This week is gonna be very telling. We are so overextended its absurd. The bears keep making this case and they keep getting completely crushed. The bull case is that the economy is turning, earnings are on their way higher as estimates were/are too low and that in the coming months as the economy picks up steam, so will the market. Further, the dollar is weakening and money has to go somewhere if its coming out of the dollar. When the dollar weakens the natual assumption is that hard assets will benefit. That includes commodities (metals, agriculture, oil), Gold (can be lumped into commodities, but it's main value is a perceived hedge against inflation and dollar weakness), and real estate. It also can include the stock market since as the dollar weakens it means that a $50 stock is actually worth as much as the dollar is worth comparatively. In other words, if the dollar were to weaken by let's say 50% then a $50 stock in theory is worth $75. That's part of what most pundits don't ever bring up. And, in my opinion its the a much bigger piece of the puzzle then anything else that is spoken about or analyzed. It's also one very real danger sign in terms of the long term stability best case and viability of the US economy.
I am hesitant to speak about certain things that remotely seem like a large conspiracy, but suffice to say that I'm not happy about the way the government is handling this situation, not in the least and I thikn there is a lot of "noise" being tossed around to distract from the global picture here. It is a total joke, in my opinion, that the accepted "wisdom" is that this bailout is that if the governement didn't send TRILLIONS of dollars to and through the banking system, the same place where the "this" all originated.
There is a systematic failure, the system should have been allowed to fail. Period. I know I'll get a few emails telling me that it's ridiculous, or unpatriotic even. Perhaps, but that's part of what makes this country great.
Let's leave it at that, other then to say that all we've really accomplished is continuing the travesty. These same banks and brokerage firms, and you can start with GS, MS, BAC, MER, C and work your way down to a whole host of others, are doing exactly what they were doing before the bailouts. Perhaps even worse. It's a total joke. They whitewash this BS by saying that leverage has come down to 15 to 1. 15 to freakin' 1. Let me repeat that, 15 to freakin' 1.
15 to 1 and they repeat TARP at what, about 10% interest to the American public, to the tax payer. Is this a hoax? Is this a horribly unfunny joke? So, basically they have $15 for every $1 and they repay TARP. Think about it.
And, why do they repay TARP? So they can pay themselves 100s of millions, if not BILLIONS (that's B as in BILLIONS). They use taxpayer money to repay taxpayer money and then they use that money to pay themselves.
That's patriotic? All in the name of saving the economy, saving the American way. Well, if the American way is to use and abuse the system because either the people in charge are too knuckleheaded to figure it out, or are simply complicit with it, then I will choose to do something else.
Now, my brain may not work as well as it did a few months ago, but it still works well enough to figure out that unless there is a systematic change there will never be a return to prosperity, or true capitalism, in this country, period.
15 to 1 freakin' leverage. As a trader we use leverage, it's called margin, its called futures, its called options, its called a lot of things, but even we try not to use more then 4 X's leverage. Yes, options give you more but there is a defined risk. The 15 to 1 margin these companies use has created a black hole where the entire monetary system was and I believe is still one big ponzi scheme. It's simple math, does anyone really believe that if everyone asked the banks for their money back so they could have actual ownership that the banks wouldn't be short 100s of trillions (that's TRILLIONS with a T, fyi)? Of course they would.
OK, so, yes, I went tangencial on ya, but so be it. In the meantime, I will say the biggest reason the market would go up next week is WINDOW DRESSING.
I think one of the best trades that would set up beyond this next week is the Dollar reversal post Window Dressing. I'm probably going to take that trade if the dollar continues to be weak this week. I don't think it'll last, but I do think the dollar will bounce pretty hard and will provide a nice profit if played correctly. Meanwhile the market has several big events this coming week as well. RIMM reports on the 24th and I am long calls on it, and have been. We're up very very nice on it and I think it could have a bit more room to run into earnings, but my stops are now trailing. The stock trends to move hard into earnings but a day or two before sometimes pulls in if I recall correctly. The stock often gets upgraded before earnings, though that's always a crap shoot. Amtech usually weighs in on the stock both ways, though again if I recall they are usually bullish on it. You know booyahhead will weigh in more then likely as well. The stock has run a lot, but it'll see $100 if they push it up after a blowout quarter. That's a big if, but I wouldn't be surprised. PALM had really good #s and every Verizon I've been in says that the Blackberry's sell like hotcakes. I always ask, not exactly the most extensive research anyone's ever done, but hey, the stock blew out last quarter and has been a skyrocket in flight, so it's tough to short this thing with any confidence. Of course, I don't plan on holding it over earnings either, my play as usual is to play INTO earnings, not to guess what happens afterwards.
If RIMM performs well it bodes well for AAPL stock to perhaps try $200. Also watch the ag stocks here, they got upgraded late last week and if we do get a push that's a sector that has lagged the latest move. I would watch POT. MOS and IPI as they got some interesting action last week.
OK, so the bullish argument is, for me, Window Dressing as we come to the end of the quarter. I really don't want to be heavy either way here. We've had an amazing run, I had a really awesome week last week, one of my very best in a long while. I prefer to preserve my capital and lighten up til we see what shakes out here. Remember, when in doubt, stay out. Capital preservation is always paramount to success.
I think that more then likely the week finishes higher then it is now. So, early week weakness is probably good to buy into. We'll see soon enough.
In the meantime, thanks again to all for the well wishes, I do appreciate it.
If you are twitter I am going under - REALWAXIE - as my user name for now so that's where you can find me and follow along. This blog goes directly there if that's easier for ya all.
Have a good rest of the weekend and Shana Tov'a to all who celebrate the Jewish New Year.
Me? As always, I'm just a Waxie, what do I know about nothin'?
Michael "Waxie" Parness