Click chart to enlargeWe took some profits yesterday morning in CF because we had bought it at the halfway point of the channel (130's), and by early yesterday it had made it back above the 3/4 mark... quite a move. We're still holding CF, MOS and AGU. We're hedged with SMN (see chart above). It is more important than ever to hold SMN now because the reward far outweighs the risk at this point. If the Fed hints that the rate cuts are over for the time being (which looks likely), there could be a raid on commodities. AGA also offers protection against Ag longs, but it is thinly traded, and has only a few days of trading history. We're going to add some SMN today, hoping for an Ag correction after the Fed's decision at 2:15 tomorrow (Wed).
In our opinion, the stimulus checks will do nothing more than offset the higher gas prices for most Americans. And that's just gas for their cars. It will not help buffer the higher cost of heating their houses next winter. The stimulus checks will likely help us avoid recession by artificially boosting our GDP just enough to skirt the standard definition of recession, but it will do little to help the real economy. We feel that Americans will be strapped for cash for at least another year, if not longer. We put the entire war on our credit card, so why not just put the recession on it too? Irresponsible debt is exactly what got us into this mess, and now an increase in irresponsible debt is going to get us out of it? How does that work?
Following the dramatic selloff we saw in January, there are billions of dollars on the sidelines waiting to get back into the market. So while the economy suffers, the market may not fully reflect the weakness in the economy. Still, we're in the camp that thinks the market will close well below 14,000 this year.
7 comments:
I totally agree Snot- the debt that the US is mired in will take far longer to payoff than it took to rack up in the first place. And unfortunately (as everyone already knows) the only way to pay off this IRRESPONSIBLE DEBT will be to raise taxes. Everyone pucker up and kiss that lovely 15% Fed Short Term Gain Tax rate goodbye and say hello to my leetle friend...20-25%!!
I guess I'll have to learn to love being short! SMN will defintely be kicking butt and taking names by the end of the week.
OT: Anyone notice MA this morning?!? I think V is going to turn out to be a bargain here in the 70s. THIS one you could put in a drawer for at least a few months and forget about, don't you think Snot?
Thanks, Craig
Good one Snot, On the Dot. Also watch DUG - it has also in the low reaches of its channel like SMN.
Why not diversify your hedges too?
--clarke
Question to Craig concerning MA and V:
How can it be that these two stocks are performing so well? If there is a recession, then bad plastic card debt will increase. Just like with negative equity for US homes, people will disappear, if there is too much debt on their credit card.
So: I would expect that bad credit card debt will turn into the next subprime issue.
Plus: In a recession, consume and shopping suffer. So should the MA and V.
Any ideas?
newfrankyboy
MA and V just process transactions, the banks behind the card handle the debt... transactions are up, credit card and debit card transactions
Hassan
Don't know much about MA and V, but we are finally getting POT back into its arithmetic channel. AGU hit the 3/4 mark, MOS hit the 1/4 mark, and CF hit its midpoint. We've been adjusting positions accordingly.
Also, can't forget steel. MTL is at its midpoint once again, so a starter position in MTL isn't a bad idea here either.
Wouldn't it be nice to get all of these names at the bottom of the channel later this week? We're sticking to our buying in layers theory, even if it means spending some time underwater.
Hi newfrankboy-
Looks like Hassan already beat me to answering your question. The beauty of both MA & V is the fact that all they do is process transactions and make their fee. They don't care if it's good debt, bad debt or in between debt as they have zero exposure on that end.
It's doubtful people around the world are going to start charging less, and MA & V seem to agree with their (sandbagging) yet still strong future growth estimates.
Even in the US it's becoming easier and easier to just use the card for every purchase instead of cash. And also for billpaying- I pay every bill of mine online now via my credit card.
The worse things get in the economy the more people are going to charge, so profits for the card companies should continue to grow.
I also bought more MTL this morning, as a 6% decline seems a bit overdone.
Craig
This selloff on MTL is getting stupid here...down 7.7%? No other steel looks to be down more than about 4%. What's the deal?
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