Far be it from me to beat a dead horse but I want to bring up an old friend again Blue Nile (NILE). Most people drone on and on about winners, of which Nile was not for me, rather it whipped me leaving me frustrated. I want to bring your attention to the head and shoulders pattern I was basing my bearish call on. It implied a target, remember targets are generalizations or guideposts, of about $40. This is the distance from the head to the neckline. At the time many would have found this preposterous. Well look what happened today !! I bring this up as yet ANOTHER reminder that stocks can fall much farther than any of us can imagine at the time. I was told I was nuts to short, at the time, a $71.50 stock that had fallen from 105. It was too late I missed the move I was told. Stocks are never too low to short and never too high to buy. Remember this, it will serve us well.


Moving on, every notice how ebulent the financial (pom pom) tv hosts and guests are when the market is moving up. Notice how dour and blah they become when it is down.


When the stock you manage goes down you must blame the short sellers. They are the bad guys of course right MBIA. Without them, your stock would be what, say triple digits? If they are so bad why don't they ban short sellers? Makes me wonder what Goldman would do then?


As I indicated before I left on vacation I view this rally as very suspect. The volume is lacking on the upside and has been very evident on the downside. Nothing has changed no matter how many stimulus packages are provided. The bubble in housing has burst and the genie cannot be put back in the bottle. Ask the Japanese, they're in a 17yr bear market for housing. You really think we will get off this easy?

This rally in various sectors is going to give us very advantageous short selling entry points. But as always I will let the tape do the talking and I will do the reacting to it.


This rally is an exercise in raising the dead so to speak. Remember my comments regarding Louise Yamada and how she opined regarding financials, that the bear market rallies, can be furious but they are to be sold. Nothing has changed here. As a matter of fact as the housing market worsens, and it is and will continue, the situation the banks find themselves in will get worse and worse, compliments of the leverage they employed.


Have the level 3 assets, sitting there like zombies on the books of the financials, miraculously become whole and given life (marketability)? I would think the AIG announcement should put that question to rest, dont't you think?


Has the LBO debt that's been sitting, rotting on their books suddenly become saleable. They can't even bid at muni auctions?


Do you think this is getting serious yet. Are you expecting Maria or Dylan from CNBC to warn you about this. Don't count on it. As for me, I just write an obscure blog so I must be tin foil hat wearing wack job !

Good luck and good trading.


Open Positions:

Long 5 units Currencyshares Japanese Yen ticker FXY @ $87.54 stop at $91.40
Short 2 units of Deutsche Bank ticker DB @ $119.85 stop at $119.40
Short 1 unit of Bear Stearns ticker BSC @ $89.60 stop at $95.70