Wrap and Raps.

Green Bay: 4-5. Jets: 6-3

Just a little past half way through the season, the Green Bay Packers have dropped five games and are now in third place in the weakest division in Football. The Packers every off season move was an improvement over last years division champion 13-3 team. All but one move that is. That was the move to force the super star, Brett Favre out. The current dumb asses leading the Packers, Thompson and McCarthy were not around in the 80's when the Packers routinely sucked and lost to everybody. They arrived after Favre established the Packers as the Power House of the 90's and one of the premier teams on the 00's. That's why they do not appreciate the debacle they are heading into with their horrible treatment of the franchise's best player ever.

The Jets on the other hand were a pathetic 4-12 last year. With Today's clubbing of St. Louis, thrashing them in a 47-3 demolition derby, they are 6-3 and tied with the New England Patriots on top of what has become the most competitive division in Football.

The difference between the Packers' last season and this year? They forced Brett Favre out. The difference between the Jet's last season and this year? They welcomed Brett Favre.

I said it once, at least, and I will say it again, I hope Brett goes into the Hall of Fame as a Jet. This is coming from an ex-live-long die hard Packers fan.

 

On Bailouts and our Tax Money.

My buddy Tom K asked about my Point of View of the recent bailout plan of the Auto Industry. Aside from his strong and enlightened political views, Tom is also one of the best, if not the best, real-life system trader that I know of. He built a robust system backed up with results and uses it to manage real money. Not some hypothetical portfolio, made up theories or paper trading. If you are looking to learn about system trading I would say that Tom, Bill and Woodshedder are the best real life, non professional, system traders out there.

But I digress... I hate bailouts. I am against bailouts. In light of the news today that AIG plowed through the billions of dollars given to them by the tax payer and are now demanding more money, I hate bailouts even more. This is a difficult topic for me to formulate and articulate an opinion. In part because of our history of supporting dictatorships and severe human rights abuses in many countries around the world in the name of spreading Laissez Fair Free Market Capitalism. This is particularly bothersome in light of the fact that Obama is surrounding himself with a group of "Chicago Boys" from the University of Chicago school of business that had advocated these practices.

While cloaked under the guise of capitalism these policies always result in concentrating wealth in the handful of undeserving few while robbing the small business and the middle class of the fruits of their labor.

I am a big proponent of free markets but in my mind free markets does not mean jungle capitalism with zero regulations and complete outsourcing of everything to the non local businesses.

I also believe that the US economy and society is a big replica of the Sub-Prime crisis. We have basically believed that we are blessed by god and that we were meant to, and are entitled to, live above and beyond all other human beings. We made it beneath us to produce things. More recently, in the last 8 years, we made it a sin to be scientific or to welcome highly educated immigrants.

We basically have turned ourselves into a service society, exported inflation to the world, thanks to the Button Wood agreement making the Dollar the reserve currency of the world, and have been living on borrowed money ever since.

It is very hard to see how our future as a nation and a country, can be any different than the future of the sub-prime "investors". Barring a new World War, I do not see how we can work ourselves out of the fiscal hole we put ourselves in.

Especially in this world of Globalism. There is no reason any more for a plumber in America to be able to live in a McMansion, drive a brand new car and own a 50 inch Plasma T.V. while a plumber in Mexico or in Egypt cannot afford to eat meat more than once a week.

The economies are interconnected and interdependent and without any real economic or professional advantage for the American society all societies have to (and will) move towards equilibrium such that all these societies are roughly at the same standard of living. That's after all the result of globalism and free trade. Absent external forces, the producing societies with surpluses will maintain a higher standard of living than consuming societies with deficits, with the gab between the most well to do and the least shrinking as market forces move towards equilibrium.

In light of that, I see more pain to come and I do not believe that any of the bail out packages will fix anything. In fact they will just make it more painful for future generations. We are robbing our children to pay for Milton Friedman's sins.

 

Any how, thus I am opposed to bail outs. But what to do about the Auto Makers? Driving these people out of business means millions of jobs lost. Driving them into bankruptcy is effectively driving them out of business, as nobody will buy a car from a bankrupt company.

In my opinion, the unions have to be thrown out, the management has to be thrown out, and previous health care and retirement "RIGHTS" of employees should just get thrown out. Hundreds of thousands of people are losing their jobs every month in America and none of those get "rights" to ever lasting premium health care. Many retirement plans blew up with Enron, Lehman, Bear Stearns, etc... and none of the employees got compensated for that.

It is tough business but we cannot all support the health care and retirement benefits of the legacy Auto Makers. Their business failed and with it those plans go away. It is a tough pill to swallow but it puts them on the same footing as everybody else.

I am self employed and I have a shitty health care plan. I'd love to have GM or the Congress sponsor me for a dandy health care plan like those employees think they are entitled to. But nobody is going to give me that.

Once that happens, we the tax payers, can bail out the Auto makers with provisions for upside going to the tax payer first.

In other words, we would be bailing out the employees, not the management, not the unions, not the investors, not the bond holders, just the employees. The entitlements get thrown out and the employees get to keep a job at market rates and benefits, not at their current pay and benefits.

 

 

The Markets

 

The S&P 500 held the 845 levels and is forming a flag here retracing about 50% of the pre-election rally. A measured move analysis indicates that the markets can continue their run to the 1050 levels. I am positioned on the assumption that the rally continues to around the 1050 level which would be a 13% move from these levels. After that, it will be prudent to take some chips off the table and wait to see whether the market consolidates near the falling 50 day moving average or gets turned down to continues its slide.

 

The Portfolio

 

The portfolio slid again, nearing all time lows, thanks mostly to the whipping inflicted on the markets on Wednesday and Thursday of this past week. I have added more positions over the last two weeks and got back into DTO (short oil) after booking profits earlier. If we do continue the rally as I expect, I will be looking to exit several of my long positions and moving to the side lines and waiting to see how the market behaves.

If instead we come crashing down, then I will probably cut losses if the S&P 500 does not hold the 840'sh levels and continues another horrid down leg from here.