jswede

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  • Why I Increased My Double Shorts
    your signs of recession - a contratrian view:

    1) what's the old adage? Inverted curves have predicted 11 of the last 4 recessions? (wait - we just came out of another one last year - make that 12 of last 4!) This curve has to do with a flight to quality due to extraneous events, the magnitude and effects of, not yet fully understood - USTs is where the market puts their cash in times like these. 1998 LTCM/Asia created the same reaction, and was NOT followed by a recession

    2) The decline in the dollar started with a correction from an overvalued greenback as US rates were cut to 1%, continued as Europe's economy began to wake, then further as the 800lb gorilla (BRIC) could no longer be ignored. It's a global rebalancing of investments - the dollar was too high, now it's way too low: of late, exacerbated by sub-prime (a headline risk in macroview), and ubiquitous talk of the US's borrowing "problem", and sovoreign funds discussing "better options" for reserves. Sooner before later, the dollar will gain footing, and come back -- not to the $.80/Euro extreme, but somewhere in between, and stable. You see, there are very limited "better options".
    (The dollar as the world's currency is not going away - there's no more stable (better) place in the world to do business, therefore no better (stable) currency - this is a big swing, may even happen again after this correction, but the dollar will be the world's currency until another nation with the same size, imprint, infrastructure for business/banking, and so on, becomes as, or more, FREE. It's a joke to even speak of socialist Europe as more business friendly, more stable, and freer than the US. All other currencies are WAY down on the list and can't be taken seriously.)

    3) The sub-prime and very temporary liquidity problems are in a macroview, small problems. This has turned some home"owners" upsidedown and will end HELOCs for the smallfrys, but it's not - in a macroview of the economy - a big problem. Funds lost money due to forced selling into illiquid markets, yes, and some lending operations that should never have been there to begin with went away, but this is not economy shattering - this is a small bubble deflation in terms of the US economy. Credit "crunch"? There is credit available ot most anyone who wants it - it's just repriced and the lender wants SOME collateral. At first credit repriced violently, but has since stabilized and now just represents a more sane pricing of risk/reward. Further, these huge PAPER losses being reported by banks and, for example, insurers - that are scaring us all to pieces - will in 6-18 mos (perhaps longer) look like dot.com overestimations - most all of this paper is still money good, but has been marked to ridiculous levels. (Citadel etc for example - sitting on cash, bottomfishing - will have returns unheard of over the next 1-3yrs as these assets are more rationally repriced)

    4) 200 DMA behaves like this as markets are sorting out and getting their arms around issues like this - you know, the ones that are crammed down our throat everyday from so many outlets.

    These issues have resulted in opportunity to buy some of the greatest companies, and growth potential on the CHEAP - (as well as, admittedly, some isolated pain here and there for some) - not a bear market.

    Just my view - much respect and happy holidays - jswede.
    Nov 24 13:55 pm |Rating: 0 0 |Link to Comment |View article

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