The shit going down in Greece is incredibly important, as it will affect the global banking system and economy is a huge way.  I thought I'd take a quick trot around the conservative blogosphere to see how many posts I could find on the subject.

As expected:  Zero.

The conservative blogosphere has managed to somehow become even more useless than the MSM.  Congratulations.

Posted by: Hermit Dave at 01:09 PM | Comments (1) | Add Comment
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This whole Weiner idiocy is making me very glad I've completely given up on politics, as I can simply point, laugh and move on.  A politician is a fucking scumbag -- gee what a shocker.  That this obvious crap is apparantly worthy of 'flood the zone' coverage isn't surprising, but it's just plain fucking tedious.

With the vast majority of the general populace being barely functioning retards, the only way any politician can get elected is to be either a scumbag or a complete idiot.  One simply can not tell the truth and get elected, thus either politicians don't know the truth or they're lying and/or obfuscating.  While there are those who are obviously idiots (eg. Boxer, McCain), most are utter scum.

I'm at the point where I don't even blame the politicians.  As people are basically begging to be raped by the political / banker class, I say go for it.  Weiner's only crime is getting caught, but at least it has the positive side effect of another circus for the braindead masses to distract them from the rising price of bread.  Whoop-de-fucking-do.

In developments that actually matter, the recent sell-off in the markets has caused my hedge to go significantly positive for the first time.  Until now, the hedge has been a slow leak in my commodities profits, but if we sell off further it will increasingly add to the bottom line.  Of course, as all risk assets are moving roughly together, my basic portfolio will most likely be leaking as the hedge makes money.  This makes the spread between commodities and stocks more important to my strategy as my investments are in commodities but my hedge is in stocks.

In my post from 1/6, I was off on the timing on the debt ceiling thing by about three months, as my breach assumption was about one month early, and I foolishly didn't anticipate the Treasury raiding government  pension funds for cash (if you want to talk about stuff that should actually matter, that's a big one).  However, my wealth preservation strategy was designed to be largely impervious to timing issues, so I'm good to go at this point.

Timing aside, it will be interesting to see if the broader predicitions prove out.  So far, it's looking pretty good.  So, while most of the rest of the American populace is chomping down on Weiner, I'll just keep trying to preserve wealth and prepare for the ever-increasing economic shitstorm.

Posted by: Hermit Dave at 01:35 PM | No Comments | Add Comment
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I had no intention of posting at all, but events keep dragging me back in.  I want to at least keep somewhat of a record of the wealth portfolio performance, if for no other reason than to be able to blast a big fat fucking I TOLD YOU SO into the void at some point.  So, I'd be remiss not to at least acknowledge this week's carnage in the commodities markets.

It's happened before and it will happen again -- commodities are extremely volatile.  Since my call to rebalance on 4/27, silver is off over 25% while gold is down a mere 2% or so.  My market timing is rarely that good, but silver was just crazy and $50 is a big number, so I don't think it was too hard a call.

This sell-off brings things closer to a much more sustainable annualized rate of return, especially vis-a-vis equity indicies.  Even though silver is down a ton in a very short amount of time, it's too early to rebalance it back yet.  There's a very good chance of more downside to come.  A lot will depend on the equity markets and the relative USD performance, especially vs. hard commodity currencies (CAD / AUD).

In any event, since QE2 start, total performance of the wealth portfolio is 27.1% (vs. a peak of close to 40%).  Total performance of the blended stock market is almost exactly 12%.  It's nice to still be up this much after that solid a crushing.  The effect of the debt ceiling 'debate' (really a foregone conclusion with a lot of associated theater) on everything will be interesting.  As we're pressed up against the ceiling already, Congress had best get their sorry asses in gear. 

Looking back to my post from 1/6 on what I thought might happen, point 6 is notable.  We got to right around all those levels at the recent peak, well before I thought would happen.  If the commodity space takes off again after the debt ceiling increase, look the fuck out.

Posted by: Hermit Dave at 04:33 PM | Comments (1) | Add Comment
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Allahpundit of Hot Air is truly the poster child for everything that's wrong with the political process in America.  To call him an utter fucking ignorant tool would be far too generous.

In a recent 'piece' on Herman Cain, AP says 'If you're looking for a political outsider, look no further'.  Somehow AP seems to have missed the fact that Cain was the fucking deputy chairman (1992–94) and chairman (1995–96) of the Federal Reserve Bank of Kansas City.

Yeah, a fucking banker is exactly what the GOP needs right now.  Asswipe.

Posted by: Hermit Dave at 03:33 PM | No Comments | Add Comment
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While I'm glad that goat-fucker is dead, it's completely meaningless at this point.  The reaction to us finally getting the bastard proves once again why I'm done with politics for good.  America is truly a nation of ADD-afflicted children, riding the short bus over the cliff.

Maybe we can manage to get Bernanke next, as he's done more damage to the US than Osama could have hoped to do in his wettest dreams.  I'm not going to hold my breath.

On a note of actual importance, silver is down sharply while gold is up a bit since my rebalance.  Is silver being manipulated?  Of course, and so what?  It's simply something to add to the equation, and one of the reasons why I expect silver to be down in the low 30s before I'd consider upping its allocation again.

Posted by: Hermit Dave at 01:11 PM | No Comments | Add Comment
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Just to get it on record, I agree with this post by Mish.  Although it could go much higher prior to a correction, Silver is looking shaky from a risk perspective at this level.  It's just come too far too fast.  So, for risk purposes, a portfolio that was 25% silver, 25% gold, 50% commodities (DBC), should readjust.

I recommend dropping silver to 10%, with 40% gold, 50% DBC.  I also recommend maintaining a hedge via a stock index (I still prefer long dated options).  Essentially, nothing has changed, so the basic portfolio concept is intact, but I think it's time to take some risk (and silver profits) off the table.

Oh, and Obama's 'birth certificate' is clearly bogus, not that it makes a damn bit of difference.  As things stand, I prefer him to the GOP, as he'll drive things over the cliff faster.  Given the stupidity of the electorate, we're going over the cliff either way and I'd just as soon get it over with.

Posted by: Hermit Dave at 02:56 PM | No Comments | Add Comment
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To call the political blogosphere a wasteland would be an insult to vast, empty tracts of land -- at least the tracts of land might someday prove useful, unlike say, Hot Air.

Wealth preservation portfolio since inception (QE2 start) -- up about 27%.  This, by the way, is roughly the true rate of inflation -- over 50% annualized!  Silver -- up an astounding 59%.  Blended stock market -- up about 11%.  So, barring complete lunacy, any hedged strategy would be up very nicely.  If someone (cough) had hedged somewhat intelligently with puts, they'd be up about 20%.  How's my ass taste, political hacks?

Just read Zero Hedge.  Sure, it's sensationalist.  But for the intelligent reader (in other words -- no one in the political blogosphere), there's more valuable content on that one site in one day than there is on all the political sites combined in a year.

I might update again in another 3 months or so, assuming I can take a brief break from laughing at the fucktards who take the political circus seriously.  Hasta la vista -- baby.

Posted by: Hermit Dave at 09:56 PM | Comments (1) | Add Comment
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Most people (like 95%) can't think past their desire to watch some crap on TV or buy some new shiny gadget that will actually complicate, rather than simplify, their lives.  Thinking through the consequences of their actions, especially in time frames that go out years or involve somewhat abstract concepts such as freedom, is something most people simply refuse to do.  And when they do make the attempt, they're almost always focused on useless shit.  I've known this for ages, but I go through periods where I struggle against the obvious.  Inevitably I throw in the towel at some point.  Now is that point.

I'm in pure 'fuck society, I'm going to simply do what's best for me' mode.  So, no more blogging most likely.  I leave all my zero readers with a live video of what's been my theme song for ages:

Posted by: Hermit Dave at 01:39 PM | Comments (2) | Add Comment
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There is news today that India and Iran are trying to come to an agreement on using gold to settle oil trades.  This comes on the heels of news that China and Russia are going to settle their energy trades in Yuan and Rubles for their new oil pipeline and other cooperative ventures.  Accordingly, exchanges have begun trading the Yuan/Ruble pair.

The only thing keeping commodity inflation from going apeshit in the US is the international reserve status of the US Dollar.  This drives a demand for Dollars, which has the effect of exporting our inflationary practices to other nations.  Needless to say, other nations realize this and with the Fed in full retard mode, they are starting to devise strategies to avoid the US Dollar for commodity trade.  To the extent that they succeed, it will force Dollar inflation back into the US.

An inflationary, weak dollar policy may seem like a good idea for exporting industries,  but it comes with a host of unpleasant consequences.  As other nations continue to lessen their reliance on the US Dollar for trade settlement, people are going to come to realize just how destructive the Fed's current policies are.

Posted by: Hermit Dave at 11:55 AM | No Comments | Add Comment
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I'm largely through talking about what I think should happen, as my opinions are different from those of the vast majority and I'm completely fed up with politics.  Instead, I'm just going to discuss what I think is going to happen and how one can try to profit, or at least protect one's self, from events.

First, let's not kid ourselves -- the debt ceiling will be raised.  The only question is by how much, and therefore how soon it will come up for yet another vote.  Oh, there will be some hand wringing and political grandstanding, but there is no way in hell politicians are willing to accept the immediate consequences of a failure to raise the debt ceiling.  The can will, once again, be kicked.

I think that the most likely course of events will be as follows:

1. Conservative politicians do a lot of tough talking and bloggers write about how we need to get this situation under control.
2. The stock market sells off sharply.
3. Articles start appearing in the MSM about all the bad effects of failure to raise the debt ceiling -- pension fund insolvency, big jump in unemployment, etc.  The rhetoric coming out of the administration (which Geithner has already started) increases to a fever pitch.
4. Politicians, after a lot of closed-door meetings with Wall Street types, where Armageddon is (yet again) threatened, decide they don't have the stomach for a difficult course of action.  Conservative bloggers write conciliatory pieces while trying to make it sound like they're not doing a complete 180.  
5. The debt ceiling is raised by about $1.5T, with some nominal budgetary concessions and a lot of stomach-churning grandstanding.  Conservative bloggers whine a bit but console themselves that 'it was the best deal we could get.'
6. Risk assets go 'yee-haw!' and rally back strongly.  Gold heads for $1,500, silver for $50, and Oil for $120.  Everyone immediately starts bitching about inflation.
7. The whole farce is replayed again in about a year except under much more dire circumstances.

Needless to say, I'm already set up for this kind of series of events, with a hedged wealth-preservation portfolio.  If all goes as predicted, the hedge can be lifted about two weeks prior to the actual vote on the debt ceiling.  Still, one will need to pay very close attention to any deviation from the above, as even seemingly small details (such as what comprises the concessions to enable the increase) can impact a proper investment stance.

Posted by: Hermit Dave at 11:40 AM | No Comments | Add Comment
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Once again, I think there is an excellent speculative opportunity to short the market, with a favorable risk-reward profile.  As before, the most likely result is a small loss, as this kind of a trade is fairly low percentage, but with a big fat tail (profit) when it works.

Short the Qs (ticker QQQQ) at 55.81 with a stop at 56.09 (approx. 0.5%).

Update (close of market):  This is another one that needs to be closed out at a tiny loss as holding overnight without a good cushion increases the risk too much.  As we get closer to the debt ceiling vote, I expect to try this kind of a trade repeatedly until it comes home (or I get carted out -- but with the kind of tiny losses I'm taking it will be ages before I can be carted out, which is why risk control is so important).

Posted by: Hermit Dave at 10:21 AM | No Comments | Add Comment
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Making market predictions is a fools game.  There are too many moving parts, all of which can change rapidly, especially in a highly-charged political environment.  The smart observer / investor will, instead of trying to predict the course of the markets, evaluate probabilities and position appropriately, with a willingness to change one's overall thesis upon shifts in the financial landscape.

The starting theme for 2011 is one of a continuation of 2010, as the Fed is still doing QE.  Avoidance of dollar-denominated financial instruments, with wealth preservation as a focus, is still proper positioning.  The one thing to note is that all risk assets are well overdue for a correction, so I also believe that a hedge is warranted at this time.  Because of the difficulty of timing, I think cash is a bad idea, as we could easily see a further run-up in assets prior to a correction.

Going forward, the new Congress will play a major role, especially as we approach the current ceiling on the national debt.  This will be a major issue from the middle to the end of the first quarter, and could easily cause the long-awaited correction in risk asset pricing.  Also, at that point, QE2 will be about half completed, and the markets will be wondering about the Fed's next move.  Should a correction occur at this point, an investor is going to need to pay close attention, as possible policy paths would have widely divergent economic results.  We could correct and have a strong bounce, keep going down, or even never correct at all depending on which moves are made by Congress and the Fed.

To be honest, looking past this critical period is mostly a waste of time, as there are so many variables in play and a large number of possible outcomes.  Still, assuming we make it through relatively unscathed, that the policymakers largely preserve the status quo (with further economic can-kicking), the rest of the year is likely to return to a repeat of the 2nd half of 2010.  This would set us up for a 2012 disaster as, with gas breaking at least $4 / gallon and food inflation starting to put a huge dent in the average wallet, the election year would likely turn into economic and political chaos.  It probably will regardless, as there will be major economic pain somewhere -- a continued decline in housing prices, pension fund collapses, state and municipal defaults are all possibilities, especially if we don't go the inflationary route.

In short, I expect to see some first quarter fireworks, followed by a relatively tame rest of the year.  I wouldn't be at all surprised to simply maintain a wealth preservation portfolio, hedged with puts, throughout 2011.  2012 is where I expect the major issues to finally come to a head (damn those Mayans).  There are so many possible exogenous factors, however, that pretty much anything is possible.

Other areas to watch for are:  a possible Yen crisis, if Japan finally runs out of the ability to increase their national debt through the looting of the savings of their own citizens; a possible Euro crisis, if Spain or Italy blow up, or if Ireland gets balls and tells the EU to fuck off; a China crisis, if inflation takes further hold there, forcing some combination of capital controls, price controls, interest rate hikes, and/or Yuan revaluation.  Or, some global hot-spot (North Korea?  Iran?) could blow up and we could have an expansion of global conflicts.  There are more than enough potential plummeting black swans to keep everyone ducking for cover throughout the year, so even though I expect 2011 to be mostly calm before the storm, I'll do my best to be prepared for as many eventualities as possible.

Posted by: Hermit Dave at 02:40 PM | No Comments | Add Comment
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Posted by: Hermit Dave at 03:26 PM | No Comments | Add Comment
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Pretty much everything with the exception of bonds ended on the highs for the year.  Final 2010 results for the wealth fund vs. the investment fund:

Year-end marks will have distorted the above figures somewhat, but at this time, the wealth fund is up almost 7% over the investment fund.  That is a huge difference for two months worth of trading.  The outright move of just over 11% is a bit on the insane side, as that projects out to nearly 70% annualized.  If one goes back to when QE2 started to get priced into the market at the beginning of September, the numbers are even more insane.  In short, this kind of trend is likely to be unsustainable, at least at this velocity.

This would be an excellent time to buy some downside protection on one's assets, if one hasn't already.  I like the June 1100 S&P 500 puts for protection, which cost around 2.5% of notional assets for 5.5 months of 'insurance'.  That being said, if the Fed keeps destroying the dollar, this trend could continue, even at this (or much greater, in the event of a currency crisis) velocity.  That's why I prefer puts as a hedge as opposed to futures, and also why I don't want to be in cash.

Anyway, hope everyone enjoys their $3+ / gallon (and rapidly increasing) gas in the coming year.  Keep focusing on gays in the military and the size of Brett Favre's peen, as that seems to be the most effective way to deal with the serious issues facing our country (eye-roll).  For the new year, I'll be giving the new Congress about one month to get serious (which they won't), then I'll be writing off politics (and the political blogosphere) for good and playing 'every man for himself'.  Good luck to all, because we're sure as shit going to need all the luck we can get.

Posted by: Hermit Dave at 02:01 PM | No Comments | Add Comment
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It's the time of the year for stupid fucking top 10 lists, which will be compounded by it being the end of a decade.  So here is a meta top ten list, in no particular order and counting up as I don't really give a flying fuck:

1. Top ten CDs or singles (of whatever passes for music in these days of autotune).
2. Top ten celebrity hotties (95% of 'em are made of fucking plastic and have a personality and talent to match).
3. Top ten movies (fuck Hollywood -- I haven't seen the inside of a movie theater in about 7 years).
4. Top ten blogs (of any type).
5. Top ten athletes or sports teams (unless it's skiing, and the entire top ten is Lindsey Vonn -- ok, you can throw Tina Maze in there also as she's a model as well as one of the best skiers in the world).  
6. Top ten anything political (you only need a bottom one for anything political and that's for everything, although I guess Barney Frank might be the top bottom, as it were).
7. Top ten consumer gadgets (useless crap I don't need).
8. Top ten anything related to investing (these are either backward looking and useless or forward looking and inevitably wrong).
9. Top ten anything to do with TV (might as well have a top ten list of ways to give yourself a lobotomy).
10. Top ten computer games (inevitably 9 shooters for which my reflexes are too old and a token MMORPG grindfest).

Posted by: Hermit Dave at 01:15 PM | No Comments | Add Comment
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Posted by: Hermit Dave at 11:22 AM | No Comments | Add Comment
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On the twelfth day of QE, Bernanke gave to me
        Twelve foreclosed houses,
        Eleven printers printing,
        Ten billion POMO,
        Nine strippers dancing,
        Eight Netflix movies,
        Seven suckers shorting,
        Six bankers lying,
        Five tungsten bars,
        Four Priceline flights,
        Three sick banks,
        Two trillion cash,
        And a debt-fueled market rally.

Merry QE to all, and to the dollar, good night!

Posted by: Hermit Dave at 10:11 AM | No Comments | Add Comment
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On the eleventh day of QE, Bernanke gave to me
        Eleven printers printing,
        Ten billion POMO,
        Nine strippers dancing,
        Eight Netflix movies,
        Seven suckers shorting,
        Six bankers lying,
        Five tungsten bars,
        Four Priceline flights,
        Three sick banks,
        Two trillion cash,
        And a debt-fueled market rally.

Posted by: Hermit Dave at 11:45 AM | No Comments | Add Comment
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For guys, Dancing / Skating with the Stars is only about hot chicks in skimpy outfits, so they should just skip the bullshit and go straight to Pole Dancing with the Stars.

Posted by: Hermit Dave at 09:35 PM | No Comments | Add Comment
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My sincerest congratulations go out to Banana Ben Bernanke, who as of today, has managed to surpass his first trillion dollars in US Treasury holdings!  This makes the Fed easily the largest holder of US Treasuries in the world.  Combined with their holdings in mortgage backed securities and other assorted garbage, the Fed has over $2.5 trillion on the balance sheet.

At his current pace, by this time next year, Ben will have managed to surpass $4 trillion.  By then, gas should be well over $5/gallon and I'm sure the serial liar will still claim that there's no inflation and that he's not monetizing the national debt.  Merry Christmas, ya fucking bastard.

Posted by: Hermit Dave at 12:02 PM | No Comments | Add Comment
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