C.S. Jefferson

Look Who's Betting on Inflation

Is it a bet on inflation, or strategic asset diversification to protect existing equity value? Gold doesn't have to move much higher to make diversification into AU a sound hedge as an asset manager, rather than an outright bet on the commodity driving ridiculously higher.

I don't buy into the hyper-inflation myth because I believe asset deflation is far more real as a systemic risk than people recognize. Inflation means that housing prices would have to go up in value over time which, if that were the case, most people would be happy to drink from the kool-aid once again.

To be in gold doesn't necessarily mean you believe it's going to $2,000 or $3,000 as infomercials on television have you think by pumpin' "semi-gold composite" coins!

To be that bullish on gold doesn't mean you're betting on inflation--it means you're betting on the collapse of the entire global economy. This strikes me as underestimating global policy that injected liquidity into the system. And if this were the case, it's not inflation or hyper-inflation that is the risk--it's a currency collapse!

Remember that all currencies trade relative to one another and with the entire global financial system in crisis, the U.S. dollar will hold up much better than people would have you believe.

And the real risk remains global in nature due to a domino effect, if one falls they all fall, so where would you rather be if decoupling doesn't realize itself?

Where would you rather be in currencies if the entire macro-economy worsened? Euros in a potential dismantling of the EU? Loons or Aussie dollars tied to commodity infrastructure demand--which requires bullish growth? Zimbabwean trillion-dollar notez?

The U.S. dollar is still the currency of choice when the world panics. And last I checked, it's hard as hell to buy groceries or gas with gold fillings and chains.

Cramer's Mad Money - How to Trade Earnings (9/11/09)

Try wearing a collar...

Don't overpay on premium and definitely don't chase false momentum.

Know what the implied volatility is and understand by how much quarterly earnings must beat what's already baked in the cake in order to trade outside the range of motion!

Economic Donkeys

I like to say: Ride that donkey as people are kickin' and screamin' all the way up!


The more doubt and reason to invite shorts to the party is a continual catalyst to drive the markets higher.

We all know the macro-economic reality is still in crisis but the market can and will move much higher despite people screaming fire in a crowded theater.

My question is how are you going to trade it?

Remember: There is no "back up plan" in case the global financial markets collapse. This isn't about the fundamentals, it's about keeping the liquidity flowing to prevent another heart attack.

Insider Selling May Simply Be Profit Taking

It could also be liquidation risk due to overleveraged insider executives that retain puffed up ballooned bubbles of paper wealth due to stock option compensation.


Lifestyles of the rich and famous are often paid for on the backs of retail shareholders either directly, or indirectly via mutual funds, ETF'S, 401k's, IRA'S, etc!

Deflation Looms

Look, deflation risk is here if you talk about the main vehicle for household finance--namely, declining property value.

So much of our capital markets are tied to housing and leveraging off phony appraisals that asset collapses only increase the negative debt to equity ratios--suffocating any breathing room by consumers hoping to dump their properties on the next turn.

Harvard and Yale 2009 Returns

Hedging works better--just 'cause you hold an Ace, King, Queen and Jack in your hand doesn't mean you have a straight flush to win the pot.

Just 'cause you buy a bunch of lottery tickets to increase your odds doesn't mean you hit the winning numbers.

With market crashes and serious deflation risk, all asset classes collapsed last year. Even gold failed to rise and maintain above 1,000 per troy oz in the worst economic crisis we've seen!

Ken Griffin's Citadel Fund: Options Eye Candy

another well informed piece--yes, you are correct that only in the financial world FAILURE is rewarded! My mistake, politics included--but the pay grade isn't on par with Wall Street tycoons...

I'm curious, do you know what their "debt to equity" leverage ratios are? How overleveraged were the CITADEL flagship funds?

To be honest, I'm surprised the hedge fund industry has survived so well facing redemptions and liquidity issues--not to mention, Bernie Madoff, Allan Stanford and mini-Madoff rip off con-artists that have followed.

Where are the clawbacks against all those hedge fund managers that extracted millions and billions in performance fees from unrealized paper profits?

If you pay me to lay down bets in the casino and I can take profits when I hit blackjack and not incur any losses or responsibility when I bust, where is the moral hazard?

What good are double-digit annualized returns if at the end of the bubble burst your entire principal is wiped out?

Ah, well, I digress......

The Capital Games that Banks Play

By the way, recently I closed out some long vertical call spreads on GS that turned out quite well!

GS has survived the market credit crisis and will emerge only stronger than its peers

I'm not long GS at this point because it's no longer cheap on valuation, but GS is a vanguard of the entire financial sector and all active traders need to pay attention to it's performance as a leading indicator

The interesting thing is that AIG is potentially emerging as a survivor as long as the market can recover. AIG is aggressively writing risk by collecting insurance premiums and doing what it did best.

I don't believe AIG is the culprit here even though the media has made them out to be the easy target as the financial scapegoat.

I hope AIG survives simply to provide stability to the market and, more importantly, to all those that have active policies and annuities. AIG is more important to many average Americans than people realize and until there is--if ever--a "PBGC/FDIC-like" national insurance guarantee, it really leaves many families at the perils of the market.

Are We Seeing a Bogus Dip?

There were two potential bottoms in the markets. The crash of 2008--which I contend was the real bottom--and the index low of March 2009, whereby approximately 40% of the underlying S&P 500 was higher despite the average telling a different story.

If anything, March may have been the retest that everyone seems to be anticipating now. It may, as a contrarian, be the reason this market can drive much higher from here! Or, at minimum, not sell off as so many doom and gloomers are predicting day after day--regardless, you have to pay to stay in the game and that means purchasing insurance against long investment themes,

It's just an opinion, but I wrote about this earlier which, if interested, you can refer to my blog

The Capital Games that Banks Play

Very interesting article.

The only people that need to come clean are those that shorted the underlying securities and drove the risk premium in the CDS market higher which, unfortunately, became a catalyst for the market collapse last year in 2008.

Why American taxpayers had to bailout winnings in a broken underground casino has never been explained.

Yes, I get it, we had to do what was absolutely necessary to save the global system, but at what cost..? And, more importantly, to whose benefit?

This is why, fundamentally, any argument that tries to deny universal health care or access to health care on a cost basis is flawed when so much was wasted on corporate welfare.

At least sprinkle some crumbs to the average person struggling to pull themselves out of the closet thing we've seen to the Great Depression!

Base Metal Miners Win UBS Upgrades

This is almost like forecasting yesterday's sports scores recap!

Talk about being late to the trade--where was this brilliant analysis when commodities crashed in late 2008?


FCX is a tremendous play, of which I am long, but to recommend a buy now after moving over way over 200% net profit off the lows is way late to the game

Quite simply, the risk to reward is not in favor of new entrants to this stock. If you can't resist now, add some put insurance or, at minimum, apply the collar trade to protect against volatility!

Copper has moved well over 100% off the lows and represents a pure play on global infrastructure demand and indirect currency hedging by China through stockpiling of base metal commodities

A Look Inside the Cockpits of Defense Contractor CDS

NOC's competition from BA/LMT in the UAV market will be interesting.


LMT is undervalued below 85 and BA is equally undervalued below 55--I am long both BA/LMT as overweight positions.

The only reason I didn't jump on NOC was due to sector overlap, but NOC is another viable defense play

Cramer's Mad Money - All About Bull Markets (9/2/09)

Nice article and recap on investment theory.

It's not the bulls that you gotta worry about--it's the "bullshit" left in the path of the pump and dumpers

I've said this before: Love him or hate him, Jim Cramer knows a lot more than he pretends to know.

SPX Short Straddle Still Hugging 1000 Level

Interesting trade, but I think I'd prefer to buy an October "strangle" and be long SPX calls and puts.

I think this market has really given multiple opportunities to be buyer's of volatility regardless of direction.


My argument is that this market is very much positioned for movement up or down and we sit at levels of consolidation around the 1,000 mark on the S&P 500 that are begging to have a push in volatility--We are at the nexus point of a binary event waiting to happen.

When and where is the question and, as you rightly pointed out, the neutral position of selling the Theta premium worked but I'm not sure for how long.

Good article

Volkswagen Sets Sights on Suzuki

volkswagen had the best short squeeze story yet! Was a pleasure to see hedge funds shorting the stock blasted from the depths of the water!

Too bad the Treasury didn't use all that TARP money as a hedge fund manager would and buy the market after the crash last year to create the same short squeeze action

Plunge protection ninjas unite