More fear mongering.............

Planned job cuts are soaring. Will the unemployment rate be higher next year?

Bank of America reportedly is mulling job cuts of 40,000 employees. Barclays several weeks ago mentioned cutting perhaps 30,000. Other well-known firms are talking about 10,000 or more. Will OBAMA'S  “job plan” stop these job cuts?

Wall Street has lowered its GDP growth forecast by 70%, from 3.6% to 1% but hasn’t lowered its corporate profits forecasts. 

The Euro crisis

Welcome to the Hotel California

Welcome to the Hotel California
Such a lovely place
Such a lovely face
They livin’ it up at the Hotel California
What a nice surprise, bring your alibis

Last thing I remember, I was running for the door
I had to find the passage back to the place I was before
“Relax,” said the night man, “We are programmed to receive.
You can check out any time you like, but you can never leave!”

- The Eagles, 1977

UBS report excerpts:

“Fiscal confederation, not break-up

“Our base case with an overwhelming probability is that the Euro moves slowly (and painfully) towards some kind of fiscal integration. The risk case, of break-up, is considerably more costly and close to zero probability. Countries cannot be expelled, but sovereign states could choose to secede. However, popular discussion of the break-up option considerably underestimates the consequences of such a move

What stocks to buy ?

I frequently come across people who are still stuck in the world where they wish to know the magic stocks which will pay for their dream holidays, etc. It is odd that after months of falling markets people are most likely on losses and yet are looking for more risks.

Had you been defensive you would have saved your capital. It takes years for beginners to learn. One behavioral problem is the dream of easy money and instant gratification. So buying a stock in a meandering market also looks enticing. Most investors are sitting on losses on investments made in the past 8-10 months. Yet they continue to ask for more stocks to buy. They are expecting tips and not value buys. Even the professionals I meet are making losses.

I guess people are confident of their business and wish to continue investing which is a good sign.

I also find that all investors now inquire about gold (which I have been selling). I must admit that to watch everyone show the same predictable behavior like clock work is amazing. Chasing increasing asset prices late in the game is risky.
I made a 30% return in 2 days SHORTING silver (a 3x leveraged fund). Few years back I made an almost 1200% return in 2-3 months leveraging silver on the way up. But I sold timely and kept the profit.

To draw the line on greed is a tough task. To learn these behavioral traits takes time. It is obvious that people wish to learn through pain. Most infact will never learn. They have only themselves to thank.

Finally at the bottom of the market they smarten up....and invest in fixed deposits and debt IN A BULL MARKET !

Incredibly most people will live their entire lives like this.

So what have I been blogging? Read it. You would have been up for the year if you followed it. I have been writing about macro. A change in asset class.

I must confess that inspite of the falling market, I too have attempted to buy. But on failure of my investment thesis, I have to humbly admit my mistake and exit. Thats precisely how I am up for the year.

Dollar up almost 5% in 2 days

The dollar has mentioned in my blog for few months is finally showing strength. If you had bought earlier, you could have made 5% in 2 days as I write.

I had written only yesterday that buying options before the volatility increases is the best way to play this.

One reason for this could be the terror fear of 9/11 resulting in safehaven buying.

One would have to watch USD for a few weeks to see the impact of this.

Surprisingly, crude is gaining  strength over past week and so are dry shipping rates ! Go figure.

Euro to weaken?

See below. Now guess what could happen to the euro. This table indicates yield of Greece government bonds.




Now look at the interest due next year.


Now if the Swiss Franc route is now shut. What do you have left? SHORT THE EURO !
If you can play this via option, do this now....before the volatility increases.

European Central Bank President Jean Claude Trichet committed a major policy error by raising interest rates for the Euro twice in the first half of the year. The next move on interest rates has to be down, possibly as far as to zero. American interest rates are already at zero and can’t go any lower. This is all hugely Euro negative and dollar positive.