What a mess!
Once again we were saved by my now habitual pessimism and the total lack of market interest from the very opening bell. Bad as I thought the market was, I was still dumbfounded by the action of CAT, who could not have made up better numbers and the total destruction of the SOX, who lost 5% today bringing them down 40% since March.
The gist of this sell off seems to be two things: The escalating war in Israel and a total lack of confidence in Ben Bernanke. After Bernanke spoke to Congress on Wednesday the markets shot up but the release of the Fed minutes on Thursday gave more of an indication that the Fed doesn’t actually have a clue what to do and that is just plain scary.
As I’ve said many times, when you have a country that’s $8,411,797,854,827.46 in debt, you really need a top financial guy you can depend on to turn it around. We no longer have that in our Fed chairman and our President doesn’t exactly seem like the kind of guy who’s going to bring in a surplus anytime soon (unless further tax cuts can do the trick). The debt is increasing at a rate of $1.64Bn per day and investors are just flat out losing confidence in our ability to come out of this without a significant economic downturn.
I will say again that the best and safest way out of this mess is inflation, the very thing the Fed is fighting! We effectively owe that money at 5% on a GPD of 12T. If we can inflate that number by 10% a year for 5 years combined with 4% average growth and a balanced budget ammendment we will have a GDP of 24T by 2011 and should have the debt paid down by 2015. So elect me in 2008 and I will make sure a gallon of milk costs you $6 by the end of my term!
Anyway, all the indices died a horrible death today and Microsoft gained just 5% on news that they are buying back 20% of the company – so pathetic. I also think it’s very sad that Microsoft can’t find anything better to do with $40Bn than buy their own stock, this really does nothing for investors in the long run and takes a big chip off the table should conditions change. I would rather they pay a steady 10% dividend ($2.4Bn) off the interest on the $40Bn than raise my share price $4 one time.
There was nothing fun to do today, I made a quick double on CAT in comments but there was nothing else worth trading and the SOX looked so scary I couldn’t bring myself to buy any more tech (I still have my Yahoos).
http://stockcharts.com/gallery/?%24sox
======================================
AMLN was trashed today on a LEH downgrade and the Aug $50 puts are now $5.10 (up 100%).
After we gave up on them 2 weeks ago, today the rumors resurface about ATYT being bought out by AMD and the stock is going crazy after hours.
CBH gave up a point and the Aug $32.50s are now flat to $1.70.
EXPD lost 6.27% on the day and the Aug $50 puts finished at $6.30 (up 180%). I still have no idea what caused the sudden sell-off.
JPM Aug $42.50s held up well and finished at $1.45 (up 45%) but it’s outperforming the sector so keep an itchy trigger finger.
http://finance.yahoo.com/q/bc?t=5d&s=JPM&l=on&z=m&q=l&c=gs+mer+leh
MAT flushed out the weak hands before making a spectacular recovery, bringing the Aug $15s to $2.85 (up 85%).
MCD did not go down today. I will be looking at the Aug $35s for .85 if the market tries to move up again.
Thank goodness MO kept us from triggering the UST trade as the tobacco industry held up very well this week:
http://finance.yahoo.com/q/bc?s=UST&t=5d
MOT pulled back a bit today and the Aug $20s finished at $1.05 (up 130%).
We got out of SBUX puts just in time, and with a nice profit thanks to a poor open!
http://finance.yahoo.com/q/bc?s=SBUX&t=1d
TGT’s unloved Aug $45s are $2.10 (up 30%) but they are really hard to dump as it still seems way too low.
TEVA may be a nice Monday morning play if the war ends over the weekend.
UNH is holding up OK and the Aug $50s finished at $1.90 (up 85%).
WIT dropped another 2% today so we take a .40 hit on the stock which is partially offset by a .20 drop in the option we sold. Need to give up on this one if it breaks below $11.
