I have two things working for me here, where the market is concerned, which leave me to believe that despite the most heinous activity of my portfolio over the last two to three weeks, redemption lies just around the corner…whichever corner it is we turn.
The first is the fixed income markets, which continue to signal disruption and turmoil. Today, as the market rallied as strongly as it did, and with oil pushing up just under 5%, Italian 10 year bond yields still pushed about 1% higher from Friday, to 5.95%. Spain and Portugal also saw significantly lower bond prices.
Remember that Italy needs $1 trillion over the next 24 months. That alone pretty much eats up the entire bailout fund the Europeans are debating. Their only hope is to get market participation to restructure the $1 trillion, plus the debts of the other countries. Shy of that, they are in serious trouble.
And the bond market, unlike stocks and commodities, is not currently giving them the benefit of the doubt.
The second salvation is the quantities under my jurisdiction. My raw volumes of shares have increased incrementally over the last few months, starting with my monstrous wins shorting crude oil and energy back at the start of summer. And I locked in a good portion of those wins when I covered ERX, shifting the proceeds into my existing holdings.
I have since received serious blows against many of those positions, such as CCJ. However, UCO was a useful hedge, whatever carnage it reaps on me now. My legacy position, which is about 33% of my net holdings of shorted UCO, still has a cost average of somewhere around $36. The net position is a loser, but much less so than looking at my last entry points would indicate.
If I take off my UCO short, and cover MGM also, and all my other longs return to where they were trading before the sell out, then I calculate that would put me back around my all time highs, and if it happens fast enough, I might even close out the year with gains.
It’s a tall order, and over the next few days, the decisions I make will decide whether or not it will come to pass.
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good luck , Cain …
Cain,
I’m thinking, much like what the Fly mentioned earlier today, that the reputation/usefulness of CDS could take quite a blow if they can negotiate a Greek haircut and leave all the properly hedged bondholders high and dry.
Any chance Spanish and Italian yields are remaining high due to funds dumping before that happens, knowing full well their hedges are most likely useless?
Maybe I’m thinking this through from one too many angles.
If anything there are a hundred more angles you could see it through. It’s one of many possibilities.
Thanks Jose
AEC reported strong performance. FFO 2011 Q3 over 2010 Q3 up 12%. 9 months in 2011 over same time last year up 20%.
“Their only hope is to get market participation to restructure the $1 trillion, plus the debts of the other countries. Shy of that, they are in serious trouble.”
With all due respect, Cain, I think you’re ignoring the Ben Bernank factor and it is to your peril and the peril of your portfolio. IMS, TARP was shown to be a backdoor bailout of European banks. I’m thinking there is another backdoor Fed bailout of Eruope in the works and that is what is moving the markets higher.
I don’t buy that. Yes, TARP essentially bailed out every bank on the planet by saying “Your US assets will not become worthless.” But at the time the US was facing the very real possibility of not only a banking crisis, but the subsequent social unrest that would take place if the majority of your citizens finances went into limbo, as well as any international relations problems stemming from a US crisis moving into other countries.
Is the US facing a similar problem, or are the tables turned? I don’t deny there may be multiple parties involved, but this is not a situation where the US bails out the world. It’s the other way around and now it’s Europe’s turn.
And when has that ever happened? They will return to killing each other with great alacrity as soon as they figure out Germany will not and indeed, can not bail out the entire continent.
How is Bernanke helping Europe?
I keep hearing people utter “the Fed” in hushed tones. What is Bernanke doing that makes you think he is intervening in Europe? I haven’t heard a damn thing that makes me think he is devaluing the dollar right now.
Mr Thaler, you stated that an Italian bailout would require $1T. What is the dollar amount required to bail out Spain and Portugal?
It looks like Italy needs €600 billion to get to 2014, Greece needs over €100 billion, Spain needs about €300 billion.
There’s $1.4 trillion, you get the idea.