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[quote author="skek" date=1237860404][quote author="usctrojanman29" date=1237860023]Skek, I think the market will drift up into April-June as many companies have slashed their 1Q and 2Q estimates so the chances of them beating are very high (this will be perceived to be very positive by that market and talk will begin that a second half recovery is in the works). Of course that recovery will not come to pass this year and once Sept/Oct come around we will see new lows in the indexs. I'm Bullish short term and Bearish long term.</blockquote>


You think it will take until September or October? We bottomed the first time in late November, and set a new bottom in early March. Seems to me that if we test the lows again, it will be within 3-4 months, which will put us in June/July timeframe. Needless to say, I'm buying some cheap June/July puts on the indices. I'm still 50/50 long to short, and will be for a few weeks.</blockquote>
Yeah because the Sept-Oct time period tends to have more of a downside bias where as the summer months and mid-Nov through early Jan tend to have upward bias. I have a list of abotu 40 companies that I like to track and almost all of them have had their 1Q and 2Q estimates sliced and diced while in 3Q they are flat and then 4Q and 2010 they start to ramp up pretty good. I think the way it plays out is that because things aren't falling off a cliff anymore (the rate of change of the economic slowdown has slowed down so the market it take that to mean that the second half recovery is a done deal and 2010 we go to the moon.....NOT, I think that Q4 and 2010 guidance will give the market that cold bitch slap of reality that the slowdown continues into 2010 which will cause new lows in the markets. It took us years to get into this mess and it will take us years to get out of it.
 
I did this friday but thought some here might find it interesting..



Happy Friday!! Something to chew on this weekend as both an idea and to lend some perspective. I chose four of our countries most prestigious industrial companies. Names you are probably familiar with. In fact two are still in the Dow Jones Industrial Average. Together they have a combined gross revenue around $292 Billion dollars. You could buy all 4 companies in proportionate $5000.00 pieces ($20,000.00 total investment) today and capture all that revenue, earnings and growth. Even if some should fail, most will survive and thrive, these four names are important industrial components. To put this into some perspective of the overly dramatic tone in today's markets I calculated the cost of purchasing these very same names six months ago to the day. I think you will find the comparisons interesting.



Company Quantity Date Price Cost Date Price Cost



GE 530 3/20/2009 9.30 5067.86 9/19/2008 26.62 14,354.67

Alcoa 800 3/20/2009 6.31 5208.42 9/19/2008 26.79 21,777.90

International Paper 720 3/20/2009 6.92 5136.04 9/19/2008 28.92 21,157.13

Dow Chemical 650 3/20/2008 7.63 5107.66 9/19/2008 37.56 24,774.67

-----------------------------------------------------------------------------------------------------------------------------------------------------

Total cost $20519.98 (today) $82064.37 (6 months ago)



What a difference 6 months makes huh? I think this both illustrates the disconnect between pricing and reality but also highlights the significant opportunity that panic can present us. Something to think about. Have a great weekend!!
 
I think we might get a pull back today. I could be wrong, and if I am... then I hope everyone can ride this rally. If not, then keep an eye on all the important technicals. <a href="http://www.ritholtz.com/blog/2008/11/dow-gains-15-in-7-hours/">Because this looks all too familiar</a>...



http://www.ritholtz.com/blog/wp-content/uploads/2008/11/dow-2-day.gif









<a href="http://www.ritholtz.com/blog/2008/08/300-point-dow-gains-during-bear-markets-only/"><strong>300 point plus gains only during a bear market</strong></a>. <strong>As you can see for yourself...

</strong>

http://bigpicture.typepad.com/photos/uncategorized/2008/08/06/300_point_rallies.png
 
[quote author="morekaos" date=1237892491]That portfolio is already up 10%. I still feel they are oversold.</blockquote>


Are you saying that one day's movement is evidence of undervaluation? On a technical basis, I would agree that the equities markets are oversold, but that is completely different from the valuation basis that you presented on four companies and their present value.







I just heard that dividends from the S&P 500 are down 23% yoy, and that is the biggest drop in dividends in 100 years.
 
[quote author="awgee" date=1237922705][quote author="morekaos" date=1237892491]That portfolio is already up 10%. I still feel they are oversold.</blockquote>


Are you saying that one day's movement is evidence of undervaluation? On a technical basis, I would agree that the equities markets are oversold, but that is completely different from the valuation basis that you presented on four companies and their present value.







I just heard that dividends from the S&P 500 are down 23% yoy, and that is the biggest drop in dividends in 100 years.</blockquote>


No, no, no I am saying that markets are discounters of future events. The fact that these very companies are already down 75% has already priced in the fall on earnings. I pulled a similar thing off in 2003 with the telecoms. Bought a basket of beaten to the pulp telecoms (Erikson, Lucent, Nortel, AT and T and a few more) Most were trading for around a buck. Out of 7 companies one failed the others fought back and that little vulture portfolio returned in the triple digits. This is not for everyone but I do feel timing wise these are not bad names or prices.
 
Never underestimate the power of the bull. One must always be friends with the bull. However, being friends with the bear is equally important. I'm friends with both, but they don't know that. The bull thinks I'm only friends with him, and the bear thinks I'm only friends with him.



Actually, I pretend I'm friends with both...I have no love for either.



EDIT: If you take a look at a 20 or 30 day chart of SPY (for a better view), you can see exactly where this market is going today...rarely do I see a more telling direction.
 
[quote author="BlackVault CM2" date=1237933262]Never underestimate the power of the bull. One must always be friends with the bull. However, being friends with the bear is equally important. I'm friends with both, but they don't know that. The bull thinks I'm only friends with him, and the bear thinks I'm only friends with him.



Actually, I pretend I'm friends with both...I have no love for either.



EDIT: If you take a look at a 20 or 30 day chart of SPY (for a better view), you can see exactly where this market is going today...rarely do I see a more telling direction.</blockquote>


Most defintely SPX has broken out of the downtrend. But is it going up or sideways short term?

I am looking for a huge bear market rally; something that takes the DOW to 10,000 or 12,000 over a six month period, fast and furious. This may be the start. I dunno.





Honestly, I know nothing about Alcoa, International Paper, or Dow Chemical. I am a horrible long stock picker.

But, I am a short seller, and my experience with GE is that it is a zero. It is impossible to value their assets accurately, but my guess is that much of their paper is marketable at 50 cents on the dollar and in a few years it will be 10 cents on the dollar.





As a side, my mom inherited a boatload of GE awhile back. I had her sell it immediately, before it even was out of the deceased's estate and in my mom's name, @ $35.77 per share.
 
[quote author="awgee" date=1237940638][quote author="BlackVault CM2" date=1237933262]Never underestimate the power of the bull. One must always be friends with the bull. However, being friends with the bear is equally important. I'm friends with both, but they don't know that. The bull thinks I'm only friends with him, and the bear thinks I'm only friends with him.



Actually, I pretend I'm friends with both...I have no love for either.



EDIT: If you take a look at a 20 or 30 day chart of SPY (for a better view), you can see exactly where this market is going today...rarely do I see a more telling direction.</blockquote>


Most defintely SPX has broken out of the downtrend. But is it going up or sideways short term?

I am looking for a huge bear market rally; something that takes the DOW to 10,000 or 12,000 over a six month period, fast and furious. This may be the start. I dunno.





Honestly, I know nothing about Alcoa, International Paper, or Dow Chemical. I am a horrible long stock picker.

But, I am a short seller, and my experience with GE is that it is a zero. It is impossible to value their assets accurately, but my guess is that much of their paper is marketable at 50 cents on the dollar and in a few years it will be 10 cents on the dollar.





As a side, my mom inherited a boatload of GE awhile back. I had her sell it immediately, before it even was out of the deceased's estate and in my mom's name, @ $35.77 per share.</blockquote>
Again I agree with you...GE Capital will bring GE down to its knees. I personally know that GE Capital did some crazy commercial real estate loans during the good old days (including equity and mezz investments).
 
[quote author="usctrojanman29" date=1237943656][quote author="awgee" date=1237940638][quote author="BlackVault CM2" date=1237933262]Never underestimate the power of the bull. One must always be friends with the bull. However, being friends with the bear is equally important. I'm friends with both, but they don't know that. The bull thinks I'm only friends with him, and the bear thinks I'm only friends with him.



Actually, I pretend I'm friends with both...I have no love for either.



EDIT: If you take a look at a 20 or 30 day chart of SPY (for a better view), you can see exactly where this market is going today...rarely do I see a more telling direction.</blockquote>


Most defintely SPX has broken out of the downtrend. But is it going up or sideways short term?

I am looking for a huge bear market rally; something that takes the DOW to 10,000 or 12,000 over a six month period, fast and furious. This may be the start. I dunno.





Honestly, I know nothing about Alcoa, International Paper, or Dow Chemical. I am a horrible long stock picker.

But, I am a short seller, and my experience with GE is that it is a zero. It is impossible to value their assets accurately, but my guess is that much of their paper is marketable at 50 cents on the dollar and in a few years it will be 10 cents on the dollar.





As a side, my mom inherited a boatload of GE awhile back. I had her sell it immediately, before it even was out of the deceased's estate and in my mom's name, @ $35.77 per share.</blockquote>
Again I agree with you...GE Capital will bring GE down to its knees. I personally know that GE Capital did some crazy commercial real estate loans during the good old days (including equity and mezz investments).</blockquote>


I would put forward that $38.00 to $5.00 is exactly that...on your knees. I think they can still stand up. I was not a buyer at 35 but at 6 bucks I am in. That risk reward looks palatalble to me.
 
I typically don't like to comment on equity market as you guys might know that bond guys have a bias towards being overly bearish. I recently conducted a survey with several internal and external credit/equity analysts about their take on S&P 500 EPS for 2009. The number range from 40-60, with mean being 46, applying a multiple of 13-15, you will have SPX at 590-690 by year end. And 100% of them agreet this is a typically bear market which will fade and we will most likely re-test the low of 650.
 
[quote author="BondTrader" date=1238019746]I typically don't like to comment on equity market as you guys might know that bond guys have a bias towards being overly bearish. I recently conducted a survey with several internal and external credit/equity analysts about their take on S&P 500 EPS for 2009. The number range from 40-60, with mean being 46, applying a multiple of 13-15, you will have SPX at 590-690 by year end. And 100% of them agreet this is a typically bear market which will fade and we will most likely re-test the low of 650.</blockquote>


That's pretty accurate IMO. The faster this suckers rally goes up, the harder it will come down. At least the weather will be nice when this thing tanks.
 
[quote author="morekaos" date=1238015553][quote author="usctrojanman29" date=1237943656][quote author="awgee" date=1237940638][quote author="BlackVault CM2" date=1237933262]Never underestimate the power of the bull. One must always be friends with the bull. However, being friends with the bear is equally important. I'm friends with both, but they don't know that. The bull thinks I'm only friends with him, and the bear thinks I'm only friends with him.



Actually, I pretend I'm friends with both...I have no love for either.



EDIT: If you take a look at a 20 or 30 day chart of SPY (for a better view), you can see exactly where this market is going today...rarely do I see a more telling direction.</blockquote>


Most defintely SPX has broken out of the downtrend. But is it going up or sideways short term?

I am looking for a huge bear market rally; something that takes the DOW to 10,000 or 12,000 over a six month period, fast and furious. This may be the start. I dunno.





Honestly, I know nothing about Alcoa, International Paper, or Dow Chemical. I am a horrible long stock picker.

But, I am a short seller, and my experience with GE is that it is a zero. It is impossible to value their assets accurately, but my guess is that much of their paper is marketable at 50 cents on the dollar and in a few years it will be 10 cents on the dollar.





As a side, my mom inherited a boatload of GE awhile back. I had her sell it immediately, before it even was out of the deceased's estate and in my mom's name, @ $35.77 per share.</blockquote>
Again I agree with you...GE Capital will bring GE down to its knees. I personally know that GE Capital did some crazy commercial real estate loans during the good old days (including equity and mezz investments).</blockquote>


I would put forward that $38.00 to $5.00 is exactly that...on your knees. I think they can still stand up. I was not a buyer at 35 but at 6 bucks I am in. That risk reward looks palatalble to me.</blockquote>
True, but this sucker is heading to Citibank territory...$1/share. All the GE shareholders can thank GE Capital (similar thing will happen to Textron).
 
[quote author="BlackVault CM" date=1236948156][quote author="norcaljeff" date=1236946381][quote author="skek" date=1236922733]So, four days in a row or will we see some profit taking tomorrow?</blockquote>


Since the Nov meltdown we've had two 20% bear market rallies. We're around 14% now. I think we'll see another moderate up day before we test the lows then fall back below 6000. Cramer called 5300 the bottom before he went all bull balls on us. He right about some things, and I think that 5300 might be it, but we're certainly not out of the woods. He changes his views faster than Obama.</blockquote>


If we go back down to retest new lows after only one more moderate up day, my BAC trade is worthless.

I don't know the future, always fun to speculate, but I disagree. We will pull back, I expect it, and we need it. (for health reasons)



However based on current data we have, the momentum is way too strong to just have one more moderate day up. As of tonight, with what I know, my guess is 7,800 first, before and if we re-test new lows.



This is just my short term perspective and is subject to change based on new economic information.</blockquote>


Good calls. I was certain the market couldn't head this high this fast. Nothing in the economy has materially changed for the better so I know we're due for a big reversal. I'm gonna stay long in energy, esp oil and gasoline.
 
[quote author="BlackVault CM2" date=1238103183]Everybody and their papa is expecting a reversal...almost makes you wonder...</blockquote>


Yes, exactly.
 
[quote author="usctrojanman29" date=1238077752]

True, but this sucker is heading to Citibank territory...$1/share. All the GE shareholders can thank GE Capital (similar thing will happen to Textron).</blockquote>


Are you shorting GE here? buying long term puts? I mean if it goes to 1 dollar...you will be a very rich man.



jun 09 puts at 5 strike are selling for 25 cents. Thats a 1600% return. 20K = 320K

sept 09 puts at 5 strike are selling for 40 cents. Thats a 1000% return. 20K = 200K

jan 2010 puts at 5 strike are selling for 57 cents. Thats about a 700% return. 20K = 140K



Tell me which you are buying and when...
 
[quote author="BlackVault CM2" date=1238126631][quote author="usctrojanman29" date=1238077752]

True, but this sucker is heading to Citibank territory...$1/share. All the GE shareholders can thank GE Capital (similar thing will happen to Textron).</blockquote>


Are you shorting GE here? buying long term puts? I mean if it goes to 1 dollar...you will be a very rich man.



jun 09 puts at 5 strike are selling for 25 cents. Thats a 1600% return. 20K = 320K

sept 09 puts at 5 strike are selling for 40 cents. Thats a 1000% return. 20K = 200K

jan 2010 puts at 5 strike are selling for 57 cents. Thats about a 700% return. 20K = 140K



Tell me which you are buying and when...</blockquote>
Man, you are reading my mind...this is scary. I'm thinking that GE gets slammed down to $1-$2/share before the year is out. I'm looking at the Jan 2010 puts $5 very closely (looking to pick up 50-80 puts). I'm gonna wait a little longer as this rally may go through the summer.



What's your take on BAC? Looks like it is hitting a brick wall around $8 the last 3-4 trading days. What do you make of the down day for the stock while the overall market was up? My thinking is if it breaks out above $8-$8.50 it's going to $10+ in no time. I'm looking to pick up some May $9 calls on BAC the next week or so.
 
[quote author="usctrojanman29" date=1238127500][quote author="BlackVault CM2" date=1238126631][quote author="usctrojanman29" date=1238077752]

True, but this sucker is heading to Citibank territory...$1/share. All the GE shareholders can thank GE Capital (similar thing will happen to Textron).</blockquote>


Are you shorting GE here? buying long term puts? I mean if it goes to 1 dollar...you will be a very rich man.



jun 09 puts at 5 strike are selling for 25 cents. Thats a 1600% return. 20K = 320K

sept 09 puts at 5 strike are selling for 40 cents. Thats a 1000% return. 20K = 200K

jan 2010 puts at 5 strike are selling for 57 cents. Thats about a 700% return. 20K = 140K



Tell me which you are buying and when...</blockquote>
Man, you are reading my mind...this is scary. I'm thinking that GE gets slammed down to $1-$2/share before the year is out. I'm looking at the Jan 2010 puts $5 very closely (looking to pick up 50-80 puts). I'm gonna wait a little longer as this rally may go through the summer.



What's your take on BAC? Looks like it is hitting a brick wall around $8 the last 3-4 trading days. What do you make of the down day for the stock while the overall market was up? My thinking is if it breaks out above $8-$8.50 it's going to $10+ in no time. I'm looking to pick up some May $9 calls on BAC the next week or so.</blockquote>


No opinion here. BAC? No idea...I'm going to bust out my ouija board to determine that.

E-mail me if you really want to know...not offering advice here. Was just curious why you think it goes to $1.
 
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