Paper Loss? Yeah, Right

It's a huge folly when people are saying that unrealized loss is a "paper loss" only. Come on, IRS does make a distinction, we shouldn't. We gain or lose whatever we do, no matter if we sell or cover. So, looking at your account, remember: what you see is what you have, minus commissions to close positions.

Jim explained today that unexpected rally this week is from mutual funds rotating part of their money into stocks. Well, that explains something. He doesn't believe we are past bottom. I don't believe it either. There are way too many people declaring bottom already. Real bottom happens when almost everybody thrown the towel.

Selling The Rip

In this bear market, selling the rips is a must. I sold half of my positions in Red Hat (RHT) and Ebay (EBAY).

Fed cut rates today. Great. Is it too late? No idea. We are in uncharted waters, real Fed rate is below 1% for the last couple of weeks anyway. The most important number, 3 months Libor rate is still around 3.5%, not good. Even worse the situation when banks still don't lend money to businesses. I mean, they do, but number of rejections is very high, rates are extremely high. As a result, money velocity is down big and we are still in danger of falling into deflationary spiral.

Full disclosure: at the time of publication author had long positions in RHT and EBAY. Positions can change any time.

Disclaimer: This article is not intended as an investment advice. Every person should make her/his own investment decisions based on all available information and advice from her/his own financial advisor.

What a Day!

It's a confirmation that's we are in a bear market. It was mentioned many times already that big upside days don't happen in bull market, when market "climbs a wall of worry".

Didn't trade anything today. May be will sell something tomorrow, we'll see.

I want to add a little bit to my previous article (this one). There might be some misunderstanding how structural crises work. Emergence of new technologies doesn't mean that there will be a structural crisis. New technology need to change something radically, change the way a lot, better yet, most, people live. In 1920s that new technologies were automobile and tractor. They were not new, but in 1920s they mostly replaced horse in transport and agriculture. That changed the way most people lived in the developed world. Lots of businesses were created to produce, service and distribute new technologies. That created 1920s boom. But then changes in the economy created huge imbalances. Not only old businesses (horse harnesses, veterinary services etc.) started dying en mass but also demand for agricultural goods fell (less horses to feed), productivity grew up a lot in agriculture, moving people into the cities, transport became much cheaper. That's the level of change you need for structural crisis. That's why I don't think that the Internet alone could be enough to create structural crisis. It didn't bring enough changes to people and businesses. But together with globalization, it's quite another matter.

Great Depression v2.0: Missing Piece Of The Puzzle

I mused about possibility of repeat of Great Depression here almost a year ago. I thought that we have only two crises of three: financial and real estate, but I couldn't find structural crisis. It just hit me: we have a huge structural crisis now, caused by globalization. And, just as an icing on a cake, we also have the Internet, which destroyed a lot of old forms of money making and will destroy even more. So we have all three components, the only question is: can Fed print money fast enough? Because our only hope is to inflate our way out of GD v2.0. It doesn't even matter anymore if we have big inflation as a result. Who cares! It's still better than deflation.

I'm also afraid that governments might try to roll globalization back. That cure would be much worse than disease. Of course, nobody can kill the Internet right now, it's here to stay.

Today action on the market was strange, to say the least. Futures stopped at limit before opening, I expected capitulation, was ready with trading screen open and finger on the mouse... And... nothing. Of course, almost everything went down (with exception of UUP, I'm still congratulating myself with that bright idea). But not enough. And it was obvious from the action that buyers were ready, sometimes with limit orders in the system. Once prices went down to some level, buyers took everything and then some. My only buy for today was Altria (MO), I increased my position. At price under 19, dividend rate is over 6.7%, that's incredible. And company just increased dividend, no way it's a dividend trap. Who needs bonds if you can hold Altria! The fact that it's an ultimate recession-proof company doesn't hurt.

I think market is going lower. Sellers are not done yet, we need to see big capitulation.

Full disclosure: at the time of publication author had long positions in MO and UUP and no positions in other stocks mentioned. Positions can change any time.

Disclaimer: This article is not intended as an investment advice. Every person should make her/his own investment decisions based on all available information and advice from her/his own financial advisor.

Taking Profit

Today I sold shares of Apple bought yesterday. Not very big profit, but profit anyway, better than loss. Sure, yesterday after hours was the time to sell. But OK, it's still profit.

May be I'm wrong about UUP? Sure, dollar should grow now, but at such speed it soon will be at parity with Euro, with purchasing parity of around 1.15. On the other hand, purchasing parity quite often is different from real course. I enjoy the ride so far, but it's time to monitor situation better. Euro parity might be a good time to sell.

Doug Kass is still thinking about inflation in today's Thestreet.com article. Come on, we are in deflation already. I really like Doug, read all his columns, but his idea of coming "blahflation", which he defined as high inflation with zero or lower growth, seemed ridiculous to me even half a year ago. Now he woke up. Who's next? The problem of perception: Doug's generation still thinks that inflation is the scariest thing in economy and they just don't see the horror of deflation. Unfortunately, this generation is at power, in companies' boards, in CEO chairs. They are making decisions right now. Too little, too late.

Full disclosure: at the time of publication author had long positions in AAPL and UUP and no positions in other stocks mentioned. Positions can change any time.

Disclaimer: This article is not intended as an investment advice. Every person should make her/his own investment decisions based on all available information and advice from her/his own financial advisor.

Sweet Apple?

Added a little bit of Apple today, 2 minutes before close. Price was way too low, below 92. Looks like I'm going to pick up some profit on it, after hours it closed over 103.

This is a trade, my current position is big enough. I mean, Apple is pretty low at any price below 150, but with current multiple contraction, I don't know when is it going to grow.

There is still a lot of talk about inflation around, although some people start to wake up. I'd like to have inflation now! No such luck, we are in deflation. Banks just don't want to lend. Libor is going down, good. Banks lend to each other. But they cut credits to businesses and people and that's the problem. As far as I see, almost nobody's buying commercial paper.

Currencies behave as I predicted. The only strange thing is a jump of yen. What, Japanese Central Bank doesn't dump yens for dollars anymore? Anyway, I'm not selling my UUP position any time soon. Maybe swap out of it in the end of the year, just to avoid all K1 troubles.

Precious metals are strange. Gold holds somehow, silver is down, and platinum is down huge! It was over 2000 just several months ago, now it's below 900! OK, part of it is South Africa situation, but come on! I know, auto companies spread the rumor that they are working on some nanotech way to reduce platinum usage, but it's not gonna happen next year. Something strange is going on here. Maybe Russia dumps a lot of metal? Need to look it up, might be some profit here.

Full disclosure: at the time of publication author had long positions in AAPL and UUP and no positions in other stocks mentioned. Positions can change any time.

Disclaimer: This article is not intended as an investment advice. Every person should make her/his own investment decisions based on all available information and advice from her/his own financial advisor.

I've Been Wrong!

I'm back from vacation. Just "enjoyed" last two weeks.

What did I do wrong? I mean, I did some things right, but rights will take care of themselves.

Didn't sell anything before going on vacation. Gross error. Cost me a lot. Didn't leave any buy orders for insanely low prices on some of my stocks. Cost me as well.

What to do now?

First of all, I'm selling Ebay and Red Hat. I don't care about the price anymore, those companies don't have much growth potential in this environment. Ebay's quarter was so-so, outlook is just horrible. Meg Whitman was a very good CEO, with her retirement this company doesn't have any direction. Decision to draw on credit line to finance next takeover just makes my decision easier. I prefer companies without debt right now. Red Hat has OK business, but growth is slow and investors doesn't seem to care about it.

Second, I'm not buying into this rally. If it goes way higher, I'm selling something else. I don't know if we escaped Great Depression v2.0, but recession is still coming and I think that October lows will be retested. Then it would be time to buy. Carefully, in stages, in small increments.

Oil is tricky. I didn't think it could go that low that fast. It overshot my price target, 90, by a wide margin. Now it can go any direction. But long term outlook should be still down. Other commodities are simpler, commodities don't go up in recessions.

Thestreet.com is a special case in my portfolio. I'm thinking of buying more. It's way too low, it can't be right. Of course, I can be wrong.

Full disclosure: at the time of publication author had long positions in RHT, EBAY and TSCM and no positions in other stocks mentioned. Positions can change any time.

Disclaimer: This article is not intended as an investment advice. Every person should make her/his own investment decisions based on all available information and advice from her/his own financial advisor.

See Ya

Going on vacation for couple of weeks tomorrow. Hope to sell something into strength before that, will let you know.

Unless I sell something, next post after 18th.