Now having said that, I'm having fun reading his most recent post on Mixed Indicators. That post makes the writer in me cringe, because it lacks focus. That lack of focus makes the trader in me cringe, because there is no evident trade in that post. I must add my 2 euro-cents worth.
Today was a strong day for the Dow, and IBM led the way. That warms my heart, because it goes back to a conversation that Pythagoruz and I have had a couple of times, concerning the value of the dollar and export earnings. At one time he was concerned that the falling value of the dollar would hurt corporate earnings, and therefore stock valuations (silly bear...).
Companies that can export their products often see dramatic bottom line profits on the fall of their home currency. My example to Pythagoruz was KO, but IBM as a hardware and software and servicing company also clearly fits the example. They proved it today, and they carried the Dow today.
Tomorrow will be another day, and I suspect it will be a very different day. For starters, Citigroup will announce their earnings tomorrow, before the bell. The rumors are all over the place with that company, and nobody really knows what the bottom line is going to be. But it's well known that Citigroup is overly exposed to the SubPrime Lending problem and if I were a new CEO, such as they now have, I would be tempted to write off everything I could, so that nothing could come back to haunt me. This is the so-called "kitchen sink quarter" for the Citigroup.
Throw it all out, including the kitchen sink!
In this case, the kitchen sink will probably be the dividend. Bank stocks trade in direct comparison to their dividend rates because if the dividend is low, investors will deposit (with insurance guarantees) their capital instead. Most American banks these days are in need of capital, so cutting dividends will conserve capital and perversely, attract deposits.
So where's the trade? Today I bought a small position of C Jan $30 puts, symbol CMF. But I also bought a few DIA Jan $126 puts, symbol DAWMV because I think that C will lead the Dow down tomorrow, just as IBM led the Dow higher today.
I also have a few out-of-the-money January IWM puts, just in case that index happens to lead the way. It often does lately, as somebody in chat pointed out. In other words, I'm all short here....
So, who's the silly bear now?
5 comments:
Well you know I have to respond to that one, so here goes..
"In our daily chat sessions I sometimes often give Pythagoruz the gears about his bearish tendencies."
The bearish tendencies have been proven correct! Woohoo! =)
"That lack of focus makes the trader in me cringe, because there is no evident trade in that post."
Well the point of the post was that the market is giving mixed signals so proceed with caution. Weren't you saying this market was choppy? And as far as a trade, i said:
"This chart(QQQQ) was so compelling to me that I took significant call positions in the tech leaders SIGM and WFR on Friday."
Theres a trade, and it did quite well today I might or might not add.
"it goes back to a conversation that Pythagoruz and I have had a couple of times, concerning the value of the dollar and export earnings. At one time he was concerned that the falling value of the dollar would hurt corporate earnings, and therefore stock valuations (silly bear...)."
I don't recall saying it would hurt corporate earnings but if I did I probably meant that earnings will fall as well as the dollar (not because of) in a recession. I do recall saying that the falling dollar was more bearish than bullish because it merely reflects inflation and systemic US problems, not organic growth. Companies might be worth more dollars due to the falling dollar, but those same companies are also worth less because they are contracting.
Maybe this was related to one of our confused conversations about the euro and the dollar. I think there were a few times when I said the increasing dollar when I meant increasing euro, but we cleared that up.
"So where's the trade? Today I bought a small position of C Jan $30 puts, symbol CMF."
Don't you think a bad quarter is priced into that stock:
http://stockcharts.com/h-sc/ui?s=c&p=D&yr=0&mn=6&dy=0&id=p71475662083
And don't you think the drop is priced into the puts? They have an implied volatility of 55.21% compared with an index of 43% last week. I do think you are smart buying the 30 puts though, being in the money they are much cheaper than the 25p's although they carry more risk per contract if C pops pre-open.
"I also have a few out-of-the-money January IWM puts, just in case that index happens to lead the way. It often does lately, as somebody in chat pointed out."
I have been pointing the IWM leadership in chat as well as others and I wrote about it a few weeks ago here:
http://stockgeometry.blogspot.com/2008/01/us-small-caps-are-in-bear-market.html
"So, who's the silly bear now?"
That would be you. (mr obvious here)
If you look at those indicators in my mixed indicators post most are actually pretty bullish and none were extremely bearish. I'd say that post one of my more bullish posts ever although I have a hard time being bullish in this environment, so I say "mixed". I think we see a continuation of today's rally till the end of the week. I remain a bear in bull's clothing and my positions are net long. Go bulls! Rah rah rah!
And by the way, its "pythagoruz" not "Pythagoruz." =)
Ladies and gentlemen, in the right corner weighing in at................ lol.
"Well you know I have to respond to that one, so here goes..."
Of course. The irony is just delicious. You go mildly bullish, and I get silly.
Silly Bear went 3 for 3 today... :)
Nice call!
good job indigo.
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