Blaze Of Perceived Glory

“I don’t know where I’m going

Only God knows where I’ve been”

-Jon Bon Jovi

 

While I doubt the 48-year-old rocker from debt laden New Jersey needs an introduction, it’s worth calling out that the aforementioned lyrics came from Bon Jovi’s #1 single back in 1990, shortly after 1987’s levered up Wall Street crash.

 

“Blaze of Glory” was also Jon Bon Jovi’s first solo album. Per our friends at Wikipedia, “the album mainly focuses on the theme of redemption and whether an individual's past wrongs will catch up with them.” How appropriate a metaphor for Debtor Nations as we tip-toe through the Ides of March 2010.

 

With short term stock market moves cheering them on around the world this morning, politicians from Greece to California will be headlining the Manic Media’s show again today. These are the wanna-be-rockers of their own political  futures. These are the high priests of all that beneficed this leverage crisis. These are the willfully blind saviors of reform.

 

Maybe the only thing worse than 545 people in US Congress deciding our children’s economic fate is piling 27 Finance Ministers from the European Union into rooms in Brussels to do the same. European stock markets are trading higher across the board this morning after Luxembourg’s Prime Minister Jean-Claude Juncker proclaimed Europe’s mystery of faith:

 

“We clarified the technical arrangements that would enable us to take coordinated action which could be swiftly put into place in the event it is necessary…”

 

Then like a phoenix rising from the ashes of a construction project in Qatar, the Central Bank Governor of the United Arab Emirates Sultan bin Nassar al-Suwaidi proclaimed this about Dubai World’s $26 Billion in debt and whether they’ll be needing a bailout:

 

““They haven’t discussed this issue with us and I don’t think it will be necessary…”

 

“Yeah!”

 

Each night I go to bed

I pray the Lord my soul to keep

No, I ain’t looking for forgiveness

But before I’m six feet deep”

 

Yeah! Hit it! “Take us now, but know the truth.”

 

With consensus clamoring to call China bubbles, the last of the global bubbles that remains is that in global politics and the Piling of debt, Upon Debt, Upon Debt. Knowingly or not, these politicians are going to take us down with a “Blaze of Glory”.

 

According to Dealogic, sovereign bond issuance in developing markets is currently amassed to $129 Billion in 2010 to-date. Never mind 2009 being the prior record in Global Debt Piled Upon Debt folks. This level of debt issuance is already running up +42%  year-over-year versus that.

 

“Yeah!”

 

Greece has another $20 Billion Euros that they’ll need to raise by May. So this debt issuance party is just getting started. Just this morning, The Financial Times is reporting from the Brussels meetings that these 27 Euro dudes seem to be contemplating another $25B Euro credit facility out of thin air to make sure the volume at this Greek leverage party stays right jacked up.

 

“Yeah!”

 

All the while, the Chinese are selling Treasury debt to the masses of people who are punch drunk at this global debt rock concert. Just plow it into whoever’s 401k that will take it as the Chinese sell it right back down our Congressional wind pipe.


China selling? Oh, no – they’d never do that, would they? I’ve said this enough times to be as annoying as Chris Dodd telling you he has it figured out this time, but please, for the sake of sobriety – please watch what the Chinese do versus what they say.

 

China was a net seller of US Treasuries for the 3rd consecutive month in January, selling another $5.8B net and taking its balance of America’s debt holdings down to $889 Billion.

 

That’s another $889 Billion reasons to ignore the reality that you can just “take me now but know the truth.” If we anger The Client (China) enough, rates are going a lot higher than your “exceptional and extended” Congressman’s sense of self is telling you.

 

“Call me a young gun” if you will, but I am telling you that this “boy will be happy to die like a man” taking a stand on sovereign debt, as those addicted to leverage go down in their Blaze of Perceived Glory.

 

We’ll be hosting a conference call on Sovereign Debt on Friday. Please email if you’d like to listen in. My immediate term support and resistance lines for the SP500 are now 1139 and 1161, respectively.

 

Best of luck out there today,

KM

 

 

LONG ETFS

 

USO – United States Oil — Despite a sharp correction in oil prices on 3/15/10, the price of WTIC oil remains in a bullish intermediate term position with TREND line support at $77.39/barrel. Buying on red.  

 

CAF – Morgan Stanley A Share — Now that all of the inflation data we have been calling for is on the tape, China's stock market looks like it wants to tell us the news is now baked into the expectations cake. Buying China low.

 

XLV – SPDR Healthcare — Healthcare was down again on 3/9/10 in the face of “Obamacare” inspired fear. While we fear we may be early here, it’s better than fearing fear itself.

 

UUP – PowerShares US Dollar Index Fund — We bought the USD Fund on 1/4/10 as an explicit way to represent our Q1 2010 Macro Theme that we have labeled Buck Breakout (we were bearish on the USD in ’09).

CYB - WisdomTree Dreyfus Chinese Yuan — The Yuan is a managed floating currency that trades inside a 0.5% band around the official PBOC mark versus a FX basket. Not quite pegged, not truly floating; the speculative interest in the Yuan/USD forward market has increased dramatically in recent years. We trade the ETN CYB to take exposure to this managed currency in a managed economy hoping to manage our risk as the stimulus led recovery in China dominates global trade.

TIP - iShares TIPS — The iShares etf, TIP, which is 90% invested in the inflation protected sector of the US Treasury Market currently offers a compelling yield. We believe that future inflation expectations are mispriced and that TIPS are a efficient way to own yield on an inflation protected basis.
 

SHORT ETFS

 

XLP – SPDR Consumer StaplesConsumer Staples was the best performing sector on 3/15/10 in our S&P Sector Model and was immediate term overbought.

 

SPY – SPDR S&P500We moved to neutral (from bearish) on the S&P500 on the week of February 22. At 1139, for the immediate term TRADE, we’ll go back to bearish. This market is finally overbought. We shorted SPY on 3/5/10.

 

EWP – iShares SpainThe etf bounced on 3/3/10 in part from a strong day from Banco Santander, the fund’s largest holding in the Financials-heavy (43.8%) etf. We shorted Spain for a TRADE again on 3/5 as every sovereign debt risk has a time and price to be short of. We have a bearish bias on the country; massive unemployment, public and private debt leverage, and a failed housing market remain fundamental concerns.

 

IWM – iShares Russell 2000With the Russell 2000 finally overbought from an immediate term TRADE perspective on 3/1/10 and added to it on 3/2; we got the entry price that the risk manager makes a sale on strength.

 

GLD – SPDR Gold We re-shorted Gold on this dead cat bounce on 2/11/10. We remain bullish on a Buck Breakout and bearish on Gold for Q1 of 2010, as a result.

    

IEF – iShares 7-10 Year TreasuryOne of our Macro Themes for Q1 of 2010 is "Rate Run-up". Our bearish view on US Treasuries is implied.


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