Friday, May 8, 2009

Apples to Apples... An Engineering Feat or a Disaster Waiting to Happen?... Just Plain Dumb...



For those of you who are familiar with my blog, you know that I love baseball and college football. While being a Cleveland Indians fan is more and more of a challenge these days, there is nothing like seeing a team build on its small triumphs, and develop into a cohesive unit. With focus, determination, and a bit of luck, almost any team can make a run at the pennant.

Lately, it appears that Obama's team is also making a run at the pennant. While off to a losing streak during the opening days of his first 100, Obama fans have seen a dramatic reversal in financial fortunes. The losing streak out of the gate (Dow 6,500) has been replaced by a rally that saw the market close above 8,500 yesterday.

I must admit that I like Obama. He communicates well, and appears to have a game plan (unlike his predecessor), and he has a team that can execute the game plan he has put together. One only has to look at the choreography between Bernanke, Geithner, Obama and practically everyone else as this juncture to know that confidence is the flavor of the month. I want to believe in this confidence almost as bad as I wanted to believe in Santa Claus when I was a kid. After all, I saw Santa Claus at J.C. Penny's. I told him what I wanted for Christmas. I woke up Christmas morning and looked under the tree, and there it was. The Tooth Fairy also gave me money for Teeth, and the Easter Bunny came up with some awesome baskets!!! If seeing is believing, then I was definitely a believer!!! Geithner's one...and maybe only plan it to keep banks capitalized at all costs.

Bernanke who is an expert on the systemic failure of the Great Depression realizes that liquidity and lending are the keys to reviving the economy, or at worst giving us a "Great Recession" as opposed to another "Great Depression." Seeing the market move the way it has of late is making some people believers again. Unemployment rates, while at a 26 year high, are showing signs of stabilization. Although it is possible unemployment will hit over 10% this summer. With first-time home buyer incentives of $8,000, "experts" are calling a bottom in housing. Finally, the government's stress test which was designed to rate a banks financial health revealed that top banks only need $75 billion to meet capital requirements.

As for me and my money, I am not buying into the hype... at least not yet. I even missed out on two hot calls from Ax about FITB and C which have could have netted easy profits... But in my mind, I didn't feel good about it. I am a pragmatist, and I will generally play the hot hand. However, this time I sat out, and cheered for a few of my fellow bloggers. After all, there is nothing like seeing a well executed play... based on skill... analysis... and of course a bit of luck. These guys are no fools. It is not that they don't want the market to succeed, they are just not buying into the story that banks are insolvent one day, and good to go the next... They just saw opportunity.

An Engineering Marvel or a Disaster Waiting to Happen?
We are reminded of the German engineering masterpiece Hindenburg, a zeppelin which carried passengers across the Atlantic Ocean in a time when the air transport business was in its infancy. The Hindenburg was also a feather in the cap of post-WWI Germany who had gained the reputation of the world's bad guy. The Hindenburg became the embodiment of German engineering, technology, and pride. And the Bible is clear on man and pride. "It comes before the fall." We are reminded that a small spark destroyed the mighty Hindenburg which was filled with Hydrogen gas. Likewise, while conspiracy theorists are pulling their hair out with the winks and nods of this well orchestrated rally, there should be a degree of appreciation for the engineering that has taken place. When it is all said and done, the players may well earn an academy award.

Sparks that May Ignite the Fire
1. Taliban sympathizers in Pakistan gain control of the nuclear arsenal...
2. Data suggesting that economic indicators were misinterpreted, and the true risk is deflation.
3. Systemic credit crisis in East Europe spreads to the EU and beyond.
4. China, Russia, and Saudi Arabia dump the U.S. dollar as the reserve currency.
5. An uptick in unemployment.
6. Israel gets the green light to take out Iran's nuclear capabilities.
7. Bloomberg wins its case to learn who the Federal Reserve loaned money to during the initial credit crisis.
8. Upbeat analyst predictions for a turn-around in earnings do not coincide with actual results. (See Toyota Motors).
9. Consumers do not return to reckless spending.
10. Credit risk to reward does not allow banks to lend as they once did during the expansion.

Just as a reminder, Fannie Mae reported losses of close to 18 billion dollars. AIG on the other hand only lost another 5 billion dollars in taxpayer money this quarter.

Just Plain Dumb
I often times wonder what people like Manny Ramirez would be doing for a living if they did not play professional sports. I don't believe his cover story at all... and believe this will do considerable damage to his "brand name" in terms of marketing. What a stooge!!!

Stocks Long: Randy's Picks
NVTL is hot! BAC,XIDE, and CLWR

Brian's
NEOP, D, and SLV

Stocks Short
TM, WYNN, DE, and BBW

2 comments:

AX said...

TC, working on a new hedge that I think you'll like....Agree with multiple points of your next leg down, specifically the $11 billion drop in consumer credit in March, largest ever. No spendee, no ponzi! Ironic that I am sickened by Obama's charade to date and you have turned the corner in your opinion. Difft. expectations I suppose.

Tiger Coach said...

Ax... Let us hope that the UN, NATO, or the free world for that matter has the resolve to nip this Taliban thing in the bud. If not, Obama will have the fate of the world in his hands...pretty scary stuff...