Pretty Unexciting

I'm long miners and gold/silver, short discretionary, real estate and have some exposure to china, along with agriculture. I'm 10 dollars richer...

Market Metaphors for the Maligned and Miserable Market Mavens

This past weekend I got drunker than the American consumer, only to find myself locked out of a friend's apartment like a depositor in a bank run. Like Mike Shedlock, I rang the bells and made some calls, but too no avail, for my cries fell upon unattenuated ears, similar to the monkeys on Capitol Hill. A companion gave me a boost as strong as a 100bps slashing of the fed funds rate, enabling me to swing high up on a fire escape like the October 2007 market. I pounded on the windows and screamed louder than a retiree looking at their 401k this coming Tuesday, hoping to wake my host, who was as unresponsive as the risk managers at Merrill. Apparently I was peering into the wrong apartment, because I was chastised by a neighbor, reminiscent of a dialogue between Peter Schiff and Tom Atkins. "What the fuck are you doing on the fire escape," said the would be Peter Schiff. "Errrr, ummmm, dahhhh," I said with my best Tom Atkins impression. Thankfully, my slumbering friend had arisen in the great cacophony, and opened the door (please insert metaphor). Like a fool, I could have used my pals window to enter safely, but I got suckered into talking the fire escape down. Like the mortgage backed securities market, the ladder only budged in fast and jerky downward motions. Finally, when I assumed things were safe, I got on the ladder, only to be shocked like a value investor who is looking for a bottom in MBIA. My foot was slammed by the metal rungs, caught between metal and a hard place, much like the Federal Reserve in periods of stagflation. More battered and bruised than the emerging markets, I finally made it to the ground, and hobbling into the apartment, which offered about as much relative safety as utilities. The next morning, there was the inevitable bit of swelling that comes with such accidents, but like a market bounce, it didn't last too long. Sadly, authorities had been notified, and my host was rather perturbed by the whole affair, making me as popular as Angelo Mozilo. Good luck Tuesday, ya'll gonna need it.

I don't know what tomorrow will bring, though I expect some high volume capitulation a la August 18th some time this week. Luckily I sold my GXC Friday for a nice 1-day 3.5% gain, though I may have shot myself in the foot by covering SLV, and buying a little GDX. I'm still short gold, and I will probably purchase some SCC and SRS if they make new highs on Tuesday. The blood in the emerging markets is impressive, but we are a long way from rivers of red in the street. I suspect there is a great deal of panic at leveraged hedgies unwinding unsustainable trades, but that is idle speculation. Yen and Swiss Franc are the safest bets in these environments, as carry trades unwind. I guess there will be strengthening in the USD as well, but I can't imagine how long that will last, for I believe the powers that be will try and inflate our way out of the remarkable trade deficit we've amassed over the years. I know I've been calling for a bounce for a few days now, and it hasn't materialized. This has been a bit of a lesson in the "trade what you see, now what you believe department," and I hope to improve my trading as my longer term macroeconomic thesis of American economic collapse comes to pass.

Midnight Musing

20% of stocks are trading below their 200 day moving average, the VIX is hovering around 30, the White House is expected to release some sort of temporary stimulus package, and tomorrow is options expiration... my bet is on a dead cat bounce. Though I'm mostly in cash, I've taken a position in the badly beaten Chinese index GXC, some ICLR, and AMED (which has a fantastic short position)... I'm sill short gold and silver (which goes against every ounce of my fundamental fiber, but remains profitable), and I expect Friday to continue the head spinning roller coaster ride that this past week has brought. Needless to say, I've lost a bit of capital this week, nearly 1.5% of my overall capital, but when I look at how the markets have been trading, I guess I can't complain. I'd love to see a nice strong bounce, especially in the financials, real estate, and consumer discretionary, because I don't feel comfortable going short at these levels. I think gold will trade down to 830-840 an oz before resuming its upward momentum, so there should be a few more points to the downside in my GLD short. SLV might trade as low as 155, but it is showing much more strength that I imagined, even though it tends to be more volatile than gold. The weakness in energy and materials has done some enormous damage to DIG and UYM, which may prove to be an excellent entry point for a bounce as well. On the other hand, everybody seems to expect a bounce, and that doesn't bode well, because there is less conviction amongst the bears, and therefore less potential for a short squeeze. I watched an interview with John Thain, the CEO of Merrill Lynch, wherein he said he doesn't expect to have anymore significant write downs because they only have another 4.8 billion in subprime exposure... guess that leaves prime loans to go bad, but only time will tell.