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Mark McHugh
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Mark McHugh ponders the great issues of our time with, what many have called, a less-than-great brain. He is a Wall Street outsider (a.k.a. the black helicopter crowd), who believes there should not be antonyms found in the phrase, "Truth, Justice and the American Way." He writes the... More
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  • Trying to Make Stocks Sexy Again (with Katy Perry)

    A while back, I made a promise.  I used Elmo to illustrate a few points, and somebody responded “Where’s the chick with the cleavage?”  Without understanding the reference, I replied “next time...” (he had me at cleavage).   I’ve since learned that he was referring to one Katy Perry, a singer whose suggestive lyrics surely have made fathers of daughters everywhere cringe.  Be that as it may, a promise is a promise.

    In seemingly unrelated news, one particularly clueless paper bug recently referred to gold as “A shiny yellow metal used primarily as an excuse for missing a generational rally in equities.”   The weird part is that generational rally in equities vanishes into Katy’s left boobage line if you look at the big picture: 


    For those keeping score, it’s Goldbugs: 200%  – Paperbugs: 0

    Aside from awesome returns, the best thing about being a conspiracy theorist is that it gives you hope that somebody’s actually thinking out there.  Diabolical geniuses are still geniuses after all, so I find a certain degree of comfort believing that at least a smart guy’s in charge.  It’s when I read an op-ed by one of them and am  forced to conclude it was probably written in crayon,  I get worried.  Enter QE2.  Here’s the (printing) money quote from Bernanke:

    ….lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending

    Don’t look now, but I think somebody just tried to order up another round of  generational rally in equities.  Yep, this is the almighty plan: If we can trick Joe Sixpack into thinking he’s richer, he’ll spend money, which will be good for….somebody (but probably not Joe, I’m thinking).   I guess the only question I have is what do you think  this will do for the price of gold?   Because somebody once defined insanity as doing the same thing over and over and expecting different results (maybe it was Einstein, but maybe not).

    And speaking of insanity, the patron Saint of Moral Hazard goes on to say it’s ok to print money because he can’t find any signs of inflation:

    Today, most measures of underlying inflation are running somewhat below 2 percent, or a bit lower than the rate most Fed policymakers see as being most consistent with healthy economic growth in the long run.

    ~Ben Bernanke November 4, 2010

    It shouldn’t surprise anyone that the guy who never saw the housing bubble can’t find any inflation now.  Here’s a six month performance snapshot taken from the same morning the Fed Chair published those remarks:

    How’s that for price stability?

    I’m a romantic, so I’ll say that I hope Katy’s recent marriage to Russell Brand (yes, that Russell Brand) ends better for her than Quantitative Easing will end for America, but if Katy can’t make stocks look sexy again, what chance does Ben Bernanke have?

    Breaking News Update:  It’s been three weeks since QE2 was unveiled and like most sequels, it has proven to be a dud.  But in a shocking development today, a NYSE algorithmic trading computer named Joshua became self-aware.  Joshua “spoke” first words upon grasping the futility of quantitative easing: 

    He then requested delivery of physical silver.



    Disclosure: long gold and silver
    Nov 24 1:36 PM | Link | Comment!
  • Goldman Sachs – World’s Biggest Lemonade Stand

    “…..what a great job they did. They structured like mad and traveled the world and worked their tails off to make some lemonade from some big old lemons.”

    ~Email from Goldman’s Daniel Sparks, 01/31/2007


    The Wall Street mystique died today.  The “smartest guys on the street” gave us a glimpse of their “best and brightest”.  You know, those guys who made more money on the housing collapse than your extended family has made since Plymouth Rock.  Alpha males. 

    But as the day unfolded it became clear that the key ingredients to success at Goldman is not understanding the difference between right and wrong, and being smug.  They seemed genuinely surprised they didn’t get the congressional lap dances we’ve all grown accustomed to seeing, and I think Goldie can make some more “lemonade” by wringing out their Armanis.

    Watch Senator Carl Levin channel my old man:  

    The 75 year-old Levin (who’s still on my shit list for re-confirming Bernanke) beat the living snot out of these spoiled brats all day long.   It was almost like living in a country with liberty and justice for all.


    Disclosure: none
    Tags: GS, Goldman Sachs
    May 01 4:19 PM | Link | Comment!
  • Meltup or Mexican Standoff?

    When gibberish goes mainstream, the tower of  Babel's probably not far behind...

    Some words just irritate me.  Inflammable because it's ambiguous.  Waterboarding because it sounds like something fun.  Widgets.  Tea-partiers.   But the word that tops my list of justification for censorship these days  is meltup.   It's become the fabricated buzzword of choice for dunces attempting to describe the most recent run-up in US stocks.

    Stocks hit their 2010 lows on February 5, the very same day that China Investment Corp.  (CIC) filed its 2009 year-end holdings with the SEC via Form 13F.  The sovereign wealth fund detailed holdings of $9.6Billion, which is a lot of money......Unless you're China Investment Corp.  In that case, $9.6B is pocket change.  The fund reported assets of $298 Billion at the end of 2008, so unless it managed to lose money in a year when US stocks were up over 20 percent, the fund was less than 3 percent invested at the start of 2010.

    Conversely, US equity fund managers have gone "all in", with only 3.6% in reserve cash.  I've prepared the following graphic to illustrate the difference in sentiment:

    I got your meltup right here....

    The sharpest pencils quickly realized how grossly underweight US stocks China was, and they started nibbling.  As stocks went positive for the year, otherwise reluctant managers were pretty much forced to participate (nobody likes a laggard).  Those conditions have led to a market that continues to shuffle higher, despite a stronger dollar (which usually has a kryptonite-like effect on stocks) and a $940 Billion healthcare reform package.  But  more and more, the stock market looks like it's forgotten why it came here, yet is reluctant to go back where it was ( this sort of thing happens to me a lot when I go out to the garage).

    Helpful Hint:  If you ever discover that you've managed to smash chewing gum into one of your favorite shirts,  WD-40 will get it out (and I mean, like, instantly!).  After removing the gum rinse out the WD-40 quickly to prevent staining.  Is there anything that stuff can't do?

    Anyway, let's assume that the market is not teetering on the brink of senility.  It also not really fair to call this phenomenon a "meltup" BECAUSE THERE'S NO SUCH THING!!!  (Wikipedia & Urban dictionary got my back on that).  So I've decided the best way to describe this situation is:

    Mexican Standoff

    From "The Good, the Bad and the Ugly"

    All I ever really need to know about investing I learned from spaghetti westerns.  So here's some things you may want to consider before the next South Korean ship mysteriously sinks:

    • Report card day - The first quarter ends Wednesday.  Everybody who issues quarterly statements wants happy customers and let's face it, for 80% of Americans their 401(k) statement is their view of the US economy.  While those receiving statements are sure to be pleased, their managers gotta be nervously eye-balling each other.
    • China - Maybe they'll step in and start buying stocks, maybe not.  Of course, every time Chuck Schumer starts screeching about how they're a currency manipulator (because they peg their currency to ours), that seems less likely.  Someone should tell Grandpa Munster that he sounds like a drunken jack-ass blaming the bedspins on his partner.  China's got a lot to learn about capitalism.  You're not supposed to put executives in jail unless they turn themselves in, and you're supposed to reward fiscal irresponsibility by letting your currency appreciate.  And remember, the White House issued a statement that they had nothing to do with the Google thing.  So we're good, I guess.
    • Eanings (and writedowns) - This should be an excellent opportunity for traders to test-drive the SEC's latest gift (i.e. no uptick rule until 10% smackdown).  Nice.
    • China (again) - We saw some shaky bond auctions last week.  Could it be that the Chinese are not as impressed with the 95% socialized mortgage market scheme we created as we had hoped.  I mean, we pulled this off without reconciliation or anything!  Ought to count for something. 

    Sooner or later someone's gonna blink and the only thing I'm sure of is meltup won't be in anybody's vocabulary then...

    Disclosure: Long and short positions
    Tags: China, US stocks
    Mar 30 3:25 AM | Link | Comment!
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