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Tuesday, November 29, 2022

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Friday – The “L” Word

This week has been dominated by the "L" word.

The Obama administration has been fighting a storm of criticism from the right, keeping a damper on any enthusiasm that may have been garnered pre-passage of a bailout.  "Liberal" is once again being tossed about liberally by the right, using techniques from this instructional video to put down pretty much everything floated by the majority party.  The talking point of the week from the conservatives is that the LIBERALS have hijacked the Obama administration and are putting all their ridiculous programs into the stimulus package

Frustrated by Republican unity against his economic-stimulus plan, President Obama toughened his rhetoric Thursday and moved to wield his personal popularity to overcome opposition in Congress.  Obama's recent courtship of Republicans gave way to blunt derision of their ideas for the stimulus, as he tried to raise the political pressure to pass a measure with a price tag of over $900 billion in the Senate.  Republican proposals are "rooted in the idea that tax cuts alone can solve all our problems, that government doesn't have a role to play, that half measures and tinkering are somehow enough, that we can afford to ignore our most fundamental economic challenges," the President said in an address at the Department of Energy Thursday. "Those ideas have been tested, and they have failed."

So the new Empire is already striking back as those Republican rebel forces try to stop the stimulus Death Star from destroying their economy.  This rapid change of tone was set in motion a week ago when 100% of the House Republicans voted against the stimulus package and that spurred Democrats to press Obama to give up on the idea of working with "Republican obstructionists" and get on with the New New Deal.  This is how things can spiral out of control in seven short days, just 2 weeks into the Obama administration and you do have to feel bad for conservatives, who have fallen out of favor faster than almost any political party since the Romanovs.

I'm not sure that there is anyone who doesn't think we need A stimulus package of some sort, so the possibility of there NOT being one in the near future spooked the markets this week.  Despite the rhetoric, there WILL be one and very likely next week so bets have to be placed on the likely winners and the market is moving on.  Sen. Charles Schumer (D., N.Y.) said the White House has learned a lesson this week about his erstwhile Republican legislative partners. While Democrats may have seen a tectonic political shift regarding the role of government after their electoral sweep in November, the GOP did not.  "This has been an early lesson for President Obama and his team," Mr. Schumer said. "The idea of getting 80 votes in the Senate is now a distant memory, even though it's two weeks old."

I imagine if I were a conservative voter, I may have had trouble getting in a buying mood yesterday as the Dow plunged to 7,850 but, as a card-carrying liberal who wasn't bothered by the doom and gloom being peddled on Fox, the WSJ and CNBC my 10:04 comment to members was: "Dow crossed 7,881, RUT is next test at 429, others look safe so far so I’m thinking going long on the Dow could be fun here and get out if the RUT crosses 429.  This is, of course, risky – DIA $81 calls at $1.20 are a fun play…  DDM is a more aggressive play but the $25s at $1.70 are shaping up to be a good gamble on the Dow getting back over 8,000 within 2 weeks."  We had been bottom fishing ahead of that, as planned in the morning post and by 10:11 we were even more aggressive, shorting the SKF, pretty much at the exact high of the day.

It's very hard to detach yourself from the emotional, vitriolic debates that dominate even the financial channels and focus on the facts to make investing decisions.  As I often say, I'm not bullish per se but I am bottomish at 8,000 and playing a firm bottom of range has served us very well since October but it only took me until 12:15 to call a top on yesterday's rally as we tested our 8,066 target and I found the test wanting and were, of course, expecting a negative reaction to today's jobs numbers to take us down in the morning.  This is still very much a day-trader's market and we still find very few long-term plays we are willing to enter other than our heavily hedged buy/write positions.  I had predicted a flatline for 8 trading days on Monday and this will be day 5 and we are 63 points over Monday's open so far.  This is perfect for our dominant strategy of option selling, where we profit on the premium deterioration of the contracts we sell but Monday will be very interesting as Obama holds his first news conference and details of the BUSH'S FAULT (Bank Under Stress Have Some Failed Assest Underperfoming Long-Term) program to bail out the financials.

One investing FACT we've been watching is the Baltic Dry Index, which jumped yet another 14% today and is looking parabolic at this point.  Oil is still down and if we can pull off a stimulus package that doesn't go straight to OPEC like the last year's $168Bn stimulus did (oil went from $100 to $140 while the checks went out and commodity food prices went up 50%), then we can expect a direct effect on the US economy.  It's 8:30 now and Non-Farm Payrolls were down 598,000 and December was revised down 53,000 more to 577,000 losses putting our unemployment rate at 7.6% or what we like to call a half-Spain.  I said yesterday that more than 7.7% would start sounding too much like 8% and would spook us lower but this one is actually better than feared (as opposed to better than expected) and should help us maintain yesterday's gains into the weekend, probably retesting yesterday's highs.  With a bailout passing next week, bears have to be seriously concerned about being left out in the cold next week.

Liberal spending programs did not spook the Asian markets, with then Hang Seng flying up 3.6% and the Shanghai going a little further at 3.9%, capping off a very nice week.  The Nikkei matched the Dow at 8,076 (up 1.6%) as my week-old prediction that the Yen would top out at 112 and then fall sharply on intervention finally pays off.  Europe is also having a beter week than we are with DAX, CAC and FTSE all testing the 5% rule for the week with the Dow playing the rule of international laggard, up just 1% overall.  The difference is that investors in other countries are looking ahead to the FACT of a massive US stimulus coming and have little concern for the rhetoric surrounding it.  Since the stimulus is aimed mainly at government programs and job creation, without the cash refund component, it is not doing anything to boost commodity prices, which keeps money in the pockets of US and global consumers, which is a good thing…

Another investing FACT is the $758Bn of cash inflows into Municipal Bonds THIS WEEK, a sure sing that investors with sideline money are willing to once again assume some credit risk to get what are now looking like very attractive yeilds.  "State and local government bonds have gained seven of the past eight weeks amid optimism that economic stimulus and financial rescue efforts by the administration would aid the market directly or indirectly," according to Paul Brennan of Nuveen Asset Management.  You won't hear this on the conservative networks as it is directly contrary to what they are telling you when they say the majority of people are against the stimulus – this is a pocketbook vote on the highest levels.

We'll examine the proposed stimulus program in more detail over the weekend and lay out some sectors that should benefit above and beyone our list of "Stocks to Buy at the Bottom."  Our last trade of the day yesterday was shorting XOM as they yet again made a foolish run at $80 and oil has no reason to rally into this particular weekend.  That sector can still be a drag on the markets and we'll see how low they can go today as the dollar bounces back and we enter the last month of winter heating demand with warm weather predicted next week in NY, London, Chicago even Denver and hurricane season still a long, long way away.

 

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Phil – R my posts going into spam??

I will try this again, without the link…ARNA is on the march, most likely due to OREX miss on final endpoints.  To back up, there are many companies in the game for weight loss drugs, but ARNA, OREX and VVUS are in final stage trials.  Orexigen missed the FDA limit of 5% (4.2%).  All other endpoints were met.  Not sure that one will make it.  ARNA and VVUS are in the final lap, with data on ARNA due out in late March, VVUS later in ’09.  My bet goes with ARNA, although there is plenty of room for more.  VVUS problem, their drug is a cocktail of generics (phentermine with topiramate) or another words speed (phen) with a stop sign added (topiramate – an anticonvulsant) (nice). Not sure the FDA will go for that or slap a controlled label on it.

I guess the link i was posting was making it to spam.  There is a link for the companies data anouncements as well as FDA rulings in seekingalpha.I will try it below using the link button.
4.bp.blogspot.com/_Du0YWLylHeA/SWnVuegTlUI/AAAAAAAAAug/3lBe3gQ5E8I/s1600/clinicx11jan09.JPG

Phil, I’ve received 82 emails in the last 14 hours from PSW with the subject [Phil’s Stock World] New Post: Caterpillar’s woes leave it trailing a broader market rally).  This happened thursday too when I received about 14 of them.  Looknig back it’s andrew wilkinson’s jan 26th post.  I’m not sure why i’m "subscribed" to these email alerts
What swtich have the programmers accidentally turned on and why do I seem to be the only one on the receiving end of it?  Please make them stop…

For risktakers, CRIS is an interesting little biotech with a hedgehog inhibitor for cancer.  Cancer is a crapshoot, but DNA recently was talking this company up at the JP Morgan conference in NYC.

Phil – I did use the hyper link in the tool bar.  it put the link in the text box, and then when submitted, it still must have gone into spam.  4.bp.blogspot.com/_Du0YWLylHeA/SWnVuegTlUI/AAAAAAAAAug/3lBe3gQ5E8I/s1600/clinicx11jan09.JPG

OK, just cannot put in its own line.  It must run consecutively in the text.

Phil – we used to live in Westfield when I worked for Merck.  Still have a bunch of friends there working for them as well.  Transfered out to San Diego when MRK bought a biotech, then went to JNJ for a short stint when MRK shut down the site here.  I now am at a private biotech of a bunch of former MRK scientist.  Our founders are ones that discovered Singulair and Vioxx.

Hi Phil,
I’m still in the AAPL earning play, long the APR 80 puts and calls and short the Feb 80 puts and calls.  Am under water a little bit, but not too terribly.  When should I adust this and what do you recommend? 

 This is regarding AAPL. I love seeing stuff like this: tinyurl.com/acr85m

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