U.S. Stocks Gain on Better-Than-Estimated GDP Report, Rate Cuts

“The S&P 500 is still down 35 percent in 2008 and 18 percent in October, poised for its worst month since 1987 … Janet Yellen said at a speech in Berkeley, California: ‘We are in the grip of an adverse feedback loop,’ in which tighter credit conditions are exacerbating economic weakness.”

Spare me the mumbo jumbo, you lousy Baby Boomer academic. Bureaucrats who use technical terms like ‘adverse feedback loop’ to describe economic conditions should be gripped by the neck and shaken. Having a Ph.D. should automatically disqualify anyone from working at the Fed (yes, I’m talking to you too, Benny). The best candidates to work at the Fed are first-generation Korean immigrants who started running their own laundromats from scratch.

If the flag in the SP breaks on the high side, 1050ish should happen.

Mizuho $7 Billion Loss Turned on Toxic Aardvark Made in America

“On Oct. 18, 2006, Rekeda and his team were offered an $11 million signing-on fee to defect to the Japanese bank … By the time the deal was consummated, the market was turning. On Dec. 11, 2006, the same day Mizuho announced it was setting up an office in the U.S. to create asset-backed debt securities, Fitch Ratings said the outlook for U.S. subprime mortgage bonds was ‘negative.’ It expected delinquencies on those loans to rise by 50 percent.

By December 2007, Mizuho had halted its U.S. CDO business. It fired Rekeda and at least four others on the team, putting an end to the bank’s one-year experiment.”

Sounds like the kid from Kiev timed it just about perfectly.

“In the prospectus, Mizuho pledged to back 87 percent of the [Aardvark] deal” — sheesh, one wonders if they had any idea what they were doing. Aardvark is mentioned here back in March 2007.

Hmmm, there’s something similar about all these funds, can’t quite put my short ultrashort 2x inverse finger on it though.

1. SDK | PROSHARES ULTRASHORT RUSSEL | +194.38%
2. EFU | PROSHARES ULTRASHORT MSCI EA | 189.8
3. SSG | PROSHARES ULTRASHORT SEMICON | 178.06
4. EEV | PROSHARES ULTRASHORT MSCI EM | 176.89
5. SMN | PROSHARES ULTRASHORT BASIC M | 172.81
6. SIJ | PROSHARES ULTRASHORT INDUSTR | 163.83
7. SFK | PROSHARES ULTRASHORT RUSSEL1 | 148.74
8. REW | PROSHARES ULTRASHORT TECHNOL | 142.9
9. RMS | RYDEX INVERSE 2X S&P MIDCAP | 142.15
10. SKK | PROSHARES ULTRASHORT RUSSEL | 141.67
11. MZZ | PROSHARES ULTRASHORT MIDCAP | 141.26
12. FXP | PROSHARES ULTRASHORT FTSE | 140.15
13. SJL | PROSHARES ULTRASHORT RUSSELL | 139.84
14. RSW | RYDEX INVERSE 2X S&P 500 ETF | 135.37
15. QID | PROSHARES QQQ ULTRASHORT | 133.92
16. SDS | PROSHARES ULTRASHORT S&P500 | 124.7
17. SCC | PROSHARES ULTRASHORT CONSUME | 111.98
18. RRZ | RYDEX INVERSE 2X RUSS 2000 | 109.91
19. DXD | PROSHARES ULTRASHORT DOW30 | 105.65
20. TWM | PROSHARES ULTRASHORT RUSSELL | 105.05
21. SJF | PROSHARES ULTRASHORT RUSSELL | 103.11
22. SDD | PROSHARES ULTRASHORT SMALLCA | 101.08
23. SDP | PROSHARES ULTRASHORT UTILITI | 98.84
24. EUM | PROSHARES SHORT MSCI EMERGIN | 95.99
25. EWV | PROSHARES ULTRASHORT MSCI JA | 95.72
26. SZK | PROSHARES ULTRASHORT CONSUME | 85.21
27. EFZ | PROSHARES SHORT MSCI EAFE | 83.67
28. SRS | PROSHARES ULTRASHORT REAL ES | 81.77
29. SKF | PROSHARES ULTRASHORT FINANCI | 79.04
30. SJH | PROSHARES ULTRASHORT RUSSELL | 73.84
31. RXD | PROSHARES ULTRASHORT HEALTH | 72.62
32. DUG | PROSHARES ULTRASHORT OIL & G | 67.29
33. MYY | PROSHARES SHORT MIDCAP 400 | 64.93
34. PSQ | PROSHARES SHORT QQQ | 63
35. SH | PROSHARES SHORT S&P500 | 59.79
36. RWM | PROSHARES SHORT RUSSELL2000 | 51.69
37. DOG | PROSHARES SHORT DOW30 | 50.43
38. SBB | PROSHARES SHORT SMALLCAP600 | +47.8%

Volkswagen Overtakes Exxon as Most Valuable Company

“Volkswagen rose more than fourfold in two days. At its high today, Wolfsburg, Germany-based Volkswagen’s common shares were valued at $370 billion, more than Exxon Mobil Corp.’s $343 billion.”

That’s an even more impressive short squeeze than the one in crude back in September.

There’s an ETF for almost everything these days, including quite a few currencies, many of which I plan to follow. Here are the “signals” for the Australian Dollar (FXA). The FXA has only been around since the middle of 2006, but you can see that my trend-following method caught a big chunk of rise and got out before things really went bad. (Fancy pants would reverse and go short on the exit in August.)

Subscribers to my new newsletter will enjoy these kind of signals for at least 100 different ETFs.

Sell Aussie Dollar as China’s Economy Weakens, RBC Capital Says

“Australia’s currency is the worst-performer of the world’s 16 most-active currencies against the dollar and yen in the past month … Australia’s 17-year economic boom has been fueled by raw materials sales, which account for 70 percent of the country’s exports.”

OK, so they’re making a short-term trading call (sell below 63.36 cents, target 55 U.S. cents, stop loss at 67.9 U.S. cents) “citing technical analysis.” Risking four cents to make eight cents is ok, but why didn’t they tell their clients to get short below 90 cents (and still holding)?

The Chinese have a great expression: “捡了芝麻”，丢了西瓜” Picking up sesame seeds while casting aside watermelons. So much ancient, agrarian wisdom has been preserved in this language. It’s high time we quit scratching for sesame seeds and start harvesting watermelons.

U.S. Stock Futures Advance as Traders Increase Rate-Cut Bets

“Futures showed odds increased that the Fed will cut its rate target by 0.75 percent. Traders are assigning a 26 percent chance of a three-quarter-point cut, up from no chance a week ago, while odds of a half-point cut are 74 percent.”

The test of 838.50 in the S&P futures was successful … not sure if it will hold, that’s anybody’s guess.

UPDATE: Brutal action in Asia means the futures have reversed after hours … so much for the “successful” test.

I will soon start a new weekly investment newsletter based purely on trend analysis. (Oh no, not another attempt at a newsletter from the Chairman! Sad but true, lol.)

Writing the Box swing trading newsletter was too much of a grind because I had to kick it out every day, and I never want to do that again. I also think the market for long-term investment ideas is much bigger than the market for swing-trading ideas, so I hope to get several hundred subscribers for this new one (at its peak, I had around 100 subscribers for the Box ideas, which was another reason it wasn’t worth my time to continue). But I’m looking forward to writing something once a week that is valuable enough for people to pay for.

The big money is made catching big trends, like I did back in the dot com days (I wasn’t smart, I was just on the right side of things, and then I stupidly didn’t sell anything when it all reversed). And as I’ve learned recently, “value investing” is easier said than done. Day trading is fun and can be very profitable, but most people can’t sit in front of a screen all day, which is essential — trading can’t be a part-time “hobby.” Finally, I’m pretty darn sure that swing trading is for suckers.

The universe I plan to track will be around 100 active ETFs and will give specific long or short calls based on the weekly charts. (It’ll be a little bit like the old weekly trend tables.) The newsletter will be free until January 1, 2009, and then I’ll begin to charge for it (probably $6 an issue or or $125 for a half-year or $200 a year). I plan to write the first issue next Saturday and will shamelessly promote it until the end of the year (and less so ever after).

Here are the buys and sells for Gold (GLD) since it started trading back in 2004. The newsletter will be in table form with specific dates and prices shown. This post is just a half-assed announcement; I’ll have a sample done by next week I hope.

Greenspan Concedes to `Flaw’ in His Market Ideology

“Firms that bundle loans into securities for sale should be required to keep part of those securities, Greenspan said in prepared testimony. Other rules should address fraud and settlement of trades, he said. Greenspan opposed increasing financial supervision as Fed chairman from August 1987 to January 2006.”

I always found people’s reverence for Alan Greenspan a little weird and misplaced. Anyway, back in the real world, we see the Baltic Dry Index down 90%+ off the high it hit earlier this year. That’s a scary chart.

Related:

Oh Ship! No Financing Available, May 13, 2008
Baltic Exchange Capesize Index Moves to New High, April 27, 2007

Oil Falls to 16-Month Low, Gasoline Tumbles, as Demand Declines

“Prices have tumbled 55 percent since reaching a record $147.27 on July 11.”

Don’t worry super spike guys from Goldman, the Bloomberg story will deprecate (fall off the web) in time and your call will be forgotten. Meanwhile, foolish bloggers who maintain permalinks will live in infamy.