Thursday, April 30, 2009

S&P 1000 Rally under way

We believe the S&P will hit 1000 as the market is reading into inventory depletion/replenishment. Let's not talk buildup here!
we are most curious to know if banks are actually extending credit to those companies hoping to build-up inventories. There is no better way to create jobs or at least get laid-off workers back into factories. Copper demand is not abating so there is hope out there.

After S&P 1000 WATCH OUT, we think subdued economic activity will give a reality check prior to Q3 numbers. Pre-announcements won't be so much fun either for the giddy.

Best to stick to ETFs than to risk individual and repeated disappointment.

with over $30BB a week of treasuries being newly issued, competing with maturing issues and re-marketed deals, credit problems around the Globe, we find the opportunity of shorting the US 10-30 yr bonds just too much fun! That's where we think the best risk reward lies.

Serious money was made on tightening spreads between corporate bonds and Treasuries putting further problems for Secretary Geithner to rework his model!

Good trading to you!


DCW

Wednesday, April 29, 2009

More easing!

When all is said and done, FOMC was a trip to crack dealer.
Heck a drop of 6% in Q1 GDP pretty much anywhere, was that REALLY the bottom?

FED basically said "Patient is weak and needs to be monitored but we believe that with printed money, he will recover" Maybe! is more adequate position...
AT EF, We are sticking to our guns and believe the bond market will fail ahead of the stock market. Luckily we are only short bonds at this point but we really think the market would be healthier IF the earnings multiple on stocks was more subdued. Instead it is yet again overly ambitious and can only cause pain and misery to many stock pickers. Would be best to play the averages if you insist on betting long this very long in the tooth equity rally.

MAY 1st is a holiday in parts of Europe. The french must be upset that it is on a Friday ... they prefer when it falls on a Wednesday so they can plan around successive other MAY holidays and take major portions of the month off...

FRIDAY MAY 1st IS worker day and GM day of more dole money... How fitting!


Good trading to you


DCW

Monday, April 27, 2009

Planes, drains and OTTO-bum-ills

PLANES
This morning, we were well intent on seeing this market rally but a series of very fortunate events prevented us from being ready at the get go. We heard of planes escorted by fighter jets circling the New York skyline. European currencies rallied...


DRAIN: Trading session in the drain...
Instead we were saddled with a cracked laptop screen and the backup was an ultra slow desktop. This required sourcing a better solution for trading futures and spot currencies. A $4K quad screen setup should arrive UPS sometime next month... Perfect cause the Japanese are going on extended vacations, the French never work in MAY ( July, August, 1/2 December, 1/2 January)... goign to be a falling market... Perfect to trade on trends rather than on merit!

MEANTIME
That took care of the morning, while keeping an errant eye on the market. With flu pandemics, drug stock rallies and by the time lunch came around the markets were down and we hadn't either made nor lost money...

This is one of those days were you realize too many people with too little capital are trying to make the news. This is again an ominous sign that the equity market is ready for a major fall.

TREASURY driving US taxpayer in the drain too
With so much Treasury issues in the bond market coming this week, we find it pathetic to see the FED feeding the markets with just enough bids to lose traders in the forest with very mean wolves hungry for the kill. Mind you, the only ones biding up Treasuries at this point, are probably, the loser banks using TARP money. The shills at CNBC make alot of noise about the banks that want to repay. WE WANT TO KNOW ABOUT THOSE THAT CAN'T REPAY!Always easier to spend money when it's not yours to dish out...

OTTO! Jetzt hergekommen!
Time for BAM, the little red riding hood WITH FIAT money, to visit the Detroit crips and other welfare BUMS. Time to let it all hang out with GM. BAM will not fail (trying)to keep GM a useless shell, but we fear GM's greater contribution to socialism will be to make BAM fail to keep his electoral support intact. The middle class has counted this administration 100 days of grace. Their thumbs look just about ready to change direction. Can the market be far behind?


Caveat Emptor!

GOOD untrading to U


DCW

Thursday, April 23, 2009

APPLE, EBAY & CREDIT SUISSE EARNINGS

Better earnings giving a lift to morning numbers. Futures point to 1% rise...
Markets should respond. Following yesterday's comments the 10yr Notes trading at best rate since Fed announced plan on March 18th.

Hang Seng up 2.3% showing marked reversal over last 2 sessions.


Goldman puts out a buy on Toyota. Car sales are showing 9MM in US vs. range of 14.2MM to 16-5MM. This makes who ever makes it unscathed at year end , the winner of pent up demand or as a friend suggest maybe Americans will adopt Cuban automobiles habits and keep them for 50 years...


Good trading to you


DCW

Wednesday, April 22, 2009

Out of Physical Gold @$889.30 and EYEING June Futures 124.10 T-bonds

The NA Equity markets closed nasty today.
In the last 10 minutes of trading the TSE lost 70 points while the DJIA retreated another 50 to close at 7886.57.
Whether it's BOTs or weak hands, it is interesting to note that this is the first WEDNESDAY since February that the DJIA closed DOWN

Looking at the US stock tape, We came to the conclusion that armchair accountants were being taught a lesson by PRO Firm capital. When a company with $50MM in sales proposes a $280MM write-off and the stock goes up 25% today alone, you have a machine trading with no sentiment. Just as well, a company with a Debt to equity of 6 could go up 19% when it announces an EXTENSION from its banking syndicate...
Sorry to repeat the same thing for a THIRD time year to date but this is not a market for people clicking their orders from a Second Cup outlet! The ability to Read a balance sheet and open an E trade account does not qualify you to be short this market! BEFORE you say it, "NO"! Just tagging along for the squeeze will protect you when the inevitable fall comes...



What's a trader to do?

CHINA SHORT?
Not quite but China looks particularly ominous... While NA American are in their own little bubble the Hang Seng looses 1000 points in last 2 trading sessions... That concerns us greatly! From 12 to 6 and now probably 3% growth is the trend about to reverse or getting worse?

US REAL ESTATE
US real estate in terms of price has bottomed especially in areas that have come off the hardest Miami, CA, Las Vegas, Phoenix.

US FIRST OUT OF THE GATE
WE still believe the US will be the first to recover, followed by Emerging Markets, especially China. Europe will lag behind.

FX: GBP
THe Brits are doomed and their currency is the best short out there. The double whammy of real estate bubble burst combined with the dilapidation of banking assets leaves the country unable to come back and justify the Pound as a viable currency.


Lastly US T-Bonds...
My favorite short ... June bonds 124.10 is CRUCIAL
Fed been buying notes it seems to keep mortgages rates alluring but the Fed wants mortgage refi to go in the 30yr range. We were surprised to see on CNBC the proverbial cheerleaders showing off a consumer so happy to lock a refi at a 5yr rate of 3.05%... good for him but next week Treasury has a bunch of 5s and 10s to issue. We don't think brokers will be so hot for that market if they are competing with the refi market.
WHAT the FED should do is take care of the 30s market but Mr.Geithner is not so naive NOT to understand that a bps on a 30yr is much harder to come by than on a 5 or 10 year. Word to the wise, If you want a positive yield curve, you are going have to do the heavy lifting Mr. Secretary. You can't have your cake and eat it too!!!

124.10 Remember that number!


Good trading to you

DCW

Monday, April 20, 2009

A Market ahead of itself , Loonie call Mea Culpa!

US MARKET GOING DOWN
With 1/3 of the S&P reporting this week, we are getting the meat and potatoes on the nastier side of the numbers...
No big Stats this week so the S&P will reveal itself as the big bad wolf
usdcad 1.2375... was 1.1985 on the 16th .. u want volatility?
Current US household valuation ( as indicated by Bank of America loan loss provisions) make a 2009 2010 recovery almost an impossibility.
As traders soon realize bank profits are just acts of FED Largesse. Loan Loss Provisions.
Unemployment in the US is being incorrectly reported as travel into the heartland shows misery everywhere.

LOONIE
the short rise on the loonie probably came after the G20 meeting. Investors saw that Canada was a safe haven for investment and momentum took over. The currency followed but as Energy and commodities rose on overly optimistic expectations, consolidation will occur and the currency will fall with traders moving out and looking for opportunities elsewhere. Expect the recent fall to show a RANGE where you should look to trade 1.19-1.30 and AVOID calls OUTSIDE that range.

GOLD
OK gold is not a short but a HOLD... The US numbers this week will look ugly and Gold will look good again. Seems it trades inversely to the S&P. CEF.A is trading at a 6% premium ... any time it hits below 13 it's a buy...

OIL
Still maintain short will hit low side of range of 44-54 on Expiry tomorrow

CHINA & US Treasuries
Seems China is selling its US treasuries and quietly converting them to stockpiles of non-ferrous metals. While the FED foolishly is buying back their Treasuries to prop up their low yields , the Chinese are getting nice reserves of copper. Now between you and I, What would you rather own, $100BB of copper or $100BB of Fiat currency treasuries?




Good trading to you

DCW

Wednesday, April 15, 2009

S&P 803 next target... short GOLD to below $800


We've seen a great rally since March 9th. "No doubt about it" would say Mr. Mark Haines.
If enough people want the market to go up... IT WILL. But once that initial move is done, momentum, above moving averages and RESISTANCE becomes counter forces to exuberance.

The somber reality has to be brought back with anecdotal evidence:
- In March 50,000 houses in California went into default.
- Munis refinancing market is sold to an unsuspecting market (pension liabilities are unfunded). There is no pro-interest in the sector ( they know what is coming)
- Some New York commercial properties are changing hands for debt (or 30 cents on the dollar)
In the U.S. market, commercial real estate is worth about $6.5 trillion, and is financed by an estimated $3.1 trillion in debt.
And that debt is going bad at an escalating rate. In March, the delinquency rate on about $724 billion in securitized debt reached 1.8%. As percentages go, that’s a pretty small number. In fact, it’s less than a quarter of the housing market’s record-breaking mortgage-delinquency rate of 7.88% for the fourth quarter, according to the Mortgage Banker’s Association.
- IF Talbots 'latest quarterly report is any indication that retailers with a marginal offering are about to bite the dust, Mall owners will be breaking into negative cash flow soon enough...

If you think banks can make a living on a spread business, think again. Q1 numbers at GS are showing some profits in business lines that aren't likely to be repeated in following quarters. Their competitors missed a golden opportunity to use the March rally to come clean with portions of their books. Waiting or delaying consolidation reporting of mergers (WFC) is NOT going to work for very long.

With the lack of transparency from the FED's decision NOT to report results of the ongoing stress tests, we fear that investors will shy away from committing new funds to this market until another watershed occurs.

Putting this all together suggests our favorite TURBO number S&P 803 is going to be tested fueling a strong move to the down side after that.

NAZ? NO
While the NAZ had a nice rebound, INTC's numbers don't seem to justify the interest in Semis and the rest of the lot doesn't show margin expansion.

OIL? NO
Oil is bound range $44-$54 and nothing seems to offer any viable scenario to see this change any time soon. Production cuts are meeting demand shortfalls step for step. Intense pressure on margins will constrain Capex on all major players well into 2010.

GOLD? NO
While Mr. Bernanke can be congratulated for offering free money all along the yield curve and avoiding the latest attempt at a market implosion from succeeding, he has won BUT a reprieve. Price deflation abounds as all measures of inflation seem to be subdued: Housing affordability, food and energy costs seem well contained and with a supply of 5MM unsold cars on lots... inflation is not coming back for a while. Holding gold therefore is not a productive asset at this point. People are already getting no return on their CDs and their bonds. HELL if pensioners are just going to sit on physical gold to further reduce their monthly income! Best be short treasuries to gain same effect...

SHORT TERM TRADING? be ready for tiny profits
Market pros are playing this market on a day to day basis bagging small profits and with the looming GM bankruptcy, another period of intense angst is about to test supports levels.

SHORT TREASURIES: HOW MUCH?
Bernanke and Geithner riding the Obama wave of popularity. Why fight it? WE are using a measure of $10 of short treasuries ETFs (TBT & PST) for any $1 we commit to short term trading, so when Armageddon hits with the inevitable implosion of the current ludicrous bond yields on treasuries, we will be protected when the market really takes another hit.

INDIA ETF? NO
Unfortunately that country doesn't have the infrastructure or resources to grow its own economy. It still needs foreign investments to fuel job creation> we think it will be a number of years before investments returns in search of what was once a source of English speaking cheap labor.


COPPER? YES
For some odd reason that metal is trading over a five month rally.

BRAZIL? YES
Best bounce back, good currency, great exporter

SELL USD, BUY LOONIE? YES
This has proven a great trade and has another 10 cents in it


Conclusion:

SHORTS:
US MM banks
US Commercial lenders
US Treasuries (7yrs-20yrs)
NAZ
US Oil majors
INDIA ETF

LONGS:
Non-ferrous metal plays
Brazil ETF
Loonie


Good trading to you!

DCW

Thursday, April 2, 2009

Friday April 3rd 2009, DAy for bulls?

This is going to be an interesting day. With March INITIAL unemployment numbers coming out, the market is going to react positively no matter what. Why? Because BOG is throwing so much money at the problems, stuff is going to stick and the shorts are going to be getting a taste of their medicine.
The White House is developing a hedge fund to manage $500 billion in toxic bank assets.
So time to adjust a bit our doomsday scenario.
We are putting money at work in highly leveraged situations.
Recent moves in stocks like Honda ( up 50% YTD) suggest that the US consumer isn't going to be content on a 8.8MM volume of car sales. I think 14MM is more of an acceptable and reasonable estimate so the market will discount ahead of a uptake before the summer. It won't help Chrysler and communist funded GM but I would look to Toyota to do well. Anecdotal evidence shows Chinese sales are up 20% showing that there IS a middle class somewhere...
I also am putting money in WFC, BAC as a good bet for a west coast led uptick,
Now for VERY speculative nuts Mirage and Sands are good casino money bet. Theie balance sheets are so messed up consolidation is inevitable.

HIGHEST EQUITY HOLDINGS since 2006

We sold gold companies ETFs and holding to gold bullion. We see gold in the 800sd before it's next up phase to 1200-1500

The Loonie is a great currency these days, dump the USD


Good trading to you