Black Monday

Discussion in 'Chit Chat' started by bond tr4der, Nov 22, 2008.

  1. Actually, in the case of companies that aren't dependent upon debt for their continued existence, with plenty of cash to meet their immediate and medium-term needs, there IS a limit to how far they can sustainably fall -- the salvage value of their assets sold at auction plus their cash reserves. Values below that point aren't sustainable for more than a few days, because if they stay down there TOO long, someone will come in, buy a controlling interest, and initiate the liquidation themselves. Companies that find themselves in that position will either defensively start to buy back their stock, declare a dividend, or their biggest shareholders (who might have been the ones who started, and maybe still run, the company) will start buying it up themselves.

    Likewise, you'll never see a company with positive cash flow and profitability drop below the amount they pay out in dividends over the span of a few years unless there's substantial doubt about their ability to keep paying them. In the case of a utility with captive customers, low/no debt, the ability to make money hand over fist in good times AND bad time, and little doubt about their ability to keep paying their dividends, I really doubt you would EVER see its stock value fall below 4x its annual dividends unless the economy were SO completely destroyed (as in, nuclear destruction of America's 10 largest cities, including NY, LA, DC, Chicago, Atlanta, and a half dozen others), nobody even CARED what the stock's price was.

    If the shares of a company like, say, WMZ fall below $10, I'll definitely buy more. If they fall below $8, I'll buy a LOT more, because they pay such high dividends, while making money by the truckload, that its future share price is almost irrelevant to its value as a long-term investment. Buy it for $8, and after 4 or 5 years, the dividends ALONE will have paid back the entire purchase price.
     
    #21     Nov 23, 2008
  2. MKTrader

    MKTrader

    Oh, the guy who likes to call rallies "gay." Maybe he'll re-emerge next time as the HomoEroticBear.

     
    #22     Nov 23, 2008
  3. timbo

    timbo

    A PPT suit that allows you to show your package: no less with lights. A real ET hero.
     
    #23     Nov 23, 2008
  4. The mere existence of this thread is proof-positive that the EOD rally from Friday will continue on Monday!!
     
    #24     Nov 23, 2008
  5. Illum

    Illum

    The PPT need something creative with C before the bell, or C's uncertainly will take all gains from Friday down the ol crapper.
     
    #25     Nov 23, 2008
  6. um citi has virtually no index weight. it could go to zero and the dow would be virtually unchanged. The survivability of the US economy doesn't hinge on citi. Citi is just a drop in the bucket like GM. it could go under and bffft its impact would be negligible.
     
    #26     Nov 23, 2008
  7. So while I agree that thinking that any individual financial is cheap at these prices might not be a smart strategy but XLF at this level seems like an easy double if you buy and hold for a couple years....combine it with some simple covered call writing and its an easy double in a year or less. [/B][/QUOTE]

    Just looked at 20 days chart (never mind Sep/Oct levels!)
    NOV5th ------ 21st NOV

    XLF------ 16.4 --9.5(Day Low 8.8)
    UYG (Ultra Long)10.8 --4 (Day Low 3.2)

    Iam a bit tempted to bottom fish using UYG ( less cash investment)
    But the reality is SPX/DJIA 750/7500 (last Friday's low) can become 650/6500 in the next few weeks never mind 550/5500 during tax loss selling!
    If we have to average in to XLF ( possible bottom in the worst case scenerio 5-6?)
    May buy UYG from 4 to 1.5 (pssible bottom) and keep it for 6-18 months for a 3 bagger!
     
    #27     Nov 23, 2008
  8. Just looked at 20 days chart (never mind Sep/Oct levels!)
    NOV5th ------ 21st NOV

    XLF------ 16.4 --9.5(Day Low 8.8)
    UYG (Ultra Long)10.8 --4 (Day Low 3.2)

    Iam a bit tempted to bottom fish using UYG ( less cash investment)
    But the reality is SPX/DJIA 750/7500 (last Friday's low) can become 650/6500 in the next few weeks never mind 550/5500 during tax loss selling!
    If we have to average in to XLF ( possible bottom in the worst case scenerio 5-6?)
    May buy UYG from 4 to 1.5 (pssible bottom) and keep it for 6-18 months for a 3 bagger! [/B][/QUOTE]
     
    • uyg.gif
      File size:
      24 KB
      Views:
      42
    #28     Nov 23, 2008
  9. #29     Nov 23, 2008
  10. What if someone resurrects the White Monday thread?
     
    #30     Nov 23, 2008