Monday, August 31, 2009

From Theodore Dalrymple, writing in City Journal, an eloquent and insightful essay about how an age of loose money not only destroys savings, but also corrodes character.  Click here   for the full essay. An excerpt: "But asset inflation—ultimately, the debasement of the currency—as the principal source of wealth corrodes the character of people. It not only undermines the traditional bourgeois virtues but makes them ridiculous and even reverses them. Prudence becomes imprudence, thrift becomes improvidence, sobriety becomes mean-spiritedness, modesty becomes lack of ambition, self-control becomes betrayal of the inner self, patience becomes lack of foresight, steadiness becomes inflexibility: all that was wisdom becomes foolishness. And circumstances force almost everyone to join in the dance."

Stock-chart overlays almost invariably stop working when we have them called to our attention in an e-mail, but it must be conceded that S&P 500 does look to be closely following a trail blazed by the Nikkei 225. If the coincident patterns continue, it would imply that the U.S. bear rally begun in November is just starting to get airborne. Click here  to see the comparison.

I suggest looking for a camouflage entry opportunity if and when the futures hit 1034.00. That's the midpoint resistance of a pattern projecting to 1046.00.  The opportunity could come Sunday night or in the first minutes of Monday's session, so be ready!

Gold did all we asked of it Friday and now looks like a good bet to achieve a minimum ____.  The target is shown in the 180-minute bar chart at left. If the futures are indeed ready to move, any correction Sunday night or Monday morning should hold at or near the _____ midpoint shown in the chart. 

We missed buying the stock last week, but it may be ready to head lower than originally forecast. To prepare for this possibility let's bid _____ for 5000 shares. That's just above a Hidden Pivot support at _____ that looks like a logical place for a bullish reversal.

We hold the Jan 130 - Oct 130 put spread four times for 3.40 and are long one September 170 call acquired on Friday for 2.00. This is a very slight backspread, with moderate premium exposure over the next three weeks. Our goal is to sell the call on a quick pop to reduce the carrying cost of the put spread. The call also makes us approximately delta neutral -- long the equivalent overall of about five shares of stock.  Goldman looks like it could push up to _____ if it can get past a lesser Hidden Pivot resistance at _____.

We hold 16 December 12.50 calls for an average 0.45 apiece.  Offer half of them to close for 0.75, good-till-canceled.  You should also offer eight December 15 calls short for 0.45,  good-till-canceled. My immediate upside target is _____, but if the stock closes above that Hidden Pivot for two consecutive days it would be signaling further potential to as high as _____ over the next 3 to 5 weeks.

Gold performed well on Friday, validating a 978.00 target flagged here last week.  In line with our bullish expectations for bullion, I've suggested a strategy to reduce the premium risk in Silver Wheaton, in which we hold 16 out-of-the-money calls.

Because we never shared investors' wild enthusiasm for Cerberus, its near-collapse in recent days hardly came as a shock. The once-huge private-equity firm specialized in distressed assets at a time when even the bluest of blue-chip companies - the name Lehman Brothers springs to mind - have fallen into mortal peril literally overnight. Cerberus's biggest gambles were in GMAC and Chrysler. The latter company's future looked as bleak to us five years ago as it did in May, when the automaker went belly-up. What could Cerberus CEO Stephen Feinberg have been thinking? Chrysler's death rattle coincided with the supposed comeback of the hemi-head engine, an older technology that made it possible to achieve higher fuel economy without re-inventing the engine. Just before the Big Three went careening off the road, Chrysler's top sellers were big, powerful and, arguably, ugly.  Is it possible Cerberus thought the well-hyped cachet of Chrysler cars with the hip-hop crowd would revive America's love affair with muscle cars?  In any case, $4 gas doomed the affair before it even warmed up. In fairness to Cerberus, it should be noted that someone even smarter than they, namely Kirk Kerkorian, got seduced by Chrysler. However, Kerkorian and his partner, Lee Iacocca, miraculously avoided losing their shirts after making an abortive $4.5 billion bid. Cerberus evidently thought it had the white knight role down pat, but instead found notoriety as a greater fool.  East Side Benchmark The surprise is that Cerberus still has any assets left. Clients reportedly plan to withdraw $5.5 billion, or 71 percent of the company's funds, but that will leave an estimated $2.2 billion to gamble with. We don't envy Cerberus the task of picking winners from amongst the many investables available these days at seemingly attractive prices. If Cerberus does live to fight again, we