I simply could not resist reposting a great quote I saw today at the Big Picture- "Markets eat like a bird, but shit like a bear"
The decline in prices of all commodities over the last three months has been nothing short of spectacular. I simply can't believe that just a few months ago predictions of oil going to $250 were actually considered to be credible just because Goldman Sachs said so? What a joke :)
I actually found few of the interviews I gave to MoneyShow.com and Andrew Horowitz from DisciplinedInvestor.com back in August when commodities were still flying high.
Video 1 from Money Show
Video 2 from DisciplinedInvestor
In one of these interview, I also said that I believed at that time that big money center banks likely hit the bottom in July. Surprisingly enough, despite all the negative news in the financial sector since than -only one of the "big boy" banks- Citi has taken out the low from July for now. (Bank of America does seem likely to join C in taking out these lows very soon though...)
I also remember quite clearly receiving some hate mail after these videos and MSN articles, especially from MOS and POT fans. One of the Mosaic employees called me funny names in his email like mor.n, idi.t etc for refusing to buy into the agriculture hype and oil and gas plays...:) Anyway, I honestly hope he is doing well today and that he did sell some of his stocks back at $100+ a share...
P.S. To finish off with the usual bad news/good news summary- because of the change in scope for TARP program, I adjusted (higher) my required preferred returns for a number of big balance sheet/higher leverage banks and now all of the prefs for Goldman/Morgan and most of Citi (except P and M series) look even more overvalued than they did a few weeks ago...
Another point as relates to prefs is that for any of the larger regional banks like STI, KEY, FITB etc now there is a new significant risk factor -potential Citi takeover. If that happens- preferred valuations for some of these regionals could easily come down -regardless of premiums paid to the common stock holders. Because for example yields on Citi are much higher than those of STI (SunTrust), which will reverse in the case of a take over. I am, for example, now officially out of all STI's prefs. Remember this is not a recommendation to do anything, just my thoughts...
Good news is that using an ultra short index ETFs like SDS as a hedge for prefs and closed end ETFS so far has worked ok, even though I do think we are now getting awfully close to a break point/washout day for most major indices. I am not as bearish as most of my colleagues, but do think that computers (technical traders) could easily take S&P to 800 tomorrow. Where we go from there is anybody's guess, but in the short term, path of least resistance is most certainly down as analysts keep dragging their feet in adjusting projections down, which means a continued stream of headline bad news...
Stay safe out there- remember, hedging is very important- no one should be 100% long the market at any time
