Tuesday, May 27, 2008

TENURED Liars

An observation, a Statement or an insult?

In the US who gets appointed to steer the economic affairs of the country?
Who gets the following mandate?: "To promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates"

There is a team out there right now holding court:
THEIR SCORE?
1) Maximum Employment? Doing still pretty good but heading for a cliff
2) Stable prices? You HAVE to be kidding me...
3) Moderate long-term interest rates? BIGGEST set of lies in here. People go listen to some snake oil salesman with doctored statistics. Amazing anybody on the planet wants to hold toxic US bonds. I STILL call for 5% on the US 10yr but hurry up because soon I WANT 7%

Bill Gross headline " Global economy deals with 7% inflation" yet he bets $130BB on GVMT backed mortgages securities , a brave soul this early!

In the Meantime
Please visit this site http://mwhodges.home.att.net/inflation.htm
to get a better sense on how inflation is creating this incredible background for all.

FED WATCH
What makes no sense to me is the policy of the FED to maintain the open window policy when clearly banks have no intention of putting this cheap money to work in areas that may do good... Infrastructure, education, non-government sponsored eco-friendly high tech... Instead it will go into carry trades speculating on the reversal of fortunes of smaller countries and even the demise of their own competitors (David Einhorn is at bat, Lehman is the ball and Bernanke is the pitcher)


The EUROPEANS and the CHINESE are DEADLY afraid of inflation.

The current FED policy is wrong wrong wrong! Keep it up and Vockler is coming back!BEN using a printing press puts the US in a dangerous position and has put it in direct conflict with its major trading partners. BEN you are heading for a run on US Treasuries as the pied piper. I see where you have been but I KNOW where the rats are having their next dinner. ECB and China will continue and MAYBE accelerate credit restriction to manage commodity speculation and unless the FED reverses COURSE NOW, I predict a pretty ugly fall in the credit markets.



LETS FACE IT: Everybody knows that the American people and ALL OF ITS INSTITUTIONS have an addiction to credit. SO FORCE THEM TO CHANGE , you don't give more CRACK to an addict entering rehab, do you?
REMEDIES
A) REVAMP inflation numbers to TRULY reflect "Causation"
B) PUT a DEADLINE on free money... Wall Street doesn't need 500K financial workers anyway ( sorry people) but make it leaner and smarter so more firms need to go bust
C) ANY FIRM that gets access to easy money CANNOT pay its top CEO $100MM Pay packages

in the MEANTIME: Hell has no furry like Meredith Whitney so she will spin her web on consumer credit card losses. It will be nasty for the summer if she is right as a new law takes effect in AUGUST...

IN CONCLUSION
Unless the FED changes its ways, I predict they are climbing at an ever increase rate of speed and by the FALL they are going to go over a cliff with no more goodwill bought parachutes... When people talk about V, W or L shape recession, I prefer to use the \ or an IMPACTED I ...


TRADING
This week In Canada, I am short XEG and XGD, US still holding SKF as I do not believe that the current rally is sustainable.

The Swiss Franc is a currency of interest to the bureau ( Just haven't figured out how to play it)

Thursday, May 22, 2008

Selling OIL when everybody is talking about it!

It was so funny yesterday afternoon. I spoke to an old trader friend, Jacques Ouellet, who said something so true but we seem to all forget so often: " With the Internet, WE trade on the same info, so unless you trade differently you will be following the crowds ". I think that rang true and I decided to unload all by big OIL stocks and Oil Index ETFs pretty much at the high of the session. I took a loss on PBR that I had bought in the morning. The last month of profits more than made enough to be happy.
SO long Peak Oil.. I am going to find other ways than to follow the madness of crowds.

Sitting on piles of cash now but I really want to be short the likes of solars and ethanol stocks. I think they are way overdone. Meantime my call of 5% on the 10yr T- bond is coming into play... You could be making serious coin if you were listening to my advice if I could only figure out the beastly Euro with such ease!

Cheers

DCW

Thursday, May 15, 2008

Writing of Index Options May 16th 2008

US Market wants to go up. Traders want to write premiums yet VIX is dead as a door knob. SELL IN MAY AND GO AWAY!!!!!!!!!!

Our North American rail stock universe is doing FABULOUS. Canada's XEG.TO, CDN Oil stock ETF is doing records weekly. What gives? 2 themes...

THE US HAS THE WORLD"S MOST EFFICIENT FREIGHT MOVING INFRASTRUCTURE IN THE WORLD
Keep raising oil prices and the US will eat the other economies for lunch!!!


CHINA IS GOING FROM EXPORTER OF DEFLATION TO CONTROLLER OF ITS IMPORTED INFLATION
I read some very compelling arguments from http://www.dailyreckoning.com
contributor Christopher Hancock who believes that the Chinese economy managers are going from boom growth to harsh realities of adolescent growth spurts and a recent 49% correction on the Shanghai stock exchange is not conducive to steady yet fast pace growth. The Chinese would prefer stability and a low US is not the driver of the Wal-Mart economy anymore and INSTEAD it is a net importer of inflation into China. WOW~! How quickly things change in 5 years!!!!
Assuming this is true that would imply that the Chinese want a strong dollar relative to their imports of raw materials and if they can't get that they will be willing to let the HUAN rise vs. the USD... Too bad the HUAN is NOT a convertible currency... I could simply convert my USDs to HUANs and the rest would be useless but I can't so here are my bets based on the potential scenario
1) IBM, Coke and all the large BRAND names franchise who had stellar foreign earnings reported in Q1 2008 might not be so hot later this year.
2) I would venture DJIA will under perform S&P 500 because of those foreign earnings numbers
3) I don't think NAZ will be so hot against either DJIA or S&P 500 unless the EURO really depreciates 25% against the USD... i.e.120-130 range and equity managers pile into strong US for the carry, not hodling my breath on that one
4) China is going to start draining liquidity in its own market to prevent former exporters from dumping and isntead favor a more gradual transition to internal consumption. You can expect another 20MM NEW chinese millionaires in the next year who will cater exclusively to Internal consumption while you will see a few company struggle with exports. If you have any either on long/short combo which values that net scenario, please drop me a line!
5)Rail is still the cheapest way to get stuff around. so won it and recommend it
6) North American Companies are going to go crazy trying to export all the raw commodities they can THIS year and probably we are going to witness MANY commodities cratering by Q3... As a whole I cannot imagine the FOOD basket index being HIGHER at year end that they were in APRIL. Fertiliser stocks should be shorted NOW because backwardation charts will be very steep in September...
7) Bernanke will be happy because he will have cogent arguments as PPI will be tamer than future rabid CPI numbers. Ben is still worried about banks ( hey that IS his paycheck!)and he is going to have to contend with critics and hacks publishing books on the Bearn Stearns story. Nothing better for the Hampton crowd to feed on their own that to dish out the latest gossip. Look for books to come out with insiders explaning how Ben got hoodwinked into this
8) You can easily price 75bps increase in Fed fund rates by Q1 2009... no big science.

I am just checking the numbers but trying to explain why I am happy to sell into strenght.

REMEMBER to read this stuff in A YEAR!!!!!!! this is HALF the FUN!!!!!


RECOMMENDATION
Long USD / SHORT EURO
LONG S&P 500 / SHORT DJIA
LONG S&P 500 / SHORT NAZ

Cheers

DCW

Wednesday, May 7, 2008

The printing presses are requiring more ink

KILLING TREES TO MAKE WORTHLESS PAPER?
According to the st-Louis Fed, MZM, a money supply indicator, is growing at a ferocious speed, 28% annual rate in just the last 3 MONTHS!!!!!!!! sad sad sad
I have come to the realization that anybody working for central banks should be at
most 25 because they sure will bear the brunt of the loss of purchasing power. The old guys don't have to worry as they get indexed pensions that will be funded for their remainder on this earth while the young kids will never be able to live on an
indexed pension.
Lets face it, the earth is struggling to give us the means to continue on over industrializing everything. No government with aging population can ever hope to balance a budget ( except Canada, Russia and a couple of dozen of resources rich countries).
The haves and the have-nots. Not enough Tsunamis to go around 2000 square meter homes.

DOWN IN ARMS
I don't understand why the most industrialized country in the world cannot or will not put its affairs in order. From 1999 until to day and probably for the next 5 years, it is in a continual spiral where nothing works for the common man but for the ultra super rich wins with the good bets and get their bad bets covered by the Fed and the taxpayers... Isn't there something wrong here? Bums get housing brokered by crooks and the taxpayer foots the bill. DO I need to go on?

Too depressed to cheer. I don't believe the COngress will allow anything to change once the New administration comes in. K street boys all over the campaigns paid by big money, nothing is going to change. The one saving grace? A limbo dance of really sick European banks are going to make the US look less for wear...

In the Kingdom of the blind the one eyed are king.


STOCKPICKERS GET A JOB WILL YA!!!!!
A buddy of mine showed me his neat new trading system which picks a series of momentum driven ETFs combined to shorting NAZ or 2xNAX ... Running numbers of 134.7% since December 2nd 2005... Not bad boy when you think S&P 500 gave you 9% and the NAZ gave you 6.8% for the period. Room for thought!
Hey you know he drill! No solicitation ... no indication of past performance can be an indication of future performance...bla bla bla

Regards

DCW