Asset allocation: neutral on this market

we appear range bound with a slight upside bias (on account of the Holiday season, and optimism surrounding the new Obama administration). So with that said I will continue to balance out my longs (NOV, GFA, APWR, GU, FWLT, ATW) with my shorts (SRS, FAZ, and of course that bitch of an ETF known as FXP). So I am basically 50/50

When I say "range bound" I mean the bracket support/resistance levels are between
$82 - $93 on the SPY.

I wanna to be greedy this x-mas with FXP...

I won't buy any more FXP until I see it hit sub $30. China will burn to the ground soon enough.

This is an Obama rally...last time I checked he ain't President for another 40 days. At least this market knows the cavalry is coming and that the Bush f&kups will be leaving office soon (but not fast enough to save this b.s. economy).

FINALS WEEK @ COLLEGE....

I've got exams on Monday and Tuesday.

so no blogging.

Bulls=Spartans / Bears=Persians

The outnumbered bulls are putting up a good fight


But they will meet their fate soon enough


In the VERY VERY LONG RUN the bulls will win this

No FXP x-mas present but it looks like this rally will BTFD...

Added 10% of portfolio to SRS on account of GGP's impending bankruptcy. That will rock the commerical REIT market and send SRS soaring into the holidays with a 2 handle.

Now 45% short, 25% cash and 30% long.

An early X-mas present would be....

FXP under $40.


If that happens I will put 50% of my portfolio into that ETF (currently 25%).

To those who ask "diversification?" I reply "Global Recession."

Asset allocation...

Now I am:

50% long

25% Short (FXP trades so poorly, but I will buy the next bucket at $45 - will then become a 35% position as cash gets drawn down)

25% Cash

The final support leg holding up this market is at around $80.25 on the SPY. Should we break it we will retest the lows.

Off to class. Very busy day ahead so no more posts today, but here's an interesting/enlightening read.

Will take it very slow with TBT because of this guy...

I mentioned earlier today that I am starting to nibble at TBT. Looking at these headlines, I will continue to be very cautious with building my position in this investment.

“This sets the stage for the Federal Reserve to be more formal in its adoption of quantitative easing,” said Vincent Reinhart, the Fed’s director of monetary affairs until last year and now a scholar at the American Enterprise Institute in Washington.

The Bank of Japan is the only major central bank in modern times to rely on quantitative easing -- the strategy of injecting more reserves into the banking system than needed to keep the target interest rate at zero.

Bank of Japan Governor Masaaki Shirakawa said in May that while the strategy “was very effective in stabilizing financial markets,” it had “limited impact” in remedying Japan’s economic stagnation because banks wouldn’t lend and companies wouldn’t borrow.

One option is for the Fed to buy “longer-term Treasury or agency securities on the open market in substantial quantities,” Bernanke said. “This approach might influence the yields on these securities, thus helping to spur aggregate demand.”

Looking at these headlines I am positive that Bernanke will bring 20-30 year bond yields down to 3.00% if not much lower. Hence I will likely add to TBT when it hits $35, $30 and $25. Of course, by the time TBT hits $25 Bernanke will likely be out as Fed Chairman. I mean why the f*ck would Obama keep this idiot around? Bernanke wrote a book about the Great Depression and yet he still couldn't see this sh*t coming even in 2007! Pathetic.

What inning is housing in? Looks like the 6th...

With all this talk about rising unemployment, Citi's bailout, Detroit's potential bailout, China's massive economic slowdown, Black Friday, and the dwindling credit card securitization market, it appears we have forgotten about THE root cause for our financial system meltdown: Housing.

Now I am not an economist and I can't run dozens of regression, time series and stochastic models. However, I can discern and listen to the really smart economists who want to enlighten and share their knowledge with the world (ie the economists that don't regularly go on CNBC/FOX ;-). My careful screening (or "leaching" if you want to be affectionate about it) has led me to some research courtesy of Calculated Risk that sheds light on where we stand in the current housing cycle. The report uses historical price to rent and price to income levels to identify exactly what inning we are in:

Looking at the price-to-rent ratio based on the Case-Shiller index, the adjustment in the price-to-rent ratio is probably 60% to 70% complete as of Q3 2008 on a national basis. This ratio will probably continue to decline with some combination of falling prices, and perhaps, rising rents. The ratio may overshoot too.

Here is Calculated Risk's price to income metric:

Using national median income and house prices provides a gross overview of price-to-income (it would be better to do this analysis on a local area). However this does shows that the price-to-income is still too high, and that this ratio needs to fall another 15% or so. The further decline in this ratio could be a combination of falling house prices and/or rising nominal incomes (Note: this uses nominal incomes, and even if real incomes are stagnant or declining, nominal incomes usually are rising).
Last quarter this index was over 1.25. Now it is close to 1.2. At this pace the index will hit 1.0 in Q3 2009. However, during a recession, nominal household median incomes are usually stagnate - so it might take even longer.

Here is additional housing deterioration information from Mish's Global Economic Trend Analysis (via Case Schiller data)
regarding where we stand and how much further is left to go:

The Case-Shiller numbers are for September 2008 which do not reflect any of the market meltdown. Price declines in excess of 10% are now occurring nearly everywhere, although the median dollar declines are only above $100,000 in those markets that experienced extreme price appreciation (CA, AZ, NV, FL). The trading in the futures markets continues to reflect nominal price declines for the next 2-3 years with prices plateauing afterwards (they only price out 60 months forward.

Great quote...

Journalist: "Given the amount of energy Americans consume per capita, how much it exceeds any other citizen in any other country in the world, do we need to correct our lifestyle?"

Ari Fleischer: "That's a big no. The president believes that's an American way of life."

I am sorry if I offended any one's political sensibilities just now.

TBT is getting crushed....

It's down almost 5 days in a row (even though we saw [emphasis on past tense] a huge rally this past week...strange, no?). I will initiate a larger position in TBT (5%) with the ultimate goal of reaching 20% by end of December - who the hell would be stupid enough to lend their money to the U.S. Government for 20 years at 3% (that's where I expect this bubble to top out at and pop). We are currently at 3.35'ish.

Current Asset Allocation....

45% long (half of this 45% are my long term value picks like GFA - so I will never go below 25% long in my portfolio)

20% short (Mainly FXP, which is acting like a total b*tch today...weak spike)

35% cash (we are stuck in a range on the SPY, IWM, and QQQQ's so I must wait for confirmation of the trend before I invest these funds), here's the game plan for my cash:

If we break $84.50 on the SPY ETF and hold below there for more than 30 minutes, I will move my cash into shorting this market (probably add more to FXP).

If you like the IWM more than the SPY than use $44 as your "Maginot" line of support for this market right now.