April 2009


Still holding, although not a happie chappie atm.



Sen believed that famines do not occur in functioning democracies because their leaders must be more responsive to the demands of the citizens.

Famine has been a chronic problem through history. We have, from the bible Joeseph advising the pharaohs on famine relief models. We have a famine in Rome in 436 BC, where the starving threw themselves into the Tiber.

In the 11’th and 12’th centuries a famine is recorded every fourteen years in England. On average, people suffered twenty years of famine in every two hundred years.

The Encyclopedia Britanica [so not wikipedia] lists thirty-one major famines from ancient times through 1960:

*1005 Famine of England
*1016 Famine throughout Europe
*1064 Seven years Famine Egypt
*1148 Eleven Years Famine India
*1344 Great Famine India
*1396 Durga Devi Famine India
*1586 Famine of England [gave rise to “Poor Laws”]
*1661 Famine India
*1709 Famine France
*1769 Great Famine Bengal [10 million died]
*1783 Chalisa Famine India
*1788 Short-Crops Famine France [gave rise to the Revolution]
*1790 Skull Famine India

In 1798, Robert Malthus, wrote his seminal work, An Essay on the Principals of Population as it affects the Future Improvement of Society. The central tenet being that there is a constant tendency for the population to outgrow their food supply.

At this time, the first Industrial Revolution was underway.

The Industrial Revolution was a period in the late 18th and early 19th centuries when major changes in agriculture, manufacturing, mining, and transportation had a profound effect on the socioeconomic and cultural conditions in Britain. The changes subsequently spread throughout Europe, North America, and eventually the world. The onset of the Industrial Revolution marked a major turning point in human society; almost every aspect of daily life was eventually influenced in some way. Starting in the latter part of the 18th century there began a transition in parts of Great Britain’s previously manual labour and draft animal–based economy towards machine-based manufacturing. It started with the mechanization of the textile industries, the development of iron-making techniques and the increased use of refined coal. Trade expansion was enabled by the introduction of canals, improved roads and railways. The introduction of steam power fuelled primarily by coal, wider utilization of water wheels and powered machinery (mainly in textile manufacturing) underpinned the dramatic increases in production capacity.[2] The development of all-metal machine tools in the first two decades of the 19th century facilitated the manufacture of more production machines for manufacturing in other industries. The effects spread throughout Western Europe and North America during the 19th century, eventually affecting most of the world. The impact of this change on society was enormous.[3]

The First Industrial Revolution, which began in the 18th century, merged into the Second Industrial Revolution around 1850, when technological and economic progress gained momentum with the development of steam-powered ships, railways, and later in the 19th century with the internal combustion engine and electrical power generation. The period of time covered by the Industrial Revolution varies with different historians. Eric Hobsbawm held that it ‘broke out’ in Britain in the 1780s and was not fully felt until the 1830s or 1840s,[4] while T. S. Ashton held that it occurred roughly between 1760 and 1830.[5] Some twentieth century historians such as John Clapham and Nicholas Crafts have argued that the process of economic and social change took place gradually and the term revolution is not a true description of what took place. This is still a subject of debate amongst historians.[6][7] GDP per capita was broadly stable before the Industrial Revolution and the emergence of the modern capitalist economy.[8] The Industrial Revolution began an era of per-capita economic growth in capitalist economies.[9] Historians agree that the Industrial Revolution was one of the most important events in history.[10] The most significant inventions had their origins in the Western world, primarily Europe and the United States.

One of the results of the IR was that population increased, and increased dramatically. In one century humanity expanded by more people than it had done in the previous million years.

Famine, however, was still present.

*1838 North-Western Provinces Famine India
*1846 Patato Famine Ireland
*1861 North West Famine India
*1866 Bengal & Orissa Famine
*1869 Rajputana Famine India
*1876 Bombay Famine India
*1877 Famine China
*1891 Famine Russia
*1897 Famine India
*1905 Famine Russia
*1916 Famine China
*1921 Famine USSR [created by Communist policies]
*1932 Collectivist Farm Policy Famine USSR
1960 Famine Congo
1968 Famine Biafra [war caused]

The sheer number of famines that have hit India, may well have influenced Sen. Certainly there have not been any material reduction within the incidence of droughts, pests, plant diseases, crop failures and any other number of natural [or man-made disasters] in the post industrial Western world, but when they occur, there has been no famine. Famine has persisted in in other parts of the world, most noteably in recent years, Africa.


Is it, as Sen postulated; that famines do not occur in functioning democracies because their leaders must be more responsive to the demands of the citizens…or, is it due rather to Capitalism?

Capitalism has allowed a country, stricken with a food shortage, under whatever reasons, to import food from another region of the world and PAY for it. [exchange goods/money for food] Capitalism, through transport systems has also provided the means, for the food to arrive at the place it is required, quickly, and efficiently [except when you place George Bush in charge]

Katrina provides an interesting case study in a disaster involving a very minor disruption in the food supply, in a modern, and ostensibly capitalistic system.


flip-flop-fly is a happie chappie currently.


Fuck You Bears, You’re Dead
April 29, 2009 – 9:53 am
No respite. No mercy.

I have given you plebs fair warning to cover your shorts and play the upside. Some of you, wildly and cantankerously, posted stupid charts in The Peanut Gallery, rationalizing your wrongness. “The Fly” was wrong, with regards to his short positions, three weeks ago. However, thanks to his “calculator brain” and space alien magician ways, he corrected his blunder—allowing him to reacquire all lost coin and more.

See, that’s what I am all about, while you are just some guy with a ruler and a pencil, trying to chart your life into something better. Life will continue to suck for you, sadly enough, because your gene pool is tainted with idiot DNA.

As for today’s trading:

It will be splendorous. The economy retrenched to the tune of 6.1% in Q1 of ‘09. However, consumption was up, and that’s all that matters. Everyone knows Jan-Feb was dreadful. People with sense are focusing on the obvious uptick now, dating back to March. The big question: when will the inventory restocking cease? Will the economy continue to reflate and if so, when will the recession end?

Luckily, for the bulls, these questions cannot be answered now. We will have to keep a mindful eye on consumption and factory data, prior to making a determination.

In the meantime, feel free to press the hot blade of upward momentum upon the necks of the stubborn, the destitute. Let us rejoice, via large buy orders of DELL, CROX, ATHR, BRCD, ERX, PCX, SONS, WRES, ARUN, CAVM even LVLT, dammit.

His thesis, or causative argument.

Let the Chips Guide You
April 29, 2009 – 12:58 pm
Many of you are besides yourself, pondering about the never ending stock market rally and why people are buying stocks.

I am going to tell you in very clear, concise words, as to why we are boot stomping ugly, monstrous bears higher

The market is not going up because of the Fed, Treasury, Banks, CRE or Pig Flu. The semiconductors marked the bottom, back in March, based upon a sharp uptick in demand, partly created by lack of supply.

In other words, factories were shut down. Utilization rates were saddled in the 30% range. Then, all of a sudden, the consumer showed signs of life, as they always do entering spring. Frantically, factories reopened, sending utilization rates upwards of 60%, almost doubling from the Jan-Feb levels. Due to lack of supply, prices for chips, packaging, testing and other services spiked, allowing companies like TSM, UMC, SPIL, ASX, TQNT etc, beat street estimates—due to better than expected margins. For fucks sake, even TXN beat the street.

Since then, the consumer has not disappointed, buying up flat panel lcd’s and smart phones, like they were candy bars.

In short, the rally will continue because inventories need to be restocked. Until we see utilization rates drop, the market will go higher, or sustain current levels.

I repeat: we will not trade lower, unless factory utilization rates head lower from here.

Going with that theory, I am adding to my CDNS position, ahead of earnings, based upon them sucking the tits of TSM.

NOTE: I bought 20,000 CDNS @ $4.75

Semiconducter chips…are responsible, that and Utilization rates.

The problem of course, is that while the market rallies, all and sundry are postulating myriad reasons as to why. They are providing narrative. The narrative, with hindsight, may prove to be correct, or not. I would say that the semiconducter/Factory Utilization narrative, is most probably nonsense.


Core capital goods orders ticked higher in March, on the heels of a solid gain the prior month. While the level of orders is very depressed, the trend is consistent with other data indicating that economic conditions are beginning to stabilize. Inventories fell for the third consecutive month, signaling that companies are catching up to the earlier deterioration in demand. Still, with inventories quite high relative to shipments, the drag from inventory de-stocking has further to go and will weigh on output into the second-half of the year. Investors should also not mistake a modest improvement in the outlook with what will remain a weak capital spending trend. The economy is saddled with considerable excess capacity and consumer leverage that point to soft capital spending for several more quarters. Bottom line: Capital spending shows signs of stabilizing, but a sustainable rebound is unlikely anytime soon.


Repurchase BWLD @ $40.46



Governments and international organizations handling food crises were influenced by Sen’s work. His views encouraged policy makers to pay attention not only to alleviating immediate suffering but also to finding ways to replace the lost income of the poor, as, for example, through public-works projects, and to maintain stable prices for food. A vigorous defender of political freedom, Sen believed that famines do not occur in functioning democracies because their leaders must be more responsive to the demands of the citizens. In order for economic growth to be achieved, he argued, social reforms, such as improvements in education and public health, must precede economic reform.

The highlighted points:

*Public Works
*Stable Prices for food
*Public Health
*No famines in democracies

Public works seems to be regurgitated in every unemployment crisis, as the sole policy response to try and alleviate said unemployment. Public Works, reallocates tax payer money to pay newly hired workers to undertake work. The visible result, and why politicians love it, sees the completion of the new bridge, highway, etc and that Xnumber of new jobs have been created. What is hidden, are the taxes raised from the tax payer, that reduce their discretionary spending. By doing so, capital is diverted, thus destroying jobs in unseen areas by starving the sectors of the capital that the government has redistributed. Public Works are price insensitive. Insensitive in the sense that prices signal capital allocation. By ignoring price signals, government misallocates capital, thus destroying economic growth.

Stable Prices for Food.
Socialists seem to emphasise their fairness, and/or social ethics. Keeping food affordable, satisfies their sense of fairness. This is generally accomplished through, price fixing, subsidies, food grants, money grants for food, essentially all have ultimately the same effect.

Price Fixing.
The price can be fixed too high, or too low. The price, has to be fixed by government, which means that they either have perfect information, or that they simply have not thought the problem through.

If government fix the prices too high, to help the farmers, then the farmers will produce as much as possible, to take advantage of the high prices. 99.9% of the population, will thus have a new tax to pay, or, they must abstain from purchasing the product. Government, will further use tax revenue to purchase the surplus. Of course, high prices do not actually help the poor a great deal.

If government fixes the price too low, of course the farmers will not produce, as, they have no incentive to produce for a loss, or non-economic return. Thus, government produces a de facto shortage of the product that they sought to price low, to allow the poorer consumers to purchase.

Subsidies transfer wealth from the producing nation, to foreign purchasers. Tax revenue is paid to the farmer, to produce say corn. The farmer produces corn, and sells it on the open market, at a lower price, as he has already been paid a % of his costs/profit. By lowering his price, he gains greater market share, from higher cost producers. Thus, foreign buyers, buy the cheaper product, and benefit from the cheaper price. Taken to it’s logical conclusion, eventually, you will pauperise the entire country, to help one segment enjoy lower food prices.

Thus we can conclude that socialism cannot create stable food prices. That some of their policies, will actually create shortages. That ultimately the distortions created by government interference will damage them more than it helps them.


flip-flop-fly has been absolutely stone cold for calling market direction, since last year. Is his record in futility going to extend the trend? Hell son, you can pay $40/month for this nonsense and subscribe to the ppt.

Stocks Are For Asshats
April 28, 2009 – 4:10 pm
Wow, days like this remind me why, deep down, I fucking hate the market, as if it was trying to steal my money. Oh shit! I think it is trying to steal my money.

Treasuries got murdered, sending rates through the roof. At the same time, the yen was strong, and the dollar was weak, while crude sold off—as did gold. Banks got boot stomped, but CRE was strong. I don’t know how long it will last, but the market is being directed by the action in CRE names. Look at the correlation between IYR and the Dow, lately. Uncanny.

In all fairness to the bulls, the market should have been “Dykstra’d” today, considering the banks were so weak.

Days like today remind me why it is so important to stick with a thesis and try not to overreact to the intra-day volatility. The market is incredibly volatile, yet within a very tight range. My guess, the market is due to make a decisive move, up or down, shortly.

Obviously, I have a multitude of long positions, so you know my bias. But, admittedly, holding bombs like LVLT remind me, in a very harsh way, how quick yesterday’s winner can become today’s loser. In hindsight, not selling LVLT was a grave error. But, I really did like the numbers posted this morning. Apparently, not too many people agree with me, at the moment. I ate rocks on this fucker today.

My positions in CROX, SONS, CECO and ERX fared okay, while other lost a percent or two.

In short, this market is one great idiot hamsterwheel, full of cocksure investors. In reality, we’re all guessing. The question is: who can guess better?


From Bespoke

1918 Spanish Flu and the Market
The 1918 Spanish Flu was a global flu pandemic that affected nearly half of the world’s population at the time (or up to one billion people). The 1918 outbreak was the worst of the 20th century, and it fell under the H1N1 virus subtype, which is the same subtype as the current swine flu outbreak. It’s estimated that the 1918 flu killed anywhere from 20 million to 100 million people, which would have equaled a mortality rate of 2.5%-5% of those infected.

The 2009 swine flu is still new to the public, but it is beginning to stoke fear since 152 people have died from it in Mexico as of now. The current swine flu is nowhere near as bad as the 1918 flu pandemic, but we thought we’d look at what the US stock market did during that outbreak period. Below we have grabbed a chart from a CDC article on the 1918 Influenza that highlights deaths per 1,000 people infected with influenza and/or pneumonia, and overlayed a chart of the Dow Jones Industrial Average. There were three pandemic waves from 1918-1919, with the worst coming from October to December of 1918. While fear of the flu was widespread, the market really didn’t react too badly. Following the first pandemic wave, the market sold off a little bit, but then rallied during the summer months before topping out prior to the second wave. The market trended downward during the worst wave of the flu outbreak, but it only went down 10.9% from peak to trough, and then it rallied significantly during and following the third wave. World War I was also coming to an end in late 1918, so the end of the pandemic and the war probably contributed to the subsequent rally in stocks.


Next Page »