Fear and Greed

Efficient markets my ass. Markets are run by the "animal spirits" of massive funds (mutual and hedge) so they only efficient in the long run and in hindsight. IMHO I think this is a TEMPORARY BOTTOM, but I'd say it's a good 3-6 months before we retest it.

Europe's is bigger than ours...

European governments say they are putting nearly $2 trillion on the line to protect the continent's banks through guarantees and other emergency measures.

Pledges by Britain, Germany, France, Spain, Austria and Portugal in recent days have reached a total of $1.96 trillion. The sums are considered a maximum, and might not all be spent if the financial crisis eases.

Many of the pledges came Monday, a day after the 15 nations that use the euro currency agreed on an unprecedented bank rescue plan

Europe's most unified response yet to the financial crisis dwarfs the the Bush administration's $700 billion rescue program.

I thought everything in Texas was bigger. Guess not.

It's a start...but spreads are still ridiculously high

Initial market reaction after announcement of coordinated policy interventions at the G7 and the Eurozone is positive: Credit spreads start to ease:

- O/N USD LIBOR: 246bp down from 463bp (17bp pre-crisis)

- TED spread (3m LIBOR-T-bill spread) slightly down to 456 from record 463 earlier on Oct 13 after Fed announces unlimited USD liquidity (17bp pre-crisis)

- 3M USD LIBOR-OIS slightly down to 359 from 364 (10bp pre-crisis)

- 3M EUR LIBOR-OIS narrows to 182bp from 207 (10bp pre-crisis)

Looking at how low spreads were before this crisis and where they stand today, it is obvious the credit markets will take years to fully recover. I'd say by the 4th year of an Obama Presidency ;-)

Don't think about the markets...

Think about this shit instead...

HERE'S THE CRAZY PART: THIS IS NOT PHOTOSHOPPED!!! OH MY GOD!!!

A lion rides a horse in a circus show in Xiamen in southeast China's Fujian province Tuesday Sept. 30, 2008. The circus shows are being held during a golden week holiday to mark China's National Day, the 59th anniversary of the founding of communist China. OH MY GOD!

More crazy pictures:

This handout from the Phnom Penh Post shwos a house sawed cut in half by a Cambodian couple as they were hoping to avoid the country's convoluted divorce process inPrey Veng province near Phnom Penh

In other more relevant news, here's some interesting thoughts about the future of hybrid technology.

There is mounting agreement among automakers, policymakers and environmentalists that the electrification of the automobile is inevitable and most of the major automakers are developing hybrid and plug-in hybrid vehicles. Although such vehicles currently make up less than 3 percent of the market, the report finds "some degree of hybridization will be evident in all vehicles produced in 2020 and beyond." That may seem ambitious, but other studies say interest in gas-electric vehicles is exploding and sales could hit 2 million a year by 2013, when there could be 89 different models on the market.

The VIX reached above 70! Wow...

THIS IS NOT A DREAM. This is THE most historical moment in global financial history since the GREAT DEPRESSION. I know the future will be painful for everyone but all I can say is "The only thing we have to fear is fear itself."


The world will continue to progress and innovate, albeit at a much slower rate. In these difficult times all you can control is how you "ride it out." For the next several years it's important that you take care of yourself and what's important to you AND STOP WORRYING ABOUT THIS SHIT, because you have absolutely no control over it. I am not saying don't read about the future expectations for markets, but don't let things beyond your control own you.

Don't let the fuck ups in the White House, Congress, and Wall Street break your spirit. People can do extraordinary things when they reach deep inside themselves and block out all the negative assholes in their life. Continue to repeat this mantra when you're faced with great uncertainty and fear. If you do you will then have the faith to ride out the shit storm perpetrated upon you by total moronic strangers.


P.S. Given yesterday's awful close, I knew the markets would gap down today. So I basically slept an extra 30 minutes so as to avoid the carnage (staying true to my don't let Wall Street's shit screw up your life - right?). I removed by JRCC stop loss order last night, so I did NOT get stopped out this morning. In fact when I woke up to see the VIX above 68, I said "no balls, no babies" and bought some more JRCC and APWR. I will enforced stops though on both of these going forward.

The VIX is above 50 - Do not short! Get long something

I picked up a lot of JRCC at 16.20.

Stop Loss set to 15
Price Target 19.50 (The upside is 2x more than the downside, but I could be wrong again...this market is a bigger tease than my first girlfriend ;-)

This could be a game changer for coal...

It's possible that the U.S., China, Russia and India won't have to scrap their enormous coal reserves because of underground emission storage technology (although "pipe it into the ground" doesn't sound all that technically innovative to me ;-)

Of course, we'll all eventually have to give up coal since it is a finite resource and is extremely dangerous to mine. Nevertheless, in the short term (say 5-10 years) I fully acknowledge the massive energy shortages currently facing the world. So anything that allows developing economies to burn coal, with minimal added CO2 emissions (not to mention sulfur and other nasty pollutants) sounds great!


It appears we won't know the full answer for another 3 years (that's how long this pilot program will take), but according to the NYTimes article, India fully expects to tap its coal reserves given that it currently produce less CO2 emissions than either the US, China, Japan, or Russia yet the country makes up 17% of the world's population (hard to argue with that logic).

Stock ideas: Long...
WLT (they do have credit exposure through their lending business though..WTF?)
ANR
JRCC
ACI
SSL

Position: None in any of the names...but thinking about it.

Al Pacino has a message for our esteemed government officials and financial CEO's (as played by Kevin Spacey)

"What you're hired for is to help us. Does that seem clear to you? To HELP US! Not to fuck us up! To help men who are going out there to earn a living. You fairy! You company man!"

Gambling sucks...and so does this market

that's all I've got to say.

Position: Sold 1/2 of my UBB for a fat loss

My bailout gamble...

This market is a pure casino (up big one day, down big the next). Lately we have the folks in Washington to thank for this extra volatility (remember the market's drop on Monday? It seems like a year ago).

Anyway, given all the pork that's been thrown on this bailout bill, I believe it will receive the 11 converts it needs to get passed. Consequently, I think this market will rally. Why? Because this is the "mother of all bailouts", I don't know if this bailout will work in the long run (this is RTC x 10 in size and scope) but I feel pretty confident that it will at least temporarily unfreeze credit markets and reduce libor (while the world digests whether it will truly end this vicious credit cycle we're in). So my play will be to go long banks.

However, rather than go long C, GS, MS, or even the UYG. I will go long UBB (a Brazilian bank). This bank has absolutely no exposure to subprime (so I feel a little more comfortable with my purchase) and it also has a beta of 2 when regressed with the XLF (financial sector spider index). That means in theory it should act like the UYG, except without the stupid 1% NAV fee the UYG charges (that's on top of the transaction fee mind you).

Of course, UBB's R-SQUARED when regressed on the XLF is only 25%. That means the XLF only explains about 25% of the total stock price variation in UBB. However, I feel it's safe to say that UBB and XLF are a little more correlated right now since we are on the brink of financial Armageddon (ie all financials are moving in lock step).

What is wrong with these people in government?

Our financial system is on the verge of collapse yet Congress is still loading up this bailout bill with pork projects (I guess these were all "must" have items):

Also included were more obscure terms extending tax breaks for motor-sports racing tracks, makers of wooden arrows for children, and the rum excise tax for Puerto Rico and the Virgin Islands.

Are you kidding me? Is this a dream?

This is the unemployment situation the U.S. can expect soon...

Our unemployment is 6.1% right now (keep in mind those figures are understated by our government), however, given the magnitude of this financial meltdown we should easily begin hitting the unemployment rates seen in Europe (which are north of 7%).

The biggest increase in unemployment came in Ireland, which already is in recession, where the rate rose to 6.2 percent in August from 5.9 percent in July.

Spain -- slowing after its housing bubble burst, hitting the construction sector -- saw unemployment rise to 11.3 percent from 11.0 percent.

The euro zone's second-biggest economy, France, saw an increase in the jobless rate to 8.0 percent from 7.8 percent. The biggest, Germany, was the only country to report a fall in unemployment, to 7.2 percent from 7.3 percent.