Contrary Thoughts

I see most of the headlines on today’s move are connecting the backslide with the Greek debacle, which may be accurate.  On the other hand, I wonder how many people want to leave their money on the table over the weekend.  If by chance there’s more of this going on than popular belief, there may indeed be a trade in the last few minutes here.  For example, if you’re interested in a quick trade on the Q’s and they continue to get smacked into the close, you might take that position with hopes that a significant relief rally awaits us on Monday.

There’s an obvious downside to this type of trade and one should not completely discount that possibility.  Again, this is just a thought (an aggressive one at that) versus a recommendation.

TD

 

 

Bernanke Quotes

3-28-07   “At this juncture…the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained.”

5-17-07   “While rising delinquencies and foreclosures will continue to weigh heavily on the housing market this year, it will not cripple the US”.

6-20-07  “The subprime fallout will not affect the economy overall.”

10-15-07  “It is not the responsibility of the Federal Reserve-nor would it be appropriate-to protect lenders and investors from the consequences of their financial decisions.”

2-29-08  “I expect there will be some failures.  I don’t anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system.”

7-16-08   “Freddie Mac and Fannie Mae will make it through the storm…in no danger of failing, they are adequately capitalized.”

Fast forward to yesterday’s prescient Bernanke quotes:

“We see little indication that the higher rate of inflation experienced so far this year has become ingrained in the economy.”

“The Federal Reserve will do all it can to help restore high rates of growth and employment in a context of price stability.”

Silly Helicopter…he’s a funny little guy.

A Few Interesting Articles

No chicken little stuff here, but doesn’t the grid seem so freaking delicate?  If you are managing an investment portfolio but haven’t invested in a generator, I think you’re missing the boat.

Huge blackout hits Southern California, Mexican border

Cool article on the meteoric growth in Chobani Yogurt:

The $700 Million Yogurt Startup

Not shocking that the president of the US owes a favor, but this stuff grinds me:

FBI Raids Bankrupt Solyndra as Lawmakers Question Panel Maker’s Finances

This is odd because I thought a “spend more and cut taxes” message would really build confidence…must have underestimated “world” math aptitude.

World stocks down after Bernanke, Obama speeches

There is hope for the retail investor:

Bank of America Structured Notes Sales Drop as Buyers ‘Shy Away’           

Defense Stock to Think About: BAE Systems

The article below regarding missing surface to air missiles reminded me about BAE Systems…cool (and unfortunately necessary) technologies for a volatile world.  I may review some of these stocks in the coming days.

TD

5 Things To Know About Libya’s Missing Antiaircraft Missiles

Bloomberg Proves You Must Filter Most Financial Media

Let me begin by stating that I use Bloomberg as a nice summary of the larger/obvious stories driving the markets.  But, I think I’ve just read the worst article ever…see link below (but I don’t recommend following it to it’s end).

Quote:  “The global inflation scare is ending.”

TD:  So ignore the recent moves on the Swiss Franc, Japan’s concerns over a strong Yen (which is sooooo much bigger than the Franc), ag commodity price increases, etc….I could go on, but you get the point.  By the way, this was the first line of the article.

Quote:  “The likelihood of weaker price pressures, which will be debated today at a Bloomberg Link conference in New York, may help extend the three-decade rally in global bonds, with U.S. Treasuries already rising last month by the most since December 2008.”

TD:  I have a difficult time calling this move in bonds a Three Decade Rally.  Wouldn’t an Ongoing Wizard of Oz Manipulation be more fitting?  The bond market has been walked up the hill like a Teacup Chihuahua.  Bloomberg’s description makes it sound like we’ve arrived at our current point via free markets…don’t think so.

Quote:  “Inflation will stay low for years, at least in rich nations, said Larry Hatheway, chief global economist at UBS AG in London. That’s because sustained price increases are a product of excess demand, and economic growth rates in France, the U.S. and the U.K. are running more than 3.5 percentage points below long-term trend rates, he calculates.”

TD:  What about the supply side of that economic fundamental…but concerning US dollars?  Not only are many countries moving or considering moving to a basket of currencies versus simply using the US dollar as the world reserve currency (thereby potentially reducing demand), but we’ve got our boy Helicopter at the helm to take care of the supply side as well.

There’s more to cover, but my point is that you’ve really got to think when you’re reading this stuff (including mine).  I’m not kidding, think for yourself and do your own homework.  I’ll try to add to your mix of things to think about, but I don’t profess to offer the holy grail of omniscience.   I just have a problem with people who do.

Good luck, it’s getting uglier by the day.

             Inflation Scare Passing Spurs Central Banks to Refocus on Recession Risks           

TD

Japan’s Machinery Orders Take a Nosedive…Yen To Follow in Swiss Franc Footpath??

This global inflation thing is happening faster than I anticipated.  I have a link below to the  Reuters article on the massive miss Japan reported last night on machinery orders.  Expectations were for a 4.1% decline while actual was an 8.2% hit.  First target of blame?…the strong Yen.  Can you say Swiss Franc?

Check the article (below) out for details, but I’d make sure you’ve accounted for the coming inflation in your portfolio.  The trend here is becoming more clear by the day.

It’s difficult to buy when most (if not all) assets that serve as an offset to ramping inflation are currently so high themselves…bubblicious even.  My suggestion is to avoid being paralyzed by indecision and make logical moves versus emotional.  This might sound extremely basic, but I talk to a lot of seemingly intelligent people whose strategies are questionable.  Since nobody can tell you with 100% certainty what’s going to happen, stick to your guns if you have a logical case for why this inflation isn’t going to happen.  Whatever you do, just make sure it’s part of a logical strategy versus the paralysis I mention above.

TD

Japan machinery orders slump, signal weak investment | Reuters

In the More Ideas than Time Department…

I’ve never been a big fan of the Small Business Administration’s lending prowess.  They seem to simply develop and market programs that encourage banks to lend when they typically would not…or should not.  Of late, I’ve been thinking about their 504 Program and how ridiculous it seems given the current state of our economy.  Here’s how the 504 works:

Borrowers can obtain loans with only 10% down.

Bank provides first 50% and takes first position on collateral.

SBA provides second 40% and takes second position on collateral.

Loans are marketed as offering at or below market rates, with fixed terms out to 20 years.

Without boring you any further on the crazy dynamics of SBA lending, I’ll simply suggest that the SBA is taking on exposure to some pretty risky situations.  If it’s my money being lent, I don’t like 10% down deals in this environment, I don’t want a second position on anything right now and I sure as hell don’t want to be extending my money at a low rate for 20 years.

So what?  I’m just wondering if there’s a play here.  Since you can’t simply short the SBA, is there a backdoor to playing the aforementioned loan exposure down?  I don’t think these loans as a group are quite as bad as the subprime mortgages played by Michael Burry with credit default swaps.  But I’m fairly comfortable in suggesting that these loans will end badly in terms of loss percentages….and I wouldn’t want to be the “guy” in second position on these loans.

There you have it.  I’ll do more homework; you do the same and we’ll see if there’s something here.  If not, onto the next idea.

TD

Who Wins/Loses as the USPS Continues Downward Spiral?

I’m not sure if there’s an investment theme here, but I wonder about companies like Fedex and UPS.  While they seem to be potential beneficiaries of a flailing postal service, these two companies will likely have their own issues.  In addition to beneficiaries, there will likely be many losers as postal services are going to be cut dramatically.  The question is whether there are any publicly traded losers.

The USPS is going to experience massive change soon…is it playable???  I don’t know at the moment, but it’s probably worth pondering.

Do your homework.

TD

Postal Service warns it could lose $10 billion this year

Thanks for the heads up UBS!

Zerohedge has a nice post this morning on a recent UBS report suggesting the possibility for either a structural change to the euro or a membership change.  The report suggests that the consequences for the departure of a strong member (say Germany) would likely involve recapitalization of  the banking system AND the collapse of international trade.  They add that almost no modern fiat currency monetary unions have broken up without some form of authoritarian or military government, or civil war.

Although I have no qualms with these ideas, I find it ridiculous that the same entity generating this report is directing their retail investors into structured notes?????????  To quote John McEnroe:  “You cannot be serious!”.

Bring Out Your Dead – UBS Quantifies Costs Of Euro Break Up, Warns Of Collapse Of Banking System And Civil War

John McEnroe – You Cannot Be Serious – YouTube

Shocker: Swiss move to depreciate Franc

The Swiss National Bank has set a minimum exchange rate on the euro at 1.20 per euro.  While I’ve added the article link below, the best quote is as follows:

Policy makers are “aiming for a substantial and sustained weakening of the franc,” the Swiss National Bank said in an e-mailed statement today, saying it’s prepared to spend unlimited quantities of currency to preserve it above 1.20 per euro.

Keep in mind that they have a regularly scheduled SNB meeting on September 15th (only 9 days away), but felt the need to act today.  The level of panic here combined with the overall feel of the market is a little scary this morning.  I never want to underestimate the capabilities of the man behind the curtain, but it sure seems like we’re getting close to the final moments of our current financial system.  Do not take the preceding statement as a proclamation that we’re about to receive notice that the current system is about to be replaced.  Instead, my point is that the fundamentals appear so broken or literally gone in some instances (a world reserve currency backed by the full faith and credit of a country that few trust…for example) that massive structural changes are simply a near term inevitability.  OK, enough on this for now.

Franc Slides as Swiss National Bank Sets Limit; U.S. Index Futures Decline