Saturday, November 29, 2008

Next week...

I'm looking for some smaller beaten down companies that are lagging the overall move we've had. You'll notice that as you go deeper into a bullish move it lifts all boats. That's been a very strong trend for years, since at least when I started doing this and I am sure before that. A rising market lifts all stocks, even the crappy ones. The question is, how high do we go in this move. I still think there's a decent shot we see 10,300 on this move. I'm making money from the long side for now, but again looking for entries longer term for shorts. The fear is always that you'll miss a move one way or another, part of good trading is not worrying about moves you miss, just concentrate on the ones in front of you. This week also watch the reaction to the disappointments regarding Black Friday. The bulls will argue its priced in, the bears will rightfully so say thats absurd since we aren't coming out of this for at least 3 to 5 years. The question is, NEAR TERM what does the market do. Right now its telling us that it feels that Obama is going to save the world and that we'll be out of this in a jiff! While I feel that is completely and utterly wrong and idiotic, I try not to fight the market, I try to be zen and go with it, and I suggest you try to do the same. So, while I remain FIRMLY in the DOW below 5000 in 2009 camp, I am hoping we get a further push to the top end of my range as I believe it will provide easy entries to the downside then.
The concern for me is that there is increasing unrest civily around the globe. New Zealand, Iceland and even China have had issues with this. What happens when people here realize that they really are on the hook for all the money the government has basically, in my opinion, thrown into the wishing well. How in the world they can justify what they just did with Citibank is scary. We are now at roughly 6 TRILLION the taxpayer is on the hook for, without real representation and with no end in sight. While we may or may not get a tax raise in the next year or two, and in fact they may cut taxes, its all PHONEY MONEY. It just devalues the dollar and when people realize that their money has been stolen from them by the Fed, I am freightened to think what is going to happen potentially to the fiber of our nation. They are stealing money from the poor to prop up the rich who already died. Citibank is worth negative $350 BIL, why would you save it? It's too big to fail? That's the biggest lie we now have. I'd take my chances, let it fail, let GM fail, let AIG fail, let GS in particular fail, let them all fail. This misplaced fear that the entire system will fold is BS at best, and a blatant disasterous lie at worst. I opt for the latter given the choice. What's mind boggling is that the Fed is trying to recreate EXACTLY what it was that got us into the mess! And, they are repeating Japan's mistakes from which they still haven't recovered. Citibank will go under, so will GM, so will AIG, so will 1/2 the big banks out there, and many insurers. All we are doing is delaying the inevitable. I suggest you listen to the people who are negative on what the government is doing. You may or may not agree, but I've found over the years that naysayers (not conspiracy theorists who are just nutty often times) are the smartest and most right group. Buy side analysts have a conflct of interest, its like listening to the guy from Pimco say that the government is doing all the right things. Of course he feels that way, it helps him directly what they are doing. Reality, I find, is unbiased, and that's where I try to skew. We are facing potentially the biggest crisis we've ever known, and that includes the "Great" Depression. I am looking for some suggestions from YOU guys and gals, send me an email if you have any ideas as far as protecting yourself in a Depression. Some people like Gold, some people like real estate, some think the dollar will be best. If you have any real, educated ideas, let me know. I think that we'll need some hard answers as we move forward through this mess. It's just unfortunate that we have a government right now that is intent on laying the burden on we the taxpayer and that is going to have potentially disasterous consequences. If they would let some of these companies fail they would have a lot more gun powder to rebuild. Now, I fear, we are shooting our load and in so doing we are condemning the collective us to something far far worse then "too big to fail".

Watch the market reaction early this week. If we can't shrug off the bad news we may be headed back down near term. If we can bounce then we have another leg up. I'm still loving the financials SHORT, but this move needs to play itself out. When it does, whether it be this week, or mid-January/February this market is going to see depths that will shock people and ruin 100,000s of people's retirement. I wish they would all take this move higher here to take ALL these money out of the market, but unfortunately my voice is pretty limited and too many people have been doped into thinking that if they hold for 10 years it'll be fine. Really? Japan's markets are down 80% from their peak in the 1990s. 80% and it's 18 years later! That logic didn't work there and its unlikely to work here. I repeat, GET OUT if you have money in the market - GET OUT, before its too late. We may get a further bump, get out while you can is my opinion, take it for what it's worth!




Brian P said...

Gold just makes so much sense to me. It has since I started investing in it since 2001. The USD is toast, I can't see gold not skyrocketing. But thats the beauty of the market, we will wait and see....

Waxie said...

The problem with gold is that it's not tied to anything, and since 1/2 the market for Gold is retail jewelry and people are and will be spending a lot less, demand will dry up. Look at all the big retailers of gold, they are toast. Plus, Gold hasn't done much of anything and its been the perfect storm of gold. I own some gold, I think its good to be diversified, but I'm not convinced you want to own a lot of Gold as a hedge. We're in deflationary period, where Gold could go down. Remember when Oil was a market for the market? That changed, and Gold's relation to things may as well. Look at Platinum. At most I'd want 5% to 10% tied up in metal thats a crap shoot. I think even that may be too high. GOld bugs are out in full force saying that Gold is being artificially manipulated down. There are other rumors that China is going to put another 600 or so tons away for safe keeping, that would move the market obviously but its not substanciated that I know of. I own some Gold, but just to be diverse. I bought my Gold at $275 an ounce, fyi.

lil said...

If you do not live in the country and can not have a garden plot, buy alot of nonperishable food supplies for at least several months.

Sunil said...

Waxi, do you see any major hedge fund redemptions coming into play in December which could de-rail current rally? According to an article I read, Dec.14 is supposed to be a major date for hedge fund managers who are still looking to unload $200 billion of stocks. As the markets start to head lower be it this month or early next year, I think one of the ways to play the down move should be via ultra-shorts such as SRS, FAZ, BGZ, TZA, SKF and I am sure there are many others. Comercial real estate is being talked as the next shoe to drop as the malls are already shutting down in mid-west due to lack of traffic. I wonder how long they can keep bailing out companies on our money. are they cherry picking? WHY?
KIndly comment on the hedge fund redemptions and the Santa Claus rally as well. Many thanks for your services and all u do for us

Bruce said...

I am new to investing, but I have been thinking about what to do for the future quite a bit. IF I had a bunch of money- or maybe when to be optimistic, I would buy other currencies. Maybe 1/3 Euro, 1/3 Yuan if that is possible at this point. I know that everyone is in this to some extent right now, but China's and Europe's balance sheets look a lot better to me. Once the US dollar tanks, I would anticipate that one or both of those currencies would remain strong with less volatility than Gold.

nesky said...

Farm land may be a place for a little cash. If you study "plat" maps showing who owns farm acreage, it's always included a lot of insurance or bank trusts. Your llc or family trust can own also. What is usually done is a farm is purchased from a family that's retiring from active farming. The buildings are usually already on a separate lot and get sold because they generate the biggest tax burden and hassle. Then the farm land is often taxed at a much lower rate if it's left to be farmed, either rented or shares. Cheapest prices are usually upper midwest. 100 good acres could pull in $20000 in yearly rent. But commodities tank and boom all the time. Our corn and soybeans sell well now, but they didn't two years ago, so boom and bust, here we go. But it's still nice to own open land. Wonder what happened to farm land values after the depression. Probably tanked with everything else, eh? Just a thought.

ragdo said...

how about gold stocks?

1924 -1936: Homestake Mining versus Dow Jones

Anonymous said...

It may sound insane but I may start buying various food seed. I think basic food and water may beome more scarce or too expensive through some sort of accelerated hyperinflation. Individuals and families may have to resort to growing their own food and seeking deep well water just to survive. Medicare and Social Security will dry up over the next 10-20 years. This will force many to live in multigenerational or multifamily dwellings. Plus, if unemployment rises to the 20+% level, civil unrest and people who just plain old go bizerk will be a common occurance. I would not put money in gold or metals as their values may drop down to the $300 -$400/oz and sit there for years. I may sound like a doomsdayer and oh hell, I guess I am.

Markus said...

o.k., here's my guess concerning the depression ahead: its vehemence will be – by far! - more enormous than the current downturn of the/stock market.
the development over last 2 months with its self accelerating speed caused by mass executions stock-market-wise was beyond any bearish assumption. and it's only by the means of almost interest free money provided by the fed that speculators are buying at the moment. as an interlude.
long term there is no escape from a long way down. easy/cheap money drove us into this situation. easier/cheaper money won't get us out of it, on the contrary: the US national debt is getting completely out of control - and they keep on issuing bonds. by 2009 the national debt should be above 13 trillion (or far above, no-one seems to care), i.e. almost 100% of the current US gdp which is declining or rather falling.
what i want to say: in the end there's no alternative to inflation and then hyper inflation (and to give an idea of hyper inflation: in the morning a single bread will cost $100.000, in the evening it will be $1.000.000. trust me, I’m german, my grandparents told me about it). not only china but china in particular as the biggest creditor of the usa will have to face dramatic losses, some trillions to be >>specific<<. well, it shouldn't surprise anyone if china wasn't maintaining its traditional countenance then.
i’m not talking about world war 3 – but the political and social atmosphere will change world wide. dramatically. in case you own real estates or gold you should care for measures to protect both of them. I’ve been to argentina when the state went bankrupt in 2003 – no police could stop the crowd running wild, breaking into shop or private properties. if you want to anticipate what it looks like when inflation rules you have to study history. every culture rises and falls. this seems to be human fate. and this fate leads to development: of mankind, technology, consciousness unless – well unless we are no longer impelled by greed, i.e. the instinct to protect ourselves by possession.
but why bother too much about future development? our world has been a fantastic place to live for over 60 years (in most parts). we have been very blessed – and we still are because the flooding of the financial markets gives us extra time.
enjoy your life then. live the moment. be aware of the all the possibilies we have. and be humble – try it at least. the stock market provides us with easy money (o.k., you spent your life watching onto your monitors). make use of your gains.

this is just a fraction of the monologue I’m having every day… and at the end of the day (or rather at the very beginning of it) I’m still hunting for more k’s.

so instead of worrying about the future I should rather worry about the now, ie.e make use of it!

thanks for your blog, waxie. read it every day.

Kevin Scobey said...


Since the unfolding economic contraction in the U.S. is rooted in the credit markets, the slow-down is most probably deflationary. Gold, silver, and real estate are probably still way overvalued because you can't repay debt with any of those things. You need cash to repay debt, so cash is king. There are many smart people out there who are worried about inflation, but inflation is what we've had for 25 years or so. 'Time for the trend to change.

Besides cash, treasury securities from the U.S., New Zealand, Singapore, and/or Switzerland are probably the best long-term bets for investors. When everything else goes down, cash goes up in value. The same amount of cash buys more tomorrow than it does today.

Even though the U.S. gov. prints a lot of money today, it does so in a roundabout way through complex transactions with the Fed. What we will have to pay attention to in the future are any new policies in which the gov. decides to print money directly, in which case, the economy may change back into an inflationary environment. But, for now, the gov. is behind the deflationary curve, and shows signs of staying there.

I would check out I think the technical analysts there have a pretty good handle on what's going on.

Thanks for your trading insights,
- Kevin, Illinois

thomas said...

If you walk into any coin shop in Manhattan or anywhere else in the country, there are no gold bullion coins, such as the American Eagle or Canadian Maple Leafs, or bullion bars to be found anywhere. You can't even buy them from the Philadelphia mint. Try it. They were all sold out part way into this year. If you can find some, they're going for well over spot gold. There's a huge disconnect now between paper gold and the spot market, which will likely sort itself out over the coming months, with the paper markets playing catchup.

Gold has been strained recently because it has been dumped by hedge funds and other large holders in a panic to raise cash to meet their cash calls, but it says nothing about the fundamentals of gold in the longer term.

That gold is not truly tied to anything is precisely what gives it the ability to shoot the moon. In "normal" times it clearly moves inversely to the dollar, but these times are now passing as it enters a new stage where it de-couples from the dollar and other soon-to-be worthless currencies to do its own thing.

Gold is money, period. It has been since it was first panned thousands of years ago, because money was and is gold, universally and internationally. Its value is based on supply and demand, and supply is limited and cannot be increased quickly in any meaningful way. It's an accepted international benchmark of value, just as Greenwich, England is the universal benchmark for world time. Thinking in terms of what gold is "tied to" is like asking what the sun is "tied to" in our solar system. We live in a financial Disneyland equivalent to believing the sun orbits the earth in comparing the dollar to gold.

As the currencies gold is "tied to" deflate to nothing, gold holds its benchmark value, then eventually decouples from these "printable" currencies and goes on its own wild ride with demand surging and supply hopelessly and relatively fixed. This isn't my opinion, it has been systematically studied by very sharp people using mathematical modeling over very extended periods of time (See for just one).

Stand back to look at the really big picture and it all makes sense.

nicasurfer said...

Unless you are an active trader and wanted to conserve capital i would recc. municipal bonds. In addition if it does get as bad as the great depression i would reccommend moving to the country and staying away from major metro areas. These area are subject to possible terrorist attacks which may be on the rise in a financial collapse.

ragdo said...

Homestake Mining versus Dow Jones

how about gold stocks?

1924 -1936: Homestake Mining versus Dow Jones

Jeanne Mancuso said...


A couple of blogs ago you said you had an ok day and made $50,000. I was just wondering what % return that was and what % return do you deem good? Just want to get an idea of what you aim for.

Brian P,

My husband has the same idea on gold as you and he is in buying mode.


Boomer said...

Waxie, this blog really spoke to me. It is exactly what I have been telling my friends and family but everyone thinks that I am being paranoid or an extremist. They just keep telling me the same thing; “This is America and we are Americans so everything will just work out”. I hear the exact same garbage from our politicians on television. Since when does just being an American pay off a credit card or save a bank? I don’t get it! No one every talks about the extreme sacrifices people will have to make in order to get ourselves out of the hole that we are in. To me, this is the same na├»ve logic that caused people to buy a big house and then only be able to afford to furnish it with a bean bag chair.
Not only is our federal government broke and borrowing money from any country that is still willing to lend it but also what about our local municipalities? Many of which are also broke but still need to pay for things like police, firefighters, water treatment plants, etc? If you are a policeman and your pension has already been destroyed and now you are facing the fear of not getting paid, do you show up for work? My worst fear is when I think about all those Americans who are angry that things just didn’t work out and are underwater on their mortgages, credit cards, car payments, children’s education but have nicely financed gun collections, well…I think you know where I am going with this.
I don’t have an opinion about gold or which currencies to own if things get really bad. That is just not my area of expertise. However, my girlfriend and I are flying to Honduras to possibly purchase beachfront property and a home. I figure that if things truly get as bad as I think they might, central and South America will be insulated from the chaos since that part of the world usually does get ignored and the people are used to living with less already. If the people who think I am nuts prove me wrong, I will be stuck trading the markets from the tropics and living in a country that allows me to live like a king on $15,000 per year.
This is my plan for protecting myself in a Depression.

Thank you for the wonderful blog,
(Boomer, Ninja Member)