What a boring day. We have crude at $120, the dollar at new lows and food shortages in Japan, yet retards with cash feel it is necessary to buy stocks.
I must tell you, this is a very frustrating market. However, knowing the eventual outcome, aware of the inevitable fate of the market, keeps “The Fly” determined to add to his burgeoning short positions, without fear.
The market leadership is exhausting itself. You cannot have stocks like [[MON]], [[CF]], [[POT]] and [[MOS]] march higher, without pause. As strong as the sector is, it is extraordinarily overextended.
In addition, many tech stocks, like [[AAPL]], [[RIMM]] and [[GOOG]] are out of control expensive.
On the other hand, there are some niche plays that are cheap, like [[EMC]], [[VMW]] and select Chinese lottery stocks like [[GSI]] or [[GU]].
In short, the market is back to normal trading. The likelihood of a sudden sharp drop is limited. However, the easy money has been made. From here on, I suspect the market will be a stock pickers haven, or death nail to those who are unable to move quickly.
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Indeed
VMW looks good, nice call.
More on the food shortage and the potential for a global famine. This is serious shit. Shorting ag or ag commodities seems like financial suicide.
http://www.cumber.com/commentary.aspx?file=042008.asp&n=l_mc
long shippers is working too, see DRYS
check out NEON for a spec
mdawsz,
I been watching DRYS for quite a while, although we did break resistance, wait for confirmation. Also, bear in mind those fuckers on Fast Money talked about it yesterday, so the 11% move was highly overextended.
Fly,
You mentioned a stock picker’s market…Are you flip-flopping to the bull camp? Oh my…
Macke dissed DRYS last night on fast money. He is becoming Cramer-ish. He has a loud opinion on everything. He was much better when he only spoke about his core knowledge; retail.
Jake: I am not posting as that long-ass winded Pluto. Brevity is my mid-name.
Fly: I’m enjoying your revolving pictures.
in this post i am officially proposing marriage to becky quick.
<3
Bobbing and Weaving vs. Fighting the Tape
First of all, I’d like to make a comment about this column. I received some emails from readers who were shocked that I would consider buying a stock. I’d like to point out that I write the Rap as a reflection of what I see and do in my real job — managing money, which entails trying to navigate the twists and turns of the marketplace and manage my risk. And, I’m doing all that predominantly from the short side, which means that I’m fighting the Fed, the government, and the masses of bulls.
Driving Defensively to Prevent Bear-Jacking
Consequently, there are lots of tricks (learned the hard way) and tactics that I need to employ to be able to win at what I do. Owning Microsoft is part of my plan of managing a portfolio through what I believe to be a tricky period. This dicey environment is one that I’ve discussed, but just to make sure there’s no confusion, I’ll restate what it is that I am wrestling with.
I believe the U.S. economy is in for an extremely difficult period of time. However, there’s a generation of investors who have come to believe that the Fed is able to solve all problems — and they think that the problems I’ve discussed are well known and already discounted. I’m not going to bore folks and rehash what I have already written. (If anyone would like to brush up on my columns, they are available in the archives.)
What concerns me, as someone who expects trouble and would like to position himself on the short side: the potentially overwhelming power at this moment of the bullish contingent. Therefore, I feel I must give them some rope, so as not to see myself get trampled. As noted, I have cut back my shorts and added MSFT as a long. Will this be a winning strategy? I don’t know. However, I don’t think it will be safe to max out my short positions until after the bullish crowd has thoroughly expressed its view, which they are in the process of doing, that the Fed will save the day — and then find out that this view is wrong. Then, we’re liable to see real problems in the stock market, and perhaps the currency market as well. Hopefully that clarifies any confusion I may have created by the requirements of my day job, which sometimes causes me to dance around a bit.
Equipment Stocks Hit by Heavy Matzo Ball
With all that said, I was very curious to see how the bullish crowd would react to last night’s results from Novellus and Texas Instruments –which, on both counts, I expected to deliver bad news. The results were worse than I expected, mostly in that the managements of those companies, who tend to be promotional, were unable to be promotional. (CEO Rick Hill of Novellus sounded like he’d been reading the Rap when discussing all the credit problems around the globe.)
For both NVLS and TXN, the balance sheets grew (particularly so for TXN, which saw its accounts receivable rise about $160 million sequentially). It’s become apparent that both companies have been stretching to “make the number” and now are unable to do so. Novellus is in huge trouble, as are the other semiconductor-equipment companies. And, the stocks are not as cheap as the bulls had contended. Novellus made just pennies a share this quarter, vs. the 40 cents per share it made for the same quarter last year.
Texas Instruments has its own set of problems (not least of which is that the estimates are set too high). Management was nowhere near as promotional as it usually is. In addition, both companies have problems with auction rate preferreds. TXN was forced to reclassify over half a billion dollars on its balance sheet.
In any case, although I expected that earnings season would bring these problems to light, they haven’t really mattered thus far. Yes, it’s true that NVLS forfeited 10% in the early going, but other semiconductor-equipment stocks initially tried to ignore NVLS. In fact, ASML initially declined less than 1%. That, after last week’s admission that it received only 26 new orders, down from 62 the year before (which saw the stock promptly scoot 10%). As for TXN, it was lower by about 5% in the early going, but it had gained better than 3% yesterday.
To sum up, although the tape was lower this morning, it looked to me like the desire to believe in the Fed had the upper hand — especially since we’d seen a blistering rally early on, due to the fact that existing-home sales were a tiny rounding error better than expected. Said differently, you could have convinced yourself (a few hours into the trading) that by day’s end, bad news might matter, or not matter.
Mercantile Dysfunction
However, the waters were muddied, and thus my ability to gauge sentiment, by a handful of tape bombs. Worse-than-expected results from highflier CME caused that stock to drop about 15%. United Airlines was drubbed for about 30%, as its results also weren’t good enough. (Which helped hammer the transports.) At the other end of the spectrum, the stock of McDonald’s sank 2%, even though the company was quite successful at beat the number.
But the real catalyst was oil. Over the last several years, bulls have rationalized the per-barrel price as it’s rallied from the low $30s to well over $100. Today, however, as oil started to pop — trading briefly just under $120 — that seemed to crack the tape. As an aside, it’s worth pointing out that from time to time, folks appear to freak out about an incremental dollar rise in oil, when previous increases of $70 or $80 haven’t seemed to make much difference. In any case, oil had the entire tape under pressure throughout the afternoon. Beneath the surface, most everything was red, though many issues were not as weak as they should have been.
It continues to amaze me that there is so much optimism and bullishness when there are so many problems staring us in the face — whether it’s the impact of $120 oil, collapsing home prices, or the runaway prices of certain foods. Any way you slice it, the average person in this country is being squeezed. I note that Costco today announced it will limit the purchases of flour, rice, and cooking oil in New York City and on the West coast. This is a worldwide problem. If the hoarding mentality sets in, it could impact lots of different commodities. And, it’s liable to be a problem that lingers for quite some time.
Away from stocks, the euro touched a new, all-time high. But there wasn’t a tremendous amount of motion ex the euro.
Oil, as pointed out, was the biggest news, as it traded to nearly $120. Treasurys were mixed. Metals enjoyed a bounce, with silver up 2% and gold up 0.3%.
Positions in stocks mentioned: Long MSFT. Short ASML and TXN.
Yo brokeass,It aint the mkt, the problem is you.
KEEP IT UP… 🙂
Pourquoi est le composé volatil du marché ainsi.
Cher Chez La Ghost
Fuck you consumers…….
you’re dead.
Seriously, Oil must be the new wall of worry, which equities apparently enjoy climbing.
This is getting regoddamndiculous.
For years, I have stolen and kept the oil drippings from the local lube shop, and hoarded leftover rice in 55 gallon drums in my bomb shelter. People said I was crazy.
Who’s laughing now, huh?!?
..Seriously, who? Stop it. People are always making fun of me…
TSO hit $27 today, go figure…
Thanks Fleck Rap, keep them coming 🙂
CubsRock: I pulled the trigger on 500 shares of TSO myself. Have another buy in at 26 should it get there for another round.
This food shortage is bullshit.
Did the earth’s population just double overnight?
I fucking doubt it.
Looks like its time to go long POT. I mean it just goes up every day. If its that easy why not?
http://finance.yahoo.com/q/ta?s=POT&t=my&l=on&z=m&q=l&p=&a=&c=mncs.ob
Probably time to go long crude too and anything Eric Bolling is buying. We all know the consumer will love crude at 150. As long as everyone is long it why not?
I think POT has gapped up in the morning something like 9 of the last 10 sessions.
Good luck on TSO gappinggandy, just remember you fighting the trend till it reverses. I’ll be grabbing some Aug 30 calls soon.
Starving Ethiopian: You’re starving because you spend your money on egregious items like computers and internet access, jackass.
My shorts:
DECK
Would you like a $140 pair of shoes to go with your $120 fill up at the pump?
HITTING THE DECKERS AGAIN
Fashion-forward footwear hasn’t exactly been the best place to hide out from the troubles of the retailing and apparel sectors these days, a less that Deckers Outdoors (DECK) is learning once again. The maker of Ugg boots and Teva sandals is slated to drop quarterly results Thursday. Investors are clearly a little squeamish, whether there’s risk to the first-quarter results the company will report, or some hiccups in the current quarter, which it presumably would talk about. The company is slated to put up 76 cents a share in the first quarter on sales of about $91 million, a 25% bulge in revenue. However, there have been some signs that the spring season has gotten off to a slow start, and that promotional activity may be a little more aggressive than investors like. The stock has fallen more than 25% from its high, set at the close of 2007.
PFCB (PF Changs)
http://futures.tradingcharts.com/charts/RIM.GIF
Yep looks like Mr. Chang may be paying up for rice just a little.
X (US Steel)
From 95 to 160 in a month and a few days? Come on now.
MS (Major Stain)
Personally I think I will get destroyed if they don’t issue some wacked out convertible. I would be careful on it.
IBM
Very small position but my contact at CDW says they are not selling shit.
I got a lot of other inverses and TSO is a short on OIL for me. I really want to be short all of the gay consumer discretionary and fads. What do you guys like for shorts?
Everyone is long crude dude. Thats why the consumer is so fucking happy right now he’s buying shit left and right. We all sold our bullshit homes at the top to illegal mexicans and bought thousands of crude contracts. Fuck the poor, let them eat food. My family dines tonight on sweet and sour cude. mmmmmmmmmmmm de-fucking-licious.
gapping,
can you shoot me an email?
seasonalityreport AT gmail DOT com
thanks
CNOA is a little lotto stock to play the Chinese market with a tiny rice play that makes rice not laden with mercury. They also just bough a winery in CA which I went to the trouble to confirm after T. Sykes destroyed the stock with an article on his blog. That was wrong and it’s coming back now.
Beats buying a buck for a lotto ticket. I’m with the rice hoarders – what great returns! I’m turning my backyard into a giant rice paddy much to the Mrs. chagrin but I’ll have to get Mexicans to tend to it because there aren’t Chinese over by me.
Speculative money only.
GAPS & YAPS ==
Short DECK, too, but also
WM
JPM
DSL
FED
ANF
HOG
Also still own SMN and DUG (MTMC) and SKF and FXP.
WHR is about to breach the 200 on a weekly chart FWIW
Jeremy: Sent.