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40 years in the investment business. Partner & Portfolio Manager, Quacera, LLC a Registered Investment Advisor. Director, R&B Cellars, Alameda, Ca.
My company:
Quacera, LLC
  • The Noose Tightens

    Bernanke complained in a speech in Atlanta today, that those nasty old banks he just bailed-out are refusing to lend which is hurting the housing market. Only Ben could miss the irony: in the nineties, banks were nearly forced to lend to all and sundry and the carrot was that they'd be complying with the wishes of Congress & the Executive. Laws were passed to compel lending and rates were attractive enough that profits were assured. Alan the G demonstrated several times that there was the "Greenspan Put" to mitigate risk so it didn't matter if the borrower had no money or hope of getting any, as long as our masters were seen as benefactors. The banks were complicit in the fraud and there was plenty of blame to throw around. Sir Alan then and Ben now, manipulated rates to accommodate one whim after another and now they are to the point that bank profits are miniscule and taking on a 30 year commitment at these rates will be poison when their cost of money rises, as it will. Public opinion, awakened to the fleecing no longer supports saving risk takers with tax money so any mortgages written now will lose substantial value just as any 3% bond would in a 5% (or higher) market. But our Ben is getting cranky. He tried to game the system in favor of housing and that failed. On September 13 he changed target to stocks and they are down since by more than 8%. So, now here he is blaming the rain on the wet streets. As we have said, probably too many times, this will not end until the Keynesian insanity ends. Government manipulation of the economy does not work and never will. Ben is getting an education.

    Nov 15 3:20 PM | Link | Comment!
  • Quacera Market View

    We have seen gradual signs that Mr. Market is tiring and in need of a rest. A 12% run-up of the S&P since January 3 is a sprint not equaled very often and a pause would make sense. Our technical indicators also show the beginnings of some selling based both on world economic problems and natural profit taking. Nothing about the future is ever perfectly clear but markets never go straight up and corrections are frequent reminders of this. Interest rate spreads between Treasuries & junk bonds are extremely narrow as well indicating complacency about risk in lower quality assets and that stretching for yield has reached extremes. We are wary of high yielding ETFs, closed end funds and bonds as all are trading at prices at or above all time highs. As mentioned above, Ben has been unsuccessful in getting our economic engine to run on paper & hot air and this, in our opinion, will be his 3rd try at testing his fuel of choice. We expect that this attempt will not prove to be the charm but if we're wrong and things get better through the fall one of the unintended consequences will be a more virulent rise in domestic inflation. This will change his plans dramatically and force a tightening of interest rates. Rising rates will then derail any nascent recovery. This will be exacerbated if the President somehow convinces Congress to raise tax rates.

    We said in our opening rant of 2012 that the odds of a good start for stocks were high but we now see clouds gathering and are watching our indicators for confirmation that a trip to the sidelines is in order.

    The mid-week rally occurred at the 50 day Simple Moving Average. On cue, the computer traders whose algo- driven systems are programmed to defend specific price points kicked in and we got back some of the recent losses but Friday's action fits the scenario in which we expect a short bounce followed by further selling. This would also square with our theory of at least 1 more Fed test failure and at least a 20% pullback. Unfortunately for our Ben, he is nearing the end of his tether. Rates will be difficult if not impossible to lower from here without a major explosion in food & fuel costs. We have little faith in the efficacy of his plans anyway but we believe it is entirely possible that things could get out of hand and the Fed could lose control of the situation. Watch this space.

    Apr 16 2:01 PM | Link | Comment!
  • Quacera Quarterly Report
    After a profitable quarter for all of the indexes, we are beginning to see some weariness in a few of the economically sensitive stocks along with those companies that cater to the 1%. That said, we find Corporate America in the best profit position as a percentage of GDP since the second world war. Stock buy-backs are at levels last seen in 2007 but if there is a chink in this armor, it is that insiders are selling into this rally more heavily than usual. We also have reservations about the continued money pumping operations of the Fed. Looking at the past two years, there seems to be a point at which Ben needs to test the mechanism to see if it will run without priming. In both 2010 & 2011 we saw a pause in the action as the Fed seemed to be stepping back and in each case the market fell without its usual support. In 2010 we had an S&P 500 inter-day top of 1219 in April, the printer was turned off and the result was a drop to 1011 by July. In 2011 there was a similar pause that began at the end of March at 1370 and bottomed out at 1074 in October. The Financial stocks have fared well in this environment but with all of the stimuli of the past few years, we find it odd that the economically responsive areas such as heavy equipment, utilities & mining have failed to participate at the same level. If the Fed decides to test the durability of its policies once again, we may be in for another correction of 20% or more. This time though, in an election year, restarting the printers might not be as easy an option because Ben is nothing if not politically sensitive. Our QPM Radar™ early warning System is flashing caution as well with the trends showing signs of rolling over.
    Apr 02 1:18 PM | Link | Comment!
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