. The ECB comments last week appear to be false as they wait for court rulings due in Germany on September 12, 2012. In addition all 17 members of the Eurozone need to approve a change in the rules to allow sovereign bond purchases by the EFSF or ESM. Do not look for the ECB to act until all countries agree.
Investors will start to realize that not all countries in the Eurozone will agree to bail out weaker nations soon. Please read the interesting article from CNBC for further details.
http://www.cnbc.com/id/48456183
The main points are as follows: A final decision would follow after September 12, when Germany’s top court rules on the ratification of the ESM, which will replace the existing EFSF, the paper said. Analysts point out that there are significant obstacles to such a move. The ESM cannot come into force until Germany approves it. “This is all speculation which is completely unjustified at this stage,” Alistair Newton, political analyst at Nomura told CNBC.
In addition, all 17 euro zone members would need to agree to such a move, and the Dutch and Finns have already expressed their reluctance.
Wednesday, August 1, 2012
ECB please save us!
Well the Fed meeting has come and gone and the real hope is that Central Banks around the world will flood the system with money and start a real economic recovery. The hope is now on the Central Banks to solve the world economic mess as political leaders cannot. Talk is cheap and the ECB is now on the hook saying that they will flood the system with as much money as it takes to solve the issue. When I first researched the issue, the European problem last year the amount of funding required for banks and the governments to just finance debt and deficits was over $2 trillion dollars. I am sure the problem is larger now as the economies are sinking into recession. So, if the ECB does not announce another major $800 billion plan tomorrow look for the markets to crash.
On another subject, I certainly believe individual investors are losing faith in the stock market due to high frequency trading. Back in 1987, the crash that day was partly caused by program trading. Look for the same meltdown again, and afterwards people will be pointing fingers again.
http://finance.yahoo.com/news/latest-market-glitch-shows-trading-174547006.html
Thursday, July 26, 2012
Groundhog Day
Investors love when the Central Banks print money to help solve the sovereign debt and banking crisis. As investors we have seen this many times before. Looks like a scene from the movie groundhog day as the actions have been repeated time and time again without any real lasting solution to the main economic issues. Will companies expand or borrow money to create jobs? No. Are savers being wiped out by low interest rates compared to inflation. Yes. Any answer to high unemployment rates in the U.S. and Europe? No. Is the short-term stock market artificially inflated by these actions? Yes. Is the long term world economy being hurt by these short term actions? Yes. The world eeconomy will be facing even more headwinds as the ECB and the Fed drains the liquidity added. Investors need to be careful what they ask for on Groundhog Day. Just as a reminder, the Fed has offered dollar swap lines and the amount has been increasing since May up from $22 to $30 billion. The Euro problem is worse not better as these lines are not zero and heading higher again. Look at the link by the New York Fed required for full disclosure to taxpayers. http://www.newyorkfed.org/markets/fxswap/fxswap_recent.cfm. In my opinion this is the last great time to exit the market. We have seen this movie before.
Tuesday, July 24, 2012
Monday, July 23, 2012
Ban on Short Seliing in Spain and Italy
Now that the financial markets are under pressure, leaders in Italy and Spain decided to announce a ban on legal short selling. Just another attempt to regulate in a depression.
I believe that short selling provides future buyers in a declining market. The attempt to regulate trading will likely backfire as investors decide the market is a rigged game and not participate. At least in Las Vegas, I know a slot needs to pay off sometimes.
It is O.K. if short sellers get caught in a short squeeze, but not alright if they profit from mismanagement of companies. Does that sound fair? The reason I like the VIX as a hedge to a declining market is it soared today is that regulators cannot attempt to control volatility. Volatility is a natural reaction to further panic by investors. Look for future attempts by leaders to continue to ban, regulate, manipulate, and control the economic winners and losers. However, the public is smarter this time and may revolt to further attempts to save savers and investors at the expense of all taxpayers.
I believe that short selling provides future buyers in a declining market. The attempt to regulate trading will likely backfire as investors decide the market is a rigged game and not participate. At least in Las Vegas, I know a slot needs to pay off sometimes.
It is O.K. if short sellers get caught in a short squeeze, but not alright if they profit from mismanagement of companies. Does that sound fair? The reason I like the VIX as a hedge to a declining market is it soared today is that regulators cannot attempt to control volatility. Volatility is a natural reaction to further panic by investors. Look for future attempts by leaders to continue to ban, regulate, manipulate, and control the economic winners and losers. However, the public is smarter this time and may revolt to further attempts to save savers and investors at the expense of all taxpayers.
Friday, July 20, 2012
I think one foot's off the edge of the cliff. Look out below!
Recently I was invited on a consulting assignment and now back in Iowa. Sorry for the lack of posts recently, but to me nothing has changed with the market. The stock rally has been minor on no major news events. The Wall Street spin on earnings releases and weak guidance appeared to be falling on deaf ears in most cases. A few stocks were pounded on the earnings misses recently.
Pay attention to the riots starting in Spain with the long term bond yield now over 7.2% in the country. No bread no peace!
With the U.S. corn crop now appearing to be really bad, the outlook for more strain on the U.S. consumer has started. The deflation process should now weaken end demand further ex food, and while I cannot predict a drought, the end deflationary environment for items other than food will likely lead to prices falling faster now. As far as positions I recommended, I would look to exit UUP on a move on the Euro below $1.19 to the dollar. Do not hurry and take your time as Italy will be next in line for funds causing more pressure on the Euro.
The VIX looks poised for a move sharply higher. The index has performed well despite the stock rally. I am buying the XVZ to participate in the stock decline I see straight ahead.
As a further note, if any firm would like to hire me for my services, I am in the market. Of course that has been the case for a while. Feel free to contact me with a post. However, as the way Wall Street works "bears are not invited" to the party. I will love to turn into a bull someday, but 2012-2013 will not be a pleasant experience for most of my former associates/co workers. All my friends on Wall Street I wish good luck and I may see you in the unemployment lines soon. I know many of you have expressed a desire to leave the business and I can understand why. You are the real heroes as you continue to try to help clients in a depression.
Pay attention to the riots starting in Spain with the long term bond yield now over 7.2% in the country. No bread no peace!
With the U.S. corn crop now appearing to be really bad, the outlook for more strain on the U.S. consumer has started. The deflation process should now weaken end demand further ex food, and while I cannot predict a drought, the end deflationary environment for items other than food will likely lead to prices falling faster now. As far as positions I recommended, I would look to exit UUP on a move on the Euro below $1.19 to the dollar. Do not hurry and take your time as Italy will be next in line for funds causing more pressure on the Euro.
The VIX looks poised for a move sharply higher. The index has performed well despite the stock rally. I am buying the XVZ to participate in the stock decline I see straight ahead.
As a further note, if any firm would like to hire me for my services, I am in the market. Of course that has been the case for a while. Feel free to contact me with a post. However, as the way Wall Street works "bears are not invited" to the party. I will love to turn into a bull someday, but 2012-2013 will not be a pleasant experience for most of my former associates/co workers. All my friends on Wall Street I wish good luck and I may see you in the unemployment lines soon. I know many of you have expressed a desire to leave the business and I can understand why. You are the real heroes as you continue to try to help clients in a depression.
Wednesday, July 11, 2012
EFSF or ESM snag?
Well the devil is in the details as bank investors holding preferred and certain debt of Spanish banks will be wiped out before the funds from the EFSF are released. In Germany, the issue has gone to court to stop the disbursement of the funds. The ruling will not be for 90 days.
J.P Morgan is set to discuss the "whale trade" tomorrow. Stay tuned in!
J.P Morgan is set to discuss the "whale trade" tomorrow. Stay tuned in!
Sunday, July 8, 2012
The Cliff
Got a chance to see Dark Shadows over the weekend and a few loved ones were falling off the cliff who could not break a witches spell!
Feel like the economy is like that right now right at the edge of the cliff under a spell of easy monetary policy by the world's central banks! On Friday, the market fell sharply as employment numbers in the U.S. remained weak, the German economy appears to be slowing along with China. Spanish rates jumped sharply to above 7% as European leaders said they have not reached a agreement to release the $100 billion to Spanish banks before July 20th.
In Germany, Merkel appears to be not only in hot water with other European leaders, but when she got home was blasted by other politicans. I was reading that Holland's leaders are not in favor of bailing out weaker European countries to hurt their credit ratings.
What we have is a cliffhanger!
Feel like the economy is like that right now right at the edge of the cliff under a spell of easy monetary policy by the world's central banks! On Friday, the market fell sharply as employment numbers in the U.S. remained weak, the German economy appears to be slowing along with China. Spanish rates jumped sharply to above 7% as European leaders said they have not reached a agreement to release the $100 billion to Spanish banks before July 20th.
In Germany, Merkel appears to be not only in hot water with other European leaders, but when she got home was blasted by other politicans. I was reading that Holland's leaders are not in favor of bailing out weaker European countries to hurt their credit ratings.
What we have is a cliffhanger!
Sunday, July 1, 2012
Let the Battle begin
I have followed the stock market since 1975, and I have never witnessed the type of event that occurred the last two days in the stock market. Either investors are all now bipolar (one day euphoric/next day in depression) or the governments/central banks around the world want to make sure they print all the money they can and give it to the world banks to prevent a global meltdown due to bad consumer and business debts. While I believe government officials want to prevent a meltdown of the world banking system, I believe the capitalist system as a result of these policies is under severe attack. The outcome will be total government control as the private sector has given up and left the mess for leaders to clean up. I did not experience the "New Deal" and feel I am too old to pick up a shovel and fix up the national park system when private businesses cannot or will not hire.
In the United States and the E.U., the printing presses have being running full blast since the 2008 peak printing money to buy all kinds of debt. The money supply has tripled in both regions. The best G.D.P. growth is behind us as interest rates have fallen. Unemployment in the United States and Europe remains high by an historical measures. When the Central banks will need to liquidate the MBS, Treasury, Sovereign debts) on their balance sheets who will be the buyer of last resort? Sorry, the private sector is tapped out. I would not look at the corporate balance sheet strength either as the cash as a percent of annual depreciation looks in-line. Yes, cash is at record highs but so are expenses.
Watch for a quick reversal during the summer and the market to head sharply lower. If not the government bought another couple of months. Sorry, as an umpire I need to call it as I see it. Out! not safe! I heard the crowd booing now!
In the United States and the E.U., the printing presses have being running full blast since the 2008 peak printing money to buy all kinds of debt. The money supply has tripled in both regions. The best G.D.P. growth is behind us as interest rates have fallen. Unemployment in the United States and Europe remains high by an historical measures. When the Central banks will need to liquidate the MBS, Treasury, Sovereign debts) on their balance sheets who will be the buyer of last resort? Sorry, the private sector is tapped out. I would not look at the corporate balance sheet strength either as the cash as a percent of annual depreciation looks in-line. Yes, cash is at record highs but so are expenses.
Watch for a quick reversal during the summer and the market to head sharply lower. If not the government bought another couple of months. Sorry, as an umpire I need to call it as I see it. Out! not safe! I heard the crowd booing now!
Wednesday, June 27, 2012
Get ready for the Fireworks!
After a brief bounce, investors pounce on any hint of positive news as a great chance to buy. While the European leaders are starting to fight about how to solve the latest regional problem in Spain, the U.S. market has been focused on some weakening manufacturing numbers. Unemployment and job growth remains sluggish, and some earnings disappointments may be in store for multinational firms in the second quarter earnings releases starting soon.
My outlook is for the S&P 500 to decline to below 1,100 at a minimum by the end of September. I remain in the UUP position and you may want to purchase some VIX funds to protect your portfolio.
My outlook is for the S&P 500 to decline to below 1,100 at a minimum by the end of September. I remain in the UUP position and you may want to purchase some VIX funds to protect your portfolio.
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