Friday, December 04, 2009

BAGAKOAA December 4, 2009 Good News is Bad News


December 4, 2009

Good News is Bad News

Hey was anybody else watching Bloomberg this morning between 6:15 and 7:00. It is lonely here sometimes. Anyway we got a great job report and a great factory order report and we were off to the races. The opening bell sounded like the starting gate bell at Saratoga (sorry int’l audience-this is a relatively famous equestrian race track in upstate New York). We were up 150 points and life was good. Money was leaving the sanctions of gold to US treasuries and the equity market. By the time I got to the office, an hour later, the Wizards of Wall Street began talking about the explosive recovery and that the FED (US Federal Reserve) will have to take action (raise interest rates) and the market was even. Then it went down as the dollars strength continued to bring gold and material related trades down. I can’t wait to here Cramer rant about this tonight. I’ll have a nice single malt and a front row seat. It should be good.

So how do you play today’s action. Here are some thoughts. This news should boost consumer confidence. That should help loosen the purse strings in the retail sector. While I am relearning the Reuters site this weekend, look at Target (TGT) and Amazon AMZN. If you account is set up for options, consider some April 2010 calls for Amazon. There is a lot of interest in the 150-165 range and the underlying stock is at 137. I’d prefer to buy more into the money with a 125 strike price selling for under 22.00 a call.

I would also take some profit on your gold. I am up about 34% and I took some profit for 4 portfolios. The good economic news should help the dollar making the exchange rate issue tough to beat and making the dollar a little more of a safe haven. Keep an eye on inflation “tells” so you can back into gold when it happens and it will happen.

Yesterday, Bank of America raised 19 Billion in the secondary market to immediately payoff the “note” to the federal government. In essence that means it is free and clear to do what is in the best interest of the shareholders. The market is reacting well as BAC is up a bit today. I will crunch numbers, which I suspect won’t be pretty, over the weekend. I feel better about the bank now that Uncle Sam does not own it and the 19 billion dilution is already built into the current price. Of note is what could be shell game being played by Bank of America and Bank of America Home Loan Servicing (Formerly known as Country Wide). There are rumors starting in the Texas market that BOA is selling foreclosed homes to BOA Home Loans, then Home Loans are selling them at market value making BAC balance sheet llok a little cleaner. It also inflates the housing market data if BAC does this with all of it 500,000 plus underwater mortgages its holds. Those sales will be logged as home sales twice once as an auction sale and once as a market sales. MIKE, any input on this would be helpful. (That would Mike Ameel realtor extraordinaire in So Cal)

I’d also look to get in on some downward market pressure on good stocks like aapl, goog, cvx, ibm, amt. It’s a good day to do some shopping.

One of you asked about a play for the 35,000 troops we are planning on sending to Afghanistan. (yes TED it was you.) The new site at Rueter’s will slow down my analysis, but here are a few tickers to look at. GD which was pimped here in October and it still looks like an 80-90 stock by Q1 2010. Check out the May call options as well. Also look at L 1 Identity Solutions (ID) which design and create personal identification systems for banks, institutional organizations and the government. They also are involved in military ID. Also FLIR, which does thermal imaging (Think Night Goggles, not to be confused with night Googles which I do on most nights.) was pimped here in Mid October. The stock looks good and should be in the 37040 range by mid 2010. There was some recent sales by the CEO, but there were corresponding sales by the family trust. A lot of homework makes me think this is just an estate planning issue rather than a value judgment call. PLEASE do you own homework on any of the these.

Salve Lucrum


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