Tuesday, December 20, 2011

A BIG JUMPSUIT TO FILL - NORTH KOREA

As you know, I am a firm believer that our current economic environment is driven by forces that are global.   Due to the significance of world political events we must be aware of the issues facing each sphere of the world.   I am struck by how stunningly fast geopolitical changes are happening everywhere.   As a result of the pace of change, it is important to use excellent resources to understand the climate in these places.

With an armed military force of more than 1 million and of course at least 6 nuclear weapons, all of us should be watching North Korea.  Please examine this short video about the death of North Korea's leader and the transition to power of his son, Kim Jong Uhn by Stratfor.

  Kim Jong Il Update

 

 Like the global elite everywhere, remaining in power is the only thing that matters. I don't think it will be long before Kim Jong Uhn needs to demonstrate his power and authority on a global stage.


GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/

MORNING CUP OF JOY


Christian Gattiker, head of research at Bank Julius Baer & Co., discusses the outlook for stocks and bonds amid the ongoing sovereign-debt crisis. He talks from Zurich with Owen Thomas and Linda Yueh.



Just thought I would share what the perspective is becoming as market participants are becoming more and more.....realistic.  I will try to cut and paste a few items I've seen over the last week where I've noticed that big players are really putting a sour note out without any reservations.  I've seen a few Tweets from Bill Gross and the other Pimco guys that have been well, downright caustic and negative.  Could this be a time to go long?  I doubt it.  Sometimes, the crowd is correct even when all of them are negative.


GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments athttp://www.goatmug.blogspot.com/

Friday, December 16, 2011

EMU GIVES EUROZONE CITIZENS A TERRIBLE PRESENT


While mostly unrelated to economics I found this very entertaining video of the Jimmy Kimmel show that had me laughing about the contents hours later.

Please enjoy......




Oddly, after watching the video, I'm struck by how similar the "gifts" of Eurozone political leaders have been to their own citizens in this mockery of a sham called the bailout process.  In fact Germany's and France's leadership seem to be doling out these "gifts" overtime and yet the citizens of the periphery countries seem to be eyeing the gift and then opening them only to fall apart in tears or lash out in anger.  See, the bailouts provided by the IMF and ECB may be wrapped up and packaged nicely, but they really are nasty old hot dogs or half-eaten peanut butter and jelly sandwiches.

I'm waiting for the moment when Greece, Portugal, Spain, or some other nation takes the approach that the kid does at 4:27 in the video.

Have a Merry Christmas!


GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments athttp://www.goatmug.blogspot.com/


Thursday, December 15, 2011

KYLE BASS - DECEMBER NEWSLETTER

As an add on to the previous post, I was able to find a copy of the December Hayman Capital investors letter.

Enjoy.

http://www.scribd.com/doc/75784106/Hayman-Capital-Letter-Dec-14

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments athttp://www.goatmug.blogspot.com/

CRACKS IN THE FOUNDATION

Ok, we knew there were serious problems with Europe as this has been a topic of discussion for more than a year on this blog.  I need to write a more detailed post on the impact that MF Global is having on the financial system, but this interview with my all-time favorite hedge fund 1%er, Kyle Bass is a great introduction to the subject.




As usual, Kyle delivers a message of death in a matter-of-fact style.  He makes the following key points;

  • That the peripheral countries in Europe are already way past the point of no return and they are going to usher in the break up of the Euro system.
  • That the ECB and EMU leadership really have no plan.
  • Liquidity provided by the Fed recently in the form of dollar swaps is an indication that there is much more trouble in credit markets than you might think.
  • When looking at the dollar swap facilities you need to realize that they are trying to counter the seizing up of global credit markets.

Enjoy the 11 minute video.  Look for a post this weekend about the MF Global fallout.  I heard a really good interview on Bloomberg Radio about the impact this disgusting theft is having on ranchers and farmers and I will see if I can find it for your listening pleasure.

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments athttp://www.goatmug.blogspot.com/



Monday, December 12, 2011

RANDOM THOUGHTS


There is so much going on right now I have very little time to manage and update the blog as this is a very busy time of year.  Despite my absolute craziness, I find myself scanning items and thinking, "I have to write something about that!"  Frankly, there is no time for long-winded notes about all of the complete non-sense that is happening in the world and in markets so I think I'll just post a list with a sentence or two of comment and then as we get deep into the holiday week, I will pull some details out.

WORLD POLITICS - IF YOU DON'T THINK THIS IS HAVING AN IMPACT YOU ARE NOT PAYING ATTENTION.


RUSSIA
Putin's party faces allegations of outright fraud and manipulation to hold power.  Opposition party Prokhorov billionaire says he will challenge Putin in March elections.  Let's cut to it right away, Putin is not a friendly guy and Prokhorov will find himself in jail soon enough.  Even if Putin somehow lost elections a circle of leadership exists in Russia that dates back 30 to 40 years and they run the show.

Funny, that is what world citizens are learning daily.  There was once a liberalization of thought that people actually had a voice in government and had self autonomy.  Unfortunately, that is untrue in Russia, Egypt, the EU, and the USA.  While it is an odd collection of nations grouped in my sentence it should be striking that we all exist in different stages of realization of our lack of individual control over our governments and our own self rule.  Sadly, I think we are actually all more alike than we'd admit.

If the challenge to Putin becomes more serious, be prepared for an orchestrated uprising and terrorist attacks in the homeland, in Russian vassal states, and even overt attacks on NATO forces by Syria and Iran.  These of course will be diversionary moves as Russians needs a bad guy, and I'm sure they will find one.

CHINA
The Chinese economy looks to be rolling over hard.  What can a country do with 300,000,000 poor people that don't have jobs?  Better find something to occupy them and focus their attention on stuff outside of their horrible conditions.

EUROPE
The financial collapse in Europe is now in the final stages.  Each political move continues to be found impotent to deal with reality and mathematical fact that spending more than your take in over many years leads to collapse.  As the final collapse draws near, I can only expect outright attacks in Syria and Iran.

PAKISTAN
Can this situation get worse for the US?  We hear that the Pakistanis are making nice-nice with the Taliban.  It won't be long till Obama engineers a caliphate in India's backyard.

ISRAEL / IRAN
Odd that tensions are rising isn't it?  Israel is running out of time to deal with the nuclear problem in Iran.  Lots of weird explosions and stuff are happening in the Persian country.  The USA lost control of a sophisticated surveillance drone over Iran and we state that we lost control over neighboring Afghanistan.

Isn't it convenient how every country needs a diversion at the same time?

US TOTALITARIANISM
Don't forget the good old USA.  We continue down a slippery slope in the name of fighting terrorism where our "leaders" erode any protections we have as US citizens from the abuse of power and creation of a totalitarian state.  The USA government continues to act without any check as we have assassinated US citizens abroad, can now detain anyone without charges with no set time frame, and also have our government actively monitoring social media for dissent and even comments about our economic leadership (the Fed).  Look at this interview with Larry Wilkerson regarding a new defense bill that is going to be passed soon.

AND BEFORE YOU FREAK OUT AND CALL ME SOME NUT JOB, remember, all it takes is one power hungry individual to change your life completely.  Imagine One SWAT team that accidentally comes to your home rather than your renter neighbor's, a reckless police officer that arrests you or kills your wife in the assault.  Our militarized police forces are now equipped to put down any peaceful protest or deal with any resistance and they typically respond with overpowering force and ask questions later.  Unfortunately that usually isn't good for the average innocent citizen that is caught up in the incident..





US POLITICS
Newt, Obama, Romney, Perry?  My goodness.  Romney's Obama-esque strategy of saying nothing and not having any real positions had almost worked.  He is being dragged into the fray by Rick Perry who fills the role of comedic relief in these debates.

Seriously, we have a sitting President that had no experience and is a complete ideologue with a Socialist or even Marxist bent and yet he somehow has a chance against an amoral smarty like Newt or a Liberal lefty in Romney.  Newt was for all for Obamacare and Fannie and Freddie when he was on the payroll and essentially Romney was the universal healthcare champion too.  Isn't there someone out of 307,000,000 citizens that can represent us better than any of these three?  Chris Christie where are you?


TRADES


GOLD IS GETTING SLAUGHTERED
In dollar terms that is.  Didn't I post last month that you needed to get long gold in Euro terms?  That trade is still a good one, in fact it is probably still a good one in dollar terms as well, you'll just have to wait for the collapse of the USD.

$SPX SHORT TERM TARGET 1185

MS TARGET $9


GETTING READY TO LIKE OIL AGAIN
We've discussed this many times in the blog that there is a season trade on oil and I've liked the refiners during this time as well.  While conventional wisdom exists that it is best to own oil during the summer months, I posted a story last year about the statistical wisdom of that and how it actually is a very good bet to sell your oil by the first week of May.  I mention this because it is probably time to dust off that strategy, especially with Iran practicing their wartime drills on how to close the Straights of Hormuz.

DIVIDEND PLAYS / DEFENSIVE RECESSION STRATEGIES
I just wanted to revisit the plays we've discussed all this year of trying to get in front of money managers that need to be invested even though many are calling for a recession.  The plays I outlined early in the year were XLV (healthcare), XLP (consumer staples), PPA (defense and aerospace), and XLU (utilities).  Those plays still look decent, but you need to be mindful of defense and healthcare cuts that may come as a result of the Super Committee's  failure to find meaningful resolutions to the debt and budget cuts.  Of course those cuts are over 10 years, so they are absolutely immaterial, but that doesn't mean that the defense and healthcare etfs won't over-react to the downside for a month or two.


RECESSION OR NOT?
My favorite bloggers and money managers are completely mixed in their outlooks for the domestic economy.  The best longer term trend watcher and money manager is Chris Puplava wrote "Bill Gross - Wrong on Bonds Again?" last week and we need to pay attention to his great article.  Chris is brilliant but has been faked out as much as anyone during this year.  While he has pretty conservative positions, he has made some bearish comments that have been reversed, and has made some bullish comments that he's had to pull back as well.  His longer term indicators suggest that we are actually heading toward expansion and that the recession is not going to stay.


Am I sold on what Chris is selling?  I don't think so, only because he isn't considering the impact of Europe's collapse in his article.  I think things get much uglier before they get better and there is a better time to position for the long side coming up.  His summary suggests that Bill Gross may get clobbered by rising US government debt rates as the economic outlook domestically improves.  That might happen if you take the Euro crisis away, but we all know that Greeks won't suddenly be able to stop spending and we also know that the ECB won't suddenly find a solution to the unsolvable either.

That's it for now.  As I have more I'll use the same format over the next couple of weeks till things settle down.


GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments athttp://www.goatmug.blogspot.com/

Tuesday, November 22, 2011

GROUPON (GRPN)- A BAD TASTE IN YOUR MOUTH


NEW IPO, SAME OLD SCAM
Groupon (GRPN) is a company that recently held its IPO (initial public offering) where it went public and attempted to squeeze in its fundraising in before the equity markets closed.  Other firms like LinkedIn (LNKD) and Pandora (P) all paved the way for the final scam which is eerily similar to the 2000 Tech Bubble days.

I've felt that many of these firms were not quite worth their initial stock prices, but for me, Groupon is among the worst of the bunch.

Why would I doubt the merits of this company?  I'll list a few below;

1)  NOTHING ABOUT IT IS UNIQUE
The GRPN business model is easy to replicate.  In fact, LivingSocial, is a player in the space that has been operating globally since 2009.  Unfortunately for GRPN, if I had a list of several thousand email addresses, I too could easily go into this business.

2)  GRPN HAS NOT BEEN PROFITABLE
The company took in $1.3 Billion in sales and lost almost $700 million.  GRPN has about $250 million in cash on it's balance sheet.  The argument is that GRPN needed to raise cash so it could scale up its business, I would suggest that it needed to stay put and make its business profitable before taking investor money.

3)  CLIENTS AREN'T PROFITABLE
It seems that it isn't only Groupon that is unprofitable.  Essentially Groupon is used by many retailers as a loss leader in an attempt to get people in the door.  The pitch is simply once they get in the door and try your product, they'll become clients.  In the case I included below we find that if the retailer or small business survives the encounter with Groupon, they probably won't be inclined to sign up again.

London Baker's Experience With Groupon Leaves Bad Taste In Mouth

The baker in the story was overwhelmed by the purchases of 75% off coupons for her products.  In fact, the baker priced their product in such a way that she lost about $3 per dozen cupcakes she sold.  In addition, she had to keep staff working overtime and ultimately lost $20,000 in the experiment with online coupons.

As we evaluate her experience, we must conclude that the baker made a few bad decisions.  So let's not "sugar coat" this.  She obviously didn't understand the demand that the coupon would have.  She obviously didn't price the coupon correctly, and she didn't put a cap on the number that could be sold.  All of these are absolutely correct, and frankly this is in line with what I see from many small retailers, they simply don't understand business and risk mitigation.  This is why so many fail and so many sign up for long term leases at rates that kill their business before they even start.

With all of those items noted, we still need to recognized that the Groupon sales person also is at fault.  Why didn't they put a cap on the sale for their client's first experience?  Why didn't they encourage the client to price their sale appropriately?

Ultimately, Groupon will lose a potential repeat customer because the baker took a bath AND the story hit the national and world media they will probably also lose potential customers.

MARKETING IS GOOD, EXTREME VALUATIONS AREN'T
Look, as a business owner I have always distrusted "marketing" because it is fuzzy and often it isn't measurable.  I do not hate the idea of email coupons, in fact, I have bought a few before (I absolutely hate the rules and conditions they place on them).  In fact, I think that Groupon's business could be a powerful tool for a small business owners to make a quick name for themselves and build a business.  The trouble I have with Groupon is simply that it isn't an "internet company" and doesn't deserve valuations that are sky high and neither do firms like Linked In that ARE internet businesses.  Valuation is important and we've seen that crazy valuations often result in heartaches.

4)  THE CHART IS SICK
While there is not much data here in about 20 days of trading, the chart looks like it will break through the lowest point it has had in its short trading history.  In fact, as I am writing, it has fallen through $22.72 which I identified as support.  I can't even identify any support below this level, so unless we get back up on the close, I think it is a stock you can short with impunity




GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments athttp://www.goatmug.blogspot.com/

Tuesday, November 15, 2011

"HAVING GERMANY BY THE SHORT HAIRS"

KYLE BASS ADDS HUMOR WHERE THERE IS NONE
As I was postulating that Euro leaders saw no other way out of their debt problem than to speed up the fiscal reorganization and consolidation of power at a supra-national level, Kyle Bass was giving another wonderful interview with the BBC.  Since Kyle works in Dallas, he absolutely uses Texan slang and references even in the most stoic and formal settings.  In the interview he breaks down the challenges that the Eurozone faces and outlines a result that is 100% the opposite of what I described would happen.  He also logically lays out an argument as to why Germany would be stupid to continue bailing out the other Eurozone "partners".

While Kyle Bass is absolutely correct, I think he gives the leadership in Europe too much credit and assumes that they will be able to realize that they are throwing good money after bad and that it is just better to stop.  Funny, the Euro political class hasn't realized this yet and according to my post earlier today and the article by Clive Cook, they rationally won't either.

LOGICAL LEADERS NEED NOT APPLY
Please check out the EURO NATION which highlights just how disfunctional the thinking is at the ECB level and just why Kyle's logical conclusions may be totally wrong.  I think this is why it is so difficult to judge the outcomes of this situation, because these leaders are not managing the situation as a business owner would, they are driven by ideological motives that they feel are much greater than mere financial concerns.

The interview with Kyle is only a couple of minutes long and I highly recommend it. (Click the caption below the screenshot).


KYLE BASS INTERVIEW ON BBC
And just as I was publishing this, I noted this Tweet from none other than the Fed's mouthpiece Steve Liesman from CNBC.  This message contained within 140 characters summarizes everything wrong with central bankers, Euroleaders, and fiscal union supporters.


Steve basically says, "PRINT, PRINT, PRINT, cause if you don't the Eurozone is going to blow up, so might as well try to print anyway."  Thus, in a simple statement we see why Kyle Bass is so right, but will be wrong in predicting how Euro leaders will react to the situation.

GOATMUG
Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/




THE EURO NATION

SAVING THE EU AT ALL COSTS
If you are like me you wonder what kind of leader knowingly commits his or her country to destruction.  In the case of the Eurozone, (and the US), I find myself asking this question almost daily.  I believe I found an answer to the question today when reading a Bloomberg piece called "Saving The Euro Will Be Easier Than The Alternative" by Clive Cook.

This piece highlights a few of the troubles with the idea of the EU as constructed and even describes the fatal error of the creators of the currency union by growing too fast and not concentrating on deep foundational changes in a core of homogeneous countries.  But, as we know, the planners and politicians didn't so we don't need to focus on that right now.  Cook's piece does make an interesting assertion that there are not many choices available now that the stew is in the pot and this is unsettling because we get a better glimpse into the minds of the EU leadership.

"What politicians have built, you might argue, politicians can unbuild. It isn’t nearly so easy. When you put a currency union together, parities are fixed. When you take one apart, they are freed: Why else dismantle the union but to let exchange rates move? That obvious asymmetry has large consequences. Who would hold a deposit in an Italian bank if Italy were expected to abandon the euro? The new lira, in which those deposits might soon be denominated, would depreciate at the instant of its creation. The mere prospect would trigger a systemwide bank run." 

Going on we find that Clive Cook may simply have opened the playbook and this message gives us the ultimate direction of the Eurozone, if this week's tsunami of debt and financial fear can be held back in the short run.

"Nonetheless, we may suffer the profound misfortune of finding out -- unless Europe’s governments see that the only sane choice is to accept the logic of the currency union they created and the obligations that go with it. In the medium term, that means closer fiscal union. In the immediate term, it means one thing above all. The European Central Bank must be granted whatever powers it may need to underwrite public debts across the EU." 
Did you catch that?

"the only sane choice is to accept the logic of the currency union they created and the obligations that go with it."

That is right, Cook describes how leaders in France, Germany, and elsewhere (even China and the US) see the world.  The dish is beyond the point of return and the main course cannot be made into another entree.  Instead of tossing it into the garbage, all efforts will be made to fix the broth.  The leadership cannot adjust course, because failure in their eyes is just not tolerable.  In a sense, they are now in the "too far along to fail" just like there is the US version of "too big to fail".  Essentially, the currency union cannot be broken without a total fiery crash of all their economies and so the only course of action is to actually speed the process up!


Remember too, that the EU is not just an economic philosophy, it is really a political and ideological movement that attempts to coalesce Europe and make future wars impossible.  These ideas are not quickly abandoned by leadership when economic times get tough.

TONE DEAF OR JUST COMMITTED?
Cook's article helps me clarify that these politicians are not just fiddling away while Europe is burning, they actually see no other choice than to solidify efforts to "save the system".  In their rational thoughts, the undoing of the Euro is not only admitting that mistakes have been made, it is more like surrendering to an army that eats their prisoners.  I detect a hint in Cook's writing that he actually supports the notion that the Eurozone must forge ahead, but as we know there are often many choices that can be made even when we think there is only one.  My sense is that the EU leadership thinks there is only one pleasant choice available, and that is to save the union.  Unfortunately, I don't believe that they agree with the notion that I hold that they can still save themselves if they simply stop now.  There will be suffering and pain, but at least the process with be limited to some countries and they can get working  on recovery.  Unfortunately, countries like Greece, Spain, and Portugal will suffer immensely while the EU groups "saves" them, and then they will suffer even more if the fix doesn't work.  Ultimately a botched job will bring down even more than the trouble spots and will potentially destroy the very large economies like France and Germany as well.

There is actually another choice here that we keep hearing.  The ECB could simply begin monetizing their debt (start printing) and then purchase all of the Italian and Greek bonds in the open market.  The move to do this would immediately crush any bond shorts and it would drive sovereign bond yields down.  What stops the Eurozone leadership from doing this?  Simply the Germans are fearful that the move would devalue their currency and usher in longer term hyperinflation.

PROMISES, PROMISES
There is another problem with printing and it simply is that Europeans all have a promise problem.  What do I mean by that?  Developed countries in Europe and the USA have gone wild promising benefits to aging workers that simply can't be met.  In time, each of these countries is finding that the future obligations of supporting retirees is just too great.  As troubled debtor countries like Greece make attempts to cut those promised benefits we see riots and strikes as a result.  The EU countries have only scratched the surface of their spending problems and until the expense side is adjusted, there are no "fixes" that will solve the debt crisis.  Ultimately, I believe the Germans will not get their wish and the EU will print as there is no fix for this problem other than wiping out  a lot of debt (which won't happen).  Let me be clear as well regarding Italy, despite what we are hearing, the country is not in collapse mode like Greece, in fact, it is the 3rd largest economy in the EU.  Having said that, it is spending too much and is now facing interest expense costs that no developed country can endure for the long term.  The attack on Italy must be dealt with with the overt action of the fiscal leadership to stop bond yields in their tracks.

NEXT STOP, FISCAL UNION
In my opinion, no matter what efforts are made by the ECB and EU leadership, they will fail.  The failure of all bailouts and bond buying will result in the last ditch political move to wrest national sovereignty from the nation states and consolidate economic power where taxation and revenue decisions can be made for the entire region.  Clearly this was the goal all along, we just haven't seen a big enough crisis to push the Europeans to abdicate their self rule.

SO WHERE DO WE GO FROM HERE?
I don't think there is a simple answer to this question.  The reality is that if Europe would go all in and become a fiscal union, I think the short run would make the Euro much stronger and the USD weaker.  US equities would go nuts and go much higher.  You might actually see gold reverse on this news which would be quite odd, but I think it would take the fear premium off of gold significantly even though the act of "printing" should send things higher.  Before this happens I am still convinced that we will remain in this trading range from 12,750 on the DJIA to 11,500 or from 1345 to 1185 on SPX.  The movements in the indices in this range will be driven by rumors and retractions of statements.  The "healthy" market with 2% and 3% moves in either direction will continue till we have some sort of resolution.


GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/

Friday, November 11, 2011

NO WORRIES THIS WEEKEND, ITALIAN BONDS IMPROVE

Apparently the "ALL CLEAR" has been sounded as Italian 10 Year Bonds are heading higher and bond yields are retreating.  While the sovereign debt issues are still well above the danger zone which is around 5.50% it is significantly better than a 7% handle yield which we witnessed earlier this week.  I wonder who could be buying all of those Italian bonds?  




GOATMUG
Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/

Wednesday, November 9, 2011

PASS THE PARCEL - DEBT GAMES

DEBT BOMBS
Please watch this 4 minute video that highlights the problems that the Eurozone is facing.  Every day that I consider the situation I am still in awe of how the leaders of these countries will destroy their own nations to preserve a broken system and a stack of lies. 

It takes a courageous man or woman to stand up to institutionalized fixtures and fight for what is right and just, especially when it might create short term pain.  Unfortunately there are no courageous men or women in Europe or the US to make this kind of stand.  This thought is only reinforced when we look at the Penn State situation.  In the US we exalt football to the level of religion.  We hear that it is a man's game and rite of passage where leaders are made and it is where the our nation finds its heros.  Yet, even on this battleground of excellence we find silent men that follow procedures instead of doing the right thing.

I'm sure the FED and IMF will attempt to ride to the rescue of Italy and the Eurozone this week, but we all know that it won't help in the long run and by the assessment of the video, it won't help at all next year.

Enjoy.






GOATMUG
Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/


Monday, November 7, 2011

KILLING THE BROKEN SYSTEM BY SAVING THE SYSTEM

UNINTENDED CONSEQUENCES STRIKE AGAIN
So, the question that has been on my mind over the last couple of days, "What Happened to MF Global? and also, "Why?"  We are finding out all sorts of details of mis-management and lack of risk controls at MF Global and the sheer arrogance of Jon Corizine at the helm of the firm. 

I suggest reading Felix Salmon's article at Seeking Alpha for a perspective on the firm.

http://seekingalpha.com/article/304132-what-happened-at-mf-global

Beyond this explanation I think it is important to go further because I believe this week is going to be critical for the markets, currencies, and global economies and we can lay the blame all at the feet of the Eurozone leadership and ISDA and their efforts to save their broken system by destroying their system.

EFSF AND THE GREEK BAILOUT
Remember two weeks ago when markets ripped higher because the Europeans finally came together and agreed to agree on things they would attempt to put together in the coming months?  Remember the Slovakia vote that paved the way for the EFSF and saving all of the Eurozone?  Remember how a 1 Trillion levered SPIV would be the catch all for crummy assets and remember how SOME institutional holders of Greek debt would suffer 50% losses and others 21% losses and even others, no losses?

Ok, so we remember all of that.  What I want to turn your attention to though is that despite the 800 point rally in the Dow in a mere week or two, despite all the agreements, we are actually in a far worse position in funding and liquidity terms than we were just weeks ago.  Why?  As part of the EFSF agreement, banks that form the ISDA (International Swaps Derivatives Association) colluded to state that the write off of 50% losses on holdings of Greek debt IS NOT a default triggering event for their purposes and for the purposes of CDS (credit default swap) protection..  Is this important?  Yes. 

CDS - INSURANCE COMPANY AND HEDGE FUND "INSURANCE"
If ISDA (the banks) can rule that the insurance protection you bought under a standard ISDA document (binding contract between counterparties- many buyers just use the standard contract instead of negotiating their own contractual triggers) even when the rest of the world knows that an "event" did occur, then institutional buyers that just took a bath and other potential buyers of sovereign debt suddenly need to rethink the risk that they have been acquiring in their portfolios. 

If their hedged portfolios are no longer hedged, why would you ever buy a Greek or Spanish or Italian bond?  The answer clearly is, you wouldn't. 

WHY WOULD ISDA CLEARLY LIE HERE?
ISDA would lie for a couple of reasons.  First, the banks would lie because they have written a bunch of this CDS as protection against a sovereign default.  While the total net exposure is probably not huge for Greece, we all know that whatever happens in Greece doesn't stay in Greece and it will be visited upon all of the PIIGS countries, so it is in the best interest of the banking cartel to rule that a 50% loss is not a default event.  If there is no default, they don't have to pay.

Second, a triggering event would immediately call for downgrades of other European banks like the French and German banks that hold alot of these bonds from credit reporting agencies.  Downgrades require more capital and the death spiral continues as the countries that issued the defaulting debt will need to somehow find more money to save their banks that are choking on their own countries exploding debt.  Nice huh?

Third, ISDA would rule in favor of a non-default because it keeps the laughable game going for just a bit longer.  This is the irony of the entire mess in my opinion.  Everyone at the table knows that there is no fix here, it is just a concerted effort to keep the plates spinning as long as possible despite the fact that any extension of the duration of this mess just makes the next mess worse.  It is all a sham.

WHAT IS THE IMPACT HERE?
Well, if you disrupt the natural forces of the market where some win and some lose by ruling that losing isn't losing (no default) you create a situation where all buyers repudiate the offerings in the Eurozone.  Can we substantiate this?  Of course, let's look at Italian bond yields since the heist occurred.


Next like all government interference, we'll see some kind of anti-market forces that try to hold rates down and keep prices up, further distorting the market pricing mechanism.  Take a look at the following  Zerohedge article for information on this escalation.  Italy Calls ECB's Bluff.  By the way, as I'm proof reading my post that I've been working on for a few days, we see that the yield continues to rise another 15 bps or so to 6.65%.  This is not the sign of anything healthy, the Italian crisis is now underway.

WHAT DOES IT ALL MEAN?
So, where we are at today is that the Eurozone, ECB, IMF, G20 solution achieved in the last week along with the outright rigging of the system by ISDA has ushered us one level lower in the death spiral of the Eurozone collapse.  If you had been a buyer of bonds and had excellent risk management techniques by buying protection to offload risk, you no longer have that capability and you actually have a ton of risk on your books.  Essentially, you are very pissed off and scared to death!  Another way of saying it is that you are no longer a buyer of these bonds at any cost.  As a result, the ECB is having to step in an buy these bonds at issuance to keep Italy from blowing sky high, although the damage has been done.

As we can see from Felix Salmon's article, the ECB intervention did nothing to save MF Global, and I suspect that we'll see more of these things as we find that hedgies and even banks that were holders of sovereign bonds are really hurting (Jefferies anyone?) as they don't have the protection they thought they had.  The MF Global bankruptcy and theft and mis-management ranks within the top 10 in terms of size of all bankruptcies.  How can this happen?  How can their be rumors of hundreds of millions of client money missing?  How can this have occurred in this age of significant oversight and regulatory control?  Clearly we've learned nothing and clearly the ECB, Eurozone, or US government are not in a position to save anyone or have any idea how to do it.  The only goal in all of these actions is to extend the time before the implosion finally happens in all of its nastiness.  Get ready, it is still coming.

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/




Wednesday, October 26, 2011

GOVERNMENT CHEESE MUST BE GOOD (SNAP DATA)

NON STOP GOVERNMENT GOODNESS
My hopes were dashed this month when I finally took the opportunity to look at the July SNAP data.  This report reveals the number of folks partaking in the government SNAP program, or simply put the food stamps program.

Once again we have 45.3 million people accepting the benefits of the SNAP program (2nd highest being May 2011), and we are paying an annual benefit cost of $6.087 billion.  These levels are 8.4% greater than last year and are a 2.6% year-to-date increase.





DO ALL THESE PEOPLE REALLY NEED THIS?
45,000,000 people is a lot of people.  My feelings on the program are mixed because I believe there are deserving and desperate folks that absolutely need assistance and then I know that there are a bunch of lazy, self-serving, system-scamming people that are just taking advantage of a bloated government sponsored give away.  Callous?  Not at all.  Since this federal plan is administered on the state level, the individual states determine the specific rules for the usage of these funds in their territory.  Some states are tough about doling out benefits, others, not so much.  Tight fiscal budgets have led to a review of the liberal views of passing out free government cheese to anyone and everyone.

Please examine the link here about the state of Michigan and their experience with the food stamp initiative -  (As you know I have about 15 to 20 stories in my queue at a time, and this link was one I had in early August that I was going to write about.  That old link doesn't work, so here is another that is a summary).  In this story, we find that Michigan kicked off about 30,000 college students that were abusing the system or at least maximizing the benefits available to them!

Despite the move to kick those deadbeats out of the program we find that the July Food Stamp data shows and increase in participants after the small decline we witnessed in June.

I wonder if the OWS guys qualify for these programs?  I'm sure they do, if they are demanding free college tuition they must have already achieved free food, shelter, and clothing since those are the basic needs of each human.  Now those needs are met by the government, it is only right to expect more efforts to provide every want and need these kids could imagine.


GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/

Monday, October 24, 2011

TRADE THEM LIKE YOU SEE THEM (IDX)

I've been watching a trade for several weeks and yes, there is part of me that regrets not playing it as it move exactly to the level that I felt would be a compelling area to short.  In effect, missing out on the move higher has actually been good because I've had to remain committed to trading the Market Vectors Indonesia etf according to the plan I identified weeks ago.

We are now very close and therefore I have begun positioning in the name for a pullback.
I believe IDX will encounter some significant resistance at $30.50 and will then turn lower to the $25.00 level.


Update - I am close to being stopped out of the INTC short trade, but will continue to hold until taken out.  As good as this morning looks, there is always Turnaround Tuesday to being the market back to reality.


GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/

Friday, October 21, 2011

OCTOBER MACRO UPDATE (Rumors and Rumors of Rumors)

OCTOBER MONTHLY MACRO ECONOMIC UPDATE

I took a month off last month and it was very good to have a break.  I'm excited to "get to" put this together and see what the data is telling us.  As of Friday, October 21, the equity markets have stabilized a bit after a thrashing and we are back to the 1235 level on the SPX.  Earnings have been mixed and there have been some misses that shocked the world and then some beats that have been quite good.  Overall, I didn't expect this earnings season to be all that bad, but the next one should be more than interesting. 

Investing in these markets is quite perilous as 2% moves up and down intraday are not signs that we are investing in a healthy market.  Rumors and rumors of rumors result in absolute face-ripping turns that can leave your rear and your portfolio aching.  It is important that you slow down and remember the risk rather than focus on the money you are not making by being in a trade.  I've had several email conversations this week with people that were upset they were "missing it".  Don't worry, there will be another trade after that one.

Let's dive in shall we?

RAILS  - http://www.aar.org/NewsAndEvents/~/media/aar/railtimeindicators/2011-10-rti.ashx
2011 continues to track right on par with 2010 on a non-seasonally adjusted basis.  From an economic perspective one might suggest that this is bearish, yet oddly I find myself noting that despite all of the ominous double-dippiness that I see, it is quite positive to see that we are tracking right along with last year and not falling.  This is based on the assumption that many folks have that 2009 and early 2010 were essentially pulling forward all sorts of demand (and that was the case for cash for houses and cash for clunkers), but at least in the midst of this "pull forward" 2011 has been able to match that transport demand punch for punch.


US Carloads - 52 Wk Moving Avg -
What does this graph tell us?  Simply that we are better off now than we have been in terms of moving stuff compared to anytime in the last 2 years.  It is not a huge revelation to note that we are not near the 2006/2007 excessive peak of everything.


Crushed Stone - I've finally found a reporting source for crushed stone transportation since Railfax went to a subscription model (greedy 1%ers!)  Here we find much the same that 2011 is right on target with 2010.  Unfortunately for commercial builders, this indicator is telling us that there is no real demand for commercial building at all.



MANUFACTURING INVENTORIES
Here is nice graph I pulled from the Railtime report that highlights a concerning trend.  See the red line there?  That is showing that since March of 2009 manufacturing inventories were at significant lows.  As we've mentioned often, the red line demonstrates that the climb in inventories has fueled much of the consumption of raw materials and the illusion that the economy is a lot better.  Now that we are near peak levels reached in 2007 and 2008, where do we go from here?



ECRI - Weekly Leading Indicators - http://www.businesscycle.com/
The WLI from ECRI continues to show weakness and point toward a "new recession". 


6 MONTH EURIBOR - Charts
Euribor continues to remain stubbornly high for this type of credit environment.  Euribor is the rate in which banks can borrow from each other in Euros.  While the absolute levels here are nowhere near the highs of the past in "normal" credit markets, given the scary lending environment the Eurozone is in now, the uptick in rates over the last two months is indicative of the stress between counterparties.  Despite being told that a solution is in the works to the Greece solvency problem, we've seen other dominoes fall.  The "dominoes" are weak banks that are exposed to bad sovereign debt.  These include Dexia, and a few other French banks.  These rates seem to be on their path higher.....again.


PULSE OF THE ECONOMY - http://www.ceridianindex.com/
I'll be very interested to see the results of next months report from the UCLA/Ceridian Fuel Index.  Readers should recall that the Ceridian Index monitors the fill-ups of truckers across the country and in turn, this fueling activity gives us an idea of how the economy is doing in real-time.  Over the last couple of months we've seen a slow-down in these figures and this is an indication that a recovery is on the skids.




MONSTER.COM INDEX - http://about-monster.com/employment/index/15
The Monster.Com Index shows a reading of 148 which is actually very good.  The print represents a 7% year-over-year gain, but more importantly the figure is the highest level we've seen in a very long time.  The Monster.Com Index measures the number of on-line job listings available.  Obviously in this graph you can tell that September is seasonally the most active job posting month, but when we continue to hear that there are just no jobs available, we must question the common wisdom.  Perhaps some of the OWS guys can use some of their down time to hop online and apply for one of those "fair wage" jobs they are demanding.



HOME SALES - Uh oh. - http://www.realtor.org/research/research/ehsdata
Home sales prices are beginning to fall again.




MIT / MOODY's REAL TRANSACTION BASED INDEX - http://web.mit.edu/cre/research/credl/rca.html
The late September release of the MIT/Moody's Transaction Based Index show some positive news, however the release captures data from the month of July.  The month of July noted an increase in transaction price of 5% which is quite good given the circumstances of the economy.  Obviously the follow on months of August and September will be critical and we'll keep watching them.







SCRAP METAL COMPOSITE INDEX - http://www.scrap.net/cgi-bin/composite_prices.cgi?id=100000&num=5
Alan Greenspan better take notice as scrap metal prices are plummeting.  Since their peak in February, metal prices have fallen.  Mr. Greenspan used scrap metal as an indicator for the health of the economy.  I'm wondering how healthy the economy looks given the almost 20% drop in the index.


FINANCIAL CONDITIONS INDEX - http://www.bloomberg.com/apps/quote?ticker=BFCIUS:IND
Bloomberg's Financial Condition Index is also suggesting that we are in recessionary territory.  Any level under 0.00 gives us the information that the economy is contracting.





BALTIC DRY GOODS SHIPPING INDEX - http://www.bloomberg.com/apps/quote?ticker=BDIY&exch=IND&x=15&y=11
After reaching multi-year lows in February, the BDGI seems to have found some footing.  and the spot rate shipping index has almost doubled.  Unfortunately we need to resist the desire to rush out and buy shippers as I recently read a story that noted that shippers have another huge delivery of ships coming online in the next several years.




USD INDEX - http://www.bloomberg.com/apps/quote?ticker=DXY:IND
The dance of the USD continues as each Eurozone fix rumor creates massive gains and losses in the USD.  September's spike in the dollar has been met with October's destruction in the greenback.  The volatility will continue till we see some sort of resolution from the ECB, IMF, and Euro countries.  A very cursory look at this chart suggests that their may be a small move higher in the dollar and then a continuance of the larger trend down to retest 74.  If that does happen, the equity markets will enjoy a healthy rally.



COPPOCK INDICATOR -
Well I've kept the Coppock Indicator warmed up and up to date despite my belief that it is pretty worthless.  I've tracked this indicator for more than a year now and as I noted when I started, it didn't have much predictive power, and doesn't seem to have much still.  Recently I did a post on the notion that the slope of the moving average had something to do with the predictive capabilities, but I'm  not sold.  Needless to say, the Coppock Indicator for September was still in "sell" mode and thus the big rally over the first weeks of October would have been missed.  Coppock needs a close over 12,500 to earn a buy turn signal.




MACRO SUMMARY -
As bearish as I sound on many posts, I am not as bearish as I could be and actually feel a bit positive.  Employment measured in the Monster.com Index is up, real estate transactions (commercial) are getting better, rails are shipping as much or more than last year, and input costs are falling (copper, scrap, etc).  There are serious headwinds, most notably a lack of any confidence in the sustainability of the "recovery" and of our leadership in the political sphere.  I think this is exactly the kind of environment that could foster upside surprises in terms of economic performance since everyone is just so darn pessimistic.

TRADING UPDATE -
The last two weeks of rallying has saved the bulls and charts have made some really compelling progress to bolster the bullish case.  As I type this, I am reminded that these markets have tended to move into territory lately that "bolsters cases" and then suddenly destroys that case in an instant.  With that in mind we'll pretend that the Eurozone issues don't exist and we're simply going to look at the charts and attempt to discern where we could go!

$SPX looks strong here for a move to the 1275 area as this would be essentially the 200 day moving average.  As I discussed in the earlier USD chart, this type of move higher in SPX would result as a drop in the USD paved way for the equity market rebound.




14/40 CROSSOVER - On a much longer time frame we get a sense that perhaps all things are not well with the indices as we see that on the 14/40 chart of $SPX that the 14 Day EMA on a weekly chart is still below the 40 day EMA.  This is essentially still a hold bonds not equities signal here.  While not pictured here, the MACD is turning up, but that doesn't change that the longer term call here is still bearish till we see a cross back over.





Finally, let me share with you a couple of perspectives on specific names.

FCX - Put this one on your watch list.  I have been playing this one long and short all week, but am out of the name as of today.  The move into the $36 area from the $34's yesterday makes this one in no-man's land.  However, if we do see a continued rally in the Euro, we'll see commodities run up and FCX has been strong despite falling copper and gold.  A continuation of this could lead to much higher prices in FCX near the $45 level.  If we get a move to $38.25 and it is repelled, it might be a good play to short.  If $38.25 holds well, a short trade may be the play with a low $32 handle as a target.  In the near term, here are the levels I am watching.

Bullish - Resistance at $38.25 if goes through there, $45 is in play.  Lower support at $32.60





INTC - While the FCX play is bullish I have been watching and shorting Intel.  Oddly, I actually like INTC alot, and had identified it as a great "defensive" name due to the high dividend when the stock was trading near 19.00.  Unfortunately I missed that entire run as I was over thinking it.  Now, despite my admiration for the dividend and the good results the company posted, I find that a 30% + move in a couple of weeks is just too much.  Look at how INTC has struggled at the $24 level.  If this isn't a good opportunity to short, I don't know what is.  I'm setting a tight stop at $24.75 and letting this one go with a target of $21.50 as a retracement to the 50 D MA and then possibly a $19 target again where I'd then flip and go long.  Finally, you'll note on the chart that INTC is at a point that is 2 standard deviations above the longer term average which is essentially the 200 day.  This seems that the move up has been a bit overdone, therefore it reinforces the bearish posture in this trade.




Well, that's enough for me today.  Please check out the blog often as I'm back and enjoying my publishing outlet again!

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/





Thursday, October 20, 2011

I SEE FED PEOPLE....THEY'RE EVERYWHERE


And just as I post the most recent article about Bill Dudley, the NY Fed Chief putting on a PR blitz to save the reputation of the Fed and inform the public about the good works they do, we get another gem that reinforces just how rigged this whole system is. 

FORMER KANSAS CITY FED PRESIDENT, THOMAS HOENIG NOMINATED FOR FDIC CHAIR BY OBAMA.
http://www.bloomberg.com/news/2011-10-21/obama-nominates-former-fed-president-hoenig-for-fdic-vice-chair.html

Hoenig, who has served as President of the Kansas City Fed for 20 years and submitted his resignation on October 1st of this year.

Is it odd that Hoenig would retire only to move into the leadership role at the FDIC?  Perhaps not, however this interesting story about Bank of America, highlighted below, has me thinking a bit more now that I have noted the story.

WHEN THERE IS DISAGREEMENT IN THE WORKPLACE, FIRE THEM
When I worked at the hedge fund back in the day, you could tell when someone was about to be asked to leave the firm (fired).  Typically, the timing would coincide with any challenge or disagreement with the CIO on any investment decision or issue.  Once that event occurred the poor trader or manager was doomed to pack up his belongings within 30 days.

I think the Fed must have this type of leadership approach when it comes to the FDIC

B of A Said to Split Regulators Over Moving Merrill Derivatives to Bank Unit -
http://mobile.bloomberg.com/news/2011-10-18/bofa-said-to-split-regulators-over-moving-merrill-derivatives-to-bank-unit?category=%2F

Hmmmmm.  Think just the first two paragraphs -

"Bank of America Corp. (BAC), hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation.

The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position."
See, the FDIC looks at these transfers of derivatives into the bank holding company and sees these as potential claims against bank assets.  The counterparties that entered into these with Merrill Lynch love this because they are getting a "better" rated counterparty with much deeper pockets. 

Isn't it interesting that the FDIC and FED are split on this approval and a 20 year veteran Fed President would suddenly be nominated to a key leadership position at the FDIC?

ONE MORE JUST FOR GOOD MEASURE -
While it is not related to this story in any way, you just can't avoid a Federal Reserve connection or Goldman Sachs employee in any important office in our government.  While he never worked at Goldman, you've got to know that our friend Herman Cain was on the Board of Directors for the very same Kansas City Federal Reserve in the early and mid 1990's. 
MONTHLY UPDATE -
I took a much needed month off from writing the monthly reports and I feel refreshed and feel like I have a better perspective on the market due to the lay off.  I'm dealing with extended family health issues so I seem to have much fewer hours to devote to writing.  I will attempt to write less long, but more frequent posts in the next month.  The monthly update should be finished tomorrow for some weekend reading.

GOATMUG


Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/


THE SOFTER SIDE OF THE FED (SCARY)


I encourage you to read the piece in Bloomberg this week on Bill Dudley, the President of the NYFED titled
"Not Your Father's New York Federal Reserve NY FED President - Bloomberg Article by Caroline Salas Gage

PR BLITZ INDICATES FED HATERS ARE WINNING
Are you getting the idea that the FED is putting the full court press on the public to encourage them to see the side of them that is benevolent and for the little guy?  Yes, me too.  I mean how on earth could we possibly believe that the Fed had anything but the common folk's best interest at heart as they engineered too major stock market collapses and one real estate implosion in the last decade?

Dudley is one of the 3 Fed chiefs that actually matter, the others are Fed Chairman Ben Bernanke and Janet Yellen who is the Vice Chair of the Federal Reserve Board.

The article notes how hard Dudley is trying to get out with regular people and explain how the Fed is helping them.  Clearly he hasn't internalized the criticism of the Fed and questioned if anything they have to say might be true as the Fed continues to squeeze investors that use fixed income investments or even savings accounts as part of their portfolio.  Dudley obviously believes that old ladies should need to take more credit risk or simply cut out medical coverage or incidentals like food or shelter rather than raise interest rates.

Dudley's moves highlight the growing importance of the public's view of the Federal Reserve given that it has now become politically acceptable to believe that the Fed is a part of the financial crisis.  Ron Paul has a book about Ending the Fed, Rick Perry also is quite wacky crying that the US needs to get rid of the Fed.  I've even seen a sign or two in the OWS demonstrations that actually reference the Fed.  A growing move to understand and dismantle the Fed is absolutely not in the Fed's best interest..... nor in the interest of the banks and uber-wealthy 1%ers.  I expect more concerted efforts to humanize the Fed and make Joe 6 Pack feel happy to have a benevolent Fed on our side.

INFORMATION FLOW OR BIG BROTHER?
Now, add this to the recent "rumored" request by the Fed to begin a project to scan and analyze references to the Fed in social media and the blogosphere in order to capture market sentiment, I think you have a situation that could be ultimately bad for all of us in the general public.
http://www.forbes.com/sites/mobiledia/2011/09/30/federal-reserve-wants-to-monitor-facebook-twitter/

http://info.publicintelligence.net/FRBNY-SocialMedia.pdf

Clearly the conspiratorial side of me feels like the Fed has sinister intentions when they move forward with this project, however, the NY Fed assures us that it is all good, why worry?
 
"The project reflects its (NY Fed's) commitment to “improving its communications and engagement with the public in order to enhance and improve the public’s understanding of its activities and the role it plays in supporting the U.S. Economy,” according to a Fed spokesman’s statement."

I'm sure the Fed's efforts will be passive and harmless and simply used for data collection.  Having said that, I'm sure it won't be long till a blogger or Facebooker is threatened with jail or lawsuit for disparaging the Fed and invoking some type of crisis of confidence relate to their posts.  Think it can't happen?  Look no further than the Eurozone's sovereign debt issues where investors and "evil speculators" are targeted for stating that the sovereign countries are broke and the bonds are a poor investment.  Give the US debt crisis a few more years and we'll see how "passive" this monitoring becomes.

GOATMUG
Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/