Back to Life -- Back to reality...

Back to Life -- Back to reality...
The British group Soul 2 Soul said it best back in the 80’s, and just to get your morning started with a little muz-ak remember that today reality is upon us…

After a three day recess full of family fun in the sun, it’s a tough task to get back to the grind. But reality is upon friends and it isn’t a pretty. If you take into account the tumbleweeds rolling down Wall Street on Thursday and Friday some might say its been a 5 day Siesta for the markets, only prolonging the inevitable beating awaiting in reality land this week.



Consider how low the volume was on Friday, and the fact that the Floor of the NYSE was showing more wood than a bowling alley, and some might say that after a miserable May most traders made it a four day weekend. Friday’s action was more akin to a ghost town than major market behavior, and the same went for the global markets yesterday. When Markets open today, expect Commodities to get crushed, don’t be surprised to see the Euro break below 1.20, and be on the lookout for real selling. Think of today’s markets as “that chick.” Yup, you know the one I’m talking about, the one we have all woke up next to after a three day drinking bender on spring break. The head’s pounding, the sun is piercing your eye balls, and you start to come to your senses and realize the haze of tequila shots—Jack Daniels and Jameson is still on your breath but no longer affecting rational thought. You look to your left and unmitigated fear comes upon you as you realize that last nights Miss USA is this mornings Tales from the Crypt keeper. That’s this week in my humble view. Much of the cash on the sidelines is firmly planted there, and the shorts who got spooked by the long weekend will be parlaying their May profits back to the short side, to try to keep their healthy May streak rolling in to June and end Q2 with a bang. Think Daniel Day Lewis’ 2007 hit movie…about Oil prospecting---in my view this week “there will be blood.” My recent calls of 9000 Dow, and 950 S&P see to be well within reach, and market players should beware sink holes in this tricky market.


June could be a key turning point. Watch the miners and oilers in this environment for violent downside moves. IOC- VALE-BHP all seem to be in jeopardy of suffering both technical and fundamental break downs.

Abe Lincoln…..Military Hero????
With the US markets closed to commemorate the brave men and women who’ve for the better part of 2 centuries, protected our freedom and liberty, the rest of the world markets seemed to rest as well. Not even the Friday revelation that Spain was no longer a Triple AAA rated entity, nor the weekend statement from Frances Finance Minister that it may be a "STRETCH" for France to keep its Triple AAA, was enough to get a rise out of the Global markets, with the US in Holiday mode. And so it goes Monday was a day of rest, and here in the US, with our Armed forces waging two wars, our Commander in Chief was resting comfortably as well.

POTUS as he’s referred to by his Secret Service detail, decided that it was just a formality to actually be at in Washington at Arlington to honor our fallen heroes. HE instead decided to take a little siesta from all this oil spill stuff, and Memorial Day pomp and circumstance, and instead he commemorated our War Heroes contributions by attending a nice little ceremony at the Abraham, Lincoln National Cemetery, just outside Chicago. HUH? For those of you wondering about Honest Abes, Military contributions that might justify Obama going to Lincolns Cemetery… let me help you out. Abraham Lincoln served in the Illinois State Militia, for a grand total of 3 weeks. He did however lead a battalion in the Black Hawk War---but the Rail Splitter so no action.
Great Man yes, but Great Military man Abe Lincoln, quite a stretch? Well the Gods of War obviously didn’t like the choice as the skies opened on cue as Obama began his speech, and the whole day much like the choice was a total washout.

Liars Poker
About a year and a half ago I was on Neil Cavutos show, and I pointed out quite clearly that while the rest of the world was abusing our banking system and markets, we needed to get our house in order pass our stimulus and TARP and HAMP and whatever else was necessary, and then let the rest of the planet start showing their cards... here’s the clip.

Well that time is now, we are seeing some cards, and looky here it seems the rest of the players at the table were all bluffing... Spain Italy France Portugal Greece, are all quietly turning over their hold cards, and it looks like a episode of celebrity poker when the two idiots playing the pro tried to bluff him out and then they have to show their Jack-5 unsuited. This thing is getting stupid now, it seems the whole globe is broke.

The Constanza Problem
The major problem facing every developed and or developing nation is, the same problem that plagued Costanza in the famed Seinfeld episode. SHRINKAGE. Yep, what the world had been enjoying was a kind of Global pool party. Think Silvio Berlusconi type bash with even the poorest nations invited to splash around frolicking naked in ocean of cheap money. Loose monetary policies and unsustainable deficit spending created a bubble that is now bursting. And there’s nothing us guys hate more than the party ending than a stiff breeze to close things out. There is no way to cut your way to prosperity, so the only real way out of a torrent of terrible fiscal conditions like this is growth. Hmmm Growth?? Ever try getting some growth after getting out of the pool with a wet bathing suit, and a cool breeze??? This problem plagued George Costanza, and now apparently Spain and the rest of the PIGS share this age old problem? Funny because usually a nice warm Pig would be the perfect remedy to the whole damn shrinkage thing, but this isn’t a backyard party, and these PIGS aren’t gonna fly.
Over in Espana, el gato is out of the bag-o, and its muy claro, that they are the next contestant on who needs a bailout. In fact this week the FT interviewed a regional economist, and he was, ummm let’s just say, quite clear about the forecast.... The government “runs the risk of being far too optimistic,” further undermining its credibility, said Fernandez, previously chief economist at Banco Santander SA. “We’re not going to grow 1.3 percent in 2011 no matter what they do.”
President Zapatero’s reputation was damaged last year when his government predicted in October 2008, with the economy already shrinking, that Spain would avoid a recession. It now forecasts a second year of contraction in 2010. A prediction of 19 percent unemployment this year was surpassed in the first quarter, as the jobless rate hit 20 percent, the highest among the 16 nations sharing the euro. Now Zapatero’s got union problems, the very group he has courted and tended to consult on policies, has threatened the first general strike since the Socialists came to power in 2004. And when Socialists start fighting unions things are upside down. Here’s how confounding recent Global problems have gotten: even the big boys who usually act in concert assessed prospects for US growth… over the weekend Goldman stated that US growth cant possibly meet projected estimates, and it would slow below trend in the second half of the year, any global tightening could push the US back into recession. But JP Morgan said even though household wealth declined nearly 1 trillion bucks, they are sticking with their estimate of 4% growth in Q3 and Q4. So, who knows? All I know is this: Remember the utter fear and embarrassment of poor George, standing bare for all to see--there is no defense to Shrinkage. Nature must take it course.


Downside Delights
With the ECB sounding the warning bell that the recent EU –IMF shock and awe bailout package may be as effective as Donald Rumsfeld’s famous Shock and Awe assault on Iraq, there are a bunch of banks that still look devilishly delectable to the Bears.
Look at IRE—as the I in PIGS continues to be internationally construed as Italy, the dire situation in Ireland is currently being overlooked. The banks were nationalized, and the finance and banking sectors are showing no signs of growth or recovery so the luck of the Irish may be that no one is noticing.
Check STD, as this stock continues to have massive exposure to the region, along with ING, and HCS.
BCS also is right smack in the middle of the UK mess and all the aforementioned could be effected by the looming losses being predicted for the Euro Zone banks.
AIG hit the radar last week and now we know why, some smart shorts obviously felt the AIA deal wasn’t going down, and now we find out that the $35 Billion we Taxpayers thought we were getting for the Asian unit is not coming our way after all. So the Taxpayer is humped again, as Chairman Benmoche prepares to head to his Villa in Croatia to oversee the harvest of his vineyard….again. http://www.guardian.co.uk/business/2009/aug/27/aig-business-insurance-benmosche-croatia-grapes He did this last year just days after being appointed to run the US Taxpayer owned entity, and since then he’s been rewarded with a raise and had restrictions on him loosened. It must be nice working for us taxpayers. Remember the stock was reverse split 20-1 so the $35 price tag is really only $1.70, and don’t be surprised if this stock is a $1.25-1.50 in short order. The market has been pricing in this windfall for months. Now we hear it’s not happening.