A Good Pocket Knife

Before launching into my daily tirade on why our markets are so poor right now, I want to toss out a kettle of kudos to Brother Todd, for ably filling in yesterday and producing an insightful and intelligent Daily Short Report in my absence. I thoroughly enjoyed it, and I hope you all did as well.

There continues to be a Spanish murmur going through the markets that Spain, with 20% unemployment and a pissed off populous, cannot cut its way back to prosperity, and will any day admit to the world that it needs a lifeline...

Apparently the life line is going to include some sort of help from the Swiss. As with many other Global crisis situations, the Swiss always turn out to be the middle men; they will either hold the money, hide the money, or provide the money. Nary a situation exists where the Swiss actually go into their own pockets to offer aide, they are usually acting as some sort of agent, to make the identity of some uber secret player in the event which they are participating in. We all know a friend or two who are Switzerland in every situation. This friend is wealthy, successful, secretive about their personal fortunes, and never takes a definitive side in any discussion, or especially in a disagreement. They are non-committal, and can never be empirically pinned down to take a side. I often say to my friends who demonstrate these Swiss traits, that once in a while they gotta take a side. No one wants their total legacy to be that they were the makers of a great pocket knife. Yet, aside from being the safe haven to hide Saddam Hussein’s dinars, Yasser Arafts Dollars, and Hitler and his henchmen, the Swiss continue to be content being the bidding beard for the most unseemly of transactions in global history. Just two weeks ago, when the Euro needed to be stabilized and the IMF needed to stave off a drop below $1.15 on the Euro, suddenly the word was that Switzerland was buying Euros. So, the IMF wants to stabilize, but they don’t want the public scrutiny of engaging in open market purchases, thus they turn to the Good ole Swis to get in there.

I had an idea of what was going on last week, but then yesterday it became crystal clear. In an unbelievable upset, Switzerland beat Spain in World Cup action. HUH, WTF? The Swiss beat the Spaniards, this must have been Giant Slalom, or a Mega Downhill. But no, this was the World Cup, and with Spain in some serious bad economic times, it looks like the Spaniards may have thrown the Swiss a Bone. We let you win a World Cup game, and you start bailing us out, to lessen the load we need to throw at the IMF. It was quite obvious, too. I am not a big futbol fan, but I know this: If the Swiss beat the Spaniards there’s something afoot.


The Spanish situation is bad and getting worse, and when Spanish Coach Del Bosque started to empty the bench and play his subs in the 2nd half, the fix was in. The call must have gone out from Spanish President Zapatero to Swiss President Doris Leuthard to open the checkbook. Now, along with being remembered as the makers of a good pocket knife, you can add a huge upset at the 2010 World Cup to the list of great things accomplished by the Swiss. Remember now, that once a desperate contestant needs to phone a friend, they are usually out of options, and the call just went in. So, watch out for the Spain Pain starting to come out very soon. The Swiss win over Spain could be the first interest payment.

An Oily Mess
Someone explain to me how BP agreeing to put $20Billion in an escrow account and suspending their dividend is a market mover? Is BP in the DJIA? NO. Is the stocks volume a significant factor in the performance of the S&P 500? No, again. It’s so clear that the markets are being shaken, rattled and rolled by machines. The volumes are meager to miniscule, and every piece of news is subject to the whimsical actions of the Black Box crowd. The machines are running the markets, and the BP actions should have a minimal effect on the markets. I hope now that the shakedown is complete, and President Obama has done his best Chicago Strong Arm on the bumbling Brits; the BP Mess should stop having any pronounced effect on our markets. It’s a distraction from the real problems we are facing: US Banks need to be recapitalized and Spain – Hungary—Portugal – and Ireland are in deep doo doo. The focus needs to be on the Euro zone, and not the Gulf.

HOT SHORT-skirts
It’s been a light week, with shorts kinda taking a short break, as there is not depth to the markets. Anytime the market upticks there is no real liquidity there to sell into these rallies. The rallies, which are primarily driven by little to no real volume, are not creating great opportunities for shorts to add significantly to established long term fundamental positions. The 10200 range is where the Bears I’ve been talking to think the market will continue to stall, and any real news events like a Sovereign default could tank this market. This week, being a Quadruple Expiration and a Russell Rebalance, will present a very active Thursday-Friday, so strap in and get ready. If Spain comes out of the closet, the thin market may take a dump. Beware.

If you are looking to play this market from the short side, the hot names that were on the LocateStock radar yesterday are the following:

TNH IRE RBCN RRI UYG