Whee – what a day!
That was just way too much fun but it's still not a clear victory until we get a little follow-through so I will save my victory speech for tomorrow. As Winston Churchill once said: "Everyone has his day, and some days last longer than others." Today was certainly a day for the bulls and I predicted this afternoon that it would last through tomorrow based on the fact that the Europeans were not buying our rally in the morning and will be forced to come in and play catch-up tomorrow.
Also apropos to Mr. Churchill (a personal hero of mine) is his quote that relates so well to the hyena attacks that took this market down to ridiculous levels of late: "A lie gets halfway around the world before the truth has a chance to get its pants on. " The market has been moved by rumors for weeks and what really surprised me is how little people understand the stocks they invest in.
I said to members on Monday: "Was everybody crazy in October or is everybody crazy now?" as we have THOUSANDS of companies who have dropped 30-50% from their highs in the space of just 3 months. This has come without any significant changes in guidance based solely on assumptions that I pointed out a while ago, were NOT shared by 97% of the CEOs surveyed. As a business consultant, I look at companies from the inside, as companies, not as lottery tickets that spit out winning or losing stock bets. I've never seen fundamentals being given less credence than I have in this downturn where even a company like BG, who couldn't possibly have a more positive story in a more positive sector, has been chopped down 40% in 40 days.
TlsVet pointed out this evening that SIGM has gotten ridiculously cheap and I couldn't agree more. They have earning tomorrow, I think in the afternoon so we're going to go with the Jan $30s at $6.40 and risk it ahead of earning. The company is down 65% from it's January high and has a forward p/e of 10! Sales growth should be along the 200% line while earnings should be roughly triple last year's and the company makes their money selling media processors for IP video as well as HD TV and digital media players – pretty much the only bright spot in every single manufacturer's sales reports as well as WMTwho said demand for Plasma TVs was up 30%. SIGM has a 50% market share of the chips that go into Blu-ray players and… oh the hell with it, just buy the damn thing, this one isn't even worth discussing!
We made a bunch of easy picks today like BSC, who were also 66% off today based on "liquidity concerns" and even if the 4 or 5 officers of the company who said it was a BS hyena attack were lying – even if they were all getting on TV and risking Federal prosecution in order to tell you the company was solvent when it wasn't – still, don't you think that $200Bn from the Fed this morning is probably enough to tide them over for a few days rather than the $12 sell-off they got between the open and 12:30 when I put my foot down and bought them?
The XLF was so good (down 35% from last year) that we jumped on those Monday, before the Fed stepped in. My logic there was that, even after October 1929, you could have made money betting that the big boys would survive. WM was easy because Cramer said to sell it, TWX was a "what recession?" pick, buying GOOG felt like hitting that "easy" button in a staples commercial and HUM dropping 30% in one day because WLP guided down 10% could be the cover story of "Obvious Trading for Dummies."
BA is now my own personal Moby Dick and I will (to paraphrase Melville): Sink more money into rolls and rolls, while still chasing thee, though tied to thee thou damned stock – thus I will give up the spread! I mean come on! This company has $300Bn worth of orders in backlog and they're selling $66Bn a year now with $4Bn in profits. They lost a tanker deal that will impact their projected $6 annual EPS (on a $73 stock now!) by $0.20. If they keep selling it to me cheaper then I WILL keep buying it so bear that in mind if you follow that trade.
In keeping with our whaling theme, let's not go overboard here, we're still going to keep our fingers on the sell button and take profits off the table. If this is a real rally, we have 1,000 points to go so we won't miss much by getting to cash once in a while. We've been taking a lot of short plays lately because I expected a pop and we'd have to say 400 points (probably 500+ by tomorrow) is a pretty good one.
Let's remember that Wednesday is supposed to be our high for the week and we can take this opportunity for sure to get out of ALL of our March calls. If you don't like a position enough to roll it to April, then you must sell it – there is very little chance of recovering by next Friday if we have a reversal in the next few days and premium deterioration will work relentlessly against you. For the same reason, it is THE BEST time to sell calls as your caller will lose 15% of his premium every day between now and next Friday so we need to start thinking of the March callers we think about selling as not just a March call, but as the first leg of the March/April sale we will make over the next 10 days.
Please make sure you read the LTP review, aside from the specific position plans there are some strategy discussions about rolling and also I made some extensive strategy comments at the end of the morning post that are worth reading (if I do say so myself).
Congratulations to all on sticking out one of the toughest market downturns I have ever seen. Those of you who know me already know I will immediately switch sides and join Anton if you all start getting too excited about this rally. We are so deep in the woods right now that saying we are not out of woods yet is like saying disco isn't as popular as it used to be.
Let's continue to be careful out there!
