Thursday, November 13, 2008

Counter Trend Rally?

Today is the kind of day that you would make you think we have found the bottom and have many brighter days ahead. I really enjoyed seeing the action today and will admit that we didn't see much selling into close. Several of my stocks closed on the highs of the day. There are several reasons that I am not overly excited tonight. First, we have seen big swings to the upside and have not gotten the follow through. If it does not hold tomorrow and Monday, we could be right back testing the October lows.

I appreciate the comments/emails that we received on last nights post. I have said over and over that the best way to stay on top of this game is to listen to what others are thinking. We got several interesting comments on Market Guru and one was saying that we are really in an deflationary mode. I don't disagree that we might see some deflation in the short run, but do you honestly think that we will see sustained inflation with gas at Pre Hurricane Katrina levels. I would like to think that many of us have changed our spending habits, but it is just not the case. As soon as we can get more credit, we will be right back out there buying items that we cannot afford. Isn't that what started this mess? Did we really learn our lesson? I don't think so. When you get November oil/gasoline consumption numbers, I'll almost guarantee that they will be on the rise.

Another reason that I am not jumping for joy is that we are not getting any leadership from the financial stocks. I believe that a major part of our rebound will be restoration of confidence in the financial stocks. Everyone knows that the integrity of our financial system is an absolute must for our economy to go forward. In this downturn, we stayed at the top of the heap in terms of the world economies because we have a strong developed financial system. The recent world actions proved that even in its darkest hour, our financial system is the most trustworthy in the world.I can't wait until January because I think with every passing day Paulson is hurting our position as he plays bait switch lie and bailout the buddies. I thought he would be on of the greatest in history when he was appointed. I WAS WRONG!!!

I am looking at a possible short on Chattem CHTT. I think the multiple on this one is overdone. It is good company, no doubt--but it enjoyed a better than average multiple. They are a consumer products company and have gotten a better than average multiple during the recent weakness in the economy. With its current multiple around 20, I don't see the growth supporting that multiple. My target this one is around 62.

For those of you that have argued that we are seeing deflation as opposed to inflation I ask you this question--Can the dollar stay strong given the level of debt we are taking on in this country? Especially with Hank the Liar trying to revive credit card debt. What happens if the dollar falls? Does oil go up?

I still like Fluor FLR even though I think you might have to be patient with it. I am planning on this one being a 4 bagger for me. XTO is still on my favorite list.

I am not rushing to make any new trades tomorrow. I want to see follow through, but am not confident enough to commit any new capital.