Because everyone always seems to forget about this one on Halloween:

Posted by: Hermit Dave at 07:06 PM | No Comments | Add Comment
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My fellow fascists, I am here today to implore you to reconsider your strategy of labeling everyone who disagrees with you as me, Hitler.  Quite frankly, it's an insult to my lethal legacy.

When this started with Bush, while it was obviously a laughable analogy, it was at least a comparison of apples to apples as it were, both of us being national leaders and all.  Now, you've devolved to the point where you're comparing people like Glenn Beck to me, Hitler.  Really?!?! Glenn fucking BECK?!?!?!  Correct me if I'm wrong, but isn't he the dry drunk talk-show host who likes to rant about gold and cry a lot?  How many fucking people has he killed?  How many countries has he invaded?  How much genocide has he committed?  Glenn fucking BECK?!?!?! It's almost enough to leave my rotting corpse speechless.

This nonsense has got to stop.  If that asshole movie company hadn't stopped people from making bunker parodies, I'd make one myself about how easy it's become to get compared to me, Hitler.  At this rate, instead of being famous, everyone will be Hitler for 15 minutes.

My fellow fascists, get a hold of yourselves.  There was only one Hitler, and I'm long dead and unlamented.  If you must make ludicrous comparisons, at least give my rotting corpse a break and start using Stalin or Pol Pot or some other brutal leader as your boogeyman.  I'm sick of it, and quite frankly, their rotting corpses could use the attention.  Thank you.

Translated from the original German by Hermit Dave.  This blog does not necessarily endorse the views of the author.

Posted by: Hermit Dave at 08:56 AM | No Comments | Add Comment
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An extremely wealthy, 48-year-old man using a bunch of braindead hipster douchebags to further enrich himself by passing off the perpetuation of the status quo as sanity.

You have to hand it to Stewart.  He just might be the single most cynical bastard on the face of the earth.  And his followers are almost certainly the dumbest.

Posted by: Hermit Dave at 09:40 AM | No Comments | Add Comment
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Another week of noise.  Not terribly surprising going into next week's Fed announcement, but still pretty tedious.  The only thing of any note was NASDAQ outperforming the S&P 500 by about 1% this week, continuing its long trend.  I'm going to make one small portfolio adjustment going into next week:

• Close the long Google (GOOG) position at 613.7, for a gain of $48.29

Even though I'm closing this position, it has the effect of increasing my risk, as the Google position was partially offsetting my short NASDAQ position.  On the other hand, it leaves me more balanced on the overall dollar devaluation issue (I had previously had a slight tilt towards further devaluation).  With the puts on the S&P 500, if the market sells off, I'd be increasingly skewed to the downside, which is what I want.

Current positions:

 

* Puts are on the S&P 500, dated March 2011, struck at 950

Results to date:

Wow, how exciting.  Next week should be much, much more interesting.  Monday and Tuesday will likely be completely dead, followed by an absolute explosion of activity once the Fed announces its QE policy going forward.  The elections may have some consequences down the road for the markets (hopefully they will, if the GOP gets off its ass and does something about all the fraud), but the Fed announcement completely dwarfs them in terms of importance.

My greatest concern going into next week is the NASDAQ outperformance.  While my focus is long term, I still need to account for shorter term trends that move against my thesis.  If, after the announcement on Wednesday, that position is still moving against me, I'll likely close it for now, reexamine that particular trade concept, and reestablish the trade later if I still think the concept is valid.  In any event, portfolio adjustments and rebalancing seem to be a likely event towards the end of next week.

Posted by: Hermit Dave at 02:25 PM | No Comments | Add Comment
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That buffalo chicken pizza I ordered last night seemed like such a good idea at the time ...

Posted by: Hermit Dave at 09:26 AM | No Comments | Add Comment
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Bill Black is the best financial regulator in recent history, and a voice of sanity in regard to the current banking fiasco.  He was instrumental in resolving the S&L crisis in the '80s and directly responsible for some of the perpetrators of that fraud going to jail.  In a sane world, he would be a lauded figure in the financial industry and his opinions would be sought by the media and politicians.  In the real world, he's been marginalized.

As opposed to the clowns teaching economics at Ivy League schools, Black teaches at the University of Missouri - Kansas City.  Unlike the crooks that advise the President and run the Treasury and the Fed, he has no political influence.  Instead of being sought out by MSM outlets on the very serious and very topical issue of financial fraud, he's writing at the fucking Huffington Post, of all places.  And yes, as dirty as it makes me feel, that's actually a link to the Huffington Post -- it's Black's most recent article there.

While it would be easy to go on a long rant about the government and academia in regard to Black's status among the elite, it would make only a trivial and tired point.  Honest people aren't welcome among politicians, bankers, the MSM, and top educators. Surprise, surprise, yadda yadda yadda.

To me, a much more important point is that Black's status is a clear indictment of the conservative alternate media.  His work should be featured prominently by conservative blogs.  He should be writing articles for National Review (no link, they fucking suck, I'd just as soon read Sullivan).  To their credit, Reason has lots of references to Black, but they're hardly conservative, and Matt Welch is laughingly an Editor in Chief there.  On balance, they're about as good a media outlet as the HuffPo.

Conservatives had best get their heads out of their asses and start taking the financial situation in this country seriously.  While sucking each others cocks over the coming election landslide for the GOP might seem fun, conservatives are setting themselves up to be even more reviled in 2012 than the Dems are now.  If conservatives want to hold power for more than 2 years, if they wish to actually help the USA rather than just play politics, they need to start paying attention to people like Bill Black.

Posted by: Hermit Dave at 10:25 AM | No Comments | Add Comment
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It turns out that the Fed has been soliciting opinions on QE directly from the supposedly independent, private sector primary dealers.  This Bloomberg article explains what's been going on behind the scenes.

This Zero Hedge piece explains why this is, quite clearly, treason.  It also dovetails very nicely with the piece that I wrote earlier today on QE.  Still think your vote in the upcoming election actually makes a damn bit of difference?  Unless the new Congress gets serious about tackling the Fed/Banking oligarchy (and right away), your vote is meaningless.

The time for dicking around with social policy and other side issues is over.  You can demand that your representatives get off their pork-filled asses and deal with the real problems or you can kiss the USA goodbye.

Posted by: Hermit Dave at 09:54 PM | No Comments | Add Comment
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Posted by: Hermit Dave at 08:52 PM | No Comments | Add Comment
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While most are focused on the elections next Tuesday, there is an even more important event on Wednesday.  This is when the Fed will announce its policy in regard to further Quantitative Easing.  It would be nice if the elections were the more important event -- they certainly should be -- but as almost nobody in the political space is even talking about Fed policies, it gives Bernanke free rein to continue down the ruinous path on which he has set the country.

What will the Fed do?  To try to figure that out, one has to ask what Bernanke's goals are.  His primary goals seem to be:  (1) Save the current banking system, (2) Promote general inflation without causing a dollar crisis, and (3) Keep the stock market levitating.  Now, I completely disagree that these should be his goals, but Bernanke is a fucking criminal and I'm not (at least as far as I'm willing to admit).  A discussion of what his goals should be is a different topic -- this post is examining what he might do.

The problem Bernanke has is that he's largely cornered.  If QE is too small, the banking system will collapse.  They've already pulled every trick in the book to try to save the system.  Interest rates are already at zero, the banks are already allowed to lie about their balance sheets, and the QE done to date is being overwhelmed by mortgage fraud.  Bernanke has to print a good bit of money just to keep the banks swimming in place.

If QE is too large, the US Dollar will collapse.  This will cause the continuation of the current commodity explosion (in dollars), along with all sorts of terrible international consequences (trade wars, etc.).  These effects will put the last spike into the heart of the average American, as prices will explode while wages largely remain stagnant.  In the worst case, we get hyperinflation (which is really a currency crisis) and society starts to unravel.

So, Bernanke's challenge is to find just the right amount of QE to keep things slowly chugging along without blowing it all up.  The problem is, he can't really have any fucking idea whatsoever what that amount might be.  Estimates by 'experts' range from $200 billion to $4 trillion -- a spread wide enough through which to sail the Death Star with room left over for a few dozen Borg Cubes.  And, in the miraculous event that he gets it right?  The reward is the Japanese experience -- years and years of economic malaise while the zombie banks and the public sector suck up every last available dollar from producers and savers.

Clearly, Bernanke needs to go, but that would require an electorate that is focused on what really ails us as a nation, rather than gay marriage and whether or not Christine O'Donnell is a witch.  In the absence of the political will to tackle the truly serious issues, the Fed's announcement on Wednesday is a good bit more important than the election on Tuesday.  Which brings us back to the question:  What will Bernanke do?

Fuck if I know, but I'm stocking up on lube.

Posted by: Hermit Dave at 01:16 PM | No Comments | Add Comment
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Today was just more noise, but I want to reposition my bank trades.  To that extent, I'm going to close the following trades:

• Short Banks, closed at 45.70, for a gain of $143.38
• Long JPM, closed at 37.58, for a loss of $14.59 
• Long GS, closed at 160.46, for a gain of $119.32

I had been long JP Morgan Chase in the thought that they were the most politically connected of the big commercial banks, but the truth of the fundamentals is that they're just as fucked as all the other commercial banks.  Goldman Sachs is the one bank that's different, and as far as being politically connected, they are the government for all intents and purposes.

My new and reestablished positions:

• $15,000 Short Banks, as measured by the BKX index, marked at 45.70
• $5,000 Short Bank of America, ticker BAC, marked at 11.56
• $10,000 Long Goldman Sachs, ticker GS, marked at 160.46

This leaves me $20,000 short / $10,000 long as before, but with a risk profile I greatly prefer.  BofA is easily in the worst position of the big commercial banks (financially and politically), and if there is to be a 'sacrificial lamb', they'll almost certainly be it.  In the event of a wholesale change to the banking system, I'm still net short.

These changes put my cash balance at $4,436.02.  Results for Week 2 on Friday.

Posted by: Hermit Dave at 11:47 AM | No Comments | Add Comment
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The entire world feels like it's in stasis at the moment.  Nobody wants to do anything in front of the elections, whether in the markets or in real life.  Everyone is positioned and now it's just a matter of waiting.  And no, the political masturbation of trying to interpret the nonstop polling data does not count as doing anything.

So, have some Jackson Browne:

Posted by: Hermit Dave at 11:23 AM | No Comments | Add Comment
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I'm going to stop doing a daily Model Portfolio update, as nobody reads this drivel anyway most days are likely to be short-term noise with very little long-term significance.  I'll update in the event of large-scale movement or if I make a change to the portfolio.  Weekly results will also continue.  Today was a noise kinda day, but generally good for the portfolio as banks got whacked even with the market up a bit.

If I have anything that I feel is worth saying in regard to the markets outside of portfolio performance, I'll do it in a separate post.  As my focus is much longer term than that of most traders, however, it's not likely I'm going to have much to say on day-to-day market crapola.

Meanwhile, read Denninger for constant updates on the mortgage fiasco, read Zero Hedge for your daily dose of market cynicism, gold touting, and conspiracy theories, and most importantly, Move Your Money.

Posted by: Hermit Dave at 12:03 PM | No Comments | Add Comment
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A lot has been written recently about the percentage of Americans that pay taxes to the Federal Government.  These articles, however, are all nearly worthless, as they only examine direct taxation.  The truth of the matter is that, even if the Federal income tax were completely abolished, it would do little, in and of itself, to change the size of government.

A government that has direct currency control has no need for any explicit taxation.  The government can simply print enough money to pay for itself.  The government effectively goes from a direct tax to an indirect one by taxing through deflation of the currency.  This course of action is, in fact, recommended by extreme monetarists.

While I think that this type of extreme monetarism is a terrible idea for a lot of reasons, one must be aware that it is, to a certain extent, actually occurring in today's world.  While the US Government doesn't have direct currency control, as the Fed is 'independent' (cough, bullshit, cough), we have a lot of indirect taxation through Federal debt, which is subsidized by the Fed's balance sheet.  In short, we have the worst of both worlds, as we have direct taxation and indirect taxation, both of which hit producers and savers the hardest.

If I were to try to examine the effects of extreme monetarism, it would take a very long (and terribly boring to most people) series of blog posts.  The purpose of this post is to simply point out that the issue of direct taxation, and the percentage of society that pays direct taxes, is only part of the picture.  I'll leave the consideration of the effects of indirect taxation as an exercise for the reader (all zero of you).

Posted by: Hermit Dave at 10:09 AM | Comments (2) | Add Comment
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They need to rename the G20 financial summit to something more appropriate, like the "Coordinated Bullshit Symposium".  The goal of these meetings isn't to actually accomplish anything, it's to put out a bunch of happy-crappy blather to sell to the dipshits back home.  Sorry, but I'm not buying, maybe Krugman would like some.

The only nation to make a statement that was at all worthwhile was Brazil,  who said 'Fuck You' to the whole process and skipped the meeting in protest.  If your tolerance for bullshit is extraordinarily high, you can read this 'news' summary of the summit.  I'd fisk the whole thing, but I have better things to do (like trim my toenails), so I'll just point and roll my eyes.

If I tried to interpret this degenerate international Kabuki theater, it would basically come down to:  Geithner showed up and said that the rest of the world should be happy to let us print lots and lots of dollars and accept that their US Treasuries would become toilet paper.  And while they were at it, they needed to stop trying to be productive and stop exporting so much to us.  The rest of the world told Geithner to go fuck himself then gave him a swirly.

If anything of substance had come out of the G20, it would have been shocking, as the global economy is one huge clusterfuck and the last thing any of these finance ministers want to do is take an honest approach to the issues.  Taking an honest approach would mean flushing the debt out of the system, which would shut down most of the world's major banks, which would mean less money for finance ministers to take cushy trips to meaningless conferences.  And God forbid that should happen.

Posted by: Hermit Dave at 08:32 PM | No Comments | Add Comment
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Today was one of those quiet, mildly annoying, short-covering days in the market.  This is perfectly understandable going into the weekend, especially with the G20 song and dance revving up.  As I think my portfolio is well-hedged for anything that might come out of the G20, I see no reason to take off risk (move into cash).  So, no changes to the portfolio at this time, just results for week 1.

This week's results were largely meaningless, even with the whoop-de-do on Tuesday and Wednesday.  Up a bit here, down a bit there, everything well within the parameters of short-term noise.  As net movement was so small, I'm not going to bother posting position-by-position info, just total results for the portfolio and benchmark(s).  One quick note:  due to an error in the spreadsheet I made to track this shit, my closed position proft/loss was slightly off, so I'm taking an adjustment of -17.57 to my cash balance.  The error had no effect on outstanding position PnL, and my cash balance is at $4,187.91.

   

So, stocks mildy up, hard assets down a bit, model portfolio almost dead flat.  If my results remain this boring and pointless for more than a few weeks, I'm gonna shoot myself for all the time I'm spending on this nonsense.

Have a good and risk-free weekend!

Posted by: Hermit Dave at 11:56 AM | No Comments | Add Comment
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I believe it's in my blogging contract that I have to weigh in on this, even though the subject's already been written about on every single site in existence.  So rather than state the obvious (no public funds for NPR, etc.), I'll focus on a different idea, one that is more obscure, yet (at least to me) much more interesting.

The biggest problem at NPR seems to be that Williams was also working for Fox.  Apparently, this was a major issue for NPR's listeners as well as its management.  One would think that leftists would appreciate someone trying to espouse and defend their ideas in a conservative arena, so as to convince others of the validity of their ideology.  One would be wrong.

Leftists are so far gone that, not only do they want to live in an echo chamber, they don't want anyone else to know what they are thinking.  This, to me, is the critical point.  They know that their ideology is indefensible, but they don't want to acknowledge it publicly.  The current elections show that, when exposed to the full light of day, their ideology is firmly rejected by most Americans.  Their only option is to retreat into a 'secret society', where not only do they hear solely what they want to hear, nobody else can be privy to their conversations.

Juan Williams was, in part, fired for breaking the leftist echo chamber and acknowledging the real world.  The main reason he was fired, however, was for exposing the bankrupt leftist ideology to others.  That was the truly unforgivable sin.

Posted by: Hermit Dave at 09:43 AM | No Comments | Add Comment
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Today was a big nothingburger, even with gold down a good bit.  Some random thoughts:

At some point Netflix (NFLX) is going to be a monstrous short.  Now, however, is not likely that time, as the current short interest is huge.  While they're clearly a legitimate business, they've got stiff competition in the on-line delivery space, and they're priced way way above any rational estimates of earnings growth.  One of these days, it's going to be 'look out below', but the stock could go much much higher before that occurs.

Gold looks like crap short-term.  However, while it's tempting to dump the position in the model portfolio, it would be a terrible move.  The model portfolio is for capital preservation, and trying to eliminate Fed risk.  Gold is a core holding of that strategy, so if it goes down, it goes down.  C'est la vie.  Still, if I were running a speculative portfolio, I'd short the living shit out if it short-term.

The more I look at a long SPX, short NASDAQ position, the more I like it.  I expect that to also be a core position of my model portfolio.  The spread between the two has absolutely blown out in the last couple years.  While technology is definitely the growth space, we're not growing.  In fact, NASDAQ encompasses much more discretionary spending than does the broader SPX.  I expect this spread to come in a lot over the coming years.

Tomorrow will be results day for Week 1 of the model portfolio.  Unless we see some really large movement somewhere, it's looking like I could have just kept the full $100,000 fake internet dollars in cash and taken a nap this week.  It would be pretty amusing if I finished the week completely flat.

Posted by: Hermit Dave at 12:14 PM | No Comments | Add Comment
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One theory of trading says that the market will move in such as way as to hurt as many participants as possible.  This is often referred to as the theory of maximum pain. Like most trading theories it works ... except when it doesn't.  But it can be fun to try to figure out a market move that will hurt a lot of traders.

From my perusal of trading sites, it seems that almost all participants are making two dangerous assumptions:  (1) Further QE is a given and it will keep the market levitating; and, (2) The market will not sell off prior to the election.  Even many traders with a long-term bearish outlook are assuming this and are currently long.

It would be fun to make a 'maximum pain' trade and bet on a sharp move downward that occurs prior to the elections.  Short-dated puts would be ideal for this, especially on gold.  A large downward move in risk assets would likely take everything with it, but in the short term gold seems most vulnerable.  It's due for a large correction and a big crack just before the elections would screw a lot of people.

Odds are, the two assumptions above are in fact correct, but they're still dangerous if one is not prepared for them to be wrong.  I'm tempted to put on a small 'maximum pain' trade in my model portfolio, but short-term gambling is not the purpose of that particular exercise.  If the market (especially gold) does tank prior to the election, the wailing and gnashing of teeth coming from various trading sites will be amusing as hell.

Posted by: Hermit Dave at 07:15 PM | No Comments | Add Comment
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In honor of all things with real value:

Posted by: Hermit Dave at 01:10 PM | No Comments | Add Comment
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The market broadly reversed yesterday's price action, and my rebalanced portfolio behaved beautifully.  The only thing I'm missing is some downside beta and asset crash protection.  To that end, one new position:

• $1,000 Long Mar 2011 S&P 500 Puts, 950 Strike (marked at the CBOE bid/ask midpoint -- 14.35)

With today's rally and associated decline in volatility, it's a great day to be buying long-dated puts, so I'm going to take advantage of it.  All other positions remain the same and I'm left with a $4,205.48 cash reserve, which should be enough to cover any short-term moves against my positions.

Bring it Bernanke!  Let's see whatcha got, punk!

Posted by: Hermit Dave at 12:25 PM | No Comments | Add Comment
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