Earlier in the year Bush proposed a $170 billion rebate program to “stimulate the economy.” I thought it to be a little ironic that today, October 15, is the last day to file to claim your check, and the retail numbers dropped an unexpected 1.2%. Then again, the forecast was at .7%, which makes me wonder what idiot is making these forecast. So who got stimulated?
Oooops.
Then the House finally passes the $700 billion Bailout Bill then the market erases $2.4 trillion in shareholder wealth in response.
Yikes.
I guess we’ll never know how bad it could have been, so I’ll give them credit there. Still… isn’t it ironic?
Jim Cramer has an interesting and desperate article up on RealMoney.com. You have to pay to access it, I don’t know why people would pay for it. Here’s an excerpt:
…This strategy, which I presume will not be adopted, but which makes the most sense, would allow for shotgun weddings for all the weak banks to eliminate the bleeding. Without this kind of action I am reverting to a downside target of 6,700 for Monday and then 4,700 for Tuesday in keeping with the hopeful ’87 playbook.
Wow. On a day when Cramer was predicting a total market crash, Gio went surfing the DOW’s biggest point gain in 21 years the next day. Anyway, here’s more of the article…
Why am I so negative? Because the forced selling is just beginning, the only people being margined out now are the most stretched, and in the ensuing weeks we will discover that most annuities cannot meet obligations as the piecemeal nature of the insurance reports will inspire even less confidence than the government.
That means we are not in a “fear itself” moment, because the losses haven’t begun to take their toll.
The newspapers are filled with stories saying there are buying opportunities and stocks selling at incredibly discounted prices. They are incredibly discounted only if unemployment does not skyrocket. My take is this: Without a comprehensive worldwide plan you should still be thinking about buying only small amounts into desperate selling tomorrow, and then Tuesday commit more into what could be a concluding gap down.
Finally, Intel beat after hours. Maybe that will crash our market.
Again, I would rather play the extremes on this market. That means if the Vix gets back to the mid-40s, then I would feel more comfortable shorting stocks. Today’s action on the tape, is so far bullish. Started gapped up, sold off from profit-taking, then bounced back a little, even though we’re down -170 on the Dow. I would notch the day as bullish if we manage to close above yesterday’s candle-stick at the close, which would be 9,271 on the Dow.
This isn’t telling me to go out on a shopping spree and buy stocks, but it at least tells me to continue to not fight a relief rally.
We’re heading into earnings season, but be careful bears… what bad news can companies report to us that we don’t already know? Again, earnings move on surprises.
Kicking back and enjoying today’s volatility. I have a huge day trade short on Petrohawk Energy Corporation [[HK]] . Expecting this to go down hard. So far, so good.
There’s a nice triangle wedge forming in the Gold ETF, [[gld]] , signalling an explosive move in the future (months out), either up or down. I know many gold traders are frustrated with the price action of gold right now, because in their minds they are thinking that printing money out of thin air would make the price of gold rise… they’re right! It should work that way. In other words, from an economic perspective: more dollars chasing a finite number of gold, means gold should go up.
But recently, many gold-related stocks have been battered and are trading near their 52-lows:
Goldcorp Inc. (USA) [[gg]]
Eldorado Gold Corporation (USA) [[ego]]
Yamana Gold Inc. (USA) [[auy]]
Silver Wheaton Corp. (USA) [[slw]]
[[gdx]]
If we are living in epic times, and I know a lot of you agree we are, then it wouldn’t surprise me to see another “epic” move in the commodities market, in particular gold. Take a look at this U.S. historical inflation chart until 2007…
… perhaps the best way to play this “breakout” on inflation numbers is to average in gold. I think we were fortunate enough to have the recent financial hurricane blow the door off of gold stocks, because now I think we can afford to sneak in a steal a few blocks.
As with any stock, commodity or sector, wait for a reversal before you start averaging in. I’m not sure how much lower gold can go, but I’ll be happy waiting on the sides for it to get lower before buying. Right now, I think buying gold is a good hedge against our current market and the Government’s plan to inject money into the market… I have come to terms that we are entering into uncertain territory, so its good to hedge. If you’re skeptical about the gold trade, then I would at least recommend you look into playing a “timed-biased-call-strangle” on Gold ETFs like [[gld]] or [[gdx]] . For example, I would buy the Jan 10 GDX calls @ 60 at 80% position right now, then pair it by buying the Jan 10 GDX puts @ 20 at 20% when gold moves higher. Come back in a year, and you’ll be up 300% on your trade without logging in and out your account every day. Lately I’ve been re-visiting Murphy’s theories (from GATA) on the Fed manipulating the gold and silver market… and looking back at it now, it certainly seems that way. I mean, originally I thought he was an idiot, but now I think he’s a smart idiot.
Anyway, it’s is just something to consider. Murphy claims that “the U.S. enters world markets without public disclosure to prop up the dollar and depress the price of gold.” He thinks gold could get to $5,000 / ounce. Wait up, $5k?… he’s still an idiot.
Man, what a ridiculous target. Still, he’s got the right direction. From what I’ve seen and what has happened in the past two months, and what will happen in the coming ones, I will be one who rushes for gold. Maybe GLD will finally break the $100 spot, then I’ll be fully invested.
In the meantime, I still can’t recommend any longs to invest in equities because I still haven’t seen any new leaders emerge from our recent aftermath.
How’d you like to be a quintillionaire? Inflation can help!
