China: US Bail-out Plan like Fast Food (Yup... They Were Laughing at US)

Update-
No moves made right now though SDTH is looking interesting. POT maybe holds 135 to close? Caution there though. I said that one way to succeed here is to 'short the hedgies'. This certainly has worked today with KOL SMN, DUG, etc. Also I suspected that the market would not go up with the bail-out announcement (though I did not write that here) because when everyone says there is going to be a bounce it is usually a good sign that there will not be.

Here is an interesting article from Minyanville on quants and deleverging,
Also note that the downgrade of AGU on Friday broke its 50 day weekly MA (the only of the three ferts that was holding it.) The reason: Strong fundamentals but hedge fund unwinding. You see... it turns out that if you want to go somewhere in this market you not only have to pick the best train but you also have to pay close attention to the quality of the passengers that are already on board.
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The financial crisis, Iraq, relations in the world... all I hear about the US from the perspective of foreigners is immense disrespect. From admiration and even some degree of idolization to contempt and disrespect. That's where we are now.

Here is the article

Also... here is a nice piece from Ron Paul on the bail-out and on the weakness of the dollar...













Here are some of the core principles that I am convinced will be necessary to succeed in this market going forward:

1. CASH: Eventually this market will recover (probably no time soon) and at that time some great stocks will be on deep discount. It's like JPM buying WAMU for almost nothing and BAC buying CFC for almost nothing, and Buffett getting a tremendous stake in GS for almost nothing...etc etc. The Fat Cats get first picking but the little guys will also have great opportunities later, down the road, when the market turns. The best thing we can all do is keep some cash handy for quite awhile. It may take patience but this is a great time to learn about the market with limited capital so that when things turn we will have the knowledge of stocks and the market to take advantage. In a market like this sometimes the most profitable move is just waiting things out. A caveat on cash: if we inflate enough then it also makes a lot of sense to hold cash and short the dollar and/or convert cash into foreign currency like the Swiss Frank or hard assets like gold. It is clear that this financial crisis is deflationary unless the government so extensively inflates that we throw away the dollar. In that case commodities would soar... and they will anyway in my opinion once this credit crisis ends (whenever that is).
   
2. Short-term trades with stops: The volatility of a market like this can create some great trading opportunities on the long side and the short side. Extensive research, constantly looking at stocks for trading bargains (for example SDTH is just over 7 right now. APWR is trading at 11. POT is testing support at 145... I mean this is a company that will do $12 in earnings THIS year and 20 or more next year. When great companies hit serious support areas (135 would be a 50% retracement of POTs large move over the last years from 30 to 240... so far it has stayed above 140 and found recent support at 145) it makes sense to look for trades. I am strongly considering putting a little into some of these names with defined price targets as exit points. If I am wrong the losses will be minimized.
3. Strong trends that are in their early stages or are still unfolding and that are very unlikely to stop. The overall market imo and according to Prechter and Schiff and Rogers and Roubini and everyone I respect still has a ways down to go. Short the market is something I am looking to get back into. I like DXD as a start... Can't short UYG but DXD has some of this. SDS. QID. SRS. I really believe that commercial real estate will be in big trouble going forward, especially companies like SGL and BXP that have exposure in areas hardest hit... I also like a short on regional banks. on the dollar if the bail-out goes through (and long precious metals and commodity future ETFs like DBA and DBC if this happens as this is really a short the dollar trade in this case), on US treasuries (though they may lower rates agian short-term which would bring them up a bit short-term, ), and on many others. In all cases I do not simply want get into the trend but want to used technical indicators to align with trend fundamentals. I plan to use stops just in case as well... If the losses are small several stop losses can be much more than made up for by a nice success here.
4. Consideration of where the smart money may be going. When POT blew away the numbers last quarter the open interest for the 180 puts had skyrocketed. This means that lots of people were betting the stock was going down. Were they wrong and uninformed investors who though POT earnings were a bubble or were the astute investors who knew something others didn't (in this case the peril of over leveraged hedge funds). When too many people are bullish or bearish and the fundamentals are public knowledge the charts must support the move to get in. I went against the charts with POT bc of the fundamentals and have learned from my mistake. When POT bounced to 185 recently on the bail-out short squeeze and hype the smart money were the ones that had bought in the 140s and were looking for an exit with profit, along with the shorts that knew the unwind still had a long way to go.... I always try to find evidence of where the smart money may be going... if I absolutely have no clue than I am probably on the wrong side... the charts (especially for big companies with heavy institutional ownership) often provide the best clues as to what the smart money may be doing. That's why I reiterate: Don't fight the charts unless you know something about a company that the market does not.
   
5. As Soros said (paraphrased): In this market you have to be cautious or you have to be nimble. This market has a tendency to destroy capital.
   

Some other useful notes:
Here is an article on REITs/Commercial Real Estate
Regional Banks: Roubini thinks hundreds will go under as mentioned... RKH, KRE are on my watch list for shorts....

Deutche Bank: According to Roubini's European RGE Monitor some European Banks are even more leveraged than US banks and are in deep trouble. DB is levered 50:1 according to the article. DB stock has fallen from its highs but is still up quite high. If it falls below 80 it may also be a potential short along with some other European banks with US credit market exposure like Credit Swiss.

What a mess.

"The Yellow Rose Street Beat" is for informational purposes only. It does not give investment advice.