A FEW CENTS SHORT

I'm a few cents short. 

I'm a few cents short of putting gasoline in my car. Ain't it funny how the money can change our lives. I'm a few cents short of seeing you tonight, a few cents short of being where you are.

I'm a few cents short of holding you in my arms, a few cents short of keeping us from falling apart.

Those are the words of a John Michael Montgomery song from the past. Most of us know that feeling. Most of us at one time or another have been a few cents short. 

Today it's more like a few dollars. It's funny how the money can change our lives. And that's the big concern among investors if and when Bernanke and crew cut off the liquidity spigot. The proof's in the market's recent jitteriness.

Turning off the spigot finally is a newly sharpened blade. For investors caught on the wrong side of that action it could turn out like a dark and stormy night, a season full of rain and a horde of investment portfolios full of pain.

A popular gym saying a while back was go big or go home. Here it's more like get it right or get poorer.

The trend may be your friend, but politicians, bureaucrats and markets ain't. All three can turn into your darkest nightmare. Take your eye off the bouncing ball now and you'll most likely turn up more than a few cents short.

BRIEFS

Once again investors need to learn a vital lesson from what's going on in Detroit.

Profligate governments that will not voluntarily right their fiscal houses should have their financial feet held to the free-market flame. One way to do it is never, ever, no matter how enticing the offer, lend them your money for unsecured securities. 

Avoid investing in any institutional firms that might do so also. Forget the rating agencies; they've proved irrelevant for the most part.  Shareholders can send a message to companies that buy this unsecured government garbage.  We will avoid your products and dump your equities.

http://online.wsj.com/article/SB10001424127887324688404578545373282545626.html?mod=ITP_pageone_0

  _________

       
                             Addictive Nipple

 If  you already don't know, Ben Bernanke's set to speak next Wednesday. By some estimates Bernanke might be the second most powerful bureaucrat on the globe. People hang on every utterance.

The important utterance this time, as it has been for awhile, will be about liquidity--to continue or not to continue it, the economic equivalent of Hamlet.

Liquidity is the oxygen of any free market, but to paraphrase Winston Churchill, never have so many depended on so few for so much. The few, besides Big Ben, include Japanese, Chinese and EU central bankers.

Fear begets people heading for exits. The nipple can become addictive.
_______

INVESTMENT OUTLOOK

We never use the term tip. Tips are more dangerous than my old girlfriend.

Do your homework. Energy has been one of the orphans in this segment of market euphoria. The market will set interest rates, not Bernanke. Bonds hate inflation. Talk about energy surpluses is rife in the news. Economic slowdown fears are on nearly everyone's lips. 

 Expect the unexpected.  Look where most aren't. Energy.

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AT IT AGAIN

A while back we wrote  about the market, not the Fed, raising interest rates. The Fed for what it's worth is a lagging indicator, always behind the curve.

They were behind the curve cutting rates when this whole mess started and they're behind now. Look at mortgage rates. The opening paragraph of a front page story in today's WSJ states: "A surprise spike in mortgage rates threatens to halt refinancing boom that has delivered strong profits for U.S. banks over the past two years."

Part of the the Fed's ploy to bail out the banking industry, an industry that still needs a real housecleaning since little has changed, was to convince regular folks all is well with the Fed on the scene. The housing market is about as close to ordinary folks as the White House is to Pennsylvania Avenue.  Make no mistake, the Fed's being on the scene is the problem.

See the recent issue of  Pimco guru Bill Gross' Investment  Outlook. Gross points out interest rates nearly everywhere are lower than a duck's belly and the duck ain't looking too healthy either.  For openers Gross cites the cost of money in the UK.

At 50 basis points short-term rates there, he notes, "are now nearly 2% lower than they have ever been, which is a long time."  At no time during the last three centuries has "the Bank of England dropped rates below 2%."

For another view see "Landlord, Inc." in the latest issue of  "Forbes."

FRIDAY'S READ

Here's a thought for you. Give some time to it and see what you think.

The nearly total unanimity of belief that something is true doesn't make it true.

Most plants need some water. Water is a form of energy. Without water many plants wither and die.

Energy comes in many forms, sunlight, water, wind, air. Words and thoughts have their own kind of energy. Strung together just so and they can become propaganda.

 And that brings us full circle to unanimity. For a belief to become so pervasive someone, in fact, lots of someones have to be putting energy into it.

Media and politicians and lobbyists and bureaucrats and marketers should readily bubble to mind. Wall Street is another example, possibly one of the more dangerous ones when it comes to your economic well being.

Perhaps the most recent case, as the WSJ noted yesterday, is that of TIPS, Treasury Inflation Protected Securities, and the mass exodus out of them by investors. There can never be a mass exodus without first having a mass entry.

 The explanation, according to one line of thinking, is concern the Federal Reserve will soon reverse or start tapering its now notorious bond buying scheme.

The fear of too much liquidity created by the Fed caused investor concern about future inflation. So investors scrambled into TIPS, pushing their prices up and potential returns down paying up for what can basically be described as a feel-good premium.

The US economy is on the mend and the Fed's succor no longer needed goes this line of thought. In early 2012 there was an investor rush out of EU sovereign debt. The near total unanimity of belief then was default.  And it still might happened. During the interim, however, numerous other things have happened, many of them contrary to the then prevailing near unanimity.

Another apparent gathering unanimity of thought today is, like the smartest kid in the dumbest row at school, the US economy is the strongest weakling among a core of global economic weaklings. So money will continue to flock here pushing up the prices of all kinds of US assets.

THURSDAY READS

How Much Worse
http://www.zerohedge.com/news/2013-06-12/guest-post-why-things-will-get-worse-much-worse

Capital Flight Spreads
http://www.bloomberg.com/news/2013-06-13/emerging-markets-from-brazil-to-india-act-to-stem-capital-flight.html

Bailing On Argentina Again
http://www.reuters.com/article/2013/06/13/us-argentina-economy-insight-idUSBRE95C04T20130613

Falling Junk
http://blogs.marketwatch.com/thetell/2013/06/12/martin-fridson-the-junk-bond-market-hasnt-come-down-to-earth/

Small Caps In Favor
http://investorplace.com/2013/06/a-point-for-the-bulls-small-cap-stocks-reclaim-leadership/

Level Playing Field?
http://online.wsj.com/article/SB10001424127887324682204578515963191421602.html?mod=ITP_pageone_0

Five Hundred 
http://www.reuters.com/article/2013/06/12/us-usa-congress-fundraising-insight-idUSBRE95B05520130612

DOUBLE-EDGED

The following is one of the contrarian articles we often look for, not that what it proposes won't happen. That's not the point.

Note in the article the contrarian point a our drug stocks falling off patent-experiation cliffs. We've been riding those drug stocks higher for some time. No hubris intended. 

Without risk there's no upside. Period. Pepsi knocking out a recent all-time high notwithstanding. That's not the question. The question is how long and why do I want to own it and when did I buy it. 

It's snack food company and there is political risk here, too. Know why you're buying and owning a company.  We own Pepsi. And we will either sell covered calls, buy puts or whatever, but we will continue to own some shares.
http://investorplace.com/2013/06/4-high-fliers-that-could-crash-land-soon/view-all/
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Be careful what you wish for is an old bromide.

In reality, it's a newly sharpened blade of a double-edged sword, especially when it comes to liquidity. 

http://www.futuresmag.com/2013/06/12/us-30-year-bonds-tapering-proves-a-double-edged-sw?eNL=51b89b621b4f3aee33000053&_LID=287557&t=financials&page=2

WEDNESDAY READS

Trouble Ahead
http://www.cnbc.com/id/100810640

Market Turmoil Opportunity
http://finance.fortune.cnn.com/2013/06/12/market-turbulence-el-erian/?iid=HP_Highlight

Money At The Fed
http://finance.fortune.cnn.com/2013/06/12/federal-reserve-bank-deposits/?iid=HP_LN

Bubbles Not Jobs
http://www.testosteronepit.com/home/2013/6/10/proof-feds-qe-is-great-for-bubbles-for-jobs-not-so-much.html

Most Bang
http://investorplace.com/2013/06/podcast-how-to-get-the-most-bang-for-your-tuition-buck/

Economy On The Mend http://www.marketwatch.com/story/former-fed-president-talks-qe3-tapering-2013-06-11?dist=tbeforebell

Bourses Sink
http://news.investors.com/investing-international-leaders/061113-659594-asia-europe-bourses-tumble.htm?ref=HPLNews

EXIT STRATEGY AND SOME MUSINGS

Musings of a Cut Man

Just waiting

Lying here in my hotel room waiting to go down to breakfast with trainer and fighter. It's Saturday, 6-8-13. Got a fight later today at Home Depot Center in Compton.

There are 11 fights, all outside. We're scheduled to go in around 4 or 5. But they make you show up hours early. So there's a lot of waiting. Usually the night before go to a movie. Saw decent one last night, The Internship, a comedy. Good to have some laughs.

You want your fighter relaxed, rested and ready. The three Rs. And they ain't readin', 'ritin' and 'rithmetic.

Walking back to hotel saw one of those white big Ford F 150 jobs. Ford has made a decent comeback. It reminded me of you. Think you had one of those once. Maybe still do. 

Anyway, brought to mind a piece I wrote a while back while I was waiting. Here it is. 

Many of us aren't grateful enough.

We don't fully grasp the importance of gratitude. It's such an easy, simple take-it-for granted thing.

No, this isn't going to be another of those motivational pieces that makes you feel great for the next 30 seconds or until your IBS flares up again. This is much more serious.

Country songs, especially the slower ones, usually tell a story. Often a heart-ripping one.

A few years ago on the backroads of my more energetic youth I first learned about the magical power of gratitude. I'll try to make this brief and not too heavy or sad.

Me and my significant other, as they say, had tried and tried and tried.Things got bad, they got worse and I had no idea what to do. Then one day driving home from work in my big white Ford F-150 with the Montana mud flaps, moose antlers on the hood and the empty gun rack in the back, I heard it on the radio for the first time, a song about a guy and his significant other.

Like us they had tried and tried. He grit his teeth, tried not to complain. While she continued to spend money like it was so much falling rain. And one day without warning or cause she announced it was pack-up the suitcase time. 

He sounded more than sad as he walked her to the door and she said she wasn't coming back anymore.

He tossed her bags in the truck and headed for the bus station. After he dropped her off, he just sat there in silence until the bus slowly pulled out of sight. 

That's when it really hit him. It was finally final. She was gone. Every time I think about that song it makes me appreciate gratitude even more. Especially the chorus: "Thank God and Greyhound. You're gone."

For me it was Amtrac. And all I can say is, thank God and Joe Biden for government subsidies.

So here's an investing tip. Make sure your exit strategy's in place. But it's mobile. You can move it. If it goes off, be grateful you have some cash to get a better position. If you miss it, so what.

Opportunities are a lot like IBS. You never know when they're going to show up. But you always have to be ready. 

Ok old friend when you find work, drop me a line.

TUESDAY READS

Beware Stinking Thinking http://www.minyanville.com/trading-and-investing/stocks/articles/Rotation-from-Non-US-Stocks-to/6/10/2013/id/50249

Gold Falls http://www.bloomberg.com/news/2013-06-11/gold-trades-near-two-week-low-on-stimulus-outlook-assets-gain.html

Book's Sales Soar
http://www.zerohedge.com/news/2013-06-11/sales-george-orwells-1984-have-surged-6884-last-24-hours

Cultural Split http://www.reuters.com/article/2013/06/10/us-turkey-protests-cultures-insight-idUSBRE9590GS20130610

Off At Open http://money.cnn.com/2013/06/11/investing/stocks-markets/index.html?iid=HP_LN

Senior Income http://money.cnn.com/2013/06/10/retirement/retirement-income/index.html?iid=HP_Highlight

Labor Market Turmoil
http://online.wsj.com/article/SB10001424127887324904004578537251643591248.html?mod=ITP_pageone_2

Spying On World http://www.spiegel.de/international/world/prism-leak-inside-the-controversial-us-data-surveillance-program-a-904761.html

Positive At Last
http://blogs.marketwatch.com/thetell/2013/06/10/tips-yield-turns-positive-on-10-year-note-for-first-time-since-2012/

Six Ways Low Rates Hurt http://www.thefiscaltimes.com/Articles/2013/06/10/6-Ways-Low-Interest-Rates-Hurt-Retirees.