Sunday, January 31, 2010

Greek Farm Protests

As if Greece needed additional problems - it now has farmer blockades. Apparently the farmers are refusing to be part of the government deficit cuts that need to happen to get Greek finances back in order. This blockade is getting expensive costing an estimated 25 million Euros a day causing strain in economic exports.

On an absolute dollar scale I am not sure this is that big of a deal but it shows the problems in trying to fix a deficit problem when it has gotten this big. Imagine the pushback if the U.S. government tried to cut subsidies or government funding programs.

From the Uk Guardian:

Talks to resolve a crippling three-week tractor blockade of highways and border crossings in Greece by farmers collapsed today, increasing the pressure on a government grappling with the country's worst financial crisis in decades.


Tonight, the Greek agriculture minister, Katerina Batzeli, signalled that while she remained "open to dialogue", the government was in no position to meet their demands for some €1bn (£867m) in extra subsidies and tax breaks. "The government is determined to get the country out of the crisis," she said. "It can't afford the money they are asking for."

The blockade, which is believed to cost €25m a day, has disrupted transport, damaged commerce and strained relations with neighbouring Bulgaria, where exports have also been hard hit.

The activist farmers, who have appealed to resume marathon negotiations with Batzeli today, have barricaded some 23 highway junctions across northern and central Greece with their tractors. Last week, they stepped up their "battle for survival" by marching in their thousands through Athens.

2009 4th Quarter Letter

The 4Q 2009 quarterly letter is not out.

If you are a reader of this blog and would like to receive this quarterly email, please let me know in the comments section and include an email address. Thanks.

Thursday, January 28, 2010

Market Update

I am about to leave for Houston and will be gone until Sunday. Attending a business auction. Don't know if there will be anything to do there or not. For those curious about my letter, I plan to email it out on Sunday. Due diligence on investments is putting me back some.

The market hit its 1105 plues level, it just did it in the futures market around midnight. If you were like any normal person, you missed it.

I was able to dribble out of some longs at the open but the market really never gave a great chance to go all in. As a result, the potential for a great setup was stolen from us. Now we are in no man's land. Bounced off the very depth of resistance again, 1080 but made a new closing low.

Where we go from here is anyone's guess. Like I said, unless you were up at midnight and trading futures the chance to get short the market like i was salivating over never materialized. A big rally tomorrow will give you that chance again but not sure it will materialize. A decent break below 1080 would be very bearish. In general though, fundamentally it is all bearish. What is being talked about is just trying to figure out the timing of entry points and trying to determine the probability that momentum is for sure proken in a way that ensures no new highs are coming.

Wednesday, January 27, 2010

Ridiculous Market But an Unbelievable Setup

Today was as absurd as any day can be but playing out very close to what I thought (well hoped) it would play out. New home sales, one of the most important leading indicators for the economy, fell apart and is getting dangerously close to its all time low. Asia was down for an 8th day in row. Europe was down 1.4%. Emerging markets have been getting slaughtered. Greece cds blew out to new records again as the country teeters on financial collapse. Copper was down 4% today, oil was down over a buck. The Fed continued with their plans to end the MBS purchases in March and yet the market ended up. Why? We went down and hit major resistance and the computer programs said buy, so the market went up. Nothing about it makes sense.

However, this is setting up for an amazing shorting opportunity. Not only do you have the potential for a big move, you know when you will be wrong (stop loss), and you have a catalyst. You don't get opportunities like this very often.

So tomorrow morning you have jobless claims and durable good order numbers. Durable good order numbers were very quietly revised down a couple of weeks ago setting a low base. So the odds are it will beat expectations. Jobless numbers have been deteriorating also so who knows but an improvement would not be a surprise. More importantly I think Asia and Europe will be up strong on a relief rally. This sets up for a big up day tomorrow. At least initially. Then tonight you have Obama talking in the State of the Union address. There can be nothing that comes out of that speech that can be a good surprise for the market. There can be alot that comes out that could be a bad surprise. In reality that is probably a push. Friday, you will have investors starting to look towards next week and most importantly Volcker speaking in front of Congress. The odds are that will be a very negative event for the market though it may happen before (Friday and Monday) he gets up there.

Anyway, I don't talk about things in this detail very often but I have been bearish for months expecting a big move down. We hit major resistance. We are getting the bounce. The break and big move may be just around the corner. So the way you play it is you short (or sell long positions where you want to take profits) between 1100 and 1110. You have a stop loss somewhere around 1130. You also have a catalyst in Thursday night and more importantly, next week Tuesday.

It has been awhile since I have been this giddy. To really confirm that the momentum is broken and things have turned where we won't be going to new highs in a long time, you need to get through this 1080 area. This bounce will give the perfect platform to move back down and do just that. It is possible it doesn't happen but it is a good risk reward set up.

Marc Faber Puts the D in Doom

Marc Faber was on CNBC Europe this morning. An article covers what he talked about. There is also a video embedded in the article. Both can be seen here.

The video is mostly a Moody's analyst talking about about Portgual and the problems there. So many problems I don't even know what Portguals story is.

Marc Faber thoughts on Obama: "I don't have a very high opinion of Mr. Obama," Faber told "Squawk Box Europe." "I was negative of Mr. Bush but I think Mr. Obama makes him look like a genius."

On banking reguation: "When someone tells me the government should regulate the banks, they shouldn't. It's a disaster. But they should have interest rates that are high, that curtail speculation," Faber said.

On the U.S. financial system: "In my opinion it's beyond repair. If the US were a corporation and had proper accounting, they would be 'Triple C, ' nobody would buy their bonds ," he pointed out.

"Having said that, in the near term I think the dollar could rally because the others are no better, the others are worse," said Faber. "I think that the dollar will rally now against the euro and against the pound sterling and probably against the yen."

On the reality of the situation: "When you look at the US… it's a total disaster, we're all doomed, we're doomed," he said.

More FOMC Thoughts

Update: The other possibility is if there are no suprises that the market crashes throught the big resistance sitting around 1085 (some call it 1087). If we really have turned the corner and are going down, it is all just symantics, try to time it perfectly can cost you.

I don't usually reference other blogs but calculated risk had a post that tied very well into the previous post. I really think the risks are rising for a very big reversal on the FOMC meeting statement.

From Calculated Risk:

As I mentioned in the New Home sales post this morning, the FOMC statement today will probably be changed to reflect the renewed weakness in the housing market. This includes the decline in new home sales, housing starts, and other indicators including mortgage applications and builder confidence.

I don't really know. I just think probability of a big bounce is high that gets pounded down Friday or early next week leading into Volckers testimony.

FOMC Meeting Today

The Fed releases their Fed statement today. Everyone is assuming it will basically a non event and it probably won't be BUT the first thing to glance at is the MBS program. If somehow the Fed tweaks that language or pulls a surprise extending that program, watch out. Dollar tumbles, stock market and commodities surge. However, it would provide an unbelievable short entry into Volcker's testimony on Tuesday. On the upside 1108/1110 ish is the first bogey. 1130 would be the second.

The housing data has been very weak lately (including the new home sales number that just came out, seasonally adjusted down 7.6%). So the Fed may just pull a surprise, especially with all the drama around Bernanke. I really think that will be just noise. Yes it will be bullish in the short term but I feel like things are changing in Washington so much it won't matter more than a day or two.

Jim Chanos on China

Possibly the worlds most famous short seller gave a lengthy speech on why the Chinese economy is a bubble. It is a long video but very very good. The implications for China and the rest of the world is massive.

The video can be found at Bloomberg here:

Tuesday, January 26, 2010

Bombshell Tomorrow Surrounding AIG Hearing?

Interesting video at CNBC All about the Tim Geithner AIG issue. The issue has gotten boring to me because I assumed it was all just politics and nothing would really come of it. But this video ties all together really well and speculated Geithner could really be in big trouble. Whoever their guest was presented something fairly complicated very simply. That is gift many people don't have.

Anyway, his thought is Geithner will not last the year if even the next month and also thinks tomorrow is critical for Bernanke.

It takes a few minutes for the video to get going.

A Day To Get Short

This just crossing the wires. If there is a day you want to be short going into (probably two days before) my guess is February 2nd is that day. lol Paul Volcker will be testifying before Congress on Obama's bank plan.

According to cbs.marketwatch

Former Fed Chairman Paul Volcker is scheduled to testify before a key banking committee on Feb. 2 about an Obama administration proposal to limit the size and trading activities of the nation's biggest banks. Volcker, the chairman of the Obama administration's Economic Recovery Advisory Board, backs the proposal, which aims to deter commercial banks from becoming so large that they put the broader economy at risk and distort normal competitive forces. Volcker will testify before the Senate Banking Committee, which is considering whether to draft legislation based on the proposal as part of sweeping bank reform legislation.

Monday, January 25, 2010

A Chance to Lighten Up

Very weak market today. I was selling long exposure out of the fund all day today (and I don't have much). Even trying to lighten up on gold some.

Existing home sales did not really get much coverage today. They were abysmal!! Biggest decline in the history of that number. It was shrugged off by the market but I consider that potentially very important. More economic data all weak. Things are shifting, changing. My long awaited resumption of the bear market may be upon us.

Sunday, January 24, 2010

A Ponzi Begins to Unravel

After the disappointment from Wednesday's sell off, the market started to unravel in earnest. The weight of reality was just to much.

So now the question becomes, is this the real McCoy? I feel about like I did on Tuesday when I took a huge leverage short bet. I don't really want to short. The fact that so many investors, including bears, are doubting this pull back means it is probably the beginning of something much more.

On Friday morning I sent this email to another investor:

"its called PONZI....once you have created it, there is only one option. Perpetrate it. They all eventually end but they can last years or decades.

That is why the market is reacting so strongly to this Obama thing. CDS is EXPLODING for the banks. That doesn't make any sense does it? I mean your just splitting up into two entities or some form of that. You may affect equity value (so it would make sense the stocks would go down) but the credit risk and the risk of default shouldn't change if your well capitalized. AHHH, but their not well capitalized. So if you take away the trading lines the ability to perpetuate is cut off at the ankles. Ponzi comes crashing down. Many understand this and there is a panic to buy CDS protection.

Bernanke and Geithner understand this very well and why they have been trying to stop any real change. They know change is not an option. There is only one option, keep it going as long as you can.

My guess is Volcker and for sure Obama don't understand how bad it is. Volcker may understand how bad it is but like the 80s he just doesn't care. He will take the pain now for the future. He will push us into a horrific depression so 2025 is great a year Volcker for President!!"

As the weekend has progressed the proposed banking change seems to be lacking teeth in true reform, surprise surprise but the signal may still be the same. The old order days are numbered. It is the same thing with the situation surrounding Bernanke. I am not sure anyone in investing is really in love with Bernanke and think he is the greatest Fed chairmen America has ever had but his replacement could usher in massive shocks to the markets. It is like a portfolio manager who is managing a ponzi and than gets replaced. The new portfolio manager discovers the ponzi with investors realizing they really don't have anything.

Another reason this may be the real thing is sentiment indexes are flashing warning signs. There has been a record dichotomy of the present situation among consumers and the future expectations. The present situation has bounced along the bottom while expectations of the future skyrocketed. This pushed overall consumer confidence numbers up. Those expectations are starting to come down and with it the overall number. Expectations more than anything drive spending. If this trend continues it could be flashing severe warning signs.

ABC NEWS Consumers Confidence Index came in at -49. Worst reading since June and within spitting distance of its all time low of -54 set in January 09.

NAHB Index also came in at its worst number since June falling to 15.

Since June!! Aren't things supposed to be that much better?

Anyway, the odds are at some point the market will have a bounce that will scare the living daylights out of bears, including me. Whether that is about to start or the market has more selling to do is any one's guess. I pointed to the 1130 number as the line drawn in the sand. Sure enough, once we broke through that, whoosh, air pocket underneath. I think 1080 to 1085 is a similar level. The bulls will be desperately trying to hold that.

One thing for sure is every trend line since the March lows has been smashed at this point. The market is trading a little bit like a ship without a rudder. So far it isn't doing to well.

If this truly the beginning of the unravel of the ponzi, watch out. Ponzi's don't bleed to death, they implode. It took months in 2008 with many rallies for the system to grind its way to a breaking point. I don't really know but I would guess it would not be the same way. There will be rallies but my guess is the unwind will be sharper.

Our foundation is much weaker than January 2008. It will take alot less to push us over.

My contention has been that stock picking has become basically useless. It is why I have been working on these special private deals trying to find something with a really short investment duration that I like. I enjoy digging through investment ideas more so than looking at macro junk. However, the way the entire system is laced with dynamite means that most investments will implode if we implode. If we do start going down, almost everything will go down.

Wednesday, January 20, 2010

Bear Failure

While yesterday was depressing, today was just frustrating. Yes, I made some money personally in my high risk trade but the market again couldn't break resistance and even in a very negative day, looked exceptionally strong. We went down to resistance, that trendline and bounced. What is new? The financials were very strong on what I thought were very weak numbers. Interestingly, the company that was most upbeat was Wells Fargo and that is the stock that is down. They must be living with their head in the sand and are probably the best at the game of extend and pretend.

Overseas you had a major reversal in Asia overnight. China was down around 3% because some of their banks may be having capital issues. That would be really bad!! Than it rolled to Europe and Greece getting pummeled sending the EURO spiraling down and the dollar surging. Hit the U.S. markets, heavy selling, hit resistance and than bam. It all calmed down.

That leaves us in no mans land for tomorrow. I went back to flat on my shorts. The risk reward isn't the same. The bogey is fairly clear. 1130 is hard resistance on the S&P. Unless the market breaks that the bears have no reason to celebrate.

It is really unreal how strong the momentum is and how the market just won't break down no matter what's news. I really wonder if Los Angeles was nuked if that wouldn't somehow turn into a reason for Wall St. to buy. More stimulus so buy!!

Line for tomorrow is clear. We shall see what happens. I leave for Louisiana in a few hours. Probably won't be back on here for a few days.

Tuesday, January 19, 2010

Gut Shot

Today was a complete gut shot to bears after Friday. Talking about tearing down your psyche. I just wanted to roll over and wither and I know I wasn't the only one.

So I did what I didn't want to do. I took a very risky short overnight personally. (Not for my fund, high risk high leveraged short that doesn't fit gambling with the fund). I will have a tight stop and if the market runs a little more I will lick my wounds and get out.

Things are changing, at least they seem to be changing to me. I continue to expect some sort of market pullback. Credit has started to vastly underperform. Today had 4 wideners to every tightner in high yield land. This has been the theme the last week in a half as credit has snubbed equities heading lower (yields higher). The ABC NEWS Consumer Confidence Index came in at -49, the lowest reading since June. The NAHB index (measures home builder sentiment) fell to 15, also the lowest since June. Germany seems dangerously close to falling back economically, and earnings are not being treated well. (One could argue today was because of Citigroup but I don't think Citigroup was even looked at. It was about the Massachusetts election. The market likes gridlock in Washington)

Anyway, I know I have continued to be bearish and sound like a broken record but it has been awhile since I have put real money behind those words. I don't think the housing numbers are going to look good and the underpinnings of the market are questionable. Like I said though, if the market runs just a little I am out. It is an easy trade with where the markets ended up today and how they ended there.

Monday, January 18, 2010

Market Thoughts

I have been saying that I think at least some sort of mini correction is coming. It may be a start of much more but at least some sort of down move is coming. I also previously indicated I thought it will start in the second or third week of January. Friday it may have started. Intel had blow out numbers with record margins. The stock got hit hard. JP Morgan had "good" headline numbers but you pealed back the onion and the numbers stunk. JP Morgan got hit hard. The whole market was down on heavy volume. Citigroup reports tomorrow. If those numbers disappoint in anyway, watch out. Housing numbers come out this week and next (what I think are the important numbers are next week) but I really think those have a chance to be brutal. Everyone is bullish and complacency is running sky high. The gigantic uptrend from March still has no been broken by all indexes, notably the Dow Jones, if that breaks down it may be the beginning of something bigger.

Later this week, I will be headed back to Lousiania. I have been working on these private deals which changes up my work schedule and posting schedule up alot.

Sunday, January 17, 2010

Sovereign Risk

Good interview of Kyle Bass of Hayman Capital Partners by CNBC's David Faber. Kyle Bass made almost as much as John Paulson betting on the housing collapse. His focus now is on sovereign risk. The second part of the interview is what is interesting. The last couple of posts I mention that Greece to me is the New Century Financial and a warning of things to come. Kyle Bass has his crosshairs directly on Japan. According to Kyle 56% (I think that was the number) of U.S. debt is bought by people overseas. In Japan that number is 6% meaning the Japanese people are the ones funding its deficit. According to Bass the problem is that the demographic changes in Japan is going to cause the Japanese to become a net seller of government debt. The largest pension fund in Japan has told the Japanese minister that it has begun becoming a net seller. What that means is that Japan must go overseas to borrow money. Japan's debt will than reprice to have a higher interest rate. A one to two percent increase would have devastating consequences. He says the consequences for the US going down the same path are 10 to 15 years out. I would argue if he is right on Japan it will have massive implications worldwide for the U.S. and Europe long before 2020.

Entire video can be watched here.

In Response to Aggie Capitalist

Aggie Capitalist posted in the comments in the previous post asking about why Greece matters. Texas alone is 4x the size of the entire Greece economy so who cares about Greece?

I believe Greece and Dubai have huge implications. Floatingrate correctly pointed to the pressure it would put on the Euro. On the front page of Bloomberg there is an article entitled Euro Falls to Three Week Low Versus Yen on Greece's Debt Crises. Will the European Union bailout Greece? Would Germans take on that responsibility and risk severe inflation down the road?

How the European Union handles it has huge implications. It won't be the last either. Spain is not far behind Greece. If Greece is a one off issue, it would be one thing. I believe it is a warning sign of something much bigger.

In early 2007 (I think it was March) New Century Financial filed for bankruptcy. The market digested it fairly well but it was the first of the financials to implode and should have sent alarm bells off everywhere.

I believe Greece has the same implications. What I keep coming back to and why I remain unashamadely bearish is that nothing has changed as a result of this downturn. Leverage is higher, solvency is a joke, and valuations in the public market are to high. All that occurred is the soverign nations reached down and picked up the risk from the private sector. They moved it to their balance sheet. This calmed the waters in the interim but corrected nothing. In alot of ways, I believe they made it alot worse because of what an implosion of this risk will eventually mean.

If Greece is the same as New Century Financial, and a warning sign of what is to come 6, 12, 24 months from now, investors ignore it at their own risk. Stress on the Euro, the risk of associated government debt being repriced has huge implications.

So I believe Greece, Latvia, Iceland, Dubai, Spain etc all have huge implications moving forward unlike in years past. We are all coupled much more than we have ever been. Some would argue that the biggest bubble of all time is now the government debt bubble. What happens if government debt gets repriced and the yield on a 10 year Treasury goes from 3.8% to 4.8%?? It would cause massive carnage. I happen to still believe that America is better off than most and problems in the European Union and eventually Japan will drive the dollar up and yields down in the U.S., at least in the interim. That doesn't mean things will be improving. It will continue the long lasting depression.

Wednesday, January 13, 2010


Been very busy working on possibly a massive deal. Heading out of state tonight. Why I haven't been able to post much lately. The sanity of the market should be called into question so not make sure it makes sense looking at it anyway. Today Greece CDS surged by the most ever setting a new record as Greece slowly moves toward collapse. The markets worlwide were down and the U.S. market looked like it was getting ready to break until a MASSIVE order came into the futures market. Shot the markets skyward and momentum gained the rest of the day. Volume on the ES S&P 500 future contracts was strong all day today.

Tomorrow is some retail data which could disapoint because so many of the Decemeber auto sales were fleet sales versus to individuals. Estimates may be to high. Next week and the week following starts the housing data which may be the first noticeable data the housing market is not okay.

Either way, still looking for a short term pullback at least. Whether it is more than that I don't know. I consider 1150 pretty important so if it can get jammed above that we may be waiting longer.

When the deal either occurs or doesn't occur I will let you know about it. It is one of the crazier things I have come across.

Sunday, January 10, 2010

Market Jibber Jabber

Markets are going full steam ahead. Big economic numbers out of China seems like it will cause the market to continue its trek tomorrow. Some thought the market would sell off hard at the beginning of the New Year. I argued in private this was probably not going to be the case coming out of the gate. However, I also argued that the second week of January may start a reversal. Well, we have five days of up movement closed off by last Friday which saw a truly bad jobs number and record drop in credit. Both are argued are lagging indicators but two points should be made. On the jobs front, the internals were really weak. The headlines is what it is but the length of the workweek, average wages, and the diffusion index all were very poor numbers. That doesn't show an improving jobs picture. On the credit contraction it was a record drop which means the credit picture is getting worse not better. So maybe it is lagging but should have really been ignored?

The real reason it may have been ignored and seen as favorably is because the market needs the not to hot not to cold economy. A surge in employment would mean a surge in rates and would be to good a news. The market really doesn't want terrific news. They want a sweat spot where papa government has to keep its liberal policies.

I thought the second week of January may mark a reversal. It may be the third week when the housing numbers come out. At long last (I was about four months early) I think you will see the housing numbers show some very negative prints. If I am right the market may not react favorably because that is a leading indicator not a lagging indicator. If the market would brush off a negative print (which is possible) the thought logic will probably be that it is the first month after the intial tax stimulus which pulled forward demand but the same thing happened with car sales in August. This caused a month or two of weak prints but car sales have stabilized and housing will also.

We will see. For the moment the market sees only one direction. It likes heading up.

Wednesday, January 6, 2010

More on Iceland

Some images floating around on the internet from Iceland. Remember I did a post below talking about how Iceland essentially snubbed England. Well Icelandic citizens made sure their voice was heard. Below is one such image.

It contains the caption:

The government has spent the greater part of the year restructuring and stabilizing Iceland's finances. Part of that planning was the legislation to pay back the UK and the Netherlands. The countries had threatened to block European Union membership for Reyjavik if it didn't reach a deal. Parliament reluctantly passed the law with a slim 33-30 majority last week. Icelandic citizens expressed their protest by signing a petition urging President Olafur Ragnar Grimsson from putting his signature on the legislation. When they delivered it to his residence on Saturday, they carried torches.

Other photos can be found here.

Thanks goes to Mrs. Watanabe

Lookalike Coaches and the Market

Two days of consolidation. Probably means a pop to new highs in the next couple of days. Whisper numbers are very good for the non farm payroll report. More government jobs and very favorable birth death adjustments could mean a very good number. An expected equity pop would come with that but if the 10 year goes bonkers and breaks 10% the rally should be short lived.

I didn't mention it but the pending home sales index yesterday came in very low. That combined with the MBA Purchase index which came in at a 12 year low may indicate housing may be starting its second leg down at long last. We shall see.

At some point oil and interest rates have to be a very big negative for the equity markets. At some point.

Bill Gross is out with his January Investment Outlook. You can read it here. He focuses on blasting the government. I couldn't agree. Both parties have sold themselves to the devil. Bush helped get us into this mess and Obama is making sure we stay there.

From Bill Gross:

What amazes me most of all is that politicians can be bought so cheaply. Public records show that combined labor, insurance, big pharma and related corporate interests spent just under $500 million last year on healthcare lobbying (not much of which went to politicians) for what is likely to be a $50-100 billion annual return. The fact is that American citizens have never been as divorced from their representatives – and if that description fits the Democratic Congress now in control – then it applies to Republicans as well – past and present. So you watch Fox, or is it MSNBC? O’Reilly or Olbermann? It doesn’t matter. You’re just being conned into rooting for a team that basically runs the same plays called by lookalike coaches on different sidelines. A “ballot box” pox on all their houses – Senators, Representatives and Presidents alike. There has been no change, there will be no change, until we the American people decide to publicly finance all national and local elections and ban the writing of even a $1 check for our favorite candidates. Undemocratic? Hardly.

Some chatter about politics. His investment conclusion:

Additionally, if exit strategies proceed as planned, all U.S. and U.K. asset markets may suffer from the absence of the near $2 trillion of government checks written in 2009. It seems no coincidence that stocks, high yield bonds, and other risk assets have thrived since early March, just as this “juice” was being squeezed into financial markets. If so, then most “carry” trades in credit, duration, and currency space may be at risk in the first half of 2010 as the markets readjust to the absence of their “sugar daddy.” There’s no tellin’ where the money went? Not exactly, but it’s left a suspicious trail. Market returns may not be “so fine” in 2010.

Tuesday, January 5, 2010

Iceland Gives the Finger to the UK

Interesting developments over in Iceland. They basically gave the finger to Great Britain and the Netherlands. The problem centers around 3.4 billion British Pounds that were lost when Iceland collapsed. Now this money should have been lost by the investors who took the speculative risk by putting money in Iceland. Well pappa government stepped in and reimbursed these losses. Pappa government (Great Britian and Netherlands) had been demanding Iceland pay back this debt. Pea Brained Iceland parliment members passed a bill agreeing to the repayment. The president than vetoed the bill much to the chagrin of pappa government (Great Britian) sending howls up across the pond.

From the Guardian:

Iceland was plunged back into crisis after its president refused to sign a bill promising to repay more than €3.8bn (£3.4bn) to Britain and the Netherlands after the collapse of the country's Icesave bank in 2008.

From a British news source. I think this helped alleviate the crises. It continues:

Almost 300,000 British savers had deposits with Icesave, attracted by market beating interest rates. Their accounts were frozen in October 2008, sparking a diplomatic row between Britain and Iceland, which had only recently begun to thaw. Britain outraged ordinary Icelanders at the time by invoking anti-terrorist legislation to freeze the UK assets of Landsbanki.

THIS IS THE FREAKING PROBLEM WITH OUR ENTIRE WORLD. Read that again. British savers put money in Iceland because it had higher interest rates. You have higher interest rates because of higher risk. If I remember correctly Iceland was over 10%. British citzens got greedy, took a gamble, and lost. Why doesn't Britian invoke anti-terroist legislation against the U.S. everytime a British tourist loses money in Vegas???? Its asinine.

The British and Dutch governments had compensated savers who lost money when Icesave's parent Landsbanki filed for bankruptcy. But both have since put pressure on Reykjavik to repay the money.

Those 300k British citizens didn't lose their money. Pappa govermnet came in and reimbursed them similar to an FDIC backing bad banks.

I commend the President of Iceland. There are people claiming international law was broken and causes international tensions. BS. Speculative failure occurred, losses need to be taken.

Monday, January 4, 2010

Happy Times

No major changes in the markets. Stock market up on light volume. 2010 appears like it wants to continue where 2009 left off. Doesn't matter that the market is trading at a lofty 20x 10yr average earnings multiple.

The markets are typically in January. The market was rebounding strong in 2008 until January 5th before it started spiraling down to its depth of March lows.

The market to me seems poised for at least a mini correction (5%ish plus) with some divergences but we may have a few more up days to go on the upside. Interesting alot of the REITS were down today even as banks were up strongly. The financials have been holding the markets back. If they get going than we may be on our way to 1200 fairly quickly.

Right now everyone is happy in the world. Insolvency surrounded by tons of liquidity. The bullish sentiment is at extremes but that can continue for several months.

Sunday, January 3, 2010

2010 starts where 2009 left off. Bailouts!!

Back from another whirlwind week.

Will have some additional thoughts coming in the near future but first an article from the Guardian.

If 2009 will be remembered for anything it may be remembered for when capitalism died. In its place was bailout after bailout. Well 2010 has literally started where 2009 ended.

From the UK Guardian:

Japanese authorities have thrown a lifeline to the crisis-struck Japan Airlines (JAL), the largest carrier in Asia, by doubling a state-sponsored credit line to £1.33bn.

JAL has been dogged by rumours that it could file for bankruptcy, causing its shares last week to plunge by more than a quarter. The national carrier is heading for its fourth annual loss in five years as a result of the slump in air travel, inefficiency and an unwieldy pension scheme. If it does file for bankruptcy it would be one of the largest failures in Japan's history.

Asia sold off the last day of 2009 partly based on JAL problems. The markets are rallying hard to start off the New Year partly because of these fresh new bailouts.

Once again, what this does is hurt everyone else. Instead of capacity being taken off line (everyone knows this needs to happen for the airlines), government intervention will ensure for the time being that liquidity is not an issue while solvency problems are not addressed playing kick the can down the road.