Thursday, November 01, 2007
Strategy Going Forward
"The Fly" is not "Chuck Bennett."
Let's face it: with the Fed put off the table, the financials are fish in a barrel. Fuck what some of you inflation hatfuckers have to say, we are too tight. The economy is not strong; therefore, rates need to be in the 3-3.5% range.
As you know, the homies, mortgage, mortgage insurers, brokers, regional banks and a variety of money center banks are getting the shit kicked out of them. All of them are intertwined in creating one of the worst banking fuck-ups-- in the history of modern banking.
The short sellers have been making a bundle, betting against these fuckers--with the exception of a select few brokerage stocks.
My short list of potential 'going to zero' plays are: RDN, BSC, COWN, TWPG, CLMS, ETFC, CNS, MCGC, NFP, SF, AIB, ESGR, IHC, MGI, RAS, ACF, CCRT, CFC, PMI, ABK, MBI, TGIC, FPIC and RWT.
Now, I know that is a fucktardly long list. Pick and choose your spots.
Look, the financials represent the largest part of the S&P 500. With earnings being slashed and burned, the overall PE of the market is going up. Plus, let's not forget how fucked the consumer is, with their only source of income (house) in the shit box.
This is how I view the 10 principal sectors of the S&P 500:
Financials: Fucked. Their only hope is renewed Federal Reserve cuts and a short squeeze.
Healthcare: Biotech is a major dice roll. I hate those little time bombs. Additionally, with an election around the corner, I'm afraid the healthcare industry will be the whipping pole for many democratic candidates. The only safe haven is established pharma's, like GILD, MRK or PFE. Also, some of the cost containers, like MHS, may thrive.
Industrials: The only stocks that can work are companies that derive most of their business overseas and benefit from the wheelbarrow dollar, or who offer machinery and/or services to the booming agriculture industry. Stocks like VMI, LNN, AGU, MON, BG, POT, DE, ITT, FLR, JEC, FWLT, PCP, BA and BEAV should continue to do well. Also, it appears the military sector will not suffer, even under the Dems. There, ATK, GD, LMT, NOC and RTN look solid.
Consumer Discretionary: This is where the wild card lays. Either the consumer is dead or she received a new, shiny credit card in the mail. Thus far, looking at restaurant and clothing stocks, the consumer is dead and buried. Let's see if she can dig her way out of that grave, in order to buy a few more pairs of plastic slippers with holes in them. The only stock I have confidence in, long term, is HANS--due to its low priced product and loyal customer base. However, looking at M, VLCM, BWLD, CROX, SBUX, HD, AEO, PERY, CACH, RL, ARO, GES, COH, CTRN, BEBE and KSS, I'd say the market is screaming recession. If not, all of the above names can quickly recover 20%.
Consumer Staples: Stocks like CL, PG, CLX and UL have survived many recessions-- and are durable. Recently, I sold out of my PG, due to valuation. However, I still own CLX and will add to the position, especially if the market gets worse.
Materials: If you believe in the retarded 'global growth' story, this is where you buy. Stocks like BHP, FCX, RS, CENX, PCU, amongst many others, should thrive for years, providing 'Chindia' keeps growing. However, the sector is subject to extreme volatility-- and should never be bought on margin, if you enjoy life with green paper that have ugly faces on them.
Energy: Oil at $90+ and gasoline under $3.00 has fucked the refiners. Stocks like ALJ, VLO, TSO, HOC, WNR and DK will not breakout, until this paradigm alters in their favor. For now, service companies, like NOV, RIG, GHM and DRQ, should continue to receive a lot of hot money. Additionally, the solar stocks have been on fire, as investors hope and wish for energy alternatives. I am not sold on solar. LDK should be a lesson to you solar fools. Watch those yields and silicon quality. Finally, natty may make a move here, with China saying natty is 'seriously cheap.' I have some clients in the industry-- and they have been shutting in supply for two years. My guess, with a cold winter, natty may hit $10--sending UNG, SWN, GMXR, NGS, NGAS and BEXP higher.
Technology: Tale of two cities. The semi's are being squeezed, with the exception of the ones who do the squeezing, like INTC. Also, having clients in the field, I understand extreme bullishness in INTC may be a profitable endeavor. However, the rest of the SOX cannot be relied upon. For the most part, good tech revolves around a select group of stocks, like AAPL, CSCO, RIMM, EQIX, CIEN, GRMN (on pause), AMZN, CTRP, PCLN, OSTK, MFE, GOOG, BIDU, SINA, SOHU, NTES, SNDA, ERTS, HPQ, MSFT, NOK, NVT, VMW, EMC, WFR, STX, WDC and a few others.
In short, it's a stock pickers tech sector.
Utilities: With rates coming down, the utilities may thrive-- thanks to rich dividends. Not really giving a fuck about the sector, I can tell you OKE, CPL, EN, D and GXP look decent.
Telecom: Another treacherous sector, if you're not careful. For a long time, NIHD was as good as gold-- not anymore. My favorites are foreign telco's, where growth still exists. CN, CHL, CHU, VIP, TKC, MBT, ROS are favorites. Domestically, I am lukewarm on VZ and T. Finally, USM seems to be kicking ass and is a takeover target.
In summary, this market, like many others in the past, is riddled with potential pitfalls. However, much of the fucked up stuff is already reflected in the share prices. Forget about where the DOW is trading. Look at the sectors that are in the eye of the storm, like retail, financials and home builders. They've been annihilated to the point where mass bankruptcy looks imminent.
Anything that helps the consumer, such as tax or interest rate cuts, will make the short sellers regret living. On the contrary, should our fucktarded politicians go gangster on China, hike taxes and fuck with our cheap labor pools, pack up boys and go home; we'll be at 9,500 DOW by 2010.
Place your bets.
do you have any idea where we'd be if they didn't have our back?
those who poo pooed the subprime/bad paper problem must be waking up to monster losses ... this problem is working through the financial system like acid.
the PPT won't allow a crash at this time & they can prevent one at the moment .. they aren't completely out of bullets yet
look for market supportive action over the weekend ... best guess - m&a action, probably coming fm overseas ... if you're worried about too much exposure, you'll get your chance to lighten up early next week ... don't be a bear going into monday
Fuck it has got to be hard to be a bear.
1. "Who am I?
2. "Why am I here?"
3. "Is The Fly Chuck Bennet?"
if you're a trader, you take a shot that the bears will get there heads chopped off next week
1.You sounding like a queer
2.Because your daddy didnt wear his jimmy,
3. I am Chuck and I dont give a F/ck. O got a dog named bear and he dont care.
Oh yes I told you people ISWI.
I disagree with your view of the political impact on the healthcare industries. The Dems love labcoats and hate the insurance companies and the drug/device sales reps rewarding doctors for using more of their product. Established pharma, which you cite as the safe haven, will take more of a hit than development-stage companies would. I see more allowance of negotiated drug prices for federally funded healthcare programs. I see a Justice Dept. that doesn't go after states and individuals trying to bring in cheaper versions of brand-name drugs from outside the country.
The story on them is the rising global increase in gasoline demand, meaning refinery additions and expansions, and, more importantly, equipment that is important for refineries trying to use the cheaper, lower grades of crude.
One cautionary part of the story is that the company does not have the ability to rapidly ramp up production. There is a lot of custom engineering in GHM's products, and it isn't especially easy to draw talent to Batavia, NY. The company recognizes the bottleneck and has been working constantly to boost capacity.
GHM tried to outsource some of its less engineering-intensive work last year, but customers wouldn't go for it.
A second cautionary part of the story is that there is a tiny amount of shares outstanding. That's great while there is demand, but it means freefall when the stock disappoints.
The Sept. qtr (FYQ2) had a very strong year-over-year revenue gain. Revenue has dipped in the Dec qtr the past couple years, but the y-o-y comparison should be very good due to the weak Dec 2006 qtr. The March 2007 qtr was much better, and will be a tougher comparison.
I got into GHM at about $13.60 in late 2005. Rode it up and down and got out a few weeks back at $42+ - just in time to miss another fast $20+ gain.
Links to this post: