Friday, December 19, 2008

POTC's timing (dated pre-Bear Stearns collapse) and sources at Goldman Sachs proved golden

Loyal Readers,
As we approach the Holiday Season and the end of 2008 we invite you to click on the link below and read what POTC had to say about the current financial crisis ten months ago, on 28 February, 2008. We hope you decide that POTC will continue to be your source of forward-looking financial insight in 2009.
In the meantime, it is our pleasure to wish one and all a Merry Christmas and a Happy Hanukkah. We will e-mail all subscribers when we resume activity in the next week or two.

Monday, December 8, 2008

As POTC Predicted, Wall Street Rallies Big after Obama's Infrastructure Plan

As POTC predicted, Wall Street rallied big after President-elect Obama's Infrastructure Plan, but we now urge caution. Our reading of the market and looming malaise in Europe has POTC expecting a reversal to test October lows sooner than most believe. "NEW YORK – A stock market gaining in confidence shot higher for a second straight session Monday as investors bet that President-elect Barack Obama's plans to increase spending on public works projects will help lift the economy back to health. The major market indexes jumped more than 3 percent, and the Dow Jones industrials' nearly 300 point advance gave the blue chips their highest close in a month."

Friday, November 28, 2008

A Youtube Dream Unfolding

=DJ Sprint, Clearwire Complete Next-Generation WiMax Deal. DOW JONES NEWSWIRES -Clearwire Corp. (CLWR) and Sprint Nextel Corp. (S) have completed a deal to combine their next-generation wireless Internet operations. -Sprint and Clearwire had said they will roll out Sprint's mobile WiMax Internet network, which is expected to reach as many as 140 million people, within 30 months of the deal's approval. -At the close of trading Friday, Sprint's shares added 11.6% to $2.79 and Clearwire's were up 9.8% at $6.62. Clearwire gained 1.4% in post market trading. -Intel Corp. (INTC), Google Inc. (GOOG), Comcast Corp. (CMCSK), Time Warner Cable Inc. (TWC) and Bright House Networks collectively invested $3.2 billion in the new company, which will retain the Clearwire name. -Sprint will hold around 51% of the firm, existing Clearwire shareholders will own 27% and the new investors will hold 22%. -Sprint, which has been struggling as its subscribership continues to fall, has considered several strategies to catch up with rivals AT&T Inc. (T) and Verizon Communications Inc. (VZ), including jettisoning the Nextel network or selling its long-distance network. -By Kerry E. Grace, Dow Jones Newswires; 201-938-5089; -Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: -You can use this link on the day this article is published and the following day. -(END) Dow Jones Newswires November 28, 2008 13:50 ET (18:50 GMT) Copyright (c) 2008 Dow Jones & Company, Inc.- - 01 50 PM EST 11-28-08

Wednesday, November 26, 2008

Insiders Putting their Skin in the Game; POTC's Optimism Grows

DJ Insider Buying Reaching 30-Year Highs By Ed Welsch Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Insiders are buying their own company stocks at rates near the highs of 1975, a research firm said Wednesday, a sign that historically appears near a bottom point for the broader market. More buying by company insiders has been a reliably bullish sign in the past, as insiders have proven better than average investors at calling the direction of their own company stocks and, when looked at as a group, the direction of the overall market. However, during the current downturn even insiders have been fooled.'s measurement of insider buying also spiked in March and in August and November of last year, though at lower levels. Those spikes marked false bottoms rather than real recoveries. InsiderScore Research Director Ben Silverman said there were more signs that the current wave of insider buying is a more reliable sign of an approaching bottom. Among the signs that give Silverman more confidence is that insiders across all industries are buying heavily, while the last three buying sprees were led by insiders at financial companies. In fact, buying among financial insiders this time is lagging behind insider buying in every other sector, he said. Also, a larger percentage of highly placed executives like chief executive officers and chief financial officers are doing the buying this time, he said, as opposed to directors or junior executives. Statistically, trades made by top executives are more likely to be more savvy than those made by other insiders. The overall rate and quality of the buying, as calculated by InsiderScore's proprietary algorithm, is also much higher this time. The algorithm's score of trades made last week reached 12,594. That's the highest level its ever reached in five years of collecting data, and nearly twice its previous peak of 6,398 after the Bear Stearns collapse in March. During the false bottoms of late last year the score reached in the 4,000-5,000 range, compared to a normal level around 2,000. Silverman says that while exact apple-to-apple comparisons between the InsiderScore algorithm and historical data are hard to make, he believes the level of insider buying exceeds the level after the 1987 crash, when insider buying peaked near a bottom in the market, and is near the level of buying reached in 1975, when the market recovered from a long slump, with the Dow Jones Industrial Average rising nearly 40% during the first half of the year. Before deciding to act on signs of broad insider buying, Silverman said investors should both consider whether insiders at the individual companies they are considering investing in are putting their money where their mouths are by investing in their own stocks, as well as whether the companies are likely to be in a stronger position after the economy recovers. -By Ed Welsch, Dow Jones Newswires; 201-938-5244; Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires November 26, 2008 16:00 ET (21:00 GMT) Copyright (c) 2008 Dow Jones & Company, Inc.- - 04 00 PM EST 11-26-08

Thursday, November 20, 2008

Auto Manufacturer's = Bank Holding Cos., Perplexity Whipsaws Markets

DJ: GMAC Bonds Soar On Bond Holding Co Plan, Exchange Offer By Kate Haywood Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--The bonds of General Motors Acceptance Corp., or GMAC, jumped sharply, while the cost of insuring the firm's debt against a default fell Thursday after the firm confirmed it has applied to become a bank as it seeks money from the Treasury Department's $700 billion injection effort. -The cash-strapped financier, 49%-owned by General Motors Corp. (GM), also announced offers to exchange $38 billion in notes from GMAC and its Residential Capital home-lending business for new securities with the same maturity dates and interest rates. The move would cost GMAC up to $2.5 billion in cash, it said. -"If it gains bank holding status, GMAC will be able to access the Treasury's $700 billion rescue package, which will clearly improve its prospects in terms of funding and capitalization," analysts at Daiwa Securities said. -As a result, GMAC's 7.25% bonds due 2011 charged 16.75 points higher to 52 cents, according to BondTicker. The company's 5.625% notes due 2009 gained 18 points in early trading to hit 80 cents, BondTicker shows. -In the credit default swap market, where investors make bets on the likelihood of a company defaulting on its debt, the cost of protection on GMAC's senior bonds dropped slightly but remained at extremely distressed levels. The company's five-year CDS was quoted at 57 points upfront Thursday morning. This implied that investors would have to pay $5.7 million upfront plus $500,000 a year to protect $10 million of GMAC's' bonds against default for five years, according to CMA Data Vision. This is a modestly lower compared with late Wednesday when investors had to pay around $5.87 million upfront. -"GMAC's application to become a bank holding company was already anticipated by the market," said Kingman Penniman, president of KDP Investment Advisors. "But until investors saw it in black and white [this morning], the market [for GMAC's bonds and credit default swaps] didn't move." -GMAC offered investors combinations of new GMAC notes, GMAC preferred stock and cash. This will cut the firm's debt levels as part of its plan to become a bank holding company. Holders of GMAC bonds maturing before 2031 will receive new guaranteed GMAC notes with the same interest rate and maturity, the company said. Investors in GMAC notes maturing in 2031 will receive new guaranteed GMAC notes, new GMAC 8% subordinated notes due 2018 and new 5% perpetual preferred stock with a liquidation preference of $1,000, or cash, which will be prorated after $2 billion. -The new guaranteed GMAC notes will be guaranteed by the firm's subsidiaries GMAC Latin America Holdings, GMAC International Holdings Cooperatief U.A., GMAC Continental, IB Finance Holding and GMAC US. These new notes will be senior to any subordinated notes at these subsidiaries and will rank equal with all existing and future senior debt of such note guarantor, GMAC said. -In addition, GMAC offered to exchange its mortgage unit Residential Capital LLC or ResCap's 8.5% second lien notes due 2010 for new GMAC 7.5% notes due 2013. Holders of other ResCap notes, including 9.625% junior secured third-lien notes due 2015, can receive new GMAC 7.5% notes due 2013 and new subordinated notes or cash, which will be prorated after $500 million, GMAC said. -This sent ResCap's bonds higher. The 8.5% bonds gained between six to seven points to around 31.5 cents, while 9.625% 15 cents from 11 cents Wednesday, according to Standard & Poor's Leveraged Commentary and Data. -ResCap completed a $14 billion refinancing in June, which resulted in a downgrade to D on a host of the company's bond issues. Holders of bonds due in 2008 and 2009 received the 8.5% second-lien 2010 notes, and holders ResCap's bonds which matured in 2010 through 2015 got the 9.625% junior secured third lien notes. The exchange announced Thursday offers expire on 11.59 p.m. EST on Dec. 28 -GMAC's confirmation of its application to become a bank holding company and its exchange offer comes just days after Commercial-finance company CIT Group Inc. (CIT) announced plans to swap $2.2 billion of debt in an attempt to raise the amount of capital needed to become a bank. -As banks, both GMAC and CIT could raise money at lower financing costs if they participate in the Federal Deposit Insurance Corp.'s guarantee program that provides government backing to debt from qualifying financial institutions. -By Kate Haywood, Dow Jones Newswires; 201-938-2348; (Mike Barris contributed to this article) Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary:

Wednesday Night Market Update" (President-elect Obama needs to step up)

A somber Wednesday good evening, Since the Presidential election a little over two weeks ago, the S&P is down nearly 20%. IF President-elect Obama doesn't enunciate his tax policies more clearly in the days ahead, the unwinding of old money could continue regardless of how strong balance sheets look or how oversold charts appear. These are unbelievable times that we are witnessing. On the day of the election, Mr. Carl Icahn was on Fast Money and said, "If this Obam-er wins, the market will not like it." We now better understand the power of those words; larger government and higher taxes in the midst of a global recession is something smart money fears. Even though this is the worst bear market since the Great Depression, we do not believe there'll be soup lines or runs on banks. There are safe guards like social security and massive bank liquidity injections, unlike the 1930's, so we know the reaction of panic today is way overdone. Just like we predicted oil would implode from the $120/barrel - $140/barrel area after the Beijing Olympics; just like we disagreed with Fast Money's Joe Terranova about his call that oil will not break $120/barrel for long a couple months back, we now feel the overshoot in the stock market has the same parallels and psychology driving it ... The market is dying to hear President-elect Obama say 8 words: "I will not repeal the Bush tax cuts,". The S&P would rally through 1,000 within a couple days. POTC stands behind the bear market rally call, but it would help IF Mr. Obama stepped up and delivered. The majority of the people who voted for him (college - under 30) do not have much riding in the stock market, so he needs to reinforce to the older conservative money he will not raise taxes. IF he doesn't do that, the market will have another climactic sell off, perhaps S&P 720; that would be the death of an entire generation of investors. Could Mr. Obama want the market to fall further before he takes his Presidential Oath this January 20th on the steps of Capitol Hill? We hope not. POTC gave him the benefit of the doubt, as we felt he would be pro-active and more Wall Street friendly than the Carl Icahn's believed. So far we were wrong and they were right. Mr. Obama needs to clarify his fiscal policies very soon, or investors will continue to sell until there is absolutely no doubt regarding who and how much tax is paid. Raising taxes on individuals and businesses making over $200K a year now would be ridiculously ignorant, as they are the growth engine for jobs and have the greatest amount swirling around in the financial markets. We continue to believe Mr. Obama will do the right thing and tell Wall Street nobody's taxes will go up. But time is running out. The Psychology of the Call team is dumbfounded by the valuations, technicals, and battered sentiment. We believe the Bush tax cuts will remain in effect through 2010. That is the panacea this stubborn bear needs to hear in order to dig the claws in & climb through S&P 1,000 by Thanksgiving Day, otherwise POTC will be eating stuffed crow!

Tuesday, November 18, 2008

Trend Setting Tuesday Intraday Alert, Alert: (Dow -64 S&P -14)

Good Day to All! Our call for a bear market rally stands. The S&P index has never traded this much below its 200 day moving average since the Great Depression. (Doug Kass- perma bear) The two overhangs have been energy stocks due to falling crude and - obviously - financials. They weigh tremendously on the S&P. We believe the job cuts behind and ahead will only bolster bottom lines/earnings, therefore knocking down already ridiculous price to earnings multiples and exploding stock prices. Today's fundamentals offer a compelling reason to be long, even breaking the 2nd Commandment of Trading and going all in... When the tide of a technical bear market rally comes in, it tends to have a tsunami effect on prices, raising 95% of sectors, so caution to all technicians calling for lower prices, and all seeking to find blame (government bashers). Many of the talking heads today are focused on a hyper doom & gloom scenario; we feel if you act on their advice, you will miss a 20%+ rally in the S&P, and larger moves in individual oversold issues like Chicago Mercantile Exchange (CME). Profiting in the short run requires skills that combine technical, fundamental, and qualitative analysis. Our bear market call hinges upon the crippled psychology of the average investor coupled with the amount of cash on the sidelines in hedge funds. We urge all forward thinkers to consider that bear rallies come when sector dislocations are occurring, and if you take a moment and study Citigroup (C, -6%) and Goldman Sachs (GS, +.06%) side by side on a daily chart, you'll see there is a tug of war that's sector internal and that strongly suggests one thing: A rally is about to begin. Thanks to all who took time and answered the blog poll. As of today, President elect Obama's appointments have been approximately 30% conservative, usually deemed "Wall Street friendly"... We will continue to monitor these developments as they unfold. We strongly believe the connection between politics/policy/legislation is critical to the financial markets, so the uncertainty this Presidential transition of power is causing has decimated equity valuations as though the world was coming to an end: IT'S NOT. From the entire Psychology of the Call team, cheers to a great bear market rally that takes us through 1,000 on the S&P by Thanksgiving!

Sunday, November 16, 2008

The Creditella Outbreak; Yet We're Ready to Rally this Bear, Ma’am

Sunday greetings to all! The uncertainy and pessimism has never been higher, and since many heavy-weight money managers are 50% in cash we see the S&P either rallying through 1,000 or breaking 800 by Wednesday's close. Ironically, here is an example of the fear level from the kings of hedging, half in cash?!?!?!: The genius of Cohen and Jones must be respected, but please realize hedge funds are rarely in cash since their strategy calls for being dynamically hedged, for example: convertible arbitage, merger arbitrage, event driven, distressed securities, equity market neutral, and equity long/short, the focus of brilliant mathematician Jim Simons of Renaissance Capital Hedge Fund: When we see the most astute minds of investment finance overweight in cash, we believe the market will not remain hosatge in this trading range for long. Look for the S&P to either explode up or implode down ahead of Thanksgiving. With the G20 summit over, 13F filings behind (, and Presidential election results now fully discounted, the market is ready to move violently up through S&P 1,000 or down through 800. We wrote about the bear market rally in our last piece, and as gloomy a scenario we will offer in this article, we stick to our thesis nonetheless of a technical bear market bounce beginning on Monday, November 17th through at least Wednesday the 19th. What happens after Thanksgiving through New Year 2009 remains unclear, but we will revisit all factors related to Psychological Financial Fusion (a timely balance of qualitative, fundamental, and technical analysis focused on short-term opportunities) next Saturday night. Here's a very important look at the S&P dating back to just post WWII levels. Please understand that long term charts make better sense during times of complete panic: Notice the powerful move in the S&P from under 400 in 1990 to 1,500 in 2000. Also notice the pronounced double top break down in 2000 and 2008. Microsoft's Windows software and many other computer related technologies/innovations spurred a tremendous rally from 1990 through 2000, agree? If you study the S&P chart, the sprint up from 1995 through 2000 may be a attributed to billions of consumers logging on to the information highway and transacting business from former non-capitalist nations, i.e. Soviet Union, Eastern European countries (Poland, East Germany, Romania, Ukraine), India, and the Chinese Dragon cannot be discounted. Do you feel the internet super highway and chip technology will enhance... --------------------------------- If you would like to receive this and future posts and market analysis, please send an e-mail to and make sure that your e-mail client will not consider messages from that address as spam.

Friday, November 14, 2008

The New Obama Team

DJ Obama Unveils Transition Teams For SEC, Other Agencies.
WASHINGTON (Dow Jones)--President-elect Barack Obama's transition team Friday unveiled teams of high-powered executives and former government officials to review the Securities and Exchange Commission, Department of Energy and other critical federal agencies in the run up to the inauguration.
-The president-elect's transition office said former Treasury Under Secretary for Domestic Finance Gary Gensler will lead the review of the SEC. Gensler, a former Goldman Sachs partner, was an adviser to Sen. Paul Sarbanes on the Sarbanes-Oxley Act.
-The SEC team also will include former Federal Trade Commissioner Mozelle W. Thompson and McKinsey & Co. partner William "Thomas" Dohrmann.
-Sylvia Mathews Burwell, president of the global development program at the Bill & Melinda Gates Foundation, will lead the team reviewing the Federal Deposit Insurance Corp., while James Johnson, a partner at the law firm of Debevoise & Plimpton and a former Clinton-era Treasury official, will lead the team reviewing the Commodities Future Trading Commission.
-The team reviewing the Department of Energy will be led by Elgie Holstein, a senior energy policy advisor to Obama, Elizabeth Montoya, a consultant with Sealaska Corp. in Juneau, Alaska, and Sue Tierney, a managing principal at Analysis Group. All three held posts in the Clinton administration.
-The teams are expected to begin their work immediately so senior appointees can hit the ground running at their departments as soon as they are sworn in.
The list of agency review teams can be viewed by clicking:
-By Henry J. Pulizzi, Dow Jones Newswires; 202-862-9256;
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary:
You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires November 14, 2008 16:15 ET (21:15 GMT) Copyright (c) 2008 Dow Jones & Company, Inc.- - 04 15 PM EST 11-14-08

Wednesday, November 12, 2008

Obama Showing Some Partisanship & Old Name Experience

DJ Obama Taps Ex-Rep Leach, Albright To Meet With G20 Leaders . WASHINGTON (Dow Jones)--Former Republican Congressman Jim Leach and former Secretary of State Madeleine Albright will be available to meet leaders from the Group of 20 this weekend on behalf of Barack Obama, the president-elect's transition team said Wednesday. Obama won't attend Saturday's emergency G20 economic summit but will receive a briefing from Leach and Albright after their meetings. Details of those sessions, including which delegations Leach and Albright will meet, will be released at a later date. "This weekend's summit is an important opportunity to hear from the leaders of many of the world's largest economies," said Obama Senior Foreign Policy Advisor Denis McDonough in a statement. "There is one President at a time in the United States, so the President-elect has asked Secretary Albright and Congressman Leach, an experienced and bipartisan team, to be available meet with and listen to our friends and allies on his behalf." Albright was Secretary of State and U.S. Ambassador to the United Nations under President Bill Clinton. Leach, who backed Obama's presidential bid, is a former chairman of the House Banking and Financial Services Committee. -By Henry J. Pulizzi, Dow Jones Newswires; 202-862-9256; Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires November 12, 2008 12:04 ET (17:04 GMT) Copyright (c) 2008 Dow Jones & Company, Inc.- - 12 04 PM EST 11-12-08

Tuesday, November 11, 2008

Trading Alert

Warm November Greetings to All Forward Thinkers! The ongoing global financial crisis has made perma bears look like geniuses, yet the Psychology of the Call team (POTC) senses the imminent appearance of a bear market rally for three good reasons. 1) President elect Obama's first speech, and his chief of staff pick, Mr. Emanuel, are very bearish for the market. We are confident both of those negative developments will change soon. POTC believes Mr. Obama's goal in the coming days and weeks will be to do everything popular in order to be re-elected to a second term in just four short years. It's that second pivotal term where most Presidents are more inclined to show their true colors, especially in terms of openly hell bent policy. We remain confident and are prepared for the Thanksgiving Day Obama rally to begin this week, as his centrist appointments begin being leaked by hedge fund insiders. We are not waiting for New Year to enter long positions, as that seems to be the easiest and most ‘herdish’ trade today: we remain forward thinking contrarians and are going long on Tuesday. We believe President elect Obama will appoint some Wall Street friendly names to his first cabinet/administration. He will do this to satisfy his political appetite to win that critical no holds barred second term in 2012, agree? Please answer the poll question regarding this issue on our blog: Yet, IF he chooses to select only hard line left wingers, the market will not rally. After witnessing the extremely well planned and hard fought victory, we would be shocked to see a concentrated cabinet: it won't happen. 2) The pressure from Warren Buffett on President elect Obama to call for a change in mark to market accounting or announce a huge infrastructure stimulus plan plays a factor in our short term bullish call as well. Berkshire Hathaway just reported a horrible quarter, and even if Buffett is okay with paying higher taxes, we know he does not want to see his almost perfect legacy wither, wilt, and die in his waning years: Other recent Buffett investments in Goldman Sachs (GS) and General Electric (GE) have underperformed as well, and both of those companies will survive this wickedly panicked market. 3) The financial sector could begin to stabilize as it shrinks. The S&P is heavily weighted with oversold financials, about 20% of the S&P value lies in financials. Regional banks could begin bouncing with 50%+ buy-out premiums. Rumors abound that Citigroup (C) is very close to bidding for a regional bank with government TARP money.
This would ignite a type of forest fire under financials, forcing many perma bears to cover their seemingly bullet proof short positions. We will take advantage of what we view as monopoly money about to be used to boost stocks like Regions Financial (RF) and/or Suntrust Bank (STI). POTC feels the S&P index could settle above 1,000 by Thanksgiving, and as the bear rally gains momentum from one or two other positive developments mentioned above, then 1,100 on the S&P could well be reached before we wish you a Happy New Year. We hope this trading alert helps you profit. We will be writing our standard Psychology of the Upcoming Week's Earnings & Economic Data and sending it to all subscribers this Saturday night... Thank you for reading & sharing The Island Where Forward Thinkers Evolve, the Psychology of the Call team.

Friday, November 7, 2008

Friday 7 November

We hope you were able to take advantage of the artificial rally in solar stocks last Friday and Monday of this week by shorting on Tuesday afternoon, prior to the close. POTC did not send out an e-mail alert, but we posted links in the section above and mentioned that we considered solars and the S&P to be overbought. Look at a 5-day chart of FSLR, or LDK, or ENER, or the S&P 500. We made substantial returns this week buying puts on the above-mentioned stocks and the S&P.
We will launch our website next week and give you an opportunity to monitor our trades before offering an advisory service. Regardless of this economic environment POTC knows how to trade market mechanics, market psychology, and how to generate profits consistently. We do it every week and would like for you to do it also. We'll provide more details soon. In the meantime have a great weekend and remember, now that it's Friday and the weekend with all of its uncertainty beckons, Cash is King.

Monday, October 27, 2008

Do these Golden Ebay Bids Signal a Preliminary Market Bottom?

DJ Gold Bars Fetch Ebay Bids Far Above Spot Prices . SYDNEY (Dow Jones)--Gold bars are trading far above current spot prices for one troy ounce of bullion on the internet auction portal eBay, highlighting current strong demand for safe-haven assets among retail investors, traders said Monday. One Credit Suisse 24 karat pure one ounce bar had attracted 12 bids, the highest at $835 with the auction open for another 10 hours and 20 minutes. This is in sharp contrast to gold's spot prices, currently trading at $728.60/oz. Heavy selling from hedge funds and other investors in need of cash to meet client redemptions and margin calls have clipped gold from around $930/oz just over two weeks ago to a one-year low of $681.75/oz Friday, before a strong bounce lifted prices back above the $700/oz level. Another Credit Suisse one ounce bar, with 15 hours to go, had attracted 13 bids, topping $880. Retail investors seeking physical gold have forced coin and bar producers such as the U.S. Mint to ration supplies. "It's an anecdotal story, but the high bids on eBay illustrate the high level of retail demand. For that reason we believe gold will go up again once hedge fund redemptions wane, which should happen at the end of October," said one Sydney-based trader. -By Elisabeth Behrmann, Dow Jones Newswires; 61-2-8235-2965; Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires October 27, 2008 02:17 ET (06:17 GMT) Copyright (c) 2008 Dow Jones & Company, Inc.- - 02 17 AM EDT 10-27-08

Sunday, October 19, 2008

Psychology of the Upcoming Week's Earnings and Economic Data

May this mail reach you in good health & good spirits! The churning in the markets continues to wash out most professional money managers. The only sure fire method to use today is what Dennis Gartman describes as "getting smaller", and it's still not too late to get small into any 3%-5% rallies. Two weeks ago, the Psychology of the Call team (POTC) recommended selling all rallies greater than 3%, and that advice has worked well. We are concerned with the temporary and limp market blip Friday, after the semi-bullish sentiment expressed by legendary investing guru Warren Buffett ( was quoted and quoted time and again. And yet equities sold off violently from their afternoon highs. We are also very concerned with many respected professionals like Dennis Gartman and Warren Buffett piling into the banking sector and espousing its merits publicly. Could their behavior be construed as desperate? Giants can afford to be wrong a lot longer than the individual investor, as their liquidity is wider and deeper. Anais Nin once wrote: "If a person continues to see only giants, it means he is still looking at the world through the eyes of a child". Of course POTC respects the legendary minds of investment finance, yet we must not forget that they’re mere mortals. Gartman's and Buffett's decision to overweight banks today could turn out to be the biggest paradoxical blunder come early to mid 2009, as unemployment rises north of 7%. Moreover, IF it happens to be an Obama/Biden administration, their policy of raising taxes on individuals and businesses making more than $250K/year will further cripple the economy and trickle into the banking sector, extending the pain to all sectors. Anytime the government has regulated any sector.... --------------------------------- If you would like to receive this and future posts and market analysis, please send an e-mail to and make sure that your e-mail client will not consider messages from that address as spam.

Sunday, October 12, 2008

Shattered Psychology, Bloodied Charts, Politics, & Earnings Reports will Whipsaw Market

Sunday Greetings from the entire Psychology of the Call team (POTC).
Our goal is to keep you at least five paces ahead of both angry herds, with a focus on exposing the many irresponsible talking heads. Perhaps having one go-to cable channel isn’t a good thing and shows like Jim Cramer's Mad Money aren’t helping anyone. Granted, Cramer is in a very difficult situation as the bear market evolves, and we don’t believe he’s inherently bad, but we would prefer it if he had more competition. His mantra "there's always a bull market somewhere" has been proven wrong of late, but he won't admit it. The aura built up around his "genius" fooled more people than a David Copperfield magic show, still GE's parent CNBC allows his circus of errors to continue on-air. POTC's ambition of offering you the most educational go-to portal on the internet is only two weeks from fruition. We feel for everyone still reading this, and we thank you for being patient during these market dislocations; dislocations caused by the virtual overnight failure of all five U.S. investment banks. The reality of their charters being changed to Bank Holding Company status means that trillions of dollars of stocks, bonds, and commodities had to be sold or bought back, thus the anomalous moves, especially with falling stocks in the face of falling bonds.
The long term buy & hold investor has suffered incredible emotional and financial loss. Only the...
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Thursday, October 9, 2008

G7, G20, .... Are We Heading Toward One World Order?

=DJ G7 Makes Room At Table To Brainstorm On Spreading Crisis. By Tom Barkley Of DOW JONES NEWSWIRES WASHINGTON (Dow Jones)--Group of Seven leading industrial nations are making room at the table for other countries as they battle a fast-spreading financial wildfire that defies containment. The spirit of collaboration was displayed Wednesday when the U.S. Federal Reserve, European Central Bank, Bank of England and Canada were joined by central banks from non-G7 countries such as Sweden, Switzerland and China to conduct a joint rate cut unprecedented in scope. When the G7 meets Friday, it will try to present a unified front in the struggle against a crisis that in the past year has ballooned from a small sector of the U.S. mortgage market to envelop Europe and an increasing number of developing countries. Acknowledging the viral nature of the credit freeze, U.S. Treasury Secretary Henry Paulson called for an emergency meeting of G20 finance ministers and central bankers. Such a gathering, set for the day after the G7 meeting, will "discuss how we might coordinate to lessen the effects of the global market turmoil and the economic slowdown on all of our countries," Paulson said Wednesday. The G7 has been criticized for being slow to recognize the depth of the financial system problems and even slower to come up with a coordinated response. Infighting was on display last weekend as European officials failed to come up with a common approach to protect their intertwined financial sectors. Since then, the U.K., Spain and Italy announced their own financial sector rescue programs, though officials in France and Germany have indicated they see no need to set up similar bank recapitalization plans. French President Nicolas Sarkozy said later Wednesday that German Chancellor Angela Merkel agreed that the two countries responses to the turmoil would be "totally coordinated." Sarkozy has taken a lead in pushing for a pan-European approach and has also called for a special G7 heads of state meeting, which some media reports have suggested could be held as early as this weekend. Paulson said it doesn't make sense to have "identical" policies. "You're going to have different policies, but the key thing is that we continue to work closely together," he said, adding that he sees more signs of coordination and "very helpful statements" coming out of Europe. Edwin Truman, senior fellow at the Peterson Institute, who has worked at the Treasury and Federal Reserve, said he doubts the G7 meeting will result in any major new measures, especially with upcoming elections in the U.S. and Canada. "I suspect you're not going to have a lot of concrete initiatives," he said. "I mean, they will commit themselves, like here, to seek multilateral solutions and work together." In addition to European officials not being on the same page, there will also be an undercurrent at the meetings that Paulson "will have to eat a little bit of humble pie," he said, since the global crisis began in the U.S. World Bank President Robert Zoellick, who previously worked at Treasury, earlier this week called for a doubling in the size of the G7, which he said "is not working." While he also criticized the G20 as too unwieldy, the quickly assembled meeting of that larger group of major advanced and developing countries suggests that his idea for a "new multilateralism" to include rising powers is shared by others. The G20 includes the G7 countries of the U.S., U.K., France, Germany, Italy, Japan and Canada - as well as Russia, Australia, Brazil, China, India, Argentina, Indonesia, Mexico, Saudi Arabia, South Africa, South Korea, and Turkey. The European Union also has a separate representative. By involving developing countries, the G7 is acknowledging that an effective response to the crisis requires more players, said Michael Monderer, managing director of Washington-based advisory firm G7 Group and a former Treasury official. "The G7 is not the sole actor in the world," he said. While Monderer doesn't entirely agree with Zoellick's idea of a flexible steering committee, he said, "I think that it's clear that there are other large actors in the world, such as the Chinese and the Indians and the Brazilians and the Mexicans and the Russians, that need to be part of the process." He doesn't expect any coordinated measures at the G20 level, seeing the meeting more as making sure everyone's on the same page. David McCormick, Treasury undersecretary for international affairs, said the G20 meeting will be mostly about exchanging viewpoints on the crisis. "If nothing else, what hopefully the last six-to-12 months has shown is how interdependent our financial markets are, as well as our global economy," he said. Still, Monderer said that even if no major announcements are expected out of this week's meetings, he gives the G7 some points for starting to show leadership. He expects Friday's communique to convey the sense that they are in charge. "If there were ever a time for the G7 to show its relevance, this is it," he said. "And I think they've gone a long way in that regard, actually." -By Tom Barkley, Dow Jones Newswires; 202-862-9275; (END) Dow Jones Newswires October 09, 2008 09:02 ET (13:02 GMT) Copyright (c) 2008 Dow Jones & Company, Inc.- - 09 02 AM EDT 10-09-08

Saturday, October 4, 2008

Past, Present and Future Psychology

Good Saturday to all! The Psychology of the Call team (POTC) begins with an important quote during this ongoing crisis: "If we get involved in fears about the future, we shall miss the chances that the present offers us".
'It could always be worse for the living' is our way of describing the horrific financial meltdown. Money is important to all, but respecting yourself and others during these unprecedented times is where POTC believes the solution rests.
Looking back, there have been world wars, plagues, and market crashes of unimaginable severity, yet within a decade after these events, human life actually improved as a result. Although we are not happy to see the market fall, we do take credit for our expression of negativity back in February and March based on what we perceived to be the "foundational crack" in banking. We were able to use that theory and profit, and we know through emails many of you have too, so congratulations.
The Eighth Commandment of Trading stresses the two sided market,
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Friday, October 3, 2008

Friday afternoon

It has been a wild and wooly week on Wall Street and we suspect that next week may not be a whole lot different. The much heralded bailout was approved by Congress today and signed into law by President G.W. Bush. The market dropped shortly thereafter. We hope most sincerely that you are adhering to the 11 Commandments of Trading. To not do so is to invite disaster.
We wish you a wonderful weekend and we'll be in touch soon. The Psychology of the Call Team.
The Eleven Commandments of Trading
1. Never trade more than 10% of your total capital/account value in any one position.
2. Cash is King, and we recommend keeping 20% liquid to take advantage of dislocations and volatility.
3. Cut losses to 15% maximum whenever possible. If your psyche is shaken, step away and don't trade for 1 week.
4. Take and enjoy profits of 30% or more.
5. Never fall in love with a stock and never force trades or over trade; remember commandment #2.
6. Never accept excuses from management, period.
7. Use technical and fundamental data & psychology/sentiment from the conference call to select trades.
8. There are two sides to the market, long & short; take advantage of that leverage.
9. Understand the significance of the macro geo-political economic environment.
10. Unforeseen events/shocks will happen, inverting the market upside down (remember commandments #1 & #2)
11. All of the above are void without reading the Psychology of the Call.

Sunday, September 28, 2008

Ridin' the Rails on a Downbound Train

The Psychology of the Call (POTC) team is very disturbed by the recent economic, financial, and political storms. None of the living has witnessed such a market, and even the free market guys on Wall Street, who are 80% responsible, are pointing fingers at each other. Their pig headedness in not addressing the issue of imbalanced sheets sooner earns them the title of investment bank boneheads, especially the Brothers Lehman and John Thain's bull no more, Merrill Lynch. Their days of levering up 30-1 are over, and the last two remaining U.S. Investment Banks, GS & MS, have been forced in line with the rest of the Bank Holding Cos., a sweet reality for many Americans, yet a sour long-term reality for lovers of liquidity, volatility, options, risk and fast money ~
The equity market will hiccup from this oversold position after the billion dollar D.C. legislation is signed. But caution is warranted as the market could...
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Friday, September 26, 2008

Our Commandments for Trading

The Psychology of the Call team (POTC) wants to thank everyone for returning to our blog on a daily basis. We wish you a happy and healthy weekend, with dreams of better days ahead. We will continue to strive toward making Psychology of the Call the go-to financial portal for analysis and articles on geo-political macro issues as well as individual recommendations on micro ideas/stocks. Now we bring you the 11 Commandments. POTC wants every individual supporter to understand how critical they are to your financial success going forward. Without an actionable plan, many well known investors of our time have failed, but eventually succeeded due to diligent adherence to strict rules. Although there are thousands of financial forums on the Internet, filled with great facts, opinions, rumors, and educational information; POTC offers you a more scientific channel to help through this maze of information. We stress the need for an actionable plan rather than mere hope. Hope and faith should never enter into your investment ideas, ever. Perhaps no one is more qualified than "Master Kung", the great Chinese philosopher Confucius (479BC) to explain why modest words are important, but nonetheless, quantifiable methods of action must surpass well meaning words of hope: "The superior man is modest in his speech, but exceeds in his actions".
The Eleven Commandments of Trading
1. Never trade more than 10% of your total capital/account value in any one position. 2. Cash is King, and we recommend keeping 20% liquid to take advantage of dislocations and volatility. 3. Cut losses to 15% maximum whenever possible. If your psyche is shaken, step away and don't trade for 1 week. 4. Take and enjoy profits of 30% or more. 5. Never fall in love with a stock and never force trades or over trade; remember commandment #2. 6. Never accept excuses from management, period. 7. Use technical and fundamental data & psychology/sentiment from the conference call to select trades. 8. There are two sides to the market, long & short; take advantage of that leverage. 9. Understand the significance of the macro geo-political economic environment. 10. Unforeseen events/shocks will happen, inverting the market upside down (remember commandments #1 & #2) 11. All of the above are void without reading the Psychology of the Call.

Sign of the Times, ECB's Wellink Cancels Crisis Management Speech

DJ ECB Wellink Pulls Out Of Chicago Conference Citing Mkt Turmoil By Emily Barrett Of DOW JONES NEWSWIRES CHICAGO (Dow Jones)--The financial crisis is causing considerable attrition at the annual international banking conference hosted by the Federal Reserve Bank of Chicago, with European Central Bank governing council member Nout Wellink the latest high-profile speaker to pull out, citing the ongoing turmoil in markets. Wellink, who is also chairman of the Basel Committee on Banking Supervision and head of the Dutch Central Bank, had his staff notify the conference organizers late Thursday that he would be unable to attend to deliver the keynote address at Friday's lunch. His withdrawal was followed late Thursday by that of Vincent Reinhart, former Federal Reserve official and professor at the American Enterprise Institute. Kenneth Dam, who is former deputy secretary of the Treasury in 2001-2003, will replace Wellink, and no replacement for Reinhart has yet been announced. He was to speak on a panel at 8.15 a.m. CDT on "Experience with Crisis Management." In another signal of how highly strung the proceedings have become, one of his fellow panelists has requested there be no recording of his comments. This year's conference, the 11th in the series, is named "Credit Market Turmoil of 2007-2008: Implications for Public Policy." The dinner keynote address was given by ECB Board Member Jose Manuel Gonzalez-Paramo. -By Emily Barrett, Dow Jones Newswires; (201) 938 2248; (END) Dow Jones Newswires September 26, 2008 09:11 ET (13:11 GMT)

Thursday, September 25, 2008

HSBC's (HBC) Actions Could Signal Bottom

DJ HSBC: Which Bank Is It Buying Today? Press 1 For No Comment . By Ragnhild Kjetland Of DOW JONES NEWSWIRES LONDON (Dow Jones)--It is a small comfort to many banks, their shares beaten black and blue, that helpful traders more than likely will name them as acquisition targets of HSBC Holdings PLC (HBC). Without ranking the following according how deep into the quicksand they've sunk in the credit crisis, Washington Mutual Inc. (WM), Morgan Stanley (MS), Lehman Brothers Holdings Inc., Citigroup Inc. (C), UBS AG (UBS), Societe Generale SA (13080.FR), Royal Bank of Scotland Group PLC (RBS), HBOS PLC (HBOS.LN) and Bradford & Bingley PLC (BB.LN) have in the past nine months all been named as potential targets for the mother of all banks, HSBC, which Forbes earlier this year ranked as the world's largest company. Is HSBC taking over the world, or has the rumor mill run amok? "It is interesting the number of banks that HSBC has been linked with over the past few months," one trader said, adding that HSBC has been "very clever" the way that it has conducted itself throughout the market crisis. "They have completely distanced themselves from HBOS, UBS, Bradford & Bingley et al recently," he said. But he said he wouldn't bet against HSBC getting involved at some stage, "and if they do - we'll probably be close to the bottom." Another trader said that if the rumors are plausible and ties in with his thinking, technical views and models, he will trade on them. He also said that he would forward rumors to other traders and journalists unless there was reason to believe they weren't true. "Information is the life blood of the markets," the trader said. "Without it, they would dry up and rumors are part of that system. Our job is to sift the wheat from the chaff and advise our clients accordingly, just as we do with other forms of information. Truth is often stranger than fiction. You only need to look at the markets at the moment to see that." Able, But Maybe Not Willing All evidence suggests that if it wanted to, HSBC could go on a shopping spree. It is the only major Western hemisphere bank whose share hasn't lost any of its value since the start of the year. In fact, it has gained 3.7%. At 7.84%, it far exceeds the market's 6% golden standard for equity held against risky assets, or core Tier 1 ratio. It has more deposits than loans, as it takes care of $1.16 trillion sitting in customer accounts, and it can absorb $10 billion in loan impairments and other credit-risk provisions and still deliver a net profit of $7.72 billion in the first six months of the year, all thanks to a hugely profitable Asian franchise. Last but not least, a week ago, it withdrew a $6 billion bid for U.S. private equity firm Lone Star's stake in the Korea Exchange Bank (004940.SE). So, being strapped for cash is certainly not an excuse. But HSBC likes its high ratio of deposits. It likes its capital ratio, and it likes emerging markets. The bank will never comment on market rumors, and Thursday, HSBC didn't return calls for comment on why it is so often subject to market rumor. But whenever possible, the bank's management repeats two mantras: HSBC doesn't want to buy an investment bank and HSBC wants to grow in emerging markets. And it is risk adverse. For a bank that has avoided many of the potholes that the rumored takeover targets haven't, it seems only natural to ask: Why should it expose itself to that risk? This week, two banks that are still branded high-risk have been named in connection with HSBC: UBS and the ailing U.K. buy-to-let lender B&B. The logic behind UBS was that HSBC would get its hands on the wealth management business, but sell on the investment bank to BNP Paribas SA (13110.FR). Incidentally, BNP is another bank often rumored to buy this, that and the other. Not only did people familiar say that HSBC isn't in talks with UBS or BNP, but analysts also pointed out the risk of carrying UBS' balance sheet until a transaction with BNP could be done. A balance-sheet split is easier said than done. Bear in mind that RBS is still carrying parts of ABN Amro on its balance sheet that belong to Spain's Banco Santander (STD) and Fortis N.V. (30088.AE) after their joint acquisition a year ago. For B&B, the situation appears more precarious every day. One analyst said Thursday that its outlook is at best "dire. It needs to be taken over. ASAP." Banco Santander, which recently sealed a deal to buy the mortgage lender Alliance & Leicester PLC (Al.LN), has also been named as a possible buyer of B&B. Santander may also want to introduce a "Press 1 for no comment" service on its press hotline. Research conducted this year by IntraLinks and London City University's Cass Business School found that more than half of deals leaked to the press don't materialize. But for HSBC, the never-ending rumor mill suggests that they are guilty until proven otherwise. That could take a while. Company Web site: -By Ragnhild Kjetland; Dow Jones Newswires; +44 207 842 9268; (Andrea Tryphonides contributed to this item.) Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires September 25, 2008 11:42 ET (15:42 GMT)

Tuesday, September 23, 2008

"Lights, Camera, Action", Attention all POTC readers

Warren Buffet will be interviewed Wednesday on CNBC at 8 ET. He will address the bailout and his $5B-$10B investment in Goldman Sachs that broke after market close, Tuesday. POTC feels the S&P could witness a 4%+ advance with the combination of these psychologies: Buffet-Berkshire/Blankfein - Goldman hook-up buzz; an okay Durable Goods Orders report (8:30ET), and the scariest of all; an unemployment number that doesn't exceed 450K (8:30ET). The market inversion we predicted in the last sentence of the "McCain vs Obama" piece is upon us, yet now in the late stages. We believe Buffet's actions will bring down the volatility index (VIX). And, IF you feel the bailout will pass before the weekend, we could see the S&P move past 1,280. Many IFs, yet we feel the pressure has shifted squarely on the shorts to cover, especially after the 70 pt S&P inversion in the last two trading sessions. Simply a panicked herd, simply oversold. Buffet's actions come at a very uncomfortable & questionable political time as Paulson and Bernanke are grilled on Capitol Hill. What will you say IF the bailout doesn't pass by Friday, yet financials and S&P stabilize due to Buffet's tune? Wouldn't that give the D.C. animals more leverage on adding their bells and whistles? You decide. POTC will set-up trades with conviction the bailout passes by Friday. We feel the risk-reward is too great to be short or overweight in cash. Lastly, Buffet's 'perpetual preferred' share investment is a long term deal as far as he's concerned. Warrants worth $5B are attached at $115/share, with an option to buy in at anytime. The psychology of the closing bell will be critical Wednesday, and we see bear blood. Equity markets are the best leading indicator of the economic cycle, so we feel it's critical the S&P closes up at least 35 points for the bulls to mount control. And that would be only half of what we lost in the last two days... We recommend aggressive traders go long, and even conservative forward thinkers nibble at some "best in breed' positions for your IRAs. We are optimistic after this Buffet $Billion investment, since the majority of recent blood loss came from the financials, especially ex-Investment Banks GS & MS. The Psychology of the Call team remains confident there will be a market, in some form this Friday, next week, and next year. Thanks to all for answering the POLL on the blog as well. Good night.

Sunday, September 21, 2008

Psychology of the Upcoming Week's Economic and Earnings Data

From border to border and coast to coast, to all supporters reading, wherever you may be, sincere greetings to all forward thinkers! "I cannot say whether things will get better if we change; what I can say is they must change if they are to get better."
G.C. Lichtenberg The Psychology of the Call team (POTC) refuses to cheer or jeer for what is transpiring, as some of it is positive on a macro-economic scale, yet some of it negative on micro levels, i.e. market/trade efficiency. The banning of selling short 799 financials has caused a market dislocation, and some participants are steaming mad. Many lawsuits are being filed, and as you continue reading, we will offer a compelling stock pick that will take advantage of the developing regulatory actions and cosmic proportion of litigation proceedings ahead of us. The Island Where Forward Thinkers Evolve has stressed the importance politics play in money & banking since February, and what an unfortunate last few days for strict technicians or fundamental analysts, as the full force of the U.S. Treasury stepped in and temporarily stabilized the market inversion. There are still those who doubt HMP's "Newer Deal" will work: that's fine, but as forward thinkers, we will find ways to trade this market and let history be the ultimate judge. We know the "11 Commandments" will continue to play an important role in our future trading successes. Many sophisticated traders are dumbfounded and trying to make sense of what is unfolding, and we do believe only those who have practiced defensive tactics will survive this market cycle and whipsaw. If you feel G.C. Lichtenberg's quote carries any weight, please do take a moment and review all of the 11 Commandments before you place your next trade, because the change in front of us remains enigmatic.
In February, before the collapse of Bear Stearns, we pointed to the "foundational crack" in banking. Now, we believe...
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Friday, September 19, 2008

HMP's Newer Deal Cements the Foundational Crack in Banking

Hank Merritt Paulson's (HMP's) astronomical deal will go down in the annals of history with the late FDR's "new deal." The "foundational crack" in the banking system, which POTC addressed before the collapse of Bear Stearns, finally gets cemented. We applaud the bipartisan effort and await its finality on Friday, by 3:00pm ET. POTC wishes one and all, from border to border, scattered across all five habitable continents a happy Friday and weekend ahead. We look forward to delivering a detailed "Psychology in the Upcoming Week's Earnings & Economic Data" on Saturday night, as well as other useful/relevant updates to the Island Where Forward Thinkers Evolve. Stay tuned! The Psychology of the Call team. Here's a reminder of how we addressed the "Foundational Crack" back on February 28th:
Thursday, February 28, 2008
Psychology of the Call did finger Alan Greenspan yesterday for causing the "irrational speculation" in the Real Estate/Mortgage market, and today the fall out continues. The Unemployment numbers released this morning are inching up to disastrous levels. Greenspan's lowering of the Fed Funds rate to 1.25% unleashed a steroidal effect across the U.S. economy and now the credit and stock markets are in panic mode. The foundational crack has been revealed and it'll take a lot more than carpenters to fix it.
--Wall Street prefers the ability to forecast the future, giving them an understanding of what to do with their capital. Wall Street prefers growth orientated momentum on both sides of the accounting ledger, but neither stocks nor bonds feel comfortable here.
--A good childhood buddy in the Corporate Offices of Goldman Sachs in Manhattan, New York is beginning to question the legitimacy of what is left in the subprime market. The credit spreads are causing bewilderment in the most powerful Wall Street Institutions. Now that we know that, do we advise our readers to buy stocks today? Absolutely NOT! We actually see more lay offs on the horizon at major Wall Street houses, so exhibit caution.
We see the "biggest hammer being wielded" in anticipation of the Unemployment Number on March 7. This hammer will not be kind to those who are long stocks and investors should shy away from adding to any positions until after that date.. Your Cash Will Be King as you sit and listen to the confused talking heads on CNBC and other for-profit channels.As for Bernanke, the tone of his delivery and the trembling in his voice will only get worse after this morning’s employment data – ugly, ugly, ugly. What is the Fed to do? We’re not Economists and we wouldn’t wish Bernanke's job on Mahmud Ahmadinajad (well, maybe we would). But we urge our readers to sit back and watch the show, with cash and buttered popcorn in hand; don't step in what we see as a deep foundational crack.
--Happy trading and remember, Psychology of the Call matters.

Wednesday, September 17, 2008

Attention POTC Readers

A somber but optimistic hello to all forward thinkers, 10,680 on the Dow marks a significant trading bottom in our opinion and we feel S&P 1,168 marks a significant trading double bottom as well. The market has had a lot to digest in past few days, but we feel most of the bad news is behind us. Any economic growth and final stabilization in real estate prices could have very positive effects on the stock market over the coming weeks. These are very difficult times for all market participants, and we want you to know we sincerely care. We reiterate our feelings of a short-term trading bottom. Wishing all a good end to the week, better days are ahead. The Psychology of the Call team.

Tuesday, September 9, 2008

If... Then

Greetingstoallforwardthinkers! - 011001010100010101010111010010101001010010101 10101001010010010101010011011001010010011101 IFyoubelievecrudeoilwillbreakbelow$100barrelTHENbuy EbayEBAY010100010GoogleGOOG100101010 WholeFoodsWFMI00011010111010100001010 IFyoubelievecrudeoilwillbreakabove$110barrelTHENbuy PetrobrasBrasileiroPBR110100011XTOEnergyXTO0111010100FirstSolarFSLR10010101 IFyoubelieveMcCainPalinwillwinTHENbuy CamecoCCJ110101001CelgeneCELG010110101HarrisHRS010001110 LayneChristensenLAYN101010101NordstromJWN000110111Tiffany&CoTIF01101101 THENsellMcDonaldsMCD101001010&sellWalMartWMT101001010 IFyoubelieveObamaBidenwillwinTHENbuy CelgeneCELG010100011CoinstarCSTR010101010DeVryDV111000101H&RBlockHRB 101001000iSharesXinhuaFXI101010111JoyGlobalJOYG000011111McDonaldsMCD 10100011OracleORCL001100110PetroBrasileiroPBR110100101 THENsellNordstromJWN010000111&sellTiffany&CoTIF1010 0001101101011011011010010ThePsychologyoftheCall101010111101001111110101 0110010101101011010TheIslandWhereForwardThinkersEvolve1010000100101010110

Sunday, September 7, 2008

Tossing Stones at -the King of the Bonds- and HMP is Wrong

Good Morning, Afternoon or Evening! You have probably read many articles and had your email box stuffed from many tossing stones at Pimco's Bill Gross for forcing the government spoon to help feed Freddie & Fannie. Here's one example: With all due respect, we too believe in a laissez-faire approach (the "let them go bankrupt philosophy") in 99% of cases, but not this one, no way, no how. Do the journalists who arecriticizing Gross & government officials like Paulson not understand that Fannie was created because the free market banking system failed us during the Great Depression? Franklin Delano Roosevelt (FDR) took aggressive steps that were contrary to "leaving it alone" and it worked for seven decades. Pimco manages the largest bond portfolio on earth, therefore Bill Gross is the perfect messenger the media can crucify after government officials see no way out and begin whispering into his ear and through his mouth. Is Pimco/Gross responsible for the current credit mess, or should he be lashed for speaking his positions? On the contrary he has in fact purchased billions of dollars of government agency paper through the decades, and is Hank Merritt Paulson's (HMP) best friend, best scapegoat, and most qualified expert witness to negotiate a very sensitive "New Deal of 2008", buoying & tweaking FDR's 1938 creation of the Fannie Mae enterprise. So perhaps the acronym 'HMP's New Deal of 2008' will make it into history books as the credit crisis stabilizes and turns. We expect some credit may go directly to Pimco's Bill Gross, aka -the King of the Bonds- Yet many in the media punish Gross and Paulson: shame on them. We believe... --- If you would like to receive this and future posts and market analysis, please send an e-mail to and make sure that your e-mail client will not consider messages from that address as spam.

Thursday, September 4, 2008


Ospraie Hedge Fund Blows Up, the Cockroach Theory Urges Caution

POTC sent out an alert many weeks ago about the dislocations that might result from the bursting of the oil bubble, and with the Ospraie news we are VERY cautious of entering ANY long positions, perhaps only for day trades. As the cockroach theory states "where there's one, there are many more lurking." This is exactly why POTC asks readers to obey the 11 Commandments, as these types of events usually come out of left field, and the 2nd Commandment becomes more relevant. We are now very concerned with how the financial sector digests this negative news, and we urge traders to be overweight cash. In addition, the ISM coming in at 49.9 foreshadows a grim Unemployment Rate this coming Friday, perhaps above the 5.7% forecast, and that would be devastating to most long positions with positive betas. As much as we hate recommending stockpiling cash, it's at times like these that cash will allow you to get some sleep. Even if there is a delayed market reaction to this news, we are very worried about the domino effect this may cause in the weeks ahead, especially as more hedge fund blow ups hit the wires. The Psychology of the Call team.

Tuesday, September 2, 2008

Gustav Stage Left, Palin Stage Right, Energy Prices Plummet

Good Trend Setting Tuesday to one & all! The weakness of Gustav is welcome news for all consumers, but perhaps the entrance of Alaska Governor Sarah Palin for Vice President has spooked the energy market more, causing crude oil and natural gas to fall more than 6% in a single trading session. Whether you subscribed to the notion of supply/demand driving up prices, or favor the idea that speculators are responsible, we know Gustav did not increase supply or demand, yet energy prices are plummeting beyond where they were when Gustav wasn't even a single storm cloud. Perhaps it is simple market/economic psychology of discounting future prices based on Alaska's huge energy supply as Palin made her beautiful stage right entrance? There are still those convinced oil is down and stocks are rallying because Gustav missed: Yet there are others who respect and may credit Palinomics with today's market reaction: With respect for your personal opinion, a majority of Americans do agree that drilling should be part of a comprehensive energy policy. The fact we now have a Governor from the energy rich state of Alaska on the elephant ticket is a breath of fresh air, much fresher than any hurricane Miss. A beauty to put it in supply/demand terms ~ We hope you enjoyed the Psychology of this Call.

Monday, September 1, 2008

Psychology of the Week's Upcoming Economic and Earning's Data

Good morning and good evening to all who enjoy this weekly piece we call the "Psychology of the Upcoming Week's Economic & Earnings Data." Welcome back to the Island Where Forward Thinkers Evolve and monoliths like gold bugs and perma-bulls just vanish in the churn, whipsaw, and noise of normal market cycles ~ The following analysis assumes adherence to the 11 Commandments and no unforeseen market inversions as addressed in Commandment #10, but especially related to geopolitical or terror events. Monday, Sept 1st brings the U.S. Labor Day Holiday, all markets are closed except for commodities, and what a bearish day for crude oil, currently down $4.15/barrel. It’s now evident Gustav will cause a lot less destruction than Katrina. More importantly, we have great faith the loss of human life will be close to zero this second time around! POTC has turned slightly bullish, at least until Thursday afternoon and then we believe being long into the monthly employment report on Friday carries too much foolish risk. We don’t anticipate any upside surprises to Friday's 5.7% unemployment forecast. Also, holding long positions into a September weekend (historically the worst for stocks), coupled with the current geopolitical atmosphere would not be justified. Even though we are in an election year, we refuse to hold unhedged long positions into "Employment Fridays" and weekends just yet. We will offer you a hedged trade idea shortly, one we are confident you can hold into Friday and the weekend. IF crude continues to break down, retracing below $110/barrel, and the S&P sells off, we would definitely begin going long select technology and select retail, as a majority of the recent pain has been the direct result of the weak greenback and energy bubble, and both are showing signs of turning toward the bullish campfire. We recommend exposure to technology and retail names that enjoy 70% or greater of their revenues/sales inside the U.S., as the strengthening greenback and falling gas prices will be synergistic. A slight positive for stocks is the fact we are in an election year stretch. With the Republican National Convention underway, conservatively run institutions, which dominate Wall Street, will no doubt be influencing trading, so a positive bias is expected at least up to Friday's unemployment release. ------------------- If you would like to receive this and future posts and market analysis, please send an e-mail to and make sure that your e-mail client will not consider messages from that address as spam.

Saturday, August 30, 2008

Happy Holiday Weekend

Gustav will dominate the news for the next several days (unless there's an Israeli response to the latest news release from Iran). We wish all US readers a Happy Labor Day weekend and all other readers an equally Happy Weekend. We will send out "The Psychology of the Upcoming Week's Economic and Earnings Data" on Monday.

Thursday, August 28, 2008

Gustav's Winds Cause Free Market System to Hiccup… Election Year Politicking

POTC believes today's sustained momentum is synthetic. We predicted a bullish GDP number and did say Mon-Thurs would be neutral to bullish, but the lack of volatility due to today's intervention rhetoric has us disgusted. A cheer for the free market system? Not today. The overhang with rising unemployment and the "foundational crack" at Freddie and Fannie will destabilize the equity markets sooner than most talking heads will lead you to believe. We bought S&P emini S&P puts today at 1,298, and will buy an equal number around 1,305 IF the S&P has another synthetic reflex rally tomorrow. POTC does not believe that news from the IEA should be driving financials higher. Perhaps Gustav will miss the major oil & gas properties, the SPR will not have to be tapped, and crude will climb due to geopolitical issues in Israel or Russia or Nigeria over the three day U.S. Labor Day holiday. We wish all our forward thinkers a good day.

Saturday, August 23, 2008

Psychology of the Upcoming Week's Earnings and Economic Data

Good morning and good evening, wherever you may be reading! The S&P 500 Index was down for the week, FRE and FNM fell below $5.00/share, simply a very troublesome development that may create hedge fund problems. Could the huge drop in crude on a Friday be related to hedge funds screaming for liquidity, especially after Goldman Sachs called for crude to rise to $150/barrel by year end? That's what we call a dislocation. The strange actions from Russia will not go away easily; even Vice Presidential candidate Joe Biden agrees: Add the hanging potential for an Israeli strike against Iran's nuclear facilities, and do you see obvious reasons for bullishness? POTC feels the bear market rally on Friday is a good lesson in market mechanics, as FRE and FNM's precipitous price erosion has caused a market dislocation. We remind you September has historically been the worst month for the stocks. Next week also brings the three day Labor Day weekend, so great caution is urged late in the week, but especially on Friday. From an economic perspective, Monday-Thursday looks to be... - - - - - - - - - - - If you would like to receive this and future posts and market analysis, please send an e-mail to and make sure that your e-mail client will not consider messages from that address as spam.

Friday, August 22, 2008

Scrathin' & Sniffin' Freddie and Fannie, Yuck

The fact FRE and FNM cannot stabilize in a bullish tape is very bad news. More troubling is the fact FRE and FNM broke that magical price of $5.00/share, and we feel the talking heads will begin addressing hedge fund dislocations caused by being forced to deleverage their portfolios. Please understand that hedge funds use individual issues to leverage from, and FRE and FNM looked okay just days ago, agree? So when you see bad stocks move up and or good stocks move down, that is typically a result of hedge funds being forced to liquidate positions they still feel strongly about, yet cannot afford to hold as the margin clerk rings, therefore the term dislocation. We look forward to sending out a detailed "Psychology of the Upcoming Week's Earnings and Economic Data" Saturday. Until then, we wish you a fun, safe, and happy weekend. We are working very hard to bring you ideas that will educate you in market mechanics, and enable you to profit consistently. Best to all, the Psychology of the Call team.

Thursday, August 21, 2008

Bill Gross Frustrated the Same Day Russia Stormed Georgia: Coincidence?

This is what Pimco's Bill Gross said: *DJ Gross: Agency Spread Widening Doesn't Make Sense-Bloomberg TV (MORE TO FOLLOW) Dow Jones Newswires August 06, 2008 14:42 ET (18:42 GMT) Copyright (c) 2008 Dow Jones & Company, Inc.- - 02 42 PM EDT 08-06-08 Perhaps Russian investments in the U.S. have more influence in our markets than CNBC talking heads are reporting? POTC thinks so. Just consider the staggering amount of oil profits funneled through Russian hands in the last year with crude breaking through $100/barrel, and realize some of it bought U.S. agency paper, especially FRE and FNM. On August 6th, when Bill Gross said "agency spread widening doesn't make sense", it happened to be the day... ------------- If you would like to receive this and future posts and market analysis, please send an e-mail to and make sure that your e-mail client will not consider messages from that address as spam.

Tuesday, August 19, 2008

positives vs NEGATIVES, Update August 19th

The positives have changed:
1) Election year: The psychology of a new administration taking over the reins rarely hurts the equity market. Both Senators will be announcing their Vice Presidential selections very soon, and that will cause some reallocation of monies by institutions… caution. Consider what happened to Halliburton shares in the last 8 years since the installation of V.P. Cheney. So, for those who think money & banking aren't interrelated, think again! We ask you to handicap both Vice Presidents and see whether there is some corporate background or some legislative history that would favor a certain sector, i.e. biotechnology/stem cell research.
2) Gross Domestic Product (GDP) fails to signal recession: GDP has not broken through zero - and we stated in the past we do not feel it will - but we're concerned with dark clouds forming in Asia and Europe. Is it possible that the Asian and European slowdowns will worsen and our GDP will break through zero? POTC is definitely monitoring that, but as of today, GDP remains in the positive column.
3) Extreme pessimism in the Michigan Consumer sentiment looks to have bottomed with oil breaking down over $35/barrel from its peak.
Will the consumer begin spending this extra disposable income on clothes/retail goods as gas falls below $3.50 or $3.00? That's the $64,000 question. Some economists feel the psyche of the consumer is broken for months and maybe years to come; what do you think?
The negatives have changed:
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