Wednesday, June 25, 2008

Bookkeeping: "I Spit on You American Middle Class" Trades

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Basically the Federal Reserve says everything is cool, inflation will abate, economy activity continues to expand (cmon now guys - seriously) - and after this euphoria wears off in a day or two, or next week we will be back to being a hostage to oil. We are back to being a lip service machine and bailing out the banks are all that truly matters to us. I mean we kind of knew that but deep in your heart you always hold out hope they'd change their tune. Hope extinguished. See you back in 6 weeks for another round of "hope".

EDIT: Warren Buffet chimed in today to say inflation is exploding. (I cannot confirm this but I believe the official Federal Reserve/US Treasury joint response was "nah nah nah, no it's not - sticks and stones.")
  • Warren Buffett says inflation in the U.S. is "exploding" and he urged the Federal Reserve not to signal in any way that controlling prices takes a back seat to encouraging economic growth.
  • "I think inflation is really picking up... Whether it's steel or oil ... We see it everyplace. It's exploding," Buffett told Becky Quick in a live interview on CNBC's Power Lunch. (Obviously Warren has been reading the blog)
  • Buffett told Becky that from a consumer's perspective, the economy's weakening is getting worse. He's been saying for several months that the U.S. is effectively in a recession. (But Warren, official government reports say everything is fine, chin up Warren)
(back to your regularly scheduled blog posting)

The market initially cheers because as all good crack addicts, we love when our dealer does not take away our drug (low rates). Unfortunately we have to wake up tomorrow and our buzz will have worn off and we'll go back to the same news flow we've enjoyed for many weeks now - high oil, weakening consumer, weakening job market, blah blah - but we'll have some multinationals reporting to make us forget the backdrop so we can perhaps forget the larger picture for a bit longer since Asians are buying our Air Jordans in ridiculous amounts. But today - the crack - it helps make the pain go away.

To wit, I am taking this pop to lighten up in some spots - things we've done today

Sales
  1. Vale (RIO) - stock is popping up against 50 day moving average ($37), lightening to 0.8% stake. Will reverse this if it shows it can hold this and keep moving up. Don't like the action in it's peers BHP and RTP today.
  2. Mechel (MTL) - identical theory to Vale, if it pop back up over $50 (50 day moving average) we'll get back what we just let go. Down to 1.2% stake until chart improves.
  3. Intuitive Surgical (ISRG) - exactly the same reasons as above but replace 200 day moving average for 50 day moving average. Down to 0.3% of fund and making me fall asleep.
  4. Lowered exposure to Ultrashorts Basic Materials (SMN) and Oil-Gas (DUG) - both back around 2%ish from 4%ish. (if the rotational correction continues - we'll get these back in larger form)
A lot of the sales above are stocks that had fallen below support, and now have bounced back to (but not through). The same playbook on all of them - if they burst through support we'll pay up a bit to get our position back.

Buys
  • More DB Agriculture Double Long ETN (DAG) - back up to 2.0% of fund
  • More iPath DJ Livestock ETN (COW) - back up to 2.6% of fund
  • More Petrobras (PBR) as it fell to support of 50 day moving average of $65 - back up to 1.5% of fund (if this breaks through $65 we'll cut back)
  • Got some Intrepid Potash (IPI) since I cut this to the bone at $60 two weeks ago after purchasing in the upper $40s. (it promptly ran to mid $70s) Now its "down" to $60 this AM, so I got some back in $62-$63s. Up to 0.8% of fund.
  • Added some myriad and sundry Ultrashorts in smallish amounts but again, until we get through the favored sons of Nike (NKE), Research in Motion (RIMM), and Oracle (ORCL) tonight - don't want to get top heavy on that side.
I continue to focus on agflation as the replacement for energy inflation in the 2nd half of 08; you can see this by the purchases.

Still heavy in cash until we see some direction. S&P 1300 seems to be the new temporary bottom - and we could in theory get all the way up to S&P 1360 on an oversold bounce, and still be in our downtrend. All white noise in between. Rallies still not to be trusted. Inflation is given free reign. Unruly and lightly regulated banks must be saved. Thanks Ben.

Long all names mentioned in fund; long iPath DJ Livestock ETN in personal account

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