Thursday, March 27, 2008

UPDATE on 2008 investing strategy and a TOTAL RANT ( two for the price of one)

1- Foreigners may not be buying treasuries but American investment banks sure are able to saddle the Fed wiht all its bad paper in exchange of squeaky clean Treasuries. I am right on track when people notice that this week alone the Fed has given $70BB plus another $200BB for the powerful to forestall the doomsday... Forget it Ben ! for every dollar of rescue you are not helping the 30:1 leverage those greedy bastards took out in the first place. They are calling asking for money but you don't even know the amount of toxic paper coming down the pipe!
2- Gold is way up there because Ben is trying to be superman. Give it up dude! and gold will plummet.
3- US Financials are still not in OVERSOLD situation and all lows will be retested.
4- India will be a place the place to invest. After losing as much as 22% on my ETF, I have slightly recovered and bailing with a net loss of 11%! I am replacing that with a short on Germany's 5 largest banks! If you think Wall street is sick, the Germans are way worse! As a side bet, I am borrowing euros against American T-bills. Hey how many people do you have to screw over to a get a number at the Special FED discount window?
5- China stock market IPO has imploded but it ain't over jus yet!

So I am only dead wrong on number 4 which I replace with a series of German shorts. 3 and 5 have paid in spades as I shorted Bear at 58!!!!!!!!! and since covered. As for 1 and 2 Ben is doing what all junkies do: borrow money against time until the next fix is in!

WARNING! The next paragraph is a pure RANT on US government. So if you are easily offended, go listen to Oprah's Big Give!

The ILLS of AMERICA

1) Has there been any worse President than George W. Bush? (http://www.thedubyareport.com/about.html)

While he has sponsored great work in Africa (negated by China's manipulative interests in the region... read the Economist), he has been toxic with his defense of loyalty vs capability and his handling of the Sept 11th aftermath. His worse move ever was reappointing the luckiest yet worse Fed chairman of ALL TIME: Alan Greenspan. While Greenie is not responsible for most of America's problems, he allowed a business culture to develop and bankrupt the country as a whole. He did it under cover of Greenspeak. YOU would think he would have learned from the LTCM fiasco? "Leverage KILLS the loser and makes all winners addicts".

The state of the union... (forced marriage)
US deficits are astronomical, middle class is double whammied on housing and inflation protection, more children are considered poor and hungry as food costs are out of control thanks to Ethanol policies and healthcare coverage is inadequate for 44MM Americans. The armed forces are in quagmire conflicts, moral is low, reenlistments are few and the repercusions will be felt by a whole generation.
Shame on US voters who elect unaccountable politicians with half baked policies and inedequate taxation but if they hire hookers , Oh my! Electing politicians that promise lower taxation yet burden you with massive deficits is about as stupid as getting another credit card to pay the other!


2) Ben Bernanke actions confirm him as a communist era fixer.
Ben: Remember the job description "Help financial institutions" NOT take on the most toxic paper ever invented and trade it in for Treasuries which are supported by subsidised taxpayers. ( Subsidies will end eventually...)

3) American CEO compensation plans: America wake up! Clean up the mess of greed on Wall Street. I sure hope the Next ambitious Spitzer type A prosecutor is openly unabashed agnostic over-sexed liberated apolitical mixed race of unknown heritage. The biggest weakness of America is trying to hide greed and corruption behind labels of god fearing seeming do-gooders.
My take on Spitzer: Instead of finger pointing Spitzer, the tabloids should have the top 4 pay candidates at BSC for 2002-2007 on the front page of the New York Post and have their personal section for the next year highlighting their lifestyle. Show their pay packages and their tax returns. Show their houses and jets . The houses in Greenwich and the homes in the Hamptons, Aspen etc. Bring shame to them! Might be little solace to honest hard working stakeholders but it sure beats reading about Britney and Lindsay.


Time to grow up America! Stop reading tabloids, watching reality shows and thinking that you can judge people by their religion and social norms. Start judging them by what value they bring to your great grand children. Today, short sightedness and the love of a winner are probalby the biggest weaknesses of American social, economic and political life.

10 REMEDIES

1) Get out of Iraq and double efforts in Afghanistan... Poppies and Bin Laden are worse than Iraq. Iran should be left to bully Iraqis to get their affairs in order!
2) RAISE TAXES,( USE a VAT & TAX energy AGGRESSIVELY), Balance the budget, feed all kids and give them adequate access to health care
3) Get rid of Ethanol for cars (DUMBEST THING EVER)
4) Phase out SUVs by 2012 by introducing SPECIAL PERMITS
5) Instead of bailing out banks, create jobs by fixing infrastructure, road, bridges and air traffic facilities. Worked for FDR...
6) Streamline Homeland security, lick your wounds and stop thinking you need to maintain the world largest armed forces. Let China and Russia spend their money! Being the bigggest bankrupt bully is not goint to allow you to pay your bills any faster.
7) Increase immigration and embrace it ( like pre Bush!)
8) Fund alternative fuels initiatives, make the USA a world leader in the area.
9) Increase margin requirements for commodity speculators ( being done)
10) Severly curtail ability to use leverage by banks and wealthy institutions

I got 100 more ideas but I got time... I am not sure US taxpayers do though....
In the meantime I will continue offending as many people who deserve it! Free Speech right? Well at least in Canada! ( for now)

Next topic: Lou Dobbs ... a man who deserves a rapid one way transit ticket to oblivion and anonimity

Tuesday, March 25, 2008

End of Queue

21 bps up yesterday…

The only way you get foreigners interested in keeping the fiat currency is if they get a really decent yield on the yank as commodities seem to have had their run for now…

If North American financials seem to have mid-water buyers , Europe and Asia haven’t had their last blowouts JUST yet!

Housing views

Contrary to normal thinking ONLY a decent yield on a mortgage keeps the market balanced . Compare this to a run of the mill Chevy vs. a Porsche. At the end of the lease regardless of what you paid for both cars, amortization, accident, horrid color etc. the Porsche will retain MORE value because of scarcity… If anybody can own a house with 4% rates well that makes houses worth less rather than more ( do you really need to think out of the box here?).

So I sincerely hope that the market has figured out that higher longer term rates are good for the market, keeps speculators and developers in check and to fix the legacy Greenspan’s Pandora box back as an Ebay item,

Legislation

Stop thinking that more bad government legislation will fix anything. All you got to do is either:
1) Increase immigration by 20MM rich dudes-dudesses

2) Getting out some John Deeres and plow under 20MM beautiful and perfectly livable houses

3) Nuke icebergs to reduce land in all American Coastal States (NIRLACS)

Please do it quick because the condo market lobby is about to join the NY Metropolitan Opera!

End of Queue

Everybody is buying up stox prior to April Fool’s , end of quarter… About that time, I usually work on my tan and figure out if I really care about not being able to tie my shoelaces after March break.

Is that a light at the end of the tunnel?

My biggest dilemma: Buying a Kindle or Abitibi stox? In any case one will become toxic kindling to my portfolio!

Meantime I love this market as it is as shooting ducks about to land or as they take off!

PULL!

Quack!

Aflac!

P.

Random Thought: Advise Fat farms that stretchable pants should be checked at the door with all treats!

Tuesday, March 11, 2008

LIQUIDITY TO THE WRONG PEOPLE and Text of statement from Fed -


Anecdotal evidence:
A) ( Deutsche Bank had to take over FIVE of the larger properties in MANHATTAN in default, ONE example: guy bought the GM building with $50MM down and a price of $500MM and the rest was financed. Later showing using presumed higher rental income the guy refinances to bumbling Germans eager to spend time in the big Apple on a $1.5BB price tag … guy defaults and has walked out with a couple of hundred millions and bank left holding the proverbial POS on a $1.5BB property which is now worth?).
B) European factories are abandoning some shift work ( meaning there will be less money to trickle through those economies).
C)US households double whammied as real estate price declines combined with falling stock portfolios lower net worth/leverage and curtails spending of luxury and large ticket items....

OIL
Recent concerted efforts of CBs would suggest that these moves have a bleeping short duration impact but cannot do much until oil is reigned in and gold plunges.People are taking refuge in hard assets (vs. financials imploders) in the hope of keeping inflation at bay. It is my understanding that the Oil exporters will continue tight supply for the following reasons:
A) No big oil discovery to flood market so even if they could…
B) Increase in demand of 2% soaks up all new comers
C) The US dollar is such a fiat currency at this point, oil is really at $70 bux when you think of it but it impacts people who will make McDonalds, Wal-Mart and Costco their idea of holiday destinations.
D) The leverage of oil traders is inordinate to the liquidity they bring to a market. They are probably the biggest benefactors of the 28day liquidity issued by CBs.

FINANCIALS
On the financial front, the biggest issue remains risk management. When your predecessor’s follies are liquidated by a risk committee comprised of liquidators, auditors and accountants, you are not in a position to find your next rising star and create value for your firm. I never heard of Admiral Nelson telling his men to batten down the hatches at the battle of Trafalgar. If anything he probably said open up all the cannon ports and send out fresh troops to conquer the enemy ( scarcity of money to be loaned to PRODUCTIVE vs. SPECULATIVE assets).
GARBAGEMEN AS ARBITRATORS
A) Margin calls always liquidate the above water positions first
B) Blue Chips get liquidated second
C) Illiquid positions will be discounted by a factor of 3x when markets implode ( so you better bet on companies with 300% increase in earnings or stay on sidelines)

WHAT TO DO?
Takes these rallies to clean up your messier stocks and keep your powder dry, reminding yourself that in a falling market your worst enemy is the risk manager at the other’s guy firm. It is HIS leverage that will affect your overall performance.

In conclusion, three weeks ago I thought I was seeing value in financials and I was looking forward to but the data is proving otherwise. While I can still hope to meet one, I haven’t still met a banker that ever impressed me. My prescription remains: Put in place conditions to allow rates to rise in US so that a foreigner sees 5% on a 10yrT as a GOOD investment. Everything Bernanke has done and doing goes contrary to that and he will fail miserably until he stops trying to hot wire a car at the bottom of a 20ft water filled quarry.Washington needs a balanced budget not rescue pork barrels packages of gargantuan imbecility.

As always thanks to my buddy "Forexman" for supplying me with articles of interest which indeniably help me form an opinion on the matters at hand.

DCW


FED STATEMENT deliverd MArch 11th-2008
- Since the coordinated actions taken in December 2007, the G-10 central banks have continued to work together closely and to consult regularly on liquidity pressures in funding markets. Pressures in some of these markets have recently increased again. We all continue to work together and will take appropriate steps to address those liquidity pressures. To that end, today the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank are announcing specific measures. Federal Reserve Actions The Federal Reserve announced today an expansion of its securities lending program. Under this new Term Securities Lending Facility (TSLF), the Federal Reserve will lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days (rather than overnight, as in the existing program) by a pledge of other securities, including federal agency debt, federal agency residential-mortgage-backed securities (MBS), and non-agency AAA/Aaa-rated private-label residential MBS. The TSLF is intended to promote liquidity in the financing markets for Treasury and other collateral and thus to foster the functioning of financial markets more generally. As is the case with the current securities lending program, securities will be made available through an auction process. Auctions will be held on a weekly basis, beginning on March 27, 2008. The Federal Reserve will consult with primary dealers on technical design features of the TSLF. (more) - 2 - In addition, the Federal Open Market Committee has authorized increases in its existing temporary reciprocal currency arrangements (swap lines) with the European Central Bank (ECB) and the Swiss National Bank (SNB). These arrangements will now provide dollars in amounts of up to $30 billion and $6 billion to the ECB and the SNB, respectively, representing increases of $10 billion and $2 billion. The FOMC extended the term of these swap lines through September 30, 2008. The actions announced today supplement the measures announced by the Federal Reserve on Friday to boost the size of the Term Auction Facility to $100 billion and to undertake a series of term repurchase transactions that will cumulate to $100 billion. Information on Related Actions Being Taken by Other Central Banks Information on the actions that will be taken by other central banks is available at the following websites:
Bank of Canada [www.bank-banque-canada.ca] Bank of England [www.bankofengland.co.uk] European Central Bank [www.ecb.int] Swiss National Bank [www.snb.ch]
Statements by Other Central Banks Bank of Japan [www.boj.or.jp] Sveriges Riksbank [www.riksbank.com]