Mark McHugh

Archive for March, 2010|Monthly archive page

Meltup or Mexican Standoff?

In Open Thread on Tuesday, March 30, 2010 at 2:16 am

When gibberish goes mainstream, the tower of  Babel’s probably not far behind…

Some words just irritate me.  Inflammable because it’s ambiguous.  Waterboarding because it sounds like something fun.  Widgets.  Tea-partiers.   But the word that tops my list of justification for censorship these days  is meltup.   It’s become the fabricated buzzword of choice for dunces attempting to describe the most recent run-up in US stocks.

Stocks hit their 2010 lows on February 5, the very same day that China Investment Corp.  (CIC) filed its 2009 year-end holdings with the SEC via Form 13F.  The sovereign wealth fund detailed holdings of $9.6Billion, which is a lot of money……unless you’re China Investment Corp.  In that case, $9.6B is pocket change.  The fund reported assets of $298 Billion at the end of 2008, so unless it managed to lose money in a year when US stocks were up over 20 percent, the fund was less than 3 percent invested at the start of 2010.

Conversely, US equity fund managers have gone “all in”, with only 3.6% in reserve cash.  I’ve prepared the following graphic to illustrate the difference in sentiment:

I got your meltup right here….

The sharpest pencils quickly realized how grossly underweight US stocks China was, and they started nibbling.  As stocks went positive for the year, otherwise reluctant managers were pretty much forced to participate (nobody likes a laggard).  Those conditions have led to a market that continues to shuffle higher, despite a stronger dollar (which usually has a kryptonite-like effect on stocks) and a $940 Billion healthcare reform package.  But  more and more, the stock market looks like it’s forgotten why it came here, yet is reluctant to go back where it was ( this sort of thing happens to me a lot when I go out to the garage).

Helpful Hint:  If you ever discover that you’ve managed to smash chewing gum into one of your favorite shirts,  WD-40 will get it out (and I mean, like, instantly!).  After removing the gum rinse out the WD-40 quickly to prevent staining.  Is there anything that stuff can’t do?

Anyway, let’s assume that the market is not teetering on the brink of senility.  It also not really fair to call this phenomenon a “meltup” BECAUSE THERE’S NO SUCH FUCKING THING!!!  (Wikipedia & Urban dictionary got my back on that).  So I’ve decided the best way to describe this situation is:

Mexican Standoff

From “The Good, the Bad and the Ugly

All I ever really need to know about investing I learned from spaghetti westerns.  So here’s some things you may want to consider before the next South Korean ship mysteriously sinks:

  • Report card day – The first quarter ends Wednesday.  Everybody who issues quarterly statements wants happy customers and let’s face it, for 80% of Americans their 401(k) statements are their view of the US economy.  While those receiving statements are sure to be pleased, their managers gotta be nervously eye-balling each other.
  • China – Maybe they’ll step in and start buying stocks, maybe not.  Of course, every time Chuck Schumer starts screeching about how they’re a currency manipulator (because they peg their currency to ours), that seems less likely.  Someone should tell Grandpa Munster that he sounds like a drunken jack-ass blaming the bedspins on his partner.  China’s got a lot to learn about capitalism.  You’re not supposed to put executives in jail unless they turn themselves in, and you’re supposed to reward fiscal irresponsibility by letting your currency appreciate.  And remember, the White House issued a statement that they had nothing to do with the Google thing.  So we’re good, I guess.
  • Eanings (and writedowns) – This should be an excellent opportunity for traders to test-drive the SEC latest gift (i.e. no uptick rule until 10% smackdown).  Nice.
  • China again – We saw some shaky bond auctions last week.  Could it be that the Chinese are not as impressed with the 95% socialized mortgage market scheme as we had hoped.  I mean, we pulled this off without reconciliation or anything!  Ought to count for something. 

Sooner or later someone’s gonna blink and the only thing I’m sure of is meltup won’t be in anybody’s vocabulary then…

“New Math” at CNBC?

In Open Thread on Monday, March 22, 2010 at 7:40 am

Hmmmmm…….   

Back when I was in school, something that was 10,741.98 and is now 10,627 was said to have changed -114.98, not -60.  Maybe it’s been so long since cheerleader central had to perform subtraction they’re a little rusty.
 
But wouldn’t it be unfortunate for the poor slobs who actually rely on CNBC for accurate, actionable, and unbiased information if this is the start of a major market correction?  Nothing to see here, folks;  just a little pressure.  Move along now.
 
Given the recent weirdness of the dollar index (previous post), and some other data that no one seems inclined to discuss (including me), John Q. Public may be in for quite a surprise.
 

I guess we’ll find out soon enough. 

Update 12:45 -  Silly me.  Apparently help was on the way the whole time: 

 

The good folks at CNBC just didn’t want to worry us unnecessarily.  Stocks aren’t allowed to go down anymore (it makes the natives restless).  Sometimes I forget.

Postcard from this Side of the Rainbow

In Open Thread on Wednesday, March 17, 2010 at 10:00 pm

Happy St. Patrick’s day to all!

Contrary to popular hope, I’m not dead.  I’ve been busy and a big project had to hit the scrap heap (at least for now).  But I had to drop a line tonight.  I’ve looked at thousands and thousands of dollar index charts, but I’ve never seen one that looked like this before:

WTF?

Moving on…..

No one out there is seriously considering listening to Chris Dodd on financial reform, are they?  I kid you not, I would rather see Bernie Madoff write a financial reform bill.  Dodd is a sleazeball who should be in jail with a longer sentence than Madoff.  Remember who paid for Dodd’s 2004 campaign: 

from Opensecrets.org

Moving on…..

I’ve not chimed in on healthcare reform in any meaningful way until now.  I think we all agree that reform is needed, but just because you label something “HEALTHCARE REFORM” doesn’t mean that’s what it is (remember “PATRIOT ACT”?).  I wouldn’t trust this pathetic bunch of weasels to make a batch of Irish potatoes, so honestly, what are the odds that this monstrosity of a bill that no one actually wants to discuss in any detail contains more good than harm?  I’m  goin’ with zero.

What I hate more than anything, is the cheap tugs at the heart-strings.  Anyone with half a heart wants to help people like Natoma Canfield.  To use her plight to gain support for legislation birthed in corruption is contemptible.  Utterly contemptible. 

Chris Matthews showed a clip today of some truly heartless douche-bags taunting a man with Parkinson’s disease at a healthcare/anti-healthcare rally.  Here’s the thing – it smells like clever propaganda to me.  In other words, people who oppose healthcare reform are total dickheads – so support this black box labelbed healthcare reform, or you’re a dickhead too.  Fuck you.  Here’s the link.

And you still believe in Leprechauns, do you?

That’s the punchline to a motif of jokes popular at this time of year.  Google it at your own peril.  In all its variations, it always involves a naive victim, a well-endowed midget and sodomy.  Sadly, it has become a metaphor for any American expecting anything good to come from our government.

Legislation this important should be constructed sentence by sentence in the light of day.  And I see no reason why it can’t be produced in smaller pieces.  Bottom line – I don’t trust these fuckers one bit and I can’t understand anyone who does.

Wish you were here…

Are Leveraged ETFs a Dumping Ground for Government Debt?

In Leveraged ETF, SEC, stocks finance, Treasuries on Monday, March 1, 2010 at 9:40 pm

**note: all data used was captured as of the February 26 close.

I’m not big on suspense, so I’ll answer right up front – YES!  Yes they are. In fact when you boil off the bullshit, there’s not much else to them. The actual (net) holdings of one leveraged ETF pair (FAS/FAZ) is currently 84% Goldman Sachs Financial Square Government Fund ($1.44B). But that’s really only slightly more outrageous than Direxion’s total ETF family (here), which is comprised of $4.77B (79%) government debt vs. $1.29B actual investment.  

If you want to understand how I know this, you will have to indulge me a little.   

For a moment, think about the concept of leveraged ETFs; promising returns of up to 300% of a particular index, or its’ inverse (-300%)!  But beyond the ability to make (or in my case, lose) money astonishingly fast; I am astounded that such devices can even be designed, by NASA, or anyone else native to this planet.  Where would you start?  And who are these guys?   

Just another day at Direxion Funds, I guess. 

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