Saturday, July 12, 2008

Weekly Wrap: When the Pep Rally Fails... BIG IDEAS...and Just Plain Dumb!



Brian's Weekly Wrap 7/11/2008

BAC 1/30 3.0 9.75 225%

BAC 1/27.5 3.15 7.60 141%

BAC 1/22.5 2.25 4.4 96%

BAC 1/22.5 3.05 4.4 44%

COF 1/50 8.10 14.9 84%

COF 1/40 6.0 8.5 42%

HBC 12/75 3.9 7.6 95%

HBC 1/75 6.0 7.8 30%

STI 10/25 2.3 2.9 26%**


**Indicates new position

In literature, there are a vv. ariety of conflicts which are identified and discussed. MAN V. MAN, MAN v. HIMSELF, MAN v.NATURE and MAN v. The UNKNOWN. The Unknown is always the one that seems to throw people for a loop. When I was a kid TV shows about U.F.Os, Big Foot, and aliens would creep me out. After all, people's imaginations can be more dangerous than reality! But what happens if there is reason to worry?

When the Pep Rally Fails
When people don't know what's going to happen next... when professionals who make their living by reading the numbers and data can't make sense of things like volatility... Wall Street can't quite see the big picture, and the picture they do see is one that is looking pretty scary! That was o.k. though right? Uncle Sam was there to make everything better right? Henry Paulson spoke on markets to calm them down right? Ben Bernanke followed suit by a great "Pep Rally" to bankers on Tuesday... And from that point on, cameras and sound bites continued to roll in the rest of the week from the Dynamic Duo! That being said, I have a deep respect for anyone in public service... However, at the end of the day... they are two men trying fix... or recommend fixes to problems which are quickly taking on a life of their own. For instance one headline read "Paulson contacts Bush on the health of Freddie and Fannie Mae." I guess we all missed the boat on that one! Imagine another bailout is under way, and the markets are fearful of the UNKNOWN...

Volatility should heat up quite a bit in the next two weeks... COF reports earnings on 7/17, BAC on 7/21, and STI on 7/22. Earnings in of themselves should shed a degree of light as to where these companies are right now, but it is always those forward looking statements, and future guidance that has such a big impact on stock price as well. For instance, Lewis from BAC held a Town Hall type meeting this week and his stock seemed to yo-yo on almost every word he uttered... a most curious phenomenon. This could very well be the best time to get out of these stocks if you like so many others on Wall Street think the carnage is over. For me, it may be one of the last chances for little guy like me to load up on a couple more financials before they hit put prices that are simply too expensive!

Big Ideas
At the beginning of the year, I was becoming increasingly frustrated with my long positions. Coca-Cola (KO) was millstone around my neck. Nostalgia aside, I just didn't see the future in the combination of high fructose corn syrup and carbonated water... so I dumped it... Wall Mart and Dominion might be a little tougher to drop. While many are critical of Wal-Mart's short-comings of the past, I can only look to the future. When times get tough, people shop for value. And Sam Walton prided himself on value for the customer. (You got to live anyone who was the world's richest mat and still drove a pick-up truck to work every day.) But I also realize that cash and leverage in options maybe the only way to beat inflation... and the more scary sibling deflation in the future. A friend asked about the tax liability of early withdraw from a 401K plan... while I believe those monies could be rolled over to a Roth taxtree... the other question I have is what is the threat to those who have money parked in a mutual fund with 5-10 years left for retirement??? Long-term anything aside things of real value such as oil (energy), gold (and other metals), and cash maybe a loser at this juncture.

Those simply providing services could be in trouble. Sure an organization like Wynn is able to utilize cash resources to prop up the stock price now, but that is not the type of company I would want to hold right now... A closer look at regional casinos should be a good barometer for that type of entertainment and discretionary spending. I like Ax's SRS suggestion. Recent conversations with people from Pigeon Forge, TN and Boca Raton, FL reminded me that real estate is a much bigger mess than anyone really understands. And to make matters worse, the bill coming to the House of Representatives will only help residential property owners... not investors, and definitely not corporations. With the short-comings of President Bush he realizes that a bailout for business is not good for ANYONE! Bush will expect a tightly drafted housing bill that does not invite "Moral Hazard" among big business.

Just Plain Dumb
Evidently, someone is not teaching history to the T-shirt makers in the South. I am o.k. with the Stars and Bars wear. It is a Southern pride thing that most Yankees just don't get... that much I can live with. It's some of the other stuff that makes us think that some people are just PLAIN DUMB! Interestingly enough, I read a shirt that said "Still Standing." Another shirt said "Apologize for What?" This must be by the same hair-brains that pushed "The South will rise again" shirts back in the 1980's. While I have a deep respect for many things in the South... traditions, football, church, etc. I do not have a lot of respect for ignorance... and you really can't debate with ignorance!

A Damn Yankee


2 comments:

AX said...

Bri, congrats on these amazing returns! My citi and STI puts are "only" up about 70%, BAC has been a homerun. There with you on COF, but my new plays GGP and GNW are potential homers as well, both up 33% this week. Keep looking for the homers, retail losers are next along with commercial RE.

Tiger Coach said...

I wish there was more liquidity on this end to hit your hot recommendations! You are right about retailers....maybe a tgt call when it hits 40. Smaller retailers will not weather this storm.