Friday, August 21, 2009
Wednesday, August 19, 2009
Perhaps my declaration that the American Energy Crisis had been put on hold for a couple of years was premature...
The U.S. Dept. of Energy's weekly status report shows Oil import declines continue to accelerate and, even as domestic production increased slightly, total petroleum availability continues to decline. Go ahead, click that link. This is either a one off, or the end of the beginning of the end.
This bears careful wathcing. Perhaps the Oil Import Crisis foretold by Jeffrey Brown is truly upon us. I would have said "No", that there was just to much "shut in" production capacity within OPEC. However, if that were the case, it should have been reflected in the price. To my mind, the price is telling me that there just isn't that much "shut in" available to be placed on the world markets.
I will be digging through the data over the next couple of days to try to understand what happened
Thursday, August 13, 2009
Release Date: August 12, 2009
For immediate release
Information received since the Federal Open Market Committee met in June suggests that economic activity is leveling out. Conditions in financial markets have improved further in recent weeks. Household spending has continued to show signs of stabilizing but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing but are making progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time.In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve is in the process of buying $300 billion of Treasury securities. To promote a smooth transition in markets as these purchases of Treasury securities are completed, the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.
The idea that the Fed is going to stop QE (quantitative easing) is a marketing ploy. How much they monetize will be a result of Tax Revenues ("TR"). If TR continues to suck wind, QE or monetizing (whatever you want to call it) will continue. If long rates spike, QE will continue. This is not what I want, hope, or wish for, just what I think most likely. It is ALL ABOUT TR.
Here is a slide presentation from A. Gary Shilling that I think is somewhat more detailed in its disclosure. This is VERY much worth your time.
Everything that the Federal Reserve and the U.S. Treasury have done has simply brought DEMAND FORWARD. "Cash for Clunkers"? That program helps 2009 auto sales at the expense of 2010 auto sales. Same with TARP, SCHWARP, and FART...
97% of the currency market is negative on the US$. That's what bottom's look like. The U.S. equity market will sell off (if and) when a US$ rally materializes (IMHO). This is a not very popular position - especially in the face of such a powerful rally. Please keep in mind that this rally has had NO volume behind it, and Oil and Interest Rates have risen substantially. It will be tough to maintain any momentum in the economy if Gasoline prices remain elevated (or heating this winter) or if Mortgage Rates do not come down.
The time to have been a Bull was Dow 6500.
Wednesday, August 12, 2009
Saturday, August 8, 2009
Friday, August 7, 2009
The 50 smallest stocks have outperformed the largest 50 stocks by 7.5%.If you are approaching retirement, or need money in the near future for your child's education, or if you just don't want kill yourself for missing this opportunity, now is a good time to lighten up on equities.
The 50 most shorted stocks have beaten the 50 least shorted stocks by 8.8%.
Thursday, August 6, 2009
I ought to write a book on the power of negative thinking. Chapter 1 should be titled “The Awful Damaging Consequences of Yes.” Ask yourself a simple question: Is a “yes”-man noble? Do you want to live without discretion or judgment? Is it right to accommodate everyone? Our permissive society is all about “yes,” so that yes has become sinister. Opening the flood-gates of yes has deformed our society. In the delicate balance of yes and no, we have tipped too far in the direction of yes and are becoming a nation of neurotics and weirdoes. Man is limited and fragile. He is not all-knowing or all-powerful. In fact, we all need to be reminded of our limitations. Think of the damage caused when we say “yes” to our appetites, our whims, our momentary urges. If you are 500 pounds, you’ve been saying “yes” when you should be saying “no.” If your credit cards are maxed, it is because you live in a world of “yes” when your world should be about “no.”
Chapter 2 should be titled, “Shut Up and Sit Still.” Every fool has an opinion without knowledge, an impulse without a plan, a readiness to plunge headlong into God-knows-what. The first lesson of discipline is to be quiet and think; to show self-restraint. Impulsiveness is the essence of the self-destructive life based on “yes.” Follow every impulse and you won’t get far. Stop yourself and you just might save yourself. And who on earth can possibly stop you? The fact is: You’re the only one who has the power of self-stopping. So shut up and sit still.
Chapter 3 should be titled “The Virtue of Guilt.” If you haven’t done anything bad in recent weeks or months, consider what you presently have in mind. You are wicked by nature, so you are guilty by nature. Therefore, it is appropriate to feel guilty. Don’t let yourself off the hook. Don’t be slipshod and weak. Suck in your gut and make a new start. Guilt is the stick across your back sent to make you better. Is guilt unpleasant? It’s supposed to be, and it better be. Feel guilty often, and have plenty of regrets. People who have no regrets are dangerous. They will suck you in and suck you down.
Chapter 4 should be titled “You’re Not So Special.” For two generations we’ve been telling children that they are special. Now we have an emerging generation of depressed adults who need constant affirmation. The demanding, impertinent and entitled individual is a weak and emotionally unstable neurotic who clings to false optimism because truth and reality are too frightening and difficult. One ought to ask: What makes all these “special” people so special? There’s nothing special about a narcissistic crybaby, and nobody likes self-pity, blubbering or whining.
Chapter 5 should be titled “How Fear and Worry Can Save You.” That’s right. Fear is good, because there are bad people and scary countries with leaders who want to anthrax you. Fear is basic to survival. Those who fear nothing are not long for this world. As for worrying, the worrier displays a caring attitude. If you really care, then you cannot help worrying. It is those who do not care about anything that never worry. For they have nothing to worry about, being detached and emotionally separated from the concerns of the whole human race. If someone tells you to stop worrying and live in the present, remind him that living in the present is for children and animals. It is not for adults.
Chapter 6 should be titled “Why Suffering is Good.” The answer is simple: Comfort is enervating while suffering hardens and strengthens. As a famous fitness guru once said, “No pain, no gain.” Those who are always feeling good never learn or grow. The best education comes in the wake of failure. If a man lives entirely without failure he cannot be called “fortunate”; for he has not learned life’s real lesson, which is loss. The more we live, the more we lose. As time advances we lose our youth, our health and eventually our lives. The cult of “winning” and “avoidance of suffering” is unnatural and guarantees a maladjusted attitude.
Chapter 7 should be “Realize What an Idiot You Really Are.” The ancient dictum “Know thyself” is the distilled essence of philosophy. And to know yourself is to know that idiocy has no bottom. It is fathomless and without limit. There is no stupidity that cannot ensnare you, no folly that cannot suck you in. As Dirty Harry famously said, “A man’s gotta know his limitations.” The more clever you seem to yourself, the more likely you are nearing some hard object about to strike you upside the head."
Wednesday, August 5, 2009
Monday, August 3, 2009
The U.S. Treasury has a huge financing in the offing, and the US$ is falling almost every day, down over 10% against the big 6 since March of this year. No creditor nation in their right mind (I know, what creditor nation has BEEN in their right mind to get to this point) is going to buy U.S. Bonds paying 3.5%... especially when they keep falling in price by more than the interest rate. The U.S. MUST halt the decline in the US$, or the U.S. risks a default (I should say a technical default, becasue the Fed would HAVE to step in and monetize BIG TIME... and that would be that - no more US$ as reserve currency. Talk about inflation!)
All eyes gotta be on the US$.
Libertariananimal (at) gmail d0T com
In probability theory,
events E1, E2, ..., En are said to be mutually exclusive if the occurrence of any one of them automatically implies the non-occurrence of the remaining n − 1 events. Therefore, two mutually exclusive events cannot both occur. Mutually exclusive events have the property: Pr(A ∩ B) = 0.
For example, one cannot draw a card that is both red and a club because clubs are always black. If one draws just one card from the deck, either a red card or a club can be drawn. When A and B are mutually exclusive, P(A or B) = P(A) + P(B).
One might ask, "What is the probability of drawing a red card or a club?" This problem would be solved by adding together the probability of drawing a red card and the probability of drawing a club. In a standard 52-card deck, there are twenty-six red cards and thirteen clubs: 26/52 + 13/52 = 39/52 or 3/4.
High Oil prices and an expanding U.S. economy are, IMHO, mutually exclusive events. High interest rates, and high equity prices are mutually exclusive events.
Something will give here. These asset classes cannot ALL have positive correlation for any length of time. I just pray that it is not the US$ that gives.
BTW, the Deflationists appear to be losing the argument at the moment. Actually, the Deflationists are watching their heads role down the street with their blood dripping from the sword of the various Central Banks.
Not that I am ready to throw in the towel on those guys... As I said a couple weeks back, I covered my shorts, because this is a beauty contest... and it doesn't matter which girl I think is the prettiest... what matters is what the judges think, and so far they seem to think the inflation trade is working.
This is either a VERY "V" shaped recovery, or one of the greatest head fakes of all time.
The time to have been bullish was at Dow 6,500. 9200? In the immortal words of former BEar Stearns CEO (my former boss back when Bear was a respected firm... say what you like about Bear, but this guy was the most humble genius I ever met) Alan C. "Ace" Greenberg: "If you didn't get invited to the wedding, don't go to the funeral".
There is a blow off in here somewhere... I just hope it ain't at Dow 12,000... or I will have a tough time cleaning up from all of the egg on my face.
The US$ is oversold versus the 6 other big currencies in the Dollar Index. This MIGHT mean that precious metals are over bought I own a great deal of metal, but I have continued to sell calls against it. If it gets called away, I will let it happen, and sell puts to re-enter. I have no intention of selling the actual bullion I own. Of course, if this is the Big Bang for the US$, well... let us hope not...
I have been a Gold Bull since just under $500. I still think over the next 5 years Gold can hit $2000. But if the US$ rallies, and it is long overdue, the precious metals could come under pressure. So, if you decide to hold now, don't freak out if they come in. Of course, with the kind of monetization the U.S. is going to have to engage in, this might very well be the beginning of the end.
The Obama administration is floating balloons about raising taxes on the middle class. I believe this is to assuage the Chinese and other creditor nations that the U.S. is going to get its fiscal house in order. The U.S., WILL ABSOLUTELY, POSSITIVELY cut expenditures and raise taxes at some point. I doubt whether this Administration will "Lead" the way, doing th right thing and cut expenditures like mad FIRST, and then sell a tax increase. They will be too busy looking 2012 in the face... but, you never know.
If Obama wants to go down in history as a great president, and was willing to forgo a second term (which is actually in his best interests. There is nothing better than being a former POTUS), and if I were working as his speech writer, here is what his opening address on the issue to the American people would be:
My fellow citizens:
America is faced with an unprecedented fiscal problem, and I am going to tell
people what they don't wish to hear, and require that which people do not wish
to do. Accordingly, I will not seek second term to my Presidency. I will instead use all of the power of my office to bring the nation's fiscal issues into balance. It will be VERY painful, but we can, and will, overcome these obsticles in our path.
Withing minutes of giving this speech I would communicate the seriousness of the issue by proposing to eliminate the Departments of Energy, Commerce, Homeland Security, Education, Labor, and Housing and Urban Development. I would issue a huge recall of military troops from around the world, and I would use these troops to engage the American poor in how to become more self sufficient in providing for themselves.
And then I would really start to cut spending.
This would throw the nation into a massive Recession, which is exactly what is needed. The U.S. must make the transition to less consumption and increased savings - and tha faster we do this the better - and only a popular president with street credibility could make it happen.
But I got a better shot at a date with the tooth fairy.
Sunday, August 2, 2009