Tuesday, August 12, 2008

Fashion Of The Day

Well you have heard me say that I thought we had more pain for the financials and we got it today. Today was the day to downgrade Goldman Sachs GS if you were a high profile analyst. When they hit the best of breeds -- Goldman and JP Morgan JPM it makes things tough for the bulls. I wouldn't go near the financials right now. I think this round of pain will last for quite some time.

When I look at the overall economy, I see some things that I like. Commodities prices are coming down rapidly and this will most certainly help margins as we go forward. The thing that concerns me is the fact that this market won't even let you be successful buying quality. Last night Flour blew away both earnings estimates and revenue estimates---oh and they also set a record for backlogs. They were trading over $80 in the after-hours and I was feeling like I was smarter than the average trader. In the premarket this morning they were over $80 again and it looked like a new all-time high would just be a few weeks away. And then---the regular session opened and after a brief visit over $80 the street started selling it like there was no tomorrow. The stock traded down intraday to just over $67 and I was in shock. I was stopped out at $71.75. Why do I tell this story? It is certainly not because I want to re-live this trade for one second. It is simply to say that I am not sure that you can even buy quality in this market. An announcement that FLR got another $3+billion dollar project didn't seem to help. I will probably be sick that I sold the stock, but I had to follow my money management principles. I went to mostly cash today and just plan to see what opportunities present themselves in the next few days.

One of my trader friends and I have had differing views on oil and natural gas for the past 15 months. He was gloating today and giving me his plans to make money as oil goes under $100. My argument is that we should find STRONG SUPPORT BEFORE we drop BELOW $100. What is the trade if my theory holds? National Oilwell Varco NOV is one that I have been watching. I think you can buy it hear and stop out if it closes below $66.30. If oil finds support, this one could take you into the mid-seventies in a couple of days.

I also think you can look for Transocean (RIG) with a stop on a close below $119 to be a decent play.

I don't buy into the "Dollar Will Never Go Lower" theory that most of the talking heads on televisions are pitching. Now I have heard Guy Adami say that gold goes up the steps and goes down the elevator. I think that gold may find some stability at $800 and if it does Freeport McMoran (FCX) should be a good play. I like FCX's chances to hit $98.

How would you like to be Ben Bernanke? I wouldn't. I love to be critical, but he is going to find himself in a tough spot if the inflation reading is lower over the next 60 days. We have had several guests on the show that have argued that we are going to see rampant monetary inflation. I don't disagree with them, but I think we are seeing a slight delay because the domestic banks are causing a slowdown because they are so reluctant to loan money. The short version is that the consumer is hampered from accessing the dollars that the Fed has been printing---but this is a temporary phenomenan. If Bernanke lowers (which is out of the question) or stays put (which is likely) he will be criticized when the inflation reading begins to heat up. If he tightens, he will be criticized as well because we are in a real slowdown. What is a Fed Chairman to do? I would start putting real pressure on the Chinese to tighten further. Chinese inflation was very high and if we need their participation to slow global growth.

Here is a thought---Lets DRILL AT HOME. It will create jobs for Americans, keep wealth at home and despite what some of the TALKING HEAD JACKASSES SAY----IT WILL LOWER OIL PRICES. I am so sick of the morons in the media saying it would take 10 years to get it out of the ground. The mere announcement of the lifting of domestic drilling bans will send oil and gas prices DOWN.