An Unprecedented "Double Bubble"

Despite the outright collapse of ABK and MBIA, two more failed financial gamblers today, investors continued to push stocks higher, solely on the backs of AAPL, GOOG, PCLN, and BIDU.  Its been quite amazing that this is the first bubble in world history that was actually able to repeat itself within the span of 18 months.  Kindleberger will have to re-write his "Manias, Panics and Crashes" book to document this absurdity.

What are the odds that the South Sea Bubble would have repeated itself in 24 months?  How about the Tulip Mania repeating itself?  Not a chance.  But this time was different.  The Fumble Managers who all piled Grandma's retirement money into AAPL, GOOG, PCLN, BIDU, etc. back in 2007 while the rest of the NDX was crumbling are at it again.  Its all about chasing "winners" and following the top stocks on Investor's Business Daily, in todays chart-driven world.  Why bother investing in anything else?

Let's check out the "Double Bubble" charts to see this amazing occurrence:

I mean, really.  Anyone else seen charts like these??  I bet you can go back 100 years and not find anything like it.

At this rate, Barack Obama, Gordon Brown, Dimitri Medvedev, Nicolas Sarkozy, etc. will be irrelevant as G-8 members.  The precarious state of the "V-Shaped Recovery", the functioning of more than a quadrillion in derivatives, and the fate of human civilization will be entirely dependent upon these guys.

The "New G-8" members:

All in all, pretty much a boring consolidation day.  Goldman was up to its usual tricks, though.  My favorite being Fluor, which was power-ramped yesterday after being touted by Cramer, only to be pole-axed after earnings today:

Here's another example:  FUQI.  This is why I never, never, never trade anything on the Investors Business Daily Top 100 list that is not a big cap OEX stock.

With virtually hundreds of amateur gamblers, junior hedge funds, momentum junkies, and card sharks trading these plays, it is too easy of a trap to fall into a Crocodile Trap set by the Goldman Prop Desk.  Look what they did to high flier FUQI:

Comments

[RobotTrader]

Whoa!!!

[ProfKool]

"the fate of human civilization will be entirely dependent upon these guys".

there was a time not-so-long-ago when that would have been hyperbole...but today, it's incredibly believable. Even Rosie in his estimate of gold at $2,750 seems a bit shy at addressing the real issues. So many of the worlds govt's are hurtling toward/already in bankruptcy the real race will be to see which ones are more bankrupt than others. what could possibly keep gold from going to $3-5k or beyond as all fiat currencies are literally vaporized?

freakin crazy if you ask me.

[gmrpeabody]

Yes, but they are less bankrupt than they could be. And less is the new more these days. 

[chet]

"I mean, really.  Anyone else seen charts like these??  I bet you can go back 100 years and not find anything like it."

Actually, a chart of the Dow starting in the mid-to-late 80's looks a lot like those.

[nightfly]

With everything being HTB on my TOS platform, the market is geared to going only up. Dow 20K here we come!

[Anonymous]

ROBO; an important question

Will you still be on the 0-hedge free site or will you be moving over to the new subscription site? (like Howard moving to Sirius, I think you could pull in subscribers)

[crzyhun]

please source this assertion?

[Green Sharts]

Overheard at the Squid's prop trading desk late in the afternoon:

"FUQ I?  No, FUQ U!"

[deadhead]

this is the first time that pics of males in a robo post gets the applause sign from me; that's funny shit robo!

although the one with rapping barry o doing the dead presidents shuffle is always a welcome sight.

hope your collarbone is okay. 

[Careless Whisper]

don't gorget about bubbilicious china.

HMIN has a bubbly day

[Trader Joe]

Amen brutha....

[MsCreant]

Here you go guys. Robo's joke was too cruel. Even me, a hetero female, would rather look at these:

http://www.vsallaccess.com/supermodels/

[Anonymous]

Forsake Klum, Embrace Kroes!

[deadhead]

how to come through MsC!!

[MsCreant]

Fresh material, emailed to my inbox today.

I know what boys like!

[Careless Whisper]

are you sure about that?

http://www.youtube.com/watch?v=ZbKxJ-IRWr4

[mitack]

Hey CW, please warn the male audience when you post female eye-candies ;-)

[MsCreant]

mitack,

I will be the one to break this to you. How do I say this? Hmm... This was eye candy for a boy, or girl.

I was being corrected for heterosexism.

Thanks CW.

[MsCreant]

I stand corrected. Cute stuff. I like them more rugged though, that way I don't feel like a child molester. But waaaay cuter than the, uh, Gee ate up there posted by robo.

[mitack]

You do indeed!

[Anonymous]

Nice!

[BobPaulson]

Good head and shoulder top on Adriana Lima, and strong volume too.

[mitack]

Hey MsC, if you are going to keep posting such fine stuff

(please do), I will need a second monitor because I hate

to lose sight of my shorts when they are in the red...

[Anonymous]

On diminishing volume no less...

[Screwball]

FUQI was in the top two of the IBD 100 for weeks, then disappeared last week, only to come back at number 2 this week.  I've read all their books, read the paper most everyday, but still don't understand how you go from 1 to off, and back to 1 or 2 again.  I've seen others do it as well.  Not uncommon at all.

[Anonymous]

I mean, really. Anyone else seen charts like these?? I bet you can go back 100 years and not find anything like it.

We're gonna party like it's 1720 baby!

[Anonymous]

Trade it and get the F*** out and move on, whats the big deal?...Churn and burn!

[loup garou]

More skanks, please.

[Leo Kolivakis]

PCLN and BIDU were among my top picks back in January when I wrote my outlook 2009: post-deleveraging blues. PCLN was a steal back then, not so much now.

Here is what I recommended (word for word, no editing and I missed the rally in financials):

***Stocks to Watch for 2009 (Will be updated)***

Solar sector: I have written extensively on the solar sector in my blog and this is where all my long-term money is invested. You can read my last comment on solars by clicking here.

The stocks I track are not only the leaders like First Solar Inc. (FSLR), Sunpower (SPWRA), Q-Cells (QCE.DE), MEMC Electronic Materials Inc. (WFR), but smaller players like Yingli Green (YGE), Solarfun Power Holdings Co. Ltd. (SOLF), Renesola (SOL), JA Solar Holdings Co. Ltd. (JASO), LDK Solar (LDK), China Development Group Corporation (CDTC), Canadian Solar Inc. (CSIQ), Suntech Power Holdings Co. (STP), Energy Conversion Devices (ENER), Evergreen Solar Inc. (ESLR), Trina Solar Inc. (TSL), GT Solar International, Inc (SOLR), Timminco (TIM.TO) and 5N Plus (VNP.TO). The ETF for solars is the Claymore/MAC Global Solar Energy (TAN).

Another company getting into the solar panel manufacturing is Jabil Circuits (JBL). Applied Materials (AMAT) is another key player in this field that is worth tracking.

Infrastructure sector: This is another long-term sector that is worth investing in. Apart from the heavy construction stocks, I also like companies like KBR Inc. (KBR) and Canada's SNC-Lavalin Group (SNC.TO). An astute money manager told me to invest in water through the PowerShares Water Resources (PHO).

Healthcare and biotech sector: This is another sector I have written on in the past. It touches on demographic themes that will impact the developed world and there are a few biotech ETFs to choose from (individual stock selection is a lot harder for biotechs).

In the big pharma names, I track Novartis (NVS), Pfizer (PFE), Johnson and Johnson (JNJ) and Merk (MRK). A smaller pharma I really like is Forest Labs (FRX).

In the HMO sector, keep an eye on Cigna (CI) and Humana (HUM) but remember the U.S. government will regulate this sector. Finally, in the medical equipment sector, companies like Charles River (CRL), St-Jude Medical (STJ) and Beckman Coulter (BEC) are worth tracking.

Technology sector: Most analysts like Apple Inc. (AAPL) but my radar is on Research in Motion (RIMM) in 2009. RIMM got slaughtered in 2008 and I think they will emerge a stronger company and compete with Apple in the all important consumer sector. Another sector I like in tech is storage. Companies like EMC Corp (EMC) and Network Appliances (NTAP) should do well in 2009 and thereafter.

Moreover, expect companies to upgrade their IT in a slowdown as they look to become more productive. Companies like Sun Microsystems (JAVA), which also got slaughtered in 2008, should capitalize if business investment picks up pace in 2009.

In software and IT space, I also like Adobe Systems (ADBE), Computer Sciences (CST), Citrix Systems (CTXS), Symantec (SYMC) and Microsoft (MSFT) because it is sitting on huge cash reserves. IBM (IBM) is another titan that is well placed to benefit from business spending. German enterprise application software maker SAP (SAP) is also worth looking at these levels.

In the semiconductor space, keep an eye on leaders like Intel (INTC), Broadcom (BCRM), and Taiwan Semiconductor (TSM) as well as smaller players like Marvell Technology Group (MRVL), ON Semiconductor (ONNN), PMC-Sierra (PMCS) and Flextronics (FLEX). If you want to punt on a penny stock, take a look at Vitesse Semiconductor (VTSS.PK).

In communication equipment space, I like Cisco Systems (CSCO), Harris Corp (HRS), Qualcomm (QCOM) and I am tracking Brocade Communication Systems (BRCD), Cienna (CIEN), Corning (GLW) and Texas Instruments (TXN) very closely. I have all but given up hope for Nortel Networks (NT) and even JDS Uniphase (JDSU) but they are on my watch list (don't ask me why!).

In the wireless space, keep an eye on Clearwire (CLWR), Novatel Wireless (NVTL) Sierra Wireless (SWIR) and Canada's Wi-Lan (WIN.TO) for a more speculative long-term play.

Recession stocks: In an economic slowdown, consumers will look at cutting costs. Companies like Costco (COST) and Priceline.com (PCLN) are on my radar. People are also trying to pay down debt by auctioning off things they own, so keep an eye on Ebay (EBAY).

In this recession, unemployment might peak at 9% in the United States and some think it could get worse. Unemployment will keep climbing across the world in 2009. Given this global weakness, keep an eye on Monster Worldwide Inc. (MWW) as its revenues are expected to grow strongly as millions of people search for work.

Others see value in small caps which typically lead the way out of a recession. One way to invest in small caps is through the iSahres Russell 2000 ETF (IWM).

However, in a tough economic environment, I prefer the big conglomerates like 3M Inc. (MMM) and Textron (TXT) because they are well diversified in many industries.

Finally, one famous New Year's resolution is to lose weight. Have you noticed all those commercials for Nutrisystems (NTRI) on television? Then again, if you love ketchup on your fries, warm soup, or packaged food, then buy Heinz (HNZ), Campbell Soup (CPB) and ConAgra Foods (CAG). And don't forget to wash the dishes and brush your teeth (CL).

In a recession, think lean and mean and think consumer staples. I will be back to update this last section over the weekend.

***Updates***

Global stocks: Some of the worst deleveraging hit emerging markets. Last February analysts were bullish on South Korea stocks, but they were wrong (again!). But now is a good time to start tracking the South Korean stock index ETF (EWY).

In China, research analyst David Sterman revealed his top three China stock picks for the year ahead: Sohu.com (SOHU), Focus Media (FMCN) and China Mobile (CHL). Some analysts are recommending Baidu.com (BIDU) but I prefer Sina Corporation (SINA) at these levels. Another Chinese company I am keeping an eye on is China Medical Technologies (CMED).

Latin American and Russian shares got clobbered in 2008 as commodities and oil sank. If you want to invest in Latin America, look at the iShares S&P Latin America 40 Index (ILF) but I wouldn't pull the trigger too soon (read below).

Oil & gas, commodities and geopolitical risks: Most analysts expect the demand for commodities to fall as the global downturn continues to weigh heavily on resources.

Oil is the big wild card in 2009 as tensions are escalating in the Middle East now that Israel has launched a ground attack on Gaza. One professor wrote me the following:

Let me supply you with the following (improbable??) scenario:

1. Hamas gets painfully beaten in Gaza.

2. Hezbollah come to their aid by firing Iranian long-range rockets from Lebanon.

3. One or more rockets hit the Israeli nuclear installations at Dimona.

4. Israel retaliates by bombing nuclear installations in Iran.

5. Iran threatens navigation in the Straits of Hormuz.

6. Oil goes to $200

I replied that if Israel goes to war with Iran, then all hell will break loose and oil will skyrocket, pretty much ensuring a global depression.

All this to say that despite global economic weakness, oil might make a comeback in 2009 due to geopolitical concerns so keep an eye on oil giants BP (BP), Exxon (XOM), and Halliburton (HAL), but also smaller players like Baker Hughes International (BHI), BJ Services (BJS), GMX Resources (GMXR), Gulfmark Offshore (GLF), Pride International (PDE), Mexco Energy (MXC), Qwest Energy Partners (QELP), and Semgroup Energy Partners (SGLP).

Among the Canadian oil & gas companies, keep an eye on Enbridge (ENB), Encana (ECA), Petro Canada (PCA.TO), and Canadian Natural Resources (CNQ).

All that glitters is gold: Peter Hodson, a senior portfolio manager at Sprott Asset Management, wrote an article this weekend recommending that you sell stocks short and buy gold to survive the Depression of 2009:

Going into 2009, we believe shorting will continue to be a prudent investment strategy.

In a depression, corporate earnings fall off a cliff. Corporate survival can become tenuous, as debts that were incurred during more prosperous times become increasingly onerous. Financing can be very hard to come by, oftentimes being extremely dilutive to existing shareholders.

Although current market valuations may seem reasonable by most measures, they have yet to fall below reasonable. In a depression, stocks will become downright "cheap," and still get cheaper.

Going into 2009, there is definitely further downside risk in the stock markets. Shorting will continue to be an effective strategy to offset this risk.

Next, let's look at the U. S. dollar and U. S. government bonds, also winners in 2008. But will this continue to be the case in 2009? We doubt it.

For one thing, with zero percent interest rates, the upside for Treasuries is effectively nonexistent. They should perform no better than cash, and potentially worse. Treasuries have become the opposite of cheap -- they are downright expensive.

We continue to believe that the strength in the U. S. dollar throughout most of 2008 was devoid of any fundamental basis. The U. S. dollar has been a beneficiary of the massive deleveraging that has occurred as the 2008 financial crisis unfolded. However, very aggressive measures, both monetary and fiscal, currently being employed will severely put into question the notion of the U. S. dollar as a "safe haven" store of value.

With a US$400-billion budget deficit in the first two months of the 2009 fiscal year (started October), the U. S. government is well on its way to posting a US$1-trillion deficit this year, more than double any deficit in history and the largest deficit as a percentage of GDP ever.

Furthermore, in its desperate attempts to reflate the financial

system, the ultra-aggressive policies and programs of the Federal Reserve (to date the most aggressive central bank in the world) also promise to ultimately debase the dollar as a store of value.

At a zero fed funds rate and quantitative easing now in full force, what's next? The Fed may soon be the buyer of last resort for commercial real estate, or common equities. The long-held rule that the Fed is only to deal in the highest quality and most liquid securities has been thrown out the window. Although they may be justified in breaking the rules, the rules have been there for a reason; namely, to maintain a sound and stable currency that people can trust.

When central banks start breaking the rules, look out. There are always trade-offs and unintended consequences. Hyperinflation could be around the corner.

Don't let the dollar's status as the world's reserve currency lull you into believing that it couldn't happen here. Any fiat currency is only as good as the faith people have in its central bank. In 2009, we believe this faith will be severely tested, especially in a depression scenario where the desire for competitive debasement may be too tempting to resist.

Lastly, there is gold. Having started 2008 at US$800, gold is now US$840. In other currencies, gold has performed even better. Although there may be some who are disappointed that gold hasn't performed better still, by now there can be no question that in the midst of the 2008 global financial crisis, gold has done exactly what it was supposed to do -- namely, protect portfolios against the carnage that was experienced in almost all financial assets around the world.

Gold has proven itself to be one of the very few safe harbour assets of 2008. Going into the depression of 2009, gold may well be the only safe harbour asset.

No doubt that some are using any bear market rally to start shorting the stock market. But while some perma-bears like Robert Prechter keep growling, others like Bill Fleckenstein have decided to close their short-only hedge funds. Shorting stocks will be much tougher in 2009 and short sellers will get squeezed hard during the bear market rallies.

As for gold shares, heightened geopolitical risks will surely boost gold prices in the near term. You can invest in shares of individual companies like Newmont Mining (NEM), Barrick Gold (ABX), Anglo Gold Ashanti (AU), Gold Fields (GFI) or just buy the SPDR Gold Shares (GLD). I warn you, however, gold is volatile and unless you're an expert in bullion, I would to stay away from junior miners.

Interestingly, gold might prove to be the only safe harbor asset in both a deflationary or inflationary environment.

Financials and Insurance: You will notice that I did not recommend any financials or insurance companies. I am bearish on financial stocks given all that toxic debt on their books and as far as insurance, some of my friends are buying Manulife Financial (MFC.TO) but I am not tempted to buy any stocks in this sector. I prefer to wait till after 2010 to take a serious look at financials again.

[Anonymous]

Heeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeey Leo..... yea you!!! How about just a link next time jacking Robo's thread is uncouth!

[Leo Kolivakis]

My apologies but I can't edit my comment. For some reason ZH does not allow you to edit previous comments after a few hours. Again, sorry for this.

[Anonymous]

Leo, go pump your ego somewhere else, as a separate post or on your own blog. Enough already.

[Leo Kolivakis]

Who is pumping his ego, jackass? And next time you take swipes at me, show some courage and post your real name.

[Anonymous]

BIDU is going to blow up first of that group, toppling like an apartment building with poor footings and a load of crap all piled on one side.

[max2205]

RT, the real question is how often do you get the chance to short these flagships in 2 years at the top?!!!!

Ps don't put charts near the top the right col cuts it off

thx

[Careless Whisper]

AAPL is the most innovative company in the world. Why? Creativity. Taking chances. Thinking outside the box.

http://www.youtube.com/watch?v=aoiGJMZjs0o

[RobotTrader]

Can't believe I went for 4 hours without noticing that I left out AMZN. 

I fixed it.....

[JacksWastedLife]

Why not? All these, except may be AAPL, are offering a good ways to save (PCLN, AMZN) or make (GOOG, BIDU) money to consumers in tight times.

Add a major mobile phone carriers, like VOD with all its regional networks and you will get a big picture.