thoughts on the euro

if you break down the situation in europe it seems like there are only 3 possible resolutions going forward..1)the euro problems prove insurmountable and come to a calamitous end in 2012...2)the problems in europe begin to get better on the back of massive stimulus, accommodation and money printing by the ecb...3)the problems in europe begin to dissipate without the need for any drastic monetary intervention..the first two of those options seems much more likely than the third and in either case the euro trades lower..so i think we are supposed to stay short the euro and add to shorts if futures(ech2) trade up to 1.2995...the obvious question is can the u.s. stock market rally if the euro is tanking? i think the answer is probably yes but i will also be short the euro and long options vol to hedge equity longs...

market notes

the best performers for 2011 have been utilities and dividend payers in a route. This statistic should surprise noone as excess money looks for places to hide out in an attempt to eek out any return on capitol.Ive read several different articles asking the question "are dividend payers in a bubble?". i've read exactly zero articles that make an attempt to give a conclusive answer to that question, so here we go. A couple of factors suggest to me that that the dividend names are NOT in a bubble. When compared with a 1.9 yield in the 10 year, a utility that gives you 4.5 still looks pretty attractive.secondly, One of most important elements in a "bubble" is when we see a ton of leverage being used to buy an asset, as of yet i've seen nothing like that. I do, however, think that we have to be more creative in picking the proper names going into 2012 and thats why i am looking at clx(as it has not participated in the rally)...i've made alot of money in so,and mo in 2011 but those charts look like they are reaching a bit and might be due to correct. The broader market picture seems relatively straight forward. the sph2 is in a triangle consolidation pattern that should keep it between 1200 and 1252, it doesnt feel like it has the ambition to knock us out of the range yet, but that will change in the early part of 2011. My gut says we break out to the upside but i am not married to that quite yet. Keep an eye on the aussie and canadian dollars as they are in similar patterns but might break out first...comments are welcome...thanks jim

myths about wealth inequality

Since many of our clients have closed their books on the year we had some extra time today ,on the trading floor ,and we used it to solve some of the worlds problems....it's no secret that wealth inequality has exploded in this country but there seems to be some confusion as to how we arrived at our current place....if you have time please take a look at the 25 year chart of the u.s. 2 year, crude,corn and wheat and the dollar..someday I will have the technological savvy to attach charts to this blog but today is not that day...since 1985 the u.s. 2 year has trended progressively lower, from 9% to it's current level of .2%...the dollar has had a corresponding and predictable down trend in this same time period which has pushed up prices of food and energy..obviously, greater costs of basic nessecities takes a disproportionate chunk out of lower and middle income salaries than it does for the evil 1%.....now china enters into the picture and their appearance has a negative effect in several different ways...first they depress the crap out of their currency( that's is a highly technical economic expression in case you were unaware),to the tune of 60% undervalued to the dollar(according to some). this has the effect of drawing 22 million manufacturing jobs from the u.s. Remember that manufacturing jobs ,along with the corresponding shipping and packaging jobs are traditionally drivers of a vibrant "middle class"..at the same time, they flood the market with cheap shit that they manufacture which ,when coupled with the ridiculous interest rates provides incentive to buy stuff instead of to save....keep in mind that in a perfect global economic model manufacturing would have eventually shifted to china anyway, but their blatant manipulation(with our blessing) probably cut the time it took from 40 years to about 18, causing tremendous shock to our economic model...at this point in the discussion we can probably mix in low tax rates but only as it applies to the ultra wealthy as people in the 150k-400k are taxed at a higher level now than at almost anytime in our nations history---------now if you're a liberal whos head is about to blow off at that last sentence, remember we are defining taxes as TAXES, dumbass, not the convenient deffinition you use which is federal taxes....jeez, my tollway tax has gone from 100 per year to 1500 per year in a short time, but i digress.......last thing i'll mention is some "non economic" factors that have contributed to wealth inequality like breakdown of traditional family units with marriage being at historical lows and single parent homes at corresponding highs...this has the obvious effect of dragging some from the middle to the lower class.....if we can agree on these things than our course is clear...we should put the argument on sturdy poster board and then beat the occupy chicago protestors into submision with them..whos with me?.....

the big truth....my first attempt at blogging, give feedback

in case you missed it there was another awesome shouting match this morning on cnbc between liesman and santelli....the topic, as usual, was where to place the blame for the financial destruction and what policy decisions would best combat the current condition...I've been told several times on air that, at this point, its useless to play "the blame game"..i cant find words to describe how strongly i disagree. the blame game isnt just fun for the whole family it is also a valuable way to help prevent future policy mistakes..the internal psychological problem that people seem to have,  is that once they choose to be on team "banks are to blame" they debate the point so often that they eventually, in their own head, absolve politicians from any culpability...the same of course happens in reverse on team "the politicians are to blame"...the bottom line is that both sides should bare tremendous responsibility as they clearly acted in cahoots along with the rating agencies and overreaching individuals.....the grease that kept the whole thing running smoothly was a fed that kept rates artificially low for decades encouraging leverage and over extension at all levels of the economy...........now here's the only point that's worth remembering.........of that list of culprits, only politicians(and the fed) were created and sworn to protect the publics interest...blaming the banks is like blaming the other man for your wife's infidelity...of course he was intricate to the process but he never took a vow...simple enough...blame them all...but blame the politicians more...glad we had this talk.........the conversation then shot past mf global(which rick blamed on too low of rates..mostly agree) to policy decisions...in a nutshell,steve wants to write down the loans, rick wants to let the mortgage holders drown...i love both those guys but they're both wrong...the economy reaching escape velocity is dependant on the housing markets stabilization and recovery, and 2 factors are keeping this from happening; excess inventory and the inability of many, at risk, mortgage holders to refi at current levels...we cant control inventory but we can pass policy to allow mortgage holders to take advantage of current rates...its unusual for me to have such a liberal opinion on this matter and i feel as though i should shower aggressively after writing this...but its probably our best shot....dont respond anytime in the next half hour as i will be scrubbing...have a great night...jim