Wednesday, December 1, 2010

HATING NFLX HERE - TIME TO SHORT

NFLX GOING SOUTH
With the disclosure a few moments ago that the FCC has no problem with pricing mechanisms that charge based on broadband usage this puts significant pressure on companies that provide content to end-user web surfers.  In other words, when you are at home and use Netflix to order a movie you buy that content and then funnel it done the electronic superhighway to your computer or internet tv.

The present situation is that Netflix sends that big load of data to you and it uses the infrastructure of your internet provider like AT&T, Comcast, or other ISP.  As that big bundle of data comes through, Netflix simply sends it off and the carrier absorbs the cost of delivering that to the user.  Of course as more folks begin using BluRay players and Netflix this places larger and larger infrastructure demands on your internet service provider who isn't necessarily getting more revenue for your greater use of its bandwidth.  The added volumes also impact their ability to provide great service.

The FCC ruling today means that Comcast and others probably have the ability to charge those internet content providers for the amount of data they are sending onto the ISP's highways.  Netflix is a great idea if it only costs $10 a month, how great of an idea is it if Netflix is going to cost $30 a month as they will need to pass these toll charges on to consumers.

Here is a snapshot of NFLX right now.  Shorting at $202.50 and I have a stop at $206.00.  The chart has been impressive going pretty much straight up.  All bubbles burst and this is probably the catalyst.  A drop to $163.00 is quite possible with some churning at $179.


GOATMUG

Tuesday, November 30, 2010

BANKS LIE AND DEFAME THEIR EMPLOYEES TO KEEP THE FRAUD PLATES SPINNING

Check out this article from Bloomberg this morning.  B of A continues to deny (like all banks) that there was a problem with the way they handled the securitization process in rolling these into MBS.  Based on the testimony of a team lead in the mortgage litigation department at B of A, Linda DeMartini, we see that it was routine for B of A to hold on to the promissory notes and keep them in their name (possession) despite the fact they were required to sign the documents over and physically transfer the paperwork to the trustee (MERS).

Is it any wonder that MERS cannot produce the actual mortgages for all of these foreclosures?  Is it any wonder that some properties have been foreclosed upon by several banks?  Is it any wonder that NO documents can be found?

Of course B of A fired back that this lady was wrong and she didn't know what she was talking about.  All I need to know is if in fact she is wrong, where is the deed?  They haven't been able to produce one!

Enjoy - BofA Mortgage Morass Deepens on Promissory Notes Issues


TRADING UPDATE
As much as I think we are winding down this dump we've had since we highlighted issues in Euribor and CDS widening, the contagion that is bad fiscal policy in Europe has some pretty strong tentacles.  We are now hearing more about Portugal, Belguim, and others being targets of concern.  It won't be long till it is the USA.  Emerging markets and commodities have been whacked as we anticipated and for nimble traders heeding warnings you've done well.  For those that have toughed out the drawn down, you are ok as these currencies fall we'll see hard assets and the emerging markets rebound.  Be aware that emerging currencies will be the targets of their governments who will try to stem the flood of assets coming their way trying to get away from the disaster that is the Euro and the USD.  Rate hikes, capital flows taxes, and more will come so don't be surprised.  Personally I bought a large slug of silver in this weakness over the last week.  I anticipate that over the next year that this will prove to be one of my best trades.  It is a very long term and ill-liquid position so I won't provide much of an update other than once or twice next year.


GOATMUG


 

Wednesday, November 24, 2010

CURRENCY BATTLES HEAT UP -

USD NO MORE?
Our old friends are getting together to "support" us I see.  Here is a brief look at a story in China Daily that shows that our buddies, China and Russia agreed to begin to settle bilateral trade in their own currencies, shunning the USD.

http://www.chinadaily.com.cn/china/2010-11/24/content_11599087.htm

This is the beginning of the end of the USD and we cannot pretend to believe that our leadership at the FED and at the US Treasury didn't anticipate these types of moves.  Clearly there is beginning to be an overt repudiation of the dollar on the global stage.  The proof of this is that the Federal Reserve became the largest holder of US Treasuries this week.  We are clearly on our way to become the largest and worst banana republic ever.

TRADING UPDATE
While the past couple of weeks have gone as anticipated with a topping action in the market and a decline caused by another European swoon due to reality visiting stopping by for a few moments.  I think we will begin to see buyers swoop in and move this market higher over the final few months of the year.  Emerging markets have been hit as China continues to attempt to cool their inflation and we even saw Korea getting slammed after yesterday's geopolitical encounter with Kim Jong-Il (nut job).  Commodities too have suffered.  Despite this emergency in the East I think that the bad actor is simply trying to obtain some sort of aid and concessions and the west will willingly concede and give the nut case whatever he asks as long as he'll just play nice.

China must be loving this!  I'm sure they will be coordinating something with Iran here to ensure that our foreign policy and diplomatic weaknesses will be revealed to all.



GOATMUG

Tuesday, November 16, 2010

UNCLE BEN'S SAVIOR / A BURNING EUROPE -

EUROPEAN COLLAPSE?  EVERY COUNTRY FOR THEMSELVES!
I'm too entrenched in work to write a long passage here, so I thought it might be best simply to reference a post by Mish here that highlights the big trouble in little Europe.  As you know, Mish is one of my favorites and I read his stuff almost daily.  Please read - EU President Proclaims "Survival Crisis"; Everyone Wants a Bailout of Ireland Except Ireland; Austria tells Greece to Get Stuffed; Currency Ping-Pong

As I mentioned in the November update, the only thing that could have derailed QEII was the one thing that I'd been watching daily, European Euribor Funding Rates and Sovereign Debt CDS (Credit Default Swaps).  In beginning of the month post titled "November Update - Man Do I Feel Richer" I highlighted that all emerging markets anything and all commodities were much higher and I felt great.  I continued in the trading section to say that this would continue UNLESS...
 "If these continue to blow out this could derail the heroin induced rally the Fed has us on, just like what happened in April of this year."

JUST LIKE THE FIRST TIME
And so just like in April, we tested the highs of the year only to sink back quite quickly in a sea of fear that Europe would implode and the mess that is the financial community might spread its contagion around the world again.

So, I continue to watch those Euribor spreads like a hawk and it seems as though those are stabilizing and I'm watching CDS spreads as well.  While I said that this pullback was healthy and expected we need to watch the stories about Greece and Ireland.  I'm not doubting that they will come to some bailout - like they do every other time.  They must, or else the games cannot continue for everyone and every central bank.  So, my real outlook is that  I do believe that it is going to continue two or three more days which could be ugly, but theirs always a sticksave in the weekend isn't there?  As soon as we hear more people telling us that this really is the end and then we'll find our white knight (Uncle Ben and his boys and perhaps Jean Claude Trichet too?) to save us all.

I have trimmed my short term trading accounts but am not short here and don't want to get sucked into the idea that we'll see a complete meltdown. 

THE FIDDLER STRIKES AGAIN
I am seeing lots of weird stuff going on in the market and normal relationships are breaking down so it is always important to continue to be vigilant.  Oh yes, and right on cue when the dollar looked like it was about to be totally trashed and thrown away in a dumpster what should be find?  That's right, a European collapse!  Perfect timing allows the US to see some upward movement of the US dollar and gain some technical traction.  The European financial fires are music to a fiddling Uncle Ben.

Be careful!
GOATMUG





Sunday, November 14, 2010

Top 5 Things Goatmug is Cynical About --

Over the last few days I've simply been cynical.  Here are a few of the random thoughts I've had in those cynical moments.

COLLEGE
1)  The idea that every student and person in the US needs to go to college makes me cynical.  For a very long time I've been a proponent of the idea that we need to justify job descriptions and job requirements to the real world person that would actually do the job.  We have so many positions that require degrees when the requirement should be nothing more than an associates degree or other some real world experience.  Our system that suggests that a call center employee for the phone company needs to have spend 5 or 6 years at a university to earn $25,000 a year is simply crazy and a misuse of resources.  I believe it should be required that all people do a full calculation of the present value of their career track and the cost of their college education in order to justify the expense.  This calculation would therefore make it impossible for students to go to private colleges that cost $30,000 to $40,000 a year in an attempt to be an elementary school teacher.  I have seen too many people with $100,000 student loans balances that are earning $40,000 a year.  It is simply a recipe for disaster.  Don't get me started about for-profit colleges either.

If you're getting a sense that I've gone commie-red suddenly, you'd be wrong.  What you are reading is disgust at seeing wasted years and money spent trying to earn a degree that adds little or no value in relation to the income production power of the job.  Always inflating college expenses must reach a point where they cannot compensate a student for the future job they will be able to earn.  We are there.

CANCER
2)  The Susan B Komen Breast Cancer Cure Organization was probably started with great intentions, yet I cynically find myself wondering if it carries on the same legacy that it did originally.  Let me start by saying that my mother died of brain cancer and therefore I am sensitive to the terrible loss and destruction that cancer creates.  My cynicism about this foundation (and others) is that it has become more of an "organization" or movement and a very big business rather than a real attempt to "find a cure".  When you have NFL players and MLB players wearing pink on the field and looking ridiculous, you have big money in play.  I often find myself wondering what would happen if any of these researchers actually did cure cancer how many folks would be out of work from there well paid positions within this non-profit?  Something to think about.  Are we finding a cure, or finding a cause to have people open their wallets?

FEDERAL RESERVE
3)   I'm cynical that the Federal Reserve really is being honest about anything.  Here are a few things we can be quite sure they are not being straight forward about;
A)  That they know what they are doing and can begin and end it well.
B)  That they are telling the truth.
C)  That they really want to create jobs.
D)  That they have a mandate to stabilize prices (what stability have you seen).
E)  That the FED is truly an independent body.
F)  That inflation as measured by CPI is representative of anything.
G)  That our economy is really improving.  - This is clear since we keep having new renditions of stimulus.
H)  I'm skeptical that "asset" price increases will fix anything except make speculators wealthy until the bubble is popped, which will make them unwealthy and in need of a bailout.  (And then we will repeat it again).

PEOPLE
4)  I'm cynical about people today.  We are having an issue in my neighborhood where everyone wants to do things their way without concern or care about those around them.  Interestingly, they don't like it when their neighbors take matters in their own hands and do things their own way to deal with the problems they cause.  I've noticed that the people that cause problems don't engage in discussions about issues as a way to avoid them and then complain loudly when avoiding the issue is unavoidable or not to their liking.  I think people are funny (in a not so good way)- and that makes the Goatmug cynical.

US FOREIGN POLICY
5)  Our foreign policy is one issue that strikes me as laughable.  In contrast to the Neo-con approach we now have an apologetic leader that believes that words are a substitute for action in every sphere of the world.  Our leadership doesn't contemplate that soft speech in places like the Far East or Middle East will work as effectively as it does in Western Europe.  Our President talks strongly about reducing our active presence in Iraq and Afghanistan, yet deploys just as many troops and creates as many mixed messages as possible.  Our leadership embraces India and therefore isolates Pakistan.  We talk tough to Israel yet continue to neglect to ensure that bellicose Iran is without nuclear arms.  The strategy of unending talk and passive hope will yield the same results as the Bill Clinton's North Korean experience.  My view is that we are attempting to be seen as "friendly and good" by people that see us as eternally evil and imperial.  While the evil and imperial aren't nice words, they certainly do garner respect and in many cases fear, while being viewed as "friendly and good" will most certainly invite intentional subversion of power and physical attack.  In a Utopian context it is better to be liked.  In the real world it is often more desirable to be feared.  I'm therefore cynical because I feel that our administration wants to be a model global citizen more than it wants to have our citizens be alive.

GOATMUG