From the Comments Section

Le_Soldat said...

Wondering what your opinion on today's light volume bear market rally? I'm losing big on puts on cof, hig, cat, spg, x, and spy.

Do you think this "rally" has any legs, or do you believe there will be a sell off starting friday?

I made the mistake of buying Jan puts and they are really dropping in value. I just can't understand how we rally with worst consumer confidence and worst home prices.

Good Luck and Happy New Year.

CP said...

I think the rally is a joke. Anytime a decent stock (BGC) vastly underperforms a garbage stock (MPG), to me it is another sign of our broken market. Result: bearish.

That being said, you need to have staying power. Buying front month puts is problematic. I own Jan puts that are deep in the money that I don't want to sell for tax reasons. But I would never buy OTM front month puts just to watch the premium evaporate.

I have no idea when the next selloff will commence. All I believe is that most of my shorts will be zeros a year from now. So I am patient.

Axelrod

From the New York Times:

Regarding the new administration’s stimulus plan, Mr. Axelrod also said that the exact dollar amount Mr. Obama will seek has not yet been determined. “We’ve talked about a package from $675 billion to $775 billion,” he said on CBS’s “Face the Nation.”

“One thing I think everyone agrees on, economists from left to right, is that we have to do something very large,” he said.

The president-elect also intends to follow through quickly on his promise for tax relief for most Americans, Mr. Axelrod said, this time on “Meet the Press.” As for repealing the Bush tax cut for the wealthiest Americans, he said that whether it was repealed early or allowed to expire as scheduled at the end of 2010, the tax cut would eventually disappear.

“It’s going to go, it has to go,” he said.

There were 135,660,228 federal tax returns filed in 2006 but 43,362,718 had "Zero or Negative Tax Liability", so only 92,297,510 actually pay any tax.

The "package" of $775 billion is almost $8,400 per taxpayer. Someone named "Axelrod" proposes to spend that much of my money. A group of Chicago crooks think they can allocate that much of my capital better than I can.

Only economists who are dopes think that we "have to do something very large." An intelligent or honest one would realize that money comes from somewhere. The government diverts it from a first-best use and will squander it on an inferior alternative.

Actually, they will probably use it to subsidize the reproduction of more dopes who get themselves in troubles that require a bailout, and who elect politicians to steal my capital.

Merry Christmas from Credit Bubble Stocks

Treasuries

We need to figure out the inflation vs deflation debate.

A few months ago, I decided that short term we would have deflation.
I had bought long duration treasury (TLT) calls.
Treasury yields have been crushed. I wish I had bought more.
(The calls increased in value tenfold.)

Now the treasury move is approaching parabolic: http://chart.finance.yahoo.com/c/3m/t/tlt
Treasuries have no substance. Economic textbooks say that they need never be repaid.
Clearly the fundamentals are terrible.
Parabolic move plus bad fundamentals equals inevitable crash.

We can make another huge return, betting on the treasury crash, if we can time it right.
But I think the forces of deflation are stronger than people give credit for:
http://web.mit.edu/krugman/www/deflator.html
Also, there are still too many treasury bears for the crash to happen yet.

Comments encouraged.

St. Joe Sells More Cheap Land

More news from our friend JOE:

Jacksonville, Florida - (December 18, 2008) - The St. Joe Company (NYSE: JOE) today said that it has closed the sales of 19,917 acres of non-strategic rural land in Liberty and Gulf Counties for an aggregate sales price of $28.0 million, or over $1,400 per acre.

"After the termination in October of a previously announced contract for the sale of non-strategic rural conservation land we returned those parcels to the market," said JOE's president and CEO Britt Greene.

Was that the land sale that I blogged about previously, the one for $1,930 per acre? So land prices have fallen substantially just in the last few months?

I'm still short JOE and I love selling JOE calls.

Who is Buying the Stocks I'm Shorting?

Look at this quote from the WSJ:

Legendary fund manager Marty Whitman is pinning the blame squarely on an "irrational" stock market meltdown for this year's hefty losses at his Third Avenue Value fund.

"As far as we are concerned," Mr. Whitman declares in his latest shareholder letter to investors, "the fund's poor 2008 performance is attributable to an irrational stock market, not any fundamental deterioration in the businesses in which [Third Avenue Funds] has invested."

I don't really know what to say. There is no deterioration in MBI's business? ABK? St. Joe?

What I don't like about Third Avenue is they never learned their lesson. Never started giving much weight to the possibility of a global depression (which is what is actually happening).

Although it does look like they are finally getting rid of JOE. Evidently, they sold out of AMAT in the 4th quarter. I am short AMAT and JOE. If Third Avenue is not going to defend the price any longer then it is probably safe for me to pile on the shorts.

Great Shorting Opportunity

Let me get this straight: Obama releases a harebrained scheme with the word "infrastructure" in the headline. Close analysis reveals that the plan involves changing light bulbs in government buildings.

As a result, manufacturers of construction equipment that you can buy slightly used at huge discounts rallied strongly. Also, the worst most heavily shorted stocks rallied the most.

Does that make any sense?

Short COF, JOE, WFC, WY, BBY, CAT, etc.

Quick Thought About the Ford Business Plan

I am not trading the automakers right now - there aren't any compelling misvaluations relative to the other industries where I am doing research. Plus, it is just too sad.

At least Ford is presenting a business plan now. This tidbit is discouraging:

Based on current business planning assumptions – including U.S. industry sales for 2009, 2010 and 2011 of 12.5 million units, 14.5 million units and 15.5 million units, respectively – Ford expects both its overall and its North American automotive business pre-tax results to be breakeven or profitable in 2011, excluding any special items.

There is no way that vehicle sales are higher in 2010 and 2011. I believe that anyone calling a bounceback/rebound in most sectors is wrong. Of course, F has to say it I'm sure otherwise their models would look even more hopeless.

Cramer Getting Cut?

According to this article, CNBC "is preparing to slash ten percent of its budget, cutting everything from perks to personnel."

Maybe they will get rid of Cramer. In some ways I hope not.
Thanks, Cramer, for helping me find buyers for the Downey stock I shorted.

By the way, I forgot to mention on here that Downey was finally shut down by the Feds.
Here was my 2007 year end review of the Downey trade.

I am uber-short right now.

Tanta

Very sorry to hear that our friend Tanta from Calculated Risk died this weekend.

Someone posted this in the CR comments today, evidently a piece written by her:

He has sounded forth the market that shall never call retreat;
He is sifting out the OFHEO before His judgment seat;
Oh, be swift, my swaps, to answer Him! be jubilant, my REIT;
Our bonds are marching on.
Glory! Glory! Hallelujah! Glory! Glory! Hallelujah!
Glory! Glory! Hallelujah!
Our bonds are marching on.

In the innards of the tranches hide the loans we cannot see,
But the Federal Reserve is looking out for you and me:
As He cut to make rates cheaper, let transaction costs be free;
Our Home is marching on.
Glory! Glory! Hallelujah! Glory! Glory! Hallelujah!
Glory! Glory! Hallelujah!
Our Home is marching on.

Genius. If there was any justice she would be the new treasury secretary right now.

.