Moral Hazards Amok

The Dow's Lost Decade

Good work, Fred.

AAPL is a great company with great potential, yet it’s my opinion that it’s also great short and will be unless it breaks above $90 and stays there.

Pull it up on a candlestick chart and notice the incredible support it had around $87. Yet on Thursday, (Nov 20) it broke down through that support very convincingly with high volume. That strong support is now strong resistance.

Friday, it set an even lower low but did not make it back to Thursday’s high. It also deviated from the general market in that the $SPX was up 6.3% but AAPL was up only 2.6%.

Fundamentally, this consumer stock hasn’t yet been punished enough to reflect market realities, imho. The great credit superbubble has burst (as I’ve been pointing out for months) and iPods, iPhones, and music downloads at .89(?) are not a necessity that today’s shell-shocked and credit contracting consumer really needs to have.

This stock has some support around $70, but I expect it to break through that without much effort.

I’ll go long when we start to crawl out of this financial vortex.

Disclosure; purchased April puts on AAPL last week.

How Deceitful Are the Big Banks?

A couple thoughts come to mind after skimming through the report.

Obviously, Sarbanes-Oxley doesn’t prevent this type of nonsense. It’s time to ditch Sarbanes-Oxley as it’s only burdensome overhead to American corporations that doesn’t work. In the end, if a corporation wants to lie and cheat, it will simply lie and cheat.

The beat goes on. The FED will always be your ace in the hole if you’re an investment bank and will always guarantee your reckless but highly profitable behavior. If LEH or BS needs a bailout from the FED and taxpayers due to their reckless speculation in RE, obviously they will get it, despite the terrible moral hazards being created. Now investment banks are helping to create yet another asset bubble by speculating in oil. $200/barrel is easily on the radar. What happens if the world economy hits the skids thanks partly to their speculation and prices fall back down to $60? Not a problem if you’re an investment bank. The American taxpayer that you worked over by stealing their income, putting them in the unemployment lines, and wrecking their 401ks, is always there to bail you out. Many more examples of the FED and Treasury underwriting highly destructive and morally behavior of investment bank at the expense to the rest of us can be given.

Finally, the Fed can pound their chests and now make a big deal about how they will seriously address inflation, but we all know it’s just a show. If the funds rate needs to be 7 or 8 percent they will keep it at 2, or if they economy slows down further they will drop it to 1. What ever it takes to save the RE bubble from seriously hurting the investment banks they will do it even though it creates runaway inflation. Also, If M3 data needs to be totally ignored because it’s running at over 15%, but it greatly benefits the investment banks and the games they play, then the FED will conveniently ignore it. Double digit inflation in real world terms is here for the foreseeable future.

Lessons, the FED will do whatever it takes to protect investment banks despite runaway inflation, moral hazards, stealing from the taxpayer, a wrecked economy, third world starvation... whatever. Allocate your investment portfolio accordingly.