Turning Heel

So it looks like I was a bit wrong when I called the top of the S&P 500 at $1,022.   After going a bit under $1,000, it went on a nice little rally to get up to a peak of almost $1,080 mid-day yesterday before closing at a little over $1,060.    I’m sure there’s a good chance that I’m wrong yet again, but I THINK IT’S FOR REAL THIS TIME.   I’ve got three main reasons that make sense, to me at least:

1) “Be fearful when others are greedy, and be greedy when others are fearful.”  - Warren Buffet

I could link to literally hundreds if not thousands of articles I have seen on Google Finance, etc. etc. in the last few weeks about how this rally has legs.  Only looking at it on a psychological level, this is generally a good sign for a fake rally.    When it is a mainstream view that this is a new bull market, not a bear market rally, after the markets have rallied 60% in half a year, it looks like a sucker’s bet to me.  The real professionals have been in for a minute, and are waiting for all the schmucks looking to get rich quick to get in the market so they can bleed them dry.  It has always been the case in the past, it’s the case right now and it will always be the case in the future.   Remember, when you go to a casino, there’s a few more reminders of how easy it is, and how much you can win than of what you can lose.

2) Unemployment /  Personal Spending

These aren’t one and the same, but they are definitely related.   Currently, unemployment is at 9.7% and underemployment is at 16.8%.   There are an absolute ton of people out of work, and if you dig deeper many of them have been out of work for a minute.    A lot of people who just do not have discretionary income right now, let alone income period.   In addition, many people are being more frugal for a variety of reasons, whether they feel their own budgets being tightened or they feel it is a ‘better thing to do.’   Regardless, a full recovery implies that the economy is back to where it was before the recession began.    It is going to be a LONG TIME before our economy reaches a level of consumption such as that of the past few decades, if ever.    The rally of the past few months has shot so far up that it is implying the market is in fact on the fast track there.   The March lows were a bit ridiculous, sure, but a 20-25% rally from that would imply that we are recovering.   A 60% rally implies that we have recovered.  Big difference there. 

3) “All I know is that this is the first time in the six-month rally that we have seen a reversal to the downside on a positive news day.” – David Rosenberg

This one is somewhat related to the first point.   Yesterday, the FOMC released its statement basically declaring the economy in the early stages of a recovery.  This was around 2 PM yesterday, and shortly thereafter the S&P reached its intraday high of $1,080.  By the end of the day, it had fallen to almost $1,060.   That is a hell of a drop for 2 hours, especially on “good” news.   In addition, the volume of trading really ramped up during the sell-off, as compared to the rise early in the day.   When there is a) “Good News”, b) heavy volume and c) a quick sell off, it means one thing – GET THE HELL OUT.   The big players have found their exit point – if you can mimic their moves, you do it all day long – they do this for a living, after all.

That all being said, since my last post, a quick update on my Roth IRA:

ACTC (Bought @ $0.1265, Sold @ $0.1525) 
The penny stock blues can be a rough game, as this had a huge rally up to $0.17 before coming all the way back down to below my entry point at $0.122 or so.   It had another quick rally based on minor news, and I decided to take my profits and get out at $0.1525.    Kicked myself in the ass when it was up to $0.165 within an hour, but certainly didn’t regret it when it closed at $0.145. 

SPXU (Bought @ $51.75, 09/23 Close @ $44.74)
Obviously I have taken a beating on this one, but that’s what happens when you time a 3x levereged ETF wrong.  However, I hung in there and actually increased my position near the end of the day yesterday.   I’ll put my money where my mouth is and put a risky bet on the S&P Index falling.  However, even if I lose a bit on this trade, it serves as a nice hedge for my 401K index holdings. 

IEF (Bought @ $91.58, 09/23 Close @ $91.56)
Being a counter to my more risky trades, this did exactly what I expected it to and held steady.   Already received my first monthly dividend, so no complaints either way.  I think I’ll keep this one for the long-term to try to balance out any stupid/risky moves I decide to make.

Good thing I haven’t put anything on here in months, right?   At this pace I won’t make another post until 2010, but since I’m the only one reading this, fuck it, right?  

Anyway – in my opinion, the top of the market has been reached.   I should probably link to a bunch of graphs showing technicals, but I won’t bother.   On a pure historical basis, after a market collapse, there’s almost always a bear market rally, followed by a pullback.  

We’re up 50%+ from the March low 0f 666, which implies a lot more of a recovery than what is really going on.   Official unemployment is close to 10%, and ‘real’ unemployment, or people who cannot find the amount of work they require, is closer to 20%.    Most consumers are beat to shit from underwater mortgages and credit card debt, and aren’t going to be spending like they did early in the decade anytime soon.    Assuming no unforseen events, the financial markets and economy seem to have stabilized, but it will be a slow recovery to say the least.

The credit markets, which supposedly have more intelligent and researched investors, are pricing in a 2% recovery from the recession.    That would imply a price of $862 on the S&P 500, or about a 15% pullback from current levels.*   September has historically been a down month for the market, and I expect more of the same this month.   Hopefully nothing too dramatic, but I would not be surprised to see a pullback to the $900-925 level by mid-October as investors sit on the sidelines waiting for Q3 results.   Who knows what happens after that, but my prediction is weaker than expected results, and an over-shoot down to 750-775 before climbing to the 850 level around year end. 

*(Information from David Rosenberg’s research, linked)

That all being said, here’s how I am investing these days: 

In my 401K, I am not really changing anything, as I have it set up fairly conservatively, and I have no problem averaging down and accumulating.   It’s tricky/inefficient to time market moves in a 401K plan, and I see a pull-back, not a collapse, anyway.  

I use a Roth IRA to try to actually play the market to a certain extent, as I can invest in basically anything, and buy and sell at any time.  Since the main feature of a Roth IRA is that earnings are non-taxable, I’d rather be ballsy on this front and take some risks to hope for a big-time (non-taxed) return later in life.    Unless I get completely slaughtered and pissed off, I’m going to try to keep track of my thoughts and portfolio changes going forward.   This is mostly for my own historical purposes, and none of it should be considered investment advice; use at your own risk.  However, I figure with thousands of assholes spewing their investment shit every day, one more isn’t gonna stink up the room any more right?

Currently, I have three main holdings in my IRA, all positions taken near end of business on 08/31, with purchase price paid. 

ACTC – Advanced Cell Technology ($0.1265)
Speaking of ballsy investing, “penny stocks” are the stock market’s version of roulette.   Usually a company in its early stages, generallly on that is without any real income-producing products, so the stock price is generally based on market news, and the swings can be major.   More than likely, the stock bounces around before dropping to nothing, and you try to cut your losses before then.  However, if you hit your number on the wheel, that ten cent stock can turn into a dollar pretty quick, giving you some huge returns.    ACTC is a stem cell company involved in regenerative medicine, particularly in the eye.   If ACTC could actually develop technology to repair/restore eyesight, this will really take off.   It’s a risk nonetheless, but I like to gamble, so I don’t have any particular target prices, just hoping to catch lightning in a bottle.

SPXU – Proshares UltraPro Short S&P 500 3x ETF ($51.75)
This is one of the newer leveraged ETFs that have sprung up lately, that give you 2x or 3x the return of the index, or in this case the inverse of the index, that it tracks.    This is another risky investment, as if the market goes lower, I will see huge returns, but if it continues to rise, I can lose a bunch pretty quickly.    This type of trade I feel you really need to have set stops, as it truly is a trade, not an investment.   For reference, I bought this when the S&P was at $1,022, and with yesterday’s big drop, it is now below $1,000.   I will let it ride down to the $850 range, but wouldn’t mess around with it too much beyond then, and, on the other side, would get out if the S&P got above the $1,050 mark. 

IEF – iShares Barclays 7-10 Year Treasury Index ($91.58)
To even things out, I have what would be considered a real safe, ‘risk-free’ investment, in an index fund of mid-dated treasuries.   I think this is a good play for three reasons.  First, if the overall market declines, investors will flock to treasuries, moving up the share price.  Second, the fund pays a monthly dividend based on current yields, so no matter what I should be looking at a 3.5% type annual return for as long as I hold it.  Finally, as mentioned, there is almost no risk to this investment.  Conspiracy theories aside, U.S. government debt is the safest investment that currently exists.   Considering my other two holdings, I feel this is a good correlary and adds a little balance. 

Only time will tell what may happen, so I fully expect to look like a real clown down the road when I look back on this.

Hong Man Choi Jose Canseco Fight Video

One day, Jose Canseco had the bright idea that he would make even more money as a MMA fighter than he would writing books about taking steroids.   Unfortunately,  he wasn’t too choosy with who his opponent would be and ended up matched against some 7′2 Korean kickboxer.  Oops.

No comment.

Last night’s loss was too much to take, so time to BASH THE FUCK out of the Mets.

Players:

1) Dave Wright – Dave, I’m glad you are the face of the franchise and will put up .300/30/100 easy, but can you not include 200 fucking strikeouts?  This is getting ridiculous

2) Jose Reyes – Jose Jose Jose.  Take off the fucking doo-rag and get a hit with RISP and 2 outs.   Every time I see you in that position, all I can think is Willie Mays Hayes in Major League II.    Stop trying to be a hero,  just get a fucking run in.

3) Ollie Perez – Dude, can you not get so butt hurt every time a call doesn’t go your way?  A runner gets on that should be out, and next thing you know you’ve given up 3 runs.  There’s tons of pitchers who have ‘great stuff’ but few have heart, fewer have balls and the rare pitcher has both.    However, we just signed you for $12 mm./yr. so time for the testes to drop buddy.

Management:

1) Wilpons – HOW ARE YOU TOO FUCKING CHEAP TO SIGN MANNY?   Ask any Mets fan and the #1 problem is that we shrivel like a dick in a cold pool when it’s late and close.  Manny would solve that, period.  We would have made up for his salary by the additional revenues from making the playoffs. 

2) Omar Minaya – I could write a book on this one, but long story short.  How could you not just give Derek Lowe (a proven winner) his money, and settle for Ollie Perez (a proven nutcase)?   How could you give Alex Cora $2 mm./yr. when Orlando Hudson signs for $4 mm./yr.?  How could you forget that we may need a catcher this year?    I mean you know nice job and everything signing the top free agents in the market (Pedro, Beltran) when you were the highest bidder, but a good GM builds a TEAM.    And for the record, while our bullpen may be sick now that doesn’t mean shit if we have no rotation.  

3) Jerry Manuel – Listen, I think the gangster is a great motivator and coach, which is why he was, and hopefully will be in the future, a great bench coach.  Unfortunately, while I’m not suggesting he needs to be Tony LaRussa tactically, one of the reasons he was run out of Chi-town was his lack of tactical skills.  It’s showing now.

Fans:

1) Any Mets fan who thinks they’ll win the World Series – Just shut the fuck up.  Get your head out of your ass. 

2) Any Mets fan who is like ‘blah blah blah we’re better than the Yankees.”  – Dickhead, we are in the National League.  I’m glad you and your moron Yankee fan friends want to play who’s is bigger, but our team sucks and probably won’t win the divison.   This is what you should be concerned about, period.

3) Matt Cerrone  -  Just to make it clear, I check Metsblog.com daily and have a lot of respect for the work you and the rest of your staff have done.    But can you have a fucking opinion for once?   Every post I have ever seen on that site is ‘while I can see how the Mets should have (insert smart move), I also see why Omar would have (insert idiotic move here).’ and so on.    Pick a side and stick to it, I know you don’t want to offend anyone but sometimes that’s how you earn respect.   It’s one thing when it is a tough decision, but when the Mets do something that is stupider than all hell, you don’t have to try to justify it every single time.  I know you got that SNY money coming in, but your readers aren’t stupid.  The straddling the fence shit is pissing me off more and more every day.  

It’s going to be a long season.

8-Bit Hip Hop Medley.  Sick.

Terrafugia.  A real flying car – unfortunately the website doesn’t mention anything about time travel.

Researchers have developed a robot capable of learning and interacting with the world using a biological brain. The beginning of the end? 

Sports Propaganda Posters.  Awesome – My birthday’s in three months in case you were wondering.

The Wright Stache.  Awesome blog devoted to getting David Wright to grow a mean ‘stache.

Article from Sports Illustrated about the Mets’ recent World Series win.  (Unfortunately, this is a 23 year old article.)

Uni Watch – Alternate MLB Uniform Ideas.  Some of these are pretty good, this is a good blog worth checking out. 

This is why you’re fat: Where Dreams become Heart Attacks.  Enough said.

Fender Custom Furniture.   I could use a new kitchen table too.

Offensive food item of the day: Obama-Fingers fried chicken.  This might not even be the most offensive one.  (Although, to be honest advertisers are like dogs – any attention is better than no attention.  I’m personally the most offended by:)

Karl Rove Says Barack Obama Has Moved Chicago Politics to the White House (WSJ).  There’s your Change, ha.

"Don’t think we’re not keeping score, brother." That’s what President Barack Obama said to Rep. Peter DeFazio in a closed-door meeting of the House Democratic Caucus last week, according to the Associated Press.

A few weeks ago, Mr. DeFazio voted against the administration’s stimulus bill. The comment from Mr. Obama was a presidential rebuke and part of a new, hard-nosed push by the White House to pressure Congress to adopt the president’s budget. He has mobilized outside groups and enlisted forces still in place from the Obama campaign.

What they Used to Teach You at Stanford Business School (Portfolio.com) To be honest, I’m of the opinion that these types of things aren’t taught, they are either common sense to someone, or they aren’t.  But for all you assholes in business with no common sense, please read it.

Good video about the credit crisis in pretty basic terms:

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Jerry Manuel announced today that Daniel Murphy will be in the 2 hole, regardless of whether there is a left or right handed pitcher on the mound.   Thank god.   I know Castillo has come into camp in great shape and all that bullshit, but let’s be serious.  Even if he has a great season, gets on base at a .375 clip and plays great defense up the middle, he has no business batting near the top of the order (although leadoff would not be a horrible idea).   The dude has no power, period.   All of his Slappy McSingles are just going to move Reyes over, which is fine and all, but the one thing I feel the Mets lacked the most last year were big innings, especially at the start of the game.  

While Murphy is by no means a power hitter, he should probably drive ~15 home runs, but that’s not the point – he is a pure doubles hitter.   Reyes has the reputation of being the most exciting player in baseball – there are few things more exciting than seeing the guy fly around the bases and scoring from first on a gapper to the outfield.   Unfortunately for the 2008 Mets, Castillo’s gappers tended to be in the infield.   While there is always something to say about ‘productive outs,’ I think there are fewer things more productive than a huge inning.   I haven’t looked at the staaaaaaaats, so I might be wrong, but I feel the Mets would always have these 1 or 2 run innings when it seemed that they really should have plated a few more than that.   As horrible as our bullpen was last year, I can’t see them blowing so many games if we had come into the later innings with a more comfortable lead. 

On the flip side, Castillo is a somewhat ideal player to have in the 8 hole.   As the Mets’ lineup is lefty heavy as-is, a switch hitter at the bottom will help break things up in that regard.   Furthermore, being a patient hitter in front of a pitcher won’t hurt, as he will take a lot of crappy pitches and probably walk a lot.    At the least, he will clear the pitcher spot a lot with 2 outs, and at best will be bunted over to give Reyes to knock in some RBIs, as Castillo still has decent speed and can get around the bases OK.   

It’s a good start, but I don’t think we should stop there.  Without going into detail, The Book explains that LaRussa is right, and the pitcher is best suited to the 8 spot, as it would gain an average of 1.9 runs for a typical NL team.   While 0.012 runs per game may not seem like a lot, the more you optimize your team, the more things add up.   The Hardball Times has a good article about batting the pitcher 7th/8th, but with the current Mets team, 8th would be ideal.   After the first time through the lineup, it would open the Mets up to the ‘two leadoff hitters’ idea, and could really make for some interesting baseball.

No complaints though, I have full faith in That Gangster Jerry M.  Lets go Mets!

I’m not going into staaaats or anything, but I do need to have my predictions timestamped somewhere, so that after the season I can look at them and either claim to know a lot about baseball, or have been ripped off.

AL EAST:
1. Yankees      (96-66)
2. Rays            (94-68)
3. Red Sox       (93-69)
4. Orioles         (76-86)
5. Blue Jays     (70-92)

AL CENTRAL:
1. Indians        (89-73)
2. Tigers          (83-79)
3. Twins           (79-83)
4. Royals         (75-87)
5. White Sox   (71-91)

AL WEST:
1. A’s              (87-75)
2. Angels        (85-77)
3. Rangers     (76-86)
4. Mariners     (66-96)

NL EAST:
1. Mets          (91-71)
2. Phillies       (89-73)
3. Braves       (82-80)
4. Marlins       (75-87)
5. Nationals   (65-97)

NL CENTRAL:
1. Cubs         (93-69)
2. Brewers    (86-76)
3. Reds         (85-77)
4. Cardinals  (78-84)
5. Pirates      (76-86)
6. Astros       (68-94)

NL WEST:
1. Dodgers    (86-76)
2. Rockies     (85-77)
3. Giants       (83-79)
4. D’Backs     (78-84)
5. Padres      (70-92)

AL Playoffs:
Yankees over A’s, 3 – 1
Rays over Indians, 3 – 2

Rays over Yankees, 4 – 3

NL Playoffs:
Cubs over Phillies, 3 – 2
Mets over Dodgers, 3 – 1

Mets over Cubs, 4 – 2

World Series:
Rays over Mets, 4 – 2

Obviously the fan in me wants to say Mets win 110 games and sweep through the playoffs and win the world series, but that’s not realistic.   They should be pretty good this year, and while the bottom of the order and rotation could be a potential disaster, I think this is the year they don’t collapse at the end, and if they actually do make the playoffs, I see them getting to the World Series.  I can’t, right now at least, say in good faith that I could realistically see them beating the Rays in the end, but you never know.

The Rays may have struggles in the regular season, but they are exactly the type of team that can beat the Yankees in the playoffs.   However, while I think the Yankees will win the division by a few games, there will be a real dogfight for the AL Wild Card between the Sox and Rays.   Since I don’t like the Sox, I’m going with Tampa but it could go either way.  If the Red Sox do win out, I think the Yankees beat them in the playoffs and probably win the World Series.   Tampa is one of the most well rounded teams I have ever seen and would outgrind the Yankees in a long series, in my opinion.

The Reds will be better, and the Astros much worse, than people seem to think.   Both the Orioles and Rangers have a ton of good prospects coming up and should be division contenders within 2 – 3 years, possibly sooner.   The Mariners will be pretty horrible, and the Padres will be pretty shitty as well.   I’m not really seeing any team as a 100+ win or loss team, but you never know.    The predictions that I feel will look the stupidest at the end are the Cubs and Nationals.   Cubs could totally fall apart mid season, especially considering Bradley, Harden and some others are pretty damn injury-prone.   Nationals could surprise and be half-way decent, in no small part thanks to:

Put some money in stocks, in like two weeks.  Right now everything has been up for a few days, it’ll swoop back down before it really goes up so get in then.  Big companies – I have money in GE, WFC and BAC.  Go for them if you want, there’s lots of really low priced shit out there.  Everyone has been scared shitless and sold the house, making the prices get lower – when the big money gets back in, this shit will go up 25%+ at least from where they’ve been, and probably a lot more.  

If you get your money into these big companies that are basically tied to the economy, you are basically betting on the fact that within a few years, we’ll be out of a recession.  Companies that are ‘too big to fail’ or close to it will not be allowed to fail by the government, so when the economy recovers they will be back to where they were and you’ll make money.  I’d recommend putting it into a Roth IRA and save long-term for retirement, but do what you want.   

Why this bet works is that since these companies are ‘too big to fail,’ if they actually did fail, the country is fucked plain and simple.  If that’s the case, the dollar is worthless so who cares about any money you lost – it ain’t worth shit at that point anyway.  Don’t be dumb, you’ll kick yourself in the ass everyday 5 – 10 years from now if this doesn’t happen.