A Life Raft with Duct Tape and Glue... A Tale of Two Cities... Stock Watch...

As a kid, I loved watching TV shows like McGiver and The A Team. Like McGiver Mr. T was always able to make some type of device out of nothing. For instance, Mr. T made a hang-glider out of a few aluminum bars, a sheet of fabric, and duct tape. The market needs a McGiver or Mr. T to make some type of invention to bring stability.

Warren Buffet has already written off 2009 claiming it to be a financial shambles. Since that is what some of the analysts and TV personalities are finally admitting, we all know that it will probably get a lot worse. How much worse will it get? Buffet went on to write “That the economy will be in shambles throughout 2009 -- and, for that matter, probably well beyond.” (1) In particular, both Buffet and Munger chastised the financial industry for creating loan products that required anything less than 10% down. However, made the most important part of the statement Buffet made about the world economy is enough to put a shiver up one’s spine. “A free-fall in business activity ensued, accelerating at a pace that I have never before witnessed. The U.S. - and much of the world - became trapped in a vicious negative-feedback cycle. Fear led to business contraction, and that in turn led to even greater fear.” (2) You don’t have to be a financial expert to read between the lines on this one… hope for the best, but expect the worse. This could be another opportunity to short the SP 500 or Russell 2000 or even FTSE to 2011.

Similar to the Lost Generation written about in F. Scott Fitzgerald’s The Great Gatsby, there are now a growing number of analysts, strategists, and hedge fund employees who are taking this opportunity to travel the world looking for excitement, exploration, and items of self-interest. In one instance, Alex Iscoe is now plotting to climb Mount McKinley in Alaska, Mount Kosciuszko in Australia, Mount Kilimanjaro in Africa and, of course, Everest. He hopes he can raise money for charity with his feat, and when it is all over in a few months, he will consider what to do for a living.
"As silly as this may sound, focusing on getting a job, even though it's relatively soon from now -- three or four months -- it's not at all on my mind," Iscoe said. "I have a 29,000-foot mountain to climb." (3) I guess Alex is not totally lost, he must be financially stable, and his heart is in the right place if he is mountain climbing for charities. The question becomes “Is this a way of clearing the mind, body, and spirit of the financial industry?”, or “Is this an opportunity of a lifetime?”

A Tale of Two Cities
Alex, if this is a way of clearing the mind, body, and spirit I would recommend that you invite John Thain and Ken Lewis along for the trip. The now infamous John Thain spoke to New York Attorney General last week regarding $3.6 Billion dollars of bonuses that were delivered as Merrill Lynch was going into the tank. According to Morningstar, there were over 700 employees who received bonus of a million dollars. “Thain was forced out of the top job at Merrill last month in the wake of his handling of the investment bank's $15.31 billion fourth-quarter loss. The investment bank set the bonus payouts in early December, when it was anticipating only about $7 billion of losses, according to Cuomo's office.” (4)
To make matters worse, Bank of America’s Ken Lewis also met with Cuomo regarding bonuses. Cuomo wants the list of those who received bonuses… and Ken Lewis is refusing to share that list unless there is a promise the names will be kept confidential. Cuomo left the meeting feeling extremely frustrated.
One thing is becoming increasingly apparent. We live in an America where most white collar criminals are untouchable. In pre-revolutionary France, the same rules applied… the rules and laws for the rich, and the rules and laws for everybody else. It appears that Obama (or at least his rhetoric) falls squarely on the side of the people. However, like most of the folks on Main Street, our ship is tied to Wall Street… and the American people will sink or swim with these crooks. Can anyone say a Tale of Two Cities? Can anyone say life raft?


In A Tale of Two Cities, Charles Dickens begins with "It was the best of times, it was the worst of times; it was the age of wisdom, it was the age of foolishness; it was the epoch of belief, it was the epoch of incredulity; it was the season of Light, it was the season of Darkness; it was the spring of hope, it was the winter of despair; we had everything before us, we had nothing before us; we were all going directly to Heaven, we were all going the other way." Along with this theme, we are empowered to make the best of this market, and that market suggests to short practically EVERYTHING!

Stock Watch...
For instance, one might believe that companies specializing in asset recovery... repossession etc. should be hitting on all cylinders in this type of economy... Looking at charts of these two lovelies, nothing could be further from the truth.
PRAA and ASFI So this could well be a market that defies some aspects of conventional wisdom... a note that all traders should take in earnest.

Like fellow blogger Ax said MCRI is moving down, and moving down rapidly. I am tempted to make additions of 6/5s which are trading at .45. WYNN and CHDN may be on there way to oblivion as well. I dumped WYNN several weeks ago... and was thankful to hit a 60% profit. Now it is looking like it could hit 10. 10s... that is the option range to consider in the next six months on that one!!! It could be a home run just in time for baseball season. RYL is also picking up a bit of steam to the down level as it appears that things will get much worse before they get better. My 12.5s are moving very close to ITM plays... MLHR suffers from a general lack of interest, this option contract only shows a 12% increase in value while I have seen the overall share price drop 4.00. It is a lesson in interest and volatility. CNK... is ITM and will need to exit this one before the 3/21 X date. O.K. so I am a bit of a pig! I also added shares of SLV to my holdings... Poor man's gold yes, but also another hedge against the gathering storm. Mr. T's Gold must be worth a fortune!!!


Next Time...

Thinking Outside the Box and Intrinsic Investing Part II

Sources Cited

1. http://www.bloomberg.com/apps/news?pid=20601087&sid=a1L50vuf_HiM&refer=
home
2. http://www.bloomberg.com/apps/news?pid=20601087&sid=a1L50vuf_HiM&refer= home
3. http://www.washingtonpost.com/wp-dyn/content/article/2009/02/26/AR2009022603926_2.html?hpid=topnews&sid=ST2009022600786
4. http://news.morningstar.com/newsnet/ViewNews.aspx?article=/DJ/200902231832DOWJONESDJONLINE000583_univ.xml

A Game of Inches... 8,000 or Bust... Shays Rebellion Revisited... Stock Watch... Economic Calendar... Seally Mattresses...

In baseball only an elite number of players were able to end the season with a .400 average. Names like Ty Cobb, Joe Jackson, Ted Williams, and Rogers Hornby belong to that elite list. Of the 12 times the magic .400 number was breached, two players (Rogers Hornsby and Ty Cobb) finished the season above this benchmark number on three separate occasions. In recent history Tony Gwynn finished the season at .394, George Brett at .390 in 1980, and Rod Carew .388 in 1978. (1)

Similar to the magic .400 number, it appears that Wall Street has drawn a line in the sand at the magic 8,000 number. This number has been tested on several occasions. November 19, 2008 stands as a key date. (2) That was a day when housing starts reached the lowest level since 1959,and the CPI marked its largest one-month decline since 1947. Since then, inter-day losses have crossed the 8,000 mark on several occasions, but the mark is always reset within a 24 hour period.

Let's face it, the news has not gotten better... and many feel it has actually gotten progressively worse. Sure the government intervened with TARP, the Big 3 bridge-loan, Obama's election, and release of the second half of TARP have all figured into the equation. Still though a steady flow of bad news should have sent this market lower. Now this mess sits squarely in Obama's lap. The issue of government transparency will be raised once again. Like Roosevelt against the back-drop of bank runs, Obama's administration may well be served to have a formal "banking holiday." (3) While FDR's plan was meant to stop bank runs, Obama's holiday would allow the banks to come clean once and for all. Obama's political capital cup is over-flowing. This is the time to make a big move. And banks need to finally come clean with bad loans, bad collateral, and faulty accounting methods. His approval rating will allow Obama to practically anything...

The Treasury and Fed, which appear to be in no way shape or form accountable to the American people must called to the carpet. The Treasury's mis-use of the original TARP funds to re-capitalize banks is the first place to start... The TARP in its original form was created to combat the mortgage and foreclosure crisis. Instead, Bush and friends exhausted their last bit of political shenanigans for a last laugh at Congress' expense. It could be that Thomas Jefferson was right. He was fearful of a class of financiers who would become so rich and powerful that they could actually manipulate the entire financial system. As mentioned before, this is the principle reason that Andrew Jackson "Killed the Bank." We have long-since blown through reporting the amount of money the Fed has printed. (4) However, the public... Congress... and the world economy for that matter is entitled to know the names of institutions which have received "additional loans" from the Fed. Furthermore, it is a necessity to find out the "true value" of the collateral that was received in those loans!!! The day that happens, could well be the last day any entity is interested in purchasing T-Bills from the U.S. government. Bloomberg's lawsuit inquiring about these loans is as much a national security issue as much as it is a question about the basic institution of democracy itself. Should that suit be denied, as Lincoln once said "When it comes to this I should prefer emigrating to some country where they make no pretence of loving liberty -- to Russia, for instance, where despotism can be taken pure, and without the base alloy of hypocrisy." (5)

Shays Rebellion Revisited...
In the past, I have alluded to Shays Rebellion. In American History, a farmer by the name of Daniel Shays took out loan, but could not repay it. Like many states immediately after the American Revolution, Massachusetts had a tremendous amount of pressure placed on it by the debtors to increase money supply, thus allowing debtors to repay their loans with inflated dollars. The creditors preferred a tight money supply. State governments were owned by the creditors. When massive numbers of farms went into foreclosure, Shays and other Revolutionary War veterans led a rebellion against banks... Kind of scary if you think about it...

What is different now it that banks are just as broke as the debtors who borrowed the money. While Treasury ad Fed have made several attempts to re-capitalize lending institutions... then beg them to lend, the credit market has become the X variable int he equation. And I would not loan a cent to ANYONE rated below a 650 credit score.

Stock Watch
Added NEOP traded on the OTC... This little dandy out of Dublin, OH is a pure speculation play which could bring a 300-500% return, or could lose 20% of my investment. We'll know more by late February. Price .70 cents a share...

SRS showing sings of a major breakout this week as retailers are showing weakness... and demand for commercial real estate diminishes.

SCC Consumer discretionary spending tends to rise during income tax season. With unemployment, and massive amounts of debt, the consumer in spite of Obama's tax cuts will be storing money under their mattress and shopping discounts!!!

EFU Significant movement from the ECB is making this an immediate winner. I own common shares. Unless the EURO becomes the world's reserve currency tomorrow, I believe we will see continued erosion in the buying power, coupled with liquidity injections.

Continued 6/115s on British Pound Sterling...

CNK I have sell orders in at 3.8. The options are currently trading at 3.2 for March. I am pushing for an extra 20% return on premium... o.k. I'm a pig at times!!!

RYL, MDC, MLHR, FXI, WYNN Puts are still in rally mode...

MCRI... June/5s puts still looking a bit shaky... We will see what their earnings look like... remember, this company gets its revenue from Nevada... ouch!!!

*Natural Gas is looking interesting...

Economic Calendar
Monday Jan 26 Tuesday Jan 27 Wednesday Jan 28 Thursday Jan 29 Friday Jan 30

Market Focus »


Existing Home Sales
[Report][djStar]10:00 AM ET

Leading Indicators
[Report][Bullet10:00 AM ET

4-Week Bill Announcement
[Bullet11:00 AM ET

3-Month Bill Auction
[Bullet11:30 AM ET

6-Month Bill Auction
[Bullet11:30 AM ET

20-Yr TIPS Auction
[Bullet1:00 PM ET

FOMC Meeting Begins

ICSC-Goldman Store Sales
[Bullet7:45 AM ET

Redbook
[Bullet8:55 AM ET

S&P Case-Shiller HPI
[djStar]9:00 AM ET

Consumer Confidence
[Report][djStar]10:00 AM ET

4-Week Bill Auction
[Bullet1:00 PM ET

2-Yr Note Auction
[Bullet1:00 PM ET

Bank Reserve Settlement

MBA Purchase Applications
[Bullet7:00 AM ET

EIA Petroleum Status Report
[djStar]10:30 AM ET

FOMC Meeting Announcement
[Report][Star]2:15 PM ET

Weekly Bill Settlement

Durable Goods Orders
[Report][Star]8:30 AM ET

Jobless Claims
[Report][djStar]8:30 AM ET

New Home Sales
[Report][djStar]10:00 AM ET

EIA Natural Gas Report
[djStar]10:30 AM ET

3-Month Bill Announcement
[Bullet11:00 AM ET

6-Month Bill Announcement
[Bullet11:00 AM ET

5-Yr Note Auction
[Bullet1:00 PM ET

Money Supply
[Bullet4:30 PM ET

20-Yr TIPS Settlement

GDP
[Report][Star]8:30 AM ET

Employment Cost Index
[Report][Bullet8:30 AM ET

NAPM-Chicago
[Report][Bullet9:45 AM ET

Consumer Sentiment
[Report][djStar]9:55 AM ET

Farm Prices
[Bullet3:00 PM E

Seally Mattresses Stink... We have gone through Three... 3 of them in a 24 month period!!! All have developed the same material defect... Finally, we are getting a refund!!!

Sources Referenced
1. http://findarticles.com/p/articles/mi_m0FCI/is_/ai_67831640
2. http://www.bizjournals.com/atlanta/stories/2008/11/17/daily64.html
3. http://search.yahoo.com/search?fr=ytff1-&p=FDR%20Bank%20Holiday%20wiki&ei=UTF-8&type=
4. http://www.slate.com/id/2205574/
5. http://showcase.netins.net/web/creative/lincoln/speeches/quotes.htm

Will a Thaw in Credit End the Crisis? TARP for the Good Banks... Stock to Watch...

The world economy in general, and the U.S. economy in particular relies on credit. Credit is the life source of much, if not all growth. However, we have all witnessed the negative impact of too much credit. According to Allbusiness.com, over-extension is defined as:
"A loan balance or total credit obligation beyond the borrower's ability to pay . In situations where the borrower has taken on more credit than he can handle, a debt consolidation loan (combining several obligations in a single loan repayable over a longer term) may be the only alternative to bankruptcy. As a rule of thumb, borrowers who pay more than one-third of their net income to repayment of consumer debt, excluding mortgage debt, may be over-extended in their ability to repay recurring household debt." (1)

As we noted, credit drives growth. The question is can the American consumer handle more credit at this point int he economic cycle? According to one Reuters report, "In spite of rising energy prices, a turbulent stock market and an
ongoing state of war, US consumers have continued to spend. While this
spending has prevented the economy from slipping, it has come at the
cost of decreased individual savings and increased personal debt." (2)
According to Reuters, one of the most influential groups driving consumer credit is aging baby boomers. This demographic has increased spending in a period when many have decreased it. This would suggest that many retailers would be best served by marketing services to this influential class.

Credit cards, which have been the key to consumer spending are adjusting their offers. According to creditmall.org, "The last year and one-half has been interesting in that banks are seeking the affluent, the credit worthy, and stable." (3) People who were able to qualify for cards several years ago cannot. Revolving credit at the corporate and individual level could well have run its course. A new "growth" engine must be found.

TARP for the Good Banks
Like most Americans, I am growing increasingly frustrated with the TARP Program. In general, there has been a lack of progress. Banks who received these funds have not begun to loan... There are a variety of reasons. 1. If you were a cash-poor bank, you would think twice about lending as well. 2. You are concerned about loaning money because you are uncertain about the counter-party's ability to repay the loan. 3. You would rather keep the dividend charade going for as long as possible to prop up the stock price.

There could well be a more modest proposal which would serve the good banks, punish the bad banks, and more importantly destroy the weak business models. If another TARP program were developed, and I am certain there will be a second TARP, then it should be done with the most solvent and well-run banks. The good banks should be given government loans to purchase the good assets of the bad banks, and allow the bad banks to fail. (4)

While I am certain this will create a great deal of turbulence in the world of finance, it could well be the only viable solution that truly saves the financial system. One thing is for certain, the government will not be able to bailout every group that needs it. Heck, instead of cooking the books to make them look good, there could well be a case of cooking the books for TARP funds. (5)

Stock Holdings
SCC, EFU, SRS

Options Holdings
RYL, MDC, WYNN, MCRI, FXI, CNK, BBW, MLHR

1. http://www.allbusiness.com/glossaries/over-extension/4944338-1.html
2. http://www.reuters.com/article/pressRelease/idUS157743+09-Jan-2008+BW20080109
3. http://www.creditmall.org/
4. http://www.marketwatch.com/news/story/bloody-start-earnings-season-batters/story.aspx?guid={3746153F-B946-4C22-8870-66BC92C0B31B}&siteid=trackedcomment#comment1416992
5. http://beltwayblips.dailyradar.com/story/the_cook_the_books_financial_collapse/

Good Bye National City... Stock Moves... Our Buckeyes...

Good Bye National City
It's not every day that you get to split a $49.5 million dollar golden parachute. However, fourteen executives from National City Bank will "share" a pot that would average approximately $3.25 million a piece. We all know that the top guys will get more, and the low man on the totem pole will get the least... but hey even a million dollars is pretty good for watching your company get run right into the ground. Sure these men will not get the stock options anymore... and have undoubtedly watched their net worth dwindle over the past two years. Let it be known that one of Cleveland's oldest institutions... 163 years old to be exact... folded up on the watch of these 14 executives. In Cleveland's history, National City Bank was critical in helping John D. Rockefeller get Standard Oil financed... and now, it is no more. Like Bear Sterns, Lehman, and Washington Mutual I have a soft spot in my heart for the trusted employees who will undoubtedly be cleaning out their desks, and saying good bye to fellow employees with whom they were almost like family. Approximate payouts include:
Peter Raskind $8.1 million
Daniel Frate $4.2 million
Jon Gorney $3.96 million
Aside from TARP funds, National City really had no other option than to sell itself. While I do not like it, National City went down the way a troubled financial institution is supposed to... either through failure or sale. Interestingly enough, banks larger and smaller than National City received TARP monies. I know Congressmen Kucinich and LaTourette gave it their best!

Stock Moves...
I have watched 10% of my 2008 net profits ebb away over the past week. A thinly veiled rally was picked up on New Year's Eve... and continued on January 2nd. While the manufacturing report showed a continued bleeding of jobs, and a slow down in manufacturing... Wall Street rallied... Expect a violent move to the downside this week. Here are the latest moves I am considering:

XRU puts... Russia needs oil to double its current price...or Putin and friends could well lose their political clout.

FXB puts... Great Britain as well as Europe cannot get a handle on their credit crisis. The BOE has responded strongly by lowering rates... but readers know that rates are not the problem as much as it is credit worthiness...and things are much worse their than it is here.

FXE puts... while Great Britain has been moving aggressively to lower rates... the Euro is well behind the curve. Expect a major slow-down that will have a devastating effect on Europe. Unlike sovereign currencies, the Euro is a currency by committee...meaning members have to agree on the best policies...and at the end of the day, Europe has a storied history of not seeing eye to eye.

FXI puts... I increased my position here knowing that even a GDP of 5% really means a -5 to -6. While pundits would have us invest every red cent into China, beware... This country has ridden a wave of prosperity, and it could well be in for a hard landing should the R word surface.

Latin America plays... ILF, BZF, EEB, EWW, EWZ are under consideration...

Looking for a way to short T-Bills... as this over-bloated haven will not last especially if the curve is negative... I am open to suggestions!

While WYNN and MCRI have rallied, be sure the casino industry is a house of cards... and not much of the next stimulus checks will make it to the slot machines.

MLHR puts... just watching the wheels fall off here....

RYL...MDC...puts... let's face it... the housing crisis is approximately 3-5 years away from playing out... these companies are cash poor... and credit as noted is for good companies not bad ones.

SRS... looking to double down here...

SIVB and TOL are interesting plays as well. Researched by fellow blogger DC North, SIVB who once stood as the "conservative" lending institution is showing a few cracks...and could well be on the verge of a "price adjustment" to the downside. TOLL are high end houses... good for those who have a lot of money. However, this economy is not discriminating and could well be hitting the luxury home buyers as well.

The Buckeyes
The #3 ranked Texas Longhorns are -8.5 to #10 Ohio State. We know that Texas is a great team. After USC trounced Ohio State back in October... then lost again to Penn State, a #10 ranking could well have been a gift. That being said, Ohio State has been decimated...dec-im-a-ted... in their last two bowl appearances. The National title blowouts against Florida and LSU respectively have not just hurt the team's chances of getting another national title shot in the future, but it also demonstrated an inherent weakness in the Big 10 schedule. There is too much of a lull between the big Michigan game (played Thanksgiving weekend) and a bowl game. It is almost a guarantee that a Big 10 team will come in a bit flat, having nothing but practice for over an entire month... hopefully, that will be addressed not just by Ohio State, but by the Big 10 conference as well. On a positive note, Ohio State has played Texas twice in the past three years... and I am looking forward to another great game. Let's hope the Buckeyes show up to play!!!

Men don't Grow Old. They Grow Careful... Portfolio Round Up: I am in the Money... Not Bad for an Amature...

Men Don't Grow Old. They Grow Careful. -Ernest Hemingway (From A Farewell to Arms)

Maybe Ernest Hemmingway had something here. The older we are, the more careful we grow. If we are to grow old, then we must grow careful. If we are too careful, then we do not grow...

I have been blogging for nearly 11 months now. Over the course I have educated myself and readers about economic, historic, and political trends. I do, for the most part, spend a portion of each day browsing through blogs, news, the archaic form of news delivery known as a newspaper, and my favorite... casual conversation. This blog has in many ways became a tool for research and understanding. It has allowed significant insight into areas in which I had little to no understanding. In many ways, this blog represents a learning community. Learning alone is nice, but there is also a financial piece that has accompanied this blog... How do we profit from this market, or at the bare minimum, insulate ourselves from the varied havoc reeked by Wall Street and politicians in D.C..

Three Mega-trends for the Upcoming Year

1. The Financial Crisis is Far from Over
Pundits on Wall Street would like to see a bottom placed in the market. As we blogged earlier... there is little credibility left on Wall Street. I would like to reminder readers that we can turn on the TV daily to hear another TV personality call market bottom... only to be toasted days if not hours later. The complete meltdown of Bear Sterns, Lehman, and Washington Mutual reminds us that the financial problem is big... and it could be devastating. Likewise, charlatans like Bernie Madoff (with billions)who could well be the biggest scoundrel in the history of Wall Street to date, underscores the the economic minefield of Wall Street. For most, money is safer under a mattress than in the hands of a broker.

2. Foreclosures Galore
While we have blogged that 1-10 houses in the United States face financial ruin, we still do not comprehend the depth of this financial meltdown. One mid-west transplant from California remarked that the house he sold in Sunnyvale, CA has lost 10% of its value in the past six months. His insight into California's housing market could well be the most frightening. As a mortgage broker, he explained that option arms, negative arms, and Jumbo Loans have yet to reset. Even with the Federal Reset, there are a tremendous number of borrowers who will not be able to refinance... under ANY circumstances!!!

3. Deflation v. Inflation
In conversation with a programmer at the Department of Treasury, he stated that the Treasury is printing out too much money. Way too much money. Still though, he commented that Treasury is more concerned about deflation instead of inflation. This individual cited housing prices, oil prices, and all goods (with the exception of food) are coming down... way down. The Treasury and Fed have gone to great lengths to ensure that money is available to purchase these goods. When asked about BILLION dollar bailouts, TRILLION dollar stimulus packages, he simply commented that the economic meltdown is their biggest priority.

Portfolio Round-Up: I am in the Money
It is never kind to brag in light of the financial turmoil that has devastated world markets, but I will simply say that this blog, and fellow bloggers like Ax at bigbigbet have encouraged me more than ever to take charge of my finances. And with great risk came great reward.

Big Winners
Calls/Puts
PQ +215% Call
SPG +363% Put
VNO +280% Put
XLI +304% Put
XLY +477% Put

Losers
Call/Puts
BAC 100% 12/25s Call: I underestimated the response of companies to the TARP. I was in good company as Buffet was said to have lost on the same calls... I followed the Oracle...and got punished for it.

TRLG -43% Puts: As a coach, I remind athletes that they should always give it their best. The worst thing they will do is lose! If only I would have heeded my own advice. But this was at the early stages of my option trading. You live and you learn.


Could Haves (Could Have Made More)... Should Haves (Should Have Sold Earlier)...

WGO -40% Put: My first option trade. I liked the triple convergence of consumer discretionary spending, high fuel prices, and unemployment to drive this one into a triple digit profit. Instead, I watched the value of this play paired... I started to panic... and that was that...

BAC -15% Put: BAC was a company I loved to hate... not only did I lose on the call side of transactions, I also lost on the puts as well. I became increasingly irritating when the government intervened this summer banning short selling... propping up this company... and I will still call CEO Ken Lewis not much less than a COMPLETE buffoon... Remember Ken if you are going to lie to the public, pick a story, rehearse the story, and stick to your story... Dare I say this could be another Citi destined for $6.00 per share. Go long on the discount price, this one is too big to fail...

COF +30% Put: Another joke still trading in the upper 20s. Like BAC, COF, and HBC, I watched triple digit profits evaporate before my eyes. At least I made a few bucks on this one...

HSBC -27% Put: Little did I know that our British cousins' situation was more dire than our own. The simple fact is that credit, as over-extended as it was here in the United States, it still wasn't as bad as Great Britain. They put a short sale ban on their financials as well... and the Tiger Coach got left holding the bag.

STI -40% Put: Their is no foreclosure crisis in Florida. At least that is what the fine folks as Sun Trust would have us believe. This bank was/is in about the same shape as NCC. Something tells me they could be one of the banks that received a loan from the FED in return for some of their useless collateral. I hope the Bloomberg Suit exposes all of these crooks for who they really are!!!

AU +10% Call/s: I traded this stock a few times buying at the open, and selling at close. I had built a nice system...and the system failed me. Kissed away approximately 40% in AU profits... and I have grown older...and wiser!!!

Not Bad for an Amature
I do not claim to be an expert. This blog is written in part as an intellectual exercise. It has given me the opportunity to observes the humor, trends, and absurdities of life. The economic, historical, and political realms are simply the venue of this observation. As far as investing goes, I was lucky to say that my portfolio at close of business today is up 88% for they year. Over 75% of these monies are currently in the market, with a reserve fund waiting for the best opportunity. I have a list of 10 stocks that could either make us rich or poor. I only ask that you share your thoughts with me. After all, I am not an "expert" like Thomas Lee or Jim Cramer.

These returns do not include the 403B plan which was saved by in large before the October and November meltdowns on Wall Street. As I watched the profits ebb away, and with the urging of Ax, I "wiped the board clean" and booked profits there as well. Those monies are currently sitting in T-Bills (1.3%) looking for the right place to move it.

In Closing: This is not my blog...it is Our blog...
I would like to thank all readers who have shared this journey. We have readers in five continents... from Capetown, Africa to Sydney, Australia...from Neidersachen, Germany to Bangladesh, India...and all over the United States. We have received letters from House of Representative members, Senators, and even members in U.S. government agencies. We also reach a variety of academic institution throughout the United States. We especially appreciate the comments of readers like Ax, DC North, Boom and Doom, Jimmy K., and a number of those who simply remain anonymous. Let's look forward to another profitable 2009.

The Miracle on 34th Street... Age of the Empty Suit... $10,000,000 Bill?

The Miracle on 34th Street
You have to love family movie night. Tonight we watched the John Hughes version of Miracle on 34th Street. In the not too distant past, I distinctly remember going into the colossal department stores as a kid. Sitting on Santa Claus' lap. Getting a picture with Santa. And taking a ride down the slide back to mom and dad. Big Cleveland Department stores like May Company, Hallie's, and The Bing Company stood as icons of a thriving 1970's era retail. Big train displays, Winter Wonderland villages, and even a few elves.

One scene from the movie which really caught my eye was the flood of people coming in these stores to visit Santa Claus. Cole's had the best Santa Claus, and everybody else was jealous. We went out to see the real Santa Claus the other night. This required a track to Great Northern Mall on the west side of Cleveland. All that I could think of was a 40 minute drive, and another hour wait to see Santa. However, much to my chagrin, we were met with a 10 minute wait. And this guy is supposed to be the best Santa in Cleveland. According to the photographers, business was down approximately 30% from last year. That would suggest that 30% less people found themselves in the mall thus far during Christmas and Hanukkah shopping.

According to the Wall Street Journal, retail vacancies of strip malls surged to 8.4% in the third quarter. The report went on to say that vacancies increased in 76 of the U.S.'s top retail markets. Not to be outdone, these recognizable names are circling the wagons and closing stores inside the United States. Others are simply filing bankruptcy. Some of the names of troubled retailers include: Shoe Pavilion, Steve & Barry's, Gordman's, Radio Shack, JoAnn Fabric, Boscov's, Bennigan's, Winn Dixie, Office Max, Comp USA, Pier 1, Sharper Image, Starbucks, The Disney Store, Wilson's Leather, Talbots, Ann Taylor, Bombay Co. and more. This could well explain the added pressure on REITs that was seen last week. No wonder Mr. Wolstein dumped the vast majority of DDR. He got out went he getting was good!

Ironically, SPG and VNO surged last week. This suggests one of three scenarios:
1. A covering rally...meaning the stocks will be very ripe to short once again.
2. Momentum trade from TARP discussion that commercial real estate and consumer real estate could be the next beneficiaries on free monies.
3. A bottom was set, and now is the time to buy.

For my money, I find scenario number one to be the most logical explanation. Although, I am becoming increasingly suspicious of a TARP play here. Especially with Obama's high level appointment of a Housing Secretary Shaun Donovan. Donovan is known as a crusader against low-income foreclosure and housing management. Obama will need a point man on this issue as once source not only mentioned the next "reset of ARMs and Alt-A loans. "At present, one in 10 U.S. homeowners is either delinquent on mortgage payments or in foreclosure, With more than 259,000 homes receiving a foreclosure-related notice last month, the Federal Reserve has predicted that the nation's 2008 foreclosure figure will reach 2.25 million." (1)

The Age of the Empty Suit
The empty suit is a new reference to those who have lost all of their material wealth on Wall Street. In this case, many of those who lost it all were affiliates of Bernie Madoff...scoundrel extraordinaire! For many of us, we hear of the financial tragedies as they unravel... wince... hope that our financial futures are not effected... and think that we are a little bit luckier if not smarter than the next guy. After all, it is human nature. Wall Street Journal writer Peggy Noonan brings up the point "That’s the big thing at the heart of the great collapse, a strong sense of absence. Who was in charge? Who was in authority? The biggest swindle in all financial history if the figure of $50 billion is to be believed, and nobody knew about it, supposedly, but the swindler himself. The government didn’t notice, just as it didn’t notice the prevalence of bad debts that would bring down America’s great investment banks." (2) The government if not Wall Street's pimp, has at the bare minimum become an accessory to the crime of negligence. Banks, investment houses, and now multi-billion dollar Ponzi schemes is exactly what Wall Street does not need. For those who have put faith in the system, they are finding out that the world can be an ugly place. Who can you trust? And I am the type of guy who will put faith in the average American.

Our forefathers might easily allude to Nathaial Hawthorne's Grey Champion as guide, protector, and champion of the persecuted. However, most believe that heroes are in limited supply.

Where have you gone, Joe DiMaggio
A nation turns its lonely eyes to you (Woo, woo, woo)
What's that you say, Mrs. Robinson
Joltin' Joe has left and gone away
(Hey, hey, hey...hey, hey, hey)

We are an optimistic people. We have and will continue to thrive on optimism and innovation. While the roads will be rocky for the next few years, I do believe this country will stand the test of time. We should experience “the current crisis” as “a gigantic wake-up call.” We’ve been living beyond our means, both governmentally and personally. “We have to be willing to face up to our problems. But we have a capacity to roll up our sleeves and get down to work together.” Americans tend to rally in crisis situations.

$10,000,000

The other side of the coin leads us back to the bunker mentality. If you live in Zimbabwe, you would be best served to transact all business in silver, gold or other commodities. This week the government of Zimbabwe created a $10,000,000 note. Don't think for a second that you are rich. This note has the buying power of a new Zimbabwe dollar...deleveraging the old dollar...and creating the new...with 168 equaling one U.S. dollar. This is served as a reminder to all readers that:

1. The world needs the United States (as of now) in spite of our financial breakdown, we are still the most stable economy in the world. Even though the printing presses are overheating, countries are still flocking to the security of U.S. bonds. More importantly, bonds that are at a minimal yield.

2. If the United States does not grow the economy... or reduce spending, we could face a inflation...deflation scenario.

Kind of scary if you think about it.

Stock Positions:
Calls
Curtain Call for BAC as by 12/25s expired worthless...
AU 1/30s will look for an exit point...
GE 3/20s Some hope... looking for an exit point as well

Puts
CNK, RYL, MLHR, WYNN, FXI, BBW, MDC, MCRI

New Considerations:

1. http://www.knx1070.com/Obama-Appoints-New-HUD-Secretary/3489158
2. http://www.peggynoonan.com/
3. http://www.tamilnow.com/magazine/inflation-in-zimbabwe-at-33.html

We had to Destroy the Village to Save it... Black Friday... My Actions... A Christmas Carol

The Old Skin-flint Ebeneezer Scrooge was transformed in the Christmas Carol by Charles Dickens...

"We had to destroy the village to save it."
During the Vietnam War, the United States found itself not only battling a shadowy force of Viet Cong, but more importantly an ideology and thinking that was almost imposible to fight. Our attempt to "win" the Vietnamease over through give-aways, acts of kindness, and even fighting their war for them proved to be folly. Communist inflitration became so heavy that one officer at Ben Tre commented "We had to destroy the village to save it."

The rationale befuddled many Americans during the Vietnam War. Destroying the village to save it... Ironically, this week Congress will discuss whether it will "Destroy" the Big Three in order to "save" them. As previously noted, a failure of the Big Three will send a giagantic shock wave through the economy from line-workers, executives, middle management, and secondary suppliers such as out-sourcers. A Big Three failure will effect every single American in one shape or form. Congress would not be destroying the automakers. Quite simply, by doing nothing Congress would allow the Big Three to whither and die... They would be forced to file bankruptcy. Bond and shareholders would have worthless shares, and all contracts would be null and void. If Congress allows the Big Three to fail, then there would be an opportunity to re-organize the manufacturers into a 21st century organization, as opposed to retaining the failed industrial model. To allow another life-line and cash-infusion in the end, would be folly. Under a bankruptcy plan, executives, line-workers, bond-holders, and speculators would be ones on the hook for the financial loss. Congress may well have to destroy the Big Three in order to save them.

Black Friday...
Bargin shopping... That is what happend the day after Thanksgiving. Nothing more, nothing less. Cash strapped consumers were out spending... and they are not spending friviously. They are looking for bargins. It is a sad commentary any time shoppers trample another human being to death for a couple of low-priced items... Ironically, the main consumer in our house noted that "The stores were very busy in the morning, but everyone had gone home by noon." Many people are going in to conservation mode... expect hellacious retail numbers within the next two weeks.

The recent run-up in stocks could well be another opportunity to re-short commercial real estate. The story of the week on several TV stations was how commercial real estate was taking a terrible hit. To be precise, chain stores specializing in apparel will be the ones that take a hit. Ironically, I do believe some stores will hold their own. As I have mentioned to fellow reader Boom and Doom, certain specialty retailers will always hold their own. Sports apparel will always have business due to the nature of their product, and the demographic of the clientele. Jerseys and hats become part of a person's persona.

Restaurants, furniture, and jewlery are on the board as well as a few specialty selections from AX that can be found at: www.bigbigbet.blogspot.com

My Actions...
Two weeks ago I sold positions in SPG and VNO puts the day before the big rally started... 180 % profits!!! It was more luck than genius... but something should be said about profit taking... profit is never a dirty word in this trader's book. Still, I am in the black on several other positions. I am continuing to hold WYNN, CNK, BBW, FXI, and RYL since the earliest of those contracts expires in March. I also added MCRI into this rally. Thank goodness it was a low-ball bid or I would be down 25%. One thing is for certain, there is more bad news to be had. It is obvious that unemployment will be heading into double digits before this is all said and done!!! Aside from stimulus checks for basic survival skills, I believe most will curb their appetite for extras like gambling. I am convinced that we are getting a nice "feel good" effect from the Obama administration... after all there is always a honeymoon phase. Just remember, the same reporters that are heaping the laurels and celebrating the arrival of a new President could well be the same ones who write vicious words. If we develop protectionist tarrifs akin to Smoot-Harley, then we will be in for a looong sloooow doooown.

Keeping Christ out of Christmas...
Whether you are a Aganostic, Hindi, Muslim, or Jew, there is nothing to gain by taking Christ out of Christmas. As my wife and I journeyed 15 miles down to the State Theater in Cleveland, paid for parking, and bought tickets for Charles Dickens "A Christmas Carol" we were treated to a dumbed down version of the play. Scrooge's tortured old soul was supposedly changed through visitations from four ghosts. Scrooge it supposed to be redeemed in mind, body, and spirit on Christmas morning. However, there is no redemption without the birth of Jesus... and that is something that would have Dickens rolling in his grave. In an age of political correctness and multi-culturalism we should genuinely appreciate the aspects of everyone's culture... not destroy it! Taking liberties with stories can destroy them, and the author's true intention. I am not sure whose version of a Christmas Carol was shown last night, but it was not Charles Dickens!!!

Ken Lewis and Jerry Lewis... A Death of a Thousand Cuts... Staying Short...

Jerry Lewis or Ken Lewis... Is there a difference?

Long-time comedian Jerry Lewis must have a long-lost brother by the name of Ken! While Ken runs the Bank of America, it is obvious that he is working on a stand-up routine. Ken Lewis has continued to tickle the funny bone of people on Wall Street... and for some, this is just what they needed to hear... for others, it is what they wanted to hear. One thing is for certain. Ken Lewis does not have a reputation for being a straight shooter, but more along the lines of a snake oil salesman. Some of Ken Lewis' quotable quotes have been "We have no need to downgrade our earnings forecast." Bank of America downgraded earnings two months later. (1) Then there is the issue of dividends. "I see no need to cut the dividends." Months later Bank of America cut dividends. (2) Now Ken Lewis is tauting that the United States should "see an economic recovery by the second half of next year (2009). But, it may feel like a recession until then." That's just like saying it feels like it is raining, but you are not getting wet! (3)

A Death of a Thousand Cuts
The Big Three testimony on Capitol Hill this evening should be one for the history books. Senators grilled the auto giants for well over an hour. It has been a while since I have seen grand-standing like this take place. Here are some the questions I remember from the testimony.
"If business is so bad, why are you building plants in Russia?"
"If you are truly global companies why don't you use profits from divisions that are making money?"
"Is it true when you make a plant idol, 80% of the workers still show up for work...and get paid?"
I am certain that some type of arrangement will be worked out. They will get their money this time. And I will bet anyone that the Big Three will back at Congress with their hats in their hand once this money is hemmoraged!

Keep the Shorts...
As I recommended last post, commercial real estate could well represent the last bastion where prices could potentially tumble into nothing!!!! Retail is in for their worst Christmas in 30 years. Since a number of retail businesses are on their way to financial oblivion, it triggers issues in commercial real estate as well.
Tiger Coach likes Puts on the following:
1. Ryland -12.75 EPS is UGLY... Homebuilder, Mortgage Finance, and Home Design sets this play up as a loser!!!
2. Simon Property Group EPS 1.74 and FALLING! This lovely specializes in commercial real estate property. This company has the distinction of owning 168 regional malls, and premium outlet centers. To make matters worse, they also
have exposure to Europe...
3. VNO 4.07 EPS and shrinking... 30 million square feet of property in NYC... Short this stock and you short Toys R Us for FREE!!!

1. http://www.tradingmarkets.com/.site/news/TOP%20STORY/1903030/
2. http://www.dividends4life.com/2008/10/bac-cuts-dividend-by-50.html
3. http://www.marketwatch.com/news/story/bank-america-ceo-expects-us/story.aspx?
guid={84E5B4CC-9B10-4E26-B664-F7FF4F54B3E6}&dist=msr_1