Deep Market Thoughts…False Confidence Abounds

We are being treated like dummies by our leaders.

We are being treated like dummies by Corporate America.

Just because we are being treated like dummies, does not mean you have to be dumb.

You MUST keep saving. You MUST pay down debt where you can. You must as Constanza says…’Do The Opposite

The hack marketing and leadership of GM have launched a ‘TOTAL CONFIDENCE ‘ plan and humongous waste of money advertising campaign. It is beyond dumb and insulting. It centers around payment protection for YOU the ‘TAPPED’ consumer. This might have worked after 9/11. It will not work now. The only confidence GM could instill in our economy is if they decided t make cars at a profiit. GM could buy my confidence if they could bust unions.

The lying and thieving bankers that continue to manage our economy are using mortgage originations from historically low 30 year mortgage rates as their pillar of hope and confidence. I doubt you should buy that crap. Sure, I will refinance, but to really get juice from the low rates, I will have to get my mortgage down to around $400k to avoid being a Jumbo loan. One day in the future I may lever up my home, but in the meantime, any saving in payment will be made up by the cash I will outlay to pay down the mortgage to lock down a silly low rate.

If you have any common sense, you will not get levered to this rally.

I plan on taking the profits from my beach call last month and leaning on this market hard over the next two weeks. I am already net short. It is a forgone conclusion that all the financial stocks will rally hard on RECORD earnings. The chartists are all aglow and maybe they will be right.

Me…I like these charts for the purpose of my short trade. I think the odds are on my side, but I won’t be stubborn as I step up my size this week.

I really wish we were making good decisions from the top. If we were, we would be 12 month closer to good times rather than countless years further behind. Despite all the financial shennanigans of the last year, Citibank, AIG, Fannie, Freddie and GM are just toast. What and who the fuck did we really save with the trillions our government has levered to it’s balance sheet?

I liked Robert Reich’s post this weekend on the economic situation . I think he has a little bit of experience and perspective. The meat:

But we’re not at the beginning of the end. I’m not even sure we’re at the end of the beginning. All of these pieces of upbeat news are connected by one fact: the flood of money the Fed has been releasing into the economy. Of course mortage rates are declining, mortgage orginations are surging, and people and companies are borrowing more. So much money is sloshing around the economy that its price is bound to drop. And cheap money is bound to induce some borrowing. The real question is whether this means an economic turnaround. The answer is it doesn’t.

Cheap money, you may remember, got us into this mess. Six years ago, the Fed (Alan Greenspan et al) lowered interest rates to 1 percent. Adjusted for inflation, this made money essentially free to large lenders. The large lenders did exactly what they could be expected to do with free money — get as much of it as possible and then lent it out to anyone who could stand up straight (and many who couldn’t). With no regulators looking over their shoulders, they got away with the financial equivalent of murder.

The only economic fundamental that’s changed since then is that so many people got so badly burned that the trust necessary for consumers, investors, and businesses to repeat what they did then has vanished. Yes, banks will lend to highly trustworthy borrowers, and the low-hanging fruit of highly trustworthy borrowers is the first they’ll pick. But there’s not much of this kind of fruit to go around. And yes, some consumers will refinance and use the extra money they extract from their homes to spend again. But most will use the extra money to pay off debt and start saving again, as they did years ago. Most consumers continue to worry about their jobs, and for good reason.

Some of the big banks will claim to be profitable, but don’t bank on it. Neither they nor anyone else knows what their assets are really worth. Besides, the big banks are sitting on over $500 billion over taxpayer equity and loans. Who knows how they’re calculating profits? Most importantly, there’s still a yawning gap between the economy’s productive capacity and what it’s now producing, and absolutely nothing will turn the economy around until that gap begins to close.

My long portfolio of stocks is light. I am long some all time high technology like SNDA and NFLX and some old leaders like CRM, ADBE and EBAY. I own some Nintendo and Amazon along with some USO, GLD and SLV.

I am being run over by Best Buy and Retail shorts the last month and as of late last week some SPX index puts.

I always get cranky and nervous when I leg into some bigger trades that go against me early. It’s not comfortable, but I do feel alive.

Should be an interesting week.


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