I’m down big time, after getting too optimistic, for a 2nd half rally, but…
hat tip – TG.
Happy New Year! See you in 2009!
Archive for December, 2008
Market Thoughts for 2008
Wednesday, December 31st, 2008A plan (full of holes) to save America: Freedom Tax, Freedom Express
Monday, December 29th, 2008Obama needs cash, like everybody who doesn’t have an oil field in their pocket. One way to raise cash is taxing things. Any tax, will make some people mad, and introduce losses into the market. But, as I’ve tweeted,
Rock | Earth | Hard Spot
So, that’s where Obama’s charm could prevail…even if taxing things is taboo given the state of the economy.
If Obama started by educating the country on where oil dollars actually go (ie the 23 major exporters, which aren’t exactly democracies, who don’t exactly like the US, and who’s people are suppressed – the higher oil prices go) then the American public, might hear him out. And maybe be supportive of a tax on oil/gas.
He could call it, a “Freedom tax”, although don’t get confused – it’s an oil/gas tax, just spun the right way. If Obama said something like:
“In order for America to keep our freedom, we have to buy sustainability. Oil, is an addiction, just like cigarettes and alcohol. So, just like cigarettes and alcohol,we have to kill our dependence on it. Anybody that wants to continue abusing cigarettes, alcohol, or oil - is going to pay a tax to do so.”
He could then argue, that
“with this tax, we could invest in sustainable city projects, to guarantee that our freedom lasts, for generations”.
Invest in sustainable solutions and name the projects with a spin on Freedom – so people see the dollars spent. Americans like freedom, so why wouldn’t they like a light rail in their cities named something like “the Freedom Express”? “The Freedom Flow Water Utilities”? “The Freedom Solar Field”? “Freedom High”? “Freedom Hospital”? Freedom. Freedom. Freedom.
And oil tax would for-sure:
Reduce demand.
Encourage research, entrepreneurs, and innovation of solutions for renewables. Thus reducing the need for solar, wind subsidies.
Put a little money back in America’s pocket + reduce the wealth transfer to OPEC.
Encourage diversification and innovation in OPEC economies, for their own good + sustainability.
If Obama wanted to get real creative, and would like to avoid the implications of the downfall/risk from the tax itself - I have an idea. Tell everybody that he is GOING to tax oil/gas, starting in, say, January 2010 at 20%. Then, say it’s going to grow by 100 bp every quarter. He could then, borrow against that future cashflows – today… and give the long-term market a chance to find a smoother equilibrium, and reduce the risk of somebody launching a missile or two.
Update: A new follower, Wattzon points out, that less than 24 hours ago – Friedman did an op-ed piece on this topic.
12 Market Predictions for 2009
Sunday, December 21st, 2008…here they are, in no particular order:
1. Oil bottoms, and by the end of 2009, everyone is shocked by the extremes in price it reached…to the downside AND THEN to upside. V / U shape. The media will create a buzzword, which is some derivative of ’supply-crisis’. An oil tax is proposed, and highly debated.
5. Whenever treasuries crash, and they will in 2009, the inflation trade will get really loud. This will do curious things to the TIPS.
6. AFAM turns into one of the new leaders in the equities, when it finally reaches retarded multiples, porter’s five forces begin to kick in, and eventually the stock crashes…similar to CROX, DRYS, GRMN, HANS, FSLR…etc.
10. ERII reaches retarded multiples, but porter’s five forces have a little more trouble catching up.
2. Volatility continues as information continues to flow faster.
8. the 2008 cheap idle resources (labour, commodities) + simultaneous government spending + money expansion, goes down in history as the cause of the largest global ex-US build-out ever seen, which starts in 2009…Sadly, the US is forced to strangle it’s own recovery by raising rates towards the end of 2009. Equities eventually price this in, and all targets turn out to be useless, cause it’s all just a function of what investors will pay for risk. If you think you can predict what investors will pay for risk by end of 2009, or maybe the eps of the S&P, please get louder – if you can.
3. The strong form efficient market hypothesis strengthens, as information continues to flow faster.
4. The loudest predictions made in the media, come to fruition by mid year, then unwind. Like gold did in 2008.
9. Something’s got to go wrong with the triple and double ETFs…2009 could be the year.
7. HEK gets coverage, and marginally misses their 2009 targets. They buy back stock, warrants. Then, by end of year, they begin to up their own guidance for 2010…only to blow away the numbers in 2010.
11. Ironically, 2009, turns out to be the year the MOST predictions turn out wrong…ever.
12. Buy & holders give up, only market participants left, are short term traders.
…what do you guys got?
Oil Gets Taxed?
Sunday, December 21st, 2008Soo…I spent the week, talking to some amazing new friends.
1. An engineer from Jacobs Engineering.
2. A doctor who works at the Aramco compound in Saudi Arabia.
3. An engineer who works here in Toronto in the industrial liquid storage industry -> ie a booming business to be in, if you’ve seen the oil contango curve.
After a very lively discussion from a group of informed people with different market perspectives, I took away, that it is likely that the new American administration eventually taxes oil imports. This is just one theory.
Thoughts?
IPO Zombies
Saturday, December 13th, 20082 days ago, I blogged that the IPO market died. It’s died, like every business cycle in the past…so I’m sure, it will be back from the dead, in the next bull.
In that post, I said I wanted to see data going back 20 years…about a day after my post, John E. Fitzgibbon Jr. at IPOScoop.com e-mailed me the monthly IPO data going back a few decades. So, I plotted some of it, against the S&P.
(click to enlarge)
This chart proves, that sooner or later the cost of equity will inevitably fall. And that top, I had no idea (prior to my CFA candidacy) will line up with the top of the next bull…as its lining up with the bottom in stocks now.
RIP: IPO Market
Thursday, December 11th, 2008
They said 2008 was the year the consumer died. Same is true, for the IPO Market.
All this means is, the cost of equity, is too high right now – and people aren’t willing to hit the (non existant) bid.
…
I’d love to see this data going back 20 years.
Best Oil Proxy? Don’t get me started…
Sunday, December 7th, 2008For those out looking for the best oil proxy…it seems like the Holy Grail. Likely because it is – think about it, you can’t buy oil, without having to pay to store it. Anyway, this pdf should help, in your hunt/decision making/trading.
Keep in mind that PDF is written by the guys that want you to buy their Macro Shares – and those have discount/premium issues as the shares move on supply and demand themselves, which of course they don’t mention. And I laugh at how treasury exposure is treated like an upside somehow. Those funds are going to get ruined when the treasury bubble inevitably implodes on itself. Unless they’ve done something about it, maybe they have, because the correlation between the macro shares and TLT seems to be fading. DBO – my favorite so far, isn’t in the document. I need to figure out, exactly what DBO is doing, right now (not what they were doing when the fund started).
A take away -> Any ETF could have treasury exposure, depending on how they track their various indexes, and what they do with spare cash. Anybody using swaps or other contracts to provide the NAV of their ETF, could literally be boiled down to a simple pile of cash/treasuries AND a pile of contracts. Likely many ETFs are holding cash now, rather than using creation money to buy treasuries – as the people that run these aren’t dumb.
BTW, my new favorite blogger, is Gregor. You can put me firmly in the camp that says oil is going to 3 digits, even if it hits the 20’s first. Especially if it hits the 20’s. Or at least back to a demand destructing level. I know things are shitty out there, I’m staying optimistic ITS A CYCLE and so what we’re seeing in oil’s price action is a summation of more than just falling off demand. We’re seeing: 1. Deflationists who are shorting. 2. Falling Demand (duh!) 3/4. Supply Dumping/Panic. 5. De-leveraging. 6. Momentum traders who are short.
All of these, are temporary, and killing supply projects. The longer it stays low + the lower it goes, the more violent and awesome the upside will be, since cheap oil price is the the best stimulus package the world can have right now. Can’t get that effect in any stock.
If you’ve followed me, you know I rarely buy plain vanilla, I think the oil upside, warrants it. So I have tucked away a few (and will hold even if they go to zero) $70 2011 strikes on USO.