Monday, August 25, 2008


Today was simply a miserable day on the street. Stocks were down across the board, thankfully on low volume. Fannie and Freddie were both up today on positive comments out of Citi. How stupid must one be to think that these things are not going to zero. I sit here writing this article and watching Ted Kennedy speak at the DNC. I think that if the Dems win we are most certainly headed down down down. The Fed has been running their printing presses at full speed and now the Democrats are going to have to tax and spend to afford everything they are promising. It is absolutely the wrong time and I think you are going to see the market telling you that as the election nears.

Now I believe that oil is going to settle in a range between $100 to $120. So the question becomes "What Companies Will The Market Value in This Range?" I think the answer is with RIG, NOV, CHK, XTO and many others. Yes we have seen multiple expansion in these names over the last year and some contraction as oil has dropped from $147. I think you will see cooler heads prevail when the summer vacation is over. I think you can pick your spots in these stocks in the coming days and possibly get some good buys. If we start to hear the political message that we may open drilling in ANWR and the OCS, then you will see oil fall. When the dust settles, it will be the drillers that benefit, even if they are initially taken down with the price of oil.

I watched Fast Money tonight and most of the traders were much higher on Morgan Stanley than they were on Goldman Sachs. I won't tread in that space at this juncture. No doubt there is volatility and money to be made on short term trades in the space---but it will be hard earned money in my upinion. I did buy shares of EMCOR Group today at $32.95. I like both the fundamentals on this one. I am running a tight stop because of the overall market conditions. I will stop out of this one at $31.40. I would hope to see the market head higher tomorrow, but we need a catalyst and I just don't see one.

Fundamentally, I think you should be looking for stocks with no debt. For my short term trades I am making no debt a HUGE consideration. The credit markets are dreadfully tight and any debt renewals that havae to be done in the next six months are going to be costly. This is the most interesting time I have ever seen in my trading life. The Fed is printing money and the cost of debt is going to hurt many companies earnings this year. My biggest concern is wage inflation. I know many working Moms that have decided that when you combine the cost of child care with the cost of gasoline to get to work, it is cheaper to stay home. This may sound silly, but some people are going to stay home and we are going to see wage inflation. When it hits we could easily see Dow 10,000. Hear our interview with Peter Schiff from a couple of months ago. He says the American Consumer is Done!!!!


Dollar.Discipline said...

Peter is spot on.....AGAIN!