As far as Goodyear goes autosales are not important. More then 71% of tire sales in 2007 were replacement tires, so what matters is passenger miles traveled which is actually benefiting from lower gasoline prices. Yet the bond is tanking with everything auto related due people making simplistic analysis. I'm still pondering this one but it looks good
Daal, You don't think XLF bottomed at $5.88? By the way very good thread, I've been reading it from day one.
Where your short entry? I am long CAL (currently looking at ~$15), as well as JBLU and UAUA. Techical long entries, I am not buying-and-holding, but I am playing those 3 stocks only on the long side.
I dont think so(better to put this way I think there is downside on XLF at the *present* levels), mainly because the 'buffett' plan is not likely to be used. His plan would call for the government to guarantee banks liabilities(preventing runs) and then let the banks play accounting games for years while they 'buildup' capital through their pre-tax income(US banking pre-tax income is around $300b compared to Roubini estimate of losses of $1.8T against $1.4T of US banking capital, so it would take a few years but it would happen, the pre-tax income would grow as margins for lending now are higher as well) Now it seems that we are having a solvency crisis but the big issue is liquidity, runs etc. The banks can stay insolvent for years and it wouldn't matter if nobody asked for their money back(like it happened in Japan), they would build capital back. In the present situation there is no trust and there are a lot of wholesale funding so there is panic and runs(BSC, LEH, WM, WB) as a long people dont trust the bankers and the government doesnt guarantee liabilities, the government will be forced to dillute bank shareholders in order to get capital ratios up and calm people down. Now there IS a risk Geithner changes his plans and does the buffett plan(perhaps starting by decreasing bank capital ratio requirements then guaranteeing liabilities) this would generate a short-squeeze of biblical proportions however this is a zombie like approach and that seem to be detested by policymarkers Under the current policies more dillution is coming down the road, its just that its important to monitor Geithner and Bernanke to see if they change their minds
I'm a lousy market timer so I dont know if this will work. I'm short from $8.3 I believe, will add the last lot when it stops rallying
This 35%+ rally in financials seem to be technical and is arising from oversold conditions. Pandit says they are having an operating profit ex-writedown ex-provisions, then few other troubled CEOs who dont usually offer much guidance join in trying to pump their stocks, people's mood are changed and they snaped financial shares given their depressed prices, now the move is feeding on itself and people are buying because thats the thing to do. Meredith says the banks saying this kind of stuff will come back to haunt them But the lesson here is that because financial share prices are getting so low taking profits in massive oversold conditions is the right thing to do, if the market crashes and you miss profits, so be it, when the rally sets in those gains will vanish anyway
I shorted BOKF today at $31.20. Something I'am noticing every day now.. more and more pamphlets in my mail box offering to buy or lease commercial real estate units, I have never seen this before..
These guys have lots of Commercial & Industrial loans as well. I havent short it because frankly I think I have too many shorts I think this 40% financials rally has hit me for about 3-4% of my networth(I dont know exactly because I flat out dont look at it, it just makes it worse to check), about the only trade that really protected me today was the long fed fund futures that I have, they rallied as the fed changed the language from 'some time' to 'extended period'. Its situations like this that remind me how important is to have bullish bets on to make it easier to handle massive rallies. My C bonds protected against C squeeze, although I think I'm taking a hit there ILFC bonds and my stocks also provided some comfort but I better be right financials will crash again otherwise its not going to be pretty. I can only blame myself for not taking profits when I could, I got too paranoid about missing profits after covering WM and WB few days before they went bust and as a result put myself into a rally I could have dodged
Bernanke is a follower of Irving Fisher and Milton Friedman. Fisher in particular advocated reflation during the 1930's as a solution, that involved during the purchasing power of the US dollar down. The US dollar is taking a beating, I was somewhat long the dollar yesterday, after the fed decision I was forced to sell dollars in a panicky market, the bid ask spread was wide and it was not fun. It turned out to be a prudent decision as the EUR trades at 3 cents higher and the CAD 4 cents high. I also used gold to 'short' dollars, if reflation is really the name of the game worldwide, gold prices should stay in a uptrend regardless of good and services deflation
follow your blog and this journal a lot, got a basic question, in the commodity rise as far as inflation goes which commodity producing stocks would you think would make a good long "inflation trade" I would think something like DRYS or maybe SEED or POT? But there has to be something else out there. I was looking for a commodity stock that would expose me to a long corn or long sugar trade. Just picking your brain.