Another grade fade trade example comes from David Tepper of Appaloosa Management. He believed that in when prices were near their all time lows in March, 2008 that people were scared beyond reasonable measure and that prices were very tempting. He purchased large amounts of financials and amassed $2 billion in a very short time. Again this was more of a fundamental fade trade, but both men went against the general market consensus and were handsomely rewarded.

Mark Fisher commodities shark and author of the Logical Trader had a term for the market consensus. He called it, “the retail bus people.” He said if you put on a trade and nothing happens then anyone in the world has had time to get on that trade. If everyone is in the same trade, how can it make any money? Fisher claims that the bus people are the masses and the masses are always wrong. This would lead credibility to the fade and breakout trades. When both of these trades are taken they usually are going against conventional wisdom and human nature. Thus, having a much greater chance of profitability.

Currently Paulson has accumulated a large stake in gold. With gold just below its all time highs this would fit perfectly into the breakout strategy. Paulson is evidence of a trader using both strategies. If gold were to have a large retracement there would lead one to consider fading the move. However, at this point gold has never looked strong and although it is well over $1,000 the momentum is to the upside and that is the trade position to be in.

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Consumer confidence came in at 66 today, its lowest level in three months. This comes at the same time JC Penny reported a large loss due to pension plans. JC Penny did report that their outlook will improve as their pension plans are now under control. JC Penny has a deal in the works where they can take on more top brands including Liz Claiborne at the end of a five year cycle. The brand power should propel profits down the road. Currently JC Penny claims same store sales are weak due to shoppers concern over their jobs and income.

The Swiss government is preparing to file a suite against Google over their street view map service. The Swiss who have always leaned towards privacy in their countries policy are upset over the relatively new imaging service Google provides. Google’s street view allows users to zoom into most major roads and get a close up view of what it would look like if one was standing right on the street. It is revolutionary and has been a great boon to real estate professionals in helping investigate listings without having to drive there in person. Many recreational users enjoy using it to plan vacations, view their friends places, and even investigate places in their own city. Google sends a truck around with a special 360 degree camera to snap the pictures and upload to the database. The implications are that there are other cars and people that appear in these pictures without knowledge and certainly without consent. The Swiss argue that any person or license plate should be blurred out of the picture before they are uploaded. Further, they insist homeowners should be notified a week before the images are going to be taken. Google claims they are not afraid of the suite and are prepared to defend themselves.

Jim Rodgers, famous for his success as a commodities investor, laughed when asked about his thoughts on the U.S. recovery in a recent interview this month. Rodgers point was that the U.S. has been in a decade of excess with mounting debt. The idea of combating the problem by creating more debt is asinine. He citied Scandinavia as an example of the same situation handled in a different way. Scandinavia had large levels of debt and a credit crisis in recent history. The government did not have the authority of the U.S. Fed to print money so they did the logical and really only thing that could be done. They allowed their citizens to file bankruptcy and have two to three years of hard times. This was a time of de-leveraging, while people learned to accept they lived in a lifestyle that should never have happened in the first place. One this de-leveraging was finished the economy was able to start up organically and this was followed with a great decade of growth and prosperity.

It is very possible that without the bailouts there could have been a run on banks and people could have lost everything in the process. For that the bailout has very significant and critical implications to the health of the U.S. Economy. However, once the banking sector was able to start lending again and the FDIC could secure the banks it was foolish to extend the bailout package further. The creation of programs such as cash for clunkers, the new home tax credit, and cash for clunkers creates only a near term solution at the cost of a long term debt. It would be far better to accept the inevitable that the grand decade of excess is over and prepare to consume less. The government has allowed ample time for this transition at a cost of longer term pain and suffering. The real effects of this debt may not truly be felt until 2012 or later, but there is no question the U.S. Dollar is going to lose its status as the reserve currency and the country as a whole is going to be in a precarious position.

As an investor or trader it is tough to be long U.S. stocks, gold, and treasuries. The government has propped up the stock market so far that it is trading at a 20% premium to its long term averages. It makes my head spin trying to figure out how investors could deem it worthy to pay a premium to own stocks in the most severe recessions since the depression. Bank savings rates and Treasuries are yielding less than 2% and gold is already trading at its all time highs. In times like this there is no choice, but to try different investment strategies. Check out the Fade Machine for an opportunity to profit in the current market turmoil. The Fade machine has been backtested for over 8 years and has consistently returned 50% per year with low risk.

It is incredible how the stock market continues to shake of the bad news with any positives they can find. Today’s jubilation includes a report that pending home sales has risen 6% along with Ford (F) posting record profits. It should be no surprise that these two events occurred. The bailout has provided a tax credit for new home buyers to receive up to $8,000 back on the purchase of a home. Escrow must close by November 30th to qualify. The level of foreclosures on the market has increased every month and this has lowered prices and enticed new buyers. These are the only people left that can purchase a home. The ones that already are home owners are fighting to keep their house, while current renters who have savings see the foreclosures as a great deal and an amazing opportunity to live the American dream. Many people that never dreamed of owning a house are now able to do it.

This is simply a result of a large never ending supply with low prices and tax incentives. If the supply of cheap homes continues to hit the market there will be new home buyers and investors willing to scoop them up for bargain prices. The pending home sale figure should not be looked at as a green and red indicator. It just reports. The signal can not tell us if housing is strong or weak. However, the Dow Jones applauded this news with a 100 point run up in the early morning.

Ford Motor Company (F) is up 8% on the day having reported record earnings. This should also be expected as the cash for clunkers deal pushed sales figures off the charts. Anyone that may have been thinking of buying a car in the next 3 years became a buyer in September. This was a great boost to the automakers and has allowed them to show strength for the recent earning season. However, there is no way their sales will be able to continue at this pace for the rest of the year. Not only will there be weaker demand into 2010, all the people that might have bought a car in the Spring have already done so, so sales should be excessively weak in the next quarter.

This is significant news now that the agency that is in charge of guaranteeing depositors money in banks is now in trouble. We have seen Freddie Mac and Fannie May take massive hits at the beginning of the credit crunch and most recently the FHA. The government organizations are in trouble and this is something that should raise concern. We have talked about Black Mondays and after a Halloween with 9 bank closures it would seem the potential for a big move down would be strong. However, the markets opened up +100 points on the Dow Jones. Since then the market has slide back to the opening, but going long stocks now would be very concerning. The currency markets are likely going to have some wild swings in volatility as this excitement continues

This is just what Timothy Geithner and the Federal government effectively did with their aid to CIT group. They did not put in any bankruptcy provisions. The current lenders prior to the Federal Government will likely get 70% of their money back during the bankruptcy process. However, the government is going to lose the full $2 billion having failed to put in writing a contingency in case of bankruptcy. This is a clear case of foolish bailout spending. Spend it if you got it; poof its gone.

Had the government done nothing the end results would have effectively been the same. However, CIT would have gone bankrupt without taking the US taxpayers for $2 billion. If this isn’t gross negligence by the US government, it will be scary what comes next. The government is trying to spend their way out of the recession. It still has yet to be determined if this can effective save the economy. It is well known that at the least it can prolong the de-leveraging. But if they are recklessly throwing money around that isn’t even helping to haul some water off of the sinking ship then we are seeing no benefit at all to this mess.

At this time it is hard to see that the bailout was the right decision. It is unfortunate that the markets scared the public into passing the bailouts without the proper directions for use. It appears that there is too much latitude and haphazardness to how it is used.

It is still possible that the economy may get back on track and that this bailout was critical to that success, but I am not buying it at the moment. As it stands unemployment is over 10% and the GDP has grown as a result of the bailout and more job cuts. Now the bailout may have stopped the market from calamity this year, but it appears to only be a weak band aid for the inevitable which will come in 2010, 2011, or 2012.

At this point there has been a brief pause in the upward lift in the stock market since eclipsing the 10,000 mark. The index is currently trading below 9,900. The is a good chance that the upside has been overextended and there is more bias towards the short side at this point

Other new on the day: ING is issuing $11.3 billion in stock, while Caterpillar (CAT) confirms cuts to 2,500 workers in limbo.

Fast forward to today after the massive credit crisis followed by an enormous run up in stocks. There has been an influx of positive news reports the last 3 months with hardly any negative ones. Today was one of the few negative reports to hit the wire with consumer confidence faltering. The market just took a drop of 250 points following the day GDP increased 3.5%. The potential for a shocking drop should not be taken for granted. The market is frothy at these levels, and if the negative reports come rolling back in the markets have much further to fall now than they did back in March. Couple this with Gas prices currently at all time highs I would caution anyone thinking of getting long at this point.