I am shorting

I am starting my short positions today speculating on the Obama win which I think will trigger a huge sell off. I am also cutting my positions locking in the profit from this rally. Yes i do think Obama will win and yes I do think the market will tank after that. This is just a speculation!

Sorry guys

i've been too busy this week and will be busy the rest of the week because i am researching to draw out a new strategy for this market. One thing i am doing now is buying the dip and selling and selling short the rally. In trading you do whatever works and this is what has been working. I am still going to consistently add to my long porfolio but in very small increments. I have a  lot in my mind right now that I want to share with you but its way to much to type out. If you wanna chat about the market give me a call  512-363-0868 

October

 Yeah, the month's almost over, but stumbled upon this quote again...

"October.  This is one of the peculiarly dangerous months to speculate in stocks in.  The others are July, January, September, April, November, May, March, June, December, August, and February."

- Mark Twain

 LOL

Protect yourself with dividends

A great man once said, " Give me yield or give me death"

Although there are tons of sectors paying huge dividends, I want to share with you about the financial sector. Remember price of the stock and the dividend yield has an inverse relationship. 

JPM- 3.9%

WFC-4.2%

BAC-5.5%

C-8.6%

USB- 5.6%

MS- 5.6%

I'm pretty sure all these yields are higher than any savings or money market account right now and some of these banks are backed by the government which means they probably won't fail anytime soon. Ride these fat dividends and reinvest with it.  

The inflation problem

I think everyone should talk about this problem with their parents or anyone you really care about. All the evidence is pointing to an accelarated inlflation and historically this has been truely detrimental to the currencies. During the asian financial crisis, the soaring foreign debt(sound familar?) cut some of the asian currencies value by half. Perhaps U.S. is going to be more resilient than the asian economies but everyone should definitely be aware of it regardless. It just doesn't make sense to hoard so much cash when the value is likely to depreciate rapidly and equities will surely outperform because inflation drives the market. 

Positions I am currently Holding/Adding/Will add:

KO GE BNI GS V AAPL GOOG BUD POT BAC WFC KFT UYM UYG RXL USB XOM PBR UDN IBM CAT CHK FDO 

If you have any questions about any particular stocks please feel free to ask. Or if you wanna know why I am buying it. 

Question/Answer

What about Chesapeak's balance sheet? lot of long-term debt and little cash...

They have billions of dollars of assets which can be sold for cash(BP bought 1.5 billion dollar worth of natural gas reserves from Chesapeake). They have debt becasuse they are growing .  In order to grow they had to borrow money to purchase natural gas reserves to expand their production. They didn't become the number one NG producer for no reason. The debt did worry me at first but I am betting on the long term demand spike of natural gas. The inflation that will eventually catch up will also spike commodities price by default which will generate so much cash for CHK. To be honest Lewis you shouldn't buy any CHK because i don't think you will be comfortable holding it. I'm sure you've read the 10-q and the 10-k and if that wasn't attractive enough don't buy CHK. You are more of a value guy because the growth stock numbers scare you. To be quite frank i'm pretty sick of writing about CHK. Again if the 10-q and 10-k didn't impress you i can't do a better job so i recommed that you don't even bother with CHK. 

What about master card, why do you like Visa better?

 I think if you took a look at the 10-q and10-k and the balance sheet you will also think Visa is better(bigger company better management and more cash). I am going to be extremely underweight on V because the soaring household credit card debts scares me a little bit. It can go bad just like subprime morgages. In the long run i still think its plastic over cash.   

When you get a chance, can you explain your put strategy a little but more specifianlly, or suggest somewhere I could read about this?

When I have more time I will explain it specifically

Important report on Monday

China is reporting its economic datas on Monday and it will be extremely important to the oil price. If they show slowing demand for oil, it is very likely that we will see $40-$50 oil. I know it sounds crazy but demand is what drives oil's price. After all, the emerging market oil demand speculation is what shot the price of oil up, well at least thats what i believe. Which leads to my next point of this deflationary scare thing for a while. I have to admit that at first I thought deflation was taking place when the oil price was dropping but it is now pretty clear after the hedge liquidation that it was probably mostly specualtion that drove the price up. The real inflationary problem is ahead and we need prosper as much off of it rather than letting the cash sit there to only lose its value. I am going to end this entry with a quote: 

"Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

-Warren E. Buffet- new york times 10/17/08  

Herng's big bet

I am going to take advantage of this opportunity of a life time(Buffet had a little influence on this decision) and put 75% of my net wealth to work for the long run(10-20 years). Some names i am adding currently are GE BAC KO NKE SSO QLD DDM XOM CHK RXL IBM AAPL GOOG.... All these are going into my long porfoilio and I am going to keep adding until the bargin is not there anymore or until I run out of money. I am definitely not done adding yet because I feel like a fat kid in a candy shop right now. I will update you as I add on and buy more  companies. A lot of you might think I am being really stupid right now but I rather see my money grow as the economy recovers rather than see the value of cash depreciate as inflation catches up. I am also only 20 so if i am going to take any big risk in my life it should be now.  I don't want to look back in 10 years and think gee why didn't I invest in these companies in the fall of 2008. Another thing that justifies this move is the fat dividends. I will be earning a decent salary just from all the fat dividends these top companies are paying(I am most likely going to keep reinvesting the dividends though). I am still going to trade for a living but my big paid day will be 10-20 years from now.  

Bitter hedge fund manager quits after returning 866%

http://www.cnbc.com/id/27239479

PSA: COUNTDOWN BEGINS

Warren E. Buffet

Buy American. I Am.

• SIGN IN TO E-MAIL OR SAVE THIS
• PRINT
• SHARE

By WARREN E. BUFFETT

Published: October 16, 2008

Omaha

Enlarge This Image

Brad Holland

Related

Times Topics: Warren E. Buffett

THE financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

So ... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

Why?

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.

Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities.

Warren E. Buffett is the chief executive of Berkshire Hathaway, a diversified holding company.

last thing for the morning

o ye and please leave Hope out the window when you trade and invest. If you like hope go vote for Obama. The market is not a game of hope and i realize its really hard to admit to yourself that you are wrong but trust me you will feel a lot better admitting it and losing less on your losing trades. It is just so important in trading to set your emotion aside. Lets not trade like girls a.k.a trading with our feelings( Mel you are like a brother to me, as cute as you are I consider you a dude). What I talked about this morning is SO SO SO important. Discipline will compound your $$$.  

this seems crazy to me but...

Did you know 95% of the traders hold on to their losing trades longer than winning trades, WTF. Please don't be in that 95% tile when you are making a trade. Admit your mistake and cut the damn thing if its losing you money. Cut the losers and let the winners run PLZ. 

also want to add

Buffet is not calling a bottom btw, he just sees tremendous value right now. He is usually 3-6 months early before the big run happens but thats because value investors see value before others see it. I also want to highlight something very important he said and that is 90% of the traders and investors miss the big run because they are too greedy and want to keep chasing the bottom. Value is value, don't try to pinch every last penny out of the deal(its like asking someone for a better deal when he is offering you $100 for $50). Its way better to be early than late. You only get huge returns from spotting out what will happen way before it happens.

For those who want confirmation

couple "experts" including Julian Robertson(legendary hedge fund manager) addressed the inflationary problem on tv today. Buffet is on an all out buy mode(for the long run 10-20 years) and so should we because I heard following Buffet is a pretty smart move. After all,  10k invested in him 40 years ago is now $400 million. 

http://www.reuters.com/article/ousiv/idUSTRE49G36C20081017  

Couple things

It is impossible to tell where the market is heading right now because there is not enough evidence to justify a uptick or a down swing.  One thing i know is that hedge funds and mutual funds are hoarding cash right now and it is a huge sum. When the big rally happens I suspect it is going to be yet another 900-1000 point rally. Today's big bounce doesn't confirm a reversal because remember what happend last time the market tanked 700+ points, it had a huge bounce back the next trading day. Same thing happened today and I am going to have to have more evidence(a follow through day with huge volume) before it is a confirmed turn around. Because I am not able to figure out the bottom, I have been consistantly adding health care(RXL) and basic materials(UYM) to my porfolio. I have also been adding UYG, WMT, and FDO. Remember I never buy all at once especially in a volatile market like this and trust me you will find this to be a very good technique. 

Google beat the fear out of earnings but again I don't think this justifies anything. There are several reasons for this and the main one is because the economy didn't experience a huge dip until september of this year. September is a super important consumer's data month because it is back to school shopping month which is the second biggest shopping period other than Christmas. Also, 51% of google's revenue was from international markets which means companies that market internationally should see better earnings then the ones that only operate domestically. JNJ and IBM has big stakes in the international markets which is probably why they saw strong earnings also. 

There are couple good news. LIBOR- london inter banking offered rate- which is the rate banks lend to other banks has dropped a little. Also from the treasury bond data one can observe that more and more people are willing to move out of the ultra safe low yield treasury bonds which they would probably then invest it in the market. 

One more thing. I am going to add BIDU aka baidu to the speculation part of my porfolio before the earnings on the 22nd. BIDU is another one of those momentum stocks that will rocket on a good earnings. I also believe that China is in a much better shape than U.S.

This is all for tonight, GL  guys.      

Best performing stock of the year

FDO- Family Dollar Store. I think FDO is going to take advantage of this chance and go for growth. I'm not gonna explain this play because its common sense   

News

Oil inventory went up more than expected driving the price of oil down and natural gas inventory was lower than expected because drillers think NG is worth way more than it is now and they refuse to drill heavily when the price is so low. OPEC pushed the November emergency meeting to October 24th, don't they sound so desperate. Expect a huge production cut, those guys are sly. I am definitely going to buy USO if it drops to the low 60s because i am almsot certain the price of oil will go up at least temporary after the OPEC meeting. I still think demand will stay low so I am not going to hold USO. 

Another thing to pay attention to today is the financial sector. Merril and Citi both reported not so good earnings driving the entire financial sector down. UYG which is a bullish ETF on financials is reaching its all time low. Remember the banks are in a totally different situation right now than last week. They needed capital and pretty much got as much as they can(a.k.a U.S. treasury). These major banks are not failing because they are backed by the Man. UYG has the potential of going 5-10 fold in the long run(3-5 years) so you might want to invest a little money and just hold it. I plan to add UYG on my long porfolio. 

Healthcare companies are beating the estimates and guiding higher left and right but the whole sector is down. Oh i forgot fear is still a huge factor in the market so it is not surprising that the entire market is probably going to underperform together. The market is down today mainly because the phily fed index that came in around 10:30 ET. PFI gives an overview of business outlook and it dropped more than expect. Healthcare sector as a whole is a SCREAMING buy and if you don't take this bargain now, i'm afraid you will miss out big time. 

These are just some thoughts for now.    

CPI and Jobless claim

CPI(consumer price index) pretty much stayed unchanged which was not a surprise because the temporary inflationary problem has been off the table until the tremendous amount of money injection sees its effect. Jobless claim was down 16,000 making the total 465,000. The datas were not as bad as expected but the expectiation was pretty low so. Apparently "not bad" is the new "good" because the futures are rocketing.  

Confirmed

DNA and JNJ blew out the earnings yestarday and the guidance looked good. Today ABT does the same thing. First time an accident, second time a conincidence, third time a trend!!!!! Hop on to the healthcare sector before it takes off. RXL

Answering Lewis

What do you think about the forecast cut(talking about CHK)? http://www.forbes.com/feeds/ap/2008/10/15/ap5559317.html

CHK is in the long category of my porfolio so i have a much longer view than just 2-3 years. I sinicerely think CHK has the potential of becoming like an Exxon in the long run and the main reason is because I have completely bought into the Natural Gas story. Natural Gas is cleaner and more abundant than oil which means we immediately knock out two prolems: foreign dependence on oil and environmental issues. I do think this will take a while to happen because Oil companies spend so much money lobbying and money they have. However, I also think that the increasing demand for a cleaner environment will eventually push natural gas to be the energy of the future. The price of natural gas historically has been valued much lower but CHK was trading higher then. The once power growth stock has now became a value pick. Unfortunately I already have a lot of shares of CHK (6250 shares to be exact and yes all my long stocks have been getting a beating like you guys) so I am not going to add any more shares. However, I Have been aggressively buying it around $12-13 in Tiffany's account. CHK is an investment for me and not a trade so the short-term related news does not bother me at all.  

p.s. Carl Icahn on the gov. and the bank situation: " Its like we are in a small town and there are many mad scientists that are conducting chemical reasearch. They blew the god damn factory up and released all these poisonous fumes hurting everyone in the town. The town then built new chemical reasearch factories and put the same god damn mad scientists in it to operate it."  hating on the CEOs of course 

Noon report

After analyzing Bernanke's speech and the Beige Book report(Economic data on all 12 districs in America), one can conclude that it was overall very negative. Beige book showed all 12 districts are showing economic slowdown and Bernanke said the economy will continue to see slow down if the banks don't stabalize. He did reveal a good news and it is that the inflationary problem of the basic materials from earlier this year is pretty much solved. This news alone made me feel so bullish about commodities and basic materials. I know i am a contrarian on this one because nobody is putting money into commodities after the commodities bubble but how can one not realize that inflation is still a big issue. We are talking about trillions of dollars getting pumped into the system and world wide coordinated rate cuts, any economics major here? I am especially bullish on agriculture sector because this is the one commodity that is not as elastic(the demand for food does not drastically decrease). I am going to put my money where my mouth is and bet that inflation is making a come back in the next 6 months. The best part of this bet is that the slowing demand is already priced into most of the basic materials companies(average p/e of like 7) so any rise in price will boost these companies. i already have "March 09 150 calls" for POT and i am starting my position on UYM(Bullish basic materials ETF). 

Another thing i wanna share with you is the speculation part of my trading account. I dedicate no more than 7% of my trading account in pure speculation because speculating is the good and the evil. Its good in the sense that it will pay off big but its evil because its too much of a gamble. I am going to bet on AAPL before the earnings next week because my guts are telling me they are going to over deliver for the 8th quarter in a low. They guided extremely low on the Q2 report so I think a surprise earning can move this stock fast. AAPL is a momentum stock and for it to go up 20-30% in a week is a piece of cake. Altough i don't get it, there are talks among traders that AAPL is recession proof because of the huge fan base. 

             

Retail sales

retail sales dropp 1.2% which is almost double the analyst's estimate of .7%. This was exactly what i was talking about how Main street hasn't tasteed the bitterness yet but it seems like the horrible economic datas are starting to come out in september. Banks reported and they lost a lot of money but were in better condition than expected. 

Imagine taking his advice...

Western Insurance Securities: Young Warren Buffett

In Insurance, Security Analysis, Warren Buffett on August 1, 2007 at 8:17 pm

In 2005, a group of students from the University of Kansas met with Warren Buffett. Their first question was whether he would still be able to earn investment returns of 50% annually. Buffett responded:

Yes, I would still say the same thing today. In fact, we are still earning those types of returns on some of our smaller investments. The best decade was the 1950s; I was earning 50% plus returns with small amounts of capital. I could do the same thing today with smaller amounts. It would perhaps even be easier to make that much money in today’s environment because information is easier to access.

You have to turn over a lot of rocks to find those little anomalies. You have to find the companies that are off the map - way off the map. You may find local companies that have nothing wrong with them at all. A company that I found, Western Insurance Securities, was trading for $3/share when it was earning $20/share! I tried to buy up as much of it as possible. No one will tell you about these businesses. You have to find them.

Recently I was lucky enough to find an old article Buffett wrote about Western:

Again my favorite security is the equity stock of a young, rapidly growing and ably managed insurance company. Although Government Employees Insurance Co., my selection of 15 months ago, has had a price rise of more than 100%, it still appears very attractive as a vehicle for long-term capital growth.

Rarely is an investor offered the opportunity to participate in the growth of two excellently managed and expanding insurance companies on the grossly undervalued basis which appears possible in the case of the Western Insurance Securities Company. The two operating subsidiaries, Western Casualty & Surety and Western Fire, wrote a premium volume of $26,009,929 in 1952 on consolidated admitted assets of S29,590,142. Now licensed in 38 states, their impressive growth record, both absolutely and relative to the industry, is summarized in Table I below.

Western Insurance Securities owns 92% of Western Casualty and Surety, which in turn owns 99.95% of Western Fire Insurance. Other assets of Western Insurance Securities are minor, consisting of approximately $180,000 in net quick assets. The capitalization consists of 7,000 shares of $100 par 6% preferred, callable at $125; 35,000 shares of Class A preferred, callable at $60, which is entitled to a $2.50 regular dividend and participates further up to a maximum total of $4 per share; and 50,000 shares of common stock. The arrears on the Class A presently amount to $36.75.

The management headed by Ray DuBoc is of the highest grade. Mr. DuBoc has ably steered the company since its inception in 1924 and has a reputation in the insurance industry of being a man of outstanding integrity and ability. The second tier of executives is also of top caliber. During the formative years of the company, senior charges were out of line with the earning power of the enterprise. The reader can clearly perceive why the same senior charges that caused such great difficulty when premium volume ranged about the $3,000,000 mark would cause little trouble upon the attainment of premium volume in excess of $26,000,000.

Adjusting for only 25% of the increase in the unearned premium reserve, earnings of $1,367,063 in 1952, a very depressed year for auto insurers, were sufficient to cover total senior charges of $129,500 more than 10 times over, leaving earnings of $24.74 on each share of common stock.

It is quite evident that the common stock has finally arrived, although investors do not appear to realize it since the stock is quoted at less than twice earnings and at a discount of approximately 55% from the December 31, 1952 book value of $86.26 per share. Table II indicates the postwar record of earnings and dramatically illustrates the benefits being realized by the common stock because of the expanded earnings base. The book value is calculated with allowance for a 25% equity in the unearned premium reserve and is after allowance for call price plus arrears on the preferreds.

Since Western has achieved such an excellent record in increasing its industry share of premium volume, the reader may well wonder whether standards have been compromised. This is definitely not the case. During the past ten years Western’s operating ratios have proved quite superior to the average multiple line company. The combined loss and expense ratios for the two Western companies as reported by the Alfred M. Best Co. on a case basis are compared in Table III with similar ratios for all stock fire and casualty companies.

The careful reader will not overlook the possibility that Western’s superior performance has been due to a concentration of writings in unusually profitable lines. Actually the reverse is true. Although represented in all major lines, Western is still primarily an automobile insurer with 60% of its volume derived from auto lines. Since automobile underwriting has proven generally unsatisfactory in the postwar period, and particularly so in the last three years, Western’s experience was even more favorable relative to the industry than the tabular comparison would indicate.

Western has always maintained ample loss reserves on unsettled claims. Underwriting results in the postwar period have shown Western to be over-reserved at the end of each year. Triennial examinations conducted by the insurance commissioners have confirmed these findings.

Turning to their investment picture, we of course find a growth in invested assets and investment income paralleling the growth in premium volume. Consolidated net assets have risen from $5,154,367 in 1940 to their present level of $29,590,142. Western follows an extremely conservative investment policy, relying upon growth in premium volume for expansion in investment income. Of the year-end portfolio of $21,889,243, governments plus a list of well diversified high quality municipals total $20,141,246 or 92% and stocks only $1,747,997 or 8%. Net investment income of $474,472 in 1952 was equal to $6.14 per share of Western Insurance common after minority interest and assuming senior charges were covered entirely from investment income.

The casualty insurance industry during the past several years has suffered staggering losses on automobile insurance lines. This trend was sharply reversed during late 1952.Substantial rate increases in 1951 and 1952 are being brought to bear on underwriting results with increasing force as policies are renewed at much higher premiums. Earnings within the casualty industry are expected to be on a very satisfactory basis in 1953 and 1954.

Western, while operating very profitably during the entire trying period, may be expected to report increased earnings as a result of expanding premium volume, increased assets, and the higher rate structure. An earned premium volume of $30,000,000 may be conservatively expected by 1954. Normal earning power on this volume should average about $30.00 per share, with investment income contributing approximately $8.40 per share after deducting all senior charges from investment income.

The patient investor in Western Insurance common can be reasonably assured of a tangible acknowledgement of his enormously strengthened equity position. It is well to bear in mind that the operating companies have expanded premium volume some 550% in the last 12 years. This has required an increase in surplus of 350% and consequently restricted the payment of dividends. Recent dividend increases by Western Casualty should pave the way for more prompt payment on arrearages. Any leveling off of premium volume will permit more liberal dividends while a continuation of the past rate of increase, which in my opinion is very unlikely, would of course make for much greater earnings.

Operating in a stable industry with an excellent record of growth and profitability, I believe Western Insurance common to be an outstanding vehicle for substantial capital appreciation at its present price of about 40. The stock is traded over-the-counter.

I am going to try something different

I am going to try to write at least 3 entries a day. One during pre-market, one at noon, and one after market. I will write about how the day is looking out to be in the pre-market entry. The noon entry will be about any major news that might effect the market. And the after market entry will be my thoughts on individual stocks and my stock watch list. You can only become a better trader and an investor through experience and the first part of that is to be up to date with Main street and Wall street. I also encourage you to post your thoughts so we can brain storm together to come up with better strategies. I welcome any questions also and i will try my best to answer it. Having said that i'll start my first afternoon report.

Intel just reported and miss the top line but beat the bottom line(Top line is the revenue and bottom line is the Earings Per Share). They miss the revenue estimate by $100 million but beat the earnings due to high profit margin. Of course they have a high profit margin because they charge an extreme premium on those computer chips because they don't really have a big competitor other than AMD(AMD is very small in terms of market cap compared to Intel). What really matters though is guidance and they surprisingly didn't guide as low as the analysts did. I personally think the most important number in this report is intel's revenue. They missed a already lowered revenue estimates. It makes sense that they beat the earnings because the estimates for that was drastically lowered last week. The fact that they missed the revenue(even though is was by a little) is telling me that demand for computer chips are slowing down as consumer spending is tightened. Although i think Intel will trade up tomorrow because the market is going to react positively to the guidance but i am going to have to be a contrarian on this one. Another thing Intel's report tells me is that the semiconductor sector is slowing down which means tech is slowing down. Basically don't buy ANY cyclical stocks. 

Wells Fargo, Goldman Sachs, JP Morgan, Morgan Stanley, and State Street is now backed by the government. Does socialism sound familiar? This can potentially turn around the financial sector  because now they have the U.S. treasury backing them up which means tons of capital. Capital is what they needed and they got as much as possible. My guts are telling me that financials has been over bought the past two days but I do think there are upsides for the financial sector now due to the massive capital injection by Uncle Sam. I am probably going to play this with UYG and SKF starting off with the same cost basis for both and slowly trimming the one that is underperforming. 

   

Guess what?

Fundamentals are back. Couple weeks ago i posted an entry about how we are going back to the micro economic way as we kick off into the earnings season and it seems like its begun. I do not recommend buying any stock before the earnings(unless you have insider info) even though every single stock seems priced in already. The truth is that it is IMPOSSIBLE to tell if things are priced in because Main Street hasnt even tasted true bitterness of the economy right now. I think the market has found its comfort zone around 9000-10000 DOW but i am still not discounting the possibility of another bottom. The reason why I am feeling so bearish is because of the worsening economics report. I don't believe that stocks have price in a possible 10% unemployment rate and most importantly the changing values of Americans. I think this recession will be so severe that the word thrift is going to be a part of many Americans value(this is not good for the economy btw). If the Americans bring back this old American value, I am afraid the economy will worsen. Japan has argueably been in a 15 year recession because of their saving ways. It be just wrong to see Americans stop spending!!!

Where the money is moving

i am guessing big money is going to start pumping dough into the health care sector. The reason is because health care is a necessity no matter what kind of economic state we are in. Bunch of companies reported today and nearly all lower the guidance for next year other than Johnson & Johnson. Health care is a good bet considering its gotten hammered with the rest of the market. RXL is the etf that invests in health care sector. Any big names like Johnson & Johnson is a good bet. JNJ also paying 3.3% dividend, thats more than the interest most of the banks are paying right now.   

Henry is completely out of the ETFs

I am only holding one thing right now and that's UNG playing natural gas going into winter when the demand spikes. I am on a all out research mode now for value picks so i will update you as I condone my research. Let me share with you something that has been going on that is very important. One of the biggest reasons why the market got hit so hard last week is because a  lot of CEOs and hedge funds were force to sell a lot of their shares in particular stocks because they had to meet margin calls. Because of this, bunch of stocks got a beating for really no good reason other than the fact that a big shareholder was forced to sell off to repay driving the stock price down. One company i know this happened to is CHK. I know i recommended CHK a while back and i will tell you why this company is even more attractive now. CEO of CHK was forced to sell all 40 million plus shares which drove the stock price down to 13 at one point(I added CHK in your account Tiff) and now its at 21. 

1) First of all they do not have to repay any debt until 2010. It is so important that a company doesn't have the burden of debt in a economy like this. 

2.) They have billions of dollars worth of assets that they can sell at anytime to raise capital. CHK's assets are valued higher than the market cap of this stock, so sick)

3.) They hedged natural gas price at $9+ meaning the dropping natural gas price actually benefits CHK. Gas is at $6.7 right now. 

4.) They are the biggest producer of natural gas which is an industrial commodity/necessity. 

If these are not strong enough fundamentals i don't know what is. 

cut the proshares

too much downside from here. I will explain why later i gotta go trade

Biggest rally ever, does this mean anything?

Yes it means that people panic bought and it also means that more than likely we will see yet another panic selloff. Buyer's volume picked up at the last hour and this is strong indicator that buying will probably continue tomorrow. I picked up QID and SDS to insure today's profit from DDM SSO and QLD that we picked up last week(by the way hell of a trade guys). If the market rallies  tomorrow and the buyers volume is heavy, i am going to immediately sell my shorts and hold all my pro-market position until i feel its peaking. If the market is down for good reasons(heavy sell volume, bad news) I am going to sell my longs ASAP to lock in the profit and hold my short positions until i think its peaking. I am most likely not going to hold the shorts past tomorrow if the market is down. 

My guess is that it will be another strong day because it seems like volume is picking up. If there is another day like today tomorrow, you bet your ass i am selling all my pro-market positions because the sell-off will begin.  

p.s. I hope you guys didn't miss this rally. I do tremendous amount of research(I work 10+ hours a day spending most of that time reasearching) to try to spot out big moves like this before it happens so i hope you guys are taking advantage of it. DDM SSO QLD all returned 20%+ in a day. Please take advantage of this volatility   

Incredibly DANK trade

In bad times like this, ease the pain with POT. POT is a fertilizer company that has been getting hammered because of the commodities bubble. The commodities bubble we experienced this year was really like no other bubble other than maybe the NASDAQ crash. NASDAQ crashed because of bunch of bogus tech companies but commodities are necessities. It is really a good time to take advantage of the falling commodities price and bet on the stocks that already priced in the commodities bubble. I chose POT because this company has been smoking the earnings estimates for the past year and although i do think it will feel the effect of a slowing down economy, a P/E of 15 for a company growing in triple digit is just wrong. Even if their earnings take a hit they are already priced in with P/E of 15 considering the 210% yoy eps growth. I am going to buy "March 09 150 calls" so this is a relatively longer term trade.  

Another reason why i am bullish on commodities is because the returning problem of inflation. All the money the banks and governments are pumping in has to cause inflation. The coordinated rate cut and possible upcoming rate cut will not help the inflationary problem. Inflation drives commodities price. Other ways to play this is with UYM which is a etf that invests in basic materials. 

additional tickers: STLD, X 

analysts hahaha

"Konik noted that despite a dismal September sales performance for most specialty retailers, he believes that Urban Outfitters was one of the few standouts though it does not report monthly same-store sales, or sales at stores opened at least a year. Same-store sales are considered a key indicator of a retailer's health."

so in  a economy where WALMART missed the same-store sales report(key sign that retailing sector is slowing down), URBN is the diamond in the rough, wow what a logic. Its impossible to out smart the analysts so don't try.