Archive - Sep 2010 - Blog entry

On Monday the NBER reported officially that our Recession began in December, 2007 and ended in June, 2009. While that is nice to hear, in my opinion, when you get down on the ground where most of us are, it doesn't feel as if it has ended.

Sugar is up a blistering 33% in a month. The old Malthusian dilemma that the world is making people faster than new food supplies. China’s middle class is expected to rise by 300 million over the next five years, and the link between sugar consumption and standards of living is one of the most unassailable correlations out there in the commodities world. It’s also an indirect play on fresh water. Party away, but with your Blackberry in hand, and always stay close to the exit.

I try to provide an inductive, critical and speculative analysis of the Fed`s (open market) operations to date. Although not quite as speculative as the typical bank loan of the past few decades.

Any readers who read the back and forth between Tyler and TRS should ask themselves, "But why didn't the Fund answer these important questions?". Hey, they may not be in a death spiral, but when you make what looks like desperate moves and your returns are spiraling at the same time your liabilities are soaring, all the while your risk is flying through the roof... One should expect a blogger or two to take notice, particularly those bloggers who can count.

Just another story....

All the pieces are in place for a significant top to form and a potentially devastating reversal to begin. To wit, stocks have spiked up over major resistance at 1,131 on the S&P 500 just as the RSI nears an overbought reading.Meanwhile investor sentiment has swung by to wildly bullish with the Daily Sentiment Index showing 83% of investors bullish on the S&P 500 while the AAII survey shows 50% of investors bullish and only 24% bearish. We also have corporate insiders dumping shares as fast as possible to cash out of the market.

It seems some large public pension funds really know what they are doing when it comes to investing in hedge funds...

This week started with the announcement of the Basel III agreement. Under the new minimum capital requirements banks are required to hold top-quality capital totaling 7% of their risky assets, but not before 2019. Markets reacted with relief as the long lead-in time eased fears of a rush to raise capital. The second big thing was Bank of Japan’s intervention in the currency market for the first time since 2004. In Euroland, during the past week data has been disappointing suggesting that growth is now slowing.

A cursory review of RIM's blowout earnings actually confirm my suspicions that the company is looking at material margin compression and significantly slower revenue growth as competition continues to eat Blackberries. Yes, the company looks fundamentally strong on the surface, but a broader perspective shows that it is weakening at a an ever quicker pace.

Fiat paper currencies are still running a frenzied race to the bottom. Politicians of both parties see the only way to win elections is to inflate. Reserves everywhere are playing out, and top producer Barrick Gold (ABX) isn’t opening a new mine at 15,000 feet in the Andes because it likes the fresh air. The output of gold has fallen by 12% annually for the past decade, compared to a doubling of production costs to $500/ounce. Almost all short term money market alternatives globally are yielding close to zero, meaning that the opportunity cost of owning the gold is nil. No pause to catch its breath until we hit $1,300. (GLD), (ABX), (UGL), (RGLD), (AEM), (GBG).

You're not working for BP? Then you can't peek ...

With the sentiment indicators turning neutral, stocks will no longer have short covering to propel them higher. This puts the onus on the bulls - it is time to put up.

My other passion. Like markets, this is not predictable.

You don't have to be an actuary to know that this pension plan will end badly. The technical phrase is "trending toward insolvency."

Like a junkie looking for "one last score", the entire country has sold out our future to try to keep the artificial high going a little longer...