18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
21,924 Blog Posts

A New Type of Moral Hazard Takes its Grip

Coked out money managers and piker retail investors dove head first into banks today, on the thesis that the Government always makes things better. There was no fundamental reason to get long, with oil higher and Fannie Mae [[FNM]] /Freddie Mac [[FRE]] on the cusp of disaster.

In my opinion, this is the worst type of moral hazard:

Through innovative and historic measures, taken by the Fed and Treasury, they (Gov’t cheese makers) have morphed Wall Streeters into upright walking pigs, always willing to take a stab at socialism.

This, as you can understand, is not how free markets work.

With the credit crisis in full blown mode here, I wouldn’t touch the banks, unless of course I was managing money for the Iranian Sovereign Wealth Fund.

Eventually, as predicted by many, the cheese makers will run out of dairy, unable to make new cheese. Then, and only then, will the market be able to correct itself and eliminate the weak/corrupted players.

For the day, my losses were minimal, as long positions in National-Oilwell Varco, Inc. [[NOV]] , Barnes & Noble, Inc. [[BKS]] , Clean Energy Fuels Corp. [[CLNE]] and Wachovia Corporation [[WB]] , amongst 90% of my financial shorts, buoyed me.

In addition, I have built a small cash position of 5%, which will be used to buy [[FXP]] under $85 or [[SKF]] under $125.

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Shut Up. China is NOT Bottoming

I am so tired of Cramer’s endless rants. See, what you know about Cramer is that he is a flip-flopper. What most of you cannot fathom is his ability to manage money, in a responsible manner.

But, you’re wrong.

There are two types of investors.

One: The guy, like Einhorn, Ackman or Buffett, who sticks to a thesis and doesn’t waiver, unless proven wrong.

Two: The guy, like Cramer and everyone on realmoney.com, who trades based upon the wind patterns of Wall Street.

The problem: Cramer style is terrible for the unwashed folk watching his show/reading his blog, especially those who have an investment time frame of more than 3 days. Because he is constantly changing his mind, he appears to never make any sense. When in fact, his nonsensical advice is perfectly sensible to someone who trades like a degenerate OTB guy.

I digress.

China’s stock market is down more than 50%, year to date. I am here to remind you that markets do not go straight up, after killing so many people. There is so much overhead resistance, littered with people trying to salvage their life savings, it will take years for the Shanghai to recover, sort of like Nasdaq 5,000.

On this faux hype, I want to go short China, via [[FXP]] or outright positions in China Life Insurance Company Ltd. (ADR) [[LFC]] , China Mobile Ltd. (ADR) [[CHL]] or [[CEA]] .

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Fly Buy: NOV

I bought 2,000 National-Oilwell Varco, Inc. [[NOV]] @ $72.22.

Disclaimer: If you buy NOV because of this post, your dog will relieve himself on your bed. And, you may lose money.

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Fly Sell: LM

I sold short 10,000 shares of Legg Mason, Inc. [[LM]] @ $39.85.

Disclaimer: If you sell short LM because of this post, your wife will demand that you get a vasectomy. And, you may lose money.

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Remember The Bag Holders

Aside from the bag holders of Fannie Mae [[FNM]] /Freddie Mac [[FRE]] /SLM Corporation [[SLM]] common, which I highlighted the other day, there are a ton of banks out there who are long preferred stock too, albeit on a much smaller scale than the retards at Legg Mason, Inc. [[LM]] .

Nonetheless, should FNM/FRE get taken out and shot, expect there to be lots of write downs, as erroneous banks see their investment dollars burn to a cinder. On the balance sheets, where it says “cash equivalents,” expect to see reductions in that number, across the banking spectrum.

At the present, I am trying to research who owns this stuff. However, as you can imagine, it’s rather difficult to ascertain. I know Corus Bankshares, Inc. [[CORS]] has exposure. But, the more I think about it, Pzena Investment Management, Inc. [[PZN]] keeps coming up as a “massive loser” amidst all of the noise—owning nearly 400 million dollars worth of FNM/FRE.

Unfortunately, there is never any stock to borrow.

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Hey, Where’s Oil Going?

If you would, please send the bastards working in the Bering Sea a memo stating: “CNBC said oil has topped. Please stop jacking up the prices. Thank you.” While you’re at it, be sure to “cc” Putin and our Arab colleagues too.

Oil trading higher throws a whole new kind of gorilla wrench into the mix, doesn’t it? Like I said before, just own one or two oil stocks. Quit thinking it’s going down to $80. At the very minimum, the oil racket has earned and killed its way into your wallets and culture, via nearly bankrupting century old industries (auto’s, airlines). At the very least, you can show them some respect by giving them (oil bastards) the benefit of the doubt, via buying an oil stock.


I like Ultra Petroleum Corp. [[UPL]] , National-Oilwell Varco, Inc. [[NOV]] , Transocean Inc. [[RIG]] and Flotek Industries, Inc. [[FTK]] here.

Ag stocks are running again. You might as well “milk the farmer” too. Owning Potash Corp./Saskatchewan (USA) [[POT]] , Agrium Inc. (USA) [[AGU]] or CF Industries Holdings, Inc. [[CF]] is acceptable, providing you put a 10% trailing stop underneath.

It’s worth noting, there is vast weakness in [[FXP]] , partly due to China’s 7% melt up last night. As you know, in recent days, I kicked out of half my position. I will buy it back, providing FXP trades below $85.

The banks are weak, yet again.

Finally, shares of Pzena Investment Management, Inc. [[PZN]] are gapping lower. In my humble, yet bold opinion, there is no way PZN keeps their clients, looking at thier abysmal performance.

My other shorts in Marshall & Ilsley Corporation [[Mi]] , Legg Mason, Inc. [[LM]] , Comerica Incorporated [[CMA]] , Morgan Stanley [[MS]] , Cathay General Bancorp [[CATY]] , East West Bancorp, Inc. [[EWBC]] , First Horizon National Corporation [[FHN]] and Pacific Capital Bancorp [[PCBC]] are minting coin for me. Ignore Fannie Mae [[FNM]] at your own peril.

At these levels, I really like Legg Mason, Inc. [[LM]] short.

And, don’t forget to sell the casinos and airlines. On the short side, I like Las Vegas Sands Corp. [[LVS]] , Wynn Resorts, Limited [[WYNN]] , Continental Airlines, Inc. [[CAL]] and Boyd Gaming Corporation [[BYD]] .

Finally, on the long side, Clean Energy Fuels Corp. [[CLNE]] ,Barnes & Noble, Inc. [[BKS]] , Apple Inc. [[AAPL]] , Research In Motion Limited (USA) [[RIMM]] , along with a variety of tech stocks, look decent for a trade. My gut says, the market bounces today—but the gains will not stick.

Pardon me Update: The above post was written before the COLLAPSE of crude, which has caused a tidal wave of buying into egregious, yet asinine, bank stocks.

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[youtube:http://ru.youtube.com/watch?v=8zBggu174SA 450 300]

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“The Fly” Wins Again

While “The Fly” slaves over an immaculate desk, lazy guys are golfing at Pebble Beach, missing out on all the fun.

Here is a rather quick, yet concise, recap:

Commodities were up.

Banks, Casinos, Airlines were down.

Tech was a no show, but weak.

Military stocks were solid.

“The Fly” was up another 4.5%, and he won again.

More on this later.

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