Wednesday, November 11, 2009

BAGAKOAA November 11, 2009 Priceline at the right Price

BAGAKOAA November 11, 2009

Sorry about the email blast yesterday thought I was posting it here. Hope you all are having good run up in the market over the last few trading sessions.

As you all can read, the Fed is committed to low rates which should help drive the current rally. It was nice to enjoy Mad Money last night and not have to worry about the flood of economic news over the last couple of weeks. There was nothing being reported today other than some earnings reports. (Macy’s kicked the department store sector in the groin, ouch.) TGT is off due to the report, could be an opportunity to add to the position, assuming you have one.

If you caught Mad Money last night Cramer described a believable theory that he called a rolling bull rally. I encourage you to download it off iTunes and watch it, but in a nutshell he describes a rally that started in March with the financials, then went to tech, then went to oil, then went to industrials, then went to retail, then went back to financials and around again. It actually kind of describes what happened since March. This strongly supports the essential need to be well balanced. BOATS, Banks, Oil, Aerospace (or industrial), Techs, and Speculative (including small cap, int’l and commodities).

Speaking of commodities, please get a hold of today’s WSJ. Check out the commodity report by Carolyn Cui. With the help of a cool chart from World Gold Council she describes the Global Banks influence on a new world gold rush. In one interesting paragraph she explains that the world average holding of gold in foreign reserves is about 10%, that is to say that of the assets held by countries in their foreign reserve accounts, on average each country holds about 10% in gold bullion. The US has 77.4% and China had 1.9 %. Many countries are increasing their gold ratio because of the weakness in the US dollar. IF China were to want to get closer to the world average, they would have to buy 180 billion dollars worth of gold. That would be two years worth of current world production. You could prognosticate a $6,500 an ounce price according to Ms. CUI. Anyway the article is solid empirical support for 1200, 1300 1400 dollar gold. BTW GLD the gold ETF is my largest position.

Though I have been accused recently of being a day trader by at least three of you, (Ouch), I did want to tell you how easy it is to see what each morning might bring. Just watch the global indexes when you go to bed. Turn on Bloomberg if you have it or check their site and see the Asian, and if your up really late, the European indices and you get a good feel for what the US market will do in the first hour of trading and with a little proactive what sector will out perform each morning.

And to close, a little success story to share. If you look back on Oct 12 in the BAGAKOAA blog, I panned Priceline as a bit pricey (About 160 a share.). That week after reading an article about PCLN and some contract they got from a hotel chain and hearing 2 celebrities actually say they booked on Priceline (Jessica Alba and I forget the other), I said what the hey and bought two January 2010 165 call options for 21 dollars and as noted a week or so ago added to that another option at 14 on tells that they might have a nice earnings call (Thank you Mr. Cramer). Needless to say I was pleasantly surprised yesterday as they blew away analysts expectations. I did take the profits.



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