Thursday, June 26, 2008

So Much Bad News, So Little Time

There's barely enough time to keep up with all of the bad news these days. Just in the 3 days since we last spoke, The Fed has done nothing while inflation (as per Buffett) soars out of this world. OPEC says oil will hit $170. Gold spiked $30. RIM, Oracle, and Nike have all gotten hammered, and oh, by the way, Citi was put on GS' sell list (with conviction!).

As I've lamented before, I don't have enough money to follow through will all of the trades I'd like to. Yesterday on the post-Fed bounce when Regionals had a brief moment in the sun, Sun Trust was trading near $40 and BAC headed towards $28. I had to take my pick of losers this week and settled on Citi as the biggest threat to go bust of them all. I bought 1/09 15s, and thought that the Fed might make an announcement that would crash the market. Well, that didn't happen yesterday, but today is looking pretty good. I would've preferred to pay yesterday's 25% discount prices, but still cheaper than if I bought last week. We're going to sit on this like our COF puts, like we should've with our LEH puts.

Hate analysts as you know. But I did see that one of my longs (yes, I have a few), FCX, was mentioned as a cash generating machine that broken up would be worth about $250 (now trading at $119). If that happens before Jan of 2010, I'm in very good shape. Furthermore, she thought the company would be bought out at over $200 in the next few years....

Let's cover some more alarming news:

Bloomberg reported a survey yesterday that revealed the continued slow death of the American consumer. "Seven in 10 of those surveyed say higher gas prices have caused them ``financial hardship.'' More than 1 in 3 respondents say they have cut back on their spending over the last six months as oil and food prices surged and unemployment rose."

Just another long reminder, my PXJ bet has paid off and would be even better had I added a little in the low $20s. Here's another refreshing reco from an analyst, 2/21. "Sonya Morris, editor of the Morningstar ETF Investor newsletter, said that exchange-traded funds and notes that track specific niches are highly volatile investments that aren't worth buying unless they are "compellingly cheap." With that in mind, Morris issued sell recommendations on five energy plays (including PXJ)." During that time, PXJ is up over 20%, market down over 5%.

"Shares of American Express Co. fell 1.6% after the firm's chief executive said credit indicators for the U.S. economy were weakening." When things are bad for Am Ex, don't think Capital One will do well.

Continuing, let's pound our favorite financial, Citi. "We see multiple headwinds for Citigroup including additional write-downs, higher consumer provisions as a result of rapidly deteriorating consumer credit trends, and the potential for additional capital raises, dividend cuts, or asset sales." Sounds promising. Also, Citi said this week that they may return to raising credit card fees for "no reason." I guess we know what the reason is now, but after promising not to do this, makes them look awfully bad.

A return to bashing of analysts please. There has been so much bottom calling and flip-flopping on financial calls just within the past month, how can anyone take these guys seriously. "Merrill's Guy Moszkowski, the top-ranked brokerage analyst in Institutional Investor's annual survey, on June 11 changed his rating on Lehman to ``neutral'' from ``buy'' and cut his target price to $28 from $36. It was Moszkowski's fourth call on Lehman this month. He shifted to ``underperform'' from ``neutral'' on June 2 and recommended investors buy the stock twice, on June 4 and then on June 10, the day before he moved back to ``neutral.''

That's helpful, right up there with Dick Bove's sage advice. I think Bove is a French word meaning pimple. He recently lowered his price target on Sun Trust Bank by 33%. Thanks. On Tuesday you're worth $60, today $40. I was just kidding when I said $60, hope you didn't buy, ouch....

IOD: Citi 1/09 $15s


Tiger Coach said...

What a roller coaster ride for the stock market...with more volatility yet to come.

How can the professionals in the analyst community sleep at night knowing they are literally killing the future of so many investors with frivolous calls of a market bottom, and pumping stocks which have no purpose to be pumped?

There really needs to be a site dedicated to the recommendations of these guys...I wish there was more exposure! Wouldn't it make a great segment on the CRAMER Show or Taking Stock?

AX said...

Huge crash today. We should actually be happy these guys are out there, providing us with a blueprint of what not to do. How many times have we heard "oil bubble," "gold bubble," "market bottom"? Cramer has a proven track record of being wrong. Let the masses get led by CNBC, Cramer, and the journal while we do our own research and face economic reality.

Anonymous said...


I don't know where to start. Loved the blog! I think deep down you have a love affair for Citi but you hide it so well.

I wish I took your advice on PXJ way back when great call.

Tiger Coach's idea of a site dedicated to the "outstanding" recommendations made by analysts is great. Maybe you should highlight some of the worst calls made in an upcomming blog.


AX said...

That would be simple. See all analysts all of 2007-2008 for bad calls (sans Whitney who called financial crash in 11/07)