Click chart to enlargeIf the Dow had a trendline, it broke it today. It still hasn't broken its 50dma (not shown) to the downside yet, although it closed right at it. There's no question when looking at this chart that the 200dma is a very real psychological barrier. Even those that put zero faith in technical analysis would be hard pressed to explain why that blue line has controlled investor sentiment for the past several weeks. Technicians would tell you that because we never closed above it (by more than a few points), we are still in a bear market.
A retest of the January lows should come as no suprise if it happens. Bargain hunters will likely create a little rally in here soon. We tend to think any relief rally will be sold. They can lie about the CPI, they can lie about the containment of the credit crisis, and they can lie about consumer confidence, but they cannot look us straight in the eye and tell us that oil prices will not have a substantial adverse affect on corporate profits. The higher oil goes, the more people are realizing that it is a serious situation. At least as serious as the credit crisis. Of course Americans can learn to conserve, and learn to budget for it. But not so quickly. Americans by nature are decadent creatures who are governed only by hindsight. Their retroactive nature is what makes it so easy to predict that their current budgets are ill-prepared for this new crisis. Despite current high oil prices, this winter's heating bill will come as a suprise to many. We can't figure that out, but that's how things work in America. After their first 275 gallon fill-up at $5 a gallon, Americans will put the brakes on spending. Q1 2009 suddenly doesn't look so promising now, does it? Second half recovery, lol!
Some fun Snot predictions if oil stays above $130:
1.) The price of firewood nearly doubles from last year's prices
2.) One used SUV is for sale on the side of the road per mile
3.) The travel industry grinds to a halt - Disney's profits suffer
4.) At least one major airline goes bankrupt
5.) A resurgance of interest in alternative energy stocks (solar, wind)
6.) Sales of bikes, scooters and roller blades rise as city people refuse to pay increased cab fares
7.) Sales of wood burning and pellet stoves rise
25 comments:
I agree with everything in your post, and have not yet believed we were in anything other than a bubble within a bear market. It's been impossible for me to understand any reason for such a healthy looking bubble (Other than mindless euphoria) while all the economic indicators are disastrous.
I love the firewood idea, and am looking for a way to capitalize on it. :)
The firewood idea... here's some tips:
Go to Craigslist and search for free firewood. There are many people who cut down trees and don't want to pay to get rid of them. Trees cut down over the winter (when the sap wasn't in the tree) don't need to be seasoned. You could also find out when your local electric company is going around trimming trees to keep them free of power lines. You can follow them around all day getting free wood. It may need to be seasoned, but it's free.
Check local prices for firewood and simply sell yours for 25% less. Considering your cost is close to $0, you'll do well. Bundle the firewood and stack it in your yard. Put a locked box for cash near it and the honor system will do the rest. This way, selling it won't take any of your time. It's a great little business idea for a retiree or anyone with a little extra time on their hands.
We personally don't have time to make a business of it, but we do heat with wood. If you're seriously considering it, start now while the weather makes collecting your wood easy. Come December, people may think twice about just giving it away!
Do you think we should sit the market out for awhile...or is there a trade that can be made during this downturn?
Snot you are still a genius ...
The power company was here last week trimming the power lines, think we'll get the teenager and some other strong friends and work em ...
Well, according to this link: http://biz.yahoo.com/ap/080521/oil_prices.html at Yahoo Finance, oil rose to 134.42 in afterhours trading. One more day like this and we're looking at $140.00 per barrel. Cheers!
On the firewood, I am dead serious. I've been talking up a plan on this in the past couple of hours, in fact. We have a few acres of land and plenty of room for storage. I may be fiftyish and female, but fairly fit, and it sounds like a great way to make some money to me! I'll be doing a little quick research on this, and it'll be interesting to see whether I can motivate my helper to make this thing happen.
This could be a way for my son to open his own stock account. Work does provide reward.
By the way, I've been following you since you and steel first appeared in the LDK Board, where I posted as agr8gem57. I'm always looking for your nest blog entry, and am so thankful you decided to start this Blog!
Thanks Hal and Kay for the kind words. Glad to see you around, Hal. Hope you are holding some LDK lately. Seems to be the only thing working!
More on that firewood thing... you can really piss people off if you sell them unseasoned wood because burning it will cause creosote to build up in their chimneys and could start a fire. Collecting wood is not rocket science, but it does take a little knowledge. If you're going to get your wood from raw land, you should find a tree that has already fallen and is not "green". If it's been dead a year or more, it's perfect. Go for the ones that are not resting on the ground, because they'll be rotted and insect infested on the bottom. The perfect tree is one that fell onto another tree so it's propped up off the ground.
Another way of getting free wood is to ask local contractors at jobsites if you can have their scraps. Don't take the softwoods (framing lumber) like Spruce, Pine, Fir because they have too much sap. Do take the cedar shingles, hardwood flooring scraps, things like that. No prefinished flooring, engineered woods, etc. i.e., nothing with glue in it, and definitely no treated lumber. Cedar sparks a lot but burns quick so it's great for kindling. Some contractors will be happy to give you the scraps because it means less waste in their dumpster, which they pay by volume to have emptied. We would do it as a sideline business, too, but just collecting enough to heat the house for the winter is enough work! We'll save about $6,000 this winter, which is nothing to sneeze at.
Regarding the discussion on wood. I do not believe there is any one of you on this board that would have more authority to speak on it then I have. I live in Vermont and have heated exclusivly with wood for 25 years. We will typically burn 6-10 cord a year depending on the winter. The House is a drafty 3000sq ft log home.. I built off trees from my land. We burn exclusivley hard wood. Many years ago I cut my own wood. I have 11 acres and each acre if managed correctly will yield 1 cord a year. So it is nice to know that no matter what happens I will always have my winters fuel in the backyard. However getting, cutting and splitting a lot of wood (try 10 cord) is a serious commitment to time and hard dangerous work. For many many years I could pay someone $85 per cord ( $850 a year ) to deliver my wood cut and split to the size I specified. In recent years this has risen sharply for no other reason then the price of other forms of heating have been going up. Last year I paid $175 a cord. Even at that price it is well worth paying someone to do all the work. Wood, even if gotten for free, will hardly be easy money as it must be cut hauled and split. I no longer have much interest in that as it is still plenty of work just stacking and hauling 10 cords a year into the house. If you have enough money to be playing the stock market forget about selling wood......On the other side of the coin next time you look at a piece of land do not dismiss the value of the wood. It is a great piece of mind to know you have all the wood you would ever need. Also note that I purchased my 11 acres in 1982 for $16,000, I immediatley logged it at got $5000 back. In addition I took all the timber I needed to build my house......and still had all that wood to heat the place. That my friends is a bargin and not something the average flatlander ever considers.
Snot,
do you think LDK will keep run up or hold this gain this time?
Squarpeg,
You're right it's a serious amount of work. The idea is not a get-rich-quick scheme. If you're willing to collect wood for 20-30 minutes a day starting now, you'd amass a huge amount by winter. It's exercise, not hard work, if done this way. Americans and exercise... another oil and vinegar combo, lol!
Squarepeg and Snot,
I'm with you on the fact that we're talking about a LOT of work here. My idea is that 30 minutes or an hour a day thing, since I don't any longer work outside the home. We also have several acres of heavily wooded land here, and built a large rock firepit a few years back so that we could "enjoy" all the timber that gets lost to ice storms, wind, etc. I started to get a little wood experience with that. We've also been thinking of "cleaning out the woods" a little at a time.
My 21 year old son has a 40 mile/day commute to work, and has been really feeling the pinch of the huge cost of simply that commute with today's gas prices, not to mention all the other driving young people think they need to do. He bodybuilds, and the yard, gardening and woods are my fitness effort which also provides some homegrown groceries. :) So I decided it's a good idea to find some way to turn some profit out of all this while putting all those extra muscles toward an actual productive effort. These muscle men types who can't find time to fit actual physical chores into their workout routine make me crazy, so I have to prevent having one of those for a son. A little extra money never hurts, either.
My son is shocked and bothered by that hard fact of life so many young people are facing these days: Although he has a good job and is earning more than most of his friends, he remains unable to "Move out on his own" and pay all the bills while also maintaining a nice "ride". He has also noticed a LARGE difference in his spare money just since Christmas. Think GAS! So I look at this experiment as a great teacher for him and as a fun opportunity to work together.
We already connected on some free hardwood from CraigsList, by the way. Good idea!
Thanks for all this great info!
Kay,
You're the parent every kid should have! Giving your children a strong work ethic is far better than giving them a trust fund.
Ok, so finally, now CNBC is on top of the "oil crisis". Tonight at 8pm/11pm et, they will air "America's Oil Crisis". Every downturn in the market needs a "story". It's how they gain momentum. And this is a story everyone can relate to.
CNBC had a guest on this week who predicted $12-$15 gas. Google CNBC oil crisis and you'll find the article. Expect to hear a lot more about America's "oil crisis" over the next few months. If you're not sick enough of hearing about it already, you will be very shortly. Some analysts are only just beginning to sign on to the severity of the problem. Others have yet to. When the last analyst finally decides that oil prices are taking a toll on the economy, we'll be at the bottom. That can't happen until the "oil crisis" has been beaten into our heads for months on end, making every headline, and being the reason/excuse for every company that misses estimates one quarter.
We use firewood for part of our heat. I cut it myself. Unless you are very experienced with a chain saw, either get someone else to do it or buy some chaps and be very careful. I made one little wrong move two months ago and got eight stitches in my knee. One or two seconds sooner when the chain was still turning full force and I would have cut half way through my leg. I have a three inch scar where it is still healing, but I might have been taken to the hospital in an ambulance with my knee cap hanging down, ligaments and tendons completely severed and half the blood in my body drained out. It was a very close call. So folks, please be careful. Here are some links on firewood:
Link 1
Link 2
Link 3
How about some forestry stocks? - VCP.
--clarke
Given the prices for most other forms of energy, it seems like a forestry stock would be a sure bet. Good idea, Clarke.
Back to the Wood Subject - Those were great Links about splitting wood, types of wood, etc. Thanks.
Yes, Injury is a big, big deal. Chainsaws seem so easy to use, but they are completely ruthless, and there is a zero forgiveness factor for errors. I'm glad the injury wasn't worse.
Thanks for your thoughts on my injury. Heating oil is through the roof and it is early summer. What about coal as a play here? BTU is the biggie company. How does its chart look?
After dropping from $40, CROX is acting like it is wanting to take off. What do people think? Snot, you wrote once before about your consternation at a plastic shoe company. But some reports suggest their cash flow should be improving throughout the year and a lots of short probably still need to cover.
Great discussion about firewood. I always enjoy the fire.
I would also like to suggest doing some vegetable gardening. It is very rewarding and makes economic sense too. Tomato, squash, cucumber, beans, peppers are the easiest to grow. Time to start is now.
By the way, I am Lightsource from LDK board. I warned you snot about the danger of FXP. The real reason FXP tanked was because the Chinese government intervened, or rather hinted that it would intervene by cutting a stock tax by insignificant amount. Chinese people trust the government so much they did the rest.
Enjoy reading the blog however I wish are back on the LDK board. You know, Longs are Shorts can co-exist, especially now that you are no longer short LDK. You covered at the right time.
Lightsource
Sorry to hear about your injury. You might try switching to a DeWalt 18v reciprocating saw. It cuts like a hot knife through butter as long as you're cutting reasonable diameters (6" or less). And the best part is that it's battery powered, so you can just leave it in your trunk and when you see a dead tree in the woods, just go get it.
Good idea on raising your own vegetables. Forgot that now food prices are getting up there. They'll go higher along with oil, so creating a small garden could offset your produce budget. We'll take a pass on that one and stick to collecting firewood... no green thumb here.
Crox... NO! Crox is over!
Remember some time back we posted about BCSI saying it was a good short because it was in a clear downtrend? It did manage to break its 50dma to the upside and break out of its downtrending channel, but it never followed through. It's overall weak trend finally won. Look at the chart now, after a bad report. Apparently, all the selling that took place over most of the past year was for good reason. Even if retail investors are only finding out now why the stock was doing so poorly, at least the chart told them a while ago that there was serious trouble.
Crox is the same way. Don't get caught up in the little rallies. Crox is headed to single digits, it's only a matter of time. Unless they come out with another fad, it's over for them. The odds of a company creating "the next big thing" more than once is very slim. Aapl is the exception, not the rule. Going long Crox is a good way to lose all of your money.
The days tick by, and MO and POT continue tracking sideways. If they keep doing that, they will eventually break through the low side of the trend channel. Wont that happen in just a few more days, if they keep tracking sideways?
What would that mean?
Why would they start trending downwards now, when every indicator seems to suggest that what brought them to these highs is only going to push them higher??
Snot, when you have time, could you comment on your use of stops, or your non-use of stops? All of my stops have been taken out the last two days except for an ultra-short I bought this morning. If I had managed them better AND had them in place more consistently, I would have been much better off in this current correction or capitulation, whichever it turns out to be. Which do you prefer -- trailing stops or stop losses? And how do you determine where to set them?
I just LOVE the CNBC top-of-screen ticker: every five seconds we can be reminded of "AMERICA'S OIL CRISES" since we see it in all CAPS against a bright orange background!!
I'm glad CNBC is there to remind us, otherwise I'm sure we'd just forget about it and go on about our daily business.
POT is nowhere near the bottom of its channel. MOS is very close. Below the channel is a buying opportunity if you can hold for 6 months or longer.
We don't use stops because we watch the market. When we buy a stock, we hold it for the long term (unless it reaches the top of the channel). If it breaks through the bottom of the channel and breaks its moving average (whichever one it responds to over the long term), then you have to ask yourself if it broke down because of a problem with the company or the sector or just due to the broader market. If it was because of the broader market (like we have now), it's a buying opportunity. If it's company specific, then you've got a tough decision. We usually sell some and watch.
CNBC Oil Crisis ticker, lol! If the oil crisis isn't bad enough to affect the market, CNBC's coverage of it will be. We especially love their countdowns which often include several decimal places for fractions of a second... amazing how little patience people have today.
Just bought a small amount of MTL. If you can't start picking up some beat up stocks, what good are corrections for? We're not doing any heavy buying yet, just nibbling.
On May 23rd you screamed and hollered that I should get out of CROX. I put a very tight stop at $11.00 under my shares and the next day the market was down and I stopped out of all my CROX for less than $100 total loss including commissions. Today CROX closed at $10.03. On paper it still looks decent in some ways. P/E of 6. Forward P/E of 5.5. But for now, you saved me some $$$$$$$$$$$$$$$$$$$$$$$$$.
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