Remember all that interest rate obsession last month. I was in great profits on my TLT puts and technically the trend was down and bearish. Sentiment was so extreme that it superceded all the technicals and i actually ended up with a loss on that trade.
Media being the great fade it is, i am getting more certain that the next phase of the bull market will be led by these very junks, whenever, wherever it bottoms, which will not be missed by astute technicans. The LBO/Private equity craze ain't reached the mania stage that the techs reached in 2000. Beleive me, i am as bearish on these LBO craze as i could be and the underlying fundmentals are as fragile as the tech was in 2000. But it has not reached the mania phase yet, which i think will come around 2009, which is where the wave patterns are calling for a major top in the stock market. IMHO, FWIW.....
Talking about the private equity, it's flowing in gargantual proportions to India. Some of the big metros in India have seen real estate prices going 800% to 1000%. A single family home that costed $40,000, 4 years back, is now going for anywhere between $350,000 - $400,000. Yes, 1000% increase in 4 years. How ? The private equity mania. Private equity firms are throwing money indiscriminately at condos, buying them in thousands. Unbelievably, the fragile banking system in India is lending 80% against their (private equity firms, most of them from U.S) 20% equity at prime rates (not subprime). Beleive it or not, 70% of bank loan portfolio is in real estate !! Yikes !. All these real estate holdings are in deep negative cash flows. Heck, who cares ? It keeps going up 100-200% per year. Just flip em'. I was very bearish on real estate, very early and could never understand the mechanics of speculation and mania fueled by liquidity, without understanding the fact that valuation and cash flow means zilch against overwhelming liquidty. The party will come to an end, but not before the party in the stock market comes to an end, which is master and the rest of them slave to the stock market. It's backasswards thinking to say that the real estate debacle will ruin the stock market trend. Nope ! Never been that way and never will be that way !. Remember Broadvision, E-Piphany, Commerce one - all that junk during the tech mania. There are thousands of such junk in the private equity land, which IMO will go nuts when we reach the manic phase of this bull !
In the end, i always wonder who the ultimate sucker is in this game !
Is it the amigo crossing the border, buying a house in california on daily wages ? - who doesn't care anyway. There's a few months of free rent and high living at worst, before the inevitable bancruptcy
Or is it the banker who lent him the money ? - who doesn't care anyway, after collecting his commisions and passing the loan to Fannie/Freddie
Or is it the Fannie/Freddie, who are suckers ? - who don't care anyway, after they package the the loans into MBS and sell it to wall street instituitons
Or are the wall street instituitons the ultimate suckers ? - Nope. They just sell that crap to the baby boomer retirees, pension funds......
Now the baby boomers sell their inflated real estate holdings to amigos in California and move to Portland, Arizona...... Now who's the ultimate sucker ?
You see, fundamental analysis is soooo interesting. Good analyzing !
Edited by NAV, 28 July 2007 - 03:37 AM.
