May 27, 2009

1) With North Korea testing low grade nukes and short range missiles (think WWII German V2's), and a former prime minister jumping off a cliff to commit suicide, you wouldn't think this is the best time to contemplate an investment in South Korea. You may recall that I recommended that the Hermit Kingdom be added to spell 'BRICK' with a 'K' last January.
Korea is in fact somewhere in between a true emerging market and a developed country, with lower risk and lower returns, than say a Taiwan or an India. Let's see how that call faired. After hitting a low of 998 in March, it soared 45% to a seven month high. The recent troubles have pared it back by 10%. For long term investors, this is opening a rare window to scale into some exposure here. Short term traders should wait for a bigger pull back. They used to say you bought Asia only when there was blood in the streets. This isn't really blood, but is close enough.

2) Just a little note to point out that my long term Treasuries short recommendation has gone ballistic, hitting a new high of $56, and that the futures have crashed to 116 1/2. The ten year yield has ratcheted up to 3.56%, a new high for the year, and the 30 year to 4.5%. The market is finally reading the writing on the wall. Who thought the sale of $100 billion in new paper was going to go well? The dealers are now choking on this stuff. I'm sure government agents are now scouring the country for new sources of high grade linen, the best raw material for printing new $100 bills. My calls don't always work out this well this fast, so please indulge me, and let me savor the moment. Let the crash continue. Instead of focusing on the bankruptcy of GM, we should consider the United States government going under, as this cataclysmic move in federal debt seems to be presaging.

3) Continental Airlines (CAL) is suing nine of its former pilots, claiming that they entered into 'fake' divorces in order to make early withdrawals from their pension funds. The aces in question took out up to $900,000 each, even though they continued living with their ex spouses and kept legal proceedings secret from their families. The pilots cashed in because they were afraid CAL would go bankrupt before they retired, wiping out any obligation to pay benefits. Do you suppose they know something we don't? One has already returned the money. Do you suppose this is going on at General Motors (GM) too?

4) Take a look at the clock below, which I obtained courtesy of the blog of Clark Winters, and please tell me what time it is. It is the clock of investment behavior, and describes the 12 stages of a 'W' shaped recovery. I think the markets are discounting 11:00, when in fact, the economy is at 6:00, or even 3:00. Have the markets gotten ahead of themselves? Is there an arbitrage here? Despite the connection with the previous administration, I think that a 'W' shaped recovery is looking more plausible every day. I look forward to your erudite comments.

QUOTE OF THE DAY

'When asked if English should be made the official language of the United Sates, 80% said 'S??,' according to late night comedian Jay Leno.