How are you invested ??

Just because it’s a bull for three months doesn’t mean it’s not an irrational bull.

A bear only needs to be right once a decade to make money. 2000 and 2008 make us two for last eight. If we can batt .300 by getting 2009 in the win column, to paraphrase David Winfield; baseball, and being a bear, is the only job where you can fail 7 out of 10 times and still make million

What perma bull made money from 1998 to 2008 with a buy and hold strategy ?? NONE.

Bears don’t make 50% in six months like the S&P, but they don’t lose 40% in that time either. Any math with tell you that losing 40% (S&P actually lost 57%) leave a million dollars down to $600,000 so followed by a gain of 50% (S&P currently up 55% from low), leaves you at $900,000 down $100,000.

Not so for a realistic and hedged bear over the last 12-16 months.  For the prudent bear the returns are much better, say  down 10% then up 20% (rather -40% than +50%). This takes the million down to $900,000 then back up to $108,000. Sure you only made $8,000 (8%) but that crushes the loss perma-bulls endured.

Look at any long term S&P charts and the evidence is clear.

Bulls should acknowledge and apologize for the last, going on eleven, years of BEAR market fact. The same people who were shouting bull were shooting bull. And they still are.

High Anxiety

108th Floor – Sears Tower, Chicago

High Anxiety

I’ll pass.

The Billy Mays of Wall Street

In honor of Bill Mays, the first “Billy Mays, Salesman of the Year”

2008 – Jim Cramer

Billy Mays never sold a product with a $700 billion commission, plus trailers.

Begs the question, is it a good thing that Wall St is based on PT Barnum’s motto on the minute?

Truth can be Violent, Vulgar and makes good Video

There is never vulgarity in a whole truth, however commonplace. It may be unimportant or painful. It cannot be vulgar. Vulgarity is only in concealment of truth, or in affectation.
John Ruskin

WARNING: While full of truth and sorta funny, the following video does have some offensive language.   Please avoid if you don’t want to here some bad words or the truth about our “Green Shoots”

Ok, a lot of bad words  ;-)

Trusting Wall Street Much

http://www.thedailyshow.com/video/index.jhtml?videoId=220252&title=cnbc-gives-financial-advice

(sorry for the Ad, not in my control)

Mother’s Milk and the Moochers

When the economy needs milk you feed the cow and not the bull.  The manufactors and consumers need cash to mitigate the upcoming economic depression and we should ingnore all the bullshit coming from Wall Street.  They are just loading up their suitcases before they move to Canada.

Watching the Auto hearings in Congress, I was struck by how thorough the questions where and thoughtful the debate.    After all they only asked for a business plan from the three auto makers.  But imagine if the same thoroughness was applied to Citibank.  How are they going to insure profitability?  How are they confident that the American people will every trust and buy their product?  How can we be sure they won’t ask for more billions in three months or three days?

All these questions must be answered by the automakers for a mere $48 billion ($25 granted and $23 currently requested).  But we don’t require the same for trillions already pledged to the financial industry.

The more that logic is applied to our current Economic problems, the more I realize the same people who couldn’t forsee the problems also have no idea how to solve them.

For all you Ayn Rand fans:

The Moocher’s are in charge so how can we expect them to get anything right?

Personal P & L

I know most people don’t keep a budget, but most know if they have money at the end of the month or not.  Let the following example help you understand the current economy. 

Suburban Family 2005

All numbers are AFTER-tax because that’s all that really matters.

Income:  $6,250 per month $75,000, dual or single income family

Cost of Living:  $5000, rent/mortgage, food, cable – EVERYTHING

Toy/Entertainment Budget $1,250

 

40% INFLATION

(ex. eggs go from $1.49 to $2.09, gas from $1.95 to $2.73) 

Suburban Family 2009

Income: $6,250 per month (assume wages have been stagnant since 2005)

Cost of Living: $7,000 (40% growth of $5,000)

Toy/Entertainment Budget: negative $750

 

What if inflation has been worse then 40% cumulative since 2005.  gas per gallon has gone from $1.74 on January 3^rd, 2005 to $ 3.64 on September 29^th, 2009, over 100% increase.  Have you noticed anything else that has doubled in price the last four years? 

So not only do we have irresponsible borrows to blame, but any responsible person who is now being pushed into poverty by inflation is hurting the economy.  No one is sending them $700 billion dollars.

Trickle down may not work, but the market is telling us that trickle up is working just fine.  The push down exerted on the middle class is bringing down some in the upper class finally.  But the more we focus our energy and resources on the wrong problems the deeper we all get. 

And you think the current government is going to help.  Arrow Shafts and Rum; get drunk and teach your children to hunt squirrels.

Well, at least the squirrels are free.

Rotten Apple

 

Gimme your Money...and your house

Ever pick up a seemingly perfect apple only to start peeling it to find some small bruises underneath the skin.  Of course you can continue to peel the apple, grab a small paring knife and cut away the rotten parts.  What you will be left with is a delicious apple.

 

But imagine you are told to stop peeling that apple immediately, glue the old skin over it and wait until the rotten part reverts back to good apple.  Ridiculous huh.

 

Well that is exactly what we are doing in the economy.  In late 2006, the first layer of the rotten housing market was revealed, sub-prime.  And rather then continue to peel the apple of housing, revealing all the rotten and bruised portions we have been told these rotten parts are only temporary, just stop peeling and surround the rotten parts with additional apples waiting for the good ones to cover for the bad until they all miraculously turn good.

 

There are two types of people who don’t like throwing $700,000,000,000 of our apples into a basket with all the bad apples.

 

The first, like myself, have spent years studying finance and economics, look carefully at the legislation and can form smart arguments about why this plan will not work.

 

The second, and far more important, is the average “Main Street” American who isn’t confused by all the details.  They simply recognize the extortion for what it is.  For them it’s simple.  They DO understand that Wall Street impacts Main Street.  In fact they feel better if Wall Street might actually share their economic misery.

 

And are you for it?  They you must be scared and trust the same con-artists who got us into this mess or you ARE the con-artist.

 

Additionally, all you Supply Siders were sorta right.  Except rather then the billions made by the rich trickling down, the economic suffering of the middle class over the last ten years is trickling up.

 

Now that is something that everyone should understand.

Coefficient of Friction

In physics it takes more energy to get on object moving then to keep it moving; static vs. kinetic friction.

Once the populace begins moving against our current kleptocratic regime

LOOK OUT

Until that happens, the kleptocrats will continue their con-game on the silent majority. 

For those who blame Republicans or Democrats, they need to take their blinders off.  They play the good-cop/bad cop ploy to perfection.

I like the Mets and don’t like the Yankees.  If you like the Yankees would you still put good money on them winning the World Series this year??

Does Smoky imply a Conspiracy??

Just notes I took while reading GRETCHEN MORGENSON’s most recent article explaining the current financial mess: A Window in a Smoky Market.

1.  New Accounting rules set to take effect November 15; conspicuously close to the election.  Sure makes it easier to spin the subsequent crash caused by this rule change as “Election” related.

2.  Simple explanation: Sell one risk but buy another.  The CDS buyer assumes the risk of “seller” defaulting rather then underlying investment defaulting.  In practice, paying Goldman Sachs 1% to sell a CDS backed by Bears Stearns rather then holding a bond backed by GM, Exxon or other company.

3.  The first failed CDS that cannot be settled amicable, will roil the markets.

4. If you owned default protected (a basic CDS) and also owned the asset then you had to disclose the details.  If you don’t hold the asset but are merely “making a bet” for or against a companies default, then no disclosure is necessary.  No surprise the market with non-disclosure grew from “133 billion three years earlier” to more the $2 trillion today (31% annual growth).