The Only Thing That Makes Sense To Me

The only thing that seems to be going up with some sense and predictability is the population and by my thinking that means we need more food. Fertiliser makes more food. Ergo, buy MAK.ASX and POT.NYSE and put them away for 10 years. You know it makes sense.

Dust in the Wind

At some stage all the Zombie banks are going to come home to roost. In the immortal words of Kansas, all they are is dust in the wind. There is a lot of bad debt floating around in Zombie banks, that no one will be interested in purchasing or refinancing, even with the preponderance of cheap credit that is again flushing through the system. This is a different sort of cheap credit boom. It's cheap credit for the risk adverse. There is no doubt that we are in the middle of one of the greatest dead cat bounces in history. 60% run in 12 months, what a joke. If you haven't moved to a market neutral or slightly short position then you are dreaming. What's the assumption? Are forward p/e ratios of 18 too low? Too much cash, no where to put it, Treasury yields are zero to negative, Gold has gone crazy.
China has built up a ridiculous amount of over capacity and as the world turns to China to pull them out of the depths of depression, their economy will surely start to falter. 8% growth is unsustainable.

One of these things first

There's clearly another cheap credit bubble building across most asset classes. Debt is cheap and thanks to the intervention of governments readily available. There is/are massive carry trades pushing up the commodity currencies (AUD, NOK) and pushing down the much maligned USD. This carry trade will unwind and when it does, down goes Oil, Gold, Equity Markets and of course the AUD and NOK.

All asset classes have been picking up in the last 6-9 Months and it has been cause by cheap credit. Nearly every OECD economy is shrinking, so how can asset values be rising? It doesn't make any sense.

This house of cards will fall down again. Everyone has forgotten about the last time it happened and the next time will feel like the first. Unfortunately some of the master criminals of the last dance are still alive and kicking (S&P, Moodys and Fitch) and telling us precisely that nothing is wrong and it's time to leverage up and bet the farm.

Buy land with cash and sit on it.

What becomes of the broken blogger?

The MQG.AX short was a turkey. These clowns are the masters of pumping up their stocks. The satellite funds are currently in the process of buying out the Millstones that are their management contracts and the parent is back doing what they do. I'm still hearing all sorts of rumours that they've got >$10bn worth of re-fi in the non operating company to complete in the next 18 months, which should keep them busy. 

One thing I can't for the life of me figure out, is that at the height of the banking crisis, many banks created these so called 'bad' banks, where they stuffed their bad debts (CDOs, CDS etc). Where have these time bombs gone? and when they blow up, who gets hurt? Surely the shareholders (or the taxpayers) still own these walking disasters. It was a nice trick sweeping all the bad debt under the rug, but at some stage the corpse is going to start smelling, and then what?

Half Volley

MQG.AX has traded up very strongly in the last week and with their share purchase plan due to list tomorrow at $26.60, we should see this stock come under pressure. I've sold today at $37 in anticipation of picking them back up tomorrow at a decent discount. I'm quite confident with this trade, although last time I was short MQG.AX, ASIC in their infinite wisdom changed the rules of the game...

The XJO seems to be struggling to break through the 4000 level. It has flirted a few times with breaking through properly, but I think even the most bullish investors know that the stock market can't go up 20% a month every month and I'm sure everyone is familiar with bear market rallies. This is a bear market rally and if you are playing this market it makes a lot of sense to play it from the short side.

I am a long term commodity bull (soft and hard) because there are more and more people needing/wanting more and more things, but that's a 10 year play and I need a 10 day play, hence the short MQG.AX

you know it makes sense.

You know it makes sense

Sell Macquarie Bank into the rights issue. As of yesterday (25th of May) ASIC kindly allowed the shorting of Australian financials and we saw a healthy drop across most of the majors. I think the trade of the month has to be taking a short position in Macquarie Bank in anticipation of the rights issue which goes live on the 12th of June. Eligible investors will be allowed to purchase up to $15,000 worth of MQG.AX at $26.60 per share and I'm sure at the time of the offer, when Macquarie was trading at $33, most investors who took up the opportunity were doing so with a view to locking in a decent stag profit. MQG is hanging around the $31 level today and I think selling here with a view to buying back on or around the 12th of June at the $27 level is a smart trade.

Coalworks

Coalworks.AX is currently undertaking a Bankable Feasibility Study for their Oaklands North Project near Albury. They are trying to prove up a 750 million tonne thermal coal resource. Thermal coal is used to power coal fired power stations and if there's one thing that people need to turn the lights on it's thermal coal. As the Global warming hysteria dies down and people realise that coal is cheap cheap cheap compared to other forms of energy, Thermal coal will be the new new thing. It's just started running hard, from 18c to 25c today (as at 1320hrs), there are approximately 100million shares outstanding. You don't have to be great at maths to realise that 750 million tonnes of thermal coal is worth a little more than $20m....

Suncorp Break Up Story?

Suncorp has been much maligned for a long time now and it seems nobody can really figure out if it's a bank, an insurance company or an investment manager and the share price has been savaged as a result. If you ask me, and nobody usually does, this business will begin to make a lot of sense once it's broken up. Any of the big four wanting to beef up their QLD credentials would have a lot to gain from taking out the banking division and there must be an insurance company that wants to take some cyclone and flood risk.

Where do we go from here?

After a 20% run in month, where can the stockmarket possible go but down? The smart money must be getting short. Unemployment, despite recent figures is rising, business investment is down. The aussie taxpayers have been lumped with about $3000 each of Rudd government debt. I'd have thought it was a fairly simple trade to get set short and wait for at least a 10% retracement. Shorting of financials should end on the 30th of May and once that happens it seems likely that financials doing massive capital raisings (Macquarie Bank) will come under significant pressure. If it's trading anywhere north of $30, then sell sell sell.

Is there any Life in this old Dog?

The machinations of Brisconnections and Nicholas Bolton, the TARP, the Geitner Plan, Kevin Rudd's 'Free' money. There's any number of schemes underway designed to restore faith in the markets, but will they do anything? What's the point? To me, they all seem a little misguided.
Take the Kevin Rudd plan. What is the point of handing out cheques for $900? These cheques can and do go to anyone. We've already seen that some of them have gone to people who've never even been to Australia. They've gone to people in prisons etc. Why not simply reduce tax, so that people who already pay tax, will have more disposable income and/or increase pensions. Doesn't that do the same without the ridiculousness created by the 'free' money campaign?
Maybe the point is that it's far more visible to hand out $900 cheques than to simply reduce tax. Rudd, stop with the stupid stunts.