Friday, December 24, 2010

12/22 Ho Ho Ho...ly !@#$!@#$

Written on December 22, 2010

Is it just me, or did Santa trim his beard a bit? If you think Christmas came a little early this year, maybe you are right. We heard some rumors that Santa was actually borrowing money and filling up his sleigh when he showed up in the neighborhood early this year. Apparently he left some IOU’s in the stockings hung by the chimney with care…enough to widen the US deficit ~$17,500 for every US household..

We did not hear any stories of Santa giving out many presents when his sleigh came around, except for the banks where he unloaded his early collections. Those guys seem very happy this year.

When he visits your house, I hope you have a wonderful experience and get lots of presents. I am not sure he will make it to Doha this year, as they are not willing to put anything into his sleigh over here.

May your:

* Leverage be big in the right investments;

* Ride be smooth on the back of low interest rates;

* Assets surf comfortably along the wave of massive governmental spending;

* Investments soar far more than the inflation you experience;

* Liabilities shrivel for your genius in borrowing in countries with soaring deficits, profligate politicians and declining currencies

Merry Christmas to all and to all a great 2011!

Leon

12/20 Wise Men, Stars, Peace on Earth, Good Will Toward (some) Men...

Written on December 20, 2010

Merry Christmas, Happy Hannukah, Best wishes on Chinese New Year and the Year of the Rabbit-

Since my roots are British, and in this season we celebrate the findings of some wise men following a star in the East not too far from where I now live, I could not help myself…

Tuesday will mark the winter solstice, the shortest day of 2010 and a coincidentally there will be a lunar eclipse happening that day. The last time these happened on the same day was 456 years ago. I started looking at that year as many market timers put a lot of stock in these lunar cycles. My interest was more historic.

Turns out that 1555 was a good year if “Peace on Earth” was the goal.

The Peace of Augsburg was signed ending the struggle between the Catholics and Protestants in the Holy Roman Empire and the Ottomans (Turkey), under Suleiman the Magnificent, signed the Peace of Amasya پیمان آماسیه (for those that read Farsi) with the then Persian Shah (Iran).

Good will toward men…not so much. Peace cost a few everything including their freedom and their very lives. Queen Mary (not the ship), etched in history her nickname as “Bloody Mary” by appeasing the Pope and keeping the British town squares warmly lit with the bodies of vocal Protestant holy men.

1555 was pretty rough on some potential Christmas carolers.

John Rogers became the first Protestant martyr to be burned at the stake.

Laurence Saunders followed his lead and was led out to the town square in his bare feet then burned at the stake.

Rowland Taylor burned at the stake.

John Hooper burned at the stake.

Hugh Latimer burned at the stake.

Nicholas Radley burned at the stake.

And, finally, Thomas Cranmer, the Archbishop of Canterbury (the bloke that had annulled the marriage of Henry VIII to Catherine of Aragon so HH could move along to another wife), was imprisoned and then in March 1556 was burned at the stake for this “heresy”.

The John Rogers execution is something out of a Mel Gibson movie…

Mr. Woodroofe, one of the sheriffs, first came to Mr. Rogers, and asked him if he would revoke his abominable doctrine, and the evil opinion of the Sacrament of the altar. Mr. Rogers answered, "That which I have preached I will seal with my blood." Then Mr. Woodroofe said, "Thou art an heretic." "That shall be known," quoth Mr. Rogers, "at the Day of Judgment." "Well," said Mr. Woodroofe, "I will never pray for thee." "But I will pray for you," said Mr. Rogers; and so was brought the same day, the fourth of February, by the sheriffs, towards Smithfield, saying the Psalm Miserere by the way, all the people wonderfully rejoicing at his constancy; with great praises and thanks to God for the same. And there in the presence of Mr. Rochester, comptroller of the queen's household, Sir Richard Southwell, both the sheriffs, and a great number of people, he was burnt to ashes, washing his hands in the flame as he was burning. A little before his burning, his pardon was brought, if he would have recanted; but he utterly refused it. He was the first martyr of all the blessed company that suffered in Queen Mary's time that gave the first adventure upon the fire. His wife and children, being eleven in number, ten able to go, and one sucking at her breast, met him by the way, as he went towards Smithfield. This sorrowful sight of his own flesh and blood could nothing move him, but that he constantly and cheerfully took his death with wonderful patience, in the defence and quarrel of the Gospel." FREEEDOM! (added for effect)

Μὴ νομίσητε ὅτι ἦλθον βαλεῖν εἰρήνην ἐπὶ τὴν γῆν· οὐκ ἦλθον βαλεῖν εἰρήνην ἀλλὰ μάχαιραν. (Think not that I am come to send peace on earth, I came not to send peace… – Jesus of Nazareth)

My definition of a free society is a society where it is safe to be unpopular. - Adlai Stevenson

Peace if possible, truth at all costs…Martin Luther.

It did not go so well for England. Three years later they lost Calais to the French, thus surrendering the last English possession on the Continent.

Freedom or peace, I guess I would choose freedom. Some never get either. Don’t forget to count your blessings during this season and while you are setting your sights and your goals for New Year.

All the best,

Leon

12/14 4th Quarter so Far

Written on December 14, 2010

Huh?

Death spirals in US bond markets have not often lead to sustainable rallies in US stocks.

It was an “interesting” quarter…swapping bonds into stocks would have benefitted US investors handsomely.Selling bonds was obvious and saved 4-9% but I missed the buy stocks side of this allocation as I still have a blind spot to US equities.

10-30 yr T-bonds are down 4-9%, stocks shot up 8% this quarter so far and I think they now look very vulnerable, Gold is up 5%. Dollar index was volatile but is little changed. QE2 took it down, further Euro crisis took it up.

Clearly, I don’t get it.

Was the stock market illiquid enough that the sell-off in Treasury bonds forced an 8% run as individual investors ran into stocks?

Since they will not be raising taxes, deficits will remain high and government will be forced to shrink spending dramatically?

The dollar will fall eventually out of fiscal concerns (if/when Europe calms down) and exporters will benefit from a lower dollar?

Seems a little wishful to me. We will see how this hand plays out as the stimulus package winds down. Not a lot of economic bang for the $1.6 Trillion spent to prop up banks. I still see 9.8% unemployment and pretty slow growth.

Careful,

Leon

12/12 What, Me Worry?

Written on December 12, 2010

http://www.liquidmatrix.org/blog/wp-content/uploads/2008/08/whatmeworry.jpg

Greetings-

All kidding aside, we have reached another point of peril this week. Many individual investors are very bullish-positive (53.0%) and hardly any are bearish-negative (22.6%)

And they have been selling options because very few believe they need insurance for their portfolios of stocks.

http://www.marketwatch.com/charts/int-adv.chart?symb=US:VIX&sid=1704273&time=10&startdate=&enddate=&freq=1&comp=&compidx=aaaaa~0&uf=7168&ma=1&maval=50&type=2&size=1&lf=1&lf2=4&lf3=0&style=1013&mocktick=1&rand=59398829

It is likely no different this time than the last and there is a sharp correction coming. Head to the sidelines; cash out your winnings and wait for a dip.

Praemonitus, praemunitus

Burnt children dread the fire…

A word to the wise is sufficient…

As a dog returns to his vomit so a fool repeats his folly.

(my personal favorite from King Solomon’s Proverbs)

Sell high, to preserve the right to buy low,

Leon