Conservative tax policy

From Steven Landsburg at the WSJ:

Like philanthropy, saving is an act of self-denial that enriches your neighbors (by leaving more goods available for them to consume). But unlike philanthropy, saving is punished by the tax system (via the taxes on interest, dividends, capital gains and inheritance). That's nuts. When you tax saving, you encourage people – wealthy people in particular – to spend more and grab a larger share of the consumption pie. "More consumption by the rich" should not be among the primary objectives of the tax code.

The alternative is to tax consumption....you can easily implement a consumption tax with a Form 1040 that says: "How much did you earn this year? How much did you save? Now pay tax on the difference." And you can make that tax as progressive as you like.

Einstein, by Walter Isaacson

I've read several different accounts of Albert Einstein's life, but none is more comprehensive and understandable than the current one by Walter Isaacson. Superbly written and inclusive of recently discovered correspondence from Europe, Einstein recounts the many facets of the life of the redoubtable scientist, profound thinker, passionate activist and singular personality.

Many of the anecdotes about Einstein's alleged learning disabilities are addressed as well as the itinerant status of stateless vagabond that he assumed in his early adult life. The most enjoyable surprise, however, is Isaacson's ability to explain theoretical physics which is accessible to the non-scientist.

Isaacson spends whole chapters discussing the photoelectric effect, bending light rays, gravitation and molecular physics which allows one to come away with a solid understanding of the language and concepts of some of the greatest thinking of humankind.

In addition to the heralded scientific discoveries, the biography takes us through the cultural and social events of the twentieth century, the ravages of Nazism, the breathtaking consequences of the atomic age and the political upheaval of the cold war. Unlike other celebrities of the age, Professor Einstein was not afraid to express his opinions on such incandescent topics as human rights, nationalism and religious faith, and to use his celebrity to promote beneficence when possible.

The paradoxes and twists of fate in Einstein's life add layers to the interest generated by this most interesting individual. While abandoning his own sons, he became the loving and devoted father to his two step-daughters. After a lifetime espousing pacifism, he became one of the creators of the most destructive weapons known to man. After decrying nationalism as the "measles of mankind", he later became an outspoken proponent of the creation of the nation of Israel.

To understand the life and times of Albert Einstein is no less than than to understand the history of the twentieth century .

Your tax dollars hard at work

... bashing Democratic nominee Barack Obama. Doesn't the Army have better things to do with its funding than to run a blog with flagrantly partisan postings? If not, then please send my portion of the few trillion dollars spent the last several years back.

McCain: "I don't use a computer..."

Didn't we just have 8 years of a chief executive who was purposely out of touch with reality? Can we survive another four?

Watch the video

Paul Newman...

is rumored to be sick, so it's time for a little Plastic Jesus (scene from Cool Hand Luke.)

Wizard of Oz gets his offense, one way or another

June 1: Ozzie has tirade blasting lack of offensive production by his first place White Sox

June 2: Jay Mariotti calls (yet again) for Ozzie's firing

June 3: White Sox win 9-5

June 4: White Sox win 6-4

June 5: White Sox win 6-2

June 6: White Sox win 10-6

June 7: White Sox win 11-2

June 8: White Sox win 12-2

I guess that's why managers manage and sportswriters, well... I don't really know what sportswriters do.

I get email...

Recently one of my self-described right-wing friends, I'll call him Ralph, sent me this email. I'll publish this along with the responses that followed.

Ralph's initial email:

Subject: "Email of the Year"

This is pretty good. Forgive a couple words in there though.... Ralph

---

WOULDN'T IT BE GREAT TO TURN ON THE TV AND HEAR ANY U.S. PRESIDENT, DEMOCRAT OR REPUBLICAN GIVE THE FOLLOWING SPEECH?
"My Fellow Americans: As you all know, the defeat of the Iraq regime has been completed.

Since congress does not want to spend any more money on this war, our mission in Iraq is complete.

This morning I gave the order for a complete removal of all American forces from Iraq This action will be complete within 30 days. It is now time to begin the reckoning.

Before me, I have two lists. One list contains the names of countries which have stood by our side during the Iraq conflict. This list is short . The United Kingdom , Spain , Bulgaria , Australia , and Poland are some of the countries listed there.

The other list contains every one not on the first list. Most of the world's nations are on that list. My press secretary will be distributing copies of both lists later this evening.

Let me start by saying that effective immediately, foreign aid to those nations on List 2 ceases immediately and indefinitely. The money saved during the first year alone will pretty much pay for the costs of the Iraqi war. THEN EVERY YEAR THERE AFTER IT' ll GO TO OUR SOCIAL SECURITY SYSTEM SO IT WONT GO BROKE IN 20 YEARS.

The American people are no longer going to pour money into third world Hell holes and watch those government leaders grow fat on corruption.

Need help with a famine ? Wrestling with an epidemic? Call France .

In the future, together with Congress, I will work to redirect this money toward solving the vexing social problems we still have at home . On that note, a word to terrorist organizations. Screw with us and we will hunt you down and eliminate you and all your friends from the face of the earth.

Thirsting for a gutsy country to terrorize? Try France or maybe China

I am ordering the immediate severing of diplomatic relations with France , Germany , and Russia . Thanks for all your help, comrades. We are retiring from NATO as well. Bonne chance, mezamies.

I have instructed the Mayor of New York City to begin towing the many UN diplomatic vehicles located in Manhattan with more than two unpaid parking tickets to sites where those vehicles will be stripped, shredded and crushed. I don't care about whatever treaty pertains to this. You creeps have tens of thousands of unpaid tickets. Pay those tickets tomorrow or watch your precious Benzes, Beamers and limos be turned over to some of the finest chop shops in the world. I love New York

A special note to our neighbors. Canada is on List 2. Since we are likely to be seeing a lot more of each other, you folks might want to try not pissing us off for a change.

Mexico is also on List 2 its president and his entire c orrupt government really need an attitude adjustment. I will have a couple extra thousand tanks and infantry divisions sitting around. Guess where I am going to put 'em? Yep, border security.

Oh, On another note; In the past 100 yrs, the US government has LOANED billions of dollars to most of the countries on list 2 in time of crisis. Have any of them ever considered paying us back???? NOOOOOOO! Instead we are on their sh_t list... Go figure!

Oh, by the way, the United States is abrogating the NAFTA treaty - starting now.

We are tired of the one-way highway. Immediately, we'll be drilling for oil in Alaska- which will take care of this country's oil needs for decades to come. If you're an environmentalist who opposes this decision, I refer you to List 2 above: pick a country and move there

It is time for America to focus on its own welfare and its own citizens. Some will accuse us of isolationism. I answer them by saying, 'darn tootin.'

Nearly a century of trying to help folks live a decent life around the world has only earned us the undying enmity of just about everyone on the planet. It is time to eliminate hunger in America It is time to eliminate homelessness in America . To the nations on List 1, a final thought. Thank you guys. We owe you and we won't forget.

To the nations on List 2, a final thought: You might want to learn to speak Arabic.

God bless America . Thank you and good night."

If you can read this, thank a teacher. If you are reading it in English, thank a soldier.

(Please forward this to at least ten friends and see what happens! Let's get this to every USA computer!)

(Please forward this to at least ten friends and see what happens! Let's get this to every USA computer!)

My first response:

Ralph,

Do I detect a little anger here? According to your guy Bush we are just on the verge of winning this thing in Iraq, so why do you want to leave now? Don't tell me you think it was a bad idea.

Tony

Ralph's response:

Tony,
I'm not angry at all! And this was the quote: "Since congress does not want to spend
any more money on this war, our mission in Iraq is complete."

As you know, the congress is controlled and led by the democrats. The e-mail never said that we should pull out
and I don't think we should at this point. The purpose of the e-mail is to show (the reckoning) or what we should happen once we do. [sic]

God Bless America,
Ralph

My second response:

Ralph,

I'm heartened to hear that you are not angry, because anger saps the soul of its vitality, especially when that anger is misdirected away from the party responsible. I'm worried about you, buddy. I guess I had mistaken all the anger and venom depicted in the "The "Email of the Year"-- since you took the immense trouble of forwarding it-- as sentiments that you may harbor. Threats to rescind treaties, tow diplomats' cars, attack Canada, or giving Mexico an "attitude adjusment"... pardon me, but this sounds a bit angry. We'll cut off "foreign aid" (Never mind, of course, that the US ranks nearly dead last among developed nations in the provision of foreign aid.) Talk of being "pissed off" or making up "sh_t lists" that include entire nations of allies, in my interpretation, smacks of anger. So if you're not angry, then what emotion should I have detected?

(Maybe I should just make a habit of deleting inane emails when they come my way, but one of my character flaws is that I have a hard time accepting such unmitigated garbage without a comment. That's my cross to bear.)

In reference to this "Email of the Year", since when has Congress withheld financing or support of Mr. Bush's ill-conceived incursion into Iraq? The Iraq Force Resolution of 2002 was signed (to my dismay and likely that of Russell Kirk, if he were alive) by half the Democrats in Congress. Every single one of Bush's defense budgets has been passed, including war supplementals approaching half a trillion dollars. Never before in my memory has a president been given such wide latitude in the conduct of any project, let alone an unjustified, unsanctioned, undeclared and unpopular war. Is the point of the "Email of the Year" that Mr. Bush has NOT been given enough money, troops and time to win in Iraq? Seriously? By your calculation, how much more of our borrowed tax revenue does Mr. Bush need? To your liking, how many more of our kids need to be thrown into the grinder to ensure the purple-fingered freedom of a bunch of religious fanatics half a world away?

The Bush administration had predicted in 2003 the war would take no longer than 6 months and less than $50 billion, so the fact that we are still mired in this debacle 5 years later and still spending $2 billion per week shows Congressional acquiescence bordering on insanity.

I realize you didn't write the "Email of the Year", but the mere act of blindly sending emails with snarky humor or self-righteous inuendo about a murderous illegal war is beyond the pale. (Forwarding risible emails has become de rigueur replacement for political debate in out post-modern internet age.) In my name-- in our names-- this nation under the leadership of its Commander-in-Chief has invaded another country under mistaken (or fraudulent) pretenses, killed hundreds of thousands of civilians, forced millions of refugees, destabilized the world's oil supply, spent billions of borrowed treasury revenue, and committed thousands of our own kids to death, debt, dismemberment and disability... and for what?

(By the way, where is Osama bin Laden? Or do you have another snarky email in your inbox implying that his current freedom is the Democrats' fault, too?)

I have little patience with such crap. If you have a point to make, make it; but try to make it without all the snide little snipets of non-humor and veiled angry threats. Ralph, the "Email of the Year" would have been more palatable if it HAD been sent by someone who was truly angry, who truly felt the emotion that is characterized in the email. Instead you have admittedly sent the email in order to portray (to idiots like me, I suppose) what "should happen" if we "pull out." This protrayal, however, is chock full of all the misguided testosterone-laden vitriol that got us into the Iraqi quagmire in the first place. If you are not really angry, then why send such an angry depiction of what "should" happen? (As if you have any judgment of "shoulds" or "shouldnt's" anyway.)

I apologize for the lack of humor in my response, which hardly connotes "bitterness" as one person on this list has characterized me (I always enjoy being labeled by people who do not know me); instead of being bitter, my comment is more a reflection of disgust. Disgust at the glibness of Bush supporters-- the twelve or so who are left-- at the mayhem that has been produced and the complete lack of a sense of responsibility for this mayhem.

My view is that if you have supported Bush all these years, the least you can do is keep a low profile. The arrogance of deflecting responsibility from anyone but the current president and his administration is frankly disgusting. He was wrong then, he is wrong now, and if you are not angered by the poor conduct of your Commander-in-Chief at a time of war... well, upon further reflection maybe anger is the healthier emotion, Ralph.

Tony

By the way, if God had truly blessed America he would have dropped a few more chads in Florida in 2000 and maybe we wouldn't be in this mess. My guess is that God gave up on us a while back.

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Gasoline demand drops... Duh!

Okay, I'm going to talk my book for a few paragraphs. The story this morning is that US consumers have stopped driving and gasoline sales have declined. When people stop driving, they also stop spending money on vacations, restaurants and discretionary spending in general. The economy, which is 70% consumer driven, cannot sustain high priced oil and the cracks are appearing.

The next part of the narrative will be the obvious recession that we have entered this quarter. The move in oil has not been exactly parabolic, but the oil contract is well above it 200-day moving average and, on a technical basis, is overbought.

Sure, demand in China and other growing economies will continue to increase, but the acceleration will most assuredly drop. Also, China currently subsidizes the cost per gallon of gas to less than $3 per gallon which may end very soon.

I've mentioned DUG before and will mention it again. Can oil get to $150 per barrel? Perhaps, but the technicals and fundamentals point to $120 before $150.

Shorting oil is also a play on a stronger dollar, and with the dollar making new monthly low against the Euro, again the contrarian play is go short oil in anticipation of the stronger dollar.

Note that I'm not one of those nutjobs that thinks the run up in oil is "all due to speculators." Demand driven prices have brought oil up to $130 per barrel, but the demand projections have not fully factored in a prolonged recession in the US which would certainly affect developing econonmies as well.

Don't sell that Gold just yet

Thomas P.M. Barnett, author of the Pentagon's New Map and other internationalist non-fiction, gives good insight on his blog about current events. A recent post commented on President Bush's trip to the Israeli Knesset and upon reading and re-reading Bush's words, it occurs to me that Barnett may have a striking point.

Barnett says that "Bush calling Iran the equivalent of Nazi Germany is his way of signaling the White House's pre-approval for any Israeli military strikes on his watch." Now that makes total sense.

The exact words by Bush from that speech are:

"Some seem to believe we should negotiate with the terrorists and radicals, as if some ingenious argument will persuade them they have been wrong all along. We have heard this foolish delusion before. As Nazi tanks crossed into Poland in 1939, an American senator declared: 'Lord, if only I could have talked to Hitler all of this might have been avoided.' We have an obligation to call this what it is -- the false comfort of appeasement, which has been repeatedly discredited by history."

Aside from violating Godwin's Principle, Bush has clearly targeted Iran, yes Iran with a defense budget of less than 1% of the US', as the latest bogeyman worthy of annihilation. Never mind that analogies to Nazi Germany are completely absurd. When the bombs launch, so will gold, US Treasuries and oil futures.

So, you think you know what's going on?

TED talk by the CEO of Public Radio International about the poor international news coverage by US news outlets.

Waning Countertrend Rally

A while back we looked at charts of the market to see the countertrend rally in an overall down market. At that time the short positions were closed and careful longs positions were taken in SPY and financials.



In April we took half profits and let the rest ride for another leg up in the countertrend rally. Well, it may be time to reverse course on this market and look for some short positions again. The rally is a bit long in the tooth for a bear market phenomenon.

If the SPY can hold above $138.20, then a sharp decline may be averted, but if this drops further then watch out below with the next support level at $134. Risk management would dictate extreme caution in this environment and the poor technicals.

The market, while not as overbought as in October, has had a heady run with two-thirds of NYSE stocks trading above their 50-day moving average as shown in the following chart. This signifies a short term overbought condition.



The fed minutes were released today under much more hype than usual and the market sold off. I would look for a some limited strength tomorrow to sell into.

Another theme is the extremely overbought condition in oil over the short term, barrel prices having gone up over 7% this past week. A reasonable trade would be to buy DUG, the ultrashort oil and gas ETF, and look for a quick 5% on the retracement.

Canadian Solar: So Far... ALL Good!

Back in February we talked about alternative energy, and specifically Canadian Solar (CSIQ) as the cheapest player in a burgeoning field of photovoltaic solar energy equipment. At that time CSIQ was under $19 and Friday it closed above $32, up over 70%.

My bias in situations like this is to take money off the table as I did with Mosaic (MOS) last year, having bought it at $20 and selling at $40, thus missing the run up over $100. So, with CSIQ I'm letting this sucker ride, although I'd put a stop-loss somewhere around $27.

Energy generation will be an issue for the remainder of the decade and beyond. Looking at the 1970's analogy, we are still only at about 1975 and the a dollar rally should not hurt CSIQ very much-- in fact they may have a better US market for sales with a stronger greenback . Even in the teeth of this current recession, we are still seeing a huge need for non-carbon energy generation and this should increase with the coming panic over global warming As such, CSIQ and Cameco Corporation (CCJ) should continue to be strong holdings.

Real Name

Just a note. From now on I will be posting entries using my real name instead of my nom de blog, Grodge. Mainly this is to avoid confusion from friends and family who have continued to ask, "I read you blog, but who is the guy named Grodge who writes all the entries."

Grodge is Tony. Tony is Grodge.

Ike was Right-- Don't Trust Anyone

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.

[snip]

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.

Expected Rally Occurs; Take Profits

I don't trust weekends. Some craven CEO is always likely to divulge bullshit after a nice broad-based market rally. The counter-trend rally we've been watching has not been as healthy as we like, although today's run is welcome.



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.

Market Trend Breakdown/ Recovery

Last Thursday we looked at the Elliot wave analysis of the S&P depository shares (SPY). The trend was short term up, and we expected further runs up with 138 as resistance.




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.

Elliot Wave Analysis

Chart Astrology, as Eric the market sage explains, affects the price movement of the stocks. Elliot came up with his wave theory almost a hundred years ago, and proponents have kept the principle alive to this day. The basis is the Guassian bell curve of human sentiment. The market begins to rise (or lower) and a few early adopters will make the trend, wave 1. The market then pulls back a bit making the countertrend wave 2, but then later adopters will pour into the market making the definitive wave 3, only to have a countertrend wave 4 and a final wave 5 when late comers try to make some money. The corrective 3 wave cycle is termed the A-B-C and goes counter top the 1-2-3-4-5 main wave pattern.

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...

Counter-trend Rally

Charles Kirk's daily trader's blog is among the best around. He compares the current market strength to the counter-trend rallies in 2001. Kirk says:

Counter-trend rallies always suck in people at the worst times as people think the “all clear” signal has been provided:

Kirk continues:

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.

The Good Shepherd

How did I miss this movie?! For some reason, despite an Oscar nomination, a great cast and Robert DeNiro as director, The Good Shepherd missed my line up of movies when it was in the theatres. Last week I happened upon it on HBO and became enthralled immediately.

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.

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Day Trading... Swing Trading... Position Trading

In a perfect world, I would not have a job.

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.)