Monday, April 27, 2009

A Few Items

There is no shortage of news items on a daily basis but it is quite interesting to see what is grabbed and run with by the media shills on TV as good news. I question the bullishness that has become more and more pervasive the higher this market has climbed. Is it hope based on rational fact? Or is it hope based on, 'gosh it just cannot get any worse now can it?'

I hear the market pundits tell us the market is cheap on a valuation basis, the standard one being P/E (price to earnings). "Okay, which E are you using", I think to myself, "reported or operating?" For as we all should know, reported are the "real" earnings as the operating earnings omit all the bad stuff. you know likek losses and charge offs.

For those that may not know already and for those that more than likely would prefer to not know, this market is trading at a p/e based on reported earnings of just over 30. Not what I would call cheap but then again the short bus equity crowd thought Cisco was cheap back in 1999 but what does that matter, right?

I remember back in that same year a senior, million dollar round table advisor (too funny?) from Merrill Lynch, enlightening me as to the virtues of how cheap CSCO was as it was trading at only 14 times 2002's earnings.

You must remember that the boyz do not want you on board for the next leg down. Just as the tech bubble was widely recognized as a bubble, very few, at least among those who were not letting losses run like a heroin addict, were on board as it rolled over and fell off a cliff.

I am still of the belief , based on facts and precedent not just wishful dreaming, that this second massive leg down will absolutely crush the "professionals" just as it did in 1930 as all the "smart money" got in betting that 1) the worst was over, 2) it couldn't get any worse, and this is the one I love, 3) valuations were at generational historic lows.

You want a primer on what is happening right now, you need to rent the movie "Boiler Room" and just replace the names of some of the junk peddled there with the names atop your Wall St. Journal. The boyz on Wall St. have a lot of stock to unload and this takes time (how much time only God knows), but it also takes a market in which to accomplish this. True students of the market know that, when you have size, you need to buy first to be able to sell.

Have you noticed that lack of, and I know this is a relative term, quality names leading this rally? Have you noticed the suspect volume on many of the 'breakouts?'
Have you noticed the local cocktail party is a little more upbeat?
Have you noticed your broker calling you, (finally!) to let you know the party has started again and you're missing the boat?

I say all this, not as a sour bear who is just mad at his losses for they have been taken and are forgotten, but as someone who sees no relief for this market on that which is the foundation of its problems, the employment front, the real estate front, and the credit front. These items are THE ISSUE PERIOD !! Bob Pisani and Money Honey Maria can breathlessly spin any piece of bad news any way they want the underlying facts remain the same.

To those who have traded this on the long side I offer my utmost congratulations as you have earned it. I offer this knowing full well the amount of sleep I absolutely KNOW I would have lost lugging long positions around in this market environment.

A couple of items worthy of note is that we seem to have insiders unloading stock in droves yet this is not significant compared to the green shoots? We also seem to be seeing a significant shift is sentiment to the bullish side. For what it's worth.

My apologies for not posting on Friday as I was away from the computer most of Friday enjoying some excellent weather that mid Michigan had to offer and which, if you know Michigan, can change quite quickly if you simply give it 15minutes.

Housekeeping notes;

I was stopped out of the following positions on Friday;

2 units of SRS at $25.20 for a loss of almost 3 pts on 2 units.
2 unit of SDS at $66.28 for a loss of just over 2 1/4 pts on 2 units.
1 unit of QID at $38.62 for a loss of almost 2 1/2 pts on 1 unit.

Good speculating to you all and never forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:


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