Archive for March, 2008
Monday, March 24th, 2008
Ok I just watched Fast Money and I’ve decided that the refiner trade is going to be my next move. I’m pretty short now but still I have to hedge those shorts but this short will have to go against the grain as oil goes down, refining margins go up. Like last year, the refiners ran up last year with the crack spreads going up but it looks like it may run up again but there are a lot of factors that may contribute to the raise.
1. Oversold
2. Rising Crack Spread
3. Higher Short Interest
The three subject stocks are Tesoro (TSO), Valero (VLO) and Frontier Oil (FTO) I don’t expect the stocks to go too far lower as they are all hitting lows and support levels. See the charts below. I’m debating about which stock to purchase as I plan to sell some upside calls just in case. Or perhaps just buy some calls strategically. Still up in the air. See the charts below. I played with one of them as you see the trends and the supports.
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Monday, March 24th, 2008
Ok people, remember we’re in a BEAR market and don’t get too into the euphoria. A lot of money is in the side lines and they are still waiting so calm down. The run in financials is probably a nice sign as well as the run in technology today. But hold those horses and keep that cash as it doesn’t seem like the big money are in yet. There may be some window dressing as we move toward the next quarter but we should probably take this opportunity to sell what losses we have recovered on our longs or sell to keep our profits because the financial crisis is not over. Here are a few reasons:
1. European banks will slowly reveal more damage as they should come clean as well.
2. Banks with large lines of credit loans will see large losses as those loans are based on extended values of homes that will reach peak default status within the next 6-12 months. Expect more write offs.
3. Consumer spending will dry up more as credit cards are being used up and cannot be refinanced with lines of credit. Expect more defaults and write offs.
4. Although there is more liquidity, lending standards are more strict and that is not going to change anytime soon so consumers and businesses still don’t have the money although the institutions that lend are in better shape. But less lending equals lower profits and revenue.
So sells the rips and buy the dips. It’s ripping so at least start selling.
Currently: Holding NMX out of money calls and COF in the money putts. Net short.
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Tuesday, March 11th, 2008
It looks like the federal government and the central banks around the world are weary of the decreasing amount of wealth in consumers in the United States. The decrease in real estate equity is one factor. The decrease in stock value is another factor. The decrease in income as opposed to inflation is another. Of course the slowing job market is a major one. With the decrease in property tax revenues a lot of states who are already in financial problems are cutting jobs especially in government services such as educations and social services. So now it’s eventually going to lead to a business slow down as we have to lower work force and spending which creates the downward spiral we call a recession . So now we’re all pretty much hoping on the recession bandwagon, the central banks have to attempt to slow the crisis. With their move to exchange liquidity in the market by exchanging treasurers for mortgage back securities, it tremendously allows banks and business to use their deadweight securities as collateral to borrow against. This is pretty much more significant than any rate cut at this time as it’s a credit and liquidity issue.
I think the bears do have something to think about with today as a starting point as the solutions start to appear in the market. Although the long term problems are not gone by any means, in the short term, there seems to be a few catalyst to push the market up to 12500 or so before another downturn. The catalyst include investment bank earnings and the fed meeting next week. There will probably be momentum going into these catalyst so it’s good to be quick on the long side or not in the market at all. I took off all my shorts last Friday and I’m long NMX and FCX but unfortunately, I did ride the punishment yesterday on the FCX as all the material stocks got punished but it looks like today will probably go back to positive and I’ll probably start taking off the position as the market rises slowing into the end of the week. But once again, good luck people and trade well.
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Friday, March 7th, 2008
It looks like the market will rebound today as I expected. I cut all my shorts yesterday which was one day too early but profit is profit. Sometimes I’m a little hard on myself for even missing a dollar of profit but as you get more experienced, you learn to live with your wins and not regret your missed opportunities because every day that the market is open, there will be plenty of opportunities. There is no lack of opportunities but there is sometimes the lack of execution. It’s better to execute less than to execute wrong.
I expect the market to have a short term bounce next week as the investment firms will deliver surprising earnings based on lowered expectations and of course, the fed will definitely cut the 75 basis points instead of the already expect 50 basis points to prop up the market. The market will jump once again on these renewed hopes. However even through all this our basic market situation is not solve as mortgages will still crumble and will trickle to other sectors such as commericial real estate, lower business spending, lower consumer spending and some job losses. It’s just what has to happen for the market to shake out the economically weak. It’s financial evolution. So I’m on the look out for a bounce on the short term and is long FCX and NMX (NMX for the buyout hopes - yes merger arbitrage is a horrible idea but I’ll stand by this one).
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Tuesday, March 4th, 2008
Looks like the markets are heading toward support levels but it seems that it may not bounce this time because with financial earnings and the fed meeting a little bit away, there seems to be very little reason to rally. So at this point it looks like the Dow will drop below 12,000, Nasdaq below 2200 and the S&P below 1,300.
As for me, I’m still long NMX with hedging putts on Capital One and Simon Properties. So I’m still doing fine - but why does this merger take sooo long! Good luck folks.
A short that I’m currently looking at is Borger Warner which I will state my case in another post.
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