Tuesday, April 08, 2008

WAAAA MOOOOOOOO!

OK, so Washington Mutual gets bailed out and everyone's SO happy! I've said for a while that WM is on MY watchlist of banks that I feel could go under. The $7 BIL bailout, believe it or not, doesn't change my view much. Just means it'll take longer, but I still think WM could go under. As it is they diluted the stock so much that the value of WM should be roughly $8s a share at most. The stock had run up roughly 30% on Monday into this supposed good news. I have to say I missed the opportunity to short it at the close because I don't like to be naked on news that I know is coming.

So, since so far nearly every financial institution that's taken on money has had to dilute their stock in a huge way, why would anyone want any piece of that sector? I think you have to be INSANE to buy a banking stock here. I don't care which one it is, you're nuts. So what some are better than others, that does not make them worth a hill a beans! C is going to be under $10 within 12 months, mark it down. And, anyone buying it thinking its a steal here at $23s is fooling themselves. Same thing with the brokers, same thing with the REITS. As usual, I hope I'm wrong!

There was a nice piece on Bloomberg today about the banking crisis. You should all go read it. http://www.bloomberg.com/apps/news?pid=20601109&sid=ay.wksrAwOGI&refer=home

The banking system is on the verge of failure. Now maybe we avert a bigger problem, but I think that in the BEST case scenario the banks will have zero dividends and will be trading sole on their PE's. And, since their is likely to be a severe credit crunch for a while, and since they are cutting back on loans anyway, where exactly are they going to be making money from to justify their valuations. Banks don't trade at 25 X's earnings, they trade at 10 X's earnings, or 12 X's earnings. And, we're probably talking about them trading at 30 - 50 X's earnings for the next couple of years at least.

There's simply no way to justify these prices.

In the meantime, the market is going to either really believe we are going to have a short lived recession and break out to yearly highs shortly, or we're going to break back down. This is, truly, make or break time in my opinion. I still think there is a decent shot they bust us higher. I always say that people would rather lose money than risk not making money. Most of us have that instinct, its part of human nature.

FRUSTRATIONS OF TRADING...

Monday was frustrating early on for me. I called the bounce off the open and the move to green. It was a super move and a nice call. But, I had my field narrowed down to two stocks that have been hot lately to play and I picked GOOG over FSLR. Bad move. GOOG never lifted itself out of the hole it was in from the start while FSLR ended up going about $7 off the open! Sometimes it happens, it's part of trading. GOOG had been red hot and you all know I think GOOG is worth a LOT less than what it trades for now, but on a gap down you want the stocks that are gonna move the most and best and GOOG usually fits that bill. Not today!

As I write this we are looking lower futures wise. If we gap down I'll be in there buying again unless news comes. We should get a bounce. From there we'll see where they want to take us, but 12,500 should provide nice support. If we bust below that and hold below it then I think we retest 12,000 again shortly. If we can hold 12,500 then it should set up a higher high near term and perhaps get us that HOY move. I hope so, cause that should set up a very nice fall when we break the yearly LOWS.

It's all about keeping your eye on the bigger picture, folks! All about it.

See ya in the am, keep your focus and keep your powder dry. We're gearing up for a BIG move here...one way or the other!

RULE

Waxie

2 comments:

Jon said...

Of course no one knows for sure where the market will be in the next 6 to 10 months, but my thinking on all this:

1. Many think market should go up & be higher especially by the end of 2008 to the beginning of 2009, so it probably won’t happen.

2. The Dems will force the capital gains & dividend taxes back up and long time investors won’t wait to sell in 2009.

3. There won’t be enough jobs for everyone, especially if the troops come back home from Iraq.

4. The dollar will rise and interest rates will eventually rise – sensing this market will sell off further.

5. Exports won’t grow jobs anymore. The rest of the world will be hit worse than the USA. Especially because of not enough supply for food & energy. Basically food, fuel & product inflation and stock & property asset deflation.

It doesn't look good even now & after options ex following week will go even lower maybe. So, I think we’ll see much lower stock market lows this year, and the crash could start as early as July 2008 to sometime before the end of the year.

Waxie said...

Jon,

we shall see won't we?

:)

Waxie