Saturday, January 31, 2009

Political games

Voltron says: President Obama is proving to be Machiavellian. link here.

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.

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.

Feds allege plot to destroy Fannie Mae data

Thursday, January 29, 2009

Apply for a bailout

Morgan Stanley extremely bearish

Voltron says: my old colleagues point out the risk of hyperinflation in the future and deflation near-term: link here and here

Wednesday, January 28, 2009


Tuesday, January 27, 2009

Ultrashort ETFs Can Work if You Trade Them Correctly -- Seeking Alpha

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

In Defense of Leveraged ETFs

Voltron says: a different analysis with links to several other articles embedded.

link here

CRE: When the Reserve Runs Dry

Voltron says: article predicts that commercial real estate projects will run out of reserves in late 2009 or early 2010. I explained this back in October here.

link here

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

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

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

Sunday, January 18, 2009

Asshat of the year award 2008

Voltron says: pretty funny. He has some unkind words for Proshares (SRS)