Tuesday, March 25, 2008

May I remind you ,'it aint over till its over"

What continues to make me very edgy is the concerted effort of the business media (CNBC) to talk up the market. The funny thing was not matter how many times they said oil and gold had turned and the commodity bubble was over virtually all of my commodity and energy plays were up. Have we turned a corner yes, it seems so the latest FED action is more targeted to the problems at hand ,,but the road to recovery can be littered with failed rescue attempts . The fact of the matter is the real estate bottom is yet to be seen.

All this brings little joy to my eyes because the bigger picture still suggests higher inflation, higher commodity prices, bad government, higher taxes, protectionism, and more onerous regulation. I am still waiting for the jimmy carter resurrection and with it those failed foolish policies of the past will bring about exactly the same results in the present. The scary thing is that everyone knows it and yet the move toward collectivism seems unstoppable.

So for now I would suggest using any sell off in commodities, metals, ag and energy as long term buying opportunities and keep looking toward financials for short term and intermediate term longs and shorts.

Monday, March 24, 2008

$2 well maybe more

Rumors continue to circulate that JP Morgan is going to up its offer for Bear Stearns ,look for around $10 a share . Look for around $10 a share . This would be a nice boost for the financials and may signify the bottom.

Thursday, March 20, 2008

the "up tick" rule

There is much rumbling about the abolition of the up tic rule by the SEC .This rule put in place in the 1930’s protected investors against savage shorting. Many credit the recent extremes in volatility to the run away no holds bar shorting of stocks. Turning even the slightest rumor into a self full filling prophesy. Although I do think the “up tick” rule as it was called was valuable in the functioning of orderly markets I am still on the fence as to weather its abolition has greatly increased volatility. Yes since the rule change volatility has grown but we had just passed through a period of almost no volatility that many investors have mistaken for normal, this is simply not the case. This period of no or little volatility was more a symptom of an uninspired stock market. In my view the current banking and liquidity crisis that coincided with the rule change has greatly exacerbated market volatility with or with out the up tick rule change. The weakness in the market can also be credited too raising inflation, lack of leadership, populist politicians, anti business and anti individual freedom attitude, lack of confidence and in my view the coming reemergence of the jimmy carter years take 2.I guess my point is that with a credit crisis of this magnitude ,I am not sure I’d look to the reinstitution of up tick rule to turn the market around or repair bad managements or stupid politics.

Monday, March 17, 2008

$2 broker

JP Morgan looks to have made one of the great deals of all times, buying Bear Stearns for $2 a share. The question now is with Bears book value of over $80 per share what does that mean for the value of other Investment Banks ? The Bear take over sends a strong little noticed signal, the signal is that if you “step up” as the buyer of very troubled assets the FED will grant you a prize.

Sunday, March 16, 2008

JP Morgan Buys Bear Stearns for $2 bucks a share

and you think you lost money look at the holdings and not just the big guys looks at the mutual funds


Holder Shares Reported
BEAR STEARNS COMPANIES INC. 2008 TRUST 27,316,339 14-Feb-08
CAYNE JAMES E 5,612,922 21-Dec-07
SCHWARTZ ALAN D 1,026,680 21-Dec-07
GLICKMAN CARL D 291,542 31-Jan-08
MINIKES MICHAEL 250,000 21-Dec-07


Holder Shares % Out Value* Reported
BARROW, HANLEY MEWHINNEY & STRAUSS, INC. 11,485,058 9.73 $1,013,556,368 31-Dec-07
MORGAN STANLEY 6,335,729 5.37 $559,128,084 31-Dec-07
Legg Mason Capital Management, Inc. 5,721,010 4.84 $504,879,132 31-Dec-07
PRIVATE CAPITAL MANAGEMENT, INC. 5,541,259 4.69 $489,016,106 31-Dec-07
Barclays Global Investors UK Holdings Ltd 4,245,451 3.60 $374,661,050 31-Dec-07
STATE STREET CORPORATION 3,550,715 3.01 $313,350,598 31-Dec-07
VANGUARD GROUP, INC. (THE) 3,149,691 2.67 $277,960,230 31-Dec-07
JANUS CAPITAL MANAGEMENT, LLC 2,765,699 2.34 $244,072,936 31-Dec-07
FMR LLC 2,359,011 2.00 $208,182,720 31-Dec-07
PUTNAM INVESTMENT MANAGEMENT, LLC 2,242,980 1.90 $197,942,985 31-Dec-07


Holder Shares % Out Value* Reported
VANGUARD/WINDSOR II 8,358,352 7.08 $949,508,787 31-Oct-07
PUTNAM FUND FOR GROWTH AND INCOME 2,350,605 1.99 $267,028,728 31-Oct-07
LEGG MASON VALUE TRUST 1,600,000 1.35 $196,496,000 30-Sep-07
JANUS TWENTY FUND 1,496,429 1.27 $132,059,859 31-Dec-07
VANGUARD 500 INDEX FUND 1,100,046 .93 $135,096,649 30-Sep-07
PUTNAM VOYAGER FUND 965,300 .82 $109,658,080 31-Oct-07
American Beacon Large Cap Value Fd 862,450 .73 $97,974,320 31-Oct-07
PUTNAM INVESTORS FUND 742,700 .63 $84,370,720 31-Oct-07
VANGUARD TOTAL STOCK MARKET INDEX FUND 702,594 .59 $86,285,569 30-Sep-07

Friday, March 14, 2008

Bear Moves toward Shot Gun Wedding

FYI on Bear Stearns,

Yes crazy day…we deal with Bear Global Clearing and Prime brokerage services, Bears investment banking uit was a lead underwriter for mortgage backed securities, which are at the center of the sub prime lending credit crisis. Bear experienced a crisis of confidence with some of its hedge fund customers ,soto sure up its cash position Bear turned to the Federal Reserve and JP Morgan Chase. Unlike banks the securities industry looks to preempt any problems, so Bear went to Chase and Chase went to the FED to alleviate the cash crisis. YOUR FUNDS ARE SAFE AND INSURED UP TO $500,000 by SIPC.

From Bear:

12:56pm 03/14/08

Bear able to do business as usual with new credit : CFO - MarketWatch

12:54pm 03/14/08

Bear saw no big withdrawals after bailout announcement - MarketWatch

12:53pm 03/14/08

Bear went to Morgan because it knew firm's holdings:CFO - MarketWatch

12:53pm 03/14/08

Morgan was able to quickly decide on helping Bear : Bear CFO - MarketWatch

12:50pm 03/14/08

Bear CFO:Firm has had no big mark to market hits since Feb - MarketWatch

12:48pm 03/14/08

Bear CEO says he believes book value in the $80s a share - MarketWatch

12:46pm 03/14/08

Bear had big cash outflows on Thursday from hedge funds:CFO - MarketWatch

12:45pm 03/14/08

Bear shares fall 41% as CEO begins conference call - MarketWatch

12:44pm 03/14/08

Bear will continue to explore alternatives with Lazard:CEO - MarketWatch

12:44pm 03/14/08

Bear comfortable with current range of Q1 estimates : CEO - MarketWatch

12:42pm 03/14/08

Bear Stearns had explored alternatives with Lazard : CEO - MarketWatch

12:43pm 03/14/08

Bear will give more detail on its positions on Monday : CEO - MarketWatch

12:41pm 03/14/08

Bear Stearns clients' withdrawls accelerated quickly: CEO - MarketWatch

12:41pm 03/14/08

Capital ratios remain in good shape: Bear Stearns CEO – MarketWatch

This is what I know so far


Thursday, March 13, 2008

Citi bank Picks Up John Reed...waspbuzzzzz

Looking for a bottom or near bottom in banking Citi bank always the fountain head of every banking crisis, has just picked up John Reed as an advisor. Folks start the count down.Don’t underestimate the John Reed Factor.

the USA no longer the buyer of last resort

For Kristine the call girl that was implicated in the New York Governor, client number 9 scandal I have one question, do you have a stock broker?

Although there is still suspicion out there that the current financial crisis in the credit markets has more to go.The FED move has managed to shift fears from financial crisis more to an inflationary spiral, with a plunging dollar leading to higher energy and food prices. Inflation seems to be a global contagion manifesting itself from many quarters especially China.

While most are focused on the dollar, with booming middle classes in China, India and Brazil this blogger has long felt that there is a global shift where the USA is longer global buyer of last resort and will for the first time since world war two become more of an export and production story.

Tuesday, March 11, 2008

net out flows from equities markets because of a short term lack of confidence in those markets

A disturbing trend has been the recent run up of many commodities without the corresponding run up in the stocks that are involved in the same sector. Gold and oil are hitting records yet oil and gold stocks have been sinking of late. Many pundits presume this market action demonstrates a short term market top ,but I am more leaning to the camp that worries that this is more of sign of net out flows from equities markets because of a short term lack of confidence in those markets.

Monday, March 10, 2008

We continue to flirt in an eerie manner with significant market break downs and Client 9

March 10, 2008


Either edible or wearable its all about commodities, inflation continues to heat up. With the FED looking to cut rates the net result being a weaker dollar and higher inflation. But unlike the 1970’s were the small investor had real estate to lean onto this time around it’s simply all about commodities.

The current state of the market looks a bit precarious .We continues to flirt in an eerie manner with significant market break downs. The light volume and lack of direction is symptomatic with lack of conviction. Even the market leaders are starting to crack.

The bond market continues to signal significant strains on bank credit and risk continues to grow for a credit break down. Yikes…

But remember the market leaders such as energy, agro .metals and mining will quickly resurrect themselves after any major short term sell off. Unless the market fundamentals are significantly somehow changed.

Tuesday, March 04, 2008

Best to Bet on Inflation

There is much uncertainty in the current market environment. Rumors of government bailouts for the mono line insurers, are countered by fears of ever larger write offs. Populist politicians target business, success and free trade with echos of the 1930’s. The current environment has the distinctive 1970’s jimmy carter feel with taxes and regulation looking to increase. There is simply no confidence, weather it be in leadership, economics or politics. So what’s an investor to do?

The one certainty at this point seems to be the increasing inflation rate so the higher probability bet is to focus on making money off inflation instead of trying to bet which way the sub prime mess is going today. Again and I repeat commodities ,metals and mining, gold, agro and energy.