Friday, July 27, 2007

We have nothing to fear, but fear itself.

When the market corrects a quarterly move in one day, most people get the feeling we are heading for some kind of disaster. Because of electronic trading and globalization of markets, what is happening is an overnight readjustment of risk. In the past, this would take months, the past 2 years we have seen it take days. I would use this opportunity to pick up battered names that are still in uptrends.

Thursday, July 26, 2007

An Okie from Muskokee

One of the most consistent ways to make money on Wall Street is to buy what is called deep value. Usually, these are companies that are down on their luck, but have good management and sound financials. These are not trades, but if you take a long term outlook, they will be a great part of your portfolio before long. Examples are energy stocks from 1998, tobacco in 2000, and tech in 2002. My pick today is housing. Every day we see the bad news coming out about the housing market. The stocks have already discounted this as they are hitting 52 week lows. With many trading under book, find the solid management and buy and hold.

Monday, July 23, 2007

Just a Good Ole Boy

If I was a betting man, the trade here is to fade the flight to quality. Maybe get long some closed end hi yield funds which are at 52 week lows, and short treasury ETF's. The flight to safety is a lot like out of the money put buyers after they have taken a hit. Sure it lets you sleep at night, but you are locking into a bad position usually. This was a pattern that I saw in the merger arbitrage game. When no one needed puts, they were cheap to own. Once the proverbial shyte hit the fan, the out of the moneys would trade at ridiculous prices. For example, back in early 2001, GE was trying to buy HON. With GE trading around 50, the deal was worth 52.5 for HON share holders. The spread, where HON actually traded, was 2.50 or 50 for HON. The 40 puts were trading at $.80. Guess where the stock opened after the EU slammed the deal? Thats right, 39. No real protection, but you had to own them.

Wednesday, July 18, 2007

All My Rowdy Friends are Coming Over Tonight.

Isn't it funny how Hank Williams Jr. is more popular because of Monday Night Football than his entire career? I guess its a family tradition.

As posted previously, index break outs are usually short lived. Too many other factors are at work. Earnings season is upon us so crank up the volatility and keep to your discipline. Right now I like some tech names that have not really participated in this quarter's run up.

Back in baseball, the Yankees are toast. Yes, stick a fork in them, they are done. Its time to get Metsmorized.

Thursday, July 12, 2007

Spirits in the Material World.

So did you catch Live Aid? Yes, the one 22 years ago, not the terrible music played last week. Does anyone really care about the Police getting back together? Sting is by far the most overrated musician of the past 20 years. I liked there stuff when it first came out, but it really doesn't have any staying power if you know what I mean.

Massive short covering today. Especially the retailers. Sears misses and guides lower, all the hedgies get short any other retailer, and the first rally they scramble to cover. Index breakouts rarely work as a trade, I am guessing we get some overbought signals over the next week.

Friday, July 6, 2007

No Reply at All

Big jobs number coming. We will see if that 5.25% is tested on the 10year and how it hits the market. I would not chase any rally here.

Tuesday, July 3, 2007

Ramblin' Man

Market has pretty much stabilized as bond yields come down. Today's action, as the 10yr bounced off of the 5% line, will lead us the rest of the month. If the market gets comfortable with 5-5.25%, and we get liquidity back in the hi yield and CDO's, then we can have a continuation of this summer rally. Me thinks the market could hick-up further down the line as earnings will not surprise as last quarter. Still like 1465 support in the SPX.

Enjoy the 4th.