Happy New Year!
It’s going to be a slow trading day most likely. Europe has been trending down all morning (7am) with no one wanting to be bullish into early closes and it looks like we’re down about 1% over there for the day. Over in Asia, the Nikkei was closed and had also finished the week with a 1% drop while the Hang Seng finished their half-day flat at 23,035, up 5% for the year while the Shanghai rallied 1.8% on no volume but it wasn’t enough to save them from closing the year out down almost 14% – kind of odd since the “China growth story” is the main driver for the US equity premise.
The Shanghai gauge’s advance for a third day narrowed its decline for the year to 14 per cent, the worst performer among the 14 biggest world benchmark indexes, according to data compiled by Bloomberg. It’s the biggest drop since 2008, when the global financial crisis crimped the nation’s exports. The index jumped 80 per cent in 2009 as a 4 trillion-yuan stimulus package and record new lending helped the Asian economy recover. Whether another 4Tn Yuan is waiting in the wings in 2011 remains to be seen. “The previous declines were excessive and the market is performing a technical rebound,” said Wu Kan, a fund manager at Dazhong Insurance Co. which oversees $285 million. “It’s a short-term correction amid weak market sentiment.”
We won’t get into that because I don’t want to be negative today. I’m not even going to say anything negative about Pimpco’s BS $92M fine for using their $1.2 Trillion Dollar fund to manipulate the Treasury markets because, like GE selling key US technology to China, which we discussed yesterday – no one seems to care so why should I? China can buy our aviation technology to build planes that may eventually put BA’s 150,000 workers onto the unemployment lines but we can’t buy property in China as China Daily reports that the nation’s housing ministry will work together with the Ministry of Commerce and the State Administration of Foreign Exchange to monitor overseas capital inflows into the property market.
Joel Kotkin makes a good point in Forbes today about what he calls “The Poverty of Ambition” in which he also suggests the need for Westerners to cheer up and try to recapture a little of that positive pride and spirit that once made our countries great. He mentions how non-Western nations are building cities with startling new architecture and bold infrastructure – something I had pointed out a few months ago when I was talking about Singapore’s exciting new skyline but the general reaction from my mainly American audience was “those buildings look stupid.” As Kotkin points out:
This lack of ambition plagues virtually every Western country. The ability to act has become shackled by a profound pessimism that according to a recent Gallup survey contrasts with the optimism found not only in rising states like China, India and Brazil, but also deeply impoverished places like Bangladesh.
We used to travel the World and bring back photos and knick-nacks that we found interesting in other cultures and we would emulate them and incorporate them into our own designs, advancing our own culture. America became a great nation as a “melting pot” of talent from many nations where a can-do attitude was blended with a willingness to try new things. Even as recently as the 1980s, American business schools studied Japanese methods to find out how they were being so successful and that led to major innovations in US manufacturing, like our “just in time” systems that drive efficiency. How many people are now studying Chinese business practices or do you, like 99.99% of all Americans, just dismiss whatever China does as some sort of bad Commie thing that we could never learn from?
What made us great was our willingness to embrace other cultures and to learn from them and exchange ideas and to adapt the things we learned into our own culture. Now we simply go to other countries looking for which local store we can tear down to make room for a new KFC or Starbucks – kind of sad… What happened to this world?:
I will reflect more on this subject over the weekend as we look ahead to 2011. As I mentioned in yesterday’s post we remained short on oil and short on the markets but the DIA weekly $116.75 puts were taken off the table at 10:28 in Chat when I said to Members: “DIA $116.75 puts hit $1.40 – DO NOT BE GREEDY!” $1.40 was up .47 (50%) from Wednesday’s entry so a good catch there and we flipped the risk to a .25 stop on the TZA Jan $14 calls at $1.50 in the Morning Alert and those finished the day at $1.63 but we should, as with the DIA puts, do much better today as hopefully the US markets match the rest of the World and drop 1% to close out 2010.
We also grabbed a TZA April spread with 700% upside potential if we get a 15% drop in the Russell by then (670), which is lower than we expect but it pays off very well at all the in-between stops as well so nice protection into the New Year to cover what hopefully will be a lot more bullish bets. In that same comment I also laid out a good starting position for a DIA Mattress Play, the strategy for which you can read about under the article “The Stock Market Parachute.”
Hey, just because we’re trying to be more optimistic doesn’t mean we need to be idiots about it, right? Actually, here’s something funny – I just Googled “portfolio protection” to look for an image to put on the above paragraph and there is almost nothing under images and and very little in the web links either. No wonder the VIX is down to 17.50 – we are a totally complacent society aren’t we? I guess the problem is most people don’t want you to protect your portfolio – they want you to CHURN your portfolio to generate fees. The only thing “THEY” want to protect is WEALTH – if you have WEALTH, then there are hundreds of links from people who are willing to take care of you – just don’t try to actually build it because one of the things that wealthy people are being protected from is YOU – trying to hone in on their action!
So we are well-protected and we can enjoy our weekend and bid a fond farewell to 2010 and the greatest holiday shopping season EVER (thanks Barry):
Will it be enough to make Q4 earnings pop in January? Will we have inflation, deflation or both and, more importantly – will anyone care or will we all just keep partying like it’s 1999?
I was dreamin’ when I wrote this
Forgive me if it goes astray
But when I woke up this mornin’
Coulda sworn it was judgment day
The sky was all purple,
there were people runnin’ everywhere
Tryin’ to run from the destruction,
U know I didn’t even care
I was dreamin’ when I wrote this
So sue me if I go to fast
But life is just a party, and parties weren’t meant to last
War is all around us, my mind says prepare to fight
So if I gotta die I’m gonna listen to my body tonight
Say two thousand zero zero party over, oops out of time
Tonight we’re gonna party like it’s 1999
Wishing you a happy, healthy and prosperous 2011,