Archive - Oct 13, 2010 - Blog entry

Is another French Revolution on its way and will it shake the foundations of Casino Capitalism?

Oh shit, it is on again like white on rice, stink on shit, and Black on Scholes (and for you quants, just know that Brownian motion has more than one meaning), as a flurry of blue chip companies beat earnings guesses and pushed the market higher. With the 50 day moving average now rising above the 200 day moving average the S&P has hit the fabled Golden Cross (which is kind of like the Hindenburg Omen only less fiery, with fewer McClellan Oscillators, and the exact opposite), which means technicians are expecting to be showered with returns.

It is clear that companies just aren't ramping up hiring fast enough to reduce the unemployment rate, now 9.6 percent. So where will the U.S. find jobs? Contrary to President Obama's belief, an analysis of the Industry Life Cycle and Supply Chain will show that green tech and manufacturing are unlikely the answers to unemployment.

Ben Bernanke should be relieved of his post. I say this in response to Jon Hilsenrath's latest article in the Wall Street Journal on the Fed, "Fed Chief Gets Set to Apply Lessons of Japan's History." I would re-entitle the article, "Fed Chief Gets Set to Repeat Mistakes of Japan's History."

Life imitating the art of fraud?

In case you haven't had enough, just a bit more Ben bashing

What is to stop U.S. banks and their customers from creating $1 trillion, $10 trillion or even $50 trillion on their computer keyboards to buy up all the bonds and stocks in the world, along with all the land and other assets for sale, in the hope of making capital gains and pocketing the arbitrage spreads by debt leveraging at less than 1% interest cost? This is the game that is being played today.

The Department of Finance released their latest economic and fiscal budget projections up until 2015, and to no one’s surprise, it is extremely optimistic. There are many positive data points in the report, highlighting the positive employment situation, the strong fiscal position ‘relative’ to other G-7 nations, and solid growth in GDP.

What has 60% of the nation’s residential mortgages but 0 employees?

Before I release my opinion of JPM's most quarterly results, I want to demonstrate the risk that banks take in releasing provisions to boost accounting earnings in this environment. After reading this in its entirety, JPM shareholders should be infuriated at JPM management's actions, which are sure to be reversed in the near to medium term. It is not as if the accounting earnings boost has fooled anyone and lifted the stock, which is currently down on an up day.

Given the global surge that is going on in all asset classes, the (PCY), with its generous 5.82% yield, has to be on the menu in a yield hungry world. One of the great ironies in the international capital markets is that emerging nation balance sheets are so healthy because the West refused to lend to them for so long. Take a look at the (ELD) where you get the a double play: a continuous cycle of credit upgrades lead to lower interest rates, higher bond prices, in appreciating currencies.

At some point, and I cannot tell you when, the US is going to find itself facing a situation very similar to that of Greece. Indeed, if Greece’s numbers are “Crisis Worthy” investors should consider that the US’s fiscal condition is in fact AS BAD IF NOT WORSE than Greece’s.

The US is expected to run a $1.7 trillion deficit in 2010. Assuming that the GDP numbers are accurate (they’re not, but that’s an article for another time), the US economy is in the ballpark of $14 trillion. This means we’re running a deficit equal to 12.3% of GDP. That’s RIGHT next to Greece.

Then of course, you’ve got our Debt-to-GDP ratio. If you ignore unfunded liabilities like Social Security and Medicare, the US already has a Debt-to-GDP ratio of 98.1%. That’s only slightly off of Greece’s Debt-to-GDP of 112%.

The mobile computing market is unfolding exactly as we anticipated...

This daily report is designed to help traders find opportunities to trade against this group. The premise is very simple we are looking for 66% of retail traders to be trading either long or short a currency pair, we then look for opportunities to fade (trade against) this group. For example if 72.99% of traders are long the USD/CHF we look for opportunities to short that pair.