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Wednesday Wrap-Up

Ha – take that bears!

We are certainly back to the Meatball Market Philosophy where bad news “Just Doesn’t Matter!

Like I said this morning, from this altitude (Dow 12,000+) all the naysayers just look like little ants down on the ground.  Can we hold this altitude?  That will be the trick of the week now that we have made a critical 50% retracement of our drop from last week’s highs.

I don’t have to talk about the dollar anymore as Gary Dorsch has written the definitive article on the subject, neatly recapping everything we’ve been talking about in one massive article.  My thanks to Mike_C for posting this one in comments.

The best summary chart of the bunch is this one, which I call “The Fed stops hiking and the dollar starts crashing:

Of course you can also mirror this chart with the US deficit chart that was under control under Clinton (see steady rise of dollar, coupled with very low oil prices) and quickly turned into a nightmare under Bush II. 

 exchange rates

Our markets are much less impressive to foreign investors than they are to us as they look at the Dow in their own currencies, which have appreciated faster than our markets have kept up.

 

I’m sorry I couldn’t find a more up to date one (perhaps one our readers is a great chartist and could bring this forward) but you get the idea – the dollar has lost 10% against global currencies this year and is down 13% against the Euro in particular.

So your stock being up 13% this year isn’t impressing anyone who isn’t holding dollars in their savings account and shouldn’t impress you either as we need that 13% to keep up with the Joneses or whatever common European and Asian surnames there are.

Finally I’m starting to see a justification for energy stocks!  The multinationals collect global currency and deserve a higher valuation than those companies that get paid in sad little American dollars.  Here’s XOM vs the ten-year treasury note.

So the markets are not actually in orbit – its just that investors (us!) are tripping and THINK we are in orbit – kind of like when you experience some massive physical trauma and get that feeling of floating away from your body… 

DO NOT GO INTO THE LIGHT!!! 

Like I said this morning, I hate to be a downer as it’s bad for ratings but someone in America has to mention this as I have not heard a single analyst mention this all year – and you would think it’s sort of significant!

I was trying to come up with an analogy for this and the best one I could think of is that we have become cold war Russia!  Our government lies to us (hiding the M3, one of many examples) and the media goes along with it and the press doesn’t tell you what you don’t want to hear allowing the people to drift through their lives accepting the status quo, despite the fact that the rest of the world thinks our country is a disaster!

So does this really matter?  No – as long as you can be happy buying American goods and services and don’t have a hankering to travel too far from home, we are lucky enough to be in a fairly self-sufficient nation that can probably get through a crisis but be aware that there is an inflation storm on the horizon that may or may not be the government’s goal, as I proposed earlier in the month.

None of this stops us from making money, we had a heck of a good day today in fact, but let’s just make sure we all know this may very well fall apart on us and make sure we are nimble enough to jump tracks without getting squashed by the oncoming train!

=======================================

As I said, all our indices made a 50% retracement of their drops – it’s all about the follow through tomorrow so we will wait and see.

Oil was a disaster, gaining close to 3% on the day ($62.46) and coming to rest only at the 5% rule.  Although it was the usual last minute pumping shenanigans that got it there, that’s what the chartists will see in the morning and we’ll have to plan accordingly.

The dollar held firm as the Beige Book figures looked generally good and, of course the GDP was better than expected (although expectations were very low).

Gold held flat for the day at $641 and platinum will be testing the 200 dma at 1,163 today but copper remains weak.

====================================

I’m not too proud of my picks today other than an intraday short of the Q’s that netted a quick 40% as that one took timing but our monkey with a dartboard could have picked winners today.

BA Jan $90s ran up to $2.90 (up 20%) while the Jan ’08 $90s are back to $10.10 (up 68%) and we should consider selling the Jan $90s against them if they get back over $4 to protect a double.

CAT Jan $65s inched up to $1.10 (up 20%) and our Jan ’09 $60s came back to $11.80 (up 21%).

COF went crazy this morning and we sold the Jan $75s for $5.20 while our Jan ’08 $75s finished at $12.30 (up 23%).  As I said in comments, with a $4.80 basis, I don’t mind if they call me away for $10 in January!

DOW Mar $45s finished up a dime at .35 but I didn’t do the DD as oil seemed too high.

GE had a choppy day and the June $35s finished up a dime at $1.85.

We grabbed HD $37.50s for .70 on a takeover rumor that is, so far, unsubstantiated but I thought they were ready to break out anyway.

JWN Jan $50s finished at $2.65 (up 32%) and our Jan ’08 $50s rose to $7.50 (up 44%).

As I mentioned, we were in and out of the QQQQ $40 puts in comments for a very quick 40% profit(.50 to .70) as we picked up on SOX weakness.

Our TIE June $25s shot up to $8.10 (up 20%) and I sold the Dec $30s for $1.40 to lock in the profits for this month.

TIF Jan $35s shot up to  $3.90 (up 80%) but I was half out at $4.20 with a $3.60 stop on the rest.

I was in and out of TXN for a dime loss as it moved the wrong way.

I grabbed the XLE Jan $58 puts for $1.25 as it just seemed too high but now that I’ve thought about this global valuation business I may have to reconsider these oil puts.

I couldn’t help taking theXOM Jan $72.50 puts for .80, as well as the $75 puts for .65, which actually made a dime so far!


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  1. Phil, what do you see as see catalyst that will move MOT up? That whole sector taking it on the chin as of late and no apparent ties to the iphone, I don’t see much in the way of price propelling news in the near term.

    What am I missing?
    Thanks


  2. To add to my question; is the conference today just standard pr, or possibly a product announcement?


  3. What about SNDK, will the Zune (disappointing as it may be) hurt SNDK much more than APPL? Those 42.50s are looking shaky, down a third.


  4. MOT – Press release Dec. 6th – my bad.


  5. The Gap Inc. on Thursday said November same-store sales fell 8%, lower than the forecast for a drop of 5.4% in a survey of analysts by Thomson First Call. The Gap said it sees its fourth-quarter inventory per square foot up in low single digits.


  6. Looking like another blowout day for the oil stocks.


  7. What will move Mot?

    http://www.financialexpress-bd.com/index3.asp?cnd=10/30/2006&section_id=4&newsid=41935&spcl=no

    http://news.monstersandcritics.com/business/article_1226357.php/China_enjoying_cell_phone_sales_growth

    http://business.uzreport.com/aziya.cgi?lan=e&id=24263

    This goes on and on, the only question is when will the story get its 15 minutes of fame but that’s why I said that MOT is a play we make monthly (in addition to our leap) as it will suddenly hit one and we’ll be sorry we missed it.

    ===============================

    There are so many things the conference could be about (but not Apple):

    BT has selected them to deploy WiFi in the UK
    There is a mreger/purchase rumor but it’s vague
    They may be giving guidance to counter/confirm NOKs lowered outlook

    ===============================

    I didn’t like SNDK on SOX weakness yesterday, but, in general I like them and still at the April $42.50 level


  8. Phil
    Spend some time yesterday reviewing the stocks picks (not options)

    Gee I should have updated your spreadsheet and emailed to you -next time

    Anyhow tried to pick the laggards and came up with
    STEM
    ZNH
    BLSI
    Would you agree and/or have other picks?

    Thks again


  9. Yeah Thanksgiving put me way behind and I have a lot of work to do this weekend to get caught up – back to that same old problem, I need staff!

    I never used to keep a spreadsheet and I started doing it because people asked but it is extra work in a busy schedule…

    Check my morning post, if it’s a stock – I’m not wild about it right now.

    Stem was up 12% and stopped out at $3.30 (up 5%) on that big drop. I like it again down here but not to fight the market – this is a long-term democrats change the laws kind of play, could take 3 years!

    ZNH stopped out at $20 on it’s drop (my stop was $21 but it blew through it) and I’m not getting back into an airline with oil at $63

    BLSI stopped me out at $2.60 for a loss and I like them at $2.40, but then again I liked them at $2.80 and look where it got me so I’m not enthusiastic about them right now.

    I’ll hopefully have a chance to go over more of these this weekend but these markets are looking very scary right now!


  10. Phile\,

    Re your MOT comment on yesterday’s wrap up:

    ” . . . MOT is a play we make monthly (in addition to our leap) as it will suddenly hit one and we’ll be sorry we missed it.”

    I think I would like to hold MOT, may I ask your leap suggestion ?
    Tx, JR


  11. MOT leaps we have are Jan ’08 $22.50s, we were back in at $2.65 after stopping out at $3.10 last week into the holiday.


  12. Phil/The Masses,
    Any opinions on China Mobile’s (CHL) recent pullback, a buying opportuinity perhaps? I’ve looked at some of their figures and, frankly, they look incredible. To my eyes there’s still a lot of value in the price.
    JOH.