Sunday, May 23, 2010

BAGAKOAA May 22, 2010 Gimme a V, Gimme a W, Gimme a ?

BAGAKOAA May 22, 2010 Gimme a V, Gimme a W, Gimme a ?

So what if any kind of recovery do you think this is going to be. From February 19th through May the 9th we saw a continuation of what appeared to be a bull market from the lows of March 2009. When you look at a 2 year chart, you could still even picture that despite the 10% correction of late. On Thursday we had whipping where down sides we 30 to 1 against uppers. But fundamentally what changed?

It is goosey and if I were 20 years older, I would be taking all of my money and getting entirely out of stocks and into safe bonds and or gold and silver. As this volatility continues and the Eurozone stays goofy, gold is headed for a conservative 1500 and possible higher. That is not yours truly speaking but almost every much more intelligent person in the WSJ, Barron’s, Bloomberg as well as people who are paid to pimp commodities. As it is, we are (NOTE I said we as Devin has shown a strong interest as of late) 25% cash, 30% bonds, 3% long options, 5% Gold, and the rest is in equities AAPL, IBM, GIS, MCD, CVX, KO, HAS, SBUX, and TGT. We took some of our Flash Crash Cash and lowered a LOC we had with Schwab.

So what do we do from here? Well I read this week’s Baron’s and while there were some great articles about the way things could and might go from here, there was no direction. Overall most of the articles were cautiously opportunistic. Don’t get me wrong, there was one sidebar tea leaf reader (technical chartist John Roque) that indicates that when a certain group of stocks (GS, MS, MON, MOS, and FCX) hits a certain level as they did Thursday, historically we have seen the S & P drop yet another 10-15 % so he is advocating a 900 level in the S & P. Could it happen? Sure. But there are till bargains out there.

This weeks Barron’s had their occasional PENTA section which is a special section they created a couple of years ago that show what hedge fund managers are doing with wealthy clients (Portfolios in excess of 5 million hence forth PENTA). The top 100 hedge funds survey for the report returned almost 21% over the last 3 years. Very impressive. I like these kinds of article because you and I can see what they are buying and what some of their reasoning is. These are big money managers. Most are managing portfolios in the billions. Remember by post about 13-F filings with the Security and Exchange Commission. Each one of these fund file a 13-F. You can go back 3 years or more and see how they adjusted their holdings through the good and the bad. You can see how they managed to achieve these incredible rates despite the world collapsing around us. You can see quarter by quarter how a guy like William Harnisch (managing about 500 million in stocks) started buying Best Buy at 2 dollars a share in 1997 and slowly bought his way into a significant position by 2006 and sold at a 200+% gain. Why did he sell? I could not tell you based upon the article or the historical 13-Fs but I know that Wal-Mart decided in 2006 to start to get serious about electronics. How did that work out? Ask Circuit city and look the price of BBY since then 58 down to 41. At 11 times earnings, I wonder if Harnisch is buying back into BBY? We’ll see next 13-F. Anyway, this is a great special section worth reading, but I say that every week.

I’ll get to other articles later in the week, but here are some teasers. Have we seen a top in the market for 2010? Caveat venditor! (Latin for let the seller beware). Watch Costco’s earnings report on Thursday, it could be a blow out against last years. Michael Santoli does a great article about some severely depressed stocks that look “Ripe”. (Michael, one of them is Wynn). Andrew Bary does a great article about the value of European Banks. One more worth mentioning is Johanna Bennet’s article about Medco (MHS) and what impact the health bill might have on the stock that is down 12% YTD. SPOILER ALERT, BUY BUY BUY.

Keep an eye ahead this week as we have existing home sales, which I was expecting this to soften a bit, but consensus estimates have it rising to 5.6 million for about 5.3 million. I was ready to arguer that number because the tax credits for home sales have expired so I thought for sure the number would be down, BUT this data point measures closing escrows so the tax credit influence will still be supporting the number. I’d temper the number down to 5.5. We’ll see. Why do you care? If you have home related stocks and the number comes in soft (Think below 5.4, HD, Lowes, Whirlpool, GE, Electrolux). They can all take a hit. (Whirlpool had a pretty day Friday) There might be some good news from Wednesday’s Durable good order. I mention that again Monday Night after I get a feel for military versus non military order which really determine the direction the report. The GDP reports on Thursday. If its not up I will be surprised. BUT, it will be my 39th surprise in the last 3 weeks so that don’t mean much. Friday, we have personal income and outlays. I agree with the consensus that income will be up and spending will be down.

To wrap things up, here is the link to who is reporting earnings this week. I will do some individual guesses either later tonight or tomorrow night. AZO files tomorrow and Advanced Auto had a great report last week. I’d guess AZO to meat or beat earnings of $3.57. TIF reports tomorrow and look for them to beat as well.

Salve Lucrum


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