Saturday, May 17, 2008

Rational Investors?

Shockingly, the Dow didn't go up 1,000 points yesterday when housing data revealed an 8% increase in housing starts. What that proved was 2 things. 1, that number applies to multi-family dwellings with a mere +/- 14.5% margin or error (single home starts down almost 2%) and 2, even the bulls realized that adding homes to a market with glut is a terrible idea. "At this point in the Housing cycle, only two metrics that report stronger than expected results—Sales and Pricing—should be rewarded in the market.”

"Department stores Kohl's Corp. (KSS) and Nordstrom Inc. (JWN) reported double-digit declines in fiscal first-quarter net income amid one of the worst consumer spending climates in almost two decades." While Kohl's isn't quite the benchmark that Walmart is, a 27% decline in sales does not bode well for the economy. Discounted discounters are getting killed and top-line numbers have been a joke across the board due to all-time discounting efforts.

Two shorts heading in the right direction. COF finished another down week briefly falling under $51 yesterday. Purchased at $50, the volatility in the puts may even provide profit as the stock returns to that level. NCC took another 5% hit as other small lenders such as KeyCorp were downgraded yesterday. However, I'm still stuck on the other side of the strangle so will hope for an even more precipitous decline and then hold on for any ride up to increase profit/reduce loss.

Will work on a diesel analysis the next few days....

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