Friday, July 4, 2008

Halftime: Ax 1, Market 0

Happy 4th to all! To celebrate, I've done some reviewing of my first half performance. Take a look:

CNNMoney released the first half winners and losers so far this year. I have to admit, my recommendations are looking pretty good at this point, even if some of them came a little late. Of the S&P 500 biggest losers, I have recommended shorting 3 of the top 6, National City, Lehman, and WaMu. Of the top 3 Dow losers, I recod shorting Citi, the 3rd biggest loser. If you factor in my XLF short, we get even more losers. So I'd say the first half was a successful one. Add in my reco on PXJ, an oil services ETF, and you have additional gains around 15% (in a market down 15%). Gold is up over 10% since I recommended buying at $847. Even SRS, which had been a big first-half loser, is back up to $111, up almost 40% in the last 2 months and down only 8.5% since my first recommendation. We'll take it.

All juiced up this week to buy silver, it went on an unbelievable run the last few days. I will wait for the SLV to get back to $175 and get in there as I am becoming more of a firm believer that this metal is more undervalued than gold. A smart dude from Itulip points out that only 7% of silver is owned by investors, versus over 90% in gold, so if there is an increase in price, greedy sorts like us will rush to get their hands on it.

Having recently solicited opinions from my regular audience on what industries are on the precipice of disaster (not already there like financials and homebuilders), we came up with a few solid thoughts. Auto, as recod last time, remains frail. GM might go bankrupt. Chrysler was taken private (I forgot, although they might go bankrupt too!), so we can't short them. But Tiger Coach reminded me to look into Auto Nation, actually the country's largest retail car dealer. Great suggestion. This reminded me of Carmax, the one-time Circuit City spinoff that resells used cars. I shorted Auto Nation on Tuesday and it's down 10% since then. I have bids out on Carmax puts. Also, on a false 5% bounce, I shorted Sun Trust Bank near $38. It finished at $35 yesterday and was under $34 after-hours.

Restaurants of the middle-tier variety continue to be on the radar. Amusement/theme parks, hotels, and retail also made the list. ``There is absolutely a slowdown in teen spending,'' said Holly Guthrie, an analyst at Janney Montgomery Scott LLC in Philadelphia." When the kids stop spending, Abercrombie and the Gap are finished. Home Depot and Lowe's continue to get pounded and Disney is sinking. All solid suggestions.

PMI's demise brought me to look at the whole mortgage insurance industry, and Genworth Financial, recently having their credit downgraded by a 2nd agency, popped out as the biggest potential loser. Down 50% this year, I still think we have a ways to go. I've been in a bidding war with an opponent this week, unable to fill at the prices I want. Got a little greedy with my lowball offers and could've filled Tuesday for a better price than I asked Wed. Oh well, trying to stick with my lowball bids to make more return on the back end.

Consumer credit delinquencies continue to rise across the board according the American Banking Association. "Higher prices for food and energy, combined with weak growth in personal incomes and declining home-equity and stock values, are making it difficult for a greater number of consumers to meet their obligations, said James Chessen, ABA's chief economist."

By the way, don't forget times are tough out there. A simple call to Scottrade asking for a reduction in fees took about 5 minutes to get my trading costs lowered by 20%. Nobody wants to lose your business, so it can't hurt to ask.

Continue to look for the next big collapse. The thought of buying stocks on the cheap right now seems foolish. I'm contemplating getting rid of my long positions altogether, aside from possibly Google. Each time I make a bottom price for companies such as Microsoft, they plunge through them like they're tied to an anvil.

IOD: Genworth (GNW) 12/08 $15 puts, Carmax (KMX) 1/09 $10 puts, Sun Trust (STI) take your pick, can't lose

http://www.marketwatch.com/news/story/economic-report-consumer-delinquencies-increase/story.aspx?guid=%7B1A63E842%2D4E25%2D44B9%2DB53D%2DCA323471BD07%7D&dist=hplatest

http://www.bloomberg.com/apps/news?pid=20601109&sid=a7WHUo_QBqkQ&refer=home

http://money.cnn.com/2008/07/01/markets/markets_firsthalf/index.htm?postversion=2008070113

2 comments:

Tiger Coach said...

Ax...
Awesome post. You're 100% correct about long positions. I already dumped KO at 56...and only wished I would have done it a year or so ago... WMT might be the next to get dumped. I am no longer playing for the annual return of 5-12%...or a 5-12% yearly loss. That would provide more traind money in the Options account...I will still hold D regardless...

Hell, I would even consider putting the breaks on the old 403B account. For some, it is much more convenient to complain about losing money...that to do something about it. I had one guy disclose that he is down 22% on his retirement account... His salesman said, it's a great time to buy!!!

I am liking your AN play...and STI... Although I am on vacation, count on some additional insight and research from the old coach.

Do you have an exit strategy on C or STI? When will GOOG become a buy opportunity again? FSLR looks like a straddle or strangle candidate as well as CLF, AKS, or ZEUS.

AX said...

Thanks, TC, for the post and AN reco. You've been on the money lately, especially with your BAC puts.

No exit strategy on either C or STI. Both have disastrous downsides. While C will not be allowed to fail, don't know if same is true of STI. Going to hold on for awhile.

I am in effect short D through my XLY puts. Guess we'll have to disagree on that one.

If Google drops below $500, I'll be looking to get in as I should've at $415. All other bets are off for my long positions, will look to liquidate over the next few weeks/months while adding silver if possible.

Enjoy your trip. Heard from your turtles buddy. Long Ambac at $25, ouch!