Naked Hedge Fund

Nouriel Roubini believes that a “wall of liquidity” is chasing all kinds of assets, yet once the economy disappoints expectations, it will all come crashing down.

Yet for Dr. Doom, gold isn’t the answer.

According to him, despite the temporarily asset bubbles right now, we’re still in a deflationary world and we’ll realize it soon enough once growth stagnates and all kinds of inflated asset categories come falling down.

Roubini:

I don’t believe in gold. Gold can go up for only two reasons. [One is] inflation, and we are in a world where there are massive amounts of deflation because of a glut of capacity, and demand is weak, and there’s slack in the labor markets with unemployment peeking above 10 percent in all the advanced economies. So there’s no inflation, and there’s not going to be for the time being.

The only other case in which gold can go higher with deflation is if you have Armageddon, if you have another depression. But we’ve avoided that tail risk as well. So all the gold bugs who say gold is going to go to $1,500, $2,000, they’re just speaking nonsense. Without inflation, or without a depression, there’s nowhere for gold to go. Yeah, it can go above $1,000, but it can’t move up 20-30 percent unless we end up in a world of inflation or another depression. I don’t see either of those being likely for the time being. Maybe three or four years from now, yes. But not anytime soon.

This seems like the same drum that Roubini has been beating. He has a strong case that deflation could be in our future. Right now I feel like we are in a limbo land where the direction has been found. Could be a rocky ride either way and be sure that your ready to play the market either way.

Well when you have the SEC busy prepping their resumes and fighting off congressmen its easy to let some things slip by. This could be the case today when the AA ramp up started around 3:30pm right before the close and their surprise “in the black” EPS numbers. You can really see the big gorillas in the last minutes loading up on this with the volume spikes. Im guessing that right about now they are enjoying a nice steak at Luger’s.

One thing that I find funny is that if you look at the Alcoa numbers year over year:

* Q3 revenues are down 34% from last year
* Q3 EPS is down 90% from last year (q3 2008 $0.33 vs q3 2009 $0.08)
* Q3 Profit down 71% from last year
* Stock price last year $14.71 … after hours tonight $14.99

Well I guess we can throw them the ol “the market is forward looking” bit to get the market pumping on this.

Video from the Jon Stewart Show on High Frequency Trading. Hilarious

Copy of the Goldman Sachs Hedge Fund Report. It dives into a bunch of stats and trends that is fairly interesting about the moves that hedge funds have made. A lot of the overall news is a given such as funds are “re-risking” and have moved into high net long exposures. A sample of bullets:

* Net long exposure rises to 31% – highest since June 2008
* 7% of hedge funds have shut down since June 2008
* Hedge Funds now own 3.7% of the financial sector’s market cap
* Bank of America was a crowd favorite as the number of funds owning it doubled quarter over quarter.

Days of the 49ers are over investing in gold is easy these days.

Tim Geithner in the hot seat with the Wall Street Journal. Video shows interview with some good questions thrown at him.

Well we are in the 9th inning of 2009 Q2 Earnings season with 91% of the S&P already reported. As expected the street ramped up on some classic lines such as “less bad” and “better than expected” even though the numbers were relatively dismal if you look at the history of earnings.

Howard Silverblatt (S&P Senior Index Analyst at Standard and Poors) had a great quote associated with the earnings that have been coming in:

But getting less worse is different than getting better, and significantly different than being good. Stats can be misleading-Fin’ls are up 244% from Q2′08, but are still down 85.6% from Q2,’07. The lack of charges (write-offs, impairments, layoffs, write downs,…) has helped and is a positive sign, but sales remain key – you can just cut so much and for so long; consumer spending is key, with confidence right behind it.

In the post is a graph showing the earnings table of the past 10 years with P/E ratios and Bullish and Bearish points to consider.

To follow up on the previous post with the Elizabeth Warren video I wanted to provide The Congressional Oversight Panels August report. To access the complete report click on the picture below. The report is titled “The Continued Risk of Troubled Assets” and gives some insight into thecurrent situation that we are in. It is a good read if you have some time this weekend or a boring Monday at work.

I was putting together an article about the potential doom that may occur based on the toxic assets still on the balance sheets of banks, but as I was researching I found this video from the Congressional Oversight Panel of all people. I couldn’t believe that someone in the Government realized what they have done so far with the toxic loans… which is jack squat.

The Federal Reserve released it’s annual budget review today. It’s pretty interesting to read if you have some time to take a look at it. It’s especially interesting if you’ve ever wondered what the roles of the Federal Reserve are. Also in the budget you can see where money goes in terms of compensation. One thing that I found interesting was a chart showing that the Federal Reserve has reduced its staffing by an average of 11.9% annually because of efficiency methods and investments in technology. … Maybe they do have a brain ??