Thursday, March 5, 2009

You Should Be Buying Stocks

No, that's not Crammer on his daily whine but your new President, Barack Obama, stating quite the opposite of the obvious. Translation-We're screwed, and if I have any shot at a second term I need the market to go up and fast! For our President to be making such statements is really unethical, calling on us to burn through even more of our hard earned money. If the last 18 months have not taught us that our leaders, both financial and political, have not a clue, then we haven't learned a single thing.

Show me one chart that led to this conclusion, a 55% drop in the Dow. Look at the headline numbers on Marketwatch comparing stock prices from just a year ago. GE at $38, GM at $22, BAC and Citi in the $20s. And now, literally penny stocks. I steered this ship astray when I recommended giving Citi a go at $8 as a hedge against a fally. It's only a matter of time before nationalization takes what's left of shareholder value and I apologize.

But at the same time I foresaw continued destruction. Just last week the bet of the day said Dow 6,500 before 9K and, uh, here we are. Gannett has fallen to $2 from $7.50. MCRI, as Tiger Coach and I both held our breath for expiring puts, has fallen from $10 to $4 in just 2 weeks, sending our March puts from 50% negative territory to triple-digit gain territory in that time. We have both recommended going again given MGM's nightmare and shorting MCRI to 0 with a June time frame. SKS under $2, NYT under $4.....and European index funds have been destroyed. I first recommended shorting the DJ Euro 50 via the VGK when it was at $64 a few months ago, now, $27.

And yet everyday, a call for the bottom. And where will that come from? Nobody can qualify to refinance their mortgage. Layoffs tomorrow might be the worst in 60 years. The government is pushing stimulus to encourage more spending of all things, but, as John Markman points out, if the savings rate hits 10%, earnings could be cut 50%, leaving the Dow in Itulipville around 5300 (and gold through the roof not coincidentally).

So where does that leave us? I'm thinking about cars and oil. Cars bad. What's left at the top should be shorted. That means Toyota and Honda, possibly Daimler (but puts are very expensive). No market for these things. I've read several articles talking about how Toyota has had to lease cargo and empty lot space just to store all of their unsold cars. Even if a GM bankruptcy is imminent, I don't think the resulting collapse of suppliers and jobs will be good for business. Oil? Only a matter of time. Perhaps time, that is, to roll the dice with DXO and a 2-5 year time frame. If oil hits $60, you win. If it hits $100, you really win. If it hits $200, jackpot. Also, I'm pretty sure it can't go to 0, so with the DXO trading at $2, it's worth a thought.

http://www.bloomberg.com/apps/news?pid=20601213&sid=a8ta_MEhUZ9E&refer=home

http://www.marketwatch.com/

http://articles.moneycentral.msn.com/Investing/SuperModels/shoppers-pass-on-passe-name-brands.aspx

5 comments:

Tiger Coach said...

Ax... Great entry... If I didn't know better, I would swear that the powers that be like this downward spiral to push through a radical political agenda...

I would like to see the market open big to the upside, and finish down for the day so our puts would be filled.

Unemployment will fan the fires of fear.

TC

P.S. Did you know that Joe Biden is the guest speaker at the ALF-CIO conference taking place in Florida.. Maybe it is driving distance for you:)

AX said...

Unfortunately, the continued demise of our economy has given ample ammunition for the most dreaded of all Conservative figureheads, Rush Limbaugh, to have a platform. What is he, like 800 pounds now?

DCNorth said...

Rush always looks like a tanned gorilla to me. I can't believe that he still draws the crowds that he does!

DCNorth

Tiger Coach said...

Gentlemen,

Rush... do people really listen to that guy? I thought he was a jackass when he was popular... any demagogue whether he is the radical right or the loony left has a tendency to turn me to the next station... Evidently, Rush is rooting against the entire Obama administration... who has been popularly elected to guide our great nation!!! What an idiot!

Let's make some money boys!!! DC North has a wedding to pay for... and we have kids to put through school!!!

Ax... Question... Do you think we are in position for another bear rally??? Regardless, I believe it gives us more opportunity... that is as long as TIME is on our side!!!

Wish I would have acted on DC's latest info.. Although, MCRI is a sympathy play here!!!

AX said...

unfortunately, I do think that there will be an upswing at some point, not based on any great news but the bombardment of "oversold" mantras from the MSM. So I don't think we need to rush to add new positions, just keep putting lowballs in and if they hit, great. An Australian manager who made 236% last year with his Black Swan fund said options are very expensive right now, and he's right. That's why the double ETFS might offer better value right now.