Monday, November 12, 2007



Quitting is for pussies. You didn't actually think I was going to vanish into thin air, in the middle of a fucking bear raid, therefore giving third tier blogs a boost in traffic, did you?

Fuck that.

If you own a third tier blog, you might as well print this fucking post out and put this shit on your blog's tombstone (I realize blogs cannot be physically buried),cause it's dead.

Much to your chagrin, "The Fly" is dumping this blogspot shit for his own domain, iBC.

This way, I can really put the hammer of death on my sworn enemies, while handsomely rewarding myself, via internet silly money.

Everything will be the same, with the exception of a few additional features, such as the merchandising of low-end internet clothes, which was entirely Woodshedder's idea.

Sunday, November 11, 2007


Ducati, step into my office

You're fucking fired.

Ha, just like that--ignorant style.

See, the problem with Ducati, and many of his ilk, he relies on make believe statistics and macro-economics to make market calls.


Ask anyone who manages money, using macro-analysis, as a guide to investing, is a suckers path to getting fleeced.

While Ducati may have the wind behind his sails now, considering how the "homo hammer of hell" is smashing bull nuts, ultimately he (Ducati) will die wrong.

In many ways, we are all stupid fucktards, trying to find our niche, our special skill-- to make enough money so that we can fly to the moon in a monkey suit.

Let me just say this: Ducati will never wear a fucking monkey suit, in a pimped out space ship, on his way to the fucking moon.

Fly wins again.

Should I shitcan Ducati, again? [30 votes total]

Yes (21) 70%
No (9) 30%



While some of you think I let Ducati post here, for sentimental or poetic reasons, you're wrong.

Know this: Ducati is an enemy of this website, always has been. I spit on his analysis and chuckle, not laugh, at his fucktarded bearish views.

In short, I just thought it would be fun to fucking fire him again.

It's that simple--and fucked up.

So, without further adieu, should I shitcan Ducati, again?

Fuck you Grant.



Final Ducati post. Stay tuned for "final elections."


The readership of Sir Fly’s blog has of course mutated over time, new readers appear, and old ones wander off to die somewhere. There have been a couple of comments in the comments section stating that they missed my first weekend stint. No matter, the one stock that defines the love/hate relationship twixt Broker A and some of the stalwarts is without a doubt……..MVIS.

When I claimed MVIS was overvalued, howls of derision. When I claimed MVIS had little or no institutional buying interest, I was accused of sodomising children, I argued the case that corporate action was fraudulent to existing shareholders with the debacle in the Warrants, my wife was ridiculed, when I claimed that MVIS had no patents worth anything, that in point of fact, all that they had were patent applications, a form of internet immortality ensued.

I had an infamous $10 bet with Broker A that is still outstanding while I await the arrival of a lemonade bottle launched I presume into the South Atlantic, to date it has not arrived in the Tasman.

What is the story today?

Well, let’s take a look at MVIS currently. First a very cursory examination of MVIS financial strength

EBIT……………….. [-$29.0]

Total Assets………... $50.42

Net Sales………..….. $7.04

Market Value…….… $222.38

Total Liabilities……. $11.27

Current Assets…….. $44.91

Current Liabilities…. $9.46

Retained Earnings…. [-253.4]

Altman Ratio [-3.89] which predicts a high probability of bankruptcy.

Of course the concept was never really about the numbers, if it was, well more fool you, the story was of course about the potential of this PicoP projector.

Let’s examine the story a little more closely. Without patent protection of the latest technological developments, this project will be doomed by imitative competition, thus, the patents assume a very large component in the quest for profitability.

Second, let’s assume that the patents are secured and that illegal competition will be curbed. Now the problem becomes, what exactly is the market share? At what price can this technology be sold? What about the vast arrays of partnerships, what exactly is their financial interest, how will this impact unit costs and profitability?

There have been numerous studies that detail the longer the development period of a new product or technology, the greater the bias to the upside estimates become, with the invariable disappointment leading to sub-par results.

Even when market demand is accurately forecast, underestimations of the competition can lead to sub-par results. A salutary example is within the air industry. The demand for passenger and freight proved to be underestimated, but the resulting over-capacity of the industry has created poor investment results over thirty years.

The length of time that this development is taking, has become in addition to the shocking financial condition of MVIS, a very real and growing risk to the owners of the business, viz. the shareholders.

In summary, I never liked MVIS, I still don’t like MVIS and I feel that this stock represents a speculation of the most uneducated nature.

To wrap up the weekend, it was however appropriate that MVIS closed out the weekend as it has defined probably more than any other single stock pick the very heart & soul of Broker A’s time in the blogosphere.

Certainly the blogosphere will be a slightly less entertaining place after Monday and the final demise of the “Fly”.

I certainly have enjoyed visiting and observing the unfolding sagas and some of the immortal characters that have populated this particular blog.

The panache and je ne sais quoi will be hard to replicate again, so on behalf of all I wish Broker A bon voyage and adieu.

Jog on




The US market and emerging markets are ranging from marginally overvalued with catalysts to the downside, to, grossly overvalued speculative time bombs.

I now offer you a quote from Horace and “Ars Poetica”, for those of you who possibly visited my blog, you will remember it;

“Multa renascentur quae iam cecidere cadentque quae nunc sunt in honore”

The moral being that bull markets invariably create bear markets, and that eventually, the bull markets revert to bear markets, while bear markets grow to bulls.

True bear markets offer very low risk entry points with huge potential upside reward potential. True bear markets are reviled by investors as they have underperformed for long periods of time, frequently teasing with cyclical bull rallies in a secular bear trend.

I have emphasized, at least for those paying attention the importance of a catalyst within investment decisions. This is not an area that I have particularly emphasized within my own investments or trading. It is however an attribute that has been on prominent display on this blog for those who were attentive.

The catalyst in this particular opportunity is particularly important as the quantitative valuation is pretty much useless. The numbers themselves provide only the merest hint and they are difficult in any case.

Thus, we are left with an almost pure qualitative play.

Japanese Yen

Japan has been in a deflationary spiral for some 20yrs now. The stock market, the real estate market, the currency have all been in a secular downtrend.

Why now?

A number of qualitative factors and one quantitative factor; I shall dispense with the quantitative factor first.

Japanese interest rates are slowly working their way upwards, from 0.25% to 0.5% currently, with further rises planned. Higher interest rates will strengthen, in time the currency.

Let’s now move to the qualitative factors; interest rates around the rest of the world have been slowly rising, faster in New Zealand, Iceland and Australia. As the world economy slows, so these rate rises will slow, freeze, or start to reverse.

Bankruptcy proceedings, both business and consumer are accelerating here in New Zealand. As the US economy slows, so the exponential growth in China will start to slow. The Chinese economy is addicted to export led growth, internal consumption is anaemic.

Thus, a closing of the interest rate spread and thus the carry trade, successful for the last 20yrs will come under increasing pressure.

Further, overpriced assets, that find themselves correcting will also find themselves if purchased with cheap Yen, under pressure to reverse.

Real estate values have again started to rise in Tokyo and other cities. Goldman Sachs, Morgan Stanley and Citibank have been purchasing commercial property in the last couple of months, positioning themselves for the end of the great Japanese bear market.

Rising real estate prices, in time force a rise in the interest rate, which for the purpose of this trade is a good thing.

Currencies trend for very long periods of time and the potential for this trade due to the massive undervaluation engendered by the carry trade is large.

Who are you trading against?

In manias, the last people to get sucked in tend to be the amateurs, seduced by the idea that markets only ever move in one direction. That easy money can be made, that the leverage available via margin can make them very rich, very quickly.

Some time ago, possibly 2 months, an article appeared detailing the extraordinary story that Japanese housewives were dominating the Fx market, engaged in the carry trade. Thus, you are trading against the leveraged Japanese housewife.

It is easy to take an unleveraged position within the Japanese Yen via FXY an ETF that has previously been mentioned on this blog.

In summary, we have some quantitative data via interest rates and numerous qualitative underpinnings to catch a secular bull market in its infancy.

Jog on




We now turn our attention to the current crisis affecting the financials. Much of the story may well be old-hat to those that follow the fundamentals of the market, some might actually surprise you.

I actually follow the fundamentals quite closely, yet, the scope of the problem had eluded me, therefore, a hat-tip is due Mr. Sierra Water for uncovering the data that will provide some of the referenced data provided.

The problem started in MBBS, specifically, sub-prime mortgages. With deteriorating employment, rising interest rates, overpriced housing stock, lax, to no lending standards, incredible greed and stupidity, fraudulent business practices, it was simply a matter of when, not if, there was a crisis.

The players


*Ratings Services


*The Fed.

First off, just how big is the problem? From the chart below we can easily see that the problem is large.

The banks loaned to consumers, who could not afford a mortgage, and then securitized the loans via MBBS, CDO’s etc and sold them to all and sundry.

They were aided and abetted in this undertaking by the ratings Agencies, Standard & Poor, Fitch and Moody’s, who accepted large fees for granting AAA grades, based on the principal of diversification.

Not being satisfied with simply this set of fees, the Banks then issued derivatives, Credit Default Swaps on the MBBS.

This is where the problem has escalated a couple of notches.

Worldwide derivatives are valued at some $400 Trillion or 30x the entire worlds GDP. US Bank exposure is circa $150 Trillion in notional value.

The vast majority of this exposure is concentrated within; JP Morgan, Bank of America, Citibank, Wachovia and HSBC.

The CDS exposure is circa $12 Trillion.

Now of course as the default rate starts to escalate, so there is movement within these derivative contracts. As the exposure is so leveraged, the Balance Sheets of these Banks is called into question.

Although the majority of the exposure is hedged, the fear is that a failure somewhere in the system might cause that exposure to move down the line and cause a bankruptcy to a First Tier Bank, Citibank for example.

The catalyst for the August meltdown, based on credit fears, was the downgrading of billions of dollars worth of MBBS securities.

One Hedge Fund that evaporated had purchased securities at $0.05 on the dollar and was required to provide margin to $0.80 on the dollar, needless to say, they passed on this generous offer.

We have two catalysts brewing for the next stage in the credit crisis. The first is an accounting change that takes effect I believe November 15 and that is Rule 157. This rule requires Level 3 assets to be more accurately valued, hence, the Merrill implosion, Citibank and Chuck.

The second of course are your corrupt Ratings Agencies again, from Fridays Wall St Journal;

"As of Nov. 1, S&P had lowered ratings on 381 tranches of residential mortgage-related CDOs. It still had a "Credit Watch negative" on 709 CDO tranches, meaning the bonds face a good chance of a downgrade.

Fitch has 609 CDO tranches on negative watch and plans to act on them by later this month. Through the end of October, Moody's said it had downgraded so far this year 338 CDO tranches worth $13 billion, backed primarily by mortgage-backed securities. It was still reviewing for downgrade another 734 tranches worth $48 billion.

Moody's says it hopes to finish its current crop of CDO downgrades in the next few months. Further downgrades could happen depending on the rating firm's assumptions about the underlying economy, where the outlook could be changing fast."

So it would seem that there remains much market volatility into the future.



China has had a lot of press recently. Their stock market is going parabolic. Warren Buffett has recently sold out of PTR citing valuations.

Everyone pretty much accepts that at some point the market will become a debacle with all and sundry running for the exits. It is also true however that the market may have much further to rise before the dénouement actually takes place.


It certainly provides some food for thought.



The first analysis based on ratio analysis left possibly an open question as to the value and likely direction in the medium term……medium term being defined as the next three years. I shall return once again to this baseline analysis when we look at the Gold & Oil markets in relation to the stock market.

Through sector analysis we have identified that the business cycle is most likely positioned within the late expansion, early contraction phase, thus, we would conclude that the stock market contains greater risk than reward at this point, assuming a long directional position.

We move next to China and the Chinese stock market. There have been numerous stock selections from Sir Fly, all carrying a health warning.

This market is if not already in a mania, close to one, this speculative orgy carries great risk, but of course parabolic moves can make leveraged bets into huge winners, thus the temptation will always be present.

For the more risk averse we shall look at the “timing” of the Chinese phenomenon, as, it will directly relate to the undervaluation that I have in mind.

Jog on


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DISCLAIMER: This is a personal web site, reflecting the opinions of its author. It is not a production of my employer, and it is unaffiliated with any FINRA broker/dealer. Statements on this site do not represent the views or policies of anyone other than myself. The information on this site is provided for discussion purposes only, and are not investing recommendations. Under no circumstances does this information represent a recommendation to buy or sell securities.