Monday, October 04, 2010

4 October 2010 In The Long Run


4 October 2010 In The Long Run

In his 1923 enthralling treatment of then modern economic modeling Lord John Maynard Keynes explains “The long run is a misleading guide to current affairs. In the long run we are all dead.” Yet on at least four occasions today I heard guests and moderators on Bloomberg refer to “the long term”. That might be helpful if they provided an operational definition for “long term”. It’s much like saying someday, eventually, or in the future. It is yet another sign to me that “THEY” don’t know what to expect either. I am in good company.

DAMN I’m Good, Sometimes

Last night I took a shot at the factory orders with this comment: “Monday we will see the factory orders report and from several of the Articles in this week’s Barron’s (As well as couple of WSJ articles) the warehouse shelves might be getting a bit crowded. Inventories seem to be up which might imply factory orders have or will slow. On the other hand we had some fairly impressive auto sales figures recently which might suggest a strong durable sector reporting. The consensus guess is a drop of 3 tenths of one percent. I am thinking we will have a drop of .5%”

Low and behold, it was -.5%. Apparently the-.3% was factored into the market as once the -5% number hit the market took a half a point drop.

As far as pending home sales which we suggested last night would not be good, we were right and wrong. This should have been positioned a bit better in last nights post. The raw numbers were good. The actual index number was 82.3 versus the previous month of 79.4 (which was adjusted down to 78.9) and the month to month was a pleasant 4.3 % increase. The negativity was the year to year comps which are down15-24% range depending upon your region. BUT, (Behold the Underlying Truth) we had the tax stimulus plan hitting the market last year and it did pop the RE market quite a bit. YTY comps are a bit irrelevant so we should take the good news as good news.

It is really hard to decide why the downturn today. You can read 15 different concepts, so here is a 16th or a blend of all 15. People are taking profit before the big labor number Friday and Alcoa’s kick off Thursday. If they take a profit, it usually implies there will redeploy those monies after these two events. That suggests we could see things lag all week and then . . . .

What I do find interesting is the new dip in Treasuries. The sixth month Treasury is at .44% and the 10 year is now dipping below 2.50 Again.

“There’s good readin' tonight”

Actually I think Roy Brown may have said it better in 1947 with his pre rockin roll hit “There’s Good Rockin’ Tonight.” The genre back then was called Jump Blues. But I digress.

One of our readers turned me on to a new writer, at least for me, named Michael Connelly. (Thanks Tim, come to think of it Tim is not a reader, but I’ll thank him anyway.) He suggested a book called Lincoln Lawyer which was Kindle-ated (remember you heard it hear this word will catch on) so I got a copy and I am enjoying it. But too much enjoyment can make you go blind I understand so Today I downloaded all 101 pages of:

I am sure this spell binding thriller will be all it has been promoted to be. We will tear it apart and give you the low down tomorrow.

News You Can Use

It’s getting a little late, but I just looked at the post and realized there really was no ways to make money in this post.

BMI, Badger Meter was a stock I Pimped here at the end of May at 40 a share and said they would hit 42 by the end of summer. They actually hit 42 three weeks later and has waffled in the 40-41 range until the last three days and is now below 40 again. The value of this stock has not changed. In fact I would say that it is a 43-44 dollar stock by Q1 2011. So it is not a bad time to take a look at it. The world will be participating in water wars and in certain countries already are. An estimated 25-30% of water supply is wasted due to leakage. BMI is a leader, that is a debt free leader, who designs and sells “Smart Water Grid” metering that will tell municipalities (lots of stimulus monies are going into water projects) when their pipes are leaking. This is an investment not a trade and should be considered long term (beyond 24 months).Do Your Homework. When you do the homework, look at the November 40 call at under 2.00 a contract.


In the portfolio today, we had two buy to open calls hit their limits so we own December 18 2010 $21.00 calls for VXX at 1.15 cents. (If you have been paying attention, I did chase that call as I started at 1.00. Shame on me.) That means we will be in the money when VXX hits 22.15. It closed today at $17.37. We also picked up some Jan 22 $14.00 calls for “But Nobody Doesn’t like Sara Lee” SLE for $1.15 (same as above, I didn’t even notice that.) SLE closed today at $14.40. I am in the money at 15.55.

Finally a Middle East Agreement!

"Gentleman, I need an agreement for my next press conference.  Can we at least agree it is 9:14 AM right now!"

Salve Lucrum


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