May 24, 2010 – Welcome Back to Earth

Featured Trades: (AAPL), (GS), (YCS), (TBT)

 


1) Welcome Back to Earth. Thank you! Thank you, Mr. Market, for finally coming to your senses. It’s about time that you kicked your ecstasy habit and quit listening to lemmings for your financial advice and started paying attention to those suspicious, odiferous lumps that have been swept under the carpet, even if the smelling salts were a fancy imported variety.  There is a whole new subprime crisis that has only just gotten underway in Europe, with their bankrupt countries substituted for our busted banks. Chinese efforts to slow down their real estate boom threaten to throw a handful of sand in the global economy. Just as the American economy is coming off life support, the crutches that were supporting it are falling away. I’m talking about the end of the first time homebuyer tax credit, the Fed’s $1.2 trillion liquidity program, and one of the greatest stimulus budgets of all time, all in the face of heft tax increases. Thanks to this belated awakening, there are now more broken 200 day moving averages than National Rifle Association bumper stickers at a Tea Party rally. I have to confess that my cupboard was totally bare of long side ideas in April. But it is slowly starting to fill up. Look at the generals, which have been taken out, one by one, and unceremoniously shot over the last two weeks. Look at Apple (AAPL), which I have avoided until now, because I am not inclined to join cults, which plunged $90 to its flash crash low of $195. If Goldman Sachs (GS) is good enough for Warren Buffet, it is good enough for me. The world’s greatest publicly traded hedge fund is a definitely better buy at $137 than it was at $187. Once the Wall Street witch trials end, they’ll make a comeback and a ton of money. I can’t believe the currency of the world’s sickest country has rocketed 7% to ¥88, so the (YCS) is on the short list. With the yield on the 30-year Treasury bond now pushing an astonishing 4%, the (TBT) is threatening its 2008 crash lows of $36. Having made three round trips in this leveraged short Treasury ETF this year, I stepped back, fearing an equity sell off could trigger a bond spike. Gong! Give that man a cigar! Of course, it’s way too early to pull the trigger on any of this stuff, but a dead cat bounce can launch from an extremely oversold technical condition at any time. As long as there is a risk that the second I get filled on a buy,  I get stopped out 10% lower, I’d rather spend my time more profitably building short lists of your next big trades.

Apple, Inc.


Goldman Sachs Group, Inc.


ProShares UltraShort Lehman 20+ Year Treasury


FiringSquad2.jpg picture by madhedge

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