It was a wild week no doubt. The majority of this week and last was like listening to a multitude of bullish chorus resonating their crack induced message: THE BOTTOM IS IN! You could hear it in the tone of uber bull Mark Hulbert and Peter Brimlow of Marketwatch.com fame. You could feel the smug arrogance of the bottom fishers building. You could taste the abject fear of the bears who have not made much progress over the past three weeks and their second guessing: COULD THIS BE THE BOTTOM?
In this irrational market for which was like teflon for bad news, much of the activity was probably manipulated on low volume. You could feel the tension and the excitement at the same time. People like Doug Kass was practicing witch craft of buying the dips and selling the rips. His increasing bullishness short term was also an indication that perhaps this reflexive snap back rally that began on January 21, 2008 SocGen lows could possibly be nearing its climax.
Anyway you look at it, it appears the time is running out against the bullish thesis. Like many bear markets before this, I suspect that many bulls will be caught on the wrong end of the tape. Many bears will be too scared to reload at the inflection point. No kidding. Bear markets are especially cruel to traders: bears and bulls alike.
AIG, the insurance company that could do no wrong, despite recent rumors surrounding their increasing exposure to this credit mess, finally came clean on Thursday night claiming over $11 billion in write downs. Their pathetic efforts at trying to down play this significance of "buying out of the money puts" and implying that their liability may be less than stated on earnings has got to be the single most ludicrous statement of the year. These jerks finally got check mated with no where to hide their lies any longer. I suspect there will be more "unforeseen" write downs to be had in the near future. I am patiently awaiting Goldman Sachs (GS) to also come clean at least to some degree regarding their credit exposure. Despite the company's silence, I think the analysts and the market is on to them. They closed below $170 on Friday.
Wall Street Journal is also getting the message that the off balance BS of our financial institutions regarding subprime liabilities must be stopped and the best way to heal from these wound is to come clean and mark to market their liabilities. As Karl Denninger aptly says, "they must mark to market their liabilities, and, if today it is a $0, then it is a $0. Perhaps tomorrow it may be more, but today it is a $0". You can hear the transcript of his recent radio interview on KFYI AM 550 with Terry Gilberg by clicking here. Also, be sure to tune in on March 15, 2008 for a full 3 hour exclusive interview on Terry Gilberg show for more indepth expose.
We are on the verge of another market meltdown. No matter how much the markets may downplay the significance of the cancer that eats within our financial system, it is there and it is worse than anyone can imagine. This time, not even Charlie Gasparino pump will save the markets. It is time to reload the shorts. Take your pick but think about the stocks that have had the biggest pumps the past few days and that may be the best place to start.
I am short Google, BIDU, BAC, and SPY.
Until the crooks in the Wallstreet can be taught a lesson in humility, Mr. Market will continue to exert and dish out much pain. This isn't over. We are barely out of second inning. Buy only with caution and if you're on crack.
Saturday, March 01, 2008
Sunday, February 24, 2008
Prepare to Reload Your Shorts- Just Not Yet.
Here is a thought. I am fuming over what happened on Friday. The deceit and manipulation continues. CNBC once again was the mechanism of this deceit. In an age where fair and objective journalism has been replaced with sensationalism and yellow journalism, it is not then surprising to see CNBC, the world's most watched financial cable TV network, take center stage once again. Instead of me running around with my head cut off crying "where are the cops?", I choose to formulate a plan to fatten my account balance.
In this schizzophrenic market, where good news is good news and bad news is even better news, it stands to reason that the current pump will continue in the short term. I cannot tell you that even astute technical analysis will help in this regard as this market trades on the side of irrationality and rumors (unsubstantiated at that). Thus even with the week full of economic data releases including heavy weights such as the PPI, GDP, consumer spending, etc... you can pretty much count on the fact that the market in the current iteration does not function on the side of efficient markets theory nor even on rationality.
The market is a consortium of mass psychology speaking as one voice. No matter how crazy that may seem, the market is pinning its hope on the following:
1. Election year rarely has a down year.
2. Bernanke will save us with more rate cuts.
3. Government intervention and bailouts, even in the form of nationalization such as Northern Rock of the UK fame, is a good thing.
4. The problems inherent with the subprime mess will magically go away because the banks and the governments are working on it.
5. We are near the bottom and the money on the sidelines will rush in to save the market.
Despite these reasons, the market continues to fall deeper into the abyss and with each passing day, the market continues its inevitable march towards the point of no return. While the banks continue to lie and deceive with their off balance tactics, and despite the fact that last quarter's earnings release related write downs were kitchen sink (where they expose everything that they have on balance sheet), I suspect that majority if not all of the banks will play "oops, sorry, I forgot to write down these."
Don't believe me? How is it that Citibank (C) (shittibank?) all of a sudden has another hedge fund that is going under for $10 billion dollars that the Citibank now has to take onto the balance sheet? Could it be that this was engineered by Citibank? For that matter, how bankrupt is Citibank anyways? Where would they borrow the next "guido" loan this time? From the Taliban? al Quaida?
In this schizzophrenic market, where good news is good news and bad news is even better news, it stands to reason that the current pump will continue in the short term. I cannot tell you that even astute technical analysis will help in this regard as this market trades on the side of irrationality and rumors (unsubstantiated at that). Thus even with the week full of economic data releases including heavy weights such as the PPI, GDP, consumer spending, etc... you can pretty much count on the fact that the market in the current iteration does not function on the side of efficient markets theory nor even on rationality.
The market is a consortium of mass psychology speaking as one voice. No matter how crazy that may seem, the market is pinning its hope on the following:
1. Election year rarely has a down year.
2. Bernanke will save us with more rate cuts.
3. Government intervention and bailouts, even in the form of nationalization such as Northern Rock of the UK fame, is a good thing.
4. The problems inherent with the subprime mess will magically go away because the banks and the governments are working on it.
5. We are near the bottom and the money on the sidelines will rush in to save the market.
Despite these reasons, the market continues to fall deeper into the abyss and with each passing day, the market continues its inevitable march towards the point of no return. While the banks continue to lie and deceive with their off balance tactics, and despite the fact that last quarter's earnings release related write downs were kitchen sink (where they expose everything that they have on balance sheet), I suspect that majority if not all of the banks will play "oops, sorry, I forgot to write down these."
Don't believe me? How is it that Citibank (C) (shittibank?) all of a sudden has another hedge fund that is going under for $10 billion dollars that the Citibank now has to take onto the balance sheet? Could it be that this was engineered by Citibank? For that matter, how bankrupt is Citibank anyways? Where would they borrow the next "guido" loan this time? From the Taliban? al Quaida?
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