Archive - 2010 - Blog entry

Interest rates have to soar to unimaginable levels to attract recalcitrant investors, or the plunge in spending sends us into a postponed Great Depression II.
There will be no Prince Charming riding in on a white horse this time. Back out the Fed as the buyer of last resort, and where are we? The $3.8 trillion budget Obama budget isn’t encouraging me to back off from this ledge. Be a peach and bring me some MRE’s, a five gallon bottle of water, and a case of 9 mm ammo, will you?

Volcker is correct in that banks conflicts of interests need to be
stemmed. One would not have to worry about over regulation if one does
not attempt to regulate every single act or attempt to guess what might
go wrong. What needs to be done is to use regulation to dis-incentivize
banks from engaging in activities that engender systemic risks and/or
harm clients. By putting everybody on the same side of the table, you
don't have to worry about outsmarting the private sector.

A knowledgeable reader, who is currently a sell side analyst, questioned
me about using book value to value Goldman and investment banks in
general. He proposed using a formula that entails revenues as well due
to the fact that the main concern during the crisis was breakup value
while revenue visibility is clearer now that the crisis is over. While the crisis may be over, the root causes of the crisis have went nowhere, and the counter party risk concentration is actually much worse than before. In addition, not only is it political suicide to attempt to bailout another bank, I think it is poor economic policy as well. Combining these two assertions, it is not clear that we will not see anymore bank failures. The probability of such has dropped considerably though.

(1) ESH10 1-minute at 9:05, (2) ESH10 377-minute, (3) ESH10 1-minute at 9:25 am, into 1st rez at 1078, (4) Market Internals (VOLD, ADD, TICK & VIX) ~ 9:48 am, (5) Market Internals (VOLD, ADD, TICK & VIX) ~ 9:57

The carry trade has run wild. Watching the dollar train wreck. Get ready for chop inside a range. Copper has had it. Buy gold against the euro. The Ags look great, long term. The current federal fund rate is asking for trouble. A Hedge Fund Radio exclusive interview

Before I get started, I want all to realize that this is not Goldman bashing piece. I think it is a [relatively] well run company, but its PR machine appears to be from Kindergarten land, and the aura of invincibility that it enjoys(ed?) is highly undeserved, as a consequence its historical "aura-based" premium is absolutely unjustified. Case in point...

The financial crisis of 2007–2010 has been called the worst since the Great Depression of the 1930s. Many causes have been proposed, including one suggested by MIT economist Ricardo Caballero that foreign investment demand was a major contributor to America's monetary mess. So, are foreigners responsible for America's financial crisis?

Pensions need leverage from anywhere they can find it, including hedge funds. Amazing how quickly they forget...

I must admit that I am surprised by the sentiment picture this week. I thought the indicators would reflect a less bullish posture amongst investors.

As James Cameron's brainchild, Avatar, continues to light up the box office the world over, relentlessly charging towards a date with damn near every conceivable box office record imaginable, the Chinese government has (rather predictably) succumb to the specter of its symbolism and attempted to pull the plug on Avatar's unparalleled success. Good luck with that CFG ~ China Film Group; ask the RIAA how 'that' worked with N.W.A.

The quasi-communist / quasi-mercantilist nation's state-run movie distributor, China Film Group, has pulled the film of the year from 1,628 2-D screens in favor of a biography of the ancient philosopher Confucius.

The recent decline in Gold has not only caused mayhem in goldbug-land, but also brought deflationists of all stripes...

I get a feeling that Buffett has been canonized into a value investor saint – investors and the media worship the ground he walks on and the air he breathes. The media are unable to get any critical quotes from his investors, and nobody wants to be caught disagreeing with the Oracle of Omaha – after all he’s been right more often than wrong – and so we only get positive puff pieces.

Felt like sprucing it up a bit so here's a snapshot of what my central 1-minute ES Workspace looks like on TS ~ TradeStation. A look at price action on the ESH10 and VIX across the: (1) NYSE (cumulative) TICK ; (2) TS bid / ask Matrix ; (3) Fibozachi Inflection Bands™ ~ FIBs ; (4) Candlestick X-Ray™ ; (5) Elite Oscillator™

Ever wonder why you suck at investing / trading / poker ? Ever wonder why your fleeting relationships / government / humanity continue to repeat the same mistakes over and over again, in a humourous refusal to heed Rita Mae Brown's "The definition of insanity is...," ? Iain McGilchrist's "The Master and his Emissary" doesn't solve today's mortgage meltdown, currency crisis, cyber wars, regulatory capture or dearth of leadership (and certainly won't help you 'breed a unicorn that defecates Kruggerands'), but it does provide an actionable blueprint for how not to repeat them (ever again).

Pretend for a moment that the US $dollar is no longer useful. With what could we settle transactions? For fun, let’s assume for a moment that we want to try something different. What about a basket of stocks and bonds? Holding a share of all future profits from those may be the best we mere mortals can do.