Saturday, July 18, 2009

Jim Rogers Latest/Karl Denninger's Kudlow Appearance

It's always nice to hear what Mr. Rogers has to say.

Obviously, he believes we are heading down the wrong path as we contemplate more stimulus and continue to socialize the country.


Karl Denninger

Ahh, it was so nice to see a true grizzly bear on Kudlow last night. Blogger Karl Denninger was invited to sit in with the bubble buys for a segment.

He more than held his own and kudos to CNBC for giving the bloggers a chance to have their voice heard. Perhaps CNBC was listening after they got lambasted by nearly everyone in the blogosphere last week for not being fair and balanced with their news coverage.

Something tells me they are beginning to pay serious attention to the financial bloggers as they continue too grow their audiences and gain more influence.


Friday, July 17, 2009

The Bond Market Rumbles

Hello All

I just wanted to briefly talk about the bond market tonight. As I warned a few days ago, Chicago doesn't appear to be very happy at all regarding the spending that's been announced this week by the government. Specifically, I believe they are extremely concerned about the cost of the national health care bill.

We have seen this story before. The bond vigilantes came out of the wood work in the early '90's when Clinton tried to push through national health care. Yields soared when this plan was announced, and Clinton eventually backed off after being bitch slapped by Chicago via soaring lending rates.

It appears the credit market is about to shove this new national health plan right up Obama's you know what.

Take a look at the 10 year today:

Now lets take a look at the 10 year for the week:

My Take:

As you can see, the 10 year has soared almost 400 basis points in just one week. This is a HUGE move folks. I don't care how how much equities soared, you don't see moves like this very often. I consider this to be a very ominous sign.

Goldman and the rest of the hacks in New York may be able to manipulate the stock market, but the credit market beats to its own drum.

Higher yields will destroy whats left of the housing market. this would stop any recovery deaad in its tracks.

Keep a close eye on this next week as this health care bill continues to move through the hill. There seems to be a lot of momentum behind it and I think the bond market now considers it to be a serious threat.

Lets hope the bond vigilantes come back with a vengeance and put an end to this ridiculous spending!


For those of you that follow Karl Denninger: He will be on Larry Kudlow's show tonight at 7PM. That should be interesting to say the least. I plan on sitting back and watching those fireworks with a beer in hand!

Have a great weekend!

Thursday, July 16, 2009

Delusional CNBC Needs To GO!

Today was the last straw for me.

CNBC needs to be shutdown. Period. This network is completely out of control as they desperately attempt to pump the market and cater to the oligarchs on Wall St.

There were two instances today where this network blatantly misrepresented the facts. Larry Kudlow was guilty of the first act today as he somehow attempted to defend Ken Lewis and Bank of America after the bank refused to tell shareholders about its plans of acquiring Merrill Lynch.

Bank of America's stock price has fallen as much as 79% since Ken Lewis made this "brilliant" acquisition. Mighty Merrill lost $20 billion in the 4th quarter when Bank of America acquired it at a whopping $29 a share.

This incident occurred during an interview with Rep. Dennis Kucinich who was absolutely flabbergasted at what was coming out of Kudlow's mouth. Take a look:

My take:

Unbelievable isn't it? Rep. Kucinich couldn't believe what Larry was saying. Kudlow's defense was BofA did tell shareholders in Jan about the plans to acquire Merrill. The problem is this was months after the acquisition was agreed upon. Larry then said he "thought" BofA had warned shareholders of the acquisition before January. There is no evidence to support this and Rep. Kucinich called him on it.

His reaction to Kudlow's theory was "Come on. Whats with the media? Your making this up!". He continued by firing a second shot at the network by asking "You've got to be kidding me! How can you even have a show about this?"

Great question Dennis. Its become clear that this network has a bigtime bullish agenda. There is nothing "newsworthy" about this network.

The second incident occurred when the network reported that bearish economist Noriel Roubini had declared that the recession was over and the worst was behind us.

Roubini angrily denied that he ever said this on his blog tonight:

"“It has been widely reported today that I have stated that the recession will be over “this year” and that I have “improved” my economic outlook. Despite those reports - however – my views expressed today are no different than the views I have expressed previously. If anything my views were taken out of context.

“I have said on numerous occasions that the recession would last roughly 24 months. Therefore, we are 19months into that recession. If, as I predicted, the recession is over by year end, it will have lasted 24 months with a recovery only beginning in 2010. Simply put I am not forecasting economic growth before year’s end.

“Indeed, last year I argued that this will be a long and deep and protracted U-shaped recession that would last 24 months. Meanwhile, the consensus argued that this would be a short and shallow V-shaped 8 months long recession (like those in 1990-91 and 2001). That debate is over today as we are in the 19th month of a severe recession; so the V is out the window and we are in a deep U-shaped recession. If that recession were to be over by year end – as I have consistently predicted – it would have lasted 24 months and thus been three times longer than the previous two and five times deeper – in terms of cumulative GDP contraction – than the previous two. So, there is nothing new in my remarks today about the recession being over at the end of this year."

Bottom Line:

CNBC needs to be taken off the air if they continue to call themselves a news network. If they want to come out and admit that they are an entertainment network then they can have at it. However, they must use the same fat disclaimer that they slap on Jim Cramer's show and then air it repeatedly throughout the day.

The reason I say this is because the people watching this cesspool actually believe what they are being told because they think its a news network. Americans are raised to trust the news. Millions use this network for financial advice.

Millions more will plan their retirements based upon what the "green shoot" bulltards tell them hour after hour day after day on this channel.

Making matter worse is the fact that CNBC has blatantly lambasted any bearish commentator that comes on the network. Most of the time their appearances are cut short. The talking heads are famous for mocking them and trying to make them look irrelevant.

You would think the bears would have at least as much airtime as the bulls on a financial news network considereing the fact that they been right the last few years.

I'm sorry folks but this isn't how the news is reported. "Fair and balanced" are two words that CNBC has never heard of.

If the market blows up again(which is highly likely) CNBC will once again be guilty of destroying millions of people who listen to their "market pumping" advice and invest accordingly. they need to realize that they have a serious responsibility to look at both sides of the market and to keep the facts accurate if they want to call themselves a news network.

CNBC, its time to clean up your act. You crossed the line twice big time today and I for one am very sick and tired of it.

Wednesday, July 15, 2009

The Two Headed Monster

What an interesting day today folks.

One of the first thoughts that I had at the end of trading today was remembering an article that I had read recently around the market action seen during the late 1970's stock market.

There were a series of inflationary and deflationary panics that rattled the nerves of investors during this time. 10%+ moves in gold in either direction were not uncommon as the market worried about the prospects of both economic monsters. This period of destabilization was finally cured when Volker took interest rates into the teens in order to kill inflation.

I am starting to wonder if this is what we may be starting to see in today's market. The one key difference seen today versus the 1970's market is the volatility in equities. Perhaps we should expect this in today's market that's filled with hedge funds, day traders, and speculators?

There are two trading trends that have clearly developed over the past two months: The deflation trade and the inflation trade.

The deflation trade(which we saw last week) is dominated by rising treasuries(lower yields), falling stock prices, and sharp sell offs in things like the metals and other commodities. You also tend to see a stronger US dollar.

The inflation trade that we are seeing this week is a complete inverse of the deflation trade. Treasuries tend to crash(yields up), stocks soar, and commodities flourish. The US dollar tends to remain weak.

Which trade is correct? The market hasn't decided in my view. Its very apparent that Wall St is divided on how this all plays out. Inflation appears to be the big worry if the economy recovers because there are too many dollars floating in the system as a result of the reckless bailouts.

All of this spending makes the bond market very nervous. Take a look at the 10-year today:

My Take:

You can look at this in two different ways. The bulls will say yields always rise when the market soars in order to make bonds attractive vs. stocks. The bears would say that our national debt is spiralling out of control, and the bond market is in the process of making money more expensive in an attempt to put an end to our ridiculous spending.

I think there is a compelling arguement for the bearish explanation. Look at the news that has come out this week in terms of spending: Obama appears hell bent on ramming through the $1 trillion healthcare legislation. The US deficit just hit $1 trillion for the first time in history. Finally, the bailouts continue to flow out of the Fed like water.

Our government has shown ZERO fiscal responsibility.

Bottom Line:

I think that treasuries have sold off much harder during the move higher this week then they should have relative to stocks in a normal market. The resulting higher yields are catastrophic for the housing market.

This could stop any recovery(COUGH) in its track.

My only advice in this type of market is to make sure you are diversified! I own treasury shorts and metals as a hedge against my short positions in stocks. Going long equities is still too risky for my taste.

All it will take is one large financial time bomb and the longs will run for cover because there is no fundemental reason to be long!

We might have seen that financial time bomb tonight with the CIT news after hours:

"WASHINGTON (Reuters) - U.S. officials are still exploring providing government assistance to CIT Group, but are increasingly concerned that conditions at the lender have deteriorated too far, according to a source familiar with government talks.

The source said Treasury Department officials are concerned that CIT's liquidity crunch has worsened over the past few days and that government aid would not effectively put the lender on a path to recovery.

A resolution for the lender's liquidity problems is expected in the next 24 hours and could end in a bankruptcy filing, the source said, speaking anonymously because the situation is still fluid."

Uh oh.

That's really ugly. 1 million small businesses depend on this firm for liquidity.

BE CAREFUL and stay nimble folks. This is an extremely dangerous market that can change on a dime.

Tuesday, July 14, 2009

The Running of the Bulls?

After the Intel and Goldman's earnings home runs today you gotta wonder if we might see another leg up here.

We all know this isn't going to end well. My bearish sentiments are now stronger then ever. However, after watching the effectiveness of the spin machine in DC and Wall St since the market lows seen in March, you gotta wonder if we see one more manic push higher in the equity markets.

Why do I suspect this could be the case? Because both the government and the street realize the ramifications of the market breaking through the lows of 666 on the S&P set in March.

WHEN and not if this happens, its going to destroy this country economically. With a 4 or 5 handle on the S&P, many of the companies on the S&P 500 will not be able to fund themselves and will end up in bankruptcy. Unemployment will soar as companies cut back to the the bare bone.

Pension funds will be left unable to fund the pensions that many baby boomers and others depend on for their retirement. We are already seeing the ramifications of a crashing stock market in the pension fund world:

Many corporate and state entities like hospitals are currently being forced to throw millions of new dollars into their pensions as a result of the market crash because they must be fully funded annually by state law. Others must be fully funded based on corporate policy.

This has been a painful reality for many corporate balance sheets in 2009 after watching stocks plummet 50% in 2008. I have heard stories of companies cutting capital spending by 70-80% in order to both make their pensions whole and also cut costs in order to survive the greatest economic crisis seen since The Great Depression.

So how does the market bounce in such an environment?

Because the government understands how catastrophic the pain will be on the other side. Its really that simple. There is NO fundamental reason for the stock market to go up. However, that doesn't mean it can't be manipulated up. If you disagree just look at what has happened since March:

- Job losses have soared as unemployment has risen to 9.5%. U-6 unemployment sits at 16.2%

- Foreclosures and delinquencies on both prime and subprime loans have soared to new highs. (CNBC reported today that 25% of the people foreclosed on still had the ability to make the payments. They have decided to walk away because they are so far underwater and realize they will never get the money back).

- Consumer spending has continued to collapse.

- Business spending just fell for the 9th straight month.

- Commercial Real Estate have been overwhelmed by vacancies and falling rents.

After all of this bad news what has the market done? Moved up about 30%. Huh? Makes no sense right?

The only logical conclusion one can make is that the government simply refuses to face the inevitable collapsing of our economy. As a result, they are using every resource available to avoid facing the music. Wall St is more than happy to help them delay the inevitable. IMO, the TARP infusion into the banks was basically a $700 billion "buy" order on the S&P 500.

In addition, they have also taken advantage of their tremendous resources that come with being the world's largest economy.

Treasuries are a prime example of taking advantage of this situation. The whole world holds the majority of their assets in the US in the form of our treasury debt.

So how has the US thanked them for their support? Well for starters we took rates down to practically zero which means these countries are being paid nothing on their investments. Classy isn't it?

Then to rub salt in their wounds, we started spending ourselves into oblivion which then in turn increases the risk of holding our bonds due to the threat of a potential US default(this is looking more and more probable BTW).

Then, After sticking it to the world twice, we then have the arrogance and the nerve to ask them to buy more of our debt so we can continue our ridiculous irresponsible spending binge.

The Bottom Line:

Desperate times call for desperate measures. I think many of the bears underestimated the ability of the elite to delay the economic nightmare that inevitably will occur.

How much longer can they delay this economic crash? That's the million dollar question. Many think that reality will strike in September or October.

I think the music could possibly go on through the 4th quarter. Remember, the economy collapsed in Q4 last year as the financial system came within a hair of destruction. Companies virtually stopped spending as a result.

This should setup some easy earnings beats at the end of the year because even anemic spending will be enough to beat the 4th quarter numbers from last year where both consumer sand corporations looked like deer caught in the headlights.

This all being said, the fundamentals are horrific. The economy could very well come crashing down late this summer or fall.

Any growth in Q4 will be be an anomaly versus a trend. I expect us to be right back in the soup the following quarter.

The repercussions of our unfathomable spending deficits will be felt for a generation or more. Short term the futures are surging on the earnings beats. Tomorrow should be interesting.

Monday, July 13, 2009

Meredith Whitney: Bearish on the Economy but Bullish on Goldman Sachs.

Hello Everyone

I sit here and write to you today with a serious sunburn. I must learn to get better at using sun block when I am at the shore.

Anyways, today was all about Meredith Whitney and her CNBC appearance. She has been totally blasted by the blogosphere following her upgrade on Goldman Sachs.

I must admot, I am pretty surprised at the negative reaction to her appearance. I thought she was on top of her game except when it came to the loan modifications and the losses. I do believe she understands these mortgage hits must be taken. I say this because later on in the interview she explained that she understood that the banks have $6 trillion in bad debt that they need to get rid of.

I think the problem here was that MEredith didn't do a very good job at explaining herself when it came to the mortgage losses and how damaging the loan modifications will be for the banks balance sheets.

Let's take a look at her appearance and I will have some more comments below:

Here is the the bullish call on Goldman:

Here is Meredith the Grizzly Bear on the consumer

My Take:

I really don't see why there is so much anger on the web around this today. Perhaps some people got caught on the wrong side of the trade as the market bounced almost 200 points almost solely as a result of the Whitney's Goldman upgrade?

Now I have no position on Goldman, but you need to ask yourself why wouldn't you be long Goldman as long as the game is rigged?

I have gained a different perspective on the market as I sit here and just accumulate cash versus trying to trade this ridiculous casino. The manipulation and fraud are on a scale that makes me simply not want to participate in any way at all in terms of adding new positions. All my current trading holdings are small and diversified so no matter which way the market moves I am not going to get hurt too much.

So as an observer, I think Meredith made some excellent points today. Before I explain, let me say right here and now that Goldman Sachs makes me want to vomit. They are some of the most vile greedy scumbags on the planet. They lie cheat and steal in order to make money, but you have to admit they are pretty damn good at it.

They are also the best firm on Wall St at this point in the collapse because they are the most well connected to Washington. In addition to being connected, they are also the best risk managers on the street. They are also one of the best on Wall St at adapting and reinventing themselves as the conditions change in the economy.

Wall St won't hesitate to shift resources and completely abandon the old game(housing) in order to look for the next one. I don't expect a new game for a generation or so, but I do believe there is money to be made in fixed income in the short term. It also sure as heck helps when the government is at your beckon call offering any assistance that's needed in order for you to succeed.

We all know Goldman still has housing bubble skeletons in the closet in the form of many worthless level 3 assets. However, as long as the government doesn't force them to mark to market, does it really matter?

Basically, from a current operations perspective, they have totally reinvented themselves into a giant fixed income bond dealer/trading conglomerate in a market that now has fewer competitors with the fall of some of the investment banks. Lehman was one of the strongest bond houses on Wall St.

The housing bubble is now in the rear view mirror at Goldman Sachs. The only thing that remains are the tens of billions of dollars in losses. This cannot be ignored, but remember, Goldman is totally out of the housing game unlike the other banks who continue to do mortgage loans.

Fixed income should explode moving forward as investors continue to flock to safety. Goldman is perfectly situated to take advantage of this.

The bottom line is when you add up all of these advantages and add the fact that the government has their backs, is a Goldman upgrade really that crazy? I don't personally think so.

That being said, I couldn't go long here because the fundamentals of the consumer are still a mess.

This leads me to the second video from Mrs. Whitney. You can tell that she is still firmly in the bearish camp. She is calling for 13% unemployment with the possibility of seeing 14%. Her outlook on the consumer was godawful. She brilliantly discusses the bearish implications of the huge contraction in credit availability for the consumer.

She basically expects to see the consumer laid out flat on its back through 2011. so much for green shoots by the end of the year!

The Bottom Line:

The one thing I love about Meredith Whitney is how cautious and thorough she is. She admitted that she missed a big piece of the move in the financials, but she explained that she needed to see how they could make money before upgrading any of them. Goldman's big moves into fixed income have convinced her that for the short term they could make a lot of money.

That's the key folks: SHORT TERM. Long term she sees no way out of this mess for the banks or any other sectors of the economy until the consumer rebounds. Meredith also explained that we need to completely overhaul of our economy before we see any long term sustained recovery.
This all makes sense to me! I don't see what the big fuss is about. I remain a huge fan of Meredith Whitney.

We have huge earnings releases tomorrow including Goldman. Lets see if Meredith was right!