2009 Archive - Mad Hedge Fund Trader

February 5, 2009

Global Market Comments for February 5, 2009
Featured Trades: ($GOLD), ($SILVER), (BRK/A), (GS), (GE), ($SSEC), ($BDI)

1) UBS was matched by Goldman Sachs in raising its 2009 target for gold ($GOLD) up to $1,000, triggering a $30 rally to $920.While jewelry demand from India and the Middle East remains weak, this is being more than offset by the ongoing financial crisis boosting safe haven buying in the US of coins, bars, and ETF's. Deleveraging of long gold positions by hedge funds is now almost done. Buyers of gold are now spilling into other precious metals like silver ($SILVER), which is up 47% to $12.50/ounce from its October lows, and can offer can offer investors double the upside volatility.

2) One of Warren Buffet's key indicators for timing stock buys is the ratio of?? total equity assets to GNP. In 2007 stocks peaked at 190% of GNP, and have since fallen to 70%, a level only seen during the thirties and the early eighties. While the Sage of Omaha's Berkshire Hathaway (BRK/A) has been hammered by 50% in the last four months, with too early purchases of Goldman Sachs (GS) and General Electric (GE), this indicator could be worth tracking.

3) In case you missed the business section of the San Francisco Chronicle today, there is a fabulous graphic illustrating the hard times for the city's commercial real estate market. The epicenter of the melt down is Tishman Speyer's 556,000 sq. ft. 555 Mission Street, which opened in late 2008 during the worst possible market conditions, and remains 70% empty. What is really impressive is how bad the implosion of the legal profession is hitting landlords. The dissolution of Heller Ehrman has emptied 350,000 sq. ft. 333 Bush Street, while 388,000 sq. ft. 101 Second Street has been vacated by the dissolution of Thelen LLP. Conditions will worsen as more new buildings started during better times come on the market.

4) The free online telephone and video conferencing service Skype has launched its version 4.0. The upgrade is faster, has better quality video streaming, and allows you to attach files, like photos, to your calls. It still only offers 1:1 communication though, not the group calls available at more expensive video conferencing competitors.

5) Hedge Fund Traders scouring the world for leading indicators hinting that it is safe to get back into the water currently have a laser like focus on Shanghai, which fell an amazing 72% from its October 2007 top. China's once red hot largest domestic stock market, which is closed to direct investment by foreigners, peaked nine months before China's own economic slide began in earnest after the Olympics. This has given the unregulated emerging market oracle like status among global market timers. This week, the Shanghai Composite ($SSEC) broke out of a six month trading range to the upside, possible entering a new uptrend. The move, along with the record 15% explosion upward yesterday by the Baltic Dry Shipping Index ($BDI), and turning noises being made by the dollar, is prompting some managers to quietly lift their global equity exposures.

QUOTE OF THE DAY

'If you're gonna owe money, owe more than you can pay, then people can't afford to foreclose,' said Clint Murchison, a famous Texas oil wildcatter during the thirties.

February 4, 2009

Diary

Global Market Comments for February 4, 2009
Featured Trades: (FCX), (CAT), ($BDI), ($BVSP), (EWC), (EWZ), (EWA)

1) There is a rare anomaly in the markets now, where mining stocks are trading at huge discounts to the metals they mine. Usually they trade at substantial premiums. This is the result of the credit crisis, as well as a global multiple compression that is punishing good and bad equities alike. Take a look at one of my favorite stocks, Freeport McMoran (FCX), one of the world's largest copper and gold producers, which just announced a record Q4 loss of $14 billion. The stock cratered from $122 to $15 after June, while copper dove from $4.10 to $1.25, and gold dropped from $1,050 to $700. CEO Richard Adkerson says that he is cutting costs by chopping capital spending from a record $2.8 billion in 2008, to $1.3 billion in 2009 and $1 billion in 2010. He is delaying projects in high cost countries like the U.S. That is why Caterpillar (CAT) stock has been getting killed. This and other measures are cutting FCX's break even cost for copper from $1.16/pound to 71 cents. Gold is now being sold for $900/ounce versus an industry break even cost of $500/ounce. While the Phelps Dodge takeover in March, 2007 now looks rich, you couldn't do that deal today because of a lack of financing. So many new projects are now being frozen, that when demand recovers, the next price spike could be worse than the last one. If you aren?t buying FCX and CAT right here I am going to lay down on the nearest train tracks until a train runs over me. If you can?t buy stocks at these insanely low prices, then you should be in the business.

2) Here is another early, nascent sign of global economic recovery. The Baltic Dry Index ($BDI) of international shipping rates was one of the markets worst hit by the seizing up of international trade, vaporizing 95% from 12,000 to only 600. It has since clawed its way back up to 1,200 from the November bottom. It lead the commodity collapse in June by a good month. Could it now be signaling a recovery? At least things are not getting worse, and we may see a period of bottom bouncing before a sustainable up trend develops.

3) The online research firm Zillow.com says that the US real estate market has lost $6.1 trillion since the top, including $3.3 trillion last year alone. One in six American homeowners is now underwater on their mortgages, the equivalent of 11 million homes. These unhappy home owners are not trading up, down or sideways anytime soon. Only prices in Fayetteville, NC, Yakima, WA, and Utica-Rome, NY went up. I won't bore you with how much Las Vegas, Phoenix, Miami, and San Francisco have gone down. Expect more frightening tidal waves of foreclosures, which will cap residential real estate for years to come.

4) Take a look at the recent performance of Brazil's Bovespa stock index, which fell 47% since June. It has jumped a healthy 48% since the November low and gives credence to my theory that when global stock markets recover, emerging markets will rise twice as fast as developed ones. The best recovery the Dow could mount was 30%, and that is looking wobbly. There is really only one global stock market now moving in the same direction. Only volatility varies country to country, and when conditions improve you want to own the most volatile one. Look at the ETF for Brazil (EWZ). Also on your shopping list should be the ETF's of other young natural resource exporting countries like Canada (EWC), Australia (EWA). You might go long term currency and bond markets too.

QUOTE OF THE DAY

'You are never are as good as they say you are at the top, nor as bad as they say you are at the bottom,' said Gerry Levin, the former fired CEO of Time Warner, who is now operating a day spa in Santa Monica, California.

February 3, 2009

Diary

Global Market Comments for February 3, 2009
Featured Trades: (SQM), (CGW), (TIP)
Special 'Invade Bolivia' Issue

1) Politicians, industrialists, and environmentalists who see battery powered vehicles as the wave of the future are overlooking the fact that 50% of the world supply of lithium comes from impoverished, landlocked Bolivia. This is a country that until now was best known for killing off famous foreigners (Che Guevara, Butch Cassidy and the Sundance Kid), and being the source of a new form a venereal disease. Lithium ion batteries are four times more efficient than the current generation of nickel cadmium batteries, and are essential for electric cars to finally become economically viable. But now that the country finally has something the world wants, nationalism is rearing its ugly head. Local politicians see their country as the Saudi Arabia of the highly corrosive, toxic, reactive metal, and are already discussing ways to restrict access. The only other supplies are to be found in Chile, Argentina, Australia, China, and Nevada.?? Should the US invade to insure supplies? Iraq worked didn't it? The best way for opportunistic investors to play this is to buy Sociedad Quimica Y Minera (SQM), Chile's largest producer of lithium.

2) Noted Chicago economist David Hale does not see a pretty picture for 2009, and believes the recovery in 2010 will be weak at best. It may take until 2011 before we return to a normal growth rate because of the systemic financial carnage that makes this downturn unique. His just released report on the global economy was a tour de force of negative metaphors (cliff diving, David?). Deleveraging will continue for 2-3 more years, with mortgage financing plunging from $3.9 trillion in 2003 to $1.9 trillion last year. US home prices will drop 40% peak to trough, so they still have more to fall. The Q4 24.6% collapse in consumer spending is unprecedented. American real estate loan losses could reach $2 trillion. The export dependent economies of Germany and Japan have been especially hard hit by this recession. Chinese exports are also falling, but the country has $2 trillion in reserves to absorb the shock. The Fed's desperately expansionary monetary policy could trigger a bull market in gold. The US financial system has lost $5 trillion in market capitalization in 18 months. A safe haven bid will keep the dollar strong for the time being. The Obama stimulus plan will save millions of jobs and add 3.7% of GDP growth by Q4 2010, but will come at enormous cost and have only a delayed effect. All sobering food for thought.

3) Water may be the ultimate consumer staple, and investment in fresh water infrastructure is going to be a good long term investment theme. Although Earth is often referred to as the water planet, only 2.5% is fresh, and three quarters of that is locked up in ice at the North and South poles.?? Some 18% of the world population lacks access to potable water, and demand is expected to rise by 40% in the next 20 years. The UN says that $11 billion a year is needed for water infrastructure investment, and $15 billion of the US stimulus package will be similarly spent. An easy way to participate is to buy the Claymore S&P Global Water Index ETF (CGW), or buy the individual stocks Geberit AG (GEBN) and Veolia Environment (VIE).

4) If you believe that imminent and massive Treasury issuance is going to pop the Treasury bond bubble, and that Obama's reflationary policies are long term inflationary, you have to be looking at Treasury Inflation Protected Securities. TIPS offer investors a US government guaranteed protection against future price hikes by raising the principal in line with the inflation rate. A 3% coupon TIPS facing a 10% inflation rate automatically boosts the face value of your bond from an issue price of 100 to 110, giving you a total return of 13%. You can buy these directly from the US Treasury, or buy the iShares Lehman TIPS Bond Fund (TIP). The best time to buy flood insurance is at the end of a long drought.

QUOTE OF THE DAY

'The mission of a conservative is to stand in the onward path of history and shout 'Stop,' said the late conservative commentator William F. Buckley.

February 2, 2009

Diary

Global Market Comments

February 2, 2009
Featured Trades: (BX)

One month into the year, let's review where we are among major asset classes:

'? Stocks are down globally and falling. The Dow is down 10% year to date.

'? The long Treasury bond bubble has popped. Corporate bonds of all grades are on a tear.

'? There is a bull market in gold that is spreading into other precious metals.???? Soft commodities like wheat and soybeans are bouncing along a bottom, but showing signs of recovery.

'? The dollar has a strong fight to safety bid. Carry trade unwinds are pushing the yen up. All other currencies are weak.

'? Real estate is going from bad to worse, with the crisis spreading from residential into commercial real estate. Rents are falling everywhere.

The markets are still in risk reduction mode. This Friday's nonfarm payroll could take unemployment up from 7.2% to 7.5%. Bankruptcies are spiraling upward. Corporate managements are in defensive mode. The consumer is hanging on to every nickel he has.

1) Swap spreads shows that interbank transactions are almost back to pre Lehman bust levels, and that credit markets are reviving. The question remains of how long this will take to filter down to increased bank lending to customers and the real economy.

2) Barron's ran an interesting article over the weekend arguing that private equity will be the next big shoe to fall in the financial crisis. The weekly paper opines that all of the investments made by KKR, Blackstone Group, Carlyle, and Europe's 3i over the last three years are now worthless. To add insult to injury, one PE firm, Blackstone Group (BX), stuffed investors with its own stock at the absolute top of the market 18 months ago, and it is now down 90%. Leveraged buyouts account for a large part of their portfolios, and these tend to be loaded with junk debt which can't be rolled over. The list of bad bets starts with Chrysler and goes on to include Clear Channel Communication, Hilton, Harrahs, and many others. Deferred accounting practices have enabled managers to keep these losses under wraps, but a newly invigorated SEC may shed daylight soon. The offshore listed PE funds are trading at an average 72% discount to published net asset values, suggesting that not a few investors are looking askance at asset valuations. Even vaunted Harvard University, a big player in the sector, has tried to quietly unload some PE funds, to no avail. The end result of all of this will be that bond investors are soon going to become equity investors in a lot of money losing, and possible worthless companies. Headlines may not be far off, and big layoffs are a sure thing.

4) I spent a shivering Saturday morning lined up for Recreational Equipment Inc.'s (REI) monthly members' only used equipment sale. This time, outdoor enthusiasts were joined by the newly jobless and homeless, who were hoping to pick up deeply discounted equipment so they could live out of their cars. They were not disappointed. I picked up a pair of Asolo heavy mountaineering boots, list price $280, with tax, for $5! I guess the size 13's have not been flying out the door. It does not bode well for our economy when retailers are selling boots for the value of their laces.

QUOTE OF THE DAY

'This is the time when fortunes are made', said Sir Richard Branson, CEO of the Virgin Group, at the Davos Economic Forum. During the eighties, Sir Richard lived on a canal boat around the corner from me in the Little Venice section of London. We flew together to Moscow once on his Virgin Air, and he graciously allowed me to take the flight controls of the Boeing 767. Again, it's been a full life.

January 30, 2009

Diary

Global Market Comments for January 30, 2009 Featured Trades: (AMZN), (GOLD), (AEM) 1) Q4 GDP came in at -3.8%, the worst in 26 years. The only buyer right now is the Federal government. What private spending there is can be found online. Amazon (AMZN) announced December sales up 18% YOY, sparking a 14% jump in the stock. This also shows the consumer preference for discount buying. The mice certainly roared for Jeff Bezos. The stock market just suffered its worst January in history. 2) If the Chinese think they are going to get 8% growth in 2009, then they are smoking their former largest import, Opium. I think they are totally unaware of the ton of bricks that is about to land on them in the form of the extinct American consumer. China has spent 30 years building a giant export machine, for which there are currently no buyers. Take a look at Japan's statistics, which are far more reliable than China's, which show exports falling off a cliff, machine tool orders evaporating, and once a half century losses for leading exporters like Toyota. These are numbers far worse than we saw during the depths of their lost decade. Of course, China has the money, and certainly the need, for a massive domestic infrastructure build out that can offset the disappearing exports. But this is not an economy that can exactly turn on a dime, and the transition will be painful. China can always report 8% GDP growth this year. Another problem is that modern China has never faced a recession, and defensive business strategies are essentially unknown. One of the advantages of a centrally planned totalitarian economy is that if you don't like the economic numbers you are getting, just make up some better ones. Personally, I think 5% growth is more realistic, but then you have always known me as a shrinking, subdued, conservative kind of guy. If I wanted headlines I would be shouting 2% growth, or perish the thought, negative growth, from the rooftops, as some China watchers are. The implications for the global economy are huge. 3) Every night the evening news in Japan refers to the 'Great American Depression'. Do they know something we don't? I hear largely inaccurate comparisons to our current economic debacle to Japan's lost decade on an almost daily basis. But there is one thing both have in common. Nobody believes for a second the securities the banks own are worth what they say they are worth. That's what bank hoarding of capital is telling you. The question here remains, how quickly can the banks be forced to face the music? 4) The Pope activated his MySpace page today. How many friends do you think he has, and are they all of the earthly kind? 5) Pundits have suggested calling the aggregator bad bank that would buy up illiquid assets 'Crappie Mae'. I like it. The ticker symbol can be 'CRAP'. 6) With gold surging $50 today to a six month high, and 30 year Treasury bonds down a whopping six points in two days, there is little doubt what's driving this market. Russian selling of bullion reserves to finance last ditch support of the Ruble knocked gold down to $875 this week. But when they didn't show at the Thursday morning fix, it was off to the races. Here is yet another bullish argument for you gold bugs out there. In 1974 the yellow metal peaked at four times the S&P 500, and in 1980 it peaked at six times. On Wednesday they were equal at $876. Technical analysts are getting excited that gold's 200 day moving average will soon start sloping upward. Two more gold stocks to add to your gilt edged portfolio are Rangold Resources (GOLD) in West Africa and Canada's Agnico-Eagle Mines (AEM).

QUOTE OF THE DAY 'A year ago there would be 30 people looking for one airplane. Today, there are 30 airplanes looking for one buyer,' said Jay Mesinger, an airplane broker in Carlsbad, California. Congressional chastising of big three execs who flew to Washington in their corporate jets put a dagger through the heart of this business. A Gulfstream V which cost $48 million a year ago can now be had for only $25 million, stewardesses included ?.

January 30, 2009

Diary

Global Market Comments for January 30, 2009
Featured Trades: (AMZN), (GOLD), (AEM)

1) Q4 GDP came in at -3.8%, the worst in 26 years. The only buyer right now is the Federal government. What private spending there is can be found online. Amazon (AMZN) announced December sales up 18% YOY, sparking a 14% jump in the stock. This also shows the consumer preference for discount buying. The mice certainly roared for Jeff Bezos. The stock market just suffered its worst January in history.

2) If the Chinese think they are going to get 8% growth in 2009, then they are smoking their former largest import, Opium. I think they are totally unaware of the ton of bricks that is about to land on them in the form of the extinct American consumer. China has spent 30 years building a giant export machine, for which there are currently no buyers. Take a look at Japan's statistics, which are far more reliable than China's, which show exports falling off a cliff, machine tool orders evaporating, and once a half century losses for leading exporters like Toyota. These are numbers far worse than we saw during the depths of their lost decade. Of course, China has the money, and certainly the need, for a massive domestic infrastructure build out that can offset the disappearing exports. But this is not an economy that can exactly turn on a dime, and the transition will be painful. China can always report 8% GDP growth this year. Another problem is that modern China has never faced a recession, and defensive business strategies are essentially unknown. One of the advantages of a centrally planned totalitarian economy is that if you don't like the economic numbers you are getting, just make up some better ones. Personally, I think 5% growth is more realistic, but then you have always known me as a shrinking, subdued, conservative kind of guy. If I wanted headlines I would be shouting 2% growth, or perish the thought, negative growth, from the rooftops, as some China watchers are. The implications for the global economy are huge.

3) Every night the evening news in Japan refers to the 'Great American Depression'. Do they know something we don't? I hear largely inaccurate comparisons to our current economic debacle to Japan's lost decade on an almost daily basis. But there is one thing both have in common. Nobody believes for a second the securities the banks own are worth what they say they are worth. That's what bank hoarding of capital is telling you. The question here remains, how quickly can the banks be forced to face the music?

4) The Pope activated his MySpace page today. How many friends do you think he has, and are they all of the earthly kind?

5) Pundits have suggested calling the aggregator bad bank that would buy up illiquid assets 'Crappie Mae'. I like it. The ticker symbol can be 'CRAP'.

6) With gold surging $50 today to a six month high, and 30 year Treasury bonds down a whopping six points in two days, there is little doubt what's driving this market. Russian selling of bullion reserves to finance last ditch support of the Ruble knocked gold down to $875 this week. But when they didn't show at the Thursday morning fix, it was off to the races. Here is yet another bullish argument for you gold bugs out there. In 1974 the yellow metal peaked at four times the S&P 500, and in 1980 it peaked at six times. On Wednesday they were equal at $876. Technical analysts are getting excited that gold's 200 day moving average will soon start sloping upward. Two more gold stocks to add to your gilt edged portfolio are Rangold Resources (GOLD) in West Africa and Canada's Agnico-Eagle Mines (AEM).

QUOTE OF THE DAY

'A year ago there would be 30 people looking for one airplane. Today, there are 30 airplanes looking for one buyer,' said Jay Mesinger, an airplane broker in Carlsbad, California. Congressional chastising of big three execs who flew to Washington in their corporate jets put a dagger through the heart of this business. A Gulfstream V which cost $48 million a year ago can now be had for only $25 million, stewardesses included ?.

January 29, 2009

Diary

Global Market Comments for January 29, 2009 Featured Trades: (GOLD), (AEM), (TBT), (HYG), (PHB), (NS) 1) December new home sales fell to a stunning 331,000, 100,000 less than the most dire forecasts.?? Average monthly home sales for 2008 were the worst since 1982. Homebuilders are getting absolutely killed by competition from foreclosures. Every real estate indicator is in free fall, and in fact, seem to be accelerating. Expect house prices to continue their relentless downward march. Brace yourself for tomorrow, when the Q4 GDP to be announced may be the worst in 30 years. 2) One month into the new year, my best call clearly has been to buy the Lehman High Yield Bond Fund (TBT), which offers investors a 200% short bet that long Treasuries are going down. A move in the long bond futures contract from 142 to 126 has taken the TBT up 35%, from $35 to $47. My recommendation to buy corporate junk bonds has done similarly well, with the PowerShares Corporate High Yield Bond Fund (PHB), and the iShares iBoxx Fund (HYG) up large. Treasury/junk spreads are shrinking at a tremendous pace, indicating that a healing of the credit markets is underway, although the stock market and the real economy can't see it yet. In December, junk bonds were priced at levels anticipating a default ratio worse than seen during the Great Depression. This trade probably has more to run, but the easy money has been made. It does show that there are great money making opportunities out there, even while the newspaper headlines are awful. 3) There is one sector of the business condominium market that is doing well, while the rest of the industry languishes. Demand remains healthy for medical condominiums being snapped up by doctors looking for an equity participation in their places of business. Medical condos in Manhattan in the 2,200 to 5,700 sq ft range are selling out at prices ranging from $1,075 to $1,350 /sq ft. This market caters to a trend of doctors moving from the old neighborhood small private 1,000 sq ft offices into larger 8,000 medical groups. This enables them to profit from economies of scale and to deal more efficiently with the byzantine new ways they are being reimbursed by providers. This is one area where financing is still easy to get because lenders see doctors as recession proof, offering constant cash flows and historically minimal default rates. People always get sick, don't they? 4) One way to play the current crude glut is to buy San Antonio, Texas based NuStar Energy (NS). A spinoff of Valero Energy's asphalt division, the company boasts 58.5 million barrels of storage facilities around the Gulf. The stock has already doubled since crude prices collapsed big time in October. The company has also been buying up asphalt production from other companies like CITCO, and may offer an additional infrastructure play, once Obama's $30 billion road rebuilding program starts in earnest. NuStar pays a hefty 8.6% dividend at an attractive PE multiple of 11 X. 5) The 170 room Pleasanton Sheraton, next door to the Stoneridge mall, has defaulted on its $12.2 million mortgage. Despite spending $3.5 million on renovations and upgrades last year, owners said that business travel to the Tri-Valley had 'virtually vanished.' The former Washington Mutual is emptying out 1,200 former employees from a nearby office complex, and remaining local firms like Chevron, AT&T, and Safeway have drastically cut back on travel to cut costs.

QUOTE OF THE DAY

'With gas at $2 a gallon, I have fuel efficient cars parked as far as the eye can see', said Mike Jackson, CEO of AutoNation, the country's biggest car retailer.

January 29, 2009

Diary

Global Market Comments for January 29, 2009
Featured Trades: (GOLD), (AEM), (TBT), (HYG), (PHB), (NS)

1) December new home sales fell to a stunning 331,000, 100,000 less than the most dire forecasts.?? Average monthly home sales for 2008 were the worst since 1982. Homebuilders are getting absolutely killed by competition from foreclosures. Every real estate indicator is in free fall, and in fact, seem to be accelerating. Expect house prices to continue their relentless downward march. Brace yourself for tomorrow, when the Q4 GDP to be announced may be the worst in 30 years.

2) One month into the new year, my best call clearly has been to buy the Lehman High Yield Bond Fund (TBT), which offers investors a 200% short bet that long Treasuries are going down. A move in the long bond futures contract from 142 to 126 has taken the TBT up 35%, from $35 to $47. My recommendation to buy corporate junk bonds has done similarly well, with the PowerShares Corporate High Yield Bond Fund (PHB), and the iShares iBoxx Fund (HYG) up large. Treasury/junk spreads are shrinking at a tremendous pace, indicating that a healing of the credit markets is underway, although the stock market and the real economy can't see it yet. In December, junk bonds were priced at levels anticipating a default ratio worse than seen during the Great Depression. This trade probably has more to run, but the easy money has been made. It does show that there are great money making opportunities out there, even while the newspaper headlines are awful.

3) There is one sector of the business condominium market that is doing well, while the rest of the industry languishes. Demand remains healthy for medical condominiums being snapped up by doctors looking for an equity participation in their places of business. Medical condos in Manhattan in the 2,200 to 5,700 sq ft range are selling out at prices ranging from $1,075 to $1,350 /sq ft. This market caters to a trend of doctors moving from the old neighborhood small private 1,000 sq ft offices into larger 8,000 medical groups. This enables them to profit from economies of scale and to deal more efficiently with the byzantine new ways they are being reimbursed by providers. This is one area where financing is still easy to get because lenders see doctors as recession proof, offering constant cash flows and historically minimal default rates. People always get sick, don't they?

4) One way to play the current crude glut is to buy San Antonio, Texas based NuStar Energy (NS). A spinoff of Valero Energy's asphalt division, the company boasts 58.5 million barrels of storage facilities around the Gulf. The stock has already doubled since crude prices collapsed big time in October. The company has also been buying up asphalt production from other companies like CITCO, and may offer an additional infrastructure play, once Obama's $30 billion road rebuilding program starts in earnest. NuStar pays a hefty 8.6% dividend at an attractive PE multiple of 11 X.

5) The 170 room Pleasanton Sheraton, next door to the Stoneridge mall, has defaulted on its $12.2 million mortgage. Despite spending $3.5 million on renovations and upgrades last year, owners said that business travel to the Tri-Valley had 'virtually vanished.' The former Washington Mutual is emptying out 1,200 former employees from a nearby office complex, and remaining local firms like Chevron, AT&T, and Safeway have drastically cut back on travel to cut costs.

QUOTE OF THE DAY

'With gas at $2 a gallon, I have fuel efficient cars parked as far as the eye can see', said Mike Jackson, CEO of AutoNation, the country's biggest car retailer.

January 28, 2009

Diary

Global Market Comments for January 28, 2009 Featured Trades: (TM), (GM), (GDX), ($GOLD), (ABX), (NEM) 1) The Fed leaves interest rates unchanged, at close to zero. Like they were really going to make them negative? All they can do now is to accelerate quantitative easing measures by buying boatloads of home mortgage, credit card, car loan, and student loan backed CDO's. They can also talk, a lot. 2) Weekly crude inventories showed a build of 6.2 million barrels, more than double what was expected, knocking front month futures prices down $7 from yesterday's high. Severe storage shortages are now driving owners to keep the excess supplies in railroad tank cars. 3) Although the family only own 2% of the company, Toyota Motors (TM) has appointed Akio Toyoda as its new president, grandson of the founder. He takes the helm just as Toyota's production last year of nine million cars makes it the world's largest producer, a title General Motors (GM) held for 77 years. Toyota introduced its Corolla model in 1966 for $1,200 and eventually sold 32 million. The 36 MPG car now sells for $15,000. 4) Gold's upside breakout through $900 on big volume last week is creating a lot of chatter among the trading classes. Historically, investing in gold came at a big opportunity cost because it didn't pay interest or a dividend, and you had to pay the cost of storage and insurance. With short term Treasuries now yielding zero, this opportunity cost is now, well, zero. There is a new profusion of gold proxies trading on financial markets where you can open an account for free, eliminating all other costs. I found five listed gold futures contracts with 50 and 100 ounce specs, and six traded gold ETF's worth $32 billion, like the Market Vectors Gold Miners (GDX) traded on the NYSE. For the past year there has been a nearly perfect inverse correlation between gold and long Treasury bonds. Does this make it the new deflation play? No matter how inflationary the long term impact of Obama's programs may be, the fact is that everyone is staring at deflation on the plate in front of them right now. And let's face it. Investment in any other instrument, be it in stocks, bonds, commodities, currencies, and real estate, pretty much sucks right now. Finally, take a look at the charts for two leading gold stocks below for Barrick Gold (ABX) and Newmont Mining (NEM), and see how they anticipated the barbaric relic's recent up move. The only thing missing from the bull case for gold is a collapsing dollar. Could that be the next shoe to fall? Many believe that a retest of last year's all time high of $1,050/oz?? is a chip shot, and a move to the inflation adjusted all time high of $1,500/oz is doable.

January 28, 2009

Diary

Global Market Comments for January 28, 2009
Featured Trades: (TM), (GM), (GDX), ($GOLD), (ABX), (NEM)

1) The Fed leaves interest rates unchanged, at close to zero. Like they were really going to make them negative? All they can do now is to accelerate quantitative easing measures by buying boatloads of home mortgage, credit card, car loan, and student loan backed CDO's. They can also talk, a lot.

2) Weekly crude inventories showed a build of 6.2 million barrels, more than double what was expected, knocking front month futures prices down $7 from yesterday's high. Severe storage shortages are now driving owners to keep the excess supplies in railroad tank cars.

3) Although the family only own 2% of the company, Toyota Motors (TM) has appointed Akio Toyoda as its new president, grandson of the founder. He takes the helm just as Toyota's production last year of nine million cars makes it the world's largest producer, a title General Motors (GM) held for 77 years. Toyota introduced its Corolla model in 1966 for $1,200 and eventually sold 32 million. The 36 MPG car now sells for $15,000.

4) Gold's upside breakout through $900 on big volume last week is creating a lot of chatter among the trading classes. Historically, investing in gold came at a big opportunity cost because it didn't pay interest or a dividend, and you had to pay the cost of storage and insurance. With short term Treasuries now yielding zero, this opportunity cost is now, well, zero. There is a new profusion of gold proxies trading on financial markets where you can open an account for free, eliminating all other costs. I found five listed gold futures contracts with 50 and 100 ounce specs, and six traded gold ETF's worth $32 billion, like the Market Vectors Gold Miners (GDX) traded on the NYSE. For the past year there has been a nearly perfect inverse correlation between gold and long Treasury bonds. Does this make it the new deflation play? No matter how inflationary the long term impact of Obama's programs may be, the fact is that everyone is staring at deflation on the plate in front of them right now. And let's face it. Investment in any other instrument, be it in stocks, bonds, commodities, currencies, and real estate, pretty much sucks right now. Finally, take a look at the charts for two leading gold stocks below for Barrick Gold (ABX) and Newmont Mining (NEM), and see how they anticipated the barbaric relic's recent up move. The only thing missing from the bull case for gold is a collapsing dollar. Could that be the next shoe to fall? Many believe that a retest of last year's all time high of $1,050/oz?? is a chip shot, and a move to the inflation adjusted all time high of $1,500/oz is doable.