A Triple Feature

Fear and Panic
A Market of Stocks
Opportunities Galore


This is a re-visit to an email written on April 18, 2005.
Oh, for the days of the triple feature, usually found at the local drive-in movie theater. You remember those days don’t you? For some of you the drive-in is just a distant memory (why is there a Cheshire cat grin on your face, you rascal you.) For others, drive-in movies are just a piece of Americana.

It would seem we are embracing a triple feature when it comes to the current market.

First feature: Fear and Panic, starring Jack Misunderstanding, Farah Follow-along, and that ever loving villain, the dastardly Alan Greenspan. The theme of this movie is that interest rates are being taken higher by the Federal Reserve to theoretically slow down the economy and inflation. However, the evil Greenspan is inadvertently being helped by our hero, Jack Misunderstanding, who hasn’t observed that the ten- year treasury rate has been falling, not rising, which leads one to believe that the economy is slowing, thus more aggressive tactics by the evil Greenspan will not be necessary. Jack Misunderstanding also hasn’t noticed that oil prices have fallen, long treasury rates are fallen, and there really is nothing to fear. Fortunately, our hero gets the drift, and thwarts the evil Greenspan. He is knighted Sir Jack Understanding. Our heroine, Farah Follow-along, takes Jack’s lead, and too, defeats fear and panic. Jack and Farah lead all the townspeople away from fear and panic, and Jack and Farah ride off into the sunset. Editor’s Note: Frank Fear and Pauly Panic were last seen doing a Vaudeville act at a Holiday Inn in Akron, Ohio. Get your popcorn and your milk duds, here comes the second feature.

A short instructional film, A Market of Stocks, starring top performers Gil Goldman Sachs ($120.70 as of 9-29-08), Sandra Citigroup ($17.75 as of 9-29-08), and Lyle AIG ($2.50 as of 9-29-08), and an ensemble of some of the brightest stars in the market. The theme of the second feature is to understand that for years, another actor, Sid Market, has given mediocre performances, overshadowing individual breathtaking achievements, almost on an Academy Award Level. To name just a few: Sashi Icici Bank ($21.83 as of 9-29-08), Norville Nextel ($$6.10 as of 9-29-08), and the ever popular Uma Altria ($19.35 as of 9-29-08). But talent must be found when it’s at the beginning of its acting career, and not at the end. We want the stars and starlets to shine brilliantly on their own, without being in the limelight of Sid Market, who unfortunately gives poor performances like his swooning death act. It’s a short film, but gives food for thought. Speaking of food:

Make sure you’ve gone to the snack bar for hotdogs, fries, shakes, and whatever else suits your fancy. It’s now time for the main feature. It’s time to steam the windows with our sexy, provocative OPPORTUNITIES GALORE. I’ll let you in on a little secret. This is really just a sequel to the first feature, Fear and Panic. OPPORTUNITIES GALORE stars that swashbuckling hero Bobby Buy-em-right, Bonita Bargain-prices, and the veteran actor Pappy Patience. The movie opens with Bobby Buy-em-right holding Bonita Bargain-prices in his arms whispering “I know we’ll make it out there, Bonita.” Yes, we weeeeellllll, Bobby” says Bonita. (She’s southern) “But not just make it Bonita. We are going to make it big, real big.” “But how do you know, Bobby?”, whispers Bonita. “Because I’ve heard from my wise old mentor, Pappy Patience.” The next ninety minutes is just whys and wherefores, with a lot of Pappy Patience pontification, and some good common sense. Time to steam the car windows. Fast forward to the finale. As the credits roll, and the music swells, we see Bobby Buy-em-right and Bonita Bargain-prices walking hand-in-hand into the sunset knowing that Bobby and Bonita together have the best of all possibilities. Another happy ending. Don’t you just love the power of movies?

Fast forward to today (9-30-08), and despite what the pundits are saying, it’s still not the time to buy. This bear market could still have a long way to go. Yesterday, we witnessed drama fit for the big screen. Just another scene, but certainly not the final act.

Till next time,

Bill


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A disclaimer: none of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

Waiving the Flag

The Democratic system works. Wall Street and the halls of Washington thought, and continue to think, that the American public is stupid. The overwhelming phone calls, emails, and letters to Congress, were vindicated today. The so-called bailout plan was voted down today in Congress. Does that mean that it can’t change tomorrow? Not on your life, never trust a politician.

However, I cheer. I was 100% against this bailout bill. I’ve watched the FDIC facilitate the largest thrift in the United States move seamlessly to JP Morgan. I’ve watched Wachovia move to Citigroup. I’ve watched the Europeans nationalize two banks, and scoff at what we were doing in our country.

There are other ways solve our current crisis without putting our money at risk. If you do the math, there is no way, no way, the American taxpayer can either make money or be made whole in the future. Gross, Buffet, Welch, are great men, but should have been in my math class. The amount of homes that were built at the peak, are still around. Many of them are empty. The purchasers for those homes are gone. No more sub-prime mortgages, no more alt-a, and no more flippers. It’s simple math. There were homes built for those kinds of individuals. They don’t exist any longer, but the homes still do. Therefore, the outcome of today’s vote was a no-brain situation for the taxpayer.

Don’t give me that garbage about not being able to meet your payroll. A good banking relationship is not going to let a small business or a large business default on their payrolls. If they do, then that’s the height of greed. They may be dumb, but they not stupid.

Today, I covered some of my short positions because you never know what can happen in Washington. I waved the flag. I think it was a great day.

Till next time,

Bill


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A disclaimer: none of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

TGIF

Let me get this straight. The greatest banking collapse in history is the secondary story on the CNBC news ticker. Washington Mutual depositors went to sleep last night feeling a little anxious about their savings, and this morning wake up to find all is well, and they are now doing business with JP Morgan. A seamless transition. Where was the Armageddon?

The $700 billion dollar giveaway program so sharply opposed by Main Street, and so widely embraced by Wall Street is on the ropes, thank goodness. Make no mistake, the banks have money, they just aren’t willing to lend, and that problem dictates a different solution, and there are other solutions. Those other solutions will be found sooner rather than later. After all the events of yesterday, the media is conspicuously not discussing Bill Gross’s (Pimco CEO) most recent statement on the bailout bill. Pimco buys more treasury paper than any other company in the world; therefore, he is the man to be listened to. He also benefited corporately and personally by the Fannie and Freddie takeover (several billion dollars), but that’s another story.

Beyond the $700 billion rescue (giveaway plan), Gross said the banking system, and the investment banking system in total, really requires about $500 billion more. Where that comes from, it’s still up in the air. Why isn’t anyone talking about that?

Today is an opportunity to take some shorts off the table. Specifically, financials. Because when the deal is done, probably over the weekend, a huge, and I mean huge relief rally could ensue. There will be time to re-load the shorts. Why? Because the economy, earnings, and the consumer will be back in the cross-hairs. This could be ugly.

Till next time,

Bill


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A disclaimer: none of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

Sickening

As I observed Paulson, Bernanke and Cox at the Senate banking crisis hearing, I’m watching them fold. Four questions among many:

1) A Senator asked about valuing the underlying mortgages as a future-value based upon cash-flow, as all bonds are normally valued. Paulson’s answer: “Senator, it’s not that simple.” However, it is that simple.

2) Paulson says were going to bring in the best and the brightest people to re-price all of the mortgages that are sitting on the balance sheets of the banks. Ostensibly, the best and the brightest got us into this mess to begin with. Didn’t Wall Street, who created this problem, have the best and the brightest? Where is he going to get these new best and brightest people?

3) Chuck Schumer asked: “Could you accept $150 billion, as opposed to $700 billion, solve some of the problems, see if it works, then come back and ask for more.” Paulson’s answer: “Senator, you have to make your decision. It’s $700 billion, or it’s nothing.” Schumer: “You’re telling me that we can’t see if it works?” Paulson: “It’s $700 billion or nothing.”

4) Both Bernanke and Paulson, asked directly by the Senator from Pennsylvania: “Does Wall Street owe Main Street an apology?” Bernanke could not answer the question, nor could Paulson. They would not say yes.

For the first time in as long as I can remember, I’m proud of Senators who are finally asking tough questions. I’m continued to be amazed by the response of the executive branch, specifically Bernanke and Paulson. Pride on the one hand, and shame on the other hand.

My indignation is unbelievable. Any American who is watching this should be shocked and appalled.


Till next time,

Bill

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A disclaimer: none of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

What's Changed?

Friday morning when I wrote “the rules have changed,” I was stunned by the brute force used by Paulson and Bernanke to exert their will over the market. I responded like many to what I deemed to be an unstoppable freight train of pure executive branch power. The rules changed. Billions dispersed. The greatest short-squeeze in history, and two men in decisive control. Was this Wall Street style Martial law, or was this the re-visitation to when Ronald Regan was shot, and former Secretary of State Alexander Haig said to the press: “I’m in control.”

Make no mistake, we enter a period of history which is a watershed moment, but for reasons other than the obvious. The piece of legislation being proposed has a section tucked away that says “Decisions by the Secretary pursuant to the authority of this Act, are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

This puts the Treasury’s action beyond the rule of law. This is a financial coup with no financial limitations. The proposal gave the Treasury the authority to buy toxic mortgage paper. However, as with all government plans, others wanted to benefit, and so the lobbyist went to work. House and Senate versions written overnight now include language broadening the type of assets for sale under the plan from “mortgage-related” to “troubled assets.” Hello auto finance companies, student loan lenders, and credit card lenders. Why doesn’t the government just buy everything? Right, comrade?

I thought that the plan, though totally contrary to my beliefs, would carry the market dramatically higher over the next several weeks, and it’s still possible. Let’s be clear. In the short-term, that’s minute-by-minute, the uncertainty is so great that large pools of guaranteed cash and assets non-correlated to the market maybe the order of the day. Doing nothing isn’t bad.

My macro-trend belief still tells me that the trouble continues to work ahead, and the long-term fundamentals and long-term technical’s are so bad that the best play for stock market money is a negative bias, with some upside hedge. The uncertainty of the government’s uncertainty IS the uncertainty.

Regardless of my opinion, my job to like or not to like doesn’t matter. My job is to make money, and protect assets, and that is a job that I will continue to do twenty-four hours a day, and seven days a week.

Till next time,

Bill

P.S. – Long EEV, MZZ, SDP, SKF, and SPY.


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A disclaimer: none of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

The Rules Have Changed

Last night the NFL changed the rules for this weekend's football games. They banned passing. It has created a complete turmoil, offensive coordinators don’t know what to do , quarterback coaches have been fired, because after all you don’t have to teach a quarterback how to hand off. Isn’t that absurd?

That’s as absurd as what happened in the late night massacre engineered by Bernanke, Paulson, Cox, and the rest of the Washington politicians, banning short selling of financial stocks until October 2nd, when all they had to do was enforce the naked short selling rules and re-implement the uptick rule. But that’s common sense and common sense doesn’t rule today.

But it is what it is. What does this action and also the RTC-like bailout mean for the market and does it have legs? Absolutely. No longer can the banks lose. No longer can municipalities lose. No longer can Money Markets lose. No longer can homeowners lose. It all adds up to a legislative bottoming for the stock market.

Do I agree with it? No. But my opinion doesn’t count when there are 3:00 meetings planning for the Washington takeover of Wall Street. Good luck Comrade.

I am a macro long term player. I have been long term short for the last 2 years. In addition I have kept large pools of cash on the sidelines. Today, a watershed moment in American History. I went long the S&P, the Dow, the Financials and increased my position in the municipal bond market.

Till next time,

Bill


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A disclaimer: none of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

Twilight of Illusion

Mark Twain once said: “Don’t part with your illusions; when they are gone, you may still exist, but you have ceased to live.” First it was Bear Stearns, then Fannie Mae and Freddie Mac, then AIG, and now the world, as we infuse billions of our dollars into foreign central banks. A bailout of the world? You be the judge. However, CNBC is playing this last Fed game as though it was the second coming of Christ. I don’t think it’s on quite the same level.

The only question one has to ask: Is this a bear market or a bull market? If, as I believe, it is a bear market, then all, and I mean all stocks will go down. Surprise Mr. Kass, surprise Mr. Kudlow, Mr. Paulson, and Mr. Bernanke. Yes, all stocks will go down. That doesn’t mean a bullet manufacturer in a war won’t have success, however, one’s long-term view should be negative and on the short-side, if in fact the bear market continues to exist.

The illusion that long-term always produces good things is just that, an illusion. That doesn’t mean that short-term trading opportunities don’t exist on the upside for the nimble and the fleet of foot, they do. But when the media, the pundits, and the politicians attempt to make lemonade from lemons, pushing the market ever higher, your best bet is to reload, and short, short, short.

Many years ago, when traveling on long trips with my young children they would ask the inevitable: “Are we there yet, are we there yet?” These days, I’m hearing a similar question from the CNBC all-stars: “Are we at the bottom, are we at the bottom?” Just like I told my kids at the time: We still have a long way to go.

Till next time,

Bill


P.S. – Looking to re-load on QID, and EEV. Still long SKF and SRS. Also, the gold that I purchased in the accounts during the Russian-Georgia confrontation is looking pretty fortuitous. Any slowdown, and I’ll ring the bell, and take the profit.

Not Enough Blood

A week ago, I told you the pundits (Kass and Cramer) were telling you to buy the financial stocks: Buy, buy, buy! Unfortunately, their spell check was not working properly, and what they meant to say was: Bye, bye, bye!

If you listened to K & C, you would have found yourself on the Sirens island, abandoning all hope. Now, K& C, and many others, are calling this a buying opportunity. Are you kidding me? The technical charts are broken, and the fundamentals are devastating. Usually, blood in the streets called for contrarian action, and buying would be in order. However, the breaking of the technical charts is only the continuation of the bear market. The fundamentals, though, extremely atrocious, portend more to come. For example, further housing declines, further foreclosures, credit card defaults, auto company bailouts (maybe), and on and on.

As Karen Carpenter once said: “It’s only just begun.”

Strategy: Take profits in short positions such as financials, NASDAQ, S& P 500, and Dow, only to make paper profits real profits. Ring the bell.

However, do not, and I repeat, do not go long anything. Be ready to re-load and short again. I will advise.

Till next time,

Bill


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A disclaimer: none of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

Are You Kidding Me?

No, I’m not talking about the bailout of Fannie Mae or Freddie Mac. I’m talking about the main reason Paulson gave for the bailout. He talked about the lack of capital, the accounting uncertainty, the quasi-government status and the prudent mortgage purchases. But his main reason for the bailout was “Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of these would cause great turmoil in the financial markets here at home and around the globe. This turmoil would directly and negatively impact household wealth from family budgets to home values to savings for college and retirement. A failure would affect the ability of Americans to get home loans, auto loans, and other consumer credit and business finance, and a failure would be harmful to economic growth and job creation.”

Are you kidding me?!?

I’m sorry I didn’t record his last speech on the Bear Stearns bailout because it was the exact same speech. Who’s next? Detroit’s in line. GM, Ford and Chrysler all with their hands out. And what about the banks who are all holding the auto loan paper? They probably could use a little bailout. After all, there are more auto owners than home owners. Isn’t there a systemic risk when their debt paper collapses. Of course most average Suzy and Joe own only one house, probably two cars, or maybe three ( one an SUV) but there is no question they all have multiple credit cards. When the credit card market collapses is Paulson or Bernanke going to ride to the rescue of the credit card companies such as CitiBank and American Express? Won’t that be a major systemic problem? Wait a minute…there will be a new administration and just possibly these two jokers will be off fishing someplace. Which begs the question, if as Bernanke and Paulson said just weeks ago that the Fannie and Freddie problems were under control, of course they also said that about housing, why the bailout now? Obviously they couldn’t wait to pass it off to the next administration.

The Titanic was sinking and was not going to reach port.

How will the market and pundits react? I believe the initial reaction will be extremely positive. We may see a big stock market rally, most certainly prime time praise and accolades and maybe even Knighthood or Sainthood for Hank and Ben. However, when the smoke clears and the dust settles the same old problems of too much leverage, over extension and consumer exhaustion will once again be front and center.

All that has happened is that the inevitable has been postponed.

No kidding.

Till next time,

Bill

Ps: Fade the Euphoria

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A disclaimer: none of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

The Sirens (Kass and Cramer)

Ulysses had to be strapped to the mast for his own protection. As he passed by the isle, the song of the Sirens wafted in his ears. “Come ashore” they called; “pleasure and safety can be found in our arms.” Ulysses knew the truth, but only strong bindings kept him from venturing forth into destruction. So it is with financials. As the winds of destruction blow over the market, we hear Kass, Cramer, and a host of others saying: “The financials, the financials, the financials.” As the Sirens call was soothing and seductive, so is the call of the celebrities. Don’t be seduced, for trouble is surely ahead. Ulysses recognized it. So should you.

Till next time,

Bill

Long: SKF

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A disclaimer: none of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

Yes, We Have No Bananas

As everybody’s attention has turned toward hurricanes, oil, Obama, and McCain’s surprise (Sarah Palin); my thoughts have been focused on the 800-pound gorillas.

After the dot-com crash of 2000 to 2002, the Federal Reserve lowered interest rates to the unbelievable level of 1%, in order to stimulate a rather moribund economy. It worked. In fact, it worked so well that the next bubble was born: housing. Housing became the 800-pound gorilla that affected every nook and cranny of our economic lives. For example, employment was directly tied to housing. That included everyone working at the big home improvement boxes, to the landscapers, and all the way to the mortgage lenders. Travel, education, and autos were also tied to housing. If you wanted to take a vacation, send the kids to school, and buy a new SUV, simple. Just take out a home equity loan. After all, home prices were going through the roof!

The economists, the pundits, even the TV talking heads (all experts, of course) said housing was the 800-pound gorilla. Then a funny thing happened on the way to the zoo. The 800-pound gorilla turned into a 75-pound chimpanzee. As housing prices collapsed, foreclosures rose, and mortgage lenders filed for bankruptcy, the experts said it mattered, but not that much. Housing, they said, was not that special in the overall picture. Excuse me, but how, I ask, for the last three years, can housing be so significant in the market on the way up, but insignificant on the way down? It made absolutely no sense. It sounded like the experts were just monkeying around. (Sorry about that.)

Now, the experts are at it again. Technology had wonderful tailwinds for the past year. Between a falling dollar, and accelerating foreign economies, the technology sector was not only a good place to hide, but also a place that was well rewarded. Both the falling dollar, and the robust foreign economies were the 800-pound gorillas that drove the future of technology. However, the dollar is now rising, and the foreign economies, are at the least, questionable. The tailwinds have turned to substantial headwinds. But the experts say no problem, the future is robust and bright. Once again, in their eyes, an 800-pound gorilla has become a 75- pound chimpanzee. No way!

According to the experts, the driving forces are significant on the way up, but insignificant on the way down.

You can’t have it both ways. The 800-pound gorilla is still the 800-pound gorilla, whether you like it or not. Make due. Buy some bananas!

Till next time,

Bill

Long: QID

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A disclaimer: none of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.