Monday, October 18, 2010

Party On America!

I think I have figured out my sales pitch if I decide to become a stock broker.  In fact, I have even role played it in my head.  Feel free to tell me what you think:

Jeff(me)"Hello Mr. Smith."

Mr. Smith:  "Hi Jeff.  You have any investment ideas?"

Jeff:  "Yes, I advise you to buy everything?"

Mr Smith:  "Huh?"

Jeff:  "Everything was up again today.....  Stocks, bonds, gold, silver.  I suggest you buy all of it."

Mr. Smith:  "That is unusual isn't it?"

Jeff:  "I know I know it's not supposed to happen but c'mon Mr. Smith.  The dollars down! Every investment goes up now just like housing does...You just have to join the party."

Mr Smith:  But what about the fundamentals?

Jeff:   "Did you just ask me about the fundamentals?  HAHAHA.. Don't be so silly Mr. Smith!  Who cares about those?  Trust me...NOW is the time to buy.  You gotta be in it to win it!"

Let me pause here.  I just thought of a great idea for my pitch:

I think I might crank a tune up in the middle of my sales pitch so he can get a feel for how fun it is when everything goes up.

Ah! here we go.  This one would be PERFECT:

Back to my role play

Mr. Smith:  "Jeff, I don't know,  I am really concerned about the dollar.  Oil was up $2.00 again today."

Jeff:  "Oil schmoil.  Apple just rocked up over $315!"

Mr. Smith:  "Aren't you concerned about the currency wars?  The Yen just broke to new highs again today against the dollar."

Jeff:  "Mr. Smith.  When was the last time you were over in Japan?  Do you really think that bothers us over here?...Mr Smith, Trust me.  It's time for you to GET IN THE GAME MY FRIEND!  DON'T GET PRICED OUT!"

Sarcasm Off

Sadly, in the real world, Mr. Smith likely would have taken the bait and given me his lifetime savings to invest into this casino.

Folks don't kid yourselves:  This is a casino.   This betting parlor has been purposely created by The Fed with it's zero interest rate policy.  I showed you the game that was being played today by the Fed in this morning's post.

Money is flying all over the place just like you would see at a craps table at 3AM in Las Vegas.  Everyone is taking numbers and hoping the "stock gods" that are backed by the Fed somehow take us higher.

Unemployment, the economy, and investing are no longer important.  Investors aren't invited to this party.  In fact, there is a sign on the door of the market that says "speculators only".

Sadly, most of the clowns that are "all in" will stay at the party too long and will end up getting caught with their pants down.   It's no different then the guy who walks into a casino for the first time and wins $5000 in the first hour only to find himself broke with a $1000 hooker on his lap by the end of the night.

Apple and IBM Earnings

Apple and IBM both beat solidly after hours.  IBM sold off pretty hard on the news and Apple was halted last I checked.  Looks like the market isn't happy with the numbers.  Futures are down.

As I have said before, the market is priced for perfection.  Beating isn't enough.  You need to "Google" it and beat by 20+% in order to Ponzi your stock up to higher levels.

Forclosuregate Intensifies

This just keeps getting uglier by the second.  Bank of America announced today that it plans on restarting the foreclosure "boiler room" in 23 states next week.  The legal profession keeps telling them "not so fast my friend" and continues to take on foreclosure victims as clients.

Take some time and watch this video of 30 year real estate attorney April Charney who warned about this problem several years ago:

My Take:

The money quote from April is this:  "The profit was separated from the risk".  Essentially, the insinuation here is that the banks got their profits up front and didn't really care how clean the securitization was as long as Moody's rated it AAA.

I am sure BAC has met with their lawyers and have developed new paperwork in order to start foreclosing again.  I am sure they have also put together a defense for the people who have already been thrown out of their houses.

I don't buy it for one second that this thing is over.  The way I see, it it's the only thing the banks could attempt to do.  If their foreclosure operation remained shut down the ramifications would be devastating.

Massive inventories would begin to build up and prices would then collapse, and Bank of America would then likely collapse right along with them.

So the table is now set for one of the largest legal wars in history.  The banks versus J6P.  The financial system will likely hang in the balance.

BTW, This is a political nightmare for the boys in DC:

On one side you have the huge pensions who own trillions of these MBS that may prove to be worth nothing if the judges rule in favor foreclosuregate. 

On the other side you have the banks and all of their power and influence.   

The Republicans and the Democrats will both be forced to take sides here and it's a tough one.  I think in the end they end up walking away from the banks in the end at least publicly.  The pensions are too powerful a force vote wise to abandon.

Don't feel sorry for the banks if they lose.  I am sure they will be taken care of in some shady fashion.  The banks may have new names but I don't expect much to change.  After all, the rule of law in this country has been absent the last few years.  Why should we hold out any hope that it's coming back anytime soon?

The Bottom Line:

The Fed is doing everything in it's power to get you to spend and speculate like a drunken sailor. 

I say don't take the bait.  It's your decision of course. 

I have spoken to a few investment advisor friends of mine the last few days who have told me that they are buying stocks knowing full well that they are overvalued.  The problem is if they don't participate then they fall behind on performance versus their peers.

This is a classic sell signal because you know they won't hesitate to push the sell button.  they have no conviction behind the positions they have taken so a mass exodus could be in the making if the market starts to roll over.  I wouldn't be surprised if many of these kinda positions have very tight stops which could make it worse.

The market is being bought for all the wrong reasons:  Speculation, greed, yield chasing, and fear.  When you see good stocks like IBM and Apple selling off after solid beats you should take notice and consider it a shot across the bow.

The falling dollar is another warning sign.  Everyone loves to buy stocks right now when the dollar drops.   they say the market is "pricing in inflation".  I say hogwash.

Folks, this trade will not last forever.  A strong economy is always backed by a strong currency. 

Come back here when we have $150 dollar oil with a weak dollar and let's see where the stock market is.

The Fed can play their games and it will work for awhile.  The problem is they don't have the money to sustain it.  Enter at your own risk.

Disclosure:  No new positions taken at the time of publications. 


getyourselfconnected said...

ZH had coverage of the SPY mess at days end, mini flash crash type issue and tons of cancelled trades. Who would want to play in this market when the switch could be hit in a second and your stops are not going to get hit? Not my kind of risk scenario.

CT-Hilltopper said...

Jeff, you've been absolutely blazing since you came back from your weekend off.


You haven't posted anything that I subatantially disagree with. (What a surprise!)

Jeff said...


Missed that.

Have to check it out. Apple was halted at one point but I heard that's not uncommon when they report ernings.

I wouldn't touch that slime pit with a 20 foot pole.

Jeff said...


Thanks! Always great to hear feedback.

Nothing like a few days off to get the batteries recharged.

When the news and the tape heats up like this it sure helps a lot as well.

getyourselfconnected said...

Holy crapola! A C-T siting!