Traders trade and investors…well, investors should own real investments, non-correlated to the stock market, and predictable.
Yesterday, Bernanke put another stimulus package on the table, and the Dow Jones Industrial Average liked it, to the tune of 413 points on the upside. Today, earnings took center stage, Lehman’s CDS problem concluded, and yesterday’s energy darlings became today’s victims of profit taking. All in all, just another typical day of volatile trading.
However, the overriding theme continues to be the governmental solutions of the worldwide banking crisis. Commentators, money managers, pundits, politicos, and probably even Joe the Plumber, say that the crisis is over, and the banks can start lending again. That’s what may take this market higher over the next few weeks, and even over the next few months. However, when reality sets in, banks, more than likely, will not lend, and the economy will be seen lurching toward a conclusion not seen since the 1930’s.
I have put a little money to work, as taking advantage of Fantasyland may not be all that bad; let's just not drink ALL the cool-aid.
Till next time,
Bill
P.S. – Long UYM, NYB, FNFG, DDM, QLD
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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.
Tuesday, October 21, 2008
Friday, October 17, 2008
A Walk Down Memory Lane
For those of you who think that I’m a Johnny-come-lately to the housing debacle and the credit crunch, below is a sampling of my emails that have gone out to thousands of people over the past two years. Positioning for the meltdown was, and is, paramount.
4/11/2006: To be successful, you need to take what’s given and react accordingly. If you pay more at the pumps, figure out who’s profiting. Not only from the start of the oil production process, but also to the finish. If the market is showing weakness, you may use the various long and short strategies to benefit. Finally, if the obvious is occurring, wait until it runs its course, and then jump into action.
10/27/06: The media’s selective information and spinning has usually made the investor the last to know. Remember Enron, WorldCom, Global Crossing? Currently, I believe the homebuilding industry is in a death spiral, one that has not been seen since 1988-1991. Inventories of unsold houses climbing, unsold completed homes at record levels, foreclosures mounting, and median prices declining to record levels. But the pundits, especially the MAD ones on TV say “So what”, “No big deal, “It’s almost over.” My response: It’s just begun. The higher we go, the harder we fall. And the beat goes on.
11/22/06: Could the breaking of the housing bubble hurt the average American more than the collapse in stock prices in 2000-2002? It could be so since 69% own their own abodes, compared with 50% who own stocks or mutual funds. Speaking of housing, how long will it take to bring inventories of unsold houses into normal levels if current selling rates do no more than hold at today’s pace? It might take the better part of a year, if sales don’t go any lower. No one can guarantee that, especially if the Federal Reserve raises interest rates. (Unthinkable you say?)
01/12/07: Look around your neighborhood. Are houses selling quickly, or are they selling at all? Does construction continue, or have projects been discontinued? Has your house appreciated in the last six months, or depreciated? And I haven’t even talked about the negative impact of re-financing, adjustable-rate exotic mortgages, and negative home equity. All in all, not a pretty picture and signs that we’ve just seen the top of the iceberg, not the bottom, as many proclaim. I believe the homebuilding industry will continue to decline, thereby providing the potential for gains in the next several months. That’s how I see it.
4/26/07: Though many people will insist, “it’s different this time,” keep in mind that every great market that has grown in debt has always ended badly, whether it’s the tulip mania of the 1400’s, or the dot.com mania of 2000, it never changes. Major stock market declines will be the rule, not the exception. People continue to ask: When will it happen? The debt contagion is spreading every day, and the decline will come when least expected. We are positioned defensively, and you can feel very comfortable. No matter how much lipstick you put on that bloated debt pig, it’s still a pig.
9/07/2007: The average $500,000 mortgage, when sliced and diced, supports approximately 20 times its value in CDO mortgage paper, sold around the world. When you factor the number of adjustable-rate mortgages that are re-setting over the next 16 months, (March alone is $110 billion), by a multiple of 20, you get some very scary indebtedness. Keep in mind, this indebtedness is dependent on rising home values and people’s ability to pay; both of which have now been called into question. Factor in the declining job picture, and you may have a recipe for disaster.
9/27/2007: In the 1980’s, the Japanese lowered interest rates to zero. That action did not save the Japanese stock market, nor did it save the Japanese real estate market. In fact, it’s just most recently that they’ve finally dug out. The difference this time is that the financial world is all interdependent on trillions of dollars of debt. From the smallest homeowner to the biggest money center bank, our economy has borrowed its way to happiness. Unfortunately, that game is over and the pain is about to begin. The countdown to meltdown has begun.
12/18/07: My prediction for 2008. A year of incredible volatility, possible homebuilder bankruptcies, the threat of banking sector meltdowns, and the chance of general panic never seen by today’s investing public, or even by the professionals. Downside swings of as much as 20% from here, and the possibilities of double digit relief rallies. But make no mistake, this is a BEAR MARKET.
So what happens now? More of the same, with the bias to the downside. But for the nimble traders, a paradise of opportunity.
Right now, I’m long, and no, I’m not wrong. (A poetic attempt.)
Till next time,
Bill
P.S. – Long GE, QLD, UYM, FNFG, DDM, FCX (at least for now.) Shorts: none
P.P.S. – If interested, a complete email journal is available upon request.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.
4/11/2006: To be successful, you need to take what’s given and react accordingly. If you pay more at the pumps, figure out who’s profiting. Not only from the start of the oil production process, but also to the finish. If the market is showing weakness, you may use the various long and short strategies to benefit. Finally, if the obvious is occurring, wait until it runs its course, and then jump into action.
10/27/06: The media’s selective information and spinning has usually made the investor the last to know. Remember Enron, WorldCom, Global Crossing? Currently, I believe the homebuilding industry is in a death spiral, one that has not been seen since 1988-1991. Inventories of unsold houses climbing, unsold completed homes at record levels, foreclosures mounting, and median prices declining to record levels. But the pundits, especially the MAD ones on TV say “So what”, “No big deal, “It’s almost over.” My response: It’s just begun. The higher we go, the harder we fall. And the beat goes on.
11/22/06: Could the breaking of the housing bubble hurt the average American more than the collapse in stock prices in 2000-2002? It could be so since 69% own their own abodes, compared with 50% who own stocks or mutual funds. Speaking of housing, how long will it take to bring inventories of unsold houses into normal levels if current selling rates do no more than hold at today’s pace? It might take the better part of a year, if sales don’t go any lower. No one can guarantee that, especially if the Federal Reserve raises interest rates. (Unthinkable you say?)
01/12/07: Look around your neighborhood. Are houses selling quickly, or are they selling at all? Does construction continue, or have projects been discontinued? Has your house appreciated in the last six months, or depreciated? And I haven’t even talked about the negative impact of re-financing, adjustable-rate exotic mortgages, and negative home equity. All in all, not a pretty picture and signs that we’ve just seen the top of the iceberg, not the bottom, as many proclaim. I believe the homebuilding industry will continue to decline, thereby providing the potential for gains in the next several months. That’s how I see it.
4/26/07: Though many people will insist, “it’s different this time,” keep in mind that every great market that has grown in debt has always ended badly, whether it’s the tulip mania of the 1400’s, or the dot.com mania of 2000, it never changes. Major stock market declines will be the rule, not the exception. People continue to ask: When will it happen? The debt contagion is spreading every day, and the decline will come when least expected. We are positioned defensively, and you can feel very comfortable. No matter how much lipstick you put on that bloated debt pig, it’s still a pig.
9/07/2007: The average $500,000 mortgage, when sliced and diced, supports approximately 20 times its value in CDO mortgage paper, sold around the world. When you factor the number of adjustable-rate mortgages that are re-setting over the next 16 months, (March alone is $110 billion), by a multiple of 20, you get some very scary indebtedness. Keep in mind, this indebtedness is dependent on rising home values and people’s ability to pay; both of which have now been called into question. Factor in the declining job picture, and you may have a recipe for disaster.
9/27/2007: In the 1980’s, the Japanese lowered interest rates to zero. That action did not save the Japanese stock market, nor did it save the Japanese real estate market. In fact, it’s just most recently that they’ve finally dug out. The difference this time is that the financial world is all interdependent on trillions of dollars of debt. From the smallest homeowner to the biggest money center bank, our economy has borrowed its way to happiness. Unfortunately, that game is over and the pain is about to begin. The countdown to meltdown has begun.
12/18/07: My prediction for 2008. A year of incredible volatility, possible homebuilder bankruptcies, the threat of banking sector meltdowns, and the chance of general panic never seen by today’s investing public, or even by the professionals. Downside swings of as much as 20% from here, and the possibilities of double digit relief rallies. But make no mistake, this is a BEAR MARKET.
So what happens now? More of the same, with the bias to the downside. But for the nimble traders, a paradise of opportunity.
Right now, I’m long, and no, I’m not wrong. (A poetic attempt.)
Till next time,
Bill
P.S. – Long GE, QLD, UYM, FNFG, DDM, FCX (at least for now.) Shorts: none
P.P.S. – If interested, a complete email journal is available upon request.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.
Monday, October 13, 2008
The Third TV
As I recently wrote, the world finally got fed up with the incompetence of the United States leadership of Paulson, Bernanke, Cox, Bush, and our Congress. Therefore, the world has moved forward with a plan to unfreeze credit markets. Make no mistake, these efforts will be successful. Unfortunately, that is the smaller of the two problems. Just because you have the ability to lend does not mean that you will lend. In addition, the lending horizon has changed because many borrowers will no longer have access to easy credit and that is the rub.
The entire problem is predicated on Joe Smith buying his third TV. Not the first, not the second, the third TV. Consider this example: Because Joe wants his third TV, an extra salesperson has to be employed at BestBuy ($25.75 as of 10-10-08), and another store has to be built by BestBuy to house the extra employee. An additional truck has to be used to deliver the third TV to BestBuy. An additional dock worker has to be hired to bring in the extra TV, which was delivered by the extra ship, which was leased to bring in the third TV. In addition, another factory had to be built in China to make the third TV, and another worker at Corning ($12.37 as of 10-10-08) had to be employed to make the glass to send to the factory, to install in the TV, to put on the ship, to put on the dock, to put on the truck, to deliver to the store, to give to the person, to sell to Joe Smith, who wants the third TV. You get the idea. In addition, a clothing store, a dry cleaner, a restaurant, a grocery store, a movie theater, and a shopping plaza, all spring up for the people who serve the man who wants to buy the third TV. All is well as long as Joe Smith can, and will be able to buy, the third TV. God help us if can’t buy the third TV, or if he won’t buy the third TV.
Till next time,
Bill
P.S. – Long the banks: UYG (large banks), NYB and FNFG (regionals.) Why not. The problem is solved, right?
The entire problem is predicated on Joe Smith buying his third TV. Not the first, not the second, the third TV. Consider this example: Because Joe wants his third TV, an extra salesperson has to be employed at BestBuy ($25.75 as of 10-10-08), and another store has to be built by BestBuy to house the extra employee. An additional truck has to be used to deliver the third TV to BestBuy. An additional dock worker has to be hired to bring in the extra TV, which was delivered by the extra ship, which was leased to bring in the third TV. In addition, another factory had to be built in China to make the third TV, and another worker at Corning ($12.37 as of 10-10-08) had to be employed to make the glass to send to the factory, to install in the TV, to put on the ship, to put on the dock, to put on the truck, to deliver to the store, to give to the person, to sell to Joe Smith, who wants the third TV. You get the idea. In addition, a clothing store, a dry cleaner, a restaurant, a grocery store, a movie theater, and a shopping plaza, all spring up for the people who serve the man who wants to buy the third TV. All is well as long as Joe Smith can, and will be able to buy, the third TV. God help us if can’t buy the third TV, or if he won’t buy the third TV.
Till next time,
Bill
P.S. – Long the banks: UYG (large banks), NYB and FNFG (regionals.) Why not. The problem is solved, right?
Friday, October 3, 2008
Mr. Smith (Paulson) goes to Washington
(He ain’t no Jimmy Stewart)
It doesn’t matter. Politics is politics, and a bear market is a bear market. I would use this opportunity to step out of your longs, and think about re-loading on the short-side. Take what they give you.
Till next time,
Bill
P.S – FYI, some of the items included in the bailout legislation: $192 million for the rum producers of Puerto Rico and the U.S. Virgin Islands; $128 million for car-racing tracks, $33 million for corporations in American Samoa, and $10 million for small film and television productions. In addition, the bill authorizes a Wool Trust Fund and additional financial relief as part of the Exxon Valdez oil spill that happened 20 years ago. Wow!
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.
It doesn’t matter. Politics is politics, and a bear market is a bear market. I would use this opportunity to step out of your longs, and think about re-loading on the short-side. Take what they give you.
Till next time,
Bill
P.S – FYI, some of the items included in the bailout legislation: $192 million for the rum producers of Puerto Rico and the U.S. Virgin Islands; $128 million for car-racing tracks, $33 million for corporations in American Samoa, and $10 million for small film and television productions. In addition, the bill authorizes a Wool Trust Fund and additional financial relief as part of the Exxon Valdez oil spill that happened 20 years ago. Wow!
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.
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