Stripnomics

Since my last post, I have been spending most of my time working on my technical analysis skills and doing some fundamental analysis of some particularly juicy equities.  I have been trying to gauge the extent of the bear market rally. My collaborator at the Tinker Factory says the rally is done and the time is upon us. (Oh how quickly things change between posts!). Mr. Volatility is the timer and he is rarely wrong.

From a fundamental standpoint I would hypothesize that any rally is likely to be short-lived and unlikely to continue through the worst earnings season in 50+ years. After all, we are living in the Great Depression II. There - I said it. That is what I believe and what I have believed for quite a while. Stripnomics and the stripconomy told me so.

People say that I am dark and pessimistic for thinking that. I know it is an unpopular and negative thought. But, on the contrary, I am not depressed nor do I feel negative. In fact, I feel the most optimistic about future opportunities that I have ever felt in my entire life. Men like Kennedy, Soros, Rogers and Morgan seized these opportunities. I am going to try. I can see that my generation will get breaks that I never dreamed would appear. Deals that my father’s generation capitalized on will become apparent if you keep your eyes open. If we know what to expect we can exploit and profit.

No doubt, there will be pain. Unemployment will skyrocket and quality of living is likely to fall for the masses. I hope that social unrest remains relatively low but some places will not be so lucky. I am not happy that we will suffer from these woes but I cannot discount my analysis simply because I don’t want those things to happen. I must remain objective and not be blinded by the implications of the mathematics or greed.

Why do I believe we live in the Great Depression II? Quite simply, every piece of evidence tells me so. Anecdotally, I see it every day through failed real estate deals and foreclosures that never foreclose and ghost town strip malls. I taste it in restaurants and it tastes like chicken: re-frozen chicken and cheap doughy ingredients to serve the many. 

Empirically, I see it through the unemployment numbers. I’m not talking about the unemployment numbers that Uncle Sam lies to you about to help you sleep better. I am talking about the real numbers that you have to search for. For example, unemployment charts like this from Shadowstats via Paul Kedrosky’s Infectious Greed:

 

 

 

 

 

 

 

Or this Part-Time Employment / Recession Chart from Paul Kedrosky and CalculatedRisk:

 

Or this Port Traffic Chart from CalculatedRisk:

 

Any way you slice it, the news is bad and getting worse.

So how can you be Grizzly? You can be well-fed if you feed on the weak. Look for the wounded, the stragglers and the clueless. It is easy smell the blood and just pick them off as they wash downstream. They are the one’s buying and that see the economy picking up in the 3rd quarter. Their analysis is based on hope not evidence. You can exploit them.

I have a new target. I expect this trade to be comparable to my ProLogis trade. It will be just as juicy and will make me fat. Stay tuned. I will begin my analysis soon. This REIT will follow the same path as ProLogis. I have been devoting great amounts of time to the books of this company. It is my favorite trade. I expect it to be the Trade of 2009!

Speaking of ProLogis….someone recently asked me why it went back to $15-16. Was my original analyis wrong? (LOL). I laugh because I know the Greater Fool Theory is at work. I know that the market is not logical. If it was, PLD would have never traded at $60 or $50 or $40 or even $2. There are smart traders who know that suckers will be coming back. There are also ”geniuses” who think that just because a stock was at $60 last year - it must be a good deal at $2. There are even few suckers that think it is a good deal at $3. Even fewer at $4 and so on and so on. That does not change the fact that they are still all suckers. If you study the company’s books, you can figure out what the true value is. Then, all you have to do is figure out when the traders will abandon ship and who the last sucker is likely to be. Personaly, with respect to PLD, I think the last sucker was a $16 sucker but I defer to the technical analyst for that.

You will recall that my other big trade is Gold. It is still working but it is at a critical technical point. As I write, it is testing critical lower support levels. If the trend breaks, I will have to switch quickly and admit I was wrong. Over the long-run cycle of this Great Depression II, Gold will have go higher. Why? Because it always has during times of turmoil. There are many reasons why but all I really care about is that it always works. However, the next few weeks will guide the trade.

That’s enough doom and gloom for today. In the meantime, enjoy some Phoenix.

This entry was posted on Monday, January 12th, 2009 at 11:43 pm and is filed under Accounting, Economics, Gold (GLD), ProLogis (PLD), Trading. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.