CheetahhhhhhhBlog Mark III

Tristan is trying to stand. Today he surprised us and used the Bug’s bed to prop himself up on his feet. He also calls me “ba”.

Bernard Cornwell is one of my favorite writers, and I really love his Alfred the Great series. I was all excited for months about the next installment, the Burning Land. I was tremendously pissed when some publishing dispute between McMillan and Amazon delayed the release of the Burning Land for the Kindle until March 1st. Well, on March 1st I downloaded it with trembling hands and read. I have to say, Cornwell lost a bit of spark with this one. It’s still good, but not like before. I’m not sure why, but I have observed that the first works of an author are usually his best. Cornwell is a very prolific guy, he has about 50 books to his name, and most of them were pretty good, so maybe he was just a little off his stride while writing this one.

We were trying to live without air conditioning as an austerity measure. Apparently it’s OK without aircon in June, the rainy season. Right now it’s pretty frakkin hot on Luzon island and Van was getting very crabby. We have the air conditioners running again.

I read that the average hedge fund is up 1% for the year, and the S&P500 is about -.25%. So I suppose Teggatz Enterprises is going gangbusters, because we’re up about 13% after expenses.

I will give a brief opinion about the market. I don’t think it’s going to rise much more. I think we’re coming up on May, and you should sell in may and go away, because the market enters the “summer doldrums”. Further, the Fed will end quantitative easing at some point, and the market will begin pricing this in. By “pricing this in” I mean that traders will start anticipating an end to Fed liquidity measures, and this has bearish, or in the very least neutral, implications. Furthermore the NASDAQ and S&P500 right now have a chart pattern of a double top, which is bearish. Furthermore it will take a lot for the NASDAQ and S&P500 to rise above their double tops, I think. I anticipate we will see a lot of sideways movement. However if there’s one thing a trader should have learned in the last year, it’s to not underestimate the current bull market. It’s on steroids. So we may still see a rise. However I doubt it, and I’ll tell you why. There is very low volume on the stock exchange. This means institutional investors, such as mutual funds etc, are sitting on their hands. Now, this low volume is also indicative of a big shift out of US equities into emerging market equities, but this shift should actually reverse pretty soon, as even the Wall Street Journal is starting to talk about an emerging market asset bubble. This blog was pointing it out to you a long time ago. I read in the Financial Times that several hedge funds are getting out of emerging markets. but to return to my point, the low volume on Wall Street suggests that the market is running out of steam. As usual I could be totally wrong.

We all have colds. Bug slept all afternoon, which is a first, and a miracle. I got to watch TV for a change. Lots going down on Big Love season 4, incidentally.

The Economist notes that, when adjusted for inflation, a retail investor made zero capital gains for the last 40 years. That’s a staggering statistic. The last ten years, adjusted for inflation, brought an average of -2.2% return. Of course here we’re speaking of people who buy-and-hold, for example, your retirement portfolios. It would have actually been more profitable to keep the $ in a CD, or even in a savings account.

Soooooooooooo there was a big damn earthquake in Chile. This is one of those times when it’s unfortunate to be on a Pacific island, because apparently there’s a tsunami running around, though it’s predicted to hit Mindanao, not Luzon. In any case we’re on the side of Luzon island that faces China, so I think we’re OK. Also Van and I were careful to select a condo on the 4th floor because of flooding, tsunamis, etc.

I am a very conservative investor, but if I was to take some risks, there are a lot of options right now. And bear in mind when I say “risk” I am still, as a conservative investor, talking about things that are fairly certain.

First, I would short sterling.

Second, I would go long on the US dollar.

Third, I would short gold.

An interesting comment came on Seeking Alpha: “Bullish a year ago, Robert Prechter now sees mounting debt creating “the biggest bubble in history… Nobody should be taking risk right now. This is a time to be safe.”" This is very interesting, though I am unsure what to make of it, as I am already constantly vigilant for market crashing. One thing that was interesting about this global economic disaster is that it flushed out the weak players, specifically Dubai, Greece, Portugal, apparently Spain. Regarding the US debt, I’m not so worried. Unlike EUrozone countries, the US can (and is currently) just print more money, which will (and is) debase the value of our currency. However this is a long term trend. I don’t remember specifically, but I saw a graph that the value of the dollar has declined 90% or something like that since 1900.

Regarding the broader market, we are currently experiencing high volatility but little actual movement. The Russell has been stuck in a range between 540 and 640 since August. Until direction is found, it is best to wait.

I’m a little under the weather from drinking wine last night. It was a stressful work day for me. New York time is the opposite of Manila time, so I have to start watching the New York Stock Exchange at 1030PM. Anyway it was a stressful day yesterday and by about 250AM I signed off and threw back some vino.

Now my doctor at the Makati clinic… who I don’t entirely trust actually, but he’s the head of his department at the Makati Clinic so I assume he’s the best gastrointestinal doctor in this country… he says to relax and just treat my stomach gently. So I am relaxing my previous behavior and occasionally drinking juice and booze, etc. Anyway I had 3 glasses of wine and I’m not feeling so good today.

Tristan is starting to crawl and sit. You can see pics on Facebook and Google Buzz. Link up with me on the Buzz.

I watched Obama’s speech on Monday. They televise anything he says on CNN because it tends to affect the markets. FIrst, I liked his Monday speech, which was new for me, I’m not generally too impressed with him. Second, I am getting irritated with anti-Obama rhetoric in Investor’s Business Daily and in some financial blogs, such as the Tucker Report. I have actually canceled my Kindle subscription to Investor’s Business Daily three times now, out of sheer irritation with their political rhetoric. Yesterday they said, and I quote, that Obama was “rapping about health care”, which is inappropriate. I’m no going to cancel my IBD subscription again, the financial commentary is useful, but whoever is writing their opinion columns is a knucklehead. Furthermore, regarding the Tucker Report. Hey, you, Tucker. I don’t tune in to your blog to read your broken-record opinions about Obama. You don’t like him. We get it. Now, I have said several times that I’m not terribly impressed with Obama. For example he is backing off the Volker Bill, accepting a watered down version to save face. So apparently he can’t make up his mind or makes decisions quickly and then changes his mind. Whatever the case may be, not impressed. I’d be more impressed if you stuck with the stupid Volker bill, at least I’d know you’re consistent. Or his not ending the wars as promised. Not impressed. He’s actually following the Bush agenda with the wars. Not impressed.

Anyway I have a very brief market comment. The average retail investor should be in cash. For a more specific market commentary I quote Trader Mike: “the indices are in no-man’s land. I say that because the Naz and S&P are between their 50 and 200-day moving averages (longer-term bull, intermediate-term bear) and because they’re not showing clear patterns of higher-highs & higher-lows nor lower-highs & lower-lows. So while we may get some trending in very short time-frames, I suspect we’ll see a lot of chop in the longer time-frames.” I agree with this assessment. In layman’s terms it means the market will be shilly-shallying around in a range, but making to real movement. This, of course, is great for options traders. I sold May iron condor spreads yesterday 670/680/550/560 which is, you’ll note, 25 points above/below the current channel of movement. As usual with my financial comments, I toss in my caveat, I could be totally wrong.

Did my taxes. As usual, as with any encounter the Uncle Sam, I feel a vague generalized irritation and resentment. What’s this about a “paperwork reduction act” incidentally, because my taxes are 20 frakkin pages long. I was, however, pleasantly surprised about how much money I made last year. Didn’t actually realize until I crunched all the numbers. I didn’t notice how much I was making because the cost of living in the Emirates was so astronomical. Anyway my taxes are ridiculously complicated because I trade options spreads, what the IRS calls “straddles”, and I really need an accountant, but can’t presently afford one. Next year. Vanessa studied accounting but I can’t seem to interest her in learning the US tax code.

The financial newspapers have been making a bru-ha-ha about Google’s Buzz service. I don’t see what the hoop-la is. For one thing, I don’t see why I would use Buzz in preference to Twitter. This point aside, Google is one of the very best companies out there, and this talk about a “heavy handed giant” is just nonsense.

I like the winter Olympics, indeed I don’t even bother with the summer Olympics, but for some reason this year I can’t trouble myself to tune in and watch. Nevertheless I have been keeping up with the medal counts. Go USA.

I would not be at all surprised if it were revealed that a lot of the European countries have been doing fishy accounting like Greece. The thing is, Portugal, Spain, and Ireland, among others, were historically poor countries, which suddenly got bionic superpowers with the introduction of the Euro. I used to vacation in Spain because it was cheap, believe it or not. I would not be at all surprised if we learned that Spain was cooking the books.

Tiger Woods made a public apology. I like Tiger. He’s the one who got me interested in golf, actually. And frankly I’m not too interested in his personal melodrama. I’m not sure why other people are.

I’m running Linux Ubuntu on my Dell XPS and it’s lightning fast. I wonder why I bother with Windows.

But had a temper tantrum in Rustan’s toy store about getting a dinosaur. I’m trying to instill some discipline and said no. The problem is him screaming, flopping around on the floor, refusing to leave, etc… well, obviously it’s much easier just to buy the frakkin dino. At home we had another, different upset, and I spanked him and sent him to his room. Not for long, and he has diapers so the spanking didn’t hurt. I’m not convinced that disciplining a 3 year old does much good, though obviously I have to try, because the only alternative is him being the boss. But on a cognitive level you can’t reason much with a 3 year old, and the only other apparent method is fear (ie, smacking, etc) which doesn’t actually teach discipline, but rather teaches the kid to be afraid of certain things. So what to do. I suppose this is every parent’s dilemma. I’m completely exhausted from the ordeal.

Tristan has hit the blog. You can see him to the left on the sidebar.

We have two small children and so can’t really do anything. Furthermore we are taking financial austerity measures so again we can’t really do anything. This having been said, here’s what’s going on.

For Valentine’s Day, Nanay babysat the kids and Vanessa and I went out on our first date in… a long damn time. We saw a movie for the first time in 3 years.

Tristan went to the Makati Clinic and cost me a mint. The doctor said he has “skin asthma” which sounds fishy to me, though admittedly I’m no physician. There is no “skin asthma” in Wikipedia. Maybe there is a translation issue going on. Anyway the boy has really dry skin on the crown of his head. It does seem to be getting better though.

As of today, Teggatz Enterprises LLC has has made a 20% return on capital for the year after expenses. Cheers. I’m bragging a little. Most money managers would love to be able to write that.

I went to the Makati Clinic as well and the doctor did not like the way my Emerati doctor had treated my stomach. He started weaning me off the drugs immediately and said I should relax, because he thinks I simply have a sensitive stomach. Relaxing is easier said than done, and actually I’d say I’m a pretty relaxed fellow already, at least compared to most, and taking into account recent stresses, such as losing my job, starting a new business, moving to a new country, etc. A lot of stress for anybody. So I don’t entirely agree with the doctor’s assessment, but I am totally willing to try getting off the medication, which is expensive.

Vanessa got me “stress tabs” which I’m taking and she thinks are effective because my sleep is better.

This “mad rush to diversify into foreign stocks” (as the Wall Street Journal puts it in today’s paper) is, in my eyes, foolish. For one thing, you should never invest in anything if you don’t understand it completely. I find it hard to believe that an investor could master the business and political facts of several different countries. Second, the political and financial stability of emerging market countries is overstated at the moment. We tend to forget the Argentina and Russia only recently defaulted on their debts, for example, and that Dubai can’t pay its bills. Dubai was supposed to be good as gold. Yet there’s a “mad rush to diversify into foreign stocks”? Foolish nonsense. To make it more so, there is, in most informed opinions, an emerging market bubble. Evidence of this is partly the very fact that we speak of a “mad rush to diversify into foreign stocks”.

The market had a gangbuster day yesterday, with the Russel butting its head on 620 resistance. 620 was very strong resistance before, and I anticipate it will be again. Translation: it will be hard or the Russel to rise above 620. If it does not and the market drops, there will be a classic head-and-shoulders pattern staring at us on the charts, which would be very bearish. Also on a bearish note, the volume yesterday was low, which means institutional investors were not in on the rally, which suggests the rally probably won’t be sustained.

While I am not overly negative on the economic situation in the US, I am not overly positive either. I said in early January that I anticipate a rather sideways year, and I still hold that opinion.

You can tell we’re in the Far East, because people are getting all excited about Chinese New Year and the Year of the Tiger.

It’s strange that poor-people food in America is rich-people food abroad. So we have English muffins and pot pies. Not gourmet pot pies incidentally. Rather the really cheap poor-people variety. Out here, English muffins and pot pies can only be found at Rustan’s, and they certainly aren’t poor-people food. I remember as a college student eating a lot of pot pies and English muffins with a slice of melted cheese on top. Also I remember eating a lot of broccoli, not because I liked it, but because it was cheap. Broccoli is a cold-weather plant and so it can only be grown in Baguio and is, of course, quite expensive.

Tristan is crawling a bit. Not far or fast, but he’s on the move.

I’m not sure why I would use Google Buzz in preference to Twitter.

Tristan is growing teeth and is very cranky about it.

Last week I advised my mom to go into cash with her retirement portfolio, primarily because market direction is very unclear at the moment, with a bias toward down. This is fine for me, an options seller. I’m making good money actually. However for the rest of you, you’ve probably lost a good chunk of money recently. The financial press is making a lot of noise about how the Dow closed below 10,000. My observations on the market are as follows.

First, the market was due for a correction in the bull market, indeed everybody was warning about it in January, so in many respects this is no surprise. In this scenario, the market will likely rebound strongly and go to new highs.

Second, the big concern on Wall Street is sovereign debt, specifically Greece, Portugal, and Spain, none of whom are entirely fiscally transparent or fiscally responsible. Spain in particular made a lot of money during the housing boom (Brits and Germans building summer houses on Ibiza), and is now back to the norm, which is high unemployment and not a lot of economic prospects. However it is, in my mind, simply inconceivable that the EU would let a member state default on sovereign debt. This would spell the death of the Euro and the union. Germany and France are not going to outright say they will bail out Greece, and indeed they like the current situation because the Euro is dropping. The high Euro was killing their exports. However it is impossible to say when the sovereign debt issue will be resolved. But to put it in the big picture, Greece is something like 2% of the European GDP, so the whole Greek crisis is actually a bit irrelevant. Their economy is the size of Maryland’s.

Third, the Fed will undoubtedly start raising rates, which will cause the market to drop in the short term. But this will not occur in the near term. I read in the Financial Times that it will not occur before September. I don’t know where they get their information. The Fed will warn us before they raise rates. People getting nervous about rate hikes are jumping the gun early, and the market is attempting to start pricing in the rate hike. In this scenario, there is a downward bias.

Fourth, there is very strong support for the indexes right below their current closes, specifically the 200EMA and the 50% Fibonacci retracement. In this scenario, we are likely at the bottom of the decline and it would be wise to buy now.

In conclusion the market is very unclear right now and there is a decent possibility it will remain unclear for a while. My advice to my mother was to stay in cash until the situation clarifies.