Economic and Market Musings

Economic: There's an interesting article in the FT. You can click on the title. You may need a subscription to view the article in full. I did at least include the title and the first paragraph:
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China fears impact of US slowdown

By Jamil Anderlini in Beijing

Published: November 15 2007 20:15 | Last updated: November 15 2007 20:15

China’s commerce ministry warned on Thursday that a slowing US economy would trigger a drop in Chinese exports that would mark a “turning point” for China’s rapid economic growth.

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The market is much like a soap opera--the story line is ever evolving! As I've mentioned here before, I did not believe that the global economy--most particularly the Asian markets which so heavily rely on the US consumer--has de-coupled from the US. The article above (I'd be pleased to e-mail it to you) lays that out more clearly than I've seen it to date.

You'll remember, of course, that the ongoing themes of (1) global economic boom; (2) liquidity, liquidity, liquidity; (3) the unflagging American consumer; (4) low interest rates; (5) low inflation have been systematically taken to the woodshed and shot. Here's the scene of the crime.

I regret that I've not benefited more from this market downturn; though I'm grateful that I was not more heavily invested. GaryK is using the "B" word for bear market. Given the steady cracking of the pillars that have kept this bull market alive, I have to believe that we are in for more pain. I suppose the good news is that there are sectors that have already had their personal bear markets such as homebuilders and some retailers.

I kept my FMD, which is much underwater (I bought it at $37, and it is at 30 and change). I think I became emotionally attached to it. I know better. But knowing and acting are two different things. I knew that there was risk, but it has good earnings, good growth. I think that because I had so few longs, I felt that it was okay to hang onto it.

Gold stocks are getting pummeled. Our friend, MarkM, foretold that. (MarkM, we are keeping that woodshed cleaned out). I did sell all but a smallish position in WGDFF into strength. I still have my speculative KRY position. I sold SFD today. The food stocks are getting hit so hard with rising input cost issues. Even though SFD has come down over the last few weeks and then climbed a bit, I really didn't wish to have too much exposure. The loss was only about 2%--less than if I had sold it last week. My bright idea on MGPI was another money loser! I closed my RIMM puts out last week. I hate holding beyond the Friday BEFORE the week of expiration given the time value deflation. Those were $100 NOV puts. When it was trading at $118, and I still had some value left, I closed it out. I didn't think that it would get any closer to $100. Wrong! Sigh. It was still the right decision to sell. I have the benefit of hindsight now.

I did pick up a DUG (Ultrashort Oil and Gas) earlier last week and SMN (Ultrashort Basic Materials) this week. Small positions-200 shares each. My thesis is that commodities would be the last to fall. They would likely fall due to slowing 1st tier nations slowing and that would lead to BRIC slowing. I still agree with the commodities supercycle--who doesn't? And because of that there are lots of folks to sell to, but who is really going to buy now and these valuations?

I do not believe that the Fed's injection of liquidity will do much to float boats, but rather bail out boats. I think that there is a distinctive, not nuanced, difference between the two.



There seems to be a souring in the reception of Ben Bernanke. I can think of no worse nor no more difficult job to have.