Tuesday, July 1, 2008

Buy and Hold...Until You're Broke

Bananas. Not only this market, this economy, but actual bananas. 40% increase in the last 2 weeks. And yet, we're fighting off recession. Well, not everybody thinks so. CIBC World Markets thinks gas will be at $7 in the next 2 years, eliminating millions of cars from the road and wiping out the ability of Americans making under $25K to even own a car. But hey, that non-core stuff like food and energy doesn't affect us, does it?

That's why we continue to get stellar calls from our investment community. Remember, at $45, AIG was the buy of the decade. What is it now at $27, the buy of a millennium? "Sentiment is so negative right now that you can't help but make money in some of these companies if you take a three-year, buy-and-hold horizon," Brian Rogers, CIO of T. Rowe Price said last week. Sage advice from a fund manager whose primary fund is down 13% this year.

Tell me if you've heard this before. "Lehman shares rise on overweight rating." Do these clowns never learn. After hours yesterday Lehman took a big leap back over $20 (woo-hoo) on this upgrade from Morgan. Thanks guys, weren't you also overweight when the stock was at $80?

GS came out yesterday and recommended shorting Europe. That's right, the whole continent. Why? As crash protection. They recod shorting the DJ European Stock Index, when I figure out how to, I'll let you know.

Remember PMI insurance, when people could actually get loans and had to cover the rest of their mortgage? PMI, the company, is now trading under $2.

Continuing our theme of trying to get ahead of this disaster, we're still looking for the next fall-off-the-cliff play. Casinos have proven not to be recession proof. Restaurants like Cheesecake Factory and P.F. Chang's have blown up, but Darden owner of Red Lobster and Olive Garden, has survived. Will that last? GM and Ford are finished. But what about Chrysler? At $60, Daimler stock has been cut in half but there may be a long road down from here.

My faith in the future destruction of this market remains intact. I continue to think that I need more downside protection.

Getting back to my airline short/long suggestion of a few weeks ago, here's how a few of those options have done:

United (UAUA) 6/16 1/09 $2.50 .60-6/30 .80-+33%
Continental (CAL) " " $5.00-.65- " .90-+38%
Delta (DAL) " " $5.00-1.90-" 2.10-+11%

Granted, there is little activity on these options and getting good prices may be difficult.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ahmkboBVHNeg&refer=home

http://www.marketwatch.com/news/story/nows-time-buy-hold-says/story.aspx?guid=%7BD096972D%2D7D53%2D4F59%2D8B7D%2DA275464B76A0%7D

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20080630&id=8846504

http://research.cibcwm.com/economic_public/download/sjun08.pdf

4 comments:

said...

Ax.. You'll note that the buy-and-hold strategy is usually presented by people during select dates...and often times will leave out bear markets like we are in today.

I do D.C.A. in my 403 B with 100% in VGPMX... I also do the same with WMT and D.

Are you interested in tracking one financial guru's picks like I do on megatrends...holding their feet to the fire....

I think AN is a great play...JCIS could be the other.

Watch out for HBC.

BD

AX said...

Thanks, TC. Anon and I had a heated debate about DCA today as I think it is a losing strategy long-term. It only works well if your stock goes up indefinitely or if you buy at a relatively cheap price. If your stock goes down over a period of time, then you are just buying losing positions over and over again.

Up and running on AN. Carmax is its evil twin and should be shorted as well. Daimler with terrible sales after the bell and Starbuck trading has halted...sure that will go well.

Anonymous said...

Good to hear someone is actually tracking the records of these "experts." A recent MSN piece on Jim Cramer's record suggests his show should be cancelled.

AX said...

Crammer has cost a lot of Americans money while he took 3-7% profits in his pumped up suggestions over and over. It's been tough going for even our finest investors this year. Greenblatt down 37%, Ackman down almost 20%, an Einhorn down about 5% (as per Itulip/per Seeking Alpha). Source may not be reliable, but Ackman's position in Target may affirm this, down 30% this year.