Thursday, June 17, 2010

What Are the Big Boyz Trying to Tell Us?

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While the bulls shout with glee and claim how wrong being bearish is, I have continued to buy puts on the S&P 500 and commercial real estate. So much so that I am at my limit in terms of what I am willing to risk. I have plenty of dry powder, but it is for Gold-related items, not general stocks. I am majorly bearish and now HEAVILY biased. While Gold continues to act as the international currency of choice for those who have broken out of their paperbug shackles, the U.S. Dollar has also received a good bid from the herd. Gold is winning the clash of the titans again today, and will of course win the final war of monetary supremacy, as it has done for thousands of years.

I remain patient when it comes to Gold and Gold stocks. I am not concerned about missing "the" move in Gold stocks, I am concerned that the stock market is about to tank. I want to focus today on the stocks of the "big boyz" of finance who haven't yet been destroyed like Lehman Brothers or Bear Stearns. I am speaking of Morgan Stanley (ticker: MS), Goldmun Sucks (ticker: GS) and JP Whore-gan (ticker: JPM). I have discussed the chart of Morgan Stanley recently. Here is the recent action in this stock on a 60 minute intra-day chart over the past 4 months thru part of today's action with the S&P 500 shown at the bottom of the chart for comparison:

And here's a similar type of chart only over the last 16 months for GS:

I am having trouble with uploading charts right now (not sure why, probably a temporary technical glitch), so I can't show you the chart of JPM over the past 16 months right now. JPM is the biggest of the group and actually has the strongest looking price chart. The theme is the same, however, with all 3 of these firms failing to bounce higher with the rest of the market over the past 2 weeks. Why is this? What is the message here? Don't financial firms lead the market rather than lag it during a bull market? Aren't financial firms often the ones to give you an advanced warning when trouble is coming for the economy and rest of the stock market?

Please remember that these 3 firms all failed miserably and are only in existence today due to a massive government bailout. The smartest sharks in the room became fish food in the Great Fall Panic of 2008 and only stayed alive through American "generosity." And yet the belief in the power of these firms to keep the stock market afloat remains powerfully entrenched. They failed in 2008 and they will fail again (and again).

And what is the message copper is trying to send today by falling almost 3% on a day when the US Dollar Index is down? And how about the short-term breakdown in the copper to Gold ratio? Let's just say I am rather comfortable holding puts on the stock market here. Anyone left in the casino knows the odds are stacked against them. We are all guessing in the short term, but due to a deficiency in my character and our paper monetary system that encourages speculation to maintain purchasing power, I love the game. I remain extremely bearish on the stock market. Place yer bets...

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