Bulls Battle Bears

Just like it was expected, once the hype was over, once the dust settled, once the reality of the true information came to light and high flying rumors were put to rest, the financial stocks fell and continued to fall all day. This is why a person who does their research, does not chase a unrealistic goals was probably breathing normally while those that just jump on baseless news got caught today either selling at a loss or holding a bag worth less than what it was the previous day.

Joe Biden today came out and said the Obama administration would not create a “bad bank” until the current bailout installment shows results of credit easing. Since the last bailout did not have this result, how likely is this one to work? Article here.

Then the other news out was how to price toxic asses without causing banks to go under/nationalized which would royally screw shareholders. Currently, companies that have toxic assets on their balance sheets have it worth a current value. However, everyone knows that that this is not the true value at which the government will purchase those assets. The kicker that complicates this program is simply this: What is the fair price? If the government offers lets say, 50cents on every dollar, the tax payers will probably get ripped off while companies get a huge cash infusing on worthless assets. On the flip side, if the government only were to offer something in the range of 15cents on the dollar, maybe this is fair value, but would be a total write off for a bank and bring stock values to zero or close to it. Creating a fair equation is going to take a while and this is why financial stocks calmed down today.

Today I didn’t make any trades. I saw my (MO) holding remain flat which is great after earnings and guidance show growth. This stock is currently expected by many to hit $21-24/share so has major upside and a nice dividend which even with current economic times is going to stay in place.

I wanted to get rid of (HPQ) which I have owned since Nov/08. But it was down today and will wait until another time. I really want to free up some tied up funds to better find some quick upswings.

Speaking of swings, (BAC) is an amazing example, look at the chart, up, down, up, down, its a nice pattern. For a very observant investor, its been quite a profitable stock. Just holding it for more than a day trade is a gamble.

Anyways, here is the summary for today:

Another thing that I talked about was (F) and its potential downside a few posts back. I was certain that the stock had the strong chance to come down further. Look at today’s news, (F) Ford managed to burn 5.9billion last quarter. It did say it was not ask for a bailout as of yet, but patience will be rewarded. I’m still certain this stock has downside before any potential broader rally takes place.

Also, anyone looking for a perspective on Gold stocks and how it relates to the uncertainty of the markets, this is a great video to look at. I could type out a whole summary of this video, but hear why Gold is a great hedge when markets crash. This is a fundamental lesson in business school, but as we can see, trading lately has not moved always in this traditional direction – but things could be changing again.

Friday the Asian markets have been down already and the outlook on the US markets have been down too. If a financial play opens up I might play a little but my mission this week has been to replace my currently longs into cash which I want to use for another financial play. I don’t want to really mention it right now, (hint, this company advertises on the site) – until I try out their unique service.

Oh, and before I go, here is a news that just came out on Dell. Apparently they are getting into the cell phone business as early as next month. With the slow economy, Dell has seen a sharp fall in PC sales and is probably trying to capitalize on the success of other phones on the market. Personally, unless Dell has something truly innovative, this market is already saturated with titans of the industry (Nokia, Erricson, RIMM, Apple, Palm, etc). Article here.

Happy Investing!

Aman, MBA