Thursday, August 27, 2009

the summer of Illusion

With a summer spent on trying to live on the March lows "miracle", reality is sinking in that a much larger credit crunch is looming.
By year's end many laid-off Americans will lose their benefits.
Cash for clunkers program should be renamed Clunkers print cash (to stave off depression for another quarter...)
Yet on the UNemployment range, the four-week average of claims, which smooths out fluctuations, fell by 4,750 to 566,250 last week.
 
Chinese Steel Spot price
Considering the amount of stimuli offered by the Fed, it shows that government needs to keep pumping.
That in itself shows that commodities are "toppy" and that the energy complex is about to unravel.
We sold our remaining XIU (TSE) the S&P 60. We took profits on Sunopta AND GE. Still riding Citi to unload between $5-6
Contrary to most we think the US dollar will maintain vs the Loonie so we are keeping a hefty US cash component while hedging with a gold bullion fund CEF.A
News out of Europe (Germany) is showing that GVMTs are stepping to provide credit where private banks are falling to do their jobs.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6095203/German-state-to-lend-directly-as-second-credit-crunch-looms.html

We will be buying 1/3 initial Puts on BMO as we can't really understand why their loan-loss provisions are so much lower than their competitors... We doubt they are an island unto themselves...
Meantime enjoy the last few days of relative peace as Q4 will be the show me quarter and no amount of "slow recovery" gibberish spin can damper lofty expectations already priced into the stratospheric valuations of Chinese and north American equities
CAVEAT EMPTOR

Good trading to you!

DCW