Bear Stearns is worth 5 times more than we thought!
In a perfect world, that would be the headline that moves the markets today as it illustrates how ridiculously undervalued things have gotten. I'm no great fan of BSC but $260M? Come on! At a certain point, we have to admit that a stock, as in your percentage ownership of a public corporation, has an actual value just like a home has an actual value and gold or oil have actual values – they just may not be as high as you thought they were…
One of our members, Jake, put up his virtual portfolio this weekend and asked what I thought re. covering positions and stocks after stock that I looked at seemed way too low to want to cover fully. We feel the same way about our LTP and even our shorter plays as we hopefully have found a bottom to the early-year panic and, even if not, we certainly see some value at these prices, even if the bears do not.
I was a little early last month when I initiated a "Bargain Hunting Virtual Portfolio." While the picks did indeed hold up well in a terrible market, there were flat after 3 weeks and I felt there was much more money to be made with $100K in a day-trading virtual portfolio and our DTP is up 83% in three weeks so that was indeed the right call but last week, we added more LTP plays and put more money to work in our leaps as we employed our 3rd "Stop, Drop and Roll" day of the year. While not adding a lot of new positions, rolling our existing leaps down to lower strikes is a commitment of capital in and of itself and, like Jake decided, this may be the perfect time to go long and strong.
Our Long-Term Virtual Portfolio is up 67% for the year and weathered the downturn quite well so far and it's absolutely amazing to me that I have AXP Jan $45s at $7.30, BA Jan $75s at $8.40, C Jan $22.50s at $4.10, TXN Jan $30s at 2.73 along with 30 other positions I really like. Had you asked me in the fall if I would like DRYS Jan $60s for $19.40 when the stock was trading at $130, I would have said… yes. As I said to members regarding other stocks that have lost more than half their value in 6 months, the question is: "Were we crazy then or are we crazy now?"
The truth (and the true value) is probably somewhere in between but, if we can assume we are in the lower end of a range that took the Dow from 14,000 to 11,750 in 6 months after rising from 11,200 to 14,000 in the prior 6 months, then we have some wonderful opportunities – even if we "only" make it halfway back and settle at 13,000, up 10% from here. 10% is a hell of a good year, yet alone 6 months.
My long-standing premise on keeping ourselves invested in US equities this year has been that, for 2008, the United States will prove to be the "least sucky" place to put our money from a global perspective. Friday the Hang Seng attempted to prove that point by bucking the trend and falling 3.5% (758 points) on the third retest of 21,000 in 4 sessions, down 33% from 32,000 in November. Now THAT sucks!
The Nikkei was flat for the day as the Yen pulled back against the dollar and gave export companies a small boost while Australia's commodity-based market dropped 3% as global rotation out of that sector continued through the weekend. Taiwan had an election which made people happy and electronics firms led a 4% rally over there – more good signs of the rotation we are looking for.
Most of the damage in China was due to their government pursuing tight-money policies aimed at reigning in inflation. Imports of natural gas to China fell 30% in March, demonstrating how quickly China can turn off that faucet. Also of concern in China is that the environment has soured for capital raising, leading some local financials to head limit down in today's trading.
European markets are off about 3/4 of a point ahead of our open, probably in fear of our 10am housing report, but I think we've moved past that particular fear factor and the markets should be ready to rock and roll this week unless we get a big downside surprise.
Uncle Rupert is tipping his hand by pumping commodities in the front page of the Journal, a trend we noted last week, Now he is falling back on the old "global growth" premise to make the case for long-term commodity investing but the funniest "news" item in today's journal has to be treating Dick Cheney's comment that "There is little more Saudi Arabia can do to increase oil production and relieve price pressures in global markets" as if it wasn't the biggest load of crap spewed by a Vice President since Tricky Dick Nixon's 1952 "Checkers" speech.
So Dick – they guys who are holding back over 2Mbd of production over a series of 3 major production cutbacks since 2006 are doing all they can for us – Oh REALLY??? Interestingly, the VP left Washington with just one briefcase that may have contained a lot of cash but came out of Saudi Arabia with a whole set of matching luggage that has to be checked in as "extra heavy."
While Cheney was out pounding the war drums for a war in Iran, we lost our 4,000th soldier in Iraq on the 5th anniversary weekend of the "slam-dunk" war. I find this very sad and not at all funny and we would all do well to remember how the upcoming election will still very likely make or break the future of this country and our economy as America decides whether we will spend the next 4 years, 4,000 lives and $800Bn improving this country or destroying another one.
I am encouraged that there are several good options for really doing something about the housing crisis on the table (in line with my own proposals) but, so far, indications are we are going to have to wait for a change at the top in order to pass any meaningful legislation as the current administration has stonewalled all efforts to help the people who are actually in crisis.
Time for another exciting week!
