Slope of Hope Blog Posts

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VIX Megaphone: ‘NOW HEAR THIS!’ (by Gary)

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Hi, Gary from biiwii posting again at the invitation of Tim, with whom I feel a kindred kind of thing as hope begins to drain from the bull case, little by little.  It is such a pleasure participating in da Slope.

Here is an updated look at the VIX and its megaphone AKA reverse symmetrical triangle (reversal) pattern.

"NOW
HEAR THIS!" blares the VIX… "Greedy bulls have had their fun, held
sway for a good long while, morphed Hope '09 into Full Tout '09, got
Wall Street to bonus season and generally reenacted the wonderful 50%
rally in hope off of the 1929 crash. You know the one, after which the
real depression descended. Happy days are not here again and it is
unfortunate that most casino patrons will come to that realization
after I begin to rise in earnest. I have not decided yet whether to
give the bulls one more run at the highs, but I will decide before too
long. This megaphone through which I give you my warning is a reversal
pattern after all."

Vix

Okay, that is what the VIX says. What
I say is that it feels so much like a false dawn that it is alarming
how people seem to have gone about their business as we head for the
tepid recovery that policy makers, media and Wall Street seem to be
touting. At best we will suffer from the law of diminishing returns
under a new and intense cycle of inflation. At worst, we go down again
and induce yet more panicked inflationary policy.

This is going
to sound overly sensitive in a 'he's giving us more information than we
need to know' sort of way, but we took our kids to see the movie Kit Kittredge
pre-crash and with everything I knew was directly ahead, it was too
much for your blogger who sat there with his eyes welling up through
half of it (I tend to do that over some really corny things too :-)).
How about the depression backdrop in Cinderella Man? Intense, man.

The other night I watched The Crash of 1929
on PBS. It was made in 1990, and indeed was intended to warn of the
possibility back then that it could happen again. Well, how did that
work out for the bears? I have no doubt that with each recession (like
1990), a new round of Great Depression lore gets whooped up, each time
providing the 'lever' for new and heroic inflation policy.

But
still, it feels like another hard down is coming and a lot of the data
I look at supports that idea. It feels like Indian Summer, just like
the one due here in New England imminently. There is a lot of noise out
there right now from the respective touts pitching their respective
wares in their respective sectors and asset classes. I expect it to all
fade away as the VIX trumpets the onset of stage 2, the GSR rampages
higher and Uncle Buck, pissed off like never before, stages a furious
short covering rally.

VIX: "That is all!"

Bank of America

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After the close today, Apple came out with their earnings, and the market loved them. The stock is trading over $200 (pretty much its lifetime high). I pretty much avoid the "four horsemen" (AAPL, RIMM, GOOG, AMZN) like the plague, so this is simply an interesting news item for me.

My attention is on individual stocks, both long and short. I have been, over the past couple of days (Friday and Monday), loading up on a wide variety of individual positions – mostly on the short side, but also some on the long.

My best cash performer so far in this array is Bank of America, which is also the stock in which I have the largest position. In spite of today's nearly triple-digit advance on the Dow, B of A continued to be weak. Unlike some stocks (like, say, AAPL), B of A is down two-thirds from its peak price, and I think the risk/reward on this is simply terrific.

1019-bac

I have also, for your viewing pleasure, assembled a modest array of some of the Many Faces of Ken Lewis. I'm not sure what it is with these finance guys; John Thain's face was frozen throughout human history, whereas Lewis just seems plain grumpy all the time. Is it fear over sexual inadequacy? It's impossible for me to tell.

So that's probably going to be it for me today. The march higher continues, and I'm busily in the background lining up my various positions. I'll probably get some time this week to share with you some of my favorites.