Tuesday, December 23, 2008

Da li'l end

Quantitative easing from Marketplace on Vimeo.

Some G-rated preview of other motion pictures while we are writing the "Da" article (targeted for XXX-rating) carefully so as to not miss any emergency exit.

Seasons Greetings:

To all investors happy holiday. May you use the calm before the storm before my final "serious" publication for this year (or perhaps for good) : "Da End Game", which is pretty much this:

Monday, December 22, 2008

2009 is not going to be a year of surprise. I can tell you all of it right here, right now.

1. There's a lot of liquidity (read: free money) out there. In the fixed income parlance you either go long duration or long credit.

1a. If you want to go long credit there is no place to invest.
1b. If you want to go long duration, well... check your 10-yr rates.

Conclusion: banks will in early January rush to buy all the short term credit paper they are going to get, and probably some more treasury and that will give a signal as if credit is thawing when the case was just people drowning in liquidity.

2. In case you are thinking of carry trade, please note that you would need to have the growth in both income and productivity RIGHT here in the US. I know, you say China this and China that will grow but not gonna be enough by any stretch of imagination. (Hint: check the GDP sizes).

3. Low mortgage rates from Dec - Feb have helped TRAPPED the housing market further. How?

3a. Most who took the rates were refinancers - these made the case further given that about $5-10k equity was stripped in exchange for lower rates that the probability of moving is even lower after than before refinancing.

3b. The guys who didn't refinance have lost both the opportunity to do so (as the market marches back up) and proved they couldn't do so in the first place when they had the chance. In the parlance: they are burnt out 100%.

3c. The unlucky few picking up houses would find out that indeed affordability is a function of mortgage interest rate, and that does not mean very good for them after artificial treasury prices were lifted.

4. Remind yourself everyday that everybody else in the world will cut rates to zero. There is no currency for which you can hope to make money beyond speculative spurts.

5. Two large banks, currently viewed as a bullwark of the remaining financial industry, will collapse H2 2009 or H1 2010. Cause of death: drowning.

Monday, December 15, 2008

The best Madoff discussion today:

Gotta put my thinking cap on:

Friday, December 12, 2008

Gettelfinger: An american hero.

Kudos to Gettelfinger for single handedly ending the FUTURE unstable consumption binges of america. You are truly an american hero on par with General MacArthur and Jesus, sir.

Tuesday, December 9, 2008

What is the Holy Grail?

Not this:

Nor this:

But maybe it's a medieval copy of "Jekyll Island"?

Monday, December 8, 2008

Low risk trades while waiting for steam to run out.

If you have 401k with no load fee either front or back end wait up for the international market to sell hard (like on Friday -4%) while the US was going solid green into the close (+3%).

Put 100% your nest egg in from cash to international growth stock, sure enough by 6 pm it's up, but only by 1-2%, depending on fund. You already nailed 3-4% arbitrage at this point. Then on Monday you get an additional session in which most of the SPX gain happens before 11am (30pts, we closed at 33pts) and add 3-4% more to the "arbitrage" gain we forecasted off friday.

The result is a 6-8% risk free. You only need $200-250k to make the ENTIRE of next year contribution and some change to boot.

Now turning to more serious topic and maybe, philosophy.

Roads add to supply. Adding roads don't add demand.
Buildings add to oversupply. Building houses/malls/buildings don't add demand.
Basic education adds to oversupply. Cheap labor is ALWAYS on the rise. Only specialized training gets you somewhere new.

Black dude doesn't get it.

That's fine.

Grab his money hand over fist. TC, AA, CX, BGC. Then run.
In the mean time, watch the 61.8% Fib and 100% Fib of your favorite consumer and financials name. (If you can find the shorts, that is.)