CheetahhhhhhhBlog Mark III

There was an impressive stock market rally yesterday. However it occurred on low volume. This means that institutions such as mutual funds were not buying. This means the rally will probably not be sustained. My market outlook remains unchanged; I anticipate a shallow dip through Halloween.

The Economist this week writes, “Investors are betting on a vibrant recovery. With returns on cash so low, they have little choice.” This is true. Interest rates in banks and money market are negligible. When you consider inflation, this means that if you keep your money in the bank, you’re actually slowly losing money. I don’t know the inflation rate in America but here in the UAE it seems to have stabilized; prices have not gone up in several months. Thank God for that. However the dollar is on the rise, which means commodity prices will rise (commodities are priced in dollars. Commodities include food and gas.), and there is considerable fear of inflation at the moment. So yes, there is actually nowhere else to put your money at the moment, besides putting it in the stock market.

This is good. This is another reason we can bet in the long term that the market will rise. The other compelling reason for this bet is the massive worldwide government intervention in financial markets. Betting on a rise right now, for the next year or so, is almost, but not quite, a sure thing. The more important question, for a longer-term investment, and it’s a question for which I don’t have an answer, is whether we are seeing the beginning of a sustained bull market, or whether we are seeing a bear market rally, such as the many that Japan enjoyed during the 1990s. At the moment, this bull market is sponsored by the government. However many of the stimulus programs such as cash-for-clunkers are already finished. What concerns me is the volatility we have seen in the last year. It’s extreme, which is very dangerous.

In the very long term, Goldman Sachs predicts that by 2050, the biggest economies will be #1 China, #2 USA, #3 Brazil, #4 Mexico. This is interesting and tells us where we can anticipate long-term profits. At the moment I would look into ETFs which mirror indexes.

It’s been a rather depressing return to work for me, after the Ramadan holiday, because I got a nasty cold. So does Vanessa. We’re afraid of what will happen if the kids catch it. Furthermore Tristan has been squawking a bit about his penis. I’ve been sick several times in the last month or two, and it’s starting to piss me off.

The season is starting to change here in the Arabian desert. There are no clear seasonal changes like in Wisconsin. However it’s not so ridiculously hot any more. In a month or so, it’s going to really cool down, and we will have just about perfect weather; around 70F. It’s funny to refer to 70F as “cooling down” but yeah, it’s still over 100F here. For my Filipino readers, sorry but I don’t know the Celsius system and refuse to learn it.

Bug will be 3 on Oct 20th. My lord how time flies. Is seems the older I get, the faster time flies. Is it just me? I wonder if when you’re 80, time moves at a blistering pace. That would be unfortunate because I like to think I’ll be slowing down soon.

So the big news, I guess, is the flooding in Manila. There is always a typhoon hitting somewhere in the Philippines so I didn’t realize this one was catastrophic at first. I saw on CNN that Manila is 4/5 under water. The condo in Pasig where we lived for a summer is under water. Vanessa’s cousin disappeared for a night and it turns out she was trapped on the roof of a gas station. And Bug’s best friend Aunty Nene, who works in Dubai… her house is completely underwater and everything in it destroyed. Vanessa’s immediate family, her brother and sister, live on higher ground and are unaffected.

Periodically Vanessa brings up her pet idea, getting a house in Manila. I’m not terribly keen on the idea because of crime and typhoons. This is case-in-point. We were watching news broadcasts and I said to her, “See, and you want to buy a house there!” Whenever I do contemplate buying a house in Manila, it’s a highrise in Makati. Vanessa never understands the appeal of this. Maybe she will now. A highrise can’t be burgled, and you know the first place a burglar is going to hit is the American guy’s house. Furthermore, the people in Makati highrises have no flooding worries right now. They’re nice and dry.

Vanessa and I seem to watch all the shows by HBO and the CW. HBO is quality TV. The CW is entertaining trash. Some of our favorite shows are CW trash, like Gossip Girl. We downloaded the Beautiful Life and were kind of excited about it because it has Mischa Barton, of our fav TV show of all time, The OC. I have to say that aside from Mischa, I was a bit bored. A little too much of a girl drama for me. “How did she get that Versace dress for the party, the bitch” etc. I fail to be intrigued by this. The sad thing is there will probably never be another show as good as The OC. We are excited for Desperate Housewives, however, which starts on Sunday.

Bug has passed from being obsessed with Thomas the Train, to being obsessed with dinosaurs. I remember I had a thing for dinosaurs myself. Judging by the dinosaur toys etc available, it seems a common kid obsession. I have downloaded just about every video Mininova has to offer on dinosaurs. Bug’s favorite is some really truly idiotic Japanese cartoon called Dinosaur King. He has also watched the Jurassic Park movies a million times. He also really likes the BBC series Walking with the DInosaurs. All day long I have to sit and have conversations with my son about Tyrannosaurus Rexes and Brontosauruses and Stegosauruses. I’m looking forward to when we can share a legitimate interest, such as golf. Right now I have to say I’m a little sick of dinosaurs.

Pursuant to my desire to return home, I spend a lot of time researching America. My primary research vehicle is Craigslist actually. A good gauge of costs. I spent the evening looking at Lake Geneva, WI. The thing is, I’ve been gone a long time and can’t really gauge how much things cost in America any more. Also prices vary dramatically depending on where you live. Energy and housing costs in particular vary a lot by location. Another useful site for me has been Cost of Living Comparison http://www.bestplaces.net/col/.

Bug’s new comment of the day was to gesticulate at me like an Italian and exclaim, “Wacha do that self???” I think he was saying “What are you doing to me?” because I had just taken some Gatorade away from him. Anyway linguistically this is an interesting comment, because he’s being creative with language, ie, he obviously never heard this phrase from anybody, but rather invented it himself. This is a cognitive milestone. Also I have laughed about it all day long.

I got some golf videos and they have really improved my game. Golf is certainly a sport where you need some instruction. There is nothing natural or intuitive about golf. I can now get the ball in the air fairly reliably, and I can also get it to go in the direction I want most of the time. Massive improvements. The thing I like about golf, incidentally, aside from being out in hyper-groomed nature, is the fact that you’re actually competing against yourself. Everything about golf is about self-control and self-direction. Your opponent is almost an afterthought.

Anyway little Tristan is getting circumcised. I can’t be around for this. I think the whole thing is barbaric. I don’t buy this talk about sanitation etc, it’s nonsense used to justify a strange mutilation of the penis. People make a big hoop-la about the practice of female circumcision in Africa but nobody seems to give male circumcision much thought. Wonder why. It apparently reduces sexual pleasure, which should be reason enough to not do it. ANYWAY the only reason both my boys are circumcised is because all Americans get circumcised. Not much of a reason but there you have it. However I am not happy about mutilating my son, not am I pleased about the $500 bill, so instead of hanging around the hospital, Bug and I went golfing. It was 3PM and the sun fried us to a crisp. I’m never doing anything outside while the sun is up in the Arabian desert ever again. For those of you not here in the Arabian desert, I should explain, you don’t do things outside until nightfall. Bug and I would have never even considered going golfing at 3PM if we weren’t trying to get away from the circumcision. We’re both dehydrated and burnt.

We took Aunty Nene to the Rotana for Eid. We discovered a lot of other places in the Rotana resort, including an infinity pool with a bar overlooking the ocean, and a beach with a bungalow bar. God bless the Rotana, they have suddenly made RAK a lot better. Bug loooooooooooooooooves the infinity pool. The Rotana also seems to be where the entire white population of RAK hangs out. I was wondering where they all went. I was listening to languages in the infinity pool and couldn’t help noticing that about half of them are Russian. (The Cheetahhhhhhh is no particular fan of the Ruskies, the reasons for this being probably ethnic, combined with residual Cold War animosity, ie I recognize there is no particularly compelling reason for my hostility toward Ruskies.) The Cheetahhhhhhh got sauced for Eid and we had BBQ pork ribs. Aside from the fact that the Cheetahhhhhhh is not supposed to drink (stomach problems) it was a good Eid.

I downloaded the first season of Supernatural and Bug and I are quite enjoying it.

Tristan needs to get circumcised. Poor little guy. I’m not sure why we circumcise. It’s a little barbaric when you think about it. My rinky-dink insurance won’t pay for it.

Well the last time I made a financial comment, I bragged about how correct I always am. The market then promptly reversed, which is case in point why you shouldn’t go around bragging. If you’ve been invested long, you’re running a nice profit.

This week there is the Fed comment and the G20 meeting, and while nobody anticipates anything particularly surprising, there nevertheless could be some development which gets the market excited. That’s observation #1. Observation #2, it’s still running up on October, which gives us the seasonal pattern of the market tanking, and current highs aside, I don’t think we should ever discount this seasonal pattern. It’s extremely powerful, just as powerful as the seasonal pattern of the Christmas rally. So, current highs aside, I would anticipate a dip. However I am modifying my outlook, I see a fairly shallow dip. As I said previously, if you’re invested long, I’d stay invested. Observation #3, as I’ve said many times, the market is still very unpredictable, and we should lean toward the bullish when in doubt, because of massive government intervention.

If you have an IRA, you should finally see a 50% recovery from the collapse of your portfolio last year.

So, the CHeetahhhhhhh is on vacation for a week. It’s Eid. I think today is the day, though we’re not sure and can’t be bothered to actually find out. Hopefully this will be our last Ramadan, which in truth I have always found extremely irritating. Everybody sleeps all day and stays up until 5AM, and so you can’t conduct any business during normal hours, and if you are unfortunate enough to work at a university, all your students are zombies. There’s also the little detail that you can’t get food anywhere in public. All adds up to an irritated Cheetahhhhhhh.

Anyway Tita Nene is here visiting, so we have a full house. Bug is pleased, since Nene is his best friend.

I’ve been watching a Big Love marathon. After Big Love I think I’ll watch The Wire, which is generally acclaimed as the best TV show ever. I’ll believe that when I see it. In my opinion the Sopranos was the best show ever.

Little Tristan still has dry skin but otherwise is OK. He is starting to be responsive to people.

Bug is no longer interested in Thomas the Train. He is now obsessed with dinosaurs.

The New Republic has an article entitled “Wealthcare”, and add to this there has been a lively debate in the last year about the state of American capitalism, and on Twitter there has been a bit of back-and-forth about Ayn Rand, the Grande Dame of Capitalism.

Well first of all, I’d like to weigh in and say that we need to take Ayn Rand in historical perspective. When she was writing, we were engaged in an ideological struggle-to-the-death with Communism, and there were many points in time when it looked like capitalism and liberal democracy were losing the fight. So when we read the Capitalist Manifesto, Ayn Rand’s Atlas Shrugged, we need to keep all this in mind. The collapse of communism has made her ideological vantage seem a bit extreme. We tend to forget how hairy the Cold War really was. I remember being genuinely afraid of Russian nuclear attack, for example.

Anyway there is that. Then there is the little detail that America is not really a purely capitalist economy, and has not been one since, at the very least, FDR. I don’t really know about before FDR so I’m qualifying my statement. But FDR gave us a lot of socialist innovations, such as welfare. The level of government involvement in the economy has skyrocketed recently, into what I might call “bank welfare”" and “auto industry welfare” with the recent bailouts.

Now, there has been a lot of talk about how the rich are getting richer and the poor are getting poorer. In America at least. I’m not sure this is anything more than a reversion to the mean. We need to realize that FDR and the 1950s-60s so a real skewing of salaries and living standards, thanks to a variety of factors, such as post-war prosperity for example. But now living standards are falling. My generation, the X-gen, is the first AMerican generation that actually expects to have a lower living standard than our parents. A sobering thought. Part of the reason why my generation has a generally poor attitude. But, as I said, from a historical perspective I think we can view this as a reversion to the mean. Remember that the vast majority of AMericans, throughout most of our history, did not actually live too well by what we now consider middle class standards.

Furthermore, this is going to sound very Republican, but the blunt fact is that the rich produce an overwhelmingly disproportionate amount of economic activity, whereas the poor are engaged in subsistence activities. So if we want a prosperous republic, we want to have rich people. Furthermore America is not premised on the idea of everybody being equal. America is premised on the idea of everybody being BORN equal. That means no aristocracy. But 2 seconds after you’re born, you’re no longer equal. Some Kennedy or Rockefeller baby is more equal than you, you can bet your diapers. Indeed the whole notion of America as a classless society has always been, and always will be, a fiction.

I’m about to leave my office, so I’m going to cut it short with that.

So the Rotana opened recently here in RAK. We don’t really have many places to eat out, and nothing really fancy here. I guess people with money in RAK have been eating at the golf club, or go to Dubai. Anyway now we have the Rotana, which is a very fancy 5-star resort. Quite nice. We ate at their Italian restaurant, with vaulted ceilings and romantic ambiance and a view overlooking the sea. Would have been romantic anyway if we didn’t have 2 children in tow. Van and I almost don’t remember what romance is any more. Now, when you’re paying 5-star prices, I expect food that is exciting and interesting. With the Rotana’s Italian restaurant, the blunt fact is Vanessa could have cooked that meal, and it wouldn’t have cost me a hundred bucks. So my verdict with the new Rotana is A for ambiance, but C for the food.

I have decided to go on a diet. Well, for me that would mean more exercise and no sugar.

So I spent the day studying the market, because my positions seem to be at a critical point. I added an SPX position I didn’t mention a few days ago. My RUT position in particular is in danger. I have the following observations:

1. The market will typically make a hyperbolic push above resistance, and then retreat. This appears to be what’s happening now. The market is stymied at about the RUT 595 level, which is right where we’d place a 50% Fibonacci retracement. So this should be a difficult level for the market to rise above.

2. Add to this, the NDX futures today have pierced above their downward trendline, which is highly significant. If it’s not a hyperbolic push, then all bets are off and my position would change firmly to bullish.

3. Everybody on Wall Street has been predicting a correction for a few weeks now. Me too. Generally when I make a prediction here in the blog, it’s nothing new. However the thing is, strange counter-intuitive wisdom, the thing is when everybody on Wall Street thinks something, it’s usually a good idea to do the opposite. There is actually an entire school of thought in investing about this, Contrarian Analysis.

4. The VIX may appears to have made a triple-bottom at 22.8 which would suggest a decline in the SPX. On the other hand, the VIX has pierced below its upward trendline, which would suggest that the VIX may be easing below its high levels, which would be bullish for the SPX.

5. Sept and Oct are, as I have repeatedly observed, the weakest months for stocks historically.

6. “Talk is building that the economic recovery may prove stronger than expected. Thursday’s economic data included strength in both imports and exports, a dip in jobless claims, and improvement in gasoline demand… Company news is definitely upbeat as a run of companies raise guidance. This session’s run included Texas Instruments, Procter & Gamble and General Mills. The S&P 500 rose 1 percent to 1,044.14. More and more are targeting 1,200 for the S&P twelve months out.” (Barron’s writes, and I agree.)

7. A bit of a retreat would be healthy for the long-term bull market, as everybody agrees.

8. Because of massive worldwide government intervention, it’s wise to lean toward the bullish when in doubt.

What do these observations add up to? Well, not a lot. The most intelligent comment I can make is that I wish I was in cash right now, as the situation at the moment is extremely unclear.