Archive for September, 2008

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Market Thought… lets be rational

Monday, September 29th, 2008

After the ‘No’ vote the market began to show signs of a temporary bottom. The VIX to SP500 chart looks pretty interesting here…

spvix

I am not saying that the markets will go straight up here, but imo, the chart is telling me around this level maybe a low point for stocks. Everyone and there mother already knows the fundamentals to the American economy is currently weak, and todays accelerated market declines are reflecting that weakness.

I just keep thinking… What new negative information are we going to findout in the next few weeks that we do not already know or are anticipating?

Keep in mind, I DO think the credit freeze will have really negative implications over the next few months, but I think stocks are discounting this negativity. The biggest indicator here is how inexpensive certain stocks of strong companies getting.

IMO, to start accumulating high quality common stock is not a bad idea. Look at strong players, top tier, players. I am accumulating GE common. Strongly considering MA, but would like to wait for the downgrades to hit (similar to what happened to Apple today), JPM common (mostlikely after they report or when/if it sees high 30s), PWR (as a growth stock gets killed due to multiple compression, but the wind is soooo on its back) and PBR (as I am a believer in peak oil).

Apple got a series of downgrades today in an anticipation of the global slow down, so analysts are now factoring the consumer slow down into their numbers. The markets will overshoot this negativity, and that is the time to act. (Not saying to get into Apple, just using it as an example… I am waiting on Apple for now.)

I would not go heavy on options for a bounce here, but common stocks like GE I already started to accumulate.

(I am still a trader here, and will not hesitate to unload when/if things get overbought. The economy is not going to quickly get out of this economic mess, and I will not kid myself otherwise.)

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Just this once…

Monday, September 29th, 2008

I was hoping to be wrong with the market collapse prediction.

We (the American citizens) will loose far more than $700B in market capitalization via 401ks, IRAs, Pension Funds… etc.

F-n shame. With the No vote, and market collapse, I covered my short position.

Stock valuations are cheap, but that could be an indication of a severe recession the worlds is about to experience.

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Market Thought… ho-hum reaction

Monday, September 29th, 2008

Despite the decline, the market is still waiting for approval of the bill.  Not a collapse, but a sizeable decline none-the-less.  (Most likely because financials can not be shorted.)

The market is acting like a repricing of equities is upon us.  MA and AAPL, to only name a few… but the general commodities as well, suggest a global slow down is upon us.  At the very least US recession that will cause much slower growth abroad.

I am causious here, but I must say stocks are looking juicy, even when repricing for lower growth.

Unfortunately we have still not hit a market bottom.

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That Nervous Feeling

Friday, September 26th, 2008

I am getting that nervous feeling again.  If something materializes by Monday, good, we avert a sudden market drop. But we will not avert a declining market.

Use market strength today to protect.  I am shorting the SPY via March 09 Puts.

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The stand-out Bank

Friday, September 26th, 2008

JPM.  They are, by far, the ones who are taking most advantage of this current credit mess.  I am seeing reports that the WaMu purchase will immediately add to earnings.  By 2009 there will be a 50cent addition, and by 2011 a 70cent addition.

In the near term they are sure to take a hit, as they were exposed to some $23B secured Lehman debt. Despite it being secured, I do not know if there is $23B from the fall to go around.

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Market Thought… look out below

Thursday, September 25th, 2008

Simply put… once the republicans stated they want to create an alternative plan, the futures dropped. I am not a fan of bailouts, but I do know market psychology, and the market wants something to help the financial situation.

IF A PLAN IS NOT APPROVED BEFORE THE MARKET OPEN ON MONDAY, 09/29/08 will by our BLACK MONDAY.

Friday afternoon, end of day, would be a good idea to purchase April 2009 SPY puts. Despite this plan the market will go lower, so even if the plan is passed and the market pops, hold on to the SPYs for future protection.

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GE

Thursday, September 25th, 2008

GE posted lower guidance, and cut their buy back due to the credit mess. (I was waiting to see it from them)  But even with this cut its forward PE is still 12.3 (using 24/1.95).  The economy is weak and GE proves it.  Hence, my small initial positions.

I am looking to continue to build a position in GE.

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Trades – the credit bailout

Wednesday, September 24th, 2008

The $700B credit bailout will most likely pass soon (imo by Friday night), and that will have obvious positive consequences for financials. There should be a market pop on the approval of the bill, and I am playing the pop via GE (primarily) and JPM.

GE’s chart is simply horrible.

ge

The downward spiral is simply impressive in that the markets allowed such a prized company get so inexpensive. It is currently yielding +5%, and if it goes toward 22 or lower I will go heavy for the ‘bailout pop’. GE is also the most sensitive to the economy, as so much of it is infrastructure related, but its one of those companies that should not be in the teens… and if it ever gets there I will go really heavy in the common.

JPM… the chart is interesting here, with the SMA’s pointing higher. With a ‘bailout pop’, JPM should see 46 again.

jpm

I have a small option position in JPM to have potential upside exposure, but will unload on the pop.

The economy is still very weak, as such my current positions are small. Until I see the formings of some capitulation, or values just get too juicy to ignore, I will hesitate to go heavy.

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Positioning…

Wednesday, September 24th, 2008

I started getting in to GE here for two reasons:

1. the indicated dividend is over 5%

2. a play on the bailout market pop we will see

I allocated a bunch of capital to start playing the market, and I am starting to use it.  I still think the markets go down, but the bailout (no matter how much it upsets me) will happen.  I want to capture some of the upside when it does.

Not going too heavy into options just yet, as I still do not like what I see on the tape, but I am waiting for attractive entry points to which I will no hesitate to enter.

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Market Thought… don’t get too excited

Tuesday, September 23rd, 2008

Mr Buffett will be making 10% on $5 Billion… wow, nice. We, the little people, were giving a suggested floor to GS with the $115/sh potential common stock right to buy via the warrants he purchased. Make no mistake, this is good for the financials, but lets not get too excited here.

There are still a lot of issues that need to be worked out with the financials, and the economy in general. Buffett will be making a killing, and will have the 10% (OF 5B) to fall back on when GS goes lower.  GS common stock will go lower. The increased regulation with being a bank holding company, and the increased regulation on leverage that will be coming, will take a toll on earnings, and the stock will be stuck in the mud for a while. (That is why the 500M in dividend while you wait is super key :) .)

GS chart is not good, and the pop it is seeing in after hours, entering tomorrow, will most likely not be enough to break the current negativity.

gs

The market is reacting positively to the Buffett news in after hours, and should cause the markets to pop in the AM. (And investors should be, as he is telling the world that he finds value in a financial, suggesting a bottom to the credit mess.) Unfortunately, the market has not bottomed yet, and the negative earnings will prove it, not to mention the lack of capitulation.

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If the market does pop upward tomorrow, look to short it. The trend is clearly negative.

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Note: For the record, I DO NOT like the concept of using the $700B to purchase the SHIT assets at essentially a ‘mark-to-model’ pricing. If the banks do not want to unload them at ‘mark-to-market’ price, then the gov. should NOT purchase the assets. I HATE the fact that the gov. is going to use my money to bailout the wall street idiots/smucks (i mean… elite).

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