Tuesday, November 29, 2011

Utilties That Pay You

Risk is all about choices. Everyone knows people can look at the same market data and get different views of the risks lying ahead in any trade or investment . Why? Value and opportunity are rarely what you think. The person who asks the right question wins, as long as they have created the ability to maximize a utility which captures those opportunities. To build great utilities however is expensive both in time and money and few have the ability or desire to contribute to such efforts.

While there are many proprietary utilities on Wall Street, it prefers to use another utility to make money . They collect from opportunities created by tapping into wealth reserves of the general public. 401ks, home equity markets, and the sub prime market have been a source of great profits. But not better than the latest, the Fed. If the trades go bad in the other aforementioned areas, the Fed will not only cover it, but continue to feed you. Bloomberg reported yesterday that Wall Street investment banks made an estimated 13 billion dollars from access to secret, practically free money from the Fed.

Wall Street may have discovered their best utility yet.

Tuesday, November 15, 2011

Buffett

Warren Buffett has announced he has amassed a huge 5.5% piece of IBM, although it was kept from all of us under the double secret exclusion act derived through natural law, but implemented by special permission by the SEC. Normally, companies such as Bershire would have to disclose their purchases. But now we know why Buffett wants the rich to pay more in taxes. It is to pay for the special treatment and subsidization they receive from the government each year.

Warren touts the great free markets whenever possible and wants everybody to operate fairly in the market place, except when he is amassing a huge stock position. Now it may be he wanted to merely surprise us with the great news that he, much like the great JP Morgan had helped the banks and US Treasury in the Great Panic of 1907, was continuing to support the economic recovery.

Maybe we should all be thankful for Warren and his ability to possibly be illuminating a top by infusing billions at purchase prices which were initiated in March of this year after a 150% rally in the stock since 2008. Maybe he really want us to join him and help support the position he is now lugging.

Sunday, November 6, 2011

Giving Them What They Demand


Since August of 2010, just after the Jackson Hole speech by Ben, and shortly before QE2 began, Nasdaq 100 stocks became the focus of an upside play where the index has gained over 34% as opposed to its neighbor the S&P500 gain of just over 20%. This of coarse on top of a massive rally in 2009. Odd price technicals, such as the QRiskValue chart shown to the left, continue to reveal unusual bloated positions where billions of dollars in share values sit on a thin perch fully expecting to be paid by the intervention strategies of the Fed and Treasury.

Given that the test of all governments these days is to placate Wall Street, all demands seem to be met. But even cash monster stocks such as AAPL are vulnerable to a large downside sell off if there is an event which triggers an unraveling by all the well laid demands of the markets