Saturday, January 31, 2009
Updated Forecast
President Obama and Treasury Secretary Tim Geithner will propose a bailout package so breathtakingly massive (2-4 Trillion) that it will even give democrats pause. If congress fails to pass it, no matter what happens next, he's off the hook. Even China does not have the reserves to foot that bill, so unless the whole world is on board with bailing us out, the inflation caused by printing all that money will be massive.
The Dow is being supported by the President's Working Group on Financial Markets at 8,000. I expect the support to be broken with the next support at 6,000. This will be allowed in order to garner support for the bailout.
The Dow is being supported by the President's Working Group on Financial Markets at 8,000. I expect the support to be broken with the next support at 6,000. This will be allowed in order to garner support for the bailout.
Friday, January 30, 2009
Horrible GBP numbers
Voltron says: The GDP numbers would have been worse except manufacturers could not cut production fast enough. As a result, the GDP number also includes lots of unsold inventory.
http://www.nytimes.com/2009/01/31/business/economy/31econ.html?_r=1&hp=&pagewanted=print
Thursday, January 29, 2009
Morgan Stanley extremely bearish
Wednesday, January 28, 2009
Tuesday, January 27, 2009
In defense of Peter Schiff
Voltron says: GASG readers know that I've been a fan of Peter Schiff, his company EuroPacific Capital and his book "Crash Proof" There have been some articles (link here and here) that point out that although he predicted the popping of the housing bubble, his investment strategy of buying high dividend paying foreign stocks has not worked out well because it assumed that the rest of the world would "decouple" and the dollar would collapse. In fact the world stock markets have done even worse than the U.S. and this has been compounded by the rally in the dollar. I think that the rally in the dollar is temporary and it's impending collapse is still my greatest concern. My investments have done well because I predicted deflation would occur before the inflation sets in, but as soon as the situation turns around, I will be dumping my short positions and aligning my portfolio with Peter's. Eventually the dollar will collapse and the world will decouple. It is important to note, that the foreign stocks I've bought (DKA, DBN and DBU) have continued to pay very high dividends (almost 6%). So although they cost less now, they are still worth the same as they were based on cash flows and so they represent an even greater value. These companies are not laying people off and they are still profitable. It's like the opposite of the housing bubble . . . the thundering herd of idiots drove up house prices even though the cash flows (rent vs own) were negative. Peter failed to predict that the Thundering Herd of Idiots (THI™) would irrationally dump their (positive cash flow) foreign stocks and buy (negative cash flow) US Treasuries. Like the housing bubble, the "Treasury bubble" will pop and Foreign stocks will make a comeback with the exception of financial stocks, which Peter specifically warned against.
Sunday, January 25, 2009
CRE: When the Reserve Runs Dry
Eric Oberg on the UltraShort Treasury ETF
Voltron Says: a good article on shorting treasuries by a former Goldman Sachs trader. He advises against shorting treasuries as a hedge against riskier forms of debt at this time. I agree, but keep in mind that cash is not a riskier form of debt.
link here
link here
SRS tracking error
Voltron says: When I eyeball the chart of SRS versus the index it is supposed to track (IYR), it seems like SRS should be much higher. To put my mind at ease, I made a spreadsheet that calculates where SRS should be if it tracked the index perfectly since it's peak on Nov 20, 2008. It turns out not to be as bad as I thought . . . SRS should be about $11 higher (15%). The tracking error has been consistently negative and has been pretty stable around 15% since SRS went ex-dividend on Dec 23rd. If you reset and track the error since Dec 23rd, it swings positive and negative and is generally under 1%. Conclusion: SRS performs as advertised and errors are mostly due to anticipation of dividend payments which are required by tax law.
link to spreadsheet here
link to spreadsheet here
Thursday, January 22, 2009
Monday, January 19, 2009
Holding inverse ETFs
Voltron says: article explains the dangers of holding inverse ETFs for long periods of time. I tried to trade in and out of it and time the market, I'm not sure I'd do any better.
link here
link here
Sunday, January 18, 2009
Asshat of the year award 2008
Voltron says: pretty funny. He has some unkind words for Proshares (SRS)
Thursday, January 15, 2009
Wednesday, January 7, 2009
Friday, January 2, 2009
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