Will Apple ever go down again?

With the way pundits, bloggers, and hedge fund managers have been speaking of Apple recently it would seem the stock will never go down again. Me I'm a little more skeptical. Apple now has a larger market cap then the entire retail sector combined, and has dominated financial news headlines for weeks (first when it hit $500 a share, and now that its issuing a ~1 % dividend-who cares). The market is absolutely enamored with the company and I fear even the slightest headwind may send the company for a tailspin, and the entire market with it.
Just a word of trite caution: Trees cannot grow to the sky.

MSG

Coach Mike D'antoni has just resigned from the knicks, no doubt under pressure from the moronic front office headed by James Dolan. I'm not saying D'antoni was a good fit, but the knicks at least should have waited for the end of the season when his CONTRACT WOULD HAVE EXPIRED ANYWAY.

This is just one more blunder in a long line of horrendous management mistakes to have occurred under Dolan's reign of terror, and its gotten me thinking if MSG is managed even half as badly as the Knicks are, it is a raging SHORT.

MSG is also selling at a very high P/E of 35 and their revenue is dependent on the NY market, which should continue to face headwinds as the financial market contracts.

I'm not shorting anything yet, as I've only done cursory research. But I am very, very tempted.

Days like today

On days like today all I can think about is the idiocy of my maintaining short positions. It's about 2:30 and the markets are up almost a full percent. My portfolio is treading water and has been dragging dead weight along with it for the past couple of months now. Should I just cut the cord and let them go? Probably. At least that's what every behavioral stock trading book would suggest I do: cut my losses and let my winners run. But for the moment I can't bring myself to do so. Nowadays its hard to find much confirming my bearish bias except for zerohedge, Hussman, and the BOND MARKET but nonetheless I am holding dearly to my shorts.

One thing that did catch my eye today and give me a glimmer of hope in my short positions (in the very short term) was the $VIX hitting a 5 year low and then sharply rebounding. If the VIX can close above its open of 14 it looks like a $VIX Connor reversal signal will be in place which accurately predicts a short term top 65 % of the time.

Thoughts on credit events

At the end of last week a Greek credit event was declared by ISDA and most Greek CDS was triggered. In response the market's gave a collective yawn and pushed higher, erasing their losses from earlier in the week. At the moment it seems the money owed on the CDS is peanuts and will prove to be a non-event. But I think what is important is that the CDS was in fact triggered (something which many speculated the ECB would go to great lengths to prevent) setting a precedent that will likely be followed going forward.
Dealing with a Greek default is one thing, BUT what happens when Spain is on the chopping block?

Neyanyahu's speech to AIPAC

I just watched Benjamin Natanyahu's speech at AIPAC, and all I can say is WOW. He gave quite a speech.

After watching it I can't help but think that we will have a republican president in November.

Is that an odd train of thought? Probably, but here's my thinking:

Netanyahu spoke unequivocally that Israel must stop a nuclear Iran (if you believe him-and I do) that means an attack on Iran is imminet. If Iran's nuclear facilities are attacked oil prices will climb, and further cripple an already weakened global economy. If that were to occur, the US economy would be dragged into the gutter, right along with the other global economies, and the US would enter a recession (remember almost every US recession has been precipitated by an oil shock). If the US enters a recession before November, Obama's chances of reelection, despite a somewhat 'challenged' Republican field, would plummet.

....Maybe the above explains Obama's ambivalence (im being kind) towards an Israeli strike on Iran...

3 risks to the economy

I just finished listening to the latest interview with David Rosenberg on Financial News Sense Newshour. David Rosenberg as usual gives a fantastic interview, and in it, focuses upon what he sees as the three biggest risks to the US economy: High Oil Prices, Rising Taxes, and the Ongoing European Recession.

Do those things sound familiar? Well they should as all three were highlighted in my post last week, Things giving me pause.

Rosenberg doesn't see the US economy headed for a recession but predicts we have a repeat of last year where the economy is brought right to the edge and only grows at a rate of about .4 %.

Rosenberg ends the interivew by encouraging investors to reach for income, hard assets, and safety (all things I would encourage as well). Definitely give the interview a listen if you have time.

Bernanke and markets

Today Ben Bernanke spoke before the house financial services committee, and boy did he upset the markets. While the S & P only closed down half a percent, it did so on the highest volume in over a month, and corresponded with gold losing over 5 %, and the dollar skyrocketing higher. (That strange day in the market on Monday, looks to have just been a one day ordeal.)

So what did he say that got the markets so riled up? Well it was more what he didn't say. Namely that he didn't make any, even subtle, mention of QE3. In reality his silence on the matter should not have been so much of a shock, with oil around $110, the economy having just been told it grew at a 3 % clip in Q4, and Republican candidates calling for Bernanke's head (one of whom happened to be questioning him). And yet, it was a shock to the markets and they reacted strongly and negatively. I think this speaks volumes of what's been driving this market higher: loose monetary policies and the perception of their indefinite continuation.

What the markets woke up to today was the potential of a hiatus in money printing (at least in the short term), because as much as Bernanke would like to print, and the government needs him to print, he's in a bind, and cannot do so with asset prices this high.

Well see what happens over the coming weeks, but I wouldn't be at all surprised to see this realization sink in a bit further and lower asset prices along the way.

Strange day in the markets

Something is amiss in the markets. Both safety and risk are catching a bid today, and the markets seem rather confused (and well, if they're not than I certainly am). Generally the USD and Treasuries are inversely correlated to equities, but not today. Today they are all up in tandem. I'm not sure what the significance of this is, and whether its a harbinger of a shift in market relationships. But watch to see how those three close (USD, Treasuries, Equities), and if this relationship holds going forward, I might just need to reevaluate my entire view of the markets.

ECRI Recession Call

Today the ECRI has reafirmed their call for a recession in Q2 of 2012. Their track record is impeccable, and when they speak I listen.
"when you look at the definitive hard data that is used to officially date business cycle recessions, it has been getting worse not better despite what the consensus view of an improving economy has been."
http://video.cnbc.com/gallery/?video=3000075118

Holdings

Below is a list, and weighting, of what I'm holding and shorting. I wouldn't reccomend following me into any one of these positions, without first doing your own research, unless of course your feeling lucky. I'm slow to change the composition of my portfolio but will make some quick trades if I see an oppurtunity.
Long - 70 %
PHYS - 19 %
UUP - 18 %
LINE - 18 %
VEMTF- 9 %
AT - 5 %
NNVC - <1 %
$VIX - 1 short dated out of the money call option
Short - 21 %
SPY - 16 %
XLF - 5 %
Cash - 9 %

Things giving me pause

I am seeing a giant caution flag being waved high above the market, its giving me pause regarding my long positions, reassuring me of my shorts, and just downright worrying me about where we're headed.
But then again, the Dow just reached 13,000, so what could go wrong? Well here are just a couple things that are on my mind:
1. From a technical perspective the market is smack against resistance.
2. The ECB plans to end the LTRO program. This program gave European banks much needed access to capital, and added liquidity to the markets. Now it seems the ECB is intent on closing this spigot.
3. The ECB just announced their Greek bonds' have "super seniority" (thats the technical term). This seems an all too clear sign the ECB is preparing for a greek default, the bond market seems to be pricing this in, but the stock market is NOT.
4. Margin compression in US companies. Margins are at all time highs, and you can only cut so much fat before you start cutting into muscle and bone. It looks like margins will begin to compress.
5. The Obama administration wants to raise taxes, and the republicans want to implement austerity. Both of which will depress US consumer spending.
6. ~50 % of the growth in GDP during the current "recovery" has come from exports. Now Europe is in full fledged crisis and China is slowing, US exports will not be sustainable (especially with a stronger US dollar).
7. Tensions between Iran and Israel are escalating, and oil is already above $100 a barrel. Even if there is no immediate war, if oil stays at this level it will be a serious drag on the global economy.

Ritual reading

The first thing I do everyday upon walking into my office, and having my morning cup of coffee, is go through the littany of financial blogs, forums, and news sites, stored in my favorites (inlcuding but certainly not limited to: valueforum, zerohedge, kimblechartingsolutions., calculatedrisk, ftalphaville.ft., and advisorperspectives.com/dshort/). My reading of these sites is almost ritualistic in nature-I visit them once in the morning, once during lunch, and once before I go to bed. If I can squeeze in more views-I do, but I'm also trying to juggle a full time job after all.

Its a new day

Today is a new day, and I'm still too short the market (until of course the market utterly collapses), and the market is still rising (at least marginally), and I am still losing money on my short positions. BUT it is ok. Because in truth, my shorts are only a hedge. They're a hedge against the ineptitude of political leaders, a hedge against the hubris of global central banks and most of all a hedge against my long positions.
When I consider my short positions from this perspective its much easier to sleep at night, and enjoy my days!

Drinking from the firehose

Reading this blog may be bad for your financial health. It also might be bad for your perception of the world.
Over the past couple of months I have made a host of poor investment decisions, namely going short an upward trending market. Not only that but I have broken the cardinal rule of investments refusing to cut my losses (in fact I am even looking to double down on my short positions). Maybe its my somewhat pessimistic outlook on life, but I just cant bring myself to close those damn short positions-I am short SPY and XLF. So if your looking for astute investment advice or strict trading rules you are on the wrong blog. But, what I am offering on this blog is to distill the torrent of information out there, and hopefully give some outside the box thinking and interpretations. In effect I am offering to drink from the firehose so my readers do not have to.
Since graduating GW with a BA in economics, I have been an avid student of equity markets, macroeconomics and the global geopolitical environment. In fact it was only after I graduated GW that I really learned anything about economics at all. I learned that my suspicions regarding my economics studies at GW were by and large correct, and that most if not almost all of what I had learned in school was wrong. I learned economists almost always fail to do a full equilibrium analysis, and that most importantly 99% of economists are absolutely atrocious at predicting future events.
Let me be clear there are certainly some merits to having a formal education in economics, BUT NOT if you want to be a successful investor. To emphasise this point, let me end this inaugaral post with the testimony of Mr. Benjamin Bernanke, former Princeton economics professor and current chairman of the Federal Reserve, in March of 2007:

"the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained."