Short Squeezes and Nipple Piercings (USO,FAS,BAC,GLD)

Oh, my!   We’re pushing the bullish story here, not – as some have averred – because we’re perma-bulls; we’re patently not. We’re not perma-anything.   We’re chart watchers. When the charts say buy, we buy; when they sell, we sell. And when the underlying monetary and fiscal reality is pushing the same story as the charts, then we have absolutely no problem piling on and encouraging one and all to join us.   Today, dear friends, the charts are bullish, the sea of money floating into the investment arena is bullish, and – one more important detail – we’re now experiencing a tremendous short covering rush that will only add to the momentum.   New highs? Dow 25,000?   We don’t know. But it’s clear from the sheer number of traders who are short, that this particular cog in the bullish engine could gun the indexes higher for weeks, at least.   Consider –   Back in the summer of 2008, before the financial meltdown of that year was in full swing, short interest on the NYSE hit a record high. That means that a whole lot of very smart investors made one chicken-skin boatload of cash betting on…

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Insiders Buying (FAS,BAC,MSFT,QQQ)

The world is on the edge. The market senses it. The political class makes hay of it. The news media luxuriates in it. And the average guy on the street just stares into the headlights, frozen, unsure when impact will occur.   One would think that the reaction here in the U.S. of A. would be one of outright panic. After all, we are the world’s leading consumers of news and politics, the ones who imbibe daily wars in the Middle East, the dreaded actions of the Fed (and other central banks), the rancor of an elbows-only political rush to become president. We hear it and see it and breathe it daily, non-stop, and whaddaya know…?   We’re unmoved.   Is it because we’re so damned distracted by our gadgets and our own race for more stuff and more action and more get-it-on? Have we lost contact with the real world, grown numb to the ominous realities, financial, military and human that press all about us? Some of us may have the luxury of dwelling gated communities and living lives where nothing dire or unsavory comes into view, but most of us are out there with the masses and see…

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Helen Roper’s Revenge (FAS,GS,TLT,GLD,UUP,GDX,KWHIY)

The old lady’s loose flowing garments were testimony to her growing brood of kids and the tendency, as one gets older, to pay less attention to the body’s need for dietary discipline.   We’re speaking, of course, of everyone’s favorite landlady (and Stanley’s wife), Helen Roper, who in many ways characterizes the investment landscape we’re now passing through.   Helen, you’ll recall was a product of the post-war generation’s affluence and the yearning of many aging folk in the 60’s and 70’s to reconnect with their inner child and lead a more fancy-free, shame-neutral life than their parents.   A Generation of Teens   So, too, with us today, though we’ve taken Helen’s moral lassitude and free-thinking, love-me-dobedobedo to heights undreamt of in 1977.   And that’s also likely why our markets are so disconnected from reality, and will continue to be so until all of us have doffed for good the fat rings and frisky hairstyles of the late mamasita who never managed to get her Stanley.   Recovering from Vladimir   We’re now going to take a quick run through the trades we missed reporting while we were suspended in a borscht-induced hiatus this last quarter. We now…

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Go Suck on a Fish! (TYL,FXI,TSLA,QQQ,EPI,KSS,FAS,TD,IYF,RSX)

Oh, my! Is that any way to talk?   Life, as you know, is not a bowl of cherries. You can’t have your entertainment and your fine foods and your night on the town every day – no, sir. There are times when the drudgery of life takes precedence over its more inspiring moments, and suck as it may, there’s simply no getting around it.   We relate the foregoing because today’s letter is going to be a slight departure from the norm, composed as it is of a simple listing of former trades and their results or advice to close or otherwise repair them.   We apologize in advance for the tedium, and we’ll do our best to keep it lively. The truth is we had a great number of intestinal changes here at Normandy over the last three months and the recovery has taken us a tad longer than expected. That’s why this week we’re playing catch-up, and why we’ve had to curb some of the laugh-out-loud antics.   So bear with us.   Here we go…   Our first trade was opened on the 23rd of February. We urged you at the time to buy the deep-in-the-money…

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Chinese Shares Go Atomic – A Nation on the Pills (FXI)

We admit it – we had our concerns. We weren’t totally sure if it was worthwhile saying anything. We didn’t want to offend anyone’s sensibilities. That’s all. But… the time has come. One can remain silent for only so long. When there’s a problem of this nature and this magnitude, it’s in everyone’s interest to be aware. We’re talking about China. We can’t be sure, but it looks an awful lot like that entire nation just started popping amphetamines. One look at the FXI chart and you’ll also be wondering – what sort of narcotic-popping investor set produces a paste-up that looks like this?! Everyone was getting along so nicely, minding their own business, when all of the sudden Sugar Man stumbled into downtown Shanghai and started getting everyone sweetened up. The market and FXI got high by some 25% in a month (in blue), and if it wasn’t for a Relative Strength Index reading close to 90 late last week (red circle), we’d have thunk this baby was on her way to an overdose. As it is, we’ll likely get some sideways to lower action for the next few weeks at least as the drying out begins. But the lift is not…

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Crisis Trade (FAS)

We’re flattered, honored, humbled and downright keelhauled by the tremendous response we’ve been getting to our latest postings. In fact, just last night the Mrs. and me were discussing it on the way home from our group therapy session at the local manic addictions clinic. “Why was it,” I proposed to her, “that folks ostensibly see the benefit of the ‘grow your own’ message that we were elaborating upon last week, but likely won’t take it to heart – won’t get dirty in the yard or on the porch or balcony?” She just blinked. I continued. “The reason, M’Lady, that they’re averse to getting dirt under their fingernails and battling bugs all year ‘round is because they really don’t believe the thing is going to happen. Or, if they do, they think it’s too far off, or that we’ll all go through it together, so who cares if we suffer a little – everyone else is gonna be in the same boat, right?” We swerved and ducked below an underpass and suffered just minor damage to the car’s underside. But I refused to let the topic go. “Tell me, Candy-bird,” I pressed, as the tow truck brought us the rest…

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Profiting Thrice in Champagne & Ice (GLD, FAS, UUP)

Today’s letter is going to touch upon several major investment trends that we’ve been discussing here for years. And they are – • Dollar strength… • Precious metals (and overall commodity) weakness, and… • A financial sector that will lead the broader equity indexes higher. Along the way, we’re also going to close out some trades and open a new one. So let’s start with the dollar. Top Dollar Back in mid-January of this year we made a decision to hold on to our stock in the PowerShares DB US Dollar Index Bullish Fund (NYSE:UUP), a proxy for the U.S. Dollar Index, after it was PUT to us in a losing options trade. The letter was called January Expiration Profits, and our rationale for holding the trade (even though the stock was at $21.82 and we were compelled to buy in at $22) was that the buck was on the rise, and we’d quickly find tidings of profit and joy in just sitting tight with our shares. And the good news is, indeed, we have reaped profits. O Righteous Day! Calloo! Callay! But it took somewhat longer than we anticipated. The buck veered sideways to lower in the ensuing months…

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Why the Financials? A Multitude of Reasons (FAS)

Let’s kick off this week with a word about earnings multiples. We’ve said it before, and we’ll say it again – multiples are Wall Street’s great fungible. They’re the gravy that gives the potatoes flavor, the gown that gives the old, torn-down hussy her lure. When Wall Street wants to keep a bull market alive, she stretches multiples – Price to Earnings, Price to Book, Price to Sales – whatever you got, Wall Street pulls and pries it to the full extent to justify the purchase of stocks. Because Wall Street is a moneymaking enterprise like no other. It works like this: Brokerage X has a large and growing clientele that’s buying stocks. Brokerage X is therefore making lots of commissions. But Brokerage X’s analysts see that many stocks, like, say, Microsoft and Caterpillar, are trading with P/Es of 16 and are reporting earnings no better than they did a year ago. Brokerage X worries that if clients get anxious about Microsoft and Caterpillar – and maybe the rest of the market – because earnings aren’t growing, they’ll stop buying stocks altogether. Brokerage X doesn’t want commissions to dry up. Or bonuses. So they say, “Don’t worry, friends – Microsoft…

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