Wednesday, December 30, 2009

Dominant Companies

It occurred to me that one investment strategy might be to invest in companies that seem to be taking over the world. I'm calling this 'king of the heap' strategy. Take for instance Goldman (GS). 1 in 5 IPO dollars went to them. Enough said. Verizon (VZ) - 20 cents to send or receive a text, which is basically an email. Just send an email to a phone instead and at least avoid the send fee. Enough said. Apple (AAPL) - a small fortune for a computer and 3x as much for an mp3 player (Ipod). Enough said.

I could go on, but when some companies are able to charge so much more than competitors and still command a large share of the market. Enough said.

Disclosure: long AAPL, VZ


Saturday, December 19, 2009

Opportunity Or Trap in FSYS?

Here's another talked about stock I've followed for sometime, since the $10 days, Fuel System Solutions (FSYS). I like the company and the industry, but hedge funds and short timers moved in about 6-9 months ago and now it looks unsafe for the rest of us.

If you're looking for a classic set up stock, look at the historical price and volume over the past few weeks. It was run up on low volume after a great quarter and added hype, then they pulled the rug out from under the longs on sky high volume! That suggests some longs moving out and a lot of shorts moving in. The associated call holders got killed because those options were/are expensive.

We'll see what happens over the next few weeks. They did the exact same thing a few months back.


Friday, December 18, 2009

Reasons For Derivatives Talk

I'm getting some mail over our posts on options and futures. I'm not a conspiracy theorist, but as we hinted at before, we have reasons why we believe retail investors are being hustled. The stock market is less of a mystery these days, so retail investors are more informed which makes it more difficult to scam you on regular equity trades. If you're not working with a financial advisor and doing it all yourself then you've had to get up to speed on something and that something is buying and selling stock. So the typical scam is more difficult.

Look at the numbers. When a highly traded, talked about stock has a lot of options at certain strike prices, notice the peculiar price movement. Most importantly, the professionals know that retail investors tend to be long only, so you only buy calls. That makes it real easy. This scam is to get the short timer, the person trading on margin, and the person trading options.

By the way, I've mentioned this before, but don't you find the advertisements for currency trading and options just a bit overdone. You'd think the government would crack down on that, as 99% of us have no business doing that business.


Fertilizers Up To Their Old Tricks

Or I should say that the hedge funds are up to their old tricks. Potash (POT) and its brethren have been hammered the past few days. This looks like the old days. POT was trading at $122 a week ago and now the stock is at $105. Of course you only need to look as far as the options expiring today!

This is starting to become too predictable. These guys in the back room run stocks like this up and then step on their throats right around this time. All the message boards are on fire with conspiracy theories and everyone is dumbfounded. All I can do is shake my head because that used to be me just a couple of years back when that scam was still someone new.


Thursday, December 17, 2009

Like Lambs To The Slaughter

Commodities and options dictate how equity markets move. In case you weren't paying attention, Friday is Quadruple Witching day, so options and futures contracts expire. Everyone who ran in to gold, grains, equity calls the past month, has to be feeling hustled. If you bought equities the past month looking for a quick buck, then you feel the same way.

Beware those strong moves to the upside like we had in early Oct and then again in early Nov followed by a pullback that appears to be brief. You're being pulled in and tempted by short term bets, then those bets never payoff. As I wrote in an early post, the new scam is in the derivatives market. Ignore those commercials and that junk mail that tells you to trade in these markets. The same people taking your money, supports this advertising. Stay informed and stay aware.


Looking Ahead

December has been a strange month. We've slowly moved up, but it feels like we've gone no where. I'm going to call this month trader month, as all we've done is churn. We've had plenty of news, most of it good, but it seems to have gone unnoticed. Today is a good example. The weekly jobs number was a non event, leading economic indicators were solid, and BofA finally found a captain.

All I read is " number disappoints and government not selling Citi shares...". Those are just reasons after the fact. Get used to it. The market moves for no real reason and the prognosticators attempt to explain later. This is the short term reality.

On a happier note. I like what I heard from GE. GE is one of the best indicators out there, as they have their hands in everything. If you listened to, or read the call, they're signally good things ahead for the economy. I'm a believer and I like GE stock.


Sunday, December 13, 2009

Do Fundamentals Matter And Options?

In a time of 'high frequency trading', 'dark pools', and who knows what else, I ask myself and have been asked if fundamentals really matter anymore. I've come to this conclusion, If you're in it for less than a year, then fundamentals don't necessarily matter, I've witnessed this, but over a year, it's hard to keep a good company down and harder to keep a bad company up.

This is why I don't encourage trading options by retail investors or even day trading. If you're a professional technician and disciplined, that's another story, but most educated people look at the fundamentals and apply that to short and intermediate term goals which can be a big mistake.

If you are trading options, look for this easy to spot trick. The market goes up, up , up for a couple of weeks and then pulls back a little. Options that were almost in the money are now out by a buck or two, but the premiums are sky high. You buy thinking it's a short term pull back. but you and everyone else were just hustled, as those stocks linger and never get back. Also, see my old post about the '1' in the market. Ever put in a bid and the market maker add a 1, then your bid sits there and never gets filled then suddenly someone jumps in between your bid and the ask in the blink of an eye and gets filled.

Most people belong in funds any way. For those looking for a few good funds, consider these - MCHFX, DODGX, FLATX, AMANX.


Sunday, December 6, 2009

Watch Dendreon Over The Next Few Months

So the word is the FDA let's Dendreon (DNDN) know in May. They're calling it May Day. Wrong, the FDA let's DNDN know by May. With all the data out there, my money says the FDA returns a decision before April.

This is a novel treatment, safe, and clearly saves lives. I think the 10% short interest gets burned believing May is it.


Saturday, December 5, 2009

Commodities On Friday

In case you weren't looking, commodities and commodity related stocks were punched in the mouth on Friday. The move down was pretty dramatic. Freeport (FCX), Mosaic (MOS), Alcoa (AA), to name a few were all down hard. If you ask me, it's all profit taking. I'm sure traders have all been sitting around looking to see who was going to head for the door first. Given the big run up this year, especially in FCX. Some tried to blame the fall in the dollar, but that's nonsense, the dollar didn't move that much.

We still like commodity related names, as well as infrastructure names. The recovery is just underway and those doubters will find it costly to be against it.


BAC back from TARP

I admit, I'm a bit surprised at how soon Bank of America (BAC) paid back the money, or are paying back the money. This is great news for the company and a great indicator for the overall market. I like the stock down here and would be a buyer at these levels.

It's true, banks are returning to profitability on the backs of consumers (23% credit card rates, fees out the wazoo, etc.) Seems the only way to get a little back is to own the stock, maybe.


The Vix

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Where we rant and rave about the market and of course give our opinions on stocks we love or hate. We're not advisors and urge you to conduct your own due diligence.

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