FRI. NOV.14- Who's In Control, Here?

“I will never apologize for changing a strategy or an approach if the facts change.” One can interpret that very positively: it is good to be open-minded, flexible, and ready to admit one’s mistakes. However, one has to judge that statement in context and situation. The person who uttered those words which will undoubtedly be repeated on shows like “Meet The Press” was Treasury Secretary Henry Paulson at a press conference. The situation was the pronouncement that the plan has changed as to what to do with the $700 billion allocated via the TARP. The original plan was to purchase distressed mortgage assets which would theoretically unlock the credit markets. Indeed, LIBOR rates have fallen to their lowest levels in quite some time. However, instead of letting some time elapse, the Fed decided things weren’t progressing fast enough as banks are still hoarding money. The fear is palpable; whereas there was a frenzy at the top of the real estate market, now no bank is willing to lend anything to anyone. So, a mere four weeks after the original announcement, Paulson changed the plan to more of an injection scenario in which companies received bailout funds for capital injections. Yet, the plan changed one more time again this when the Treasury Department said it planned to aid the automobile companies, student loan entities, and even holders of credit card debt. Financial markets abhor uncertainty. Just as in life, it is arguably better to know bad news so one can deal with it rather than be unsure as to the outcome of a terrible situation. Well, this principle goes a long way to explain the weakness in the markets. Nobody is sure of what will happen next in the Obama administration. And arguably more important, when the Treasury Secretary of the United States shifts strategy time and again, the message is sends to the rest of us plebians is as such: “if the Treasury Secretary cannot make up his mind what to do, does anybody knows how to fix this? This is not an indictment of Paulson or Obama per se. However, the performance of the markets these last couple of weeks indicates that the broader investor community is worried that nobody has any idea what the ultimate fix for this crisis will be. For day traders, it just shows we cannot get into work five minutes before the open and expect to be profitable; we must be knowledgeable on the ongoing details of this crisis and be ready to act intra-day appropriately as the news changes – as it did yesterday when the Dow rallied a mere 9.85% from its low to its close as rumors swirled that the G-20 is going to tackle everything together this weekend at their conference- some how, some way.

Overnight, markets throughout the world rallied 2%-3% on the heels of Wall Street’s rally yesterday. State-side, things aren’t looking quite as good this morning with a little giveback likely. The problem, however, is that LIBOR crept up for a 2nd day in a row and the dollar is down very hard against the yen this morning. So, there may be a little follow-through to yesterday’s short covering burst, but if things don’t hold early, it could get messy later in the afternoon.

Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified


Good-

MSCC- good earnings

PLD – closed way off of its lows…A-B-A2 would be nice thru yesterday’s high around 7

GS- massive reversal yesterday; looking to buy around 70 if it opens down

AMB- huge reversal; looking to buy above yesterday’s 16.88 high on A-B-A2 of some sort

FCX- closed near a high

POT- closed at a high

LNC- massive reversal; would like A-B-A2 thru yesterday’s 15.25 high

RAS, MPG, NCT- small REIT’s with major short covering yesterday; if they open down, they are all buys thru unch

AMAG- almost doubled yesterday; may get wave of short covering today thru yesterday’s high of 37.50 particularly if it opens down

MBT, VIP- among the Russian ADR’s to rally yesterday; track Russian markets as morning progresses as these may go right back down

GOOG, AAPL, AMZN- among big cap tech with massive reversal; look for money to flow to these two among others if market rallies

RIG, OXY, NE, APA, SLB, MRO- among others, very strong oil stocks yesterday on short covering; they will likely lead oil prices today

Bad-

WYNN- announced 8 million share offering at 43.50; if it opens below 43.50, may be a buy thru 43.50 because the offering may provide extra cash to write down some debt which makes it accretive to bottom line as debt interest decreases

KSS- warned on its earnings outlook

JWN- warned on its earnings outlook

BIDZ- bizarrely weak since its earnings released Monday…look for much more volatility in this issue today and perhaps some major short covering

ANF- warned badly

NOK- terrible guidance

JCP- warned badly on holiday quarter

A- warned on next quarter

Earnings:

FRI NOV 14 BEFORE

A ANF CIG

HEW JCP



Good luck today.