A Rally on the EUR is about to start

The Euro has been on a one-way downtrend since May 2014 where it was trading at 1.39xx against the USD all the way down to 1.12xx which it reached as I'm typing this post.

Sentiment has been very negative for a while now:

• Daily Sentiment Index (DSI) falling to just 6% Euro bulls (source)
• Daily Sentiment Index (DSI) fell to just 4% EUR bulls (source)

"Everybody" hates the Euro, while on the contrary, everybody loves the US dollar, and that trend has been going for a number of weeks now, so I'm expecting it to reverse very soon.

The biggest catalyst is probably going to be the fact that the ECB had purposefully leaked the number 50 billion of their money printing, currency debasing project, in order to "positively surprise" the market a couple of days later by announcing 60 billion euros being printed every month. 

Now, this "positive surprise" is priced in. Speculators are massively short, as shown on the COT report below.

It makes sense for contrarians to bet against the crowd at this level and expect a bounce.
As usual, I will make an update to this post when I open the position.

[Update: I purchased EURUSD options on Friday when the EURUSD was trading at 1.132x. This should give a limited downside risk, specifically given that I believe the EUR bottomed just after I posted this blog, and in the case of a rally, I would have a very good leverage.]

Contrarian Signal — Barron's Cover Blasts "This Time is Different"

The sentence "This Time is Different" is usually known as the most expensive sentence in the history of investing: it is always used as a exuberant reaction trying to rationalize unsustainable and impossible trends into the future.

Additionally, Barron's is a first class candidate for the Magazine Cover Indicator. 

While I haven't read the full report, amazingly, Barron's states on the cover they know that this the "most dangerous words on Wall Street", but we still dare to say it. 

The magazine is dated the 8th of December (yesterday), which, unsurprisingly to contrarian investors, marked a big down day. Today seem to be another down day too.

So the conclusion from this post should be that we have either already hit the top of the multi-year bubble, or are very very close to the crest — probably a few weeks maximum.

I keep my ammo for a shorting early Jan, but I might change my mind before that, in which case, I'll mention it on the blog.

[ZH] Silver Soars 17% From Intraday Lows: Biggest Swing On Record

This is a follow up on the post on Friday about buying Gold and Silver.
Here's a quote from ZeroHedge:

Silver is up over 17% from its intraday lows today - this is the biggest positive swing since our data began. All the previous major swings have been downshifts, most recently in September 2011 (-22% and -18% over 2 days). Volume is very high also. Gold is back above $1,210,up over $70 from its intraday lows...

Those who where planning to bottom fish had a very narrow opportunity both in terms of market depth and duration of the window in the middle of the night in the Asian hours.

Here are the screenshots (they do not show the Asian hours).

Short ES futures contract [Updated]

I just shorted the ES SP500 contract @ 1682.00
I intend this trade to be short term trade, lasting only a few days, but I keep my options open.

Update: Call it luck, but the ES just dropped 5 points within minutes of entering my trade. I now have a GTC stop order @ 1681, making sure that this trade will not lose money.

Bullishness and Complacency - Extreme Again

Again and again, bullishness and complacency reach extreme levels, not seen since the peak of 2007. This means that the mania area is not finished yet, and the third bubble within 15 years has now been blown by the socialist governments (all of them, really, as they all have a socialised, centrally controlled money and interest rate) and their main branch: the Central Banks.

Here are some of the indicators of such extreme bullishness and complacency:

• New Record Highs For Dow Jones Transports and Russell 2000 — Well, as you know, the Russell 2000 is the Junk equivalent of US equity, and it's at an all time high. 
• VIX Slips to Lowest Level Since 2007 as S&P 500 Rallies — The VIX traded for 12.xx a few days ago, the lowest since the all time high in shares.
• Investors Are Most Optimistic on Stocks in 3 1/2 Years —
  International investors are the most bullish on stocks in at least 3 1/2 years, with close to two- thirds planning to raise their holdings of equities during the next six months, according to a Bloomberg survey. 
• German Investor Confidence Increases to 2 1/2-Year High —
  German investor confidence increased to the highest in 2 1/2 years in January, adding to signs that Europe’s largest economy may gather momentum.
  The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, jumped to 31.5 from 6.9 in December. That’s the highest since May 2010 and the biggest gain in 11 months. Economists forecast an increase to 12, according to the median of 39 estimates in a Bloomberg News survey. 

So... Where from here? :-)

Apple - How to Disappoint both Consumers and Markets

As a long term investor in Apple — I bought my shares back when they were trading at $26 before the 2 to 1 split; which, means $13 of today's shares — I have been writing periodically about the company, Steve Jobs, and more recently, the incompetents who have taken the leadership positions at the firm, including Scott Forstall (thankfully, he was let go not long ago) and Tim Cook, ex-bean-counter trying to take the genius and visionary seat left empty by the late Steve Jobs.

Back to when Apple was trading near its all time high, I wrote AAPL at New All-Time High While The Internal Destruction of Steve Jobs' Legacy Has Begun.

So, what has happened? Let's ignore the markets for a moment, as the share price doesn't tell anything about how the good a companies products are. Let's focus on the products then:

• The share buy-back plan announced when the share price was in the $600s... How clever does that look now that it's in the low $400?
• The new iMac
• It's basically the same old iMac stripped off it's optical drive and packaged in a much nicer design, but as with the iPhone, its design too far to difficult and expensive to produce. That's exactly what happens when there's no one to reign in genius designers with no commercial understanding. 
• Not only is it difficult and costly to produce, a major commercial mistake was committed by announcing it in August/September and not making it available until late December. In the meantime, no pre-orders were taken and the old iMac was taken out of the picture. So not a single iMac was sold for almost 3 months! Yet, in case nobody at Apple saw that coming... they blamed low Mac sales on the supply iMac issues!
• The iPhone 5
• The iPhone 5 is flawed the same was that the iMac is: extremely difficult to produce, and expensive due to its base materials. In addition to that, it's plain ugly, and it lacks any killer feature to get people to upgrade. So basically, since the iPhone 4 (where the retina display itself, was a good reason to upgrade) there has been very little innovation made to the iPhone, only pushing the limits of what was already there. That's not the area were Apple used to strive, that was Microsoft's domain!
• Apple still refuses to create different screen sizes, yet, many people would prefer a larger display, even though the one person in charge of the iPhone's design might disagree.
• The Maps fiasco
• Why did Apple need to go in the Maps business? Specially when there is not a single dollar of profit coming from it?
• Even though Apple wanted to go into that business, it was too arrogant to buyout a struggling Nokia or even TomTom. We can do maps better than anyone, and beat something Google has been refining for 9 years, in 1 year. Major sin.
•  In the end, Google Maps for iPhone is a killer. It's beyond any map apps, and it is really saving Apple's ass.
• iOS
• iOS has not been making any progress for quite some time now. Over the past 5 years, there has not been any real UI progress made on the iPhone, even though people have now been able to adjust themselves to touch screens and several interface widgets have now emerged as intuitive and successful, and are widespread (used in FaceBook and GMail and so forth). Such widespread widgets used by say 90% of the iPhone users should be embraced instead of suffering from the "not invented here" syndrome.
• On my iPad, GMail, Chrome and GMaps have replaced Mail, Safari and Maps. They make more productive, are faster and work far better than the Apple's equivalent. The issue again is that Apple has lost its time implementing ridiculous UI animations and useless tools such as the PassBook and its shredder...
• In addition to that, something I really don't understand is why Apple doesn't implement a shorter release cycles for the iOS apps it bundles. Google is, using the AppStore, pushing numerous versions very month, and making their tools better and better by the week. On the other side, Apple has created the AppStore but will update its own apps only with operating system upgrades. How silly! Google is really killing Apple using the limited set of tools and within the anti-competitive rules that Apple has set for the iOS ecosystem!
• iPad / iPad mini
• The iPad mini is a killer; and it's going at lower price tag than the iPad 2 which is still on sale. Who's going to buy that??
• Mac OS
• Yet again, no real innovation or revolution for several years now. It seems like most of the staff is now working on iOS.
• They have made some horrible UI decisions with the Contacts and Calendar apps which make them unusable. So I now use Google Calendar and only contacts on the iPhone.
• No updates to iLife or iWork since 2009...
• Reverse porting things like launchpad to the Mac is stupendously stupid. They are not meant for keyboard+environment and do not fit in nicely.
• Same for Aperture. So I replaced Aperture by the much better and nicer Lightroom.

While I was eager to upgrade my Macs and my iPhone, I was sorely disappointed and have since decided to not upgrade and wait & see... 

I use my iPad and iPhone mostly for:

• Browsing (Chrome these days)
• email (on my GMail)
• maps on Google Maps
• Bloomberg
• Music on iTunes
• Videos
• books in ePub and PDF format
• Trading tools

 Is there anything Android cannot do? So chances are, I'll buy myself an Android tablet and phone to try them out.

While it's easy to beat someone who's fallen on the ground now that the share price as fallen by about 40%, I don't think that's how this post should be perceived — after all, I saw that coming and started to beat up the management before Forstall was fired and near the all time high of the share price.

It's amazing how Steve Jobs was single-handedly driving this company. It's time for Apple to look into the mirror and see that they're only the shadow of what they used to be when Steve Jobs was in charge and either make the required readjustment, or end up becoming irrelevant like Microsoft has been doing for the past 10 years.

That said, I think the negativity about the stock is now very deep, and it's trading at close to 10x net earnings... So if profits don't start to fall (they are still on a positive slope, and rising), the share is good deal. One can wonder though just how much more the profits can rise with those incompetents as pilots.

The Prospect of Christmas and the New Year Make Social Mood's Positiveness Well Beyond Reason

As every year, the prospect of Christmas and the New Year's celebrations, bring a whole lot of optimism in every category of people and groups you can think of.

And the prospect that the new year will bring in a clean slate, a new beginning, and that the worries of yesterday will not apply tomorrow still fools people.

See for yourself a few reports and articles gathered in the past few days:

Businessworld, yesterday:

The three major concerns that have dominated markets in 2012 appear to be easing, according to a survey of more than 400 global investors conducted by Barclays.

Investors' fears about the eurozone crisis, threats to US growth and the spectre of a Chinese economic slowdown have eased over the past quarter. [...]

Prospects for equities remain positive and positioning light according to the results.

Nothing has changed, everything has deteriorated, specially the mess in the Eurozone and in China...  Yet, on the 11th of December, everybody is happy and all the concerns have eased. I am not making these up!

Bloomberg, yesterday:

German investor confidence jumped more than economists forecast to a seven-month high in December on speculation Europe’s largest economy will gather momentum next year.

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, climbed to 6.9 from minus 15.7 in November. Economists predicted a gain to minus 11.5, according to the median of 38 estimates in a Bloomberg News survey.

 Bloomberg, yesterday again:

European stocks rose for a seventh day as German investor confidence jumped more than analysts estimated and investors waited for progress on U.S. budget talks.

Seven days in a row! Wow. And today they seem up so far. Will we get 8 days in a row? Isn't that reaching mania level optimism?

Bloomberg, December the 6th:

Three Economic Bears Seek Goldilocks Economy in U.S.

When it comes to the U.S. economy, the glass may not be half empty after all.
Three prominent bears -- David Rosenberg, chief economist at Gluskin Sheff & Associates, Mohamed El-Erian, chief executive officer at Pacific Investment Management Co., and David Levy, chairman of the Jerome Levy Forecasting Center -- separately see some hopeful signs. These include a housing market that is healing, a more competitive manufacturing industry and technological breakthroughs that could boost productivity.

“More so than at any time in the past three years, I’m doing whatever I can to identify silver linings in the clouds,” Rosenberg said.

The housing market is not healing except in their wishful thinking, I am wondering where they see a more competitive manufacturing industry, specially now that ObamaCare is here, and technological breakthroughs and other evolutionary or revolutionary things could have happened in March 2009 as well.  When perma bears turn bullish, it's usually a very good sign for a top.

Other points I am not going to delve into the details of:

• Lots of bullishness in commodities, including gold and silver which have now topped about 12 to 18 months ago.
• VIX at multi-year lows for quite some time.
• Bubble currencies close to historical highs
• Russell 2000 (the equity equivalent of Junk bonds) at historical high
• Same for most high yield, junk, and muni dept...

Reality Starts To Settle In

Except in the banking where the GAAP and Mark to Market seem to have been suspended forever; it seems like reality is finally starting to show up.

See for yourself:

• Apple is down $100 from its peak a few weeks ago.
• This is the second consecutive quarter in which sales have shown signs of deterioration. Likewise, with company’s net income experiencing a shortfall, this ends its streak of year over year profit growth, which spanned four quarters. As disappointing as these numbers were, they weren’t all that surprising, as the Street had anticipated weakness in IBM’s hardware business, which fell 12% from the year ago quarter. (source)
• Google shares plummeted as much as $79.49 per share and CNBC immediately devoted their entire coverage for hours on end to the Google pre-report. The reason for the drop had to do with Google missing by a mile on both the top and bottom lines due to a slowdown in advertising, a fourth consecutive cost-per-click decline, and a whopping $151 million loss from its Motorola Mobility purchase. Pretty much every concern I've listed over the past month or so regarding Google came to light during this report. Tablet sales are hurting Google's ad margins. No defined mobile ad platform is in place yet (source)
  
• Intel posted relatively soft numbers earlier this week, largely in part to overall weakness in the broader PC market, longtime partner-in-crime Microsoft (Nasdaq: MSFT  ) is following suit with its own uninspiring figures ahead of one of its most important product launches in years.
• AMD shares settled lower by 16.8%. (source)
• Marvell Technology slid 14.3% after lowering its third quarter guidance.

Yet, sentiment doesn't seem to be affected much - the VIX is higher, but not in anyway showing any fear, and bullish news flow seem to be unabated:

• Did Google Just Become the Best Buy in Tech? at Motley Fool (Fri, Oct 19)
• GOOG: Hilliard Cuts to 'Long Term Buy,' $840 2-Yr Target at Barrons.com (Fri, Oct 19)

On the other hand, even banks show that they are reaching the limits of falsification and accounting massages, and shareholders are also showing signs of exhaustion, as Vikram Pandit realised recently. See the massive gap between the losses shareholders had to endure, and the personal profits of Mr. Pandit, which undoubedtedly is perhaps one of worst CEOs ever, but also one of the best con man ever:

(Bloomberg) Citigroup will have paid him about $261 million in the five years since he became CEO, including his personal compensation and about $165 million for buying his Old Lane Partners LP hedge fund in 2007 in a deal that led to his becoming CEO. The bank shut Old Lane soon after Pandit took the post, causing a $202 million writedown.

During the 5 year period where Pandit increased his personal wealth by $261 million (gross), shareholders have lost 91% of their capital. Well done!

Extreme Sentiment Readings Spotted Across All Assets - Next Decline Imminent

Extreme sentiment has been spotted on all the "risk-on" trades with sentiment readings close to all times highs for most, and even making new all times high for some.

ElliottWave reports that:

• Maket Vanes Bullish Consensus is at 70%, higher than October 2007 when the Dow made its all time high (69%).
• According to the CFTC’s Commitment of Traders report, Large Speculators, which are mainly hedge funds, recently moved to a record net-long position in futures and options contracts on the NASDAQ 100.
• The 10-day average of the CBOE index put/ call ratio just declined to a record low .90, based on data since 1995.
• As recently as mid-September, the number of sales- to-purchases of insider shares for S&P 500 companies was 40:1, according to data provided by Bloomberg.
• A 10-day average of the Daily Sentiment Index (trade-futures.com) for gold rose to 82.2% bulls on September 17
• Silver: the Daily Sentiment Index recently surged to 92% bulls.
• And the USD: With the Daily Sentiment Index falling to just 7% bulls on September 14, the day of the recent low at 78.60, the odds are high that these current extremes will coincide with the early phases of another significant U.S. dollar advance.

So we are getting to a point where the risk-off trade should be quite violent. Oil is already down significantly. It's about time to short AUD, CAD, EUR, Silver, Gold, and even oil and equities across the board... And go long the USD.

Excessive Overbullishness Getting More Excessive

Generally speaking, on contrary to popular beliefs, markets are uncorrelated with the economy. But this is normal given that they raise and fall with sentiment, and not with fundamentals, and that politicians and central planners have been spreading oil on the fire, massaging economic and employment figures for decades, but now reaching epic proportions since 2009, believing that higher markets improve economics.

In this odd reality of our world where the 'experts' would more likely be qualified as madmen in a rational world; it's not surprising to see all the expert to call for even higher levels:

GS forecasts massive rally in 2013 and ending the year at 1,575 on the S&P, BofA aims at 1,600, and Citi 1,615 although surprisingly, MS forecasts a big drop to 1,167

UBS and CS aim at 1,500-1,525 for the year end.

Another analyst forecasts Apple Shares to Hit $1,650 by Late 2015

More from Bloomberg:

Goldman Sachs Group Inc. forecasts an 18.2 percent return from commodities in the next 12 months, with energy and industrial metals leading the way.  

Another Bloomberg report states

Bullish commodity wagers rose to a 16-month high just before the Federal Reserve’s pledge for more stimulus drove prices to a seventh weekly advance and banks from HSBC Holdings Plc to Citigroup Inc. forecast more gains. 

Yet another Bloomberg report is titled: Stocks Show Americans Better Off With S&P 500 Cheap to World. Here are a few selected quote from this report:

“We are in a healthier state right now,” Chris Hyzy, who helps oversee about $325 billion as chief investment officer of U.S. Trust in New York, said in a Sept. 12 phone interview. “Next year, we think the growth clip in the United States and the globe is going to be better than expected. Over the next three years, we are bullish.

“Our economy and our banking system are in better shape than others,” Chanos said last week in an interview at Bloomberg’s headquarters in New York. “I suspect that the surprises will probably be on the positive side in the U.S. market.”  [Even Chanos is Bullish?!]

I think we’re dramatically better off than we were,” Cohen, the senior U.S. investment strategist at Goldman Sachs, said in an interview at Bloomberg’s headquarters in New York last week. “The market is telling me that investors are generally confident that we’re on the right path.”

Russia Reveals It Is Sitting On 'Trillions Of Carats' Of Diamonds

An amazing story again: 

• The discovery of a vast new diamond field containing "trillions of carats," enough to supply global markets for another 3,000 years.
• The diamonds could be worth $1 quadrillion at current market prices (amazing number, but completely meaningless as you couldn't sustain the current market price and even you would likely divide the prices by 10 or 100 should you flush the market with that enormous amount of diamonds)
• It seems like it's not going to be cost efficient to mine these industrial quality diamonds - and might be a good reason why nobody has mined them yet; if you believe the story is real.

From CSMonitor

MOSCOW — Russia has just declassified news that will shake world gem markets to their core: the discovery of a vast new diamond field containing "trillions of carats," enough to supply global markets for another 3,000 years.

The Soviets discovered the bonanza back in the 1970s beneath a 35-million-year-old, 62-mile diameter asteroid crater in eastern Siberia known as Popigai Astroblem.
According to the official news agency, ITAR-Tass, the diamonds at Popigai are "twice as hard" as the usual gemstones, making them ideal for industrial and scientific uses.
The institute's director, Nikolai Pokhilenko, told the agency that news of what's in the new field could be enough to "overturn" global diamond markets.

"The resources of super-hard diamonds contained in rocks of the Popigai crypto-explosion structure, are by a factor of ten bigger than the world's all known reserves," Mr. Pokhilenko said. "We are speaking about trillions of carats. By comparison, present-day known reserves in Yakutia are estimated at one billion carats.

From CSMonitor again

If that wasn't crazy enough, the head of the Novosibirsk Institute of Geology and Mineralogy, Nikolai Pokhilenko, bragged about the value of the diamonds, telling Russian reporters about "trillions of carats" under the surface of Siberia. Pokhilenko even said that they would have enough diamonds to supply the global market for "3,000 years".
The news invariably went viral, with one website saying that the diamonds could be worth $1 quadrillion at current market prices, and arguing that the find could cripple the market value of the gem.

Unfortunately: 

Alrosa, the Russian mining giant, confirmed that the huge diamond deposit really does exist. Unfortunately, the diamonds are not jewelry quality, a spokesperson for Alrosa said, and while they could feasibly be used for industrial purposes, they are located in an area without good infrastructure and it would not prove cost efficient to mine for them when low-grade, industrial-use diamonds can be made in labs more cheaply.

A Few Jaw Dropping Numbers Related to Apple

Here are a few quotes gathered around Apple in the last few days:

• AAPL share price tops $700
• Apple market cap about $650 billion dollars
• Apple sells 2,000,000 iPhone 5 in 24 hours
• An analyst at JPM estimated that sales of the new iPhone could boost American GDP by $3.2bn in the 4th quarter, adding 0.33% to the annualised rate of growth for the period.
• Apple represents 4% of all the Chinese exports.
  

Markets Frothing — Topping in Progress?

Here are a few headlines about market forecasts and markets action showing how exuberance, irrationality, and "over-condidence" in what is called a "textbook market behaviour" is. Markets are made to fool 95% of the people 95% of the time. Whoever believes in a textbook market behaviour is a fool or an academic — or, very often, an academic fool!

1. BofA Sees Fed Assets Surpassing $5 Trillion By End Of 2014... Leading To $3350 Gold And $190 Crude 
2. Platinum Has Longest Rally in 25 Years; Gold Gains on QE3
3. Canadian Dollar Rises to 13-Month High as Fed Spurs Risk Demand
4. Forth consecutive month of gains for the S&P500, which closes at 6 percent of its all time high.

Here are some quotes:

(Bloomberg) 2012-09-14 — Platinum rose, capping the longest rally in 25 years, after the Federal Reserve took steps to bolster the U.S. economy and as strikes halted output at mines in South Africa, the world’s largest producer. Gold advanced.

The Fed yesterday said it will expand its holdings of long- term securities with open-ended purchases of $40 billion of mortgage debt a month in a third round of quantitative easing. Workers at a Lonmin Plc mine and nearby operations of Anglo American Platinum Ltd., the biggest producer, are holding protests over pay.

“Today’s rally can be attributed partly to the easing announced yesterday,” Marc Ground, a commodity strategist at Standard Bank Plc in Johannesburg, said in a telephone interview. “The fundamentals remain supportive.”

(Bloomberg) 2012- 09-14 — Canada’s dollar strengthened to a more than 13-month high against its U.S. counterpart as stimulus measures by the Federal Reserve spurred global demand for higher returning assets such as stocks and commodities.

The dollar gained for a third week versus the greenback and rallied against 11 of its 16 most-traded peers as investors bought the currencies of commodity producing nations including Canada on a bet global economic growth will accelerate. Crude oil, the nation’s biggest export, climbed above $100 yesterday for the first time since May. Statistics Canada will release data on Sept. 17 showing whether international investors added Canadian securities in July.

“The Canadian dollar is up quite a lot after the Fed decision and its complete textbook currency behavior,” Eric Lascelles, chief economist at Toronto-based Royal Bank of Canada Global Asset Management said in a phone interview. “With quantitative easing, the U.S. dollar weakens, commodity prices strengthen and both those things are like catnip for the Canadian dollar.”

NEW YORK, Sept 14 (Reuters) - U.S. stocks pared gains but were up for the fourth straight day on Friday on the Federal Reserve's aggressive new plan to stimulate the economy.

Apple Inc and Exxon Mobil, the two largest U.S. companies by market value, reached new highs, and the small-cap Russell 2000 index neared a record peak.

Equities are in the midst of a run-up in which the S&P 500 has posted gains for four consecutive months, fueled by the actions of Europe's and the United States' central banks to keep interest rates low and stimulate their struggling economies.

Market Update: Extreme Overbullishness Again; Return of the "Good News is Good - Bad News is Good" Mentality

First of all; let's see the news which, yet again supposedly drove the market higher on Friday. Here are the notifications I've got from Bloomberg on my iPhone:

• US Payrolls rise less than projected
• Intel Lowers Q3 Revenue Forecast

Yet, the market rallied; and not only did it do so, but the last 15 minutes saw the market close at the highest level of the day, meaning that in spite of the current environment, speculators are happy to pile on risk just before the week-end break. Undoubtedly because they believe Monday will be another great day, and they expect governments to come and help them out with more inept policies. 

As far the the VIX is concerned, it collapsed this week to 14, close to the lowest levels since 2007. Undoubtedly; complacency and confidence are at extremely high levels.

At the same time, IWM; the ETF on the Russell 2000 - which I like to call the Equity Junk Index - rose back 84, higher than the top reached in 2007 and close to the all time high made in April 2011, just before one of the biggest 20% drop ever.

Bubble currencies and commodities popped:Silver, Gold, CAD, AUD and my friend SS sent me a chart of the DSI for Silver, which is now comfortably sitting at 88, meaning extreme optimism even though price-wise, we are still 40% below the top reached about two years ago now.

In the meantime, reports about $200 oil have been resurfacing and the final confirmation currently missing is for Sprott and his accomplice in foolishness Embry come on the TV to talk us about Silver $1,500.

In the meantime, real economic news coming from anywhere is very poor. With that level of complacency, I wouldn't be surprised if we saw another repricing of risk very shortly. Why not Tuesday after the iPhone 5 has been announced? Apple driving some much of the market, it's highly likely that the sell the news behaviour will mean a peak for AAPL and for the equity markets...

Australia Employers Unexpectedly Cut Payrolls While At the Same Time Australian Unemployment Unexpectedly Falls

Here's about the magic of government statistics; and over-bullish behaviour of the market; and the mania 'buy buy buy' mentality. And this also illustrates the ways news is reported: the same news can be bullish or bearish; it's just the sentiment of the reporter which will tell you which!

Bloomberg - 2012-09-06 —Australia Employers Unexpectedly Cut Payrolls by 8,800 in August

Australian employers unexpectedly cut payrolls in August for the second month in the past three, as evidence mounts that China’s slowdown is discouraging hiring.

The number of people employed fell by 8,800, the statistics bureau said in Sydney today. That compares with the median estimate for a 5,000 increase in employment in a Bloomberg News survey of 23 economists. The jobless rate declined to 5.1 percent from 5.2 percent as the participation rate dropped to the lowest level in more than five years, a sign that some job seekers exited the labor force.

Bloomberg - 2012-09-06 — Australian Unemployment Unexpectedly Falls, Lifting Currency

Australia’s jobless rate unexpectedly declined in August on signs employers in mining states are still hiring workers, boosting the local currency after a three-day slide.

The unemployment rate fell to 5.1 percent from 5.2 percent in July, the statistics bureau said in Sydney today. The median estimate in a Bloomberg News survey of 23 economists was for a rise to 5.3 percent. The participation rate slumped to the lowest level in more than five years, a sign job seekers exited the labor force. The number of people employed dropped by 8,800, compared with economists’ forecast for an increase of 5,000.

Risk-On Trade To Top

With exuberance and peak confidence in the abilities of politicians and central banks — the two most inept and incompetent type of people — risk markets have jumped quite a lot over the past month or two, and with it investors sentiment as well.

Markets are soon to be disappointed, and getting into September with such a valuations and such sentiment levels will be very risky.

It's time to get ready to short equities across the board — including AAPL will peak the day before or after the iPhone 5 release. US and European equities might peak on Friday with the Fed announcement that there will be no QE3 at this time — and why would there be one? Rates on US treasuries are close to their all time lows and equities are close to a multi-year high!

On the short list is also the bubble economy currencies: CAD and AUD on the top of the list. And in commodities, while I expect weakness across the board Gold, Silver, Oil and the rest of the commodities complex — including ags and grains, no matter what rationalisation about drought etc. you see on the news.

Apple Becomes The Largest Capitulation Ever Reached

Old news (yesterday) as reported on Bloomberg:

Apple Inc. set a U.S. record for market value, surpassing the high mark reached by Microsoft Corp. (MSFT) during the Internet heyday, on optimism the next version of the iPhone will meet high demand. 

The shares of Cupertino, California-based Apple rose 2.6 percent to $665.15 at the close in New York, for a market value of $623.5 billion. That overtook Microsoft’s $616.3 billion closing market capitalization on Dec. 27, 1999, according to data compiled by S&P Dow Jones Indices.

Let's remember that these are not including the massive inflation which occurred between 1999 and 2006, and that dollar as of 1999 was much more valuable than today.

For example, Gold was probably trading around $300 back then and about $1600 today. So priced in gold, MSFT was worth 2,000,000,000 oz (or 2 billion ounces), while AAPL today is worth about 375,000,000 oz (or 375 million ounces) "only" or 5 times less.

Zynga The Forgotten Dog

I forgot to mention Zynga in the list of pathetic IPO blow ups and crash and hence very successful IPOs for insiders.

Zynga is currently trading for $3 after hitting $15 following the IPO. That's about 80% decline as well.

Hat Tip to my friend Mr H. for reminding me about Zynga

Facebook and Groupon IPO: Facebook Unlocks 270 Million Shares, 1.4 Billion to Follow — Peter Thiel Sells Most of His Stake — Groupon Backers Divested Their Stakes

I wrote about Facebook and Groupon yesterday in a post titled The Most Successful IPOs this Year?. Here are some follow up stories which appeared after I published my post:

(Bloomberg) — Facebook Inc. director Peter Thiel sold most of his stake in the operator of the world’s largest social-networking website, bringing his divestment to date to more than $1 billion, after restrictions on insider sales ended. 

Thiel, one of Facebook’s earliest investors, sold about 20.1 million shares in the company on Aug. 16 and Aug. 17, raising $395.8 million, according to a filing with the U.S. Securities and Exchange Commission. 

The sale, including $640.1 million in proceeds from the initial public offering, makes the venture capitalist and hedge- fund manager one of the biggest beneficiaries of Facebook’s rise. Concern that early investors, including Thiel -- who initially invested $500,000 in the fledgling startup in 2004 -- would sell holdings has been weighing on the stock. 

Shares in Menlo Park, California-based Facebook, which are down by almost a half from the May 17 initial public offering, rose 5 percent to $20.01 at the close in New York today.
Facebook last week unlocked 271.1 million shares, the first of five insider-sale restrictions scheduled during the company’s first year as a public company. Another 1.44 billion shares will be freed up through November. 

The share sales revealed today were tied to a trading plan adopted by Thiel on May 18, Facebook’s first day of trading, according to the regulatory filing. Thiel still holds more than 5 million shares. The reported proceeds don’t reflect underwriter or broker fees.

(Bloomberg) — Groupon Inc. backers Battery Ventures and Andreessen Horowitz have divested their stakes in the daily-deal website, joining a group of early investors who have sold the stock and added pressure to slumping shares. 

Battery sold all of its 15.99 million shares earlier this year, according to data compiled by Bloomberg. Andreessen Horowitz sold its 5.1 million shares in June, said a person with knowledge of the matter, who asked not to be named because the sale wasn’t publicly disclosed. 

[...]

“These are the people that were the initial backers that probably know more about the details behind Groupon’s results than the general public,” said Larry Chiagouris, a professor of marketing at Pace University’s Lubin School of Business in New York. “The fact that they have chosen to move their positions out of the company tells you that they obviously believe there’s likely to be more downside.” 

Grace Ellis, a spokeswoman for Menlo Park, California-based Andreessen Horowitz, declined to comment on the firm’s holdings. Karen Bommart, a spokeswoman for Menlo Park-based Battery Ventures, declined to comment. Paul Taaffe, a spokesman for Chicago-based Groupon, didn’t respond to requests for comment.

(Yahoo Breakout) Shares of Facebook (FB) hit a fresh all-time low, falling as much as 6.5% in early trading after the company's insider lockup period expired. As many as 271 million shares could potentially hit the market today. It's the first of a series of expirations that could result in almost 2-billion shares being released to the public over the next two years. Facebook currently has 420 million shares in the public markets.

Ironically, with all this bearishness, we're most likely to rebound from here for a few weeks and continue the collapse in a straight line.

Quick Market & Portfolio Update

The VIX is trading at around 14, dipping below it while the S&P 500 Futures contract is trading at 1424. These are respectively new lows and new highs since the top of May 2007.

Getting into September with these kind of set up should prove to be interesting, September and October being historically the ugliest bloodiest months for bulls and complacency being extreme.

With VIX at 14, it doesn't make sense to be short volatility, and it's actually quite a bargain to buy options.

On my portfolio, I closed all my short IWM Puts, which were deep out of the money and brought in gains of 70-80% and bought some more PUTs ATM on IWM. This means that I have closed my hedges (which currently didn't cover all my losses on my long put options), and got more shorts.