Monday, May 17, 2010

Euro gold has run it's course; The profit machine of BIG OIL is in DEEP TROUBLE!

State of our successful calls
So this is getting repetitive bu today we are starting to pull back on all the negativity. We have been short ALL equities since April 21st when the S&P hit 1208. We maintain our call that the S&P 500 is still the best market to short and that the Euro suffers rightfully in  the hands of its creators, malevolent Eurocrats. In the same esprit, we NOW recommend to cover EUROPEAN EQUITY SHORTS and start analyzing potential stocks that can benefit a low euro...


A 4 MONTH WINDOW...
North American and Asian exporters to Europe are going to report massive losses when their receivables start clicking at 25% less... Oh yes, supposedly, banks are supposed to help their clients hedge their currency risks but we all know that they charge a fortune for that service. When in the full midst of a recession, we all know that safety and R&D are usually the first items to be chopped off. In this case financial safety through hedging really got impacted. An analysis of Wall street desks did not show accrued business in currency hedging. Clients must have reasoned that is has been unnecessary for the longest of time and some people just took on a bad risk... Now the premiums are too high and frankly the export business has all but dried up.

In a fit of  perverse  reasoning ( which usually pays very well for us) we think that some Euro stocks will show stellar results because of a falling euro. The likes of Volkswagen, Nestle, Unilever and other multinational will thrive. They will compete very well at home against imports while their exports will show amazing currency gains. We therefore advise to look for European companies and use a steep sell-off (anything over 5% a day or 9% a week) to build a 1/3 position while instituting discipline stop losses).

While positions are built in Europe, Chinese and Indian stocks look ripe for selling. We have seen serious signs that infrastructure stocks ( landlines telecom notably) have been hitting 52 week lows. By the same token, the predicted fall of the Yen vs. the USD should have you place this no-brainer from May to September currency bet until end of August...

We still do not understand all the upward movement in gold in EURO terms. Interest rates will rise in the biggest deficit member countries. Holding gold will end up being a 10% gainer when there are are much higher returns to be had holding higher yielding instruments.  We know very well that Greece and the other PIIGS might be able to announce IMF, World Bank, ECB intervention. We also fully well know it will take time before the money is in place and there is more grumbling ahead. With a kitty of $750BB no member is ont eh verge of defaulting any time soon. While we are convinced rated charged to members countries will inevitably divide the groups into As and Bs, the latter will pay at least 400bps more to borrow. Gold will then become a very unappealing instrument when the yields will confront low inflation. Good European companies with superb rating will be able to borrow at very favorable rates and showing stellar profits... SO if I can advise our European based gold bugs... change course, sell the metal and buy stocks... remember the date May 17th 2010...


OIL WILL LEAD EVERYTHING LOWER

Here all hell is about to break loose... Support lines are breaking everywhere and the currencies are too high for their own good. With no plan in place to balance its budgets, no political system with a clear mandate to do so, we can only wait for the depression to bring about new lows on North American equities... the Export picture for both March and April were well below our expectations and imports rose in both countries.  that means anemic job growth at best.
With the latest 60 minutes http://www.cbs.com/primetime/60_minutes/video/?pid=pMKLhmm7XQBQ2O_0q8zOFxBFCmY6ixf3&vs=Default&play=true
  which took two segments to explain the BP/TRANSOCEAN HORIZON RIG disaster, we just learned that there is a 16 well system which is 100 times bigger and probably as accident prone... You just need to remember what pictures and videos did to the seal fear industry, the oil spill will literally destroy any profit making scheme for big oil for the next five years... While the Titanic only sank once, in this case, there are hundred of accidents waiting to happen... SO if Exxon and many giant oil companies are hitting 52 week lows, we believe oil is going to hit many more lows. The industry has hit the iceberg of public opinion!

One guy who might enjoy all this diverted attention will be Lloyd Blankfein who must be enjoying  his daily dose of schadenfreude.  Adamant on destroying any possible passing of the Volcker rule, let big bad Oil that the wrap while Wall Street wants to keep business as usual.

WHY o WHY are we surrounded by such people? 

Off on the bike to deliver our second to last stock certificates, we have sold all our private companies. We are going to buy farm land in many parts of the world and avoid many parts of  the paper or electronic economy until an element of accountability and reason return to society... That might take a while...


Good trading to you


DCW

Tuesday, May 4, 2010

We all like records... sort of...

What a week.
This post was originally written on April 30th but stayed in our draft folder due to a medical emergency... So if the tone is dated the information is of relevance

Posturing and grandstanding on Capital Hill On Tuesday and criminal charges against GS filed on Thursday
Rating agencies and Greece yields competing for the limbo title
US exports numbers making some stocks shoot up but domestic look anemic at best

We are more worried by two events:

The oil spill in the gulf ( going to eclipse the damage of the EXXON VALDEZ)
US Illegals: Immigrants and Emigrants both records...

THE OIL SPILL

The leak from a blown-out well a mile underwater is five times bigger than first believed. Faint fingers of oily sheen were reaching the Mississippi River delta late Thursday, lapping the Louisiana shoreline in long, thin lines. Thicker oil was about five miles offshore. Officials have said they would do everything to keep the Mississippi River open to traffic.
The oil slick could become the nation's worst environmental disaster in decades, threatening to eclipse even the Exxon Valdez in scope. It imperils hundreds of species of fish, birds and other wildlife along the Gulf Coast, one of the world's richest seafood grounds, teeming with shrimp, oysters and other marine life.
Sooner or later, the world will realize uncontrolled used of oil  and passing on to taxpayers the real costs of its use must stop once and for all...
Europe understood that by taxing the hell out of it and somehow plowing back 30% into non-social projects. Can the US do the same... If you remember THREE MILE INCIDENT, it killed any nuclear plant construction for THIRTY (30) years. WILL this be the watershed  event that will seriously curtail high risk drilling? I wouldn't want to be in the DEEP SEA OIL platform BUILDING business for the next three years... New regulations will take for ever to be finalized and in the meantime, the Shipyards will be vacant...

With a bunch of hillbillies , pick-up trucks and tea drinkers poised to wrap themselves in the American gas guzzler fall election parade, I fear the moment has not yet come to see $6 a gallon gas but it is a comin'.

Have you ever seen a COUNTRY SONG where alternative energy, hybrid cars are used?.. NAH! That would be silly and make you look weak. AMERICA stands for lots of BHP under the hood! the land of NASCAR, DRAG RACING, the 18 WHEELER and the DINER!

I think this disaster is going to make RAIL SERVICE have a bigger share of the transportation market. Too bad it falls in the middle of a depression...

EMIGRATION AND IMMIGRATION

Fighting for FIRST PRIZE in the 2010 WORST POLITICAL TIMING DECISION YEAR TO DATE:
1)PRESIDENT OBAMA EXTENDING OFFSHORE DRILLING RIGHTS

and close behind

2)ARIZONA CODIFYING RACIAL PROFILING INTO LAW


Governments are there to serve and protect the people. There are supposed to offer free access to commerce and to support thriving communities where access to education converts into high paying jobs and prosperity for all. They are not there to run car companies, provide arbitrary measures of what constitute value, efficiency or in this case what makes economic sense to a community.
TO start with a cliche , the world's greatest powers were always thriving when immigrants and traders came into to share work and exchange good and services.
THE fall of these mighty empires always can be traced to people not so inclined to come over and just happy to send underlings.
Soon enough this will come back to haunt those short sighted lawmakers as those economies will suffer one of their worst drop in economic activity... Thank god they will be able to blame everything and everybody except themselves... If you think Arizona had cheap real estate, you haven't seen anything yet!

TWO very scary statistics came out this year:
A) 2-3MM "illegal immigrants" aren't coming to work in the USA anymore finding the prospects not worth it. Already many misses in top line revenue by companies who catered to these hard underpaid workers who did the menial jobs any blue blood yank would not dare get his hands dirty doing...
B) A record number of US EMIGRANTS have renounced their citizenship... While a laughable number ( less than 600) it might be a trend as baby boomers realize that the US consumption craze is just not worth it any more especially as their broken Governments at most levels are creeping daily ever more into their affairs neither making them happier, healthier or safer.
Here is a short list of unconfirmed numbers of Ex-Pats who haven't decided to renounce their citizenship just yet but with massive deficits, higher taxes and a socialist agenda, get ready to see those numbers change considerably when 30% of your taxes doesn't have to pay the Pentagon's budget, 40% to Entitlements and most of the rest to debt servicing....
US EXPATRIATES LIVING IN
# Canada - 688,000
# Mexico - 500,000
# Philippines - 250,000
# Israel Israel - 184,195 (admirable precision to collect on Israel bond drives)
# United Kingdom - 150,000
# Germany - 92,000
# Dominican Republic - 80,000
# South Korea - 67,000
# Australia - 64,000
# France - 62,000
# Hong Kong 60,000
Finally, we maintain our sell rating on the Euro as we think Greece will be forced out of the EURO zone or quit on its own. May that be a lesson to all nations that have a laisser-faire attitude when fueling massive deficits and failing to prosecute tax dodgers. You may survive several bad marriages but when credit goes , you better have a new game plan!

Good trading to you!

DCW