Goals for the new year!

As you may know, 2012 is the widely predicted year of complete economic breakdown.  Even if things don't collapse entirely there are a few very serious roadblocks in terms of debt, spending, and available capital that will have to be dealt with during the course of the year.

Potential Roadblocks:
- FOMC rates and stimulus decisions:  they've pledged to keep rates low until 2013, but what happens when that's not enough?  If a bear market hits the US pressure will be put on the fed to create stimulus, and if it doesn't, it could easily trigger the next great depression.

- Elections: the market may react quite negatively depending on who gets elected.

- Potential debt ceiling issues

Two baskets of equities I will be trading.

In times like this, when everything in the market seems to be coupled together, I like to stress having positions both long and short.  Thus movement in the dollar that effects equities will largely be offset.  That being said, here's a basket of financials i'll be shorting and other things i'll be long on.

Short Basket: 
MS
BAC
P
DAL

Long Basket
GLD
USO
RIO
KMP

Winning

Hedged some short positions with a BAC call, figured it could only make a new 52 week low so many days in a row.  Its paying off today, i'll update with a net gain, if any.  I have a longer term MS short that I'm going to attempt to ride back down.  It seems the United States has committed to preserving liquidity for foreign banks.

For more on that see this: http://www.zerohedge.com/news/here-comes-global-liquidity-bail-out


For a good speech on economics in the United States, see here:http://vimeo.com/32496312

How do we know B o A is going to fail?

Well, they just hired 1000 financial solution advisers to manhandle their preferred customer's money.  They are going to help these poor customers make standard investments in an irregular economy, I expect this effort to slightly +EV at best.  Make no mistake about it, this will not help bank of America in the short term.  Mortgage assets (burdens) inherited from countryside, malinvestment, and euro problems will be hurting BAC this year (we haven't hit bottom yet).   While the effort to improve service in areas in attempt to promote long term growth is admirable, BAC is not going to last long enough to see the long term.

warren buffet bashing encore

Warren Buffett has made another questionable stock play following it with a public announcement.  Buying IBM near a 52 week high, Buffett looks like he is setting himself for another great timing bust.  Like his disaster BAC and Wells Fargo play a few months ago, this IBM confidence should drain within a month or so.  Who advises buffett on financial decisions?  Surely he's just wasting money trying to prove a point, because his investing no longer makes sense, and his portfolio is no longer increasing in value.  Down over 10% on the year, Buffett no longer deserves the nickname "Oracle".

SCROOGE

Is it bah humbug of me to short christmas trees?

lols yup

http://mrctv.org/videos/peter-schiff-takes-99

Market is High on Hopium, Presents Opportunities

A fortunate event has occured, and amidst a risk hedging*/eurobailout** fueled 3 day rally some favorable job growth numbers come out and put icing on the cake.   Unfortunately for the economy, manufacturing/production jobs were down 13k.  Less manufacturing jobs = less production (or just improved technology but thats a differet bag tricks and isn't the case in this scenario).  So if we are producing less (oil, energy in general, goods), where does the money to create more jobs come from?  If we sell/produce less goods, we are certainly not getting more money to fuel new job creation from production jobs.  Where else does money come from?  It comes from the savings of americans, the government, profitable domestic investments in foreign nations, or foreign nations buying services or making investments/buying debt in the US.  That is it.  We know investments in foreign nations are sub-par right now, and we know the demand for US services by foreign entities is not exactly hoppin.  The job growth is a result of Hopium.  It comes from people using savings and government printing in hopes things are about to turn around.  Thus it creates a unique opportunity, we know its not turning around, its a false positive this time.  We are creating a very good short term value shorting opportunity.  For this go around I'll be buying IWM puts (russel 2000, small cap US stock index). 





* How does risk hedging fuel an economy?  It could move the markets in either direction, after a prolonged or intense period of gains or losses, wall street covers their hedged positions by using "covered calls" or "covered puts".  So everyone with a short position buys a call after the drop, if it keeps going down they make more on the put then they lose on the call because option pricing is not linear and the further you get from your strike price the more you gain or lose.  If the market turns around and goes up they can easily get out of the put in the money and profit from their covered call. 

**How does a European Bailout fuel an economy?  Pretty simple, financial system is rather interconnected worldwide and when you give banks money banks stocks benefit.

pay the bills homie

watch:
http://www.youtube.com/watch?v=VL2313MRn1E

Warren Buffet the Hypocrit

I'm sure all have heard Warren Buffet's spiel on how the rich should have higher income taxes.  However, few people realize that WARREN BUFFET DOES NOT PAY INCOME TAX.  I am not pulling rabbits out of my ass here.  Warren Buffet intentionally does not pay himself a salary from Berkshire Hathaway, thus he has no income, and no income to tax.  The only tax he pays is on capital gains, the same rate as everyone else in America.  It may not be easy to see, but he actually circumvents the income tax and pays significantly less than he would otherwise have to pay.  Since his fat salary is not existent, all of that money stays with the company, adding to its capital, and in turn, its stock value.  As the stock goes up Buffet gets his profit and is taxed at the long term capital gains taxed, ez money.  I'm surprised this isn't a more popular trend in the big wigs of business, then again it can be quite a volatile way to get your paycheck.

Boston Consulting Group Grim

The well respected Boston Consulting Group came out with a 14 page report titled "Back to Mesopotamia".  Boston consulting group is not known for being particularly conservative or libertarian in their economic views, so it's quite surprising for them to have such a boldly grim outlook.

report below:
http://www.docstoc.com/docs/97122913/BCG_Back_to_Mesopotamia_Sep_11[2]

Hopefully they are exaggerating the timeline and consequences of dealing with debt.  I like to think things can be solved a bit more comfortably.  Of course i'm in the school of thought that believes US debt obligation should eventually fall on the countries that loaned us the money, aka treasuries go to zero and anyone holding them lose out.  After all, if you make a loan to someone who can't repay it who can you blame but yourself?

Head of Unicredit lays down the pain

Former president of the Hungarian stock exchange, and current CEO of Unicredit, a large European bank in the middle of the European default/financial crisis predicts a Greece default in the near future that's going to rattle Europe and the US financial markets.  This is a bold prediction from a market/government insider who would benefit greatly from austerity, but elects to speak his mind.
http://www.zerohedge.com/news/step-aside-bbc-trader-head-unicredit-securities-predicts-imminent-end-eurozone-and-global-finan


Also, the average trader on wall street's point of view:
http://www.youtube.com/watch?v=aC19fEqR5bA

Morgan Stanley is the next Bank of America

Here's my list of banks that will default/get bought out, in order of how soon they will be dead.

1. Bank of America
2. Morgan Stanley
3. Wells Fargo

For these particular financial institutions this is not a matter of if, but a matter of when.  When you're leveraged beyond the value of your company in declining assets there's really no easy solution.  The only real risk to shorting these in my opinion is short term upside volatility such as the recent "rally of hope" that just ended a day ago, and the possibility of buyouts/mergers.  Although I would speculate that any one of these companies would have to fall pretty hard before anyone would want the leftovers.

Operation Twist it is.

But as it turns out, the bernank was a bit stingy with his twisting.  Everyone knows its not enough to keep the economy afloat until the next elections,  so in short, ITS PEANUT BUTTER JELLY TIMEEEE.

Fed announcement

Tomorrow the fed will make an announcement that may have more effect on the markets than anything else this year.  It is essentially the last chance to unleash QE3 or operation twist before the banks start imploding.  The fed has the data, they know consumer credit is low and that banks are swamped by toxic assets.  There is tremendous pressure from the right to not push forward with another round of QE, but the bernank won't be able to help it, because there is nothing that would disgrace his career more than another financial meltdown.  Long story short, I am predicting operation twist (long bond purchasing program while selling short term bonds), its still QE but its a little more disguised.

The man who controls the supply of money and runs our federal reserve bank

http://www.youtube.com/watch?v=GbOWiJ94Xvg

The video above gives insight into the now popular wall street strategy to bet on the exact opposite of what bernanke predicts.

Netflix, more.

About 3 months ago I predicted that Netflix was severely overrated.  Today they confirm my prediction.  After a bad couple months they crash down to reasonable levels in a final ~15% push today.  At my prediction netflix was valued around 260, they are now $177 per share.


Also, if you want the new jobs bill explained;  consequences, alternatives, other solutions.  go here:
part 1: http://www.youtube.com/watch?v=FLmD9TeUC54
part 2: http://www.youtube.com/watch?v=xZbQGpf3D_Q

Rule 48 open

surprise! another rule 48 market open.  I think charting the frequency of rule 48 market opens and the general general health of the economy would make for an interesting and telling correlation.

Euro Central Bank Presidient Steps down, New Jobs bill, and the Girl Selling Lemonade Story

ECB president leaves, the image below sums it up, courtesy of zerohedge




Jobs Bill
President announced new jobs bill, this should be quite successful in transferring wealth and mediocre jobs from some poor people to others.  Don't expect that jobs number to get better,  but do expect some new roads.  If the government wants to cut budgets elsewhere to build roads and cut taxes, i'm not going to say I don't support it, houston could use some transit improvement.  However, to think this will actually "jump start" the economy or create jobs is a stretch.


To bettter understand this, I bring back the classic girl running a lemonade stand story.

Girl Running Lemonade Stand Story
On an island secluded from the rest of the world lived a small tribe of civilized individuals.  Some people farmed (lemons, cocounuts, fishing, vegetables, pigs),  some people built things (houses, tools, fishing poles, clothing), and a select few were elected as leaders to guide the tribe to organize and guide the tribe.  The leaders created a currency from a special type of palm leaf which they just called palm notes to help facilitate trade.  The leaders were quite responsible and only printed new palm notes to replace old ones that were worn and torn.  They collected a 5% sales tax on all goods for their services (leadership, currency control, and law enforcement). 

On the island there lived a girl who decided to start a lemonade stand.  Her plan was to buy lemons at about 3 palm notes a piece, make lemonade, and sell it at 5 notes a piece.  Business went well.  In fact, business was booming, and other people on the island were inspired.  Other tribespeople excited by the opportunity of business so they left their farm jobs, and took out loans to start fancy coconut stands, designer clothing stores, and fishing emporiums.  A sense of excitement was in the air and the tribespeople spent a lot of their savings on awesome new stuff.  However, after a binge of awesome times and spending, it turned out that people just couldn't afford to keep buying this new stuff.  After all, they had dug into their savings to buy the stuff, and eventually their savings were depleted.  On the business end of things, the profit margins for the fishing emporium, clothing store, and cocunut stand were slim.  These businesses were bad business models to begin with, selling expensive products at slim profit margins.  The real issue however was that all these businesspeople now found themselves jobless, and even though they could go back to farming, they would have to pay off their debts before buying more new things.  This hurt businesses around the island, many clothing and tool makers went unemployed.  The lemonade stand girl cut her lemonade prices from 5 palm notes to 4 palm notes to attract customers and stay in business.  Now eventually the failed businessmen-turned farmers would have their debt repayed, at which point their consumption rate would return and the economy would be back at the level it was initially at.

Regardless, the leaders saw the state of the island and decided to act.  They saw the struggles of business and took some of the money out of the law enforcement budget to subsidize local businesses like the lemonade stand.  They gave the lemonade stand girl a fresh supply of 300 lemons to bolster her business.  Now she made a larger profit margin than ever!  selling for 4 palm notes and paying 0 for the lemons she was banking, and increased her consumption accordingly.  However.....the law enforcement officers that took a paycut were obviously forced to decrease their consumption...  thus the net effect on business was negated.  The only way that the economy would have benefited from this stimulus is if the lemonade stand girl somehow used these lemons more efficiently than the law enforcement used their budget.   This however is not the case...  maybe if the girl took the additional 300 lemons and began loaning lemons to stands that had temporary shortages it would have caused some real growth.  By both helping other stands that had shortages and making some extra interest this would made the lemonade stand business more efficient in a win win situation.  Growth is a direct function of efficiency, 300 lemons worth of palm notes for a lemonade stand is exactly the same as 300 lemons worth of palm notes for law enforcement unless one party can utilize those notes more efficiently.  The problem with this stimulus method is that the efficiency aspect is often overlooked in favor of a focus on short term economic boosts. 

So assuming the girl found nothing groundbreaking to do with her lemons, they eventually ran out and the economy went back to square one with no real change.  The government then decided that the "recovery is not as strong as expected"  and proposed QE2, a second stimulus that would be much greater than before.  This time they vowed to not cut the law enforcement budget.  Instead they would just increase the money supply by printing a bunch of new palm notes to give to needy businesses.  They also cut taxes to 1%!!!  However, the leaders didnt decrease any of their budget, so the tax revenue shortfall had to be made up for by new printed palm notes.  Obviously, the short term effects were quite nice and businesses all over were making more money than ever before.  However, not everyone can become wealthier simultaneously without any increases in efficiency.   The lemonade stands think "hey all my customers have a lot of money i can increase prices without much decrease in demand!".  Then the lemon farmers think "hey these lemonade stands are making a killing I can increase my lemon prices!"  This is price lag.   In the end this type of inflationary stimulus doesn't much hurt the businesses and entrepreneurs: they have an increase in earnings for a while then prices rise and they are back to where they were, netting a slight gain from the transitory period of increased earnigns.  It does however, hurt people with savings and wages in palm notes.  If you work for a lemon producer and get payed a fixed number palm notes, the inflation process is quite painful as you will start paying more for goods but will make the same amount of money.  That is why this type of inflation typically creates class animosity, poor get poorer, rich get richer ect.  No wealth was actually created in this example, merely transfered from the poor to the rich in a roundabout sort of way.


Finally, with so many poor people and no real economic growth, QE2 is deamed "less effective than expected".  The leaders then said  "we need to stop printing money and help the poor!", so they set up a plan in which they stopped printing and increased the tax rate to 20%.  The leaders got their 5% to keep a stable budget, and the other 15% would go into welfare programs for the poor.  It's not hard to see that this plan resulted in a large flow of cash from the richest tax payers to the poor.  So the rich end up still mildly rich and the poor end up not that poor, good right?  This is a primary argument of socialism, but the downfall is again:  efficiency.  The welfare method of stimulus demotes production and efficiency in two ways:  Rich are less motivated to make money because they will just have to pay more in taxes.  Poor are less motivated to make money because they are already getting money from the rich.  Its easy to see how this leads to a decrease in production and efficiency, which of course leeds to a less productive economy. 


So the leaders have tried everything they can and nothing has worked, what can they do???  They can do nothing.  These examples are meant to show that whatever intervention the government takes will not create any growth if it does not create greater efficiency or obtain value in raw materials, and since the leaders don't target efficiency and are poor candidates to achieve efficiency in the first place, intervention almost always fails.   Private industries cope better with improving efficiency.  Competition drives a constant need to be more innovative, the process occurs naturally. 

Summation:  Efficiency (efficient use of resources, new technology, innovative ideas) create growth, and there is nothing anyone can do to force growth without efficiency or obtaining new valuable raw materials.

Opportunity Strikes!

Pick up your gold and GLD options now.   An oddly timed currency battle just dropped GLD 4%, just a short time before the government  is rumored to spend an additional 300 bil printed money.  Fundamentally, it doesn't get too much better than this, buy in but save some purchasing power in case we drop further, in which case we double down.


This, similar to my silver play a month or so back, is going to be an instant 20%. 

Gold Backed Credit Cards win win win win win

Next year expect the emergence of gold backed credit cards!!!  This in itself is going to be bullish for gold and is in theory self promoting until a saturation point is reached where a maximum number of persons owning a gold backed card is reached.  Explanation:  The banks backing this card utilize a massive store of gold.   When you make a purchase they sell off the equivalent in gold to pay the store in dollars.  If gold goes up in value... goods end up costing less because the amount of gold the parent bank needs to liquidate to pay for that good falls.  If customers pay less for goods it will promote ownership of such cards.  As ownership of these cards grows, so does the demand for gold as the bank providing the card will need more gold to continue its service.  Increased demand for gold will drive the price of gold up, making goods even cheaper for everyone with these cards and starting the process all over again.

This can be loosely interpretted as an inverse ponzi scheme.

Rule 48

yup, madness did end friday.  We've just erased all last weeks gains.  Another rule 48 open today as the market is hit hard by european woes, rumors of a european union breakup, and poor economic indicators from friday.  The biggest reason to sell however, may be that the people are losing their trust in the fed.  Fridays numbers are just another notch on the board representing a consistant wrong prediction streak for chairman Ben Bernanke.   This is yet another case when the exact opposite of what he predicts becomes reality, just a friday before bernanke said he expects "strong growth" in the jobs numbers, when instead we had a strong decline with respect to the forecast.

The madness ends at some point, possibly friday.

On a wave of confidence, rumors, and hope, we are seeing another rally.  Can't really put my finger on any positive data driving it.... but attitudes are still positive.  Rallys on hope usually come to an end when some of the important indicators come out, so jobs info on friday might derail it.

Called it, bernanke punts...

Bernanke punts, puts off any QE3 announcements to sep. 20th, where he will likely punt again.    In the knee jerk reaction phase in the markets right now, we had a flash crash followed by what is now becoming a flash boom.  I don't think it will take more than a week for everyone to eventually decide that this is bearish news, and the ensuing plunge will occur.

Everything going to fall.

I'm going to stack up on some puts tomorrow morning as soon as I can, I believe we are looking at a tank tomorrow.  It is my belief that trouble in Europe and a delay of QE3 is going to bring about mass destruction.  Gambling, yes.  +EV, yes.

Gold, QE3

Gold still on the fritz after margin hikes and some selloffs, expect it to continue a little more.  The next buying oportunity is going to be before QE3 announcement, all though i'm now fairly confident that that will be delayed past friday. 

The markets recent rally is premature.  Fueled by a falling dollar and a possible QE3 announcement on friday, I beleive this rally is going to come to an adrupt end on friday.  My reasoning behind this is that things are no where near bad enough for bernanke to justify any more QE outside of the ~0% interest rates held low by printing he has promissed to keep around until 2013.   There has been a lot of public scrutiny towards bailouts, assett purchasing programs, and other forms of QE.  We were all expecting bernanke to fire on friday and if he doesn't it will likely trigger a mass sell.   With gold prices where they are and this recent rally, the chairman has, in my opinion, his hands tied.

Gold Margins Hiked Across Europe and China

I foretold this occurring, its whats driving the pullback in gold. Unfortunately we haven't seen any margin action from the CME, so gold might still have some ways to go in its pullback  Of course rumors and disclosure of QE3 or equivalent will nullify all this and send gold to the roof.

Speechless

Not sure what to say about this.  I'm not usually one to believe in conspiracy theories but .....  Earlier today the CEO of the S&P spontaneously stepped down from his position and will be leaving the company, to be replaced by a CEO of Citibank (banking unit of citigroup).  This comes just weeks after the S&P made the bold move to downgrade US debt from AAA to AA+.  The US government immediately launched a full scale investigation of the S&P after the downgrade on the premises of making misleading mortgage ratings back in 2008!?!?!  4 days into the investigation....nothing surfaced of course.... and the CEO, Sharma, steps down (today).  As if it needed to get any fishier, the CEO replacement from Citibank, Douglas Peterson,  was a large critic of the S&P downgrade of US debt as part of a to-big-to-fail bank.   In a direct conflict of interest, Peterson stands to gain tremendously from reinstating the governments AAA rating.  Its funny how the one man telling the truth among the raters has just been kicked to the curb by Uncle Sam.   Tax Payers will end up shelling out some serious extra dough for moves like this one day.

LOL GS

At approximately 3:45, 15 minutes before market closing, Goldman Sachs hired renowned defense attorney Reid H. Weingarten.  Mr. Weingarten is a high profile lawyer with a stunning resume for defending rich white collar criminals.  He represented Enrons chief accounting officer, as well as Mr. Ebbers, a worldcom executive whos fraud led to worldcom's bankrupcy.  Other high profile clients include the former head of teamsters and the former secretary of agriculture.  Anyways, he now represents goldman sachs, and the news of this dropped goldman stock 2.5% in less than 10 minutes.  I can't wait to find out what goldman is getting sued/charged/investigated for.   

Gold Margin Hike Coming

Warning!!! get out of short term gold options real quick they are about to hike margins.  Long term gold:  ignore this message its just going to mean some volatility.

Dollar Bill

Don't be tricked into thinking the markets are up today, the dollar is just down.  Thus people, particularly foreigners, are getting out of the dollar and into assets.   Compare DXY, GLD, and the Dow.  You will see that GLD is higher than the dow and DXY has taken a huge plunge, meaning there's no growth here, just inflation.  Rumors on the street is that information about QE3 has been leaked and it is probable.  When it is actually announced later this month i'm going to make sure i'm out of all short positions and i'll try to have as little as possible in cash.   

How do low interest rates and the Federal Reserve cause inflation?

Read:
http://en.wikipedia.org/wiki/Federal_funds_rate
and read:
http://en.wikipedia.org/wiki/Open_market_operations


If you want the summation without all the how it works stuff.  Banks are required to have a certain amount of money in reserve,  depending on how much they have lent out.  To increase their reserve of cash they themselves get loans by selling government bonds for cashmoney.  The federal reserve prints money to buy these government bonds, buying enough so that supply and demand set the interest rate on the loan to what they decide the target rate is.  Very low interest rates means the fed is giving money to the banks at very low interest rates, allowing them to profit buy simply turning around and loaning that money to other people at a slightly higher interest rate.  Yes, the fed kinda gets screwed in this deal, because the money they recieve from interest on the bonds does not make up for the money they would lose if one of the banks they were lending to fails.  This is all okay though because the fed can print an infinite supply of money and the government will always be there to bail out the banks.

Markets

Markets took a nose dive today with the root cause seeming to stem from poor economic data and problems in europe.  A foreign exchange transaction rattled investors in europe: it was observed that there was a central bank liquidity swap of 500 million dollars late yesterday, meaning a bank had urgent need for 500 million dollars cash.  Banks being broke is no big surprise in europe these days but it seems at least one bank in europe is on the verge of collapse.  Just a little bit ago right after market close today there was another such transaction for 200 million in swiss francs.  While i'm still at a loss to explain exactly what these central bank liquidity swaps really mean in the long run or why it is so necessary to have 500 or 200 million extra cash on hand, i know that it doesn't indicate bank healthiness.  Since the 500 mil helped startle the markets yesterday, I predict the 200 will do the same thing tomorrow.  I can't think of any informative economic data that comes out tomorrow either so there should be nothing to be joyful about.  It's all very pessimistic, but the truth hurts sometimes.   

Europe, Morgan Stanley

Europe said F@#$ the short selling ban, we're okay with just selling.  Morgan Stanley caught wind of the rest of the worlds sentiment on the global economy and decided "WE ARE CAPITULATING", as in morgan stanley made the decision to sell off stock assets at a loss in order to re-position them in safer assets like gold.

Goldman Sachs: "QE3 is part of baseline estimates"

Goldman Sachs has priced it in.  With their government influence and endless stream of inside information I wouldn't doubt their assessment.  Look for a place to exit shorts before the last week of august... that's when its expected to come out and get your gold now while the gettin is good.

Addressing Physical Silver vs. ETF Silver

I've stated before that physical silver is my preferred investment choice over silver in the form of ETF.  One obvious reason for holding physical silver is that you can do transactions in cash, thus avoiding any paper trail and consequentially any capital gains tax.

The next reason for owning physical silver is that it benefits all other silver investors, while owning silver in ETF form does not....  let me explain.  JP Morgan and HSBC Bank are the custodians behind the two silver ETFs: SLV and SIVR, respectively.   As custodians, they are paid and trusted to keep the reserve supply of silver to back silver ETF purchases, so that in theory buying the ETF is essentially like buying silver.  Problem is, the custodians DON'T buy the necessary amount of silver to back up the quantity of silver that is sold as ETFs on paper.  Example, say there's 800 million silver ETFs that people own, it would be likely that the ETFs, and more specifically, the custodians for that ETF only have about 100 million worth of silver purchased.  Yes, these custodians submit to inspection, but NO THEY DO NOT ACTUALLY HAVE TO PROVE THEY HAVE THE NECESSARY AMOUNT OF SILVER RESERVES TO BACK ALL OF THE "SILVER" THEY HAVE SOLD IN ETF FORM.  


Does this mean Silver ETF's are not safe?  No, not really, the ETF price is still pegged to the price of silver.  What it does mean is that the custodians have infinite amounts of power to manipulate the silver market.  They combine short selling with buying insufficient quantities of silver to back the ETFs to make huge profits.

Example:  Say Joe is a custodian for my silver ETF.  I buy 1 million dollars worth of my ETF at 40$, I expect joe to take that 1 million and buy 1 million worth of silver.  Instead, he doesn't buy any silver, he Shorts my ETF with 500k!  Since joe didnt buy any silver, the demand for silver has fallen and the price decreases.  Take your pick on why my etf falls, whether it be all the shorting or an artificial peg to silver pricing, my ETF moves down.  Then while its down at say 20$, joe buys some silver, say 500k.  Joe simultaneously gets out of his short positions on which he made a killer profit, and the price of silver moves back up to around 40$.  After the price increase, joe has 1 mil worth of silver, an additional 500k of mine, and probably an additional 500k he got from shorting.  Good Deal!!!!!!

This is exactly what happens in real life.  By having simultaneous ability to effect the supply of silver that backs an ETF and the price of silver on which the ETF is backed, this type of ridiculousness is possible.  The losers in all of this become people who buy into silver at high points before these manipulation runs happen.  In reality it is even worse than in my example as banks can also utilize rate hikes and pretty much never buy enough silver to fully back the ETF commitments.

Point is:  if you buy physical silver you are not giving the banks ammo with which to fire against the silver markets.  The banks control over the market is illegal, and it is fading due to overwhelming demand in the silver market and the introduction of other outlets in china to buy and regulate the trading of silver.

Silver is the investment of a lifetime due to this unprecedented amount of manipulation to lower the price, and as soon as JP Morgans grip fails it cannot do anything but skyrocket.  So buy physical silver and help the train along   : )

Dispelling the Myth that Gold Is in a Bubble

Gold is appropriately valued, bordering undervalued pending future politcal and fiscal policies that look to be bullish for gold.

Below is the inflation adjusted price of gold.  This chart shows clearly that not only are we a long way from any real high point in gold, and also that there isn't too much room for gold to fall. 

LOLS Warren Buffet

Warren Buffet came out and stated that the US debt is worthy of a AAAA rating, and then the S&P downgraded Berkshire Hathaway to AA+ from AAA.   Retaliation?

Stories Behind the Story for Friday

Markets up today but an in depth look into todays numbers would make the most interesting man in the world quite nervous. 

Lets start with the short selling ban in europe.  Today is the first day of the short sale ban and while i'm certain they have successfully prevented plently shorts sales from weighing on market prices, it doesn't look good when a government has to intervene to prevent people from shorting.  If an economy was healthy, there wouldn't be such a large mass of people shorting everyting, and thus no reason for the short selling ban.

Second, retail numbers came out today much better than expected.  I don't think it's too much of a surprise but I think it bodes warning.  In my opinion these are unsustainably high and combine mild overextension by consumers with boosts from a weakening dollar (a weak dollar increases reported earnings measured in dollars, especially earnings made in foreign markets).   Earnings will correct themselves in the coming months if the weaking dollar did have an effect as baseline company costs will be increasing.  A third possible explanation is that expectations were just much too low for retail sales, which is a very real possiblity.

Another number coming out today was consumer confidence, which hit a low point.  Now what does it mean when consumer confidence hits lows while retail sales hits highs?  Historically, it's a surefire indication of consumer debt.  This same behavior can be noted during the "growth" from 2004-2007  after the bush tax cuts.

Consensus on todays news:  Retailers are still a poor investment decision.

2008 deja vu

* Europe Banning the shorting of stocks again... didn't work out well in 2008 likely won't work out here.

* First time since 2008 the market has experienced +400 point losses

* First time since 2008 the market has seen back to back 300+ point losses in a week.

* Same problem, different bank:  Bank of America struggles to deal with toxic mortgage assetts and other debt similar to lehman brothers.

* Google and Apple still go up??  Well I guess this is a constant for just about any given year.

* Mortgage insurers back in big trouble

Differences
*This time around the CPI shows that we have experienced quite a bit of inflation, and the Fed is going to have its hands tied a little more this time around.

*As a result of the above, commodities have somewhat decoupled from the rest of the market and aren't expereincing as significant losses.

*Currency issues and default scares are driving the price of gold/silver sky high, which will only get worse with more measures of easing and or threats of default.

* We are in more debt than before, and have more expenses that we can't pay than before. 

* People now blame Bush and Obama for the mess.  Although personally, I blame fiscally irresponsible political and economic policies put in place since the time of Franklin D. Roosevelt:  Creation of the federal reserve, a dollar backed by confidence, political ability to create programs and departments without a means to pay for them, congressional ability to raise the debt ceiling, the keynsian idea that the root of economic growth comes from spending rather than savings, the idea that 2% inflation each year is actually good for the economy, dramatic increases in leverage and liquidity, ect.

Twas the Morning Before an FOMC Announcement

Twas the Morning Before an FOMC Announcement, and all through the streets,
The markets were cheery, expecting more Q E.
The time passed quite slowly, with no other news,
We all searched the internet, looking for clues.

Then in the afternoon, the news hit the screen,
The fed said no QE, but low rates until 2013.
Investors panicked, not knowing how to react,
QE3 was dead, and NASDAQ got sacked.

"But wait one minute", Goldman Sachs directed,
"This news is bullish!, and just as expected!"
"The fed won't just let the market destroy,
And there's a range of policy tools it's prepared to employ"

Then just as the Dow hit an intraday low,
Something amazing happened, prices started to grow!
To one percent, two percent, three percent, four!
The S&P 500 continued to soar.

But in the back of the crowd Andy Lee cried "doomsday!"
"We just can't recover, there's too much debt to repay."
But a massive sell off will just have to wait.
Until then, we have a currency to inflate!

Alas,  much hope lies on a meet at Jackson Hole,
But the fed doesn't bring presents, it only brings coal.    
So ready your defenses for a QE assualt,
but know nothing we do can save us from default.  : (

Big Market Plunge

On bright side, my portfolio experienced its biggest up day ever.

Its not rocket science, the country is in a 50 ft pit with a 8 ft ladder.  While we may be able to get up to the top of that ladder via more fed quantitative easing and such, were not getting out of the hole.

The formula to combat this is simple:
1.  Short US stocks and indexes
2.  Buy silver.
3.  Your value stocks should be mostly foreign relying on markets in countries where shit isn't hitting the fan.
4.  US Bond funds/US treasury bonds are NOT the safest place to be by any means.


Part 7 of the educational talking bears

www.youtube.com/watch?v=eJlzhnZMChY&feature=player_embedded

Silver

Buy. Silver. Now.  Or forever regret it. 


* Traditional silver to gold ratio: 16:1
   Current silver to gold ratio:  43:1

* Overextended leverage, 160 ounces of silver is traded on the market for every 1 ounce of physical silver.

* Price/supply imbalance, inability to satisfy the above problem because there is not enough silver mined in a year to satisfy the amount that is traded in a week at current price levels. 

* Market Manipulation, JPmorgan and others found guilty of taking massive short positions on silver in order to affect the price of gold and profit on gold derivatives trading.  Rinse and repeat.  Now stuck billions in the hole in leveraged long term contracts.  Still playing the same game, trying to drive price lower in waves in attempt to get out of toxic derivative positions.  (silver market is much smaller than gold and big money buying or selling has a significant effect.)

*Central bank monetization.  The monetization of debt, or printing of money to pay for debt, is occuring in multiple european countries as we speak, and has been a long standing tradition in the US, this is a bullish point for both gold and silver.

!!!! Inside scoop on todays market bloodshed and gold/silver

Dow, S&P, and all major indexes got hammered today in massive stock selloffs.  Gold began the day on a high note then after the dow reached -3% or so it tanked, whiping out all its gains for the day and posting a significant 1% loss  (silver moved in a similar manner, sliding even further late in the day).  One may think that Gold followed suit with the rest of the market today and sold off for the same reasons as everything else, but that is completely false. 

The drop in gold comes solely from large hedge funds and banks that were forced to liquidate (sell off) some of their most valuable assets at the current time in order to meet margin calls on positions that got hammered at the beginning of the day.  Margin calls explanation:  trading on margin describes a trade that you make with borrowed money, usually to obtain leverage.  To meet a margin call is to obtain additional cash or other assets to make up for losses in a position that exceeds your cash or liquid assets available to pay for the loss.  Think of not meeting a margin call as bouncing a check.   Anyways, losses on positions in the morning forced hedge funds and banks (many rumored to be based in London), to sell some of their valuable assets such as gold and silver in order to pay for the losses, or meet their margin call.

Why this is an obvious buying spot for gold/silver:  Banks/funds did not want to sell their precious metal assets, they were forced to in order to pay for losses incurred on stocks.  This is not a trend that is sustainable, as companies liquidating their gold and silver assets will run out of gold and silver to sell off, and healthy corporations that just sold to meet margin call requirements will buy what they sold back when they can afford to.

Conclusion:  buy silver/gold (silver preferred), and if it dips more in the coming days, buy some more.

Yup, Schiff nails problem on the head.

http://video.foxbusiness.com/v/1090172254001/schiff-happens/

The Way to Play the Game

A tip off monday alerted me to the very strong possibility that jobs numbers, one of the most influential pieces of data the market chooses to act on, will be far below expectations friday.  Tuesday and Wednesday market performance seems to think that expectations are already below expectations, if that makes any sense.  Anyways, I was planning on riding some debt deal thunder then laying down a massive put on the S&P before friday.  However, the debt deal thunder lasted about an hour and was only good for ~1%.  Fear not, I am still going to make my put, and i'll chose the expiry to be sometime around november/december.  I'm going to let this ride for a little bit, I think there is much further to fall in the near future until the fed decides to do something.

China Not Happy With us

China's primary credit rating agency downgraded our credit rating a notch.  China owns about 1.3 trillion in US debt, this is them telling us to get our crap together.

Also, Just found out that 14.5% of the US population now receives food stamps.  Maybe we could teach some of them to fish instead of giving them fish?  Or maybe instead of food stamps start a rice + potato bank, i bet food stamps wouldn't be so popular if all you could get was rice and potatoes.

No Real Spending Cuts in Debt Deal, Just Another Nail

Its no surpise why this bill passed without support from more than 40 fiscal conservatives in the house.  According to a number of politcal figures, including Ron Paul, the debt deal does not elimate any current spending, instead focussing on cutting projected future expenses.  This is just another nail in the coffin of the US economy, and is the beginning of an age that i'm going to call:  Age of the Black Swan and the Big Long.  The black swan refers to the catastrophic event of the eventual US default, and the profitable shorting of the US economy as a whole.   The big long refers to the value of Gold/Silver, which will ultimately gain in value until the day the US defaults, and even then it may serve as a safe haven depending on politics and current economics.  The swiss franc is a less volatile alternative to gold/silver.

Raiz the det sealin

http://www.youtube.com/watch?v=EoS52fVtVQM

Markets, this week

Dissapointing manufacturing data is killing the thunder of a nearly complete debt deal.   Thats okay, look for the same kind of volatility tomorrow.  Negating other negative data, im still expecting a small rally as the debt issue is cleared up briefly.  

In other news, there is a strong rumor from a few credible sources that fridays jobs numbers are going to be much lower than estimates, and by much lower than estimates I mean they could be as low as half.  This may settup a unique money making opportunity that I will talk about more on tuesday/wednesday.

Markets Ahead of Debt Deal

Markets are pricing in the debt deal as we speak, get rid of your shorts and get ready for at least a day of solid gains in the market.

Moody's, S&P credit ratings

Moody's and S&P are a biased and corrupt source of credit ratings. I have full confidence that neither of them will strip the US of their AAA status anytime in the near future.  However, look for them to continue dropping the hammer on Spain, Italy, Portugal, Ireland, and Greece.

Good Ways for the Common Investor to Capitalize on Market Woes

Don't let your investments suffer if the market suffers!!!! What can the average, not too serious investor buy to capitalize on a falling market?

My answer: Inverse ETFs (same as shorting, but you don't need a margin account)

Heres a list of my favorites to invest in right now

SH - short the S&P500

SDS - short the S&P500 2x leveraged

SPXU - short the S&P500 3x leveraged

DOG - short the Dow

PSQ - short nasdaq

I list the short dow and nasdaq etfs for reference but its better to be short S&P right now. I see an easy 20%+ here from (SH) over the next 2 years.

Comic Relief, people used as colateral on loan!?!?!

This just in:  the Bankia savings group, a banking company in Spain, is actually using soccer players Christiano Ronaldo and Kaka as colateral on a loan made to the Real Madrid football club.  Upon default on the loan, the bank would have the athority to actually seize the players from the team, and would obtain all rights and profits the club has relating to the players.

1971

This was the year the music died.  Its been a thrill of a ride into the record books; the U.S. dollar and a basket of other currencies now share the record as being "the longest lasting fiat currency" at just 40 years.  The reason I bring this up is that we while the doctors at the federal reserve have diagnosed us with the deflation, it is plain to see that their treatment causes severe inflation.  Not one currency has ever died from the deflation; its like the chicken pox, it sucks for a while but when you get over it you're cured for a lifetime.  Inversely, hundreds of currencies have died from the inflation.  The ultimate black swan is on its way, post up.

Credit Default Swaps spike

Credit Default Swaps on the United States government have spiked immensely in the past few months.  Seemingly there are a lot of people out there holding the belief that we will default sometime sooner rather than later.

In other news:
Bonds and Credit Default Swaps explained:
http://richnewman.wordpress.com/2007/12/09/a-beginners-guide-to-credit-default-swaps/

Pretty good stuff to know

Long Term Value Portfolio

Portfolio Picks:

Ticker          |            Risk         |      About Investment

     

EPIBX            Very  Very Safe          foreign bond investments in reputable/trustworthy nations (No US bonds obviously)

EPIVX             Very Safe                 fund that value invests in foreign nations with high growth and good outlook

EPD                  Safe                       Oil pipelines + energy transportation, history of steadily increasing dividends

CH                   Safe                        Fund, invests primarily in exponentially growing Chilean economy.

LYSCF             Moderate               Newcomer to rare earth metals industry, http://www.lynascorp.com/

RIO                  Moderate                Gold/Silver mining corporation

SIVR                Moderate                Silver

List of Yearly Dividend Yield

EPIBX      5.49%

EPIVX      3.31%

EPD          5.54%

CH           10.0%

LYSCF     none

RIO          1.75%

SIVR        none

Correcting my previous post,

SNDK jumped huge in early morning trading due to the earnings report, more than I had anticipated in my previous post so let me correct the numbers.  *Easy 10% or ~50% on call option

SNDK, VZ

Sandisk (SNDK) beat earnings forcast, you can now sell.  Congrats to anyone who bought SNDK when I said to on July 18th, you made an easy 5-6%, or ~20% on your call option.  No harm in holding on a bit longer, it has tremendous upside.  However, I'm more content to sell off now and reevaluate when the U.S. and Greek debt crises stabilize a little more. 

Also, looking forward to verizon earnings report tomorrow.  Forcasts for VZ have been pretty good last few years so i'm inclined to say it won't differ much from the forecast.  Still waiting for the stock to feed off of some of this apple hype.  Clearly apple is rocking the house.... but who else benefits from record selling of Iphones, IPads, and Macbooks?  VERIZON, SANDISK, CISCO !!!  There are more, but you would have to read cody willard's "50 stocks for the app revolution" to get the full spectrum.

GREECE, sim city

Since when is financing old debt with new debt a bailout??  A default for greece would surely be better than current bailout terms, which would just prolong greek destruction for a while.  Has nobody on this planet played sim city??????  Every good sim city player knows that after a certain point in debt it is nearly impossible to recover because the maximum amount you can get in taxes isn't enough to cover interest payments and be able to grow enough to alleviate debt. Plus if you have taxes without services to your people your people leave the country and your revenue decreases..... The only way out of the debt is to pretty much neglect your population and sell a ton of water and power to your neighbors, and even then surplusses after the interest rates on debt are minor.  I think we should all play sim city, it will teach us all how doomed debt plagued importer nations are.

Wait Wait... People are surpised?

"Nasty Surprise in Housing"
http://www.marketwatch.com/story/sales-of-existing-homes-slip-08-in-june-2011-07-20

For All Who Were in Doubt.

The answer is yes, there are people alive today that predicted the 4 biggest economic crisis of the last decade:  Internet Stock bubble of the Early 2000s, 2003 Recession, 2007-2008 Housing Bubble crash, and 2008 recession/financial crisis.  

They are few and far between

http://www.youtube.com/watch?v=tZaHNeNgrcI

Hold on SNDK Until Earnings Report

I'm expecting Sandisk to beat estimates of .99 per share with numbers around 1.09 a share.  Looking to sell on 7/22/11.  Updates to follow

Follow up to SNDK play,

Apple blew earnings numbers out of the water, SNDK apears to be uncoupled and moving independently.  While it posted gains yesterday and opened higher today, it does not appear that it is benefiting in the short term from apple's numbers.  Oh well, next time we'll go with the less creative play and just buy apple : ). 

BAC fail

Bank of america comes out with positive earnings report numbers and still takes a dive, you just can't catch a break when your drowing in toxic assetts, regulated to the max, and being investigated for accusations from the last financial crisis.

QE explained, a classic

QE  and the fed explained

http://www.youtube.com/watch?v=PTUY16CkS-k&feature=related

BAC, AAPL Earnings Report Playbook

First off, BAC down again on bad news, I hope you were shorting it.  If by some mericacle it makes a bull run sometime in the next few weeks I would use that as an opportunity to short harder.

Now, down to business.  Apple's Q3 earnings report comes out tomorrow,  and i'm going to make a creative play on it.   Apple has beat earnings reports for at least the past 8 consecutive quarters, and I don't think it will come as much surprise if apple beats it again by a moderate margin.   Apples been skyrocketing lately, and I'm worried gains from their earnings report have already been priced in.  Thats okay,  I have a safer play.   SNDK (sandisk)  got killed today in the markets when their price target was downgraded.  However, they benefit from apple revenue and they have an earnings report of their own coming out thursday.  Point being this seems like a great short term buying oportunity.

JPMORGAN

Is it just me or is are the October and September Call/Put prices lagging behind the stock price?  Looks like low volume may be a culprit, we'll see if it corrects at all on monday.  

food

Food prices up 2%, thank you Bernanke for discouraging obesity in America

QE3!!!!!!!!!

In the Fed chairmans speech this morning, he hinted at a third round of quantitative easing, saying he would provide further support using one of a few possible methods, all of which involve stimulatation and attempts to keep the interest rate low. 

That being said, I hope someone took my July 5th advice and bought silver while it was down (who am i kidding, there are about 3 people that even look at this blog, bless their souls).  QE3 was bound to happen, and it's going to push silver back to ridiculous levels.  Silver is up 10% from july 5th, and up 20% on the year, even after a setback in may which saw it drop more than 25%.  Look for a return to above 45$ when the federal reserve decides to intervene to "promote growth" and "stabilize the economy".  I do not beleive this to be a question of if, but a question of when. 

Full Default in Greece Now Seems Likely

Bailout talks are not going too well accross the pond.  All of our funny accented friends over there in europe are feeling troubled.  Greece is just the tip of the iceberg with spain, italy, portugal to follow.  Decisions in greece may very well set a precedent for how the rest will be dealt with.  While I don't claim to be exited about the demise of all these countries, I am positioned to benefit from them with puts on JPM and GS.  The default will be better for the region in the long run.  If the decision is for greece to default, its party time for me.  I would try to pick up some more securities specifically to gain from greece's demise, but alas, they have already been hit pretty hard in the market. 

Early Warning, Bank of America (BAC) Settlement Not Over, Grim Outlook

See this article from zerohedge.com, news of the banks recent settlement was premature.  BAC is near a 52 week low today, and there it doesn't have much going for it in the coming months.  I wouldn't mistake this as an opportunity to buy.

http://www.zerohedge.com/article/congressman-brad-miller-blasts-legality-bank-americas-85-billion-rmbs-settlement

Beating Dead Horse, LYSCF

I know i've been blowing the horn on Lynus Corporation a lot.  If you couldn't tell, i'm a fan.  I've some numbers to look at comparing some popular rare earth metal companies, specifically I want to look at trading volume.

Company                                       Average Trading Volume

MCP                                               6.46M

REE                                                 1.64M

AVL                                                 2.20M

GWG                                               1.08M

LYSCF                                            952,220

Lynus Corporation is the least traded of the big rare earth metal stocks.  The size of their operation and mining potential threatens to be the greatest of any rare earth metal mining company, including molycorp (MCP).  Apparently the secret isn't out.  Lynus's market cap is ~78% of Molycorp's, but their supply of rare earth metals in the coming year is going to be equal if not greater.  Lynus also reaps the benefits of a stable, strong currency in the Australian dollar.  Sure, Lynus isn't at full scale production yet, and they have just begun mining operations, but when the cat gets out of the bag this is going to be a good one.

The Lights are Dimming

One day, a long long time from now, I will speak to my grandchildren and tell them that I lived through the second great depression.  That is, if I am lucky enough to live that long.

Metals, Google, LPS, LYSCF

Silver in recent times has proven that it can have a good day even amongst negative indicators.  It consistantly acts about twice as volatile as gold.  I've been bullish on silver for over a year now, and it's looking to make a run up to $45 or so before I'll start looking back again.  Evaluating the LPS short by Cody Willard in May, it seems this was absolutely spot on.  LPS has lost ~33% since Willard voiced that the company was in shambles.  Around yesterday the CEO resigned due to medical reasons.... clearly it doesn't seem like things are getting better.  If it makes a bull run in the next week or so I might try to squeeze in a put.  FWIW Willard also bullish on google over the next six months.

After a project delay LYSCF is rebounding, still a fist pumping buy. 

SIVR a buy at $33.66

Silver has been on a bit of a downtrend recently and now looks to be an attractive buy.  Look for a turnaround in precious metals over the next six months.

Trading Ideas for Zynga IPO

Zynga, the next to jump on the internet tech IPO trend filed paperwork for their IPO today, looking to raise 1 Billion.  This is the game company that created farmville.  They don't have any other real significant titles, but they're well connected to facebook and have proven that they can reach a large audience and get people to pay for their games. 

http://news.cnet.com/8301-19882_3-20075220-250/zynga-ipo-like-facebook-but-sharper/

Zynga seems to be causing alot of exitement.  I don't see a reason why the IPO won't behave similar to linkedin or pandora.  That being said, I think everyone on wallstreet knows exactly how they are going to play this one.

Buy Buy Buy............get in before the crowd.  Then take profits and run, sell before its too late.  This IPO is going to garner an uncanny amount of public exitement.  I'm getting in and getting out. 

Long term growth prospects??? Haha, don't kid yourself, this is an internet gaming company. 

Stock Evaluation from May 20

I'll keep evaluating the picks throughout the year, but heres the progress after a month and ten days.

Dow jones industrial average over this period:  -2.8%

Bullish:
BGY  -5.4%
SIVR  -3.3%
AAPL  -0.2%
KMP  -2.9%
ABB  -5.2%
CH  -0.9%
CCJ  -8.1%
MON  -1.0%
LYSCF  -22.0%
RIO  4.6%

Average: -4.44%

 Bearish:
MS  -6.6%
LNKD  -18.0%
JPM  -9.5%
PFE  -1.2%
GS  -4.3%
ALK  -1.9%
NOK  -36.5%
RIMM  -53.9%
ARO  -4.6%
SHLD -2.3%


Average:  -13.88%


Net Gain (shorts + buys):  -(-13.88)+(-4.44) = 9.44%

Lots of movement in the last month or so.  Somewhat dissapointing that I didn't beat the dow with my bull picks but oh well, these are long term picks theres plenty of time.

Banks and Bernankes

An article on marketwatch today highlights the reasons I've been positioning for U.S. banks to take a tumble.  It spot on nails the two reasons I've been short banks since the beginning of the year:  1. A growing public opinion of disapproval towards stimulus and Bernankes seeming unwillingness to support QE3 (The two seem related, theres a lot of public and political pressure against a QE3).  2. National debt cieling disagreement.  Uncertaintly and turmoil in this matter may bring the banks to their knees.

The article also cites the greek debt crisis, which completely escaped my mind until it took a bigger spotlight in the news a month or so ago.  If I could find the numbers on how much greek debt our banks own, and who owns what portion, that would be perfect. 

Heres the article:

http://www.marketwatch.com/story/three-financial-funnel-clouds-ahead-2011-06-28

We have a specific timeline, and a reasonable idea of what the decisions will be when each deadline comes.  It sounds easy, but I'll have to follow up on this post in August to evaluate theses assumptions.

Spotlight on Lynas Corporation

Lynas Corporation, a budding rare earth metals company, is full of investment opportunity. 

Anual Report for 2010:
http://www.lynascorp.com/content/upload/files/2010_Lynas_Corp_Annual_Report_FINAL.pdf

Investor Presentation, updated May 2011
http://www.lynascorp.com/content/upload/files/Presentations/Investor_Presentation_May_2011.pdf


In my opinion, the stock is currently undervalued and represents the current value of the company without considering earning potential.  The good news is that Lynas corp is beginning mining operations and it shouldn't be long before that earning potential is realized.  Even without growth rare earth demand, Lynus looks to take some significant market share from Chinese rare earth suppliers.

ticker: LYSCF

Internet Tech Stocks Will Be Among the First to Fall

It's not that I have anything against the Pandoras and Linkedins of the world, but its a fantasy thats not made to last.  Recent internet IPO's have created a lot of exitement in the markets ... deja vu?  The growing weight of an unpayable debt burdon and flimsy earning potential of these stocks should be enough to bring them down in the long run.

Bernanke forcasts growth in 2nd half of year, other updates

Ben Bernanke spoke today, explaining that growth for the year thus far has been slower than expected, noting high oil prices and the tsunami in japan as reasoning for the mediocre performance.  He then goes on to say that the outlook for the second half of the year is good, and forecasts strong growth.

http://www.youtube.com/watch?v=-3WRAG8GqEo

Rarely does the chairman get down to specifics, but we will remember this growth forecast and hold him reasonably accountable for his words.  

Something else to take away from his speech is the repetition of terms like "monitor", and "watch closely" that Bernanke uses superfluously to make it seem as if the fed has control over the economy.  I'm at a loss to explain why the FED thinks it has a mandate to control the economy.  Does stimulating our way out of a bubble deflate the bubble? Or does it just prolong the suspense?  I suppose we will find out soon enough.

A look into LPS

LPS, or lender processing services, is a Florida based mortgage servicer.  In the midst of what could very well be a second collapse of the housing market and an eventual financial meltdown, I can't see any good reason to own this stock.  They've been slapped with subpoena's, and market watch's Cody Willard seems to think they are going to go busto.   However, it's been extremely volatile recently, driving up option prices.  I have to figure that most of the money people are putting into this stock is short term.  I'm not sure when the merry go round will  end, but a well timed put will be the eventual response.  Hopefully I don't miss the boat.

How I'm Playing the US Debt Ceiling Crisis

August 2nd.  That is the ultimate, country in chaos, depression eminent deadline for the US to raise the debt ceiling.  I'm looking for something to be agreed upon sometime in late July, possibly June if washington's feeling up for a comprimise (not quite as likely).  The way I see it, there are three possible outcomes to this scenario:

1.  Debt ceiling raised, 2 trillion, with less than 0.5 trillion in budget cuts.

2. Debt ceiling raised 2 trillion, with republicans convincing the democrats go along with larger budget cuts in the realm of 0.5-2 trillion.

3.  Default, or stop medicare, social security, military funding, ect.


Option 3 isn't really a realistic option.  Option 2 is more realistic, but the political mind is incredibly short-term, and polititians can't be expected to make difficult decisions anytime close to an election year.  That leaves option 1.  Sooner or later the rupublicans will have to give in and raise the debt ceiling so that they will not be blamed for option 3.  This brings me to the point of this post: how to play the debt ceiling decision.  Most are of the opinion that the markets will remain relatively unaffected, which may be true of the market in general, but not on a sector by sector basis.  Look for large gains in commodities when debt ceiling is raised. Silver seems to experience the largest gains of the commodities when favorable monetary policy provokes the sector.  It currently has a great deal of volatility and is coming off a recent dropoff in prices.  Oil, a slightly less volatile investment should also see gains.  Turmoil and disagreements in policy could be short term bad for financials and other sectors.  A default, of course, would cause just about everything to tumble, but of course is not likely.  I'll be betting on commodities, maybe short banks.  If something unexpected happens i'll have to reevaluate, but we'll save that for a later time.

Bullish or Bearish: A starting point

I'd like to establish a list of 10 stocks that I am bullish on, and an addiitonal 10 that I am bearish on.  This will serve as a starting point, a medium through which performance can be judged in the future.  I'm not going to explain any of the selections, but I will evaluate all of them at later dates.

Bullish:
BGY
SIVR
AAPL
KMP
ABB
CH
CCJ
MON
LYSCF
RIO


Bearish:
MS
LNKD
JPM
PFE
GS
ALK
NOK
RIMM
ARO
SHLD

Disclaimer

This is a largely speculative blog created to track the accuracy and validity of speculative predictions and conclusions.  The views expressed within this blog are opinions, and should be treated as such.