Dr. Kellegro's Articulate, Enlightened and Intensive Financial Truths

[HRHolland]

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[HRHolland]

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[DrKellegro]

Ten Monumental Events For The Next Ten Years

Published on January 6, 2010 on www.drkellegro.com

How will the markets, economy and world look in 2020? What follows are Dr. Kellegro’s guesses for what transpires going forward. As a disclaimer of sorts, I believe in Bruce Kovner’s philosophy that he outlines in the original Market Wizards. The basic gist of it being that you must be able to imagine the unthinkable. For example, in 2000 if I would have told you that Bear Stearns and Lehman brothers would be out of business, the Dow would be at 10,500 and an African-American with a Muslim name would be President of The United States…you would have told me to get lost. The unthinkable has a way of becoming reality…so we must think along the lines of the unthinkable in order to have any chance of even being 20% accurate.

1. After suffering at the hands of the two party system and seeing no sign of better times ahead…the American voter will embrace a third party, electing to office a President from this party and as a result of good times for the country, this third party will come to replace either the Democrats or Republicans as the party of choice for most Americans.

2. Due to talk of global food shortages taking place during the first few years of the decade, there will be an abundance of new farms and water systems created to prevent such a disaster. As such, food production will soar creating a surplus of crops that will end up depressing commodity prices for years on end going into the final years of the decade.

3. BRIC countries…with the exception of Russia, will experience social upheaval that renders whatever economic advancements they have made useless. One of the BRIC countries will collapse completely under the weight of this social upheaval creating a medium- term financial crisis.

4. The resurgence of the United States and Western Europe as the economic powerhouse of the global economy will become apparent as we approach the end of the decade, with US GDP growth reaching levels that rival the best of times.

5. Oil prices will plummet into the single digits with gasoline being sold for less than $1.00 per gallon due to economic issues in the BRIC countries and the prevalence of alternative fuels for the entire world. By the end of the decade, nearly all vehicles will be largely independent of gasoline.

6. As a result of depressed oil prices, the OPEC nations, especially Iran and Saudi Arabia, will experience severe economic issues that cause a moderation in the governments. The monarchy of Saudi Arabia will fall and the country will be split into two parts…the larger being more progressive and the smaller of which is a fanatical Wahhabi government that will be seen as the next threat to the civilized world. Iran will experience a resurgence on the global stage as the Islamic government ceases to exist and the country becomes a leader for progressive thought throughout the Middle East.

7. Goldman Sachs will be taken private and then sold off in pieces as the nature of their corrupt behaviour over the past several economic catastrophies becomes inescapable.

8. Housing prices will remain largely unchanged for the entire decade, as an exponential rise in mortgage rates causes homes to become unaffordable for a majority of buyers.

9. Due to a losing effort versus the drug trade, Mexico will legalize and regulate all illegal drugs in the country. This will stimulate Mexico’s economy and lead to the country being one of the top tourist destinations for the world. Mexico, as a result of this policy, will experience of a golden age of wealth and partying.

10. After being voted out of office after his first term, Barack Obama will replace Jay Leno on The Tonight Show. Ratings will soar and by the end of the decade, Barack Obama will be seen as the second coming of Johnny Carson.

[DrKellegro]

A dormant period is followed by a period of activity. In light of my dormancy, I could see no better time than the opening to a new decade to reemerge. And so Dr. Kellegro, in all his wisdom, has come forward to document the next 1096 days of his reemergence.

The documentation will not only be for entertainment but for definitive proof that Dr. Kellegro’s methodologies continue to be superior to those of his peers across all categories. I use the word “continue” not out of paper trading delusion but out of circumstance. The circumstance being circa 2004 Dr. Kellegro’s methodologies were documented to be superior as his macro hedge fund was # 1 in its class with a triple digit percentage return year over year.

And so I have looked into the eyes of my adversary and I see much of the same. Except today, I see an even larger propensity for deception. The type of deception that allows elimination of all but a chosen few name players on Wall Street. The type of deception that renders traditional analysis limp and incomplete. The type of deception that disallows retail investors from having prolonged periods of success. The type of manipulation that screams out in its blatant regard for only itself.

I see this manipulative behavior as a chronic condition of the financial markets. The only question at any given moment is at what amplitude is the level of manipulation? How far reaching are the lies? Dr. Kellegro is the filter…Dr. Kellegro is the truth. And with that truth, comes the ability to profit.

1096 days….1096 eventful and glorious days to document thoughts, opinions, analysis…the sum of which equal TRADES..or you can call them picks. I see a littered field of websites, blogs if you will, that provide thoughts, opinions and analysis…but stop at the sum of all these parts, which is trades. After all, what is the purpose forcing an erection of your frontal lobe if you stop at simple analysis? Any gentile can come up with a hypothesis formed from a millenium of study, but few are those who are able to compose those thoughts into profits. Even fewer are those who are able to do this consistently over a 1096 day time frame. And only the especially insane and eccentric of those fewer few are willing to document all of it in a public diary.

Dr. Kellegro is the fewest fewer of the few. And so the journey commences…..

[DrKellegro]

TRLG Short Sale Synopsis

Dr. Kellegro has initiated a substantial short position in TRLG after Lazard upgraded shares of the stock to buy from hold only a couple months after lowering the shares to hold from buy. Typically, incoherent moves like these by members of the analyst community point to conflicts of interest that involve courting future business from the company involved in the upgrade. The ratings system on Wall Street has been used as leverage against companies to win further business from them for the firm initiating the upgrade. An appreciation in market value such as the one TRLG experienced today is traded for future service income to that investment firm. It is no coincidence that shortly following the November downgrade of TRLG a meeting took place between Lazard and TRLG. And now comes the upgrade, as the promise of further business either from the company itself or the executives involved in the company is a virtual guarantee.

What is important to note about TRLG – as a company - is that it has been losing market share in its segment versus competitors. Given economic conditions specialty jean companies are not easily getting the $75-$300 price tag that their jeans command. In TRLG’s case they have taken on an ambition expansion plan for individually branded stores at precisely the wrong time. I am sure that in management’s mind opening new stores while lease rates are favorable and choice locations are becoming available will make their venture successful. However, what management has not taken into account is that TRLG is a fart in the wind. A fart in the wind that attracted some attention for the past few years but is now fading back into nothingness. And now they are adding to their potential liabilities by taking on long term leases and the expenses of opening 100+ stores over the next however many months/years. Add to that the fact that they have been losing focus, moving away from the bread and butter of the company - which has been jeans - into jackets, shirts and apparel that will make their burgeoning number of stores look more “consumer friendly”. After all, you can’t have 100+ retail stores that only sell different colored jeans.

Now let’s move to the insider selling. It seems that insiders at the company enjoy selling shares between the $20 – $30 range, as they too realize that their share price and their brand is a fart in the wind. The insider selling between $20-$30 over the past year has not just been substantial, it has been monumental. With the founder of the company, the orginator of the fart, if you will, dumping a majority of his shares over the past two years. Now I ask you, if their blindly ambitious plan of expansion was as monumental as the company or Lazard would have you believe, why would the founder and CEO of the company be dumping shares of TRLG at such an astounding rate?

In TRLG you have the perfect confluence of factors:

1. A specialty retail stock that did what specialty retail stocks do during their life cycle: go from obscurity to becoming a recognizable brand. The life cycle becomes complete when the fickle public moves onto the next specialty retail name. TRLG is in the latter stage of this life cycle as consumers are beginning to move away from the brand.

2. An inept management team that is A) trying to keep the stock price inflated with pie in the sky dreams of success through expansion B) dense enough to actually believe that their plan of expansion will lead to increased revenue and brand recognition independent of consumer spending habits C) unfocused and moving away from the business that got them to this point in the first place.

3. Insider selling that is not substantial but monumental, with the leader of the pack being the founder of the company himself.

TRLG, with its current market value, is a deception and an outright lie. It should not only be avoided by prospective investors, but taken advantage of by those astute enough to recognize the vast number of flaws apparent within the company.

Also available at http://drkellegro.com/?p=68

[DrKellegro]

http://drkellegro.com/?p=60

Short TRLG @ 20.40

Lies abound…deceit is plentiful.

As such, Dr. Kellegro has initiated a substantial short position in TRLG after false assumptions were made this morning from an analyst at Lazard.

Further details to come.

A formal introduction of myself and my methodologies will be made later.

- Dr. Kellegro

[Stock]

Expectations, Methodologies and Cannibalism

Published on January 4, 2010 in Uncategorized. 0 Comments

Ladies and gentlemans, if you have any problem with having a minority opinion about the markets, individual investments or the investment guru of the movement, I would deem it appropriate that you exit from either the front or rear exit. Dr. Kellegro will always be clawing against the grain, as the very center, core, and all powerful invisible hand that commands Dr. Kellegro’s actions is rooted one hundred percent in the concept of the financial markets being in a constant state of deceit.

At any given moment a large group of investors are succumbing to outright lies. The market has built its foundations on fooling the majority of the people all of the time. The Wall Street machine that is at the periphery of the deceptive practices is constantly straddling the line between being observed as an asset to investors and pursuing its own self-interests, which are inherently opposed to that of all but its own. And this is the essence of the Wall Street machine that has existed for many decades now…a consistent conflict of interest between Wall Street firms and those who they purportedly serve.

This conflict of interest only becomes amplified and therefore apparent during intense bouts of dislocation, such as what we experienced in the fall of 2008. But you are wise to assume that these conflicts of interest are always bubbling just below the surface. Wall Street, in its current state, would cease to function without the deception. It has become an essential part of the infrastructure.

It used to be that this infrastructure was geared against the individual investor. However, then came the dark ages for individual investors. After seeing a good percentage of their equity wiped away when the internet bubble collapsed, investors shunned individual equities in favor of real assets, mostly in the form of real estate. This left Wall Street in a cannibalistic mood and it created instruments to augment its appetite. However, the instruments were now geared towards institutions, as there was no more meat left on the bones of the tiny individual investor. When there are no more fish left in the sea where do the sharks turn for food? To each other, of course.

And so we saw the gross, corrupt and scripted demise of such heralded institutions as Lehman Brothers and Bear Stearns. This was made all the more conspicuous by the individual players involved, reaching into the very pinnacle of government. Conflict of interests abounded and due to the magnitude of the conflict, the sheet has been removed and history will be a harsh judge. We haven’t seen even a fraction of the consequences….they will be much more far reaching both in terms of time and severity than what we have observed thus far.

In order to survive in such an environment you have to assume that you are in a constant vortex of lies. The Dow being at 10,600 at this very moment is a lie, just as Dow 12,000 was a lie and Dow 7,000 earlier this year was also a lie. Put another way, disequilibrium is the natural state of the markets. There is never a moment of balance or true value. It simply doesn’t exist. The greater the duration and severity of the price decrease and especially increase, the greater the propensity for a diabolical lie.

This philosophy created through observing numerous trading patterns over the past 15 years has led me to a strategy that focuses on specific long and short opportunities. I take a very stringent approach towards which investments I take on as I want to have the greatest chance of success at any given moment.

On the long side, I have found that special situation investing can be especially attractive and profitable. I like to see a confluence of factors at work before I will take a long position in any equity issue. I have grown especially fond of taking positions in bankrupt companies, mostly trading below $1.00 due to a host of complicating factors. Bankrupt companies make for extremely risky investments as the equity in the company can essentially be cancelled virtually overnight and in most cases, this will be the outcome. The reward, however, lies in this very risk. As such a risk of complete and total loss of investment exists, there will be times when the market ignores an opportunity or delays the factoring in of a more favorable outcome. Bankrupt securities are not widely followed, making for a less efficient method of pricing in favorable fundamental events. The bottom-line, not all corporate bankruptcies end in the cancelling of shareholder equity. There are issues that manage to turnaround and those are the issues I search out. I see them as being mildly risky investments with potentially enormous rewards. These are issues that have very little correlation to the general market and will do well regardless of whether the Dow goes from 10,000 to 11,000 in one day or 10,000 to 9,000 in one day.

The short side of the equity markets is less research intensive, as I don’t search out potential balance sheet bombs or hidden toxic investment vehicles. There are certain sectors and sometimes certain individual stocks that are more prone towards trading within a predetermined cyclical pattern or price range regardless of market conditions. One example of such a sector is retail. Nine times out of ten retail names that are the “it” stock of the moment or must have momentum name of the day, week or month will succumb to the simple fact that human beings are fickle creatures. Tastes change and as such stock prices will change, as well. Management teams are never able to stay ahead of the human propensity for change. A retail name will only be the must have brand or store for months or possibly a couple of years before tastes begin to change. All the while the market, being the market, will get ahead of anything that management will be able to produce to justify such a price and the price will inevitably shift lower.

As times change, the appetite for sectors to sell short should change, as well. Consumer credit, for example, is in the process of a long-term contraction. All macro signs I have seen are pointing to that fateful period of time when consumer credit experiences its own reversion to the mean. As such, the process is in its infant stages. Therefore, opportunities are freely available in rallies such as the massive rally we have experienced since March of 2009 to get short names that will be affected by such a contraction in credit.

All who read this should take home the following point: you, me and all who care about the markets were deceived by the markets today. All of the prices you saw scrolling across the screen are completely incorrect and subject to enormous shifts over the months ahead. I have taken aim at those which I believe will shift the greatest in that time frame. I only need to be right on a few of these names a year and it will be a good year. If I am right more than a few times, it will be a fabulous year. It really is as simple as that.