understanding the psychology of behavior

Enough said.

(NY Times Op-Ed)

As I was reading Coke’s earnings report I took away that emerging market consumers are not doing as badly as the US.  This may correlate to a positive reaction to Mastercard’s earnings on Nov 3rd.

Let MA come down some, hopefully to 160, which will give it a year ending PE of 18 (160/8.81).  Could be an interesting play with respect to a better than expected international performance.

Zig, while others keep Zagging, that is the way to beat the gorilla of a market.  The SP500 is quickly approaching pre-credit crisis levels, and stock valuations (for most) have come up to the ressecion price market that is to be anticipated.

IMO, I do not think the markets will breach 1100.  The reason I pretty much went ‘all in’ on Friday was to play the value created by the dislocation from the credit markets.  My play on equities was a play on credit markets getting to where they need to be.  Now equity prices are coming into the current economic situation… so I zig.

The plays I pointed out in a detailed way included…

MA - from 146 to now around 180… +23%

PBR - from 25.50 to now around 35… +40%

GOOG - from 330 to now around 390… +18%

GS - man-oh-man if anyone sold the Oct 90 Puts on Friday is sitting pretty. From an equity perspective 87 to now around 125… +43%

JPM - 36 to now around 44… +22%

If you are sitting on these type of gains… gains made in TWO DAYS… and are not selling, I have no… NONE… pitty for you WHEN the market goes lower due to the normal economic negativity.

I will begin shorting the market when it gets over extended again.

to say the least.  Some of my targets were reached today, as indicated by my previous post. So you can bet your ass I sold some.

Overall today was a good day… except for GE. I am pretty disappointed in GE.  IMO, the company is simply not trusted by the street.  No matter how they positioned their infrastructure biz (which is postioned really well for high growth), management has lost credibility (especially with Baron’s… how many negative articles can they write?)

Anyway… with GE shares moving upward toward the end-of-day, I unloaded a few and my options within the company.  I still own a bunch, but I will be trading GE more conservatively, and strickly for income.  I will probably not unload the share I currently have, and maintain them for the dividend.  On top of the dividend, I will be selling calls on GE, and letting the calls expire.

All-in-all, if the dividend is maintained, I will be looking to yield well over 10% a year on GE… assuming the stock does not collapse due to a dividend cut. 

The only fustration I have getting my orders filled are the brokers going too slow for me.  There appears to be technical difficulties with the online brokers.

But I started buying… annoyed in that I do not know if my JPM order got filled, and I am watching it rocket!

I started to add common on MA (initial position at the 150 level).  I placed limit orders for PBR around 25, and JPM around 36. And I have plenty of GE (waiting for after earnings to add)

Too inexpensive to ignore. The market is now at a severe discount due to the troubles in the credit market.  Stocks have value, the market players are ignoring this value.

Playing common because I do not want to deal with time decay, as I do not know when the credit markets will start to act normal (which will have an immediate effect on stock prices, pushing them upward).

PS… with the Fed Commercial Loan help, there should now be no question to GE’s insolvency… there is no threat now.

Entered positions in:

GE (Will add even more if 20 is broken downward.  This recent capital requirement was not needed, they did it to satisfy the market.)

PBR (Peak oil is real, and prices will stay high until alternatives slow the use of crude. Will add more around 37.)

PWR (Did anyone even bother to see the PTC was passed yesterday, and the alternative space has one common theme… upgraded Power Grid. But multiple compression is a bitch to deal with. Will add more if below 20 is observed.)

Still waiting for downgrades on MA, also BNI. Valuations look good, but downgrades should be coming as the global economy has slowed. (IMO, these downgrades will be lagging.)

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.

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.

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.

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.

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.