Finance /

• Why I Tripled My Volatility Index Short

  It has been quite a hectic and frenetic day, so I am just getting around to writing out the logic behind today’s short cover of my November (VIX) $35 puts. Basically, I was betting that once the S&P 500 hit the first technical downside target at 1,065, a long overdue and furious short covering rally would ensue. This was when the (VIX) was trading just shy of $46. This was not only an important Fibonacci level, it also showed up in the technical models of several different persuasions. Such a rally would cause the market volatility to plunge, (VIX) to…

• The Most Bizarre Recession in History

  If we are now in recession, this is the most bizarre one in history. It is a recession where the first thing people do is rush out and buy a new car. That is what the sales figures for General Motors showed this morning, up an impressive 19.8% in September. The results were even better for Volkswagen (+36%) and Chrysler (+27%). The data suggest that corporate managers start loading up on new inventories in this recession. That is what the Institute of Supply Management (ISM) suggests, with their index up from 50.6 to 51.5 last month. Managers also hire new…

• 4 Expert Views on the Current State of the Economy and Financial Markets

  In an environment of sustained uncertainty and volatility, financial institutions from Wall Street to community banks must continue to adapt their business models and work to restore public and investor confidence, according to a group of expert analysts comprising APCO Worldwide’s International Advisory Council and Global Political Strategies groups. How are the latest developments affecting the customers of the financial sector, and what will be the impact on long-term investment and consumption? Eduardo Aguirre: Three years ago, bank governance and administration, together with government regulators and independent auditors, failed miserably at their individual and collective responsibilities. We’re still crawling out…

• Get Ready for the Final Flush in October

  What a quarter that was! Q3, 2011, will go down in the history books as one of the worst in market history, and certainly one of the most volatile. 1929, 1987, and 2008 come to mind. Is the fat lady getting ready to sing in October? The economic data is saying definitely not, while commodities are saying definitely yes. The one economic indicator I would choose to receive if I were stranded on a desert island, the weekly jobless claims, showed a blockbuster decline of 37,000 over the previous week to 391,000, the first drop under the boom or bust…

• Soros: Europe is in a More Dangerous Situation than the U.S. in 2008

  Although stocks around the globe appear to be expecting the Eurozone to produce a game changing plan involving a leveraged, TARP-like approach, not all investors are convinced that Europe is out of the woods. In a number of recent interviews, noted financial expert, legendary hedge fund manager and philanthropist, George Soros, expressed his professional conviction and provided advice regarding Europe’s current financial crisis. Soros believes Europe is worse off than the U.S. back in 2008 given mass uncertainty. “It is a more dangerous situation…to the global financial system than the collapse of Lehman Brothers…” the 81-year old investor said. “Even…

• Following the Money: A Look at Solyndra’s Lender

  If you want to find out what happened with Solyndra you have to follow the money. I did. The half billion dollars of taxpayer dough that is probably lost in Sol came from the Federal Financing Bank (“FFB”). It’s worth a look at this bank to see what else is going on. FFB is a bank that is owned and controlled by the US Treasury. The chairman of the Board is the TSec. (Tim Geithner). With the (big) exception of the Post Office all of the loans at FFB are guaranteed by government agencies. Technically speaking, FFB has no risks…

• Selling Oil Again for a Hedge

  With oil having bounced $5.50 over the last couple of days, I am going to flip back to the short side for several reasons, not all of which have to do with Texas tea. The trigger was oil’s failure to rally in the wake of a surprisingly large draw down in inventories this week, some 6.7 million barrels. This comes off the back of a large build in gasoline inventories of 2 million barrels, which has been a great leading indicator for crude. For a start, I have run out of “RISK OFF” positions, having covered them all during the…

• Itching to Get Into Corn

  Long term readers of this letter know that I have long been banging away on the fact that the world is making people faster than the food to feed them. According to the World Bank, the world’s population is expected to jump 2 billion, from 7 billion to 9 billion in the next 40 years. Half of that increase will come in the arid, food deficient Islamic world. This is happing when the rate of increase of the world’s agricultural productive capacity is rapidly declining. Ancient aquifers everywhere are falling, thanks to “water mining”, especially in India, Saudi Arabia, and…

• Bring Back the Uptick Rule!

  When the Dow crashed 514 points on August 8, the market lost a staggering $850 billion in market capitalization. High frequency traders were possibly responsible for half of this move, but generated a mere $65 million in profits, some 7/1,000’s of a percent of the total loss. Are market authorities and regulators being penny wise, but pound foolish? The carnage the HF traders are causing is triggering a rising cry from market participants to ban the despised strategy. Many are calling for the return of the “short sale test tick rule”, or SEC Rule 17 CFR 240.10a-1, otherwise known as…

• My View of the Stock Market for the Rest of 2011

  Down, then up, then down again. How about that? I believe that the global risk markets will bottom sooner than people think, and that the time has come to compile a shopping list of investments to pick up on distressed days in the market. I think that at the most extreme, the S&P 500 will bottom at 1,000 at the lowest from yesterday’s 1,023 close. More likely are important bottoms at the Fibonacci levels of 1,045 and 1,065. At 1,000, the index will be showing a 28% decline from the April 29 peak. The market multiple will have collapsed from…