Monday, April 21, 2008
Grodge is Tony. Tony is Grodge.
Eisenhower warned us to beware of the military industrial complex almost 50 years ago and now we have all his unheeded warnings come to raw fruition. The New York Times reported Sunday on the multitude of retired military officers who have acted as television "analysts" during the run-up and early stages of the Iraq war and occupation. According to emails recently released only after NYT sued the Defense Department through the Freedom of Information Act, many of these analysts were also on the payroll of defense contractors in addition to being wined and dined by the Pentagon in order to be fed pro-war propaganda-- which some have conceded after the fact was misrepresented-- as well being paid by the networks for their appearances.
This should make your blood boil.
From the NYT:
Hidden behind that appearance of objectivity, though, is a Pentagon information apparatus that has used those analysts in a campaign to generate favorable news coverage of the administration’s wartime performance, an examination by The New York Times has found.
The effort, which began with the buildup to the Iraq war and continues to this day, has sought to exploit ideological and military allegiances, and also a powerful financial dynamic: Most of the analysts have ties to military contractors vested in the very war policies they are asked to assess on air.
Those business relationships are hardly ever disclosed to the viewers, and sometimes not even to the networks themselves. But collectively, the men on the plane and several dozen other military analysts represent more than 150 military contractors either as lobbyists, senior executives, board members or consultants. The companies include defense heavyweights, but also scores of smaller companies, all part of a vast assemblage of contractors scrambling for hundreds of billions in military business generated by the administration’s war on terror. It is a furious competition, one in which inside information and easy access to senior officials are highly prized.
Critics I have read in various comments sections have made remarks about the veracity of the NYT, and I will be gracious enough to give voice to those misgivings. However, the damning accusations by the Times article, if untrue, would surely elicit defamation lawsuits by the networks and retired officers. These retired military men are 1) getting tax-supported pensions, 2) being paid by main stream media outlets for appearances as supposedly objective observers 3) receiving payment from defense industry lobbyist firms or the companies directly, and in one instance-- General Marks-- is a CEO of a defense contracting company who was actively negotiating contracts with the Pentagon while he is beating the war drums on CNN as a paid "analyst", and 4) accepting tax-supported air fares and dinners to receive talking points directly from Donald Rumsfeld from 2003 to 2006.
Nobody is innocent in this affair if the NYT's piece is to be believed. The networks never questioned the "analysts" about industry ties and accepted their "analysis" as objective. The retired military lost Pentagon access if they failed to promote the war strongly enough, which would have threatened their lucrative jobs lobbying and negotiating defense contracts. So they continued to dance.
Some network officials, meanwhile, acknowledged only a limited understanding of their analysts’ interactions with the administration. They said that while they were sensitive to potential conflicts of interest, they did not hold their analysts to the same ethical standards as their news employees regarding outside financial interests. The onus is on their analysts to disclose conflicts, they said.
CNN, for example, said it was unaware for nearly three years that one of its main military analysts, General Marks, was deeply involved in the business of seeking government contracts, including contracts related to Iraq.
General Marks was hired by CNN in 2004, about the time he took a management position at McNeil Technologies, where his job was to pursue military and intelligence contracts. As required, General Marks disclosed that he received income from McNeil Technologies. But the disclosure form did not require him to describe what his job entailed, and CNN acknowledges it failed to do additional vetting.
“We did not ask Mr. Marks the follow-up questions we should have,” CNN said in a written statement.
In an interview, General Marks said it was no secret at CNN that his job at [defense contractor] McNeil Technologies was about winning contracts. “I mean, that’s what McNeil does,” he said.......General Marks said his work on the contract did not affect his commentary on CNN. “I’ve got zero challenge separating myself from a business interest,” he said.
Whew! That makes me feel a whole lot better. A guy whose salary of several million dollars depends on the occurrence of a war goes on television to use Rumsfeld's talking points to "sell" the war to me-- but he says he can separate all these competing conflicts. Sure, I believe him.
How about this... instead of interviewing Mark McGuire and Frank Thomas about whether they juiced in order to hit home runs, what if our astute Congress hauled these snake oil salesmen before the hot lights and cameras and grilled them about the obvious conflicts involved in the orchestration of this war? Is that too much to ask? Get the retired generals and colonels, but also the Pentagon officials who planned the dog and pony shows, and most importantly the network executives who either willingly took part or failed in their obligation as purveyors of information. I want to see them at least squirm.
We have perpetrated a criminal war, slaughtered civilians, maimed and killed our own soldiers, exhausted our treasury, empowered terrorist leaders, destabilized the world's supply of oil-- and why? Because craven "analysts" sold us this war and occupation for apparent financial gain and the press allowed it.
Perhaps the retired military guys are true believers who somehow feel that a great service is being done by our war machine and defense contractors, but that does not release them from the responsibility of submitting possible conflicts of interests. Fox News I understand: they are unrepentant warmongers and have been from day one; we all know their "analysis" has always been a commercial for Rummy's magical mystery tour. But what the fuck was going on at CNN, NBC, ABC and CBS?
No hell is hot enough enough for this lot.
Friday, April 18, 2008
Eric has been posting the LIBOR spreads against fed funds, which gives a little window into trader sentiment. As the spread narrows, it shows more confidence in the credit markets. As Eric explains, the LIBOR-fed funds spread is a fear index, and as the spread widens this denotes the liquidity and credit markets are locking up. Another explanation is here. Just one more data point I suppose, but we all know that bond traders are the smartest guys in the room-- reference Rick Santelli.
Great market sentiment, cash on the sidelines, high short interest: all point to a continued market rally in the immediate term. Even so, if there is a melt-up, say to SPY 142 in the next couple trading days, then I would not hesitate to open a short position for the pull-back.
Have a good weekend. Be careful.
Disclaimer: Never, never, never take advice from hacks who have free websites on the internet. This is for entertainment purposes only, so have fun.
Wednesday, April 16, 2008
But the market did not respond as expected. Presumably due to worse than expected earnings from bellwethers such as General Electric and big banks, the market dropped below trend on Monday and Tuesday. Now today, we are seeing more recovery as some regional banks announced better-than-expected earnings. The SPY has come back within the regression lines on good volume.
The higher low this week with an upturn above $132 is a bullish sign for the short term; this should act as support. The trip earlier this week emphasizes the trouble with the economy overall and the justified skittishness for investors. Be careful.
The NASDAQ has done even better today than the financial-laden SPY, and IBM reported excellent results after the bell and is trading up $7 as I type.
My surmise is that $138 on the SPY is very reachable this week as the countertrend rally continues. Shorts continue to put a nice bid on this market and lots of cash on the sidelines may also act to lower the risk for long positions. The economy sucks and the long term market trend is still down, but this bear market rally still has legs with support at $132.
Specifically, regional banks look appetizing. UnionBanCal Corp (UB) is my personal pick with favorable Return on Assets and even a 4.4% dividend. Many have been beaten down with all other financials, and the stronger regionals should be the first to recover.
Thursday, April 10, 2008
Voo-doo? Sure, but followers of wave theory will swear by it, and most will admit that it takes an active right brain to see the trends and line patterns. Here's my amateur evaluation of the last few days:
And the prediction of the A-B-C corrective phase should last over the next 2 or 3 trading days:
My analysis differs from Eric's only slightly. While I just dabble in the dark arts of market prediction, I still find some value in watching the trends and counter-trends. And I find value in Eric's discipline and narrative as well.
Another analysis of the trend could look like this:
Which gives a similar result and SPY hitting $138 by Tuesday. We'll see...
Saturday, April 05, 2008
Counter-trend rallies always suck in people at the worst times as people think the “all clear” signal has been provided:
We could very easily see a similar situation here although history never repeats exactly (that would be far too darn easy). And, many will also legitimately argue there are major differences between now and back then (like reasonable valuations for example). However, at the end of the day, the market itself must ultimately confirm whatever thesis you’ve aligned yourself to.
All in all, I expect we’ll see a series of powerful and impressive counter-trend rallies that are worthy of trading short-term but extremely dangerous for those investors who like to hold stocks for more than just a few weeks. Most everything I continue to see confirms this so far.
Be careful out there.
Friday, April 04, 2008
The movie was long, nearly three hours, but was completely captivating due to its excellent acting, interesting plot material and adequate screen writing. When this movie came out it was advertised as a history drama about the start of the Cold War and the CIA. It is much more than that.
In fact, The Good Shepherd follows Matt Damon's character, Edward Wilson, from childhood and through his career in the Foreign Service during World War II and then into his role as counter-intelligence operative during the Cold War. Wilson is loyal to his wife, his son and his country; he murders, tortures and deceives wantonly and without conscience if such actions are in the interest of these charges. The good shepherd indeed. Angelina Jolie, as his wife Margaret, is amazingly believable as a Connecticut daughter of privilege.
The underlying theme of the movie, however, is more fundamental than a simple history pic about spooks and bad guys. This movie is actually the WASP version of The Godfather. Really. Loyalty and family and "doing the right thing" are emphasized above all else, much like Mario Puzo's 1969 novel and subsequent movie starring Marlon Brando about the New York mafia. The good shepherd is no less than a blond-haired blue-eyed capo regime.
The thematic scene in this movie has Joe Pesci making a cameo appearance as an aging mobster, ala Sam Giancana, who was apparently expelled from Cuba after Castro's revolution. He is being recruited by Matt Damon's CIA character Wilson in a plot to overthrow the Castro regime. Appalled that he would be expected to do the CIA's bidding and that Wilson threatened to export him back to Italy, Pesci's character Joseph Palmi says,
Who are you people? We Italians have our families and the Church, the Irish have their homeland, the Jews have their traditions, even the ni&&ers have their music. What do you have?
Edward Wilson, in a stoic, matter of fact way, intones, "Mr. Palmi, we have the United States of America. You people are all visiting."
And that is the entire point of the movie. The governmental, political, military and clandestine infrastructure of this nation was established for the service of the white majority. Historically, all other ethnic and racial groups exist only at the discretion of this establishment.
Much has evolved in the nearly fifty years since that scene supposedly took place, but the fact remains that the mindset of the aristocracy has not changed. Edward Wilson was a member of Yale's Skull and Bones, as were many of his friends and colleagues at CIA-- an apparent reference to our current president and many of the extant political power-brokers.
The Good Shepherd is an excellent movie with an enduring message as well as a cautionary tale. To limit its message as merely a depiction of the early CIA misses the strong underlying themes of entitlement and purpose of the majority race as well as loyalty, family and service. Leave it to DeNiro to direct such a tour de force.
Studio advertising and movie trailers did not do adequate service promoting this flick. If I had known the fundamental motif, I would have willingly shelled out $8 to watch in the theatre.
Instead I would day trade stocks and indices, or more accurately, swing trade: keeping positions anywhere from a few hours to a few days. Follow market trends and nimbly get in and out. Position trades are longer term, holding positions for months or years.
Today is such a perfect day. I had a big case cancel, so I took the day off. The non-farm payroll report, i.e., the jobs report, for March was scheduled to be announced at 8:30 am, so the market promised to be interesting.
The jobs report was terrible by all standards, which by itself did not surprise me at all. Service and manufacturing jobs declined month over month and year over year. The only maintenance of job numbers were in the government sector-- go figure (I thought we had small government conservatives in charge. Ha!)
The market has responded very well this week and it seemed to take the poor jobs report in stride. Either the traders and investors feel this is the bottom, or they are confident that Ben Bernanke and his team are not willing to allow any more drainage on market returns. The market is solid.
As Charles Kirk says:
As we saw from trading [Thursday], investors are showing some confidence (or brash complacency) depending on your perspective. I suppose with bailout Bernanke and Paulson now on high alert and the economy already out of recession, there’s no downside risk anymore. At least that’s the vibe I’m getting from a number of people.
Granted, there is always downside risk, but in relative terms the market should fly over the next 2-6 weeks. If it can absorb the crappy metrics in the economy, then it will certainly weather the storms of any poor earnings next week.
Barry Ritholtz, the writer of an award winning macro-economic blog, recently has called for traders to close their short positions and look for select long opportunities. I agree. Last week I began looking at tech plays like Sybase, (SY), Taiwan Semiconductor (TSM) and Sun Microsystems (JAVA). I think that tech will lead us out of this recession eventually.
Also, small retail banks should be at multi-month bottoms. Associated Bancorp (ASBC) is located in Green Bay, home of the vaunted Packers (who are looking for Lynn Dickey to come out of retirement now with the departure of Favre, but I digress). Northern Wisconsin has a relatively stable economy based on tourism from Chicago and Milwaukee, paper and other natural resources. Another is Union Bank of California (UB). Both of these have 4%-plus dividends, great technicals and solid fundamentals. These are longer term holds-- probably through the summer at least-- but eternal vigilance is the price of trading.
Another flyer I got into recently is Cameco (CCJ), the largest producer of uranium. If the world isserious about decreasing carbon emissions, then nuclear energy will play a huge role. Toshiba just signed a large contract to make several reactors for the United States and they will all need substrate uranium. Cameco has not the run up in valuation that solar stocks have had and nuclear power offers proven potential to generate large quantities of electric power, unlike solar. Cameco is a long term secular trend that should last several years, if not a lifetime.
By the way, the trade today was China (FXI) on the upside. In at the bottom, out near the top. The perfect day-trade. The perfect day.
Disclaimer: I'm a simple working stiff who knows less than nothing about finance and economics. My interest in the market is solely for entertainment purposes. In no way should my ranting serve as investment advice in any way. (Unfortunately, the same disclaimer is true for every financial "adviser" I've ever sought out.)