Taking Some Profits: Where Is This Country Going?

In 4 sessions this week, the market has almost completely obliterated the previous 2 weeks of losses. I am laughing at last Friday's employment report now - as if those things mattered. I proclaimed I'd be looking for a bounce and then be adding some short exposure as we got closer to S&P 1070 - I am mulling it here.

My strategy was to get short somewhere between 1070 to 1080, and then abandon ship on that side of the boat, if we break north of 1080 because that would mean a new leg up. It's actually very clean technically - textbook. Thus far it's played out perfectly, but I have deep hesitation to short here. We have the best of the banks reporting earnings next week and since the entire American system has been subjugated to make them filthy profitable, I can only imagine the cries of glee next week as Goldman Sachs (GS) and JPMorgan (JPM) raise the heads of the shorts on poles with their massive profits.

Remember we are pretending balance sheets don't matter anymore for banks since we changed a few accounting rules... so its a tough one here. As we wrote in our weekend summary, the question will not be about "beating numbers" because analysts simply have no clue how beneficial chopping employees to the bone will be - but does valuation even matter anymore? Just because a consumer discretionary company beats analysts by 3 cents should I really bid it up... if it's already valued at 60x forward estimates? So far the market seems to say "yes" since they have nothing else to do with all the fiat currency Ben is printing for us.

I have a ton of cash, so rather than shorting for now, I am going to follow the same strategy (over S&P 1080, under 1080) but instead of getting short, I'm going to simply sell some long exposure into the strength and use the massive cash hoards as a cushion against any downfall.

Sold half of BHP Billiton (BHP) position; recall we bought a chunk last Friday when the monthly employment report mattered for a few hours. Technically it's rallied to a recent high; either a double top is forming or we are about to start a new leg up - if its a new leg, we'll get back in.


Sold 1/3rd our gold position in Powershares DB Gold Double Long (DGP) - what a run. I have to sit back and assess this, with the US dollar the black sheep of the world, this could just keep going, but I want to lock in some profits.


Sold 1/3rd our silver position, Ultra Silver Proshares (AGQ) - all the same comments as gold; this has been a monster the past 4 sessions: +25%.


Sold 1/3rd of Blackstone Group (BX) - as with BHP Billiton; we added to this position Friday on the selloff and now exiting.

Sold 40% of Starent Networks (STAR); will look to rebuy on any pullback closer to a moving average.

Sold 1/4th of Discover Financial (DFS) - same game plan as Starent for buybacks.

Sold just under a third of E-House Holdings (EJ); same strategy to buyback as STAR, DFS

Also sold a levered long (ETF TNA) which I bought earlier in the week.

**************************************

While I'm enjoying having a "hot hand" in the stock market, I am actually profoundly distressed about what is going on in the real world. It's just seemed to have become a game of sacrificing the long term of the country to create an illusion in the present. There are 2 parallel universes - the Wall Street world and the Main Street; watching one gloat while the other suffers is surreal. We are creating such massive issues for our future I cannot believe it anymore - but much like 1999, it didn't matter until the *bleep* hits the fan. You could not short in 1999 and right now you cannot short here for anything longer than a few days. When the bill comes due for what we are doing, I expect to derive massive profits from the short side ala 2000-2002. But when this period's March 2000 is, I don't know.

I honestly just feel sad when I think about what is being done and how the masses don't care or don't understand. Yesterday there were rumors that the government was handing out $3000 checks in Detroit; in fact it was a $15M program (application process) to help people facing foreclosure and the like... there was a stampede of 50,000 people for 3,500 slots. This country is a mess. When it all comes to a head is unknowable, but I become more distressed on our long-run future by the day.

• The lure of federal cash assistance for needy Detroit families sparked pandemonium Wednesday at Cobo Center, as hundreds of city residents pushed, jostled and trampled others in a rush to apply for the aid.
• In a scene that spoke volumes about the despair of one of the nation's poorest cities, about 50,000 Detroiters descended on downtown to pick up 5,000 applications in hopes of enrolling in a federal program that pays a few hundred to a few thousand dollars to low-income residents to help pay rent and utilities.
• Wednesday's line stretched for blocks and before the process could be completed at least six people were taken away by ambulance, 150 police were called to the scene and the city stopped distributing applications before noon.
• The mayhem seemed to reflect the desperation of a city in which one in three lives in poverty and 28.7 percent are unemployed. Others said it was exacerbated by rumors the government was literally handing out cash.
• Walt Williams, 51, arrived at Cobo before sunrise to get a good spot for the 10 a.m. opening of the doors. "This morning, I seen the curtain pulled back on the misery," a bewildered Williams said. "People fighting over a line; people threatening to shoot each other -- is this what we've come to?"

These scenes are akin to the ones when American helicopters drop food and aid on refugee camps or victims of typhoons in some far off poor country. Desperate people reaching out their hands hoping a box falls somewhere near them. Except the helicopter with the aid is inside a building.... inside the richest country on Earth.

Comments

[doubleguns:]

TM why are you selling. Could you just put in trailing stops and run for a while.

DGP and AGQ are two of my favorites. I am running with stops.

Oct 09 08:52 AM

[TradingHelp...:]

"My strategy was to get short somewhere between 1070 to 1080, and then abandon ship on that side of the boat, if we break north of 1080 because that would mean a new leg up."

Wise words Mark. But 0.25% rates and stimulus policy in the hundreds of billions means we will see SPY 1,200 before 800.

Oct 09 08:55 AM

[John Galt:]

So when is the last time Detroit didn't have a Democrat for mayor? It's been over 50 years...

The definition of insanity is doing the same thing over and over and expecting different results.

PS if those people were in bed with all the politicans like Goldman Sachs, they'd all get 3,000 dollars checks and probably more.

Oct 09 08:57 AM

[watchingellie:]

Great point of view, by the way where did you tell everyone about your buys last week that you are now taking profits on. Do you have a subscription service?
Thanks

Oct 09 10:40 AM

[tivoboy:]

TM, I am doing just as you. I bought in a number of the same positions last friday, including the BGU and SSO, but have been scaling out since Wednesday and today even more so.

Mark my words, there will be a pull back next week, most likely at the end, but then the FOLLOWING week I think we'll see even another leg up (this could be an H&S with TWO HEADS) before a more precipitous fall towards the end of the month.

Oct 09 10:50 AM

[Jasper M:]

While I HOPE for a breach of 10,000 (on the Dow), the better to flesh out my put book, I am Not holding my breath. While I recognize that tops can take awhile to form. the awarding of the Nobel peace prize (fercryinoutLoud?!?) to the living avatar of empty hope is one hell of a top signal.

Oct 09 01:26 PM

[TraderMark:]

I have a website

3 buys were posted Friday, BHP and BX among them

www.fundmymutualfund.c...

Seeking Alpha just grabs a portion of the sites posts and puts them here, so you're getting just a snapshot of postings here.


On Oct 09 10:40 AM watchingellie wrote:

> Great point of view, by the way where did you tell everyone about
> your buys last week that you are now taking profits on. Do you have
> a subscription service?
> Thanks

Oct 09 02:13 PM

[TraderMark:]

p.s. with Goldman Sachs and JPMorgan reporting next week I find it hard to believe the market will falter - I am assuming a gap up even Wed or Thursday morning on either both of their reports and off to the races.

Oct 09 02:14 PM

[TraderMark:]

I don't have trailing stops as an option in the system that holds my model portfolio

I'd literally have to place stop orders and change them by the hour or day. Don't have time.

AGQ was up 25% in 4 sessions, good enough for me to snap off some profits - I am like a squirrel, I like to store my acorns as they fall for winter. Rather than simply wait for all the acorns to fall and then try to rush them all back my nesting spot at once.


On Oct 09 08:52 AM doubleguns wrote:

> TM why are you selling. Could you just put in trailing stops and
> run for a while.
>
> DGP and AGQ are two of my favorites. I am running with stops.

Oct 09 02:16 PM

[Paul Harper:]

Mark ... just been looking at commodities; miners in particular. Any thoughts on BHP that you would care to share here ? RTP is looking ripe to hit it's 50 day EMA (imo)

Oct 09 03:04 PM

[TraderMark:]

as explained above BHP is either forming a double top or about to start a new leg. It retreated today but any close over $70 would be quite bullish.

RTP looks identical. Remember to the quant computers they are all the same stock ;)


On Oct 09 03:04 PM Paul Harper wrote:

> Mark ... just been looking at commodities; miners in particular.
> Any thoughts on BHP that you would care to share here ? RTP is looking
> ripe to hit it's 50 day EMA (imo)

Oct 09 04:17 PM

[lower98th:]

Your remarks about Detroit and Main Street are so poignant, and on point. There is something that is just not civil or even humane about all the glee on CNBC, all the justification for $100 million payouts, when it is flaunted in the face of those in deep despair. It is especially so when there is good reason to conclude that the rewards went to those running, with impunity, a con game, a dishonest scam instead of a great, smart business. You wonder who raised those CEO's......not my Momma, from whom you could earn a righteous whipping for rubbing someone else's nose in your good fortune.

PS. I am half cash, 1/3 long equities, about 20% long Gold, energy, and foreign currencies. But I don't feel good about it.

PPs. And speaking of unintended consequences. My twenty-something son is very interested in some overseas job offers, salaried in non-dollars. Maybe instead of "them" coming here, we will lose our educated kids to more stable realms.

Oct 09 05:31 PM

[Paul Harper:]

PPs. And speaking of unintended consequences. My twenty-something
son is very interested in some overseas job offers, salaried in non-dollars. Maybe instead of "them" coming here, we will lose our educated kids to more stable realms.

You make a very interesting point here, I read a while back that many foreign professionals are repatriating from the US & the author of that article (Newsweek I think) argued that this was not a good thing for the US economy, he referred to it as "brain drain"
With the state of the US economy right now, I would imagine that many US citizens & especially the new generation leaving college/university in the next 5-10 years will be looking at a similar option to your son.
This double whammy of highly qualified young people leaving the country could have a very hard detrimental effect on any recovery & the impact would be felt for a long time.

Oct 10 12:37 AM

[a. palmer jr.:]

Rather than just giving the Detroit people money the government should have given the people food and paid their rent and utilities directly. How much of the check do any of you think went for tattoos, jewelry, liquor, and other unnecessary items?

Oct 10 09:39 AM

[bluesky123:]

we need to start tens of thousands of new companies every single year for the next 10 years. Then there will be growth across all US states and industries. You can't select one "mega" project like a new grid. Take $10billion, give a bit to VC firms in every state and say "finance start ups. Here's seed capital. Each firm funds 15 companies a year". Growth always comes back to creating lots of new companies. We can't create lots of new big companies so we start with creating lots of start ups that become big companies. This is a 5-10 year plan. We don't get out of this monster mess in the short term. Then you won't have scenes like at Cobo Center or Derrion Albert's murder in a street frenzy. People are being reduced to animals because they can't keep their head above the water anymore. BLS "U6" is now 17%. Next year it will be 25%.

Oct 11 09:32 AM

[Alan Young:]

"While I'm enjoying having a "hot hand" in the stock market, I am actually profoundly distressed about what is going on in the real world."
My sentiments exactly, Mark. I'm grateful for the chance to reconstruct the nest egg that was so rudely smashed last year, so my anxiety about my personal security can be alleviated, but in exchange for anxiety about the future of our society. It hurts to care too much; but my daughter, now in college, is facing a very challenging future no matter what.

Oct 11 09:37 PM