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Monday Morning Musings

I have a dream too.

My dream is that one day the markets will be left alone and we can get back to trading on fundamentals that can be measured like:  "Does the company make a good product that is in demand at profitable and sustainable margins" rather than "How much stimulus money can they get their hands on and is their stock a good candidate for the next pump and dump program run by the IBanks using our taxpayer dollars to make the price of both equities and commodities much more expensive than they should be while depressing interest rates so we are also grossly underpaid for our savings."  

We used to look at the Russians and wonder how they could put up with a corrupt Government that falsifies data and puts pressure on the press to spin the news in a positive light while the people suffer and the oligarchs line their pockets, committing blatant crimes with the blatant attitude of people who know that their political connections keep them above the law.  

Well, as John Mellencamp once pointed out: AIN’T THAT AMERICA?  Or,  as Ronald Reagan warned us in 1983:

Leaders have openly and publicly declared that the only morality they recognize is that which will further their cause…  that they repudiate all morality…  or ideas that are outside class conceptions. Morality is entirely subordinate to the interests of class war. And everything is moral that is necessary for the annihilation of the old, exploiting social order.  The refusal of many influential people to accept this elementary fact…  illustrates an historical reluctance to see totalitarian powers for what they are. We saw this phenomenon in the 1930′s. We see it too often today.  

It was C.S. Lewis who, in his unforgettable "Screwtape Letters," wrote: "The greatest evil is not done now in those sordid ‘dens of crime’ that Dickens loved to paint. It is not even done in concentration camps and labor camps. In those we see its final result. But it is conceived and ordered (moved, seconded, carried and minuted) in clear, carpeted, warmed, and well-lighted offices, by quiet men with white collars and cut fingernails and smooth-shaven cheeks who do not need to raise their voice."

Well, because these "quiet men" do not "raise their voices"; because they sometimes speak in soothing tones of brotherhood and peace; because, like other dictators before them, they’re always making "their final territorial demand," some would have us accept them at their word and accommodate ourselves to their aggressive impulses. But if history teaches anything, it teaches that simple-minded appeasement or wishful thinking about our adversaries is folly. It means the betrayal of our past, the squandering of our freedom.

Reagan was, unfortunately, not warning us about Investment Bankers at the time, he was banging the fear drum and driving the US to the largest peace-time arms build-up in history as he trashed Carter’s START initiative where we had mutually agreed with Russia to cut our nuclear arsenal by 50%.  Reagan instead insisted that Russia could not be trusted to live up to an agreement, therefore it was our patriotic duty to increase spending by 66% during his term while the 9/11 wars, now entering their 10th year, have driven the base military budget (not counting war costs) to near WWII inflation-adjusted highs of over $650Bn per year.  

Another American President, Five-Star General Dwight D. Eisenhower, had warned us in 1960, not indirectly or subtly but DIRECTLY and POIGNANTLY that:

We have been compelled to create a permanent armaments industry of vast proportions. Added to this, three and a half million men and women are directly engaged in the defense establishment. We annually spend on military security more than the net income of all United States corporations.

This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence — economic, political, even spiritual — is felt in every city, every State house, every office of the Federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved; so is the very structure of our society.

In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the militaryindustrial complex. The potential for the disastrous rise of misplaced power exists and will persist.

We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.

Did America listen to the often-decorated military leader who fought in World War I and helped lead us to victory in World War II – the man who derailed Robert Taft’s platform "Against Communism, Korea and Corruption" and instead won by a landslide and used his mandate to end the Korean War, sweeping Joseph McCarthy out of office?  Did we listen to the man initiated the "Space Race," shepherding those who we still call "Our Greatest Generation" by emphasizing science and research to keep our nation competitive while expanding the scope of Social Security and putting Americans to work with the massive Federal Highway Act of 1956?  No, as it turns out, we listened to the cowboy actor, who was best known for partnering with a monkey, and look where it got us! 

This is not a political statement – this is the background to our current national economic reality as Congress opens their delayed session (delayed due to a shooting spree) where the chart on the right will be gone over as they look in that bottom 47% of the discretionary spending pie for places to make further cuts while our military portion grows from 53% to 55% to 60% to, hopefully (I guess) 65% of our discretionary spending if the Republicans are to achieve their goal of shaving $250Bn off the discretionary budget without cutting the military.

At what point do you admit that you are living in a military state?  Is that when the military budget crosses 75% or does it have to get to 90%?  When do you admit to yourself that your duly-elected government’s main priority is not Health (5%), Transportation (7%), Education (7%), Housing (3%), Science (2%) or, God forbid – the Environment (3%) but is, in fact, running what is by far the largest peacetime army in the history of the Earth – a budget that is now almost  50% of the rest of the planet’s ENTIRE military budget and that includes our allies, who make up another 25%?!?  

Are we "smart" for maintaining massive military superiority or fools for squandering the development of infrastructure, education, science, research and development that could keep our nation great (not to mention EMPLOYED) long-term?  Instead we pursue short-term military solutions that resolve nothing while our overwhelming military presence makes the US a much-resented powerful-looking target to the poor and powerless nations of the earth.

Again, I’m not looking to have a political debate but ALL of the decisions our Government will be making are very tied up in this central issue, of course.  After all, it is 53% of our discretionary budget already and our Treasury is borrowing $140Bn PER MONTH to support that budget as well as the stimulus spending or tax cuts or whatever it is you want to call the cause of our nearly $2Tn 2011 budget deficit.

1When you look at Ireland and Greece and Portugal and you shake your head and go "tsk, tsk" at the silly little countries that can’t control their budgets – keep in mind that ONLY Greece has a deficit AND debt to GDP ratio that is comparable to the US.  

Although the UK, Spain and Ireland have current deficits that approach our 12% annual mark, none of them have our 90% debt to GDP ratio and while Italy and Belgium have 100%+ debt to GDP ratios, they are only adding to their problem at a rate that is 50% below the snowballing disaster we are running.  In a fair and open marketplace, our debt would be treated as junk and interest rates would soar and our economy would cool.  

Clearly that is not happening so let’s consider the mechanics that go into manipulating (and there is no better word) a "better" outcome and also consider how long this manipulation can be kept up as well as whether or not our supported economy will be able to eventually stand up on its own (and, if so, when) or if we are simply killing the patient with this particular "cure" that masks the symptoms well enough but encourages the growth of the underlying disease.   

What is the disease?  Well, it doesn’t take Hugh Laurie to figure out that we are dealing with a collapsed economy.  Like a collapsed lung, it has suffered a traumatic shock (blame whatever/whoever you like) and is unable to work on it’s own.  Not to get all medical but generally a collapsed lung suffers from deflation (sound familiar?) and the goal a doctor has is to re-inflate the lung but that cannot be done until the pressure that caused the lung to collapse is dealt with first.  Another example I use with members is comparing the economy to a swimming pool with a large hole in it.  You can keep pumping in water (stimulus) and, if you do it enough you can keep the level stable or even make it rise but it’s a false positive because, as soon as you stop pumping (stimulus) – if you have not fixed the hole, the water simply rushes back out again and you have another collapse on your hands. 

So, sticking with the swimming pool, if you have a 100,000 gallon pool with a 50 gallon a day leak, every month you will lose 1.5% of your water or about 1,500 gallons and if you need 1 gallon of water per goldfish (jobs) then 1,500 goldfish die each month as well.  Now most pool men will come by and do a few tests but, as often as not, they will tell you that the best way to treat the leak is to let the pool drain out and fix it properly when it’s dry.  This is pretty simple and obvious but perhaps you are having neighbors (investors) over the next weekend (or an election next year) and you don’t want them to see an empty pool.  So what do you do?  You fill it.  You pump 50 gallons a day back into the pool and maintain your water levels and save 350 goldfish per week and the pool looks great and all your friends vote for you and make you neighborhood party coordinator but, unfortunately, that means they’ll be coming back next week too.

Now, let’s think of our "leak" as being measured by our deficit spending.  Lack of jobs, lack of business activity, stupid tax policies, etc. cause low levels of collection – there is no "rain" to fill up the pool, the normal hoses are not working and the system cannot sustain itself.  We have a trade imbalance that leads to more losses, like evaporation on hot day as money simply disappears and leaves the country – another way we end up with a hole to fill and, of course, we drain "water" out of th system through deficit spending as interest rates and other liabilities pile up on us.  

Swimming pool trivia infographicThere are many factors and many ways to place blame but the FACT is that we, as a country are losing $140Bn a month.  That is our own $5Bn per day leak that needs to be filled and we fill it by selling Treasury bills which is money we are borrowing from our neighbors, who keep lending it to us as long as they don’t think we have any problems with our pool. 

But we do.  We have serious problems because our leak is getting bigger.  It gets bigger every year because we keep ignoring it and keep filling the pool but that just allows more water to pour out and erodes the hole, making it ever bigger and harder to fill.  Clearly it’s madness to believe we can just keep filling and filling because, eventually, the leak will become bigger than our ability to fill it.  As you can see from the crises in Europe – that spot happens roughly at 12% of GDP – that is the point at which your Global neighbors are going to lose faith in your ability to keep the pool filled to the water line.  

Our neighbors have already lost faith in our ability to pay and, if it wasn’t for Uncle Ben and his giant hose – there wouldn’t be enough water now to keep our pool filled.  The Fed is artificially keeping money flowing into treasuries at a rate of $100Bn a month.  This flow of seemingly free money from the Fed masks the size of our leak but, since the Fed is ultimately just another debt we will eventually have to pay – it also masks the growing size of our deficit by taking on what is now heading towards $3Tn of debt IN ADDITION TO our "known" debt of $15Tn.  

Even with the help of Uncle Ben, our hole is getting bigger, at $1.8Tn this year – up from $1.4Tn last year.  What can screw us is the same thing that screwed Ireland and Greece and, almost Portugal (until Uncles China and Japan stepped in for them last week) is rising interest.  When your Debt is as much as your GDP and you are already spending 12% of your GDP on your current deficit (filling the pool) then a 1% rise in interest rates WILL (and this is an inescapable mathematical fact) raise your deficit by 1%.  

Through demonstrated actions, bond holders have shown us that they do not have faith in a country able to sustain a 12% deficit.  The US is right on that line and, whether it is through cut-backs in spending or improvements in revenue collection (come on everyone, click your heals together 3 times and say: No New Taxes!) then we remain right on the brink of collapse.

Our Federal Reserve has the unique ability to print more money than most Central Banks but we are in untested waters here – never before in the history of the planet Earth has a nation gone this far funding it’s own debt without setting off an inflationary spiral that ultimately sends rates skyrocketing and sets off a de facto default.  Certainly never an economy the size of the United States of America!  

Is America "too big to fail"?  Does the rest of the World have no choice, as China and Japan are now doing for Europe, but to do their best to keep the money flowing so all those Billions of goldfish can keep swimming around as if there is no problem?   It certainly seems that way and there’s no reason for this party to stop as long as "they," who in this case are the Global Central Banks and their partners in crime – the IBanks – keep filling up the leaking economies.

Meanwhile, it’s our job to monitor the flows, look for additional leaks in the system and wade through the Government BS to figure out the size of the leak we currently have.  As I pointed out above, discretionary spending is only 1/2 of the Federal Budget and only 47% of that is non-military spending.  You can cut 100% of it and we’d still have a massive deficit.  In reality – you are perhaps going to be able to cut 5% of 25% of our deficit for a whopping 1.25% reduction.  If interest rates rise 1.25% or if all the government workers we lay off or the government spending we cut back leads to a 1.25% decrease in internal revenue collections – then we will be forced to borrow above that 12% ceiling anyway.

If our currency begins to devalue at a rate of 1.25% a year, then people buying our debt will want 1.25% of interest to compensate.  The dollar has been rising since November of 2009, when it bottomed at 74.23.  We topped out at 88.71 and TBills, measured at TLT’s 10-year notes, topped out at 107.52.  Those notes are now 91.76, down 15% in 6 months yet we expect another $140Bn worth of buyers to show up next month and pick up our notes again.  So thank goodness for Uncle Ben, who is currently buying all but $40Bn of those notes and Uncle China and Uncle Japan are buying the rest.  Hu Jintao will be meeting with Obama this week and this video pretty much sums up the issue quite nicely:

"Extend and pretend" is the "new normal" for Global Economic policy.   We "couldn’t" allow BAC, C, WFC, GS, MS, etc. to fail so we plunged our nation into unimaginable debt to prevent it and now the rest of the World, SO FAR, has decided they can’t allow America to fail so China ignores the $1Tn we owe them and Japan ignores the $1Tn we owe them and Europe ignores the $1Tn we owe them even though they themselves need every Euro at the moment.  Unless a fleet of spaceships come in for a landing – there are no outside auditors to call an end to this global farce so we can pretend to be solvent and our bankers can pretend that our loan is solid as long as no one asks any questions and nobody will as long as the monthly bills keep getting paid.  

Unfortunately, this Global policy of easy money pushes inflation through the system and that increases the size of the hole in everyone’s pool yet again.  With the US, it shows up in our trade imbalance as we import 300M barrels of oil per month so every $3 increase in the price of oil increases our leak rate by $1Bn a month.  Our overall trade deficit is $600Bn, almost half of our total leak and it would be much worse if not for the fact that we are currently pushing massive food inflation out to the rest of the World.  With no manufacturing base remaining in this country – it’s very hard to see what is going to be done to turn these numbers around with the following chart being an excellent example of how even a "fine American product" like the IPhone only serves to add to our deficit:

There are no easy fixes and what bothers me about the market is that it’s priced like there are.  Perhaps the market is simply priced to account for the inevitable inflation and that is a valid investing premise but, so far, inflation is not coming on fast enough to support the values the market has been hitting.  Don’t worry though, despite the jokes in the video above, this week’s meeting with Hu Jinatao is pretty much exactly that – we need to know how much China is willing to take as Uncle Ben looks to "kick it up a notch" with QE 3, 4 and 5.  

Japan is on board as they still have DEflation so their attitude is "Sure, print however many dollars you want as long as you spend them buying our cars and electronics."  Japan isn’t likely to have food riots anytime soon but, as I pointed out in chat this weekend – many other countries already are and, frankly, Uncle Sam don’t give a damn as long as it’s not a country we need to borrow money from or sell something to and THAT is why Hu Jintao will once again meet with Obama this week and that will very much set the macro tone for the rest of the first quarter.  Clearly those bets are already in and Wall Street figures we are back in business in 2011 – so let the good times roll (for now):


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  1. Good Morning!
    It has been reported that Steve Jobs has taken a medical leave from Apple, always one of you points about Apple

  2. What the elite know is that there is a well-oiled machine, and an extremely well  known quantity in the Corporatocray, particklelerly the Defense (Offense, really, the name should be changed) – Corporate juggernaut.
    What both democrats, yes the democrats,  and republicans also know is that the money raised and spent or invested in Offense (and Agriculture) spending provides much greater volume, faster velocity and speed than any other dollar spent by government. The wages and salaries, benefits, perks, bribes, and extortion are all at orders of magnitude no human bean can conceive of.  Let’s count the ways that the multi-billions have disappeared, no one accountable, that have been sent to Iraq in C-class air ships, and not one single person apprehended or prosecuted by a neutered Justice department in hock to first class passengers on the ship of state. 
    As long as there is bread and circuses to occupy the sentient and take up vast hours of  their limited awake time, this has been going on and will never cease.  
    Then there is the constitutional problem of what exactly a massive Federal government should be doing spending even 1% on education in the first place. There is likely some role for Central government in education but money ain’t it as it’s given out today.  I know I would rather send some of my tax dollars to the local school district (or not if they are going to install day-care centers in the grade and high schools for the babies of post pregnant 13 year olds) than to some liberal agenda driven federal bureaucrat I had no hand in electing or appointing, and iover which I have Zero control).
    The Federa government has proven it cannot do but the simplest things well. Once it gets just a bit complicated, the environment for fraud, corruption, and outright murder is too tempting for the mortal, greatly flawed human sociopaths that occupy our government.

  3. Hi there all of you. Hope you have a nice holiday.
    Just want to report on AAPL stock droped in Germany from from 259 to 244 Euro after the sick leave anouncement of Job. I trust we will find the same tomorrow at the US market. Possible below 340.00!!!!!!!

  4.  Good morning! 

    Wow, it looks like those QIDs may actually pay off!  Now we have to hope our hedged Dow doesn’t fall too hard because that would suck after we just finally covered them.  

    Story looks legitimate as it’s on many services and the Nas futures took a 1.5% hit, which is 20% of the reported 7.5% drop in AAPL so all checks out so far.  

    I’ve got a busy day but will hopefully be able to finish my thoughts on this article this evening.

    Jet game was great!  Sorry to New England fans but I sure enjoyed it.

    Also great was Ricky Gervais hosting the Golden Globes.   I only watched because he was hosting and expected the usual tame crap but he really ripped into people.  This is pretty much the same reason I don’t get invited back to speak at things twice as I also tend to point out whatever BS I see going on but I don’t think I would have had the balls to do what he did:

  5. Phil,
      With all the POMO days injecting billions into the system, what factors can make the market go down?

  6. Factors to drive an overbought market down?

    Sovereign default

    None of those worked? Ok….

    How about transplant rejection? Or infection?

    Yea, we have a robust, broad based recovery on our hands. No question….

    /sarcasm off

    Ps thx for the Ricky Gervais post, great stuff.

  7. Seriously Phil, Jets are a classless org and it starts with their Blowhard coach! Cant stand that guy, good coach, but as Terry Bradshaw said, NOT CLASSY. Pitt and Cap’s GB will play in the SB with GB taking it down. I guarantee it :)

  8. Hey Dawgs!  Happy MLK Day-
    Not excusing the vast imbalance in our budget.. but money spent on developing weapons is not completely wasted even if the weapons are never used.  There is tremendous research that goes into developing weaponry and that research can often be applied to the commercial world for profit and gain.  Think GPS.. 
    I like Ike.

  9. Ricky Gervais
    Wow! He drove a stake through Mel Gibson.

  10. Jets/NE:
    I live in NH and am a Pats fan. The Jets deserved to win. Simply the better team last night. Congrats to them.

  11. AAPL @ 320 tomorrow (ie. down 7.8% which was the Frankfurt close)….buy, sell or hold?  
    With earnings reported after the close tomorrow and the Jobs leave news hitting the day before when the market is closed, how could you ask for more drama, intrigue and confusion for the trading day on Tuesday?!  Fortunately, I don’t have a position to manage.    As I asked on Friday ( rhetorically, was there anyone in the world short AAPL ahead of earnings?  How cute that AAPL would do this once the whole world was long!  Aren’t they so cute and innocent?…lol!
    My take is that the earnings are so blown out to the upside that this is the ONLY time that makes sense to announce Job’s departure.   Now, why didn’t they announce as a part of the earnings statement release?   Well, in my view it’s because once the bad news is baked in (not much if only 8%), the good news will far outweigh it on the subsequent release.  They are doing everything they can to manage the stock price UP and to stay UP.  I believe Jobs will NOT be coming back, however that news will not be made until at least one more quarter of earnings release, showing stability and growth to the market.
    The Jobs health risk discount, remember, has always been in the stock price.  It is higher now, of course, but I think not that much and will be offset by the strength of earnings reported and an increase in the growth premium.  What is more important however, is what will increase the growth premium (PE) in the future in order to keep the stock price going up?   This may be the top of the stock arc, and while I don’t expect a severe and sustained drop on the Jobs news, I do expect the upside to be limited to 10-15%, to around 400, and then sideways for some period.
    So, "buy the F***ing dip", is my thinking.   However, I would not expect more than 25% growth in 2011.

  12. phil, not surprised about Jobs – probably waited until this wknd because he absence from earnings conference would be noticable – i suspect his condition is very complicated – problems after liver transplant plus his pancreas issues could be very messy at best.

    thoughts on svu play. pulled back after tepper news came out. thinking about 5/10 213 call spread financed by selling 5 2013 puts for debit of 1.1

  13. Hi Phil, do you think that a bullish play on ADBE or GOOG is a good idea under the circumstances? (Or you expect all stocks to go down with AAPL?)

  14. I looked into trading futures. I have the access but have never tried it. I guess I dont know how it works. I tried to buy 10 units, but it looks as if it is not a cash transaction, and the amount of money encumbered made no sense at all. Anybody have an idea?

  15.  I’m going to close out some winners tomorrow I think. NAK, IMGN, some other.s
    Things are too lofty. Note that his is short term sentiment. I still think a multi-year DOW melt-up to 20k plus is in effect. In fact, at this point it cannot be stopped, even if they wanted to. The Fed made sure of that.
    Also, a combination of uncontrollable commodity prices and, what I will call "what seems to be fairly rowdy weather" (so I don’t piss off the climate change denialists), makes me remain bullish on food and a hater on grocery (WFMI, SWY etc.). Long CORN, a few DBA calls … some others.

  16. The March e-mini Nasdaq futures contract NQH11  is down 28.25 points already, but up off the low.   Not sure how much more downside to come, since the news is already factored into the price. 

  17.   Good Morning Phil,
    Re:  NVDA
    Last May during the market swoon & VIX spike, I did a buy/write on NVDA with the stock at $9.15.  I sold the 2012 $10 strike Puts & Calls which reduced my costs to $4.50/$7.25.  The stock has been on a parabolic run and with more than a year before expiration these options are now $14.00 for the Calls & $0.25 for the Puts.  In this situation with the shares at $23.68 I’m asking whether you would roll the options up to much higher strike prices, go out to 2013 or just kill the position(s) and take a nice profit?

  18.  Phil – maybe Steve Job’s announcement and a combinations of less than stellar earnings MAY bring the downside you are looking for. Like you have been pointing out, we needed a solid reason for THEM to bring the markets down. 

  19. Phil – since you’re going to start making big bucks how about a decrease in rates for longtime members? lol 

  20. The problem is BOTH political parties love to spend other people’s money!
    So, your pool has TWO holes in it… a Republican hole….the other a Democrat hole.
    Until we elect a repairman to fix both holes….the spending and deficits get worse.
    The TEA Party people are the ones who, for a long time now, have recognized that there are TWO holes in the national swimming pool that need to be plugged!
    Our fiscal (spending) problems should TRUMP ANY OTHER ISSUE in the next election.
    In fact, your wonderful Governor Chris Christie is exactly the type of man/woman we need to get the country back on track. And, what is so refreshing about him is…..he tells the truth and he has the cajones to stand up to ALL the special interests.
    Just my 2 cents.

  21. The futures will rebound and may come all the way back by the open tomorrow. That’s why I wanted to figure out how to trade them.

  22.  barfinger- I have traded some futures – you can enter your order just like any other- but be very careful- small moves can be expensive. If you are on TOS, I suggest you try the paper trading to give you a feel for it.  I have traded the dollar futures (/DX on TOS). I always entered (long or short) with a .05 or .10 stop. For /DX,  a nickel move is $50 per contract. 

  23. Regarding AAPL & Steve Jobs:
    I have a friend, who lives near Silicon Valley, claims that AAPL (the company) can be described by one word, chaos.
    He claimed that the company has so many talented and creative people that they fight each other too much.  Observe what happened before Steve Jobs came back.  The company was in chaos because of the fighting within.  Steve Jobs was the person that brought the company out of chaos.  Now if Jobs is gone for good, my friend thought, the company will eventually go back in chaos again.  It may take a while before the fighting resumes.
    What do you guys think?

  24.  Let’s see what Assange brings this time.

  25. NYS Gov Andrew Cuomo talks tough.

  26.  First the Great News:     PACKERS 48 – 21 over Atlanta.  Bring on da Bears.  
    Pack self destructed in 1st game w/Bears and lost on last second fg.  Won 2nd game.  No self destruct this time.
    The Good News:   Jets shock Patriots and everyone else.
    Packers vs. Jets would be a cool Super Bowl matchup; but so would Packers vs. Steelers.
    And of course Bears vs. anyone would just suck !
    Market News:   AAPL / Jobs.   Leave it to AAPL to hold back until a long holiday weekend AND right before (blowout) earnings in trying to manage the bad news about Job.  Sorry to hear the bad news about Steve of course, I am thinking to sell Jan puts on AAPL tomorrow if it gets hit large, I dunno, let’s see what plays Phil can come up with.
    Post not political ??  LOL.  Not buying that.  Almost fell out of my chair when I saw Phil was quoting Reagan; until the obligatory disparagement set in.   Of course, we all know that it was really Obama that was the catalyst in events such as the collapse of the USSR and the fall of the Berlin Wall.  Or they just fell down.   All that he hath forseen had come to pass.
    Back to PACKERs, 1020, how’s this one for ya … I am also a GB Packer shareholder !

  27.  oh; and Barfinger, please don’t trade futures if you never have and don’t understand how they work.    Supercharged with leverage and not for the inexperienced.  
    That said, do the homework and get the experience … gradually, not by jumping in like this.

  28. Oh boy, Cramer sends out an e-mail tonight that says AAPL will be a buying opportunity tomorrow.  I bet CNBC talks about  it all day tomorrow.  
    Phil, Need your guidance.  You have been talking about this  event to anybody who has been bullish on Apple for months now , and here we are….

  29. Phil:
    Great write-up explaining our issues. It is quite sobering to learn that we are worse off than countries currently being labeled as total failures! The million dollar question is how long do we have and how deep will it cut? I think the fact that we are so polarized as a country simply exacerbates our problems as we vacillate between the right and the left. Where are the great leaders who can lead us out of the abyss rather than just moving us from one side to the other? I am a conservative--(I think? --you make me think maybe not?), but I am disenchanted by the lack of leadership from either party. Can we really just sit back and watch it completely unravel before we do a thing?
    On the other hand, in a perfect world, do you see any way where federal spending and the actions of the fed (Bernank) can lead to some success and what positive signs should we look for if this occurs?  It will be interesting to see how the markets react to the Apple "story of the day". Will we press on and up, or will it be the first catalyst for a strong move downward? Oh, and will we finally get a reaction from the VIX?! Interesting times!

  30.  Good morning!

    Amazingly, AAPL is down just $10 in the futures and, if you own AAPL, I’d say take advantage of the fact that it’s a "must save" stock for "THEM" and sell them your shares.  In Jan 2009, when AAPL was at $97, Steve’s last health issue took them to $78 and they were already down from $192 in 2008.  Now they are UP from $200 this year with the same announcement and, so far, the futures have them down $10.  

    I don’t think I’ll ever have to explain how blatantly manipulated the markets are again.  Clearly this is NOT the week that the markets are to go down or "they" would have let the futures die but the Nas is almost 100% recovered along with AAPL stock, which was down 7.5% in Europe but is now (6:30) down just 2.5%.  

    Strange goings on in China as well as the Shanghai opened down almost 2% but closed flat with the huge stick save coming into lunch, beginning at 11am.  The Hang Seng, on the other hand, fell 250 points after lunch and closed flat at the day’s low.  The Nikkei went up 50 points at the open to flat and stayed flat all day while the Bombay bounced off 18,888 – a number that the Chinese consider very lucky (by coincidence, of course). 

    Europe is up 1% across the board despite Spain looking at a possible 7% bond auction on 10-year notes.  

    Meanwhile, our own 2/20 Year Yield Curve is at a record 3.96% – compared to an average of 2.07% over the past 10 years.  Talk about ignoring an elephant in the room!  

    Speaking of elephants (or 800-pound gorillas)  - Hu Jintao, on he way to meet with Obama said "the present U.S. dollar-dominated currency system a "product of the past" and highlighted moves to turn the yuan into a global currency."

    OooooooooooooKayyyyyyyyyyyyyyyyy – Party on Wayne, party on Garth…  Let’s see, is there anything else we can ignore?  Hey, how about PBOC’s Zhou, who says China’s excessive money supply is at the root of high inflation and cannot be easily solved?   The central bank has had to print lots of yuan to buy foreign exchange in China to maintain a relatively stable exchange rate between the yuan and the U.S. dollar, which has depressed the value of money held by ordinary people, Zhou said in the latest edition of the China Reform magazine.

    This has knocked the dollar down the magic half a point they like to get to prop up the markets, now at 79.  That’s giving us $91.50 oil again and $4.44 copper (an unlucky Chinese number) with gold at $1,369 and silver at $28.82 – all shortable if this  were the real World.  

    Logically, we should be shorting Nas futures (2,310) and S&P futures (1,292) along with the commodities but maybe I just read too much.  Germany’s Der Spiegel says there is already a rift between EU President Barroso and Angela Merkel and, without Germany’s full support, the EU will fall apart very quickly.  

    China is also making moves to reign in lending at home by 10% AND is looking to hike interest rates which is why, in a real market – there would be no question that we should go short.  As this market is a manipulated joke – I would say be very careful shorting but in no way, shape or form should you join the crowd and go long this week.  That crash after expiration week scenario still looms large and if there is a lot of selling pressure from AAPL this morning – they may not be able to keep it going that long.  

    If I am wrong and we go up and up – then very possibly this market will never go down ever again for any reason and we can make plenty of money on the way to Dow 30,000 but please, this week, just indulge my caution through the month’s end.  


    - Phil

  31.  Factors/Japar – As I said above, POMO is like a hose that’s filling our leaky pool.  They had to double the rate of fill since the last round as our hole got bigger since last year.  Notice on the chart that QE1 was about $1.2Bn over 2 years while QE2, so far, is $600Bn in 6 months – so the Fed has doubled up the rate of full to keep the economy afloat.  What do we do if interest rates go up 1% to cover half the yield curve?  That would be another $150Bn a year in interest alone.  

    WE are causing riots in Tunisia, WE are causing civil unrest in India, WE are driving inflation in China by turning the World’s reserve currency into  a joke.  You only get one chance to do this before the rest of the World decides it is too dangerous for the US to be "too big to fail" and insist on drastic changes.  Our last great delusion is that we are still the Global leader and are somehow indispensable to our group but we are more like the School bully who has a lot of fake friends while he’s young but, as the group gets older and the consequences for bullying behavior get more serious, more and more those friends turn away and the bully realizes he has no real-world marketable skills and no real-world friends either.  

    You’re right Hoss, nothing "works" to take down the economy – so far.  

    Jets/Jrom – I avoid the BS during the week so I can maintain the image of my pure warriors taking the field on Sunday.  

    Weapons R&D/Matt – Sure there is some benefit but it’s nothing compared to what NASA does/did (no more budget).  The problem with the military is a pretty narrow focus and too big a budget so they don’t go for consumer-friendly solutions other than providing suburban tanks and ways to make a whole generation of people too dumb to read a map. 

    AAPL/LV – I won’t be very satisfied unless I see a nice, 20% drop with very strong volume.   Cramer is already distorting reality as are guys from MS and others who are all swearing they will "Buy the F’ing Dip" – I wish we could audit them to see if they actually do it…

    SVU/Jo – I like that one, they are a good long-term play at $7.50 (as I have been saying). 

    ADBE, GOOG/Alik – The whole Nasdaq is tied around the neck by AAPL.  It will all be a nice buying opportunity if we have a big sell-off (technically, this should boost RIMM, MOT, GOOG etc) but let’s not forget how overbought we are so a 5% dip isn’t going to be too interesting until we’re safely past earnings.  

    Futures/Barf – Be very careful with those.  Those contracts move in huge increments like the Dow Minis are $5 per Dow point so 10 contracts on a 100-point move against you can cost you a very quick $5,000!  Other contracts are even worse so unless you have a massive account with tons of play money that you don’t mind losing – I’d stick to paper-trading the futures for many months before you try to jump in with cash.  

    Oops, 7:30 already – I’ve got to go to work!  

    Feel free to re-ask anything I missed in the new post. 

  32. 66% of 18-24 yr. olds,  polled in a recent auto survey of potential buyers said they see no problem with texting while driving and will continue to do so.
    If you have to pass a law to tell 18-24 year olds  that you will have to pay a fine if you are caught for texting while driving, the end game of civilization as we knew it is already into overtime and the defense has resigned.