Tuesday, July 12, 2011

It is getting scary... My little commie rant for you today!

Politicians are like compulsive gamblers playing craps on your dime... Instead you should be playing" balance the budget roulette" with their heads. If  they fail to get it done, it's the politicians heads that comes off... has worked before , should work again...
Disgusted by Republicans who prefer a $2Tb deficit target (rather than $4TB) in exchange of no tax increases for the rich... the rich are freeloaders in US for way too long.... add to that... GAS should be $6.00 and all would be well in the US economy but no no no , country still controlled by archaic defense establishment, ethanol and the corn belt voters... makes me (&(*#@!!!!!

The Euro gold chart is the scariest I have ever seen. When Greece defaults, what will happen to the French Banks? In Italy, people are not waiting to find out, Italians and all investors are dumping banking stocks to the great rejoicing of short sellers...

Not going to be a quiet summer... Buy 'em gold... I am securing land in the Caribbean, we need to go to places where financiers are persona non grata. Just artists, cooks, beaches , and a barter economy! Coconuts anyone?

Monday, June 27, 2011

2008-2011 A period to reflect on

We sometimes wonder why men let themselves believe that their ill gotten gains will be swept under the carpet of time. Four years after the worst financial collapse of the last 60 years, we are still at the mercy of  central bankers who print money, politicians courting Investment bankers for campaign contributions and a serious lack of Statesmen who do the right thing over the expediency.
Why are there only two women Sheila Bair and Meredith Whitney constantly sounding alarms on the policies of foolish men.
We relish in the falling of people who fall on their own swords or those intent on exposing them in public! 
The Obama administration is now geared to a second term and its policies are those of incumbents and not those of true leaders. Courting Wall street handouts, pulling out of  Afghanistan are two quick ways to replenish the coffers and win the populist vote.
We believe the repeal of Ethanol production, a serious cut to defense spending and a total review of immigration policies in a much better agenda.
America is producing an amazing share of PhDs yet many of those budding entrepreneurs choose to take their education and go back to China, India, Brazil and start-up new ventures which once would have found home in Silicon Valley,  Boston or Austin.
The future is bleak and many a man are to blame...
I still wonder if Hilary would have done a better job!
In the meantime. an ear of sweet corn has gone up from 99 for a dozen to three for the same price. Gold has gone from $400 to $1500 and the list is long and painful to watch.
Hope you enjoy your summer and the oracles on Greece prove too dire to come true!


Friday, November 12, 2010

G20 meeting, Private message

Simply said, Mr. president , we have our own problems and your pouring more dollars on the world stage is not helping anybody. If anything, it is a lopsided trade which bring about a collapse of commodity prices when it soon unravelS. Your Wall Street bankers are having a record year in bonuses and your uncontrolled debt building is going to put us all out of business. So do what you must but don't beg for endorsements of your king of fools, Ben Bernanke. The USA is damaged goods! VIVA CHINA! ( but not for long )

Wednesday, October 27, 2010

September was different. Bulls won. October was a new commodities bubble in the making

Dollar trading value around the globe has reached epidemic proportions.  It is trading at 5x its peak since 1929. At $63TB, it is incomprehensible that every trader is chasing bets against the lowly buck and fueling a rampant speculation boom that will consume markets and institutions over the next five years. Smarter is the person who can pinpoint where the next flash point will be. Is it China 60% portion of GDP related to NON-INFRASTRUCTURE CONSTRUCTION! ( a Healthy economy should be 10-15% MAX)?
Is it rapid food and other commodities reaching all time highs against the US dollar?
Let6's not get ahead of ourselves and work on DATA...

While the currencies gyrations we predicted did materialize in a big way, we can only start by commenting on the extraordinary moves on the S&P which is about to eclipse all previous records with a 10% gain for the month of September! As we analyzed the numbers and trading day patterns, we soon realized FLASH TRADING (supposedly outlawed) accounted for over 65% of the volumes. What is wrong with that? ( phew! I thought you would never ask)

The process is obviously flawed. While US Economic data was awful, yes PLAIN AWFUL, the market traded really up on bad numbers and down on expected numbers. FLASH trading is encouraging rogue behavior and the markets are becoming nothing less than a rigged slot machine. So as September is usually a BAD MONTH if not the worse month of year, Flash trading made sure this was going to be a good month shopping a four month high on the DJIA and 20% of the S&P 500 stock index reached 52 week highs.We expect that  the consequence of manipulated trading while seriously  constrain smaller hedge funds which make real bets and are having their lunch handed to them. Any fund under $100MM in assets is surely to consider folding by year's end. Leaving an even bigger liquidity problem past the mid-term elections. We still contend that the markets will continue to go up Until the end of October.

But what is this really saying? Simply prices are manipulated and we are rapidly approaching hyper inflation. Signs?

On September 21st, Bloomberg reporter Jeff Wilson had this to say:
"The price of Class III milk, used to make cheese, rose in Chicago to the highest level in almost two years as global demand for dairy products increases.  Cheese exports by major milk producers, including the European Union, New Zealand, Australia and the U.S., will rise 10% this year, the U.S. Department of Agriculture said… Wholesale-cheese prices are up 22% since the end of June, butter gained 25% and Class III milk rose 16%... ‘Export demand continues to improve’ for U.S. dairy products, said Roy Huckabay, the executive vice president for the Linn Group… ‘Milk is playing catch-up with the gains in butter and cheese.’”

To prove our point here are a few more:
September 21 – Bloomberg:  “Imports of refined copper by China, the largest consumer, gained for the second consecutive month in August, as traders ordered material to benefit from a profitable arbitrage window.  Inbound shipments totaled 267,153 metric tons last month… That’s 19% higher than… July and 22% more than…a year earlier…”
September 21 – Financial Times (Gregory Meyer):  “The price of jeans and T-shirts could be about to rise. The world’s textile mills, nervous about a global shortage of cotton, have propelled prices of the fiber to their highest in more than a decade.  This week’s jump in cotton prices above the $1 a pound level, for only the second time since the US civil war, has been a long time coming.”
September 21 – Bloomberg (Aya Takada):  “Rubber advanced to the highest level in almost five months amid expectation that the global market is set for the worst shortage in four years next year as weather constrains supply and demand keeps expanding… The price increased for a second day and has gained 10% this year.”
September 21 – Bloomberg (Aya Takada and Supunnabul Suwannakij):  “Bridgestone Corp., the largest tire maker by sales, is raising European prices for the second time this year and Goodyear Tire & Rubber Co. is charging more as rubber gains on prospects for the biggest shortage since 2007.  ‘Drought earlier this year and heavy rains later on hampered tree-tapping across Asian plantations,’ said Pongsak Kerdvongbundit, managing director of… Von Bundit Co., the largest natural-rubber producer and exporter in the world’s biggest supplier. ‘Global production will lag behind soaring demand for at least another two years.’”

So here you have it, what you eat is in hyperinflation, what you wear and let's not forget basic material which were  up at its highest levels in 10 years, Rubber, Copper, Gold!
Do you really feel confident Bernanke and Geithner really have Savers in mind when they push rates down to  1/10th of the real inflation rate?

The FED objective of trying to put a bid under distressed assets rather than avoiding rampant speculation in commodities seem totally illogical to us.  If we WERE FED chairman, we would go out there and corner strategic commodities and start to take out people trying to corner the market. Hoarding is not really a valuable endeavor for Wall Street firms but it is exactly what they are doing with their excess cash. ..  Making a fast buck on others people misery is really low.

That brings us to our probable two outcomes. Hyper inflation being ONE OUTCOME: As I alluded to earlier hyper inflation is a real possibility in commodities if further Dollar devaluation continues unabated. What is your best defense? It is still buying FARM land in a THREE SEASONS growing climate with good access to an adequate aquifer. Five years ago , I was already musing on the rich arable land in Africa which could use modern agricultural methods. Obviously those methods based on profits will not work there because unequal wealth distribution rapidly escalate into turf wars.Unfortunately commodities have gone way higher than they should have thanks to the new Bernanke bubble. Too late now!

SECOND OUTCOME:  Much more unlikely, Fed policy changes and decide that people need access to cheap food (over cheap housing) and institutes a sane price program but preventing Wall Street from speculating in commodities through hedge fund investing. Deflation in over built housing is not a bad thing. Banks should bite the bullet and not repeat Japan's mistakes. 

Germany economic output has improved. China is moderating growth through interest rates. Brazil and Russia are still there supplying resources!

The leader is Jakarta’s stock market which is up a stunning 44.1% thus far.Manila follows hard by, rising 40.2%. Bangkok is up 35.9%; Santiago’s market is up 34.3%, followed by Istanbul, also at 34.3% [Ed. Note: Istanbul lags Santiago by 0.1% to be precise.] and then comes Copenhagen, where stocks are up 27.1% [Ed. Note: Actually the Shenzhen “B” share index should be in 5th place, but because it is “B” shares we’ve chosen to avoid counting
it amongst the world’s leading equities markets. The Shanghai Composite Index, on the other hand, is down
7.8% year to date and that is after the massive rally ofthe past two weeks!]. Lifted from TGL.

 WHY can't the good old USA figure out that a loose monetary policy only benefits Wall Street and practically nobody else??

Thursday, August 5, 2010

August: the calm before the fierce storms created by FX moves

The S&P in July rose over 7%. Leaving many a hedge fund dumbfounded. As Gary Kaminsky suggested, they will be hard pressed to cover the reminder of the year and beat the indices. Expect a few stock names to go stratospheric but most bets will be on commodity speculation.
We are of the view that Oil prices are being propped up by a concerted effort of producers to keep the futures prices up. Anyways, we have lost all faith in getting a real sense of prices and their value. After reading Patel's book "Value of nothing" you soon realize that prices are set nowhere near the costs of owning anything let alone the cost to society and the planet as a whole. Prices for goods are set by a totally archaic and  nonsensical basis of supply and demand. Through advertising, People are made to BUY BUY BUY while not really thinking about their actions and consequences.. In India a new car can cost less than $5K where you are hard pressed to find the same in Canada for less than $10K. Why?
Economic theory followed today was written when less than 1 Billion people lived on earth. With more than 6 billion it is totally inadequate to deal with the world's mounting problems.
Too bad the animals in the Gulf of Mexico don't get to vote on the price to charge for gasoline after the latest catastrophe.
According to some studies, some other 300 deep sea SHUT-IN or DISCONTINUED wells may also erupt due to corrosion... If it takes more than 100 days to fix a new well,  we wonder how long it takes to fix an old one!
Well enough scary talk for a day! Let's get back to supply and demand!


Next week the Fed meets. To prepare the terrain, US Treasury secretary Timothy F. Geithner (what does the F stand for? )wrote an Op ed yesterday in the New York Times vaunting his and Fed Chairman Bernanke calls in the past two years saying, the Administration's policies saved 8.5MM jobs vs. doing nothing. Interesting assumption... Bernanke is hinting that things in the near future will be done "à la Japonaise" i.e nothing. So if 2008, the FED was the BUYER of last resort, today the FED has delivered as they ARE, on our behalf,  the HOLDER of last resort. This is for many years to come or until some sweet deal is negotiated in the backrooms. Good luck with that boys! Freddie, Fannie and the other in-breds' portfolios will continue to be held close to taxpayers balance sheets. This is a typical case of Prozac induced deflation courtesy of inane government policy. We are also curious to see how the FED plans to go after all those MBS issuers claiming fraud.

So deflation will continue unabated in the US and for good measure the Fed will continue to hold Treasuries as it has no choice but to maintain appearances in an INCEPTION type state of disbelief while using QE  as the drug of choice. Expect 10yr Treasuries to trend towards an idiotic 2%. The pressure on that cauldron will be unimaginable when it blows, and blow it will, but we are not standing brave enough to face off both the stealthy Fed and the US Treasury. Best leave that to the young wolves and the old foxes!

According to Realty Trac , the top five  US cities for foreclosures were:

Top Foreclosure Cities

  1. Las Vegas, NV
  2. Miami, FL
  3. Chicago, IL
  4. Orlando, FL
  5. Phoenix, AZ

That CHICAGO is third is both a surprise and a worry to us!

 As this chart shows all gains of the last 7 years were washed away. Would have been better to rent and spend the money on vacations, some collectibles and retraining...

Gold has proven a poor insurance policy as of late and we still think its prospects are limited.

In conclusion, the US government, as a dying republic, funds a $1.3Tb deficit with very little hope of getting out of the tomb dug by the voting public. Nice Job people!

So how is it out there in the rest of the world? EURO / USD CHART (last 120 days)

Freight rates in Asia are up 50% over last October and the ships that comprise the Baltic Index are steaming ahead now showing a 2% idle  time vs. 12% last year.

Liner board prices have gone up and the UPSes of the world show nice numbers.

It has been our contention that Germany is enjoying a huge export boom and flooding the markets with its goods and machinery. Teutonic power at work. Our local dealer announces, with glee, further price decreases for 2011 Mercedes. BRING them on boys!  We all need more gas guzzling toys!

With The Ukraine and Russia disparaging each other over wheat crops estimates, fall prices have seen huge speculation to the upside. I would hate to be an industrial baker right now and having to decide the future of those prices. It's a bit like airlines locking jet fuels at $67 or $140. There are going to winners and whiners.
Best for the bakers to recite the Lord's prayer. It can't hurt!

In the Meantime, we continue to hold a firm amount of US bonds, a healthy portion of Euros and expect Spain to be center stage this fall with its very precarious economy.


Good trading to you


Wednesday, July 14, 2010

Bastille Day

Not many bullish people have made money year to date.
We have spent most of 2010 trying to understand which forces would define the year. Would it be deflationary or inflationary?

The result has been a mixed bag around the planet. While food prices have been contained for now, we saw foolish commodity speculation in metals and energy.

An encouraging note is the backstop on Greek debt is holding (probably to unravel after labor day though).

The most striking anecdotal observation was in tourism. Both in Montreal and The Berkshires, we noticed incredible tourism spending. It is evidence that there is money flowing when the consumer is not reeling from leverage compression.

On a more somber note, which comes from Middle America ( as usual), we have come to the conclusion that TARP has hurt local banking which was unable or willing to write off the more toxic commercial real estate on their books. While Wall street knew how to use Tarp money and lavish it on adroit traders , the more than 900 regional bank on the TARP continued to deal with gangrenous real estates loans. While it is beyond hope for many, expect vulture funds to swoop in until the FIDC receives a fire sale mandate form the powers that be.

As emerging economies continuing to adjust to tight credit conditions, America and the Yankee dollar are going to feel the credit raters readjusting...

Lets hope the Q2 results now in full swing get massaged enough to create an environment where investors back job creators otherwise a Republican landslide in both houses is to be expected. At this point, this might not be a bad thing as Obama know how to spend but is definitely not on a value creation agenda.

Enjoy the dog days!

PS BP FIX IT! enough already!

Friday, June 4, 2010

So much for Obama's promises.. S&P 666

There were no jobs in May... and 22,000 LESS in revisions to March and April...
Double dip here we come!
Worse, the credibility of the commander in chief is seriously put to the test.
While the president raised eyebrows on job creation earlier this week, his hubris has come to light. What is worse is the LACK of new jobs being created out there...

So back to the short on S&P... no harm done as there is much more to go on our way to S&P 666

Good trading to you