March 24, 2009
Featured Trades: (COPPER)
1) 'I said a few months ago that Washington was all in. We are now all in squared. The FDIC, Fed, and the Treasury are making a concerted effort to turn deflationary swamp water in inflationary wine.'?? Ah, Paul McCulley, man of Virginia, you have such a way with words. PIMCO must love you. I agree.
2) If you want to get an inkling of Obama's new out of the box foreign policy weapon, listen to President Obama extended to Iran in an unprecedented YouTube New Year's greeting beamed directly to the people of Iran. Check out the link at http://www.youtube.com/watch?v=yft9ZCe3VCw. He said that Iran was a 'great nation that should join its rightful place in the community of nations', and that 'It's great and celebrated culture has made the world a better place'. The US is committed to diplomacy with the Islamic Republic of Iran, which should not pursue terrorism.?? He signed off with a Persian salutation, which was nothing less than stunning. One can't imagine a more radical departure from the Bush doctrine, which got the US nowhere for eight years. No one has benefited more from tragic American missteps in the Middle East than Iranian extremists. This now puts the spotlight on Secretary of State Hillary Clinton's carrot and stick approach to get Iran to dump its nuclear program. If it fails, she can use our new found moderation to recruit European allies to impose sanctions if the Islamic republic goes all the way. The only reason I care about this is that fresh troubles with Iran could trigger an instant $30 spike in crude prices on a bad day. This would send global markets tumbling, send gold through the roof, and snuff out any prayer of a recovery from this ghastly recession.
3) Satanists, occultists, and Tarot cards readers who follow the market closely (yes, there are some), called the S&P market bottom one point above the sign of the devil at 666. Does this mean my performance will improve if I draw a pentagram on my front door and engage in ritual chanting?
4) On of the stellar performers in the commodity space this year has been copper, up 50% to $1.87 since December. Heavy and secretive stockpiling of the red metal by Chinese, which accounted for a third of the world's 18 million tonnes of consumption last year, has been a main driver. Of course, we are still less than half the $4.10 peak seen last year. But copper is the only commodity that has a PhD in economics, and when it flies, prudent hedge fund managers have to pay attention. As a predictor of future economic activity, it can't be beat.
5) I'll tell you what GM's problem is. My dad was a lifetime GM customer, religiously?? buying a new Oldsmobile every five years. Once he even flew to Detroit for a factory tour and drove his new prize home. Thirty years ago I told him he was doing GM no favors by buying their cars, and the only way to force them to improve a tragically deteriorating product was to buy better made German and Japanese vehicles. This was right after the State of California forced auto makers to install seatbelts on new cars. Airbags and ABS brake systems were still years away. His response, 'I didn't fight the Japanese for four years so I could buy their cars.' (He was a Marine). GM's problem is that my Dad passed away seven years ago. Of the original 17 million WWII veterans, 1,500 a day are dying, and there are only 1.5 million left. All of them loved Detroit because it built great Jeeps, Sherman tanks, and half tracks that brought them home from harm's way. Their kids prefer German, Japanese, Italian, Korean, and soon, Chinese and Indian vehicles. It is no coincidence that GM's problems really accelerated with the passing of the 'greatest generation.' During the last 35 years, when Japan's share of the US car market climbed from 1% to 40%, I begged GM to mend their ways and build a quality, price competitive product that Americans wanted to buy. They answer was always the same: 'Nobody can tell GM how to build cars.' Maybe someone should tell them.
QUOTE OF THE DAY
'The children of Adam are limbs to each other, having been created of one essence,' said President Obama, quoting a famous Persian Poet in his Internet New Years greeting to Iran. Whoa! Heavy!