The Limerick of Finance for 09/30/12

Euro leaders face heavy unrest
Unity will be put to the test
Countries that have no cash
Will see their bonds crash
It's no plan to just hope for the best

The Haiku of Finance for 09/29/12

Spanish debt rising
If they don't get bailed out soon
They take down euro

The Haiku of Finance for 09/28/12

Wall Street forecasts vote
Four more years of the same stuff
It can't be all bad

The Haiku of Finance for 09/27/12

If you like bad debt
Europe has plenty to sell
Dumb funds buy it all

European Turmoil Gets Entertaining

I can find amusement in just about anything, especially financial follies.  Europe's move to curb high-speed trading comes after years of allowing a few dozen hedge funds to magnify market volatility.  I'm glad I won't be anywhere near European stocks when that music stops.  

Spain is about to go all-in on austerity on direct orders from Angela Merkel, probably risking civil disorder on a scale that will tempt Catalans to secede and right-wingers to call for a counter-revolution in the name of forced national unity.  I'm glad I won't be traveling to Spain in 2012 or 2013, no matter how many euros my dollar will buy.  

Europe's creditor nations threw the proposed bank bailout agreement into a tailspin again, proving that the ministers who actually have to fund the bailout are far more reticent than the national politicians who endorse bailouts for the purposes of pumping markets.  I'm glad I don't have money deposited in European banks.  

S&P is gently reminding us that European corporate defaults on debt payments just might possibly be higher because of all the problems people are having paying their bills and getting along with each other over there.  I'm glad I don't own any European corporate bonds.  

One amusing thing in all of this bad news is that the U.S. isn't doing any better.  Our GDP in Q2 was much lower than what we were told at the time.  That's not enough to keep pace with population growth so of course median income will keep declining; watch for the fake numbers on that score which will be revised downward themselves when you're not looking.  

This is only news to people who think we live in a magical candy-land where life gets better just because we elect leaders who say it will.  People fall for that every time.  That's what's really so amusing here.  

The Haiku of Finance for 09/26/12

Drunk on QE3
Bankers want more stimulus
Cash to throw away

More Alpha-D Option Updates for 09/25/12

The options trades I tried to execute yesterday didn't get accepted.  I have no idea why nothing worked but I tried again today and they went through just fine.

I wrote covered calls on my long GDX position, some of which were very close to at-the-money and others that were farther out.  I do this to gradually whittle down my gold position as inflation ramps up.  This may seem odd to those gold bugs who are convinced that gold is always and everywhere the best possible hedge against inflation.  I am not similarly convinced, and I do not regard gold with religious fervor.  It has its use in an era of generally rising prices but it is of limited use in true hyperinflation.  That's where the U.S. is headed eventually thanks to the Federal Reserve's permanent stimulus and the government's unfunded entitlements.  I'm reducing gold as it rises to make room in my portfolio for other hard asset equities that will keep pace with hyperinflation.

I also renewed my cash-covered short put position under FXF, a currency ETF I wouldn't mind owning.  The Swiss central bank can't hold down the franc's value forever.  Maybe I'll just go ahead and buy some FXF next month.

I did not renew the options positions I've recently had around FXA and FXC.  I'd rather just watch them while the euro's pending self-destruction forces the U.S. dollar higher and plays havoc with other primary trading currencies.  

The Haiku of Finance for 09/24/12

Sold off all China
All of their numbers are lies
No transparency

Alpha-D Update for 09/24/12

Let's make this as quick as possible.  My GDX holdings rose through the strike price of the covered call options I wrote last month.  I bought some back and let some go.  Gold stocks are rising again thanks to QE3 hurting the dollar so I'll be trimming my position as it rises.  Remember, gold and other precious metals  respond positively to the beginning of hyperinflationary periods but they are poor long-term hedges against the entirety of a hyperinflationary period.  That means I'll be looking to buy other hard asset equities pretty soon.

I sold off the last of my FXI, just as I said I would do for the past few weeks or so.  My FXI holdings have greatly diminished since I opened the position a couple of years ago, and they did quite well much of that time.  I have since come to my senses on the China story now that their economic figures are pretty much known to be fabrications.  I won't return to any more non-U.S. indexed equity investments for the foreseeable future.  The world's biggest economies have not decoupled and they'll all head down the slope together, at some point.

Here's how the Alpha-D looks right now.  I'm long GDX, FXA, and FXC.  I tried to renew the short option positions that expired for those two currency ETFs (and also FXF, which I'm not holding right now) but the orders wouldn't execute.  I couldn't even write short options on GDX.  What is up with that?  I'll try again tomorrow.

My pile of cash awaits deployment after the inevitable crash.  If I'm lucky, and the market crashes before the Fed and Uncle Sam launch their coordinated wage-price spiral, I may be able to buy U.S. equities at lifetime low prices.  If I'm unlucky, and hyperinflation hits first, I'll buy a basket of hard asset equities I've been tracking and hang on for the ride.

BTW, you may have seen an excess of haiku and a dearth of analysis on my blog for the past few months.  I am heavily engaged with several other projects that have come to dominate a huge amount of my time.  You'll just have to deal with what I publish until I'm finished doing some important work.  I'll tell you all about it when I'm done.  I promise.  

The Limerick of Finance for 09/23/12

The Fed has a new lease on life
With tools to fight financial strife
Well-intentioned but wrong
This bold style won't last long
When inflation sticks it with a knife

The Haiku of Finance for 09/22/12

Central bank folly
Currency intervention
Destroy its value

New Zealanders Threaten Competitive Currency Devaluation

Count on silly politicians somewhere to argue for the wrong way to promote exports.  Some New Zealand politico wants to force that country's central bank to devalue the New Zealand dollar.  Cooler heads are likely to prevail through simple political strength and solid arguments that the Swiss haven't been able to hold their currency down.  The risk for currency investors is that these pro-stimulus sentiments can catch on among people desperate to revive economic growth.

New Zealand is doing the right thing by maintaining a normal interest rate policy.  Central bank intervention destroys a currency in the long run.  Proof will come in a year or two when the euro will have dissolved and the dollar will have begun its own devaluation.

Full disclosure:  No position in the New Zealand dollar, although I am considering buying some as a hedge against the U.S. dollar.  

The Haiku of Finance for 09/21/12

Goldman hedge platform
Another waste of money
Banks should not do this

Recession Signs Abound For Dummies

The "Dummies" book series is popular because it doesn't insult it's readers intelligence.  I don't insult my readers because they're intelligent enough to get my analysis and humor.  The people I do insult are too dumb to ever read my blog.  This post is about them; more specifically, it's about a few signs of a renewed recession that they'll probably miss, because they're dumb.

The WTO is downgrading its global trade forecast for 2013.  I'm puzzled by their continued insistence on some growth rather than none.  They've caught on to all the noise made by doom and gloom prognosticators who will soon be hailed as prophetic.  It's funny to recall the chatter from a few years ago about how the world's economies were supposed to decouple, mainly from portfolio managers looking to validate their theories about geographic diversification.  The only useful diversification for the next few years will be in currencies not linked to the dollar or euro, or in countries with economies focused on natural resource production.  Everything else remains coupled due to central banks' foolish penchant for monetary stimulus.

A majority of U.S. states is now reporting rising jobless numbers.  These numbers won't be counted in federal unemployment statistics because the DOL's economists are more skilled at massaging unpleasant data than the amateurs in state capitals.  Look for more dine-in restaurants to start accepting EBT payments, because catering to welfare recipients is a growth industry.

Every baseless rescue announcement in 2008 pumped the stock market up until the unavoidable liquidity crisis hit in September.  The same nonsense is happening now, with European stocks rising on pump promises that can't be fulfilled without destroying the euro.  Equity markets move in one direction while macroeconomic data moves the other way.  Only dummies would ignore these clearly marked warning signs of a big fat global recession.  Count on Wall Street analysts to stay bullish and money managers to keep buying equities and fixed income.  They're dumb.  

The Haiku of Finance for 09/20/12

Cut backs coming hard
Wall Street knows pre-select list
Three banks will survive