Sunday, October 12, 2008


You will notice that I time stamped the title of this post because in todays market things can change so fast. I hope we are going to see a rally tomorrow. The futures are being helped by the announcement that the global financial leaders are determined to get the credit flowing again. Specifically the EU leaders are guaranteeing banks. Now I hope this is more sustainable than the announcements that we have had lately.

Goldman Sachs cut their 2009 average price of oil to $86 from $115 per barrel. Not great news for the energy complex, but certainly welcome news for the consumer. I believe that they cut this years low estimate to $70 per barrel. Falling oil will help the consumer just in time for the Christmas shopping season if it continues on the same path.

I think we have enough government guarantees floating around to reasonably assume that we are getting close to the end of the total panic surrounding the banking system. I am looking for companies that have strong balance sheets such as JNJ. It is my opinion that we are going to go from a state of panic to merger mania if we don't bounce back soon. If I am a CEO of a company with a strong balance sheet, I am licking my chops at the thought of buying some of my competitors at these reduced prices. I would not get in a hurry because right now panic and fear are just creating better values. At some point these guys are going to jump in full force.

The DOW FUTURES were up 251 pts when I started typing this post and now they are only up 237. We must see some positive follow through tomorrow from this news if we are going to be able to get off of the bottom.

I am still holding SWS and FLR. Both of these have been totally slammed lately and the fundamental story has not changed that much in my opinion---but to date I have been VERY WRONG. I absolutely cannot believe that Chesapeake Energy CHK has fallen below $20. Just a couple of months ago this thing was up in the $70's. Now I know they have been hit, but this seems like it has to be overdone.

Everyone is writing off the disk drive makers, specifically Seagate STX. I think this one is a steal under $10. I thin this one could double, but I said that at 15.

I still think the consumer is going to be stronger than people think. I am trying to use my common sense to guide my thinking. I have a friend who sells condos in a normally very stable market, and he has told me several times that this has been a very difficult year---but it is slower and not dead. There are those of us that have not lived beyond our means and will still be eating out and taking vacations---slower
not dead. Recessions are healthy parts of the normal business cycles and SLOWER is just a part of this recession---it is normal. As I said before this recession may be a little deeper because of the excesses we saw the years preceding it, but we will get through this.

If we don't open sharply higher on the EU news, then tomorrow will be a wild one. If we do, we might be seeing the bottoming process really kick in.