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2024
August 16th, 2007 at 2:47 am
Wow! See what happens when I get out of my chair!
I took my own advice and layered down the mattress but other than that I didn’t have a chance to make any changes but now I’m getting a bit concerned about my remaining calls so I’m setting stops and looking to take things to 90% cash probably weighted to the puts side until we test 12,500.
At this point it’s panic, not fundamentals driving the market but I just sat down with a guy who lost almost $50M this WEEK as the hedge fund he had trusted just sent him a note saying “gee, we had no idea mortgage backed securities were risky.” Risky is an understatement if home prices start to collapse and a home collapse can spread to a credit crisis (oops, already there) which leads to banks going under, unemployment, a stagnant economy and spiraling inflation ie – the stagflation I’ve been warning about since last year!
Buffett has been jumping the gun with his calls and BAC is another example. He likes to be a little ahead of the bottom to get a good feel but I think his growing sense of mortality is causing him to rush things a bit so I don’t think I’d be chasing him into the banking sector just yet. C still seems like a better play to me as they have better global diversity and strong international credit card revenues.
MAT – as I mentioned last week (I think?) you have to wait for the other shoe to drop. Polly Pockets is a VERY big deal and this recall can poison the toy business. Probably good for Build-a-Bear (who have been in the dregs) and bad for Dollar stores as people make the connection to cheap Chinese goods. I do have to wonder how much of this stuff is just trade war propoganda becuase we all ate lead paint in the 60’s and 70’s and look how great we turned out!
PLEASE PLEASE PLEASE DO NOT FORGET – your options are not worth as much as you think they are as they are inflated by a huge VIX so getting into more cash is more prudent right now. It is a good time to pick up beaten down stocks like MU and selling $1 in premium (10%ish) on something you either don’t mind holding for a while or don’t mind getting called away with a nice profit but it is not a good time to buy leaps as we may have another leg (or more) down and it’s hard to say where the real bargains are going to be.
OXPS – I said last week that the problem with on-line broker trades (and main-line brokers too) is that a big crash can also cause a big volume crash which causes a fee crash and a deal crash so you can’t go by current projections to gage forward earnings. I can’t do this now as it’s a lot of research but you want to focus on brokers who have gained market share by client growth and NOT rev PER client growth as trading volume is very likely to fall off. Non-discount brokers (Etrade) tend to really get hammered in a crash as investors always want to blame someone and those fees really start to be bothersome on top of trading losses.