Friday, June 27, 2008

(My pic)

My previous post where I lifted a fairly lucid writing from Tim Knight's blog from April of 2007 is an example of terrific research coupled with poor execution. It fills me with both pride and contempt!

As you know I have little confidence in analysts. I think that the investment research performed on industries (sectors) and the companies within industries, in addition to the economic research, are terrific. But I do not trust buy, sell recommendations.

Look at yesterday. C is trading a little more than a 1/3 of its price just a year ago. Goldman comes out with a sell. A little late to the tea party, isn't it. Shareholders have already come aboard the ship and thrown barrels of valuation into the harbor of derivative discontent! Both Lehman and Punk Ziegel issued overweights and buys earlier. What chance do you and I have in making a well thought out decision when the heavyweights cannot agree?

This qualifies as a genuine perplexion. You either stand aside, or you put some of your speculative money at work. Personally, the leadership changes at all of the places makes me a bit nervous. It is disruptive. And when navigating through a crisis, you don't need disruption. I acknowledge that it is precisely this sentiment that makes a countermove (buying) such a bold and potentially profitable decision. Then again, look at GM.

Someone mentioned the following blog (click on image to be transported). You might find it worth a look:

I've mentioned Carl Futia's blog. Last night I clicked on my link and I found the following from his Jan 14.



The first half of 2008 will prove to be a very bullish period and that the second half of the year will be flat or bearish.

Cycle Evidence . . ..

I omitted the cycle evidence because from where we stand on June 27, there's nothing at all bullish. I don't say this to be a nanny-nanny-boo-booer, but rather to point out that opinions are just that--OPINIONS. Many respected technicians thought the low had been put in. Proved wrong or ill timed. (I've a number of my opinions that fall within that basket!)

There were a couple of curious things (to me) about yesterday:

  • Curious Thing 1: There was mention that that the sell off was not large in volume--so it was not a capitulation sell off. Meaning? There was no selling pressure, but rather an absence of buying pressure.
  • Curious Thing 2: The VIX was not at an extreme high that we saw in other selloffs (which seems to support CT 1).

My cash position is very high. I have some exposure (mostly my chapped behind!) to the market via options (GE calls and BNI puts--not pretty). Nevertheless, I wanted to share with you three stocks, two of which I have a small position in. Remember, this is for the sake of heuristics and never a recommendation.

Here's a chart that I had in my conglomerates chartbook. Everything was already marked, and I thought the break significant. I bought some July 50 puts yesterday. It may touch the redline and bump up. I may hedge buy buying common if renewed strength is shown.

DVR is a favorite of mine. The stock has been acting well--though it might be a bit overbought. I purchased some OCT 15 calls on this.

HERO, which I have NO position in having sold my JUL 30 calls (I've been awaiting an crash in this area--). I made money, but I left lots of money on the table. Note that money flow is currently negative.


nice said...

"A market analyst is an expert who will know tomorrow why the things he predicted yesterday didn't happen today"


That the stock market is selling off with oil rising seems to put to rest the idea that the market is a discounting mechanism - after all the market has been bombarded with stories that oil is going up up up... nothing new...

Friday's in bear corrections lately have been so mechanical- almost predictable - market usually down -inching down along the intraday trendline going lower and lower - then either someone shows up in the last hour or they let go of their machines - and let it drop lower.

Oil stocks really diverging badly lately...

In fact looking at the run in OIL from the beginning of the deacade - each 25% increase in the price of oil is now resulting in a smaller and smaller % increase in oil stocks. Now there is a stock sector that is a very efficient market discounter.

In fact the real correlation with oil now is an inverse one - banks - this is what it is all about - spring of 2007 is when it all began - banks down 50% oil up 100%
- this trade is getting really really long in the tooth

One can understand the selling of bank stocks - but fundamentally who in their right mind would be buying oil at these levels (unless they have to)

A lot of the mentality of people now reminds me of the irrationality around Y2K...

In fact just the other day some noted economist - was saying that all the roads are going to become empty now and people will stop driving - again irrational.

Funny times.


nice said...

"Worst June since the Depression"

"Bloomberg - On Verge of a Bear Market"

And every media outlet news source is flashing warnings about the rising VIX...

Why does the media all of sudden want to scare everyone?

Where were they 1300 points ago LOL


Oil bulls chickened out into close - figured we would close around 140

Anonymous said...

Both DVR and HERO seem to be suffering from increased expenses, acquisition integration, and lower rates/utilisation.

Why your divergent views on the two?

Anonymous said...

nice- thinking hard this weekend about moving to the sidelines, if for no other reason than harrison is already there:

been reading "toddo" for years beginning in the nineties, and i don't believe he's ever made a bad mistake...

wondering what some of the last-i-heard-they-were-still-bullish timers (eg, brinker) are thinking this weekend...