Thursday, August 28, 2008

Market Update: No reason for short term bets

On August 20th, we noticed that support had been broken and the nice run from the July 15th capitulation was nearing an end. We recommended to sell into strength at that time, and the time is now.

Sure this week has been low volume with the end of summer, but the technical analysis of the market is not reassuring. The future is impossible to predict and now is a good time for risk management and hedging all your long positions with corresponding shorts.

Oil price has been the wild card and now we are seeing renewed strength in that sector with the narrative assigning weather considerations to the recent rise in the barrel price of oil.

The sentiment indicator we are looking at in the above figure is the "% of NYSE stocks above their 50-day moving average." While this is not as bearish as we had seen in October, the pattern certainly is not contradicting the bearishness of the price movement in the first figure.

We have had a large number of stocks cross above their 50-day MA in the last 5 weeks and that should act as a short term ceiling to price movement. Be careful establishing any new long positions in this environment.

Having said that, the regional banks (KRE) have been pummeled and will likely be the first to emerge from the financial doldrums when that time comes. Many of these companies have solid balance sheets and their retail businesses should continue to to do well as the economy chugs along. The question remains how long it will take, but KRE basket of regional bank stocks boasts a 5.2% dividend, which would pay one to wait while taking little risk for the long term.

Sunday, August 24, 2008

Is Dark Knight a political allegory?

Walking out of the latest Batman movie, my politically aware compatriot immediately remarked that he thought the Joker was a representation of Dick Cheney, an agent of chaos battling the rule of order.

I disagreed. In fact, if Dark Knight is a political allegory, then I would argue that Batman himself is supposed to be Dick Cheney, the secretive complex protagonist who grunts in monosyllables, an ersatz hero with a billionaire alter ego who has benefited immensely from the status quo and will go to great lengths in order to preserve it. Who are we to know what the political tendencies of the filmmaker are, if there are any indeed?

Cheney, like Bruce Wayne, and unlike the Joker, has lived within the crucible of the power structure of our culture and has done well financially and politically. Bruce Wayne is a self-assured and connected player within the Gotham society; he owns buildings, escorts dignitaries and influences the opinion of the mucky-mucks. That’s our beloved Dick Cheney.

The Joker is the disconnected agent of chaos, sowing destruction for no other reason than to do it. The better political analogy would be the Joker representing Osama bin laden or perhaps global terrorism itself. While some of us may see a bit more order to the roots of real world terrorism, for the purpose of the movie’s plot, this would suffice. The Joker recruits the dregs of society to do his bidding and act as fodder.

Continuing the analogy, Commissioner Gordon is akin to George W. Bush, the maligned leader who is caught between forces that he cannot control or even understand. Batman, while attempting to serve as the force for good, engages in destructive activities that lead to a host of unintended consequences that endanger the populace. The Commissioner bears the brunt of the mayhem as he wishes to bring the Joker to justice but must also navigate the mixed sentiments surrounding Batman’s violent vigilantism. In the end, Commissioner Gordon is hurt and his family (read: Bush’s legacy) is injured, as he muddles through the out-of-control situation.

Of course, the filmmaker may have had none of this in mind when he penned the screenplay. All comic book characters play with the notion of good versus evil, control versus chaos, and the Bush administration’s “with us or against us” ideology plays into the comic book analogy very well.

I suppose we can see political analogy in much of culture if we were to use our imagination. Was “Jaws” a metaphor for the Nixon administration’s wanton predation upon our civic structure? Maybe “The Exorcist” was meant to be a simile for the Vietnam War or the evil of war inhabiting the being of even the most innocent of our culture.

A couple years ago I read Mary Shelley’s Frankenstein and I could not help but see the similarities between the monster and George W. Bush, but then my senses were deeply affected at the time by the rapidly degenerating situations of the Iraq war and the economy. Bush, I truly believe, has always meant well by his intent, but he is flawed by infantilism, much like Dr. Frankenstein’s creation. Bush lacks the intellectual prowess, the cerebral horsepower, to navigate complex situations, he is a creation of our modern social structure, and seems truly surprised by the failures that he has encountered-- all ripped from the pages of Shelley's classic.

Of course some literature has been expressly intended as political allegory, as every high school student learns when studying Gulliver’s Travels, Jonathan Swift’s satire on European politics. Other fictional works merely play on eternal truths which can then be applied to many situations, political or personal. Ernest Hemingway’s Old Man and the Sea could also be seen in the Bush presidency, and certainly Herman Melville’s Moby Dick.

With any of these possible metaphors, we start to paint a picture of George W. Bush as a pathetic character, a flawed hero who is put into an unwinnable situation, or eschews warnings to the detriment of himself and his charges.

The Dark Knight: Dick Cheney kicking ass and taking names.

Friday, August 22, 2008

Counting Houses for Sen McCain

Besides, I like the song:

Maybe someone should do a version to Cougar's Little Pink Houses?

Wednesday, August 20, 2008

Market Update: Support is broken

Ugly end to the 27-day rally. It was fun while it lasted, but alas, it is time to sell into strength. My horizontal line could be a bit lower than depicted on the above graph, but you get the picture. Violation! With such an oversold condition, however, look for a bid today or tomorrow to take some profits.

Hypocrisy Fest 2008

Condoleezza Rice on Russia:

"Russia is a state that is unfortunately using the one tool that it has always used whenever it wishes to deliver a message and that's its military power...that's not the way to deal in the 21st century."

But that rule does not apply to the US:

The US must continue to engage in "kinetic warfare" - which [David Kilcullen, adviser to Condoleezza Rice,] defines as "killing the enemy and breaking their stuff" - in order to demonstrate to the Iraqi population that it has the upper hand.

Sunday, August 17, 2008

Revenge of the Old Lady

Sure, this might be staged, but it's still hilarious.

Biotech Index: Don't do anything [Updates 1 & 2 below]

This is scary stuff. If someone held a gun to my head to make a decision today, I guess I'd buy it before I'd sell it. But let's just leave it alone.

If it breaks below $67.70, the next support is $58, but that's a big "If."

Update 1
[Aug 17 at 2316hrs]:

Eric at Buy the Top is giving this index an 80-95% chance of breaking down in the next three days due to its overbought condition. I view him as a savant of sorts with a superbly developed right brain, which makes him uniquely qualified to see the spatial relationships necessary for technical analysis. My intellect can detect the overbought condition, but my brain cannot process such a high likelihood of XBI "breaking down to $60-62 over the next month." We'll see.

Update 2
[Aug 19 at 0400hrs]:

XBI closed at $67.37, which is indeed below support of $67.70. Eric's thesis looks good. The entire market closed down today, but the losses in XBI were greater than the market indices. All broad averages tested support levels (again) and while it may not be time to panic, this counter-trend rally is getting long in the tooth. Oil dropped after hours which may perk up the stock market today. Also the low volume trading yesterday tends to mitigate the worry we are learning to embrace. Looking for exits overall, and if XBI rallies back up to support (now resistance), maybe I'll open a short.

One Batshit Crazy Christian:

Sunday, August 10, 2008

Are These Examples of Irony or Hypocrisy?

"I think this president has shown a remarkable disrespect for his office, for the moral dimensions of leadership, for his friends, for his wife, for his precious daughter. It is breathtaking to me the level to which that disrespect has risen."
-- John Edwards, on Bill Clinton, 1999

"Georgia is a sovereign nation, and its territorial integrity must be respected. We have urged an immediate halt to the violence and a stand-down by all troops. We call for an end to the Russian bombings. The attacks are occurring in regions of Georgia far from the zone of conflict. They mark a dangerous escalation of the conflict."-- George W. Bush, on Russia, 2008 (at left, Mr. Bush's own example of "respect for a sovereign nation", circa 2003)

Answer: Hypocrisy. But one is just the expedient blather of a smarmy ambulance chaser, and the other is your country's foreign policy. One matters and the other does not. You pick.

Saturday, August 09, 2008

Whither Conservatism

A meme that I broach on a regular basis is the anti-conservatism of George W. Bush's fiscal policy. It cannot be called liberalism, but it certainly is not conservatism. Charles Wheelan, PhD, a University of Chicago Economics professor, discusses the characterization of Bush's fiscal policies with the appellation Neo-neoconservatism. (I still prefer anti-conservatism.)

Conservatives are supposed to be about balancing the budget and limiting the size of government, not about adding new entitlement programs and borrowing money from China to pay for them...

...So what is George W. Bush? He's certainly no liberal, either. In fact, we're left with the worst of all worlds: liberal-style spending without the stuff it usually buys...

...Seven years of fiscal recklessness hasn't solidified a tattered safety net, or fixed a broken health care system, or upgraded the skills base of America's working class, or improved our crumbling infrastructure, or updated our outmoded international institutions... We're spending like drunken sailors, but we're not even getting the hookers and booze...

...Republicans are starting to distance themselves from Bush. There's something pathetic and unprincipled about that, given that they were complicit in the policies that have made him unpopular. If the Republicans truly stood for sensible conservative policies, they would have ditched him six or seven years ago -- and we'd be better off for it...

I know conservatives. Conservatives are friends of mine. You, George Bush, are no conservative. And shame on the Republicans for not recognizing that sooner.

I would add that the Democrats have been complicit as well to some (albeit lesser) degree. Upon gaining leadership in the House and Senate in January 2007, I would liked to have seen a barage of subpoenas and testimony about the various alleged illegalities perpetrated by the Bush administration. Sure, Conyers, Feingold and a few others have been vocal in this regard, but the Congressional majority leaders have been almost giddy in their silence.

The next president will inherit the worst situational maladies since Carter took office in 1977. Obama or McCain, upon being sworn in, will need to confront two stagnant theaters of war, a worldwide recession of our making, poor relations with our allies, record budget deficits, spiraling health care entitlements, lack of confidence in US capital markets, palpable governmental incompetence-- all of which have been either unaddressed or mismanaged during a lame duck presidency.

The opposing party of whoever wins in November will be quick to tag the next president with the culpability for these problems as they percolate and explode in the next 18 months.

The anti-conservatism of George W. Bush.

Salim Hamdan (finally) Gets Justice

The shrill voices of the authoritarian right will echo for a few weeks on this one. Osama bin Laden's driver was sentenced to 66 months, of which he has already served 61 months.

Is this the proper sentence? That's what a military tribunal and judge have determined. The prosecutors had asked for 30 years and that request was summarily rebuffed and changed to a shade over time served.

As the Rude Pundit put it:

"...when the judge in the trial, Captain Keith Allred, told Hamdan, "I hope the day comes when you return to your wife and your daughters and your country," and joined him in speaking, "God willing" in Arabic, it was a direct "fuck you" to the civilian leadership at the Pentagon and the Bush administration as a whole. It was a way of acting as an example and asserting that, even against the inhumane, one can still behave humanely."

He speaks the truth rudely.

Alexander Solzhenitsyn, R.I.P.

I remember reading the Gulag Archipelago when I was a kid at the advice of my grandfather who I revered deeply. At the age of 14 the size and scope of the book was daunting, but the result was a stark realization that the freedoms we enjoy in this country are worth the constant vigilance of an informed citizenry. Tyranny lurks around every corner.

The world would be a much more dreary place if dissidents like Solzhenitsyn did not feel safe coming forth with their revelations. We would not have won the Cold War, or even World War II for that matter, without the complicity of former enemies who viewed our free society as something special.

What damage is being wrought by the continued disrespect we are showing for the rule of law?

Market Update: Big Purple Crayons

A couple weeks ago the market was in steady decline, making consistently lower lows and showing a drip drip indicative of a lack of confidence. The narrative was rife with talk of the weak dollar, expensive gasoline, banking and mortgage crises, brokerage write-downs, etc, etc. With all the negative sentiment I took out the big purple crayons and did some multi-decade technical analysis-- Eric reminds it's always a sobering idea-- warning to consider taking cover for a prolonged downtrend with the SPY trading below a declining 200-day moving average.

At the end of the blog entry on July 26th I concluded, however, that the following few trading days would be important:

I truly feel the next five days will determine the market posture for several weeks. I am an inveterate market timer and it has served me well for a number of years. The 200-day moving average cross-over has me spooked, no question, but I am not out of the market as I type this missive.

The last days of July and now early August have shown exceptional strength in the market indices. Higher lows and now a critical breakout above significant resistance at SPY $128.80. The small cap and tech indices are even stronger. This bodes well and I am fortunate that I did not pile out of the market on July 26th.

Yes, many hurdles exist to further upward movement in the stock market, but stocks are often the leading indicator out of recessions and while unemployment may continue to rise for another quarter, the market indices could continue to show strength. The added narrative is the demand destruction of oil coupled with a bottomed out dollar now gaining strength, which should bring commodity prices down at least in the short term and this will act to support stocks.

The risk in the market is still significant and bears very close observation, but I'll stay net long for now. Big purple crayons are fun to play with, but trading and investing often need a finer point.

This information is for entertainment purposes only. Anybody who takes investment advice (or any advice for that matter) from strangers on the internet needs their meds adjusted.

Friday, August 08, 2008

Pssst... Barack... Jim Webb for Veep

Dear Senator Obama,

I know that you have been logging onto The Kalamazoo Post almost daily for the choice buzz, and while I've entertained the idea that you may be here for my take on Ozzie Guillen's latest rant/ ejection/ fine/ controversy/ call for firing from Jay Mariotti... I realize now that you have been looking for my pick for your running mate.

Sorry for the delay, but here it is: Jim Webb. If you are the The One, then I suppose he is the The Two. Besides, if he's okay with Fred, then he's okay with me. This election is about salvaging whatever credibility as a nation we have left so don't encumber your ticket with some slick politician. We are counting on you to make a good first decision, unlike Al Gore's in 2000-- gag.

See you at the Convention,

Sunday, August 03, 2008

Tha Savaging of General Clark

This video is an excellent compilation of clips demonstrating the perfection of the type of defense that Kerry should have mounted against the Swiftboaters four years ago. Come out with guns blasting, and never let up. It worked and now Wesley Clark is silenced. This won't necessarily win the election for McCain but is takes Clark, the one guy who could have stood up to McCain's war record and tempered the importance of his being a POW, out of the picture.

This is masterful stuff really and the clip not only shows right-wing whores (Hannity, Kelliann Fitzpatrick, Ollie North, Rove, etc) bemoaning Clark's comments, but it also shows Democratic-leaning moderates (Mika Brzezinski) and outright anti-McCain partisans (Rachel Maddow) chiming in with "Swiftboat" comparisons. Even the usually rational Bob Schieffer likened Clark's comments to "denigrating McCain's war record." This was nothing like the Swiftboat bullshit which really did attempt to negate Kerry's war experience. Clark was making a rational argument about the value of war time experience as a soldier as it pertains to executive decision-making.

The Republicans hire pit-bulls who know the way to handle these attacks. They have a grease board with all the possible attacks that could be made and the various responses. It's well-coordinated, ferocious and effective. But such responses and rhetorical techniques are nothing new. I'll let the Communications professor enlighten us, but I seem to remember that Cicero was famous for the mastery of such rhetoric in the Roman Senate. History rhymes.

The power and money at stake in the US elections is enormous and exponentially more than even 20 years ago. These campaign people are the most talented at what they do and their incentive is greater than ever. Perhaps the lesson in this is that no office in the world should be as powerful as the US presidency is today. The rest of the world is a little freaked by the damage that one person can do and merely electing Barack Obama will not assuage their trepidation, only allow them to breath a sigh of relief for four years. The US system of such unchecked executive power has become, under Bush, structurally threatening to the world. While 70% of Americans and 80% of Iraqis want US soldiers to pull out of Iraq, and the Iraqi Parliament and Prime Minister have called for time tables for withdrawal, the US leadership has said this is not feasible and will not be done. The opinion of one person-- Cheney or Bush or whoever is running the show-- has promulgated a criminal war, destabilized the world's oil supply, promoted nuclear tensions, instituted torture as modus operandi, holds prisoners illegally, etc.

These guys are just plain bad people.