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Friday, March 29, 2024

Wednesday Wrap-Up

An Apple a day makes Dr. Bernanke go away apparently!

We have one happy group of traders at PSW as Apple is one of our "core" holdings and we've been loading up on this recent dip.  While we are not yet ready to declare victory (that comes at $150) we are certainly in a very good mood seeing them make a huge turn today.  The big move came after hours today as Tim Cook (COO) made a presentation at the GS Technology Investment Symposium and effectively negated all the BS that's been used to take the company down the past month.

Companies like Apple and Google that have policies of not talking to the press between official releases are favorite targets for hyenas, who have no such restrictions and spread rumor and innuendo with impunity as people like Bill Ackman can be spectacularly publicly wrong in their attacks knowing that they will still be invited on CNBC and treated like an expert the next time they want to assasinate a company they are short on and they can sleep soundly in their beds knowing the SEC is also asleep at the wheel.  Even a blatant fraud like Henry Blodget (who was rated the #1 Internet/eCommerce analyst by TheStreet.com in 2000) is still treated like a venerable analyst by the media but, then again, so is Cramer.

Speaking of CNBC, I love the Fast Money Recap from Tuesday night: "Google GOOG fell today on news that clicks on its site, a source of revenue for the company, were flat or down. Macke predicted that the next CEO will reduce headcount. He added that Apple AAPL hasn't been working. He advocated avoiding the two stocks.  Adami noted that Google at $513 has typically been a good level to trade around. He cited a new algorithm as a potential catalyst and called it a value stock at 18 times forward earnings. Najarian said he'd wait to see institutional money in the name." 

Yes, by all means, don't buy until everyone else does!  With advice like this it's no wonder traders are losing their shirts this month.  If you listen to the media when they tell you to panic on the dips and wait until everyone is back on the bandwagon to buy again then you are, by definition, selling low and buying high.  While they may be able to get away with that schlock advice during a massive bull rally, in a choppy market this kind of trading can shred your virtual portfolio.

We have made very few trades in the past two weeks because IT'S NOT A GOOD TRADING ENVIRONMENT – that's not complicated is it?  When it snows we don't go to the beach and when it's 100 degrees out it's usually not worth a trip to the slopes but why is it people feel compelled to trade no matter how harsh the conditions are?  Are we compulsive?  In 5 posts this week I made one pick – GS $180s, which doubled today.  There are plenty of opportunities if you wait for them…

The GS trade worked because this morning I said: "At $1.50 to the Euro, we can expect a lot of M&A activity from across the pond – this was the logic in taking BX in the first place.  Meanwhile, GS is down but not out as they still have their fingers in the same pot.  This morning’s drop will give us another shot to pick them up at $170, so I’ll be adding some $180 calls at the bell for a quick mo play."  By taking a FUNDAMENTAL view that GS was falling for no good reason, we were able to pick up the calls at $4 while the stock was going down – you need to make a stand in order to make real money!

We took the money and ran, of course – how could you listen to Bernanke and NOT be worried about the financials?  The Fed Chairman was full of doom and gloom today, listening to his statements I looked at the TV and was surprised he wasn't wearing a T-Shirt with "STAGFLATION NOW" printed across his chest.  The dollar dropped to yet another new low as he spoke, finishing the day down at 74.17 as the Euro gained another point and the Yen edged another 2 towards the magic 100 Yen to the Dollar mark.  Let's not forget that Japan is a country with a 0.5% interest rate that's been in a 20-year recession AND THEY ARE GAINING ON US! 

According to the Chaiman: "The economic situation has become distinctly less favorable since the time of our July report.  Strains in financial markets, which first became evident late last summer, have persisted; and pressures on bank capital and the continued poor functioning of markets for securitized credit have led to tighter credit conditions for many households and businesses.  The growth of real gross domestic product (GDP) held up well through the third quarter despite the financial turmoil, but it has since slowed sharply.  Labor market conditions have similarly softened, as job creation has slowed and the unemployment rate–at 4.9 percent in January–has moved up somewhat."

"The risks to this outlook remain to the downside.  The risks include the possibilities that the housing market or labor market may deteriorate more than is currently anticipated and that credit conditions may tighten substantially further. Consumer price inflation has increased since our previous report, in substantial part because of the steep run-up in the price of oil.  Last year, food prices also increased significantly, and the dollar depreciated."  OK Ben, you can stop now, we get it!  Despite Bernanke's dire statements, the markets held up fairly well but I predicted we would test 12,750 this week and I stand by my prediction that failing that mark will be a good reason to short next week.

Of course our man Ron Paul got right to the point – what the hell are we doing about the dollar?  "Inflation comes from the unwise inrease in the money supply, not higher prices…  If we continue to purposely debase the value of our currency it destroys the incentives to save and puts more pressure on the Federal reserve to create (air quotes) capital out of thin air in order to stimulate the economy which only goes towards misdirected investment of the type that caused these bubbles in the first place."  Is Ron Paul the only guy in Washington who gets this?  Here's a great video that shows you where Bernanke gets his BS excuses from!

It's all very sad but, as I keep saying, all very priced in at this point.  The real thing to watch is a move by China to close factories ahead of the Olympics in an emergency effort to cut down on pollution.  This move in itself is huge as the 6 provinces under order to curb production are larger than France, Germany and Italy COMBINED but the real impact will be on future growth targets for China as it's finally obvious that an economy can't grow at 11% a year indefinitely – something has to give and, in this case, it's people's lungs…

Among plants closed are a number of steel mills, which explains the runs in that sector,  High polluters like chemicals (good for DOW, DD, XOM) cement (CX, EXP, TXI) are also being shut down which will translate to a drastic slowdown in construction (bad for CAT?) with the Olympics still over 5 months away.  In Beijing, there also are plans to curb the use of autos and halt construction before the Games to clear the air.  Part of the city's massive construction works could also stop as early as May, according to people in the industry.

 

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