Wednesday, October 21, 2009

PPI and the dreaded D word or why things ARE NOT GOOD!

There you have it folks!

"The Producer Price Index for Finished Goods declined 0.6 percent in September, seasonally 
adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This 
decrease followed a 1.7-percent rise in August and a 0.9-percent decline in July. In September, at 
the earlier stages of processing, prices received by manufacturers of intermediate goods moved 
up 0.2 percent and the crude goods index fell 2.1 percent. On an unadjusted basis, from 
September 2008 to September 2009, prices for finished goods fell 4.8 percent, the tenth 
consecutive month of year-over-year declines"

PPI came in and the market reacted vigorously. Bovespa retracted 2.5% and the loonie lost 2 cents.
The USD is a reserve currency and for all the misguided efforts on Capitol Hill to keep Wall Street insulated from the vagaries of earning an honest living, the political mood is A changin'! NOT IN MY LIFETIME!

Last night, we watched PBS's Frontline's episode called "The warning" which recounts the efforts of Brooksley Born, Chair of CFTC 1996-1999 to have OTC derivatives come under the CFTC ( Commodity Futures Trading Commission). She was debunked on the hill in committee after committee and Robert Rubin , Larry Summers and Alan Greenspan derided her as a fool who could bring down markets if derivatives were ever regulated. You could see who drafted Congressman and Senators queries to Mrs. Born... right out of the offices of the bank lobby groups in Washington. THERE ARE FIVE BANK LOBBYISTS FOR EVERY SITTING MEMBER OF CONGRESS.
Amazingly enough, there is STILL NO LEGISLATION out there to regulate 573 TRILLION DOLLARS of derivative bets made by people who can only write checks to themselves but never meet their own obligations if another market shock came our way. That shock is coming. You may be inclined to buy peace of mind with insurance, hard assets like gold or hold on to different currencies but make no mistake, Bankers around the world have corrupted elected bodies and they will continue to prevent any legislation to limit their pay or their leverage trading activities. Citi below $4.50 , GE below $17 while GS and MS at record highs show that their power grab has succeeded and record bonuses courtesy of the American public will continue.

This brings us to our talk on deflation. Q3 earning results show that large businesses lost ground on topline revenue but cleaned the fat on the bottom line. Great! mass firings brings in less consummers, higher unemployment and sales over 2 years comparisons are dismal. Wall street plays games by comparing over last year, small consolation. "Employment is a lagging indicator" they say... All I remember is that inventory build-up was a sign of optimism... WHO has inventory build-up?

Deflation means that prices going forward are cheaper than before... Case in point: In Canada MERCEDES-BENZ sells its flagship series E 2010 models at a BASE price $10,000 less than LAST year... that's even before subsidized lease rates and other incentives...

Expect more of the same.

Until the Fed raises the price of money, gets out the shorts out of the USD and the US government learns to manage risk takers with a baton, expect access to credit for your average Joe to go down until Q3 2010 and that the S&P has hit a wall at 1100 and will have to retrace its meteoric rise to deal with the reality that the money out there is in the wrong hands! We think a retracement 5-10% is healthy at this point...

In the meantime lifting the veil on Dark pools, front running and a couple of WASPY rogue traders in jail sounds good for morale!


Good trading to You


 

Friday, October 2, 2009

Alone in OUR OWN THOUGHTS

It's been a wonderful September and October is off to a roaring start.
Our December 1100 Puts were up $17 yesterday.
Time for an update.
While we can always make excuses for awful stock purchases, using the madness of crowds and trends to come up with archaic and obsolete economic mumbojumbo is NOT an acceptable excuse!

So instead of repeating over and over again the way to look at the US market, please read on. If you can't agree with ALL of the following  axioms, best you go somewhere else because you will NEVER understand why we are beating all the market indices since March 2007.

First have a look at the unemployment ranks. Fierce cost cutting and massive layoffs have given temporary reprieve to companies but what happens when the consumer disappears! Welcome to Q4 , Reality sets in!



 
This is the AXIOMS about 2009 AMERICAN ECONOMY AND THE LEGISLATIVE PROCESS:

1) CHEAP RATES DO NOT BENEFIT CONSUMERS WHO DO NOT HAVE ACCESS TO CREDIT
2) CHEAP RATES DO NOT ALLOW RICH PEOPLE TO EARN MONEY ON CAPITAL AND GO OUT AND SPEND. iNSTEAD THEY GO PLAY AT THE NYSE AND NASDAQ CASINO TABLES
3) US TREASURY DEPARTMENT SUPPORTING LOW YIELDS ON  ITS OWN PAPER  CREATES DEFLATION
4) HUGE BUDGET DEFICITS MAKES THE US  AN UNENVIABLE PLACE TO SET UP BUSINESSES
5) GOVERNMENTS NEVER SPEND MONEY MORE WISELY THAN PRIVATE ENTERPRISE
6) THE ROLE OF GOVERNMENT IS TO MAKE IT FAIR FOR ALL CITIZENS
7) IF POLITICIANS CAN BE BOUGHT THROUGH ANY FORM OF CAMPAIGN CONTRIBUTIONS, YOU HAVE A CORRUPT GOVERNMENT. NOTHING WILL CHANGE. THE BIGGEST DONORS GET TO SET THE AGENDA AND DEFRAUD THE PEOPLE ALL OF THE TIME.
8) WRITING LEGISLATION TO PREVENT A REPEAT OF LAST YEAR'S PROBLEMS IS BY NO MEANS AN EFFECTIVE TOOL TO PREVENT THE NEXT CRISIS.
9) PRESIDENT OBAMA HAS A BIG GUN POINTED OUTSIDE THE US BORDERS WHEN IT SHOULD BE POINTED TO ALL PEOPLE ENTERING THE CAPITOL AND WORKING THE HALLS
10) IN 2009, A US PRESIDENT IS NOTHING BUT A PESKY LOUD MOUTH WITH A WET NOODLE. THE ONLY VARIABLE IS VOCABULARY AND INTELLIGENCE. ATTRIBUTES THAT UNFORTUNATELY ARE NOT PARTICULARLY USEFUL IN CHANGING WASHINGTON'S WAYS
11) TIME TO BRING BACK A STEALTH PRESIDENT WITH A TAZER


Buy em' S&P puts 666!

Good trading


DCW