Risk is Cheap

Sometimes we get so focused on the news, the technicals and the charts, that we fail to see the ape dancing around in the room.

Hello!? Blue chips are cheap.

If you have a long term perspective and don’t mind collecting dividends while you wait, you should be buying into this fear-ridden market. There are times to ignore and throw away what you think you know and just be a simple-minded, emotionless and lucid buyer of the leading companies in America. This is one of those times.

I’m continuing to scale in here, and so should you.  Just a little while ago, I bought:

Pfizer Inc. [[PFE]] , @ $17.41 (13:15 ET)

Citigroup Inc. [[C]] , @ $13.98  (13:16 ET)

General Electric Company [[GE]] , @ $20.45  (13:16 ET)

The Home Depot, Inc. [[HD]] , @ $20.67 (13:18 ET)

Alcoa Inc. [[AA]] , @ $12.12  (13:18 ET)

Relative to “riskless” assets like treasuries, blue chips are a bargain.

In other words, risk is on sale. Risk is cheap. It’s premium has already been realized since October 2007.

Ireland’s economy is slowing. It’s property and construction sectors are weak. This is already baked into the price of Allied Irish Banks, plc. (ADR) [[AIB]] , $9.11 (10/20/08). So I did the Costanza thing and bought some. I know, it makes no sense, given the state of affairs on the Emerald Isle.

However, the diversified business portfolio and conservative risk management of this Irish-based bank are positives in this environment. They will survive and become stronger because they’re just plain lucky, no? (Plus don’t count out their legions of leprechuans who have stashed away pots of gold at the end of the rainbow).  

So if you’re thinking of buying this stock, you have to ask yourself one question, “Do I feel lucky?” ….(Well, do ya, punk?)

Target: $23 (12 mos).

Disclaimer: Buying bank stocks at the center of the current financial crisis involves risk. If you buy AIB without any due diligence on your part, a leprechuan might jump out of a tree and waylay your unlucky ass.

Nothing like at 400 point, 4.65% up day on the Dow to put the bears on notice that the market is indeed rallying off the lows of a little over a week ago.

On a relative strength basis, cash and bonds are still favored over stocks. However, the NYSE Bullish Percent Index is up above 20% bullish, and is moving in on the 30% level. The downtrend has been broken and I’ve started buying stocks again.  A resounding break above the 30% bullish level would mean that the game is back on and the market may begin to see recovery in a broad number of sectors. 

Some of the sectors to look for ideas: banking, finance, biotech, REITs, and food/beverage. I’m focusing on dividend paying stocks in these areas.

It was a very good day to be long stocks.   Unless you’ve been listening to the apocalyse-loving uber bears, you should have made money today.

If and when the Dow hits 10,000 this month, I’m going to sound off a reverberating barbaric yop and smash a clown-faced pumpkin with an 8 lb sledgehammer.

Even with the market down last Friday, the NYSE saw 1073 issues rising on their PnF charts and 188 falling. There were 47 new buy signals given and 9 new sell signals given. There were 943 upward reversals and 61 downward reversals.

That Nasdaq had 684 issues rising on their charts and 289 falling. There were 52 new buy signals given and 7 new sell signals. And, 558 upward reversals and 115 downward.

So, despite the Dow being down, the NYSE Bullish Percent rose by 1.70% and the Nasdaq Bullish Percent rose by 1.39%. Odd, no? 

Mixed signals and divergences again.

Happy Monday, everyone.

UPDATE: I think that we’ll see a move back to over 10,000 DJIA in the next couple of weeks. What to buy? Anything, except the late cycle stocks related to energy and commodities. I’d focus on dividend paying stocks, if I were you.

Someone please tell me how our beloved DJIA can be down over 100 points and [[DXD]] isn’t up significantly in price? How can the S&P 500 be down 6 points and [[SDS]] is also down a buck thirty-six?

Have they changed the definition of “inverse”?

Something is rotten in Denmark, or some other Scandanavian country with fat viking chicks.

Has somebody addressed this? Am I missing something here?

Biotech titan Gilead Sciences, Inc. [[GILD]] beat estimates, coming in at $0.52….and they gave upside guidance for Q4. Don’t be surprised if they beat estimates again.

Sales are very strong with their HIV drug. As long as people keeping fucking around indiscriminately, GILD will have product to sell.

Disclaimer: Not intended to be a recommendation to buy. Do your own due diligence before investing your hard earned government guaranteed cash.