Sunday, April 25, 2010

BAGAKOAA April 25, 2010 How, not what and the week ahead


April 25, 2010 How, not what and the week ahead

It’s been a while but its time for me to get back on to blogging everyday if for no other reason to stay on top of the now 12 portfolios I am directly or indirectly involved in. We have an interesting week ahead with some exciting earnings being released, but first, I had an interesting conversation with my wife. She asked me how I do what I do in the market. She knows we had a good year last year in stocks because she has seen the portfolio and signed our tax return. She knows the investments helped significantly with a little project we had in the back yard. She knows I am working with several friends in the management of their accounts.

She asked me what is she supposed to do if something were to happen to me. I explained to her that most of the tocks have strategic stops in place and there are basic instructions as to what she might do in case of my untimely demise. She surprised me by saying she did not necessarily want to get entirely out of the market, but she wants to know the basics of why and how I make individual trades. With that in mind, It made me think that that type of information might be of help to the readers here. From this point forward I will attempt to explain the why and th how on any trade I make. There were a few trades this week, but first let’s look at the week ahead.

I am headed to Cancun for a week of meetings so my reporting might be a bit hit or miss. Throughout the week the wiggle stories will be the Greek Tragedy, and the Goldman Sac of political icky. Keep an eye on the Fed’s post meeting statement to be sure their attitude hasn’t chanced. If they indicate any tightening it could trigger the 10-15% adjustment some are expecting.

Tuesday we have a consumer confidence report coming out and the consensus is a slight bump, about 1% above last months 52.5. That of course would be 53.5. But I don’t see it. I hope I am wrong but I am thinking it will stay about 52.5 or even slide a bit to 52. If I am right, look for a 2% hit in the market on Tuesday. Let’s hope I am wrong.

Wednesday you have the Federal Open Market Committee meeting minutes. I am sure the Fed will not mess with rates until 4th qrtr 2010, but watch their statement for signs of tightening. If they talk about reserves in banks and or reserve limits that will be a tell of things to come.

Thursday we have jobless claims and the guess is 447,000 initial jobless claims whish is below the great report we had last week of 456. I am thinking we could see an improvement and bigger than expected. Look for a number closer to 440 and that should keep this rally going.

Friday, we have the real GDP figures. The last report for 4th qtr was revised down to 5/6% annualized. The consensus for the annualized figure based upon first quarter is 3.4%. I am thinking closer to and possibly hitting 4%, which would be good news.

OK now for my trades during the week and what I might do this week.

On the 19th I had two trades execute as they were calls from January. One was an IBM 140 call, I had 10 contracts and they expired worthless. On Monday the 19th, I was surprised to be the owner of a giant position in Amazon. I had 5 contracts execute which got me in debt with Chuckie. I did some quick but thorough homework which comprised of some value analysis and evaluation of free cash flow, and decided I did not want that much Amazon. I completely sold out of my position and tool a nice 22% gain for a 3 month investment.

I immediately put the proceeds to work, adding to my position in CCC, the reasons why I am in that are explained in the blog about a month ago. I am adding to the position as I still feel it is undervalued at less than 17.00 a share. I also bought 3 GS July calls at 160 a share. I feel that all this political BS will share off soon and GS will haed back on its way to 200 a share. My feelings were reinforced this weekend in a Barron’s article. I added to may position in HAS as it has several great franchises (Transformers for one) and is a great value at 41 a share. I will continue to buy on the dips as I feel this is a 60-65 dollar stock.

I received a nice dividend on my Ford Motor credit bonds. I added to my positions in MCD, SBUX, and again more HAS. MCD because I had a feeling their would have a good earning report and they did. SBUX because they continue to buy back shares and are being managed very well. Buying o the dips in both MCD and SBUX just makes sense. Lastly I bought more RIG. The stock went down about 3% after the tragic accident in Louisiana. This is a dicey bet, not because of the tragedy, they have insurance for that, but the oil slick it is causing could be a huge environmental issue. I am hoping it can be contained and the stock value pops back quick. BP is about to announce some exciting finds in the same area and they are the oil company of record on this accident. Trans Ocean is the Rig builder for most of the gulf.

Salve Lucrum


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