Archive - Dec 26, 2010
It is inevitable that when you have a market run up like we have had recently driven mostly by liquidity and the Santa Claus Rally, many stocks would see pullbacks in the New Year. These are just five of such candidates that I believe capable of some meaningful downside risk.
Something amsuing out of England (and ever slightly less so if you happen to be the CTO for Capital One). After in late 2009 four Cambridge students uncovered a no-PIN attack that allowed those so inclined to hack ATM machines, and subsequently they made their findings public, a recent thesis paper by an Omar Choudary has summarized the findings, and has been in the public domain for some time. However, it appears that the UK banking cartel, with its 2010 bonuses finally safe and sound, has only now discovered this major weakness across their systems. But instead of taking prompt steps to fix the problem, in typical kleptocratic oligarchic fashion, the bankers' initial demand (apparently across the Atlantic, "UK Cards Association" is another name for the bailed out crew) is for Cambridge University to censor the paper. Alas, Cambridge has not agreed to fold like a lawn chair. The response that follows is quite hilarious. What will be less hilarious is if the no-PIN "attack" works in the US just as well as it did in the UK. Zero Hedge staff is currently enjoying the "all flights canceled" weather, testing out this particular null hypothesis.
Sprott's John Embry is in fine form today: in a just released oped in the Investor's Digest of Canada, the Chief Investment Strategist of Sprott Asset Management LP, and one of the biggest fans of shiny metals in history, makes the following bold prediction, which also explains how he views the concerted attempts by the LBMA to keep gold below the $1,420 all time high: "I am not in the least bit concerned about these shenanigans because I believe considerable additional quantitative easing is inevitable, irrespective of what the Fed says or does in the short term. Goldman Sachs's chief U.S. economist Jan Hatzius clearly shares my view as he has suggested that ultimately as much as $4 trillion maybe required although he anticipates that it will be staged. In my opinion this will act as catnip for gold and silver prices, which could go ballistic by year-end." Presumably, he means 2011. So forget all you have heard about interest rate (real or otherwise) correlations: they don't exist. All that does exist is the willingness of the Fed to 'print.' And with China increasingly starting to tighten, the Fed will need to do double duty if it wishes to keep global liquidity well-offered with near-free fiat paper. While we don't quite share Embry's enthusiasm for gold's imminent escape velocity, we are confident that as long as loose monetary policy is the only means to extend and pretend the ponzi, gold will, in turn, be well-bid.
The markets don't have to go down just because everyone is bullish, but if you are a "believer" and buyer at these levels, then you will need to identify a market top and get to the exits before the next guy to extract profits. This is a very crowded trade and identifying the top is a tall order.
As an element of nature, gold is what it is, no matter what form. The same cannot be said of the golden rule, however, for no matter how natural the social process out of which it evolved, the golden rule is a human construct and therefore its application can be decidedly different that of its elemental namesake. After all, it is one thing to say, “What you do not want done to yourself, do not do to others” and quite another to say, “What you want done to yourself, do to others.” For although both are reciprocal, the first rule merely requires restraint, while the second requires intervention. That is, the first says that if John doesn’t want Joe to hit him, then John must refrain from hitting Joe, while the second says that if John wants Joe to feed him, then John must feed Joe.
Simon Black, aka Sovereign Man, who recently has been a frequent guest on the pages of Zero Hedge, was interviewed by The Daily Crux, and explains why in a world of relentless printing of credit money, and thus a surge in global sovereign debt, sovereign risk is rapidly becoming the first and foremost risk factor for investors. Courtesy of his extended travel experience, Black, who visits 50 countries each year and actually performs due diligence, summarizes his thoughts on all those pundits who base their macro views on a tourism brochure: "I spend my life trying to put my boots on the ground in as many places as possible to really see with my own eyes what's going on in the world and what the opportunities are, rather than take some idiot's recommendation on Fox Business News who doesn't know his ass from his elbow." In addition to getting some more background on Black, who is oddly low-profile in a world filled with media whores, here is one chance to evaluate key risks vicariously courtesy of a man who actually has "been there, done that."
One of the Christmas day stories getting little attention was the explosion of the rocket carrying what would have been the largest Indian telecommunications satellite. As BBC explains: "An Indian space rocket carrying the country's largest communications satellite has exploded shortly after launch. Live television coverage showed the rocket vanishing in a plume of smoke moments after lift-off from Sriharikota near the city of Chennai (Madras). The Indian Space Reserach Organisation said it believed the explosion was caused by an electronic failure." The satellite that would have been launched is the GSAT-5P: "GSAT-5P was a 2,310-kilogram (5,100 lb) spacecraft, which was built by the Indian Space Research Organisation based around the I-2K satellite bus. It was equipped with 36 transponders operating in the G/H band of the NATO-defined spectrum, or the C band of the older IEEE spectrum. Twelve of the transponders operated on extended frequencies within the band. GSAT-5P was expected to operate for at least 12 years, and would have been placed at a longitude of 55 degrees east." A video of the explosion is attached below. There is no evidence of foul play or less than gross incompetence at this point. It is also unclear if AIG was the company insuring the satellite and/or rocket. Lastly, to the best of our knowledge, this is one satellite incident that has not cost Phil Falcone hundreds of millions.
This is a must view, particularly for all Americans...
Even as European retailers are bemoaning their fate, having their entire holiday shopping season destroyed due to inclement weather, shoppers across the US Eastern seaboard, which has so far experienced a mild winter, are about to see just how easy it is to proceed with inventory liquidations when nobody can get to your store. We can only hope that the bulk of sales have already taken place, although more than likely many consumers have left off they real bargain purchases until after Christmas when retailers bring out the hard-core, 80%+ off deals. Will snow be sufficient to keep the marauding masses away from that $199 46 inch LCD? Watch in real time below, as a webcam tracks the hexagonal water crystal accumulation in Midtown NY.
Charting 2010, Part 2: Currency - Printing Money, FX Manipulation And Pricing Unleaded In Bits Of BaconSubmitted by Tyler Durden on 12/26/2010 11:38 -0500
No summary of 2010, visual or otherwise, would be complete without an extensive overview of what pundits call Monetary Stimulus, quantitative easing or Large Scale Asset Purchases, and the peasantry calls, just as correctly (with a few footnotes), the printing of money. If there are two words that define what we had an absence and an abundance of in the past year, those would be jobs, and money. As some of the key jobs-related charts were presented yesterday, below, once again courtesy of BusinessWeek, are the main charts that among other things demonstrate the various currency manipulation playbooks, the price of gas in bacon and other products, the annotated strength of the dollar through time, and what is actually printed when the Fed does print money.
I took all of the 782 comments on the Holiday Open Thread and ran them through a word cloud generator...