Free Market Get Presidential Shout Out...Beware!

When I hear President Obama talk about dismantling Fannie Mae and Freddie Mac, I temper initial enthusiasm because it’s too good to be true. In fact, my thoughts immediately shifted to Mary Shelly and her groundbreaking novel Frankenstein, or the Modern Prometheus. A brilliant student from a wealthy family, Dr. Frankenstein discovered how to recreate life through electricity and body parts from dead people.

While I think it’s a great idea to dump those would-be government sponsored enterprises, the idea of taking their dead parts and cobbling them back together into an even more menacing monster is frightening. The White House wants to force private banks to make 30 year mortgages available to virtually all applicants with as little as five percent down. The White House would help out if there are catastrophic losses, but why worry about that, what could go wrong, after all?

Of course the new housing plan is more of the same, and the sixth time such sweeping reforms have been suggested. Then again the summer tour has been a greatest hits extravaganza of ideas either tried and failed or proposed and rejected. It’s been a combination victory lap and plea for more power to “really” fix problems. Then there’s the opening act that includes a song and dance about “phony scandals” and mean-spirited politicians that think $16 trillion in debt - and counting - shouldn’t be considered an asset.

I can only hope these ideas are rejected and 2016 voters understand the person in charge for six years shouldn’t’ be blameless for this tepid recovery.

Right now the modern day Prometheus is the U.S. economy, with its gut ripped out each day by the same rhetoric, regulations, and higher taxes. Each day the economy screams out in pain because of what it could be if not chained to a rock and punished. Each day the economy survives because it’s backed by capitalism, people of faith and determination … but it suffers the indignity of an ugly reality that sees it routinely assaulted. So, our economy is actually the story of Frankenstein and Prometheus. The monster learned to read and came to understand his hideous form scared humans. so he hid and asked his creator to form a female companion.

Although, there is no public demand for more of the same when it comes to economic rescues from the White House. No thanks, Mr. President, we don't need you to dismantle the current monster born from the Community Reinvestment Act for something more sinister, brooding and risky.

Sure, there was talk of loving "free markets" after kicking the private sector out of the game of backing mortgages. At least President Obama talked about the private sector without asking the audience to grab the nearest pitchfork and torch to run them out of town. Mary Shelly wrote the first science fiction novel in history but President Obama is crafting together a humdinger of an economic horror novel that's as scary as anything Shelly dreamt up and as tedious and painful as anything Prometheus endured.

Showdown for the Shorts
Two of three stocks that have crushed the shorts reported after the bell last night. Right now it looks like the shorts have a victory but I think it will be short lived. In fact, Zillow (Z) and First Solar (FSLR) got the Amazon treatment. Be that as it may the shorts get a sigh of relief which means they'll be emboldened to redouble their efforts on all their favorite targets. In the meantime I think both these names come back, especially Zillow which got silly this week popping for a $300 million market cap gain on news of President Obama's town hall on the site today.

Zposted records across the board:
* Revenue +69%
* Traffic all-time high 61 million monthly unique user
* Mortgage revenue +126%
* Real estate revenue +80%
* Display +29%

FSLRposted a solid top line number but is spending a lot of money trying to build a real company while the subsidies last. Actually a smart delay of certain projects hurt the quarter but points to management grasping a better understanding of the longer term. Be that as it may guidance was lowered to $3.8 billion and earnings to $4.25; the street was at $3.8 billion and $4.12 going into the announcement. By the way, GE sold its technology to FSLR which for some means the party could be over as there is no company more connected to the White House. No more subsidies?

I have a feeling they'll keep going for at least three years ... call it a hunch.

Summer Doldrums
The summer doldrums have arrived and each down session will be greeted with speculation about the economy, Fed and how much China will lie with its next round of news releases, but the fact is the market is due for a breather. This is when great opportunities are born.

The Plan
The long overdue pullback could be upon us—actually great news. Essentially the Hotline seeks unrealized value, and I love it when pullbacks mask value even more. The challenge is raising money, holding positions that are under pressure but singling out those that wish to cut bait.

> Now is the time to take profits on (most) trading ideas – I suspect we’ll send out half dozen alerts on our Swing Service.
> Now is the time to close long term holdings where investment thesis has been shattered as opposed to an earnings miss that looks like an anomaly.
> Now is a time to pay close attention but filter out the noise—most guys on television have an axe to grind and none understand your long term goals, so they are not necessarily speaking directly to you.
> Now is not the time to panic.