Archive for October, 2008

Happy Halloween!

Have fun and stay safe trick or treating tonight!

It's Halloween Time!

With Halloween fast approaching, have you had a chance to checkout all the halloween costume stores yet? Halloween Adventure can help you locate a store in your local area that specializes in Holiday Costumes. Just type in your zipcode and you’ll get a listing of all their stores in your town or within a short distance.

Last year I found a terrific “evil jester” costume at a local store that I wore to a haunted house at the Boys & Girls Club that I volunteer at. In fact, that particular costume was so scary that I had to remove the mask to avoid freaking out the small children walking through the section I was in. The costume was relatively inexpensive, costing about $40 from the store I purchased it at. Some things I just prefer buying in person and Halloween costumes are one of those things. Not only can you save money on shipping charges, but you can try it on, or at least see how it looks versus trying to imagine it from a small picture on a website.

However, sometimes you can find some incredibly good deals online that could even save you a considerable amount of money after including shipping and handling charges. But, in that event I still like to see the item in person before placing an order for the exact model online at a cheaper price. Use Halloween Adventure to find the best deal for what you’re looking for this year!

Wells Fargo Earnings

Wells Fargo (WFC) is announcing earnings and probably forward guidance before the market opens on Wednesday. WFC was up over 10% today and I took that opportunity to buy Nov 33 put options in the company because I see a lot of downward pressure on the stock over the coming weeks. The market rally on Monday will be remembered as a day that you should have taken profits because there is a lot more downside to this market as the economy continues its decline.

Wells Fargo will undoubtedly benefit from the federal government’s bailout plan and will be receiving a large investment in soon-to-be-issued preferred shares to the feds as well. However, I don’t see these actions as benefitting the shareholders in the near-term, especially because WFC will likely need to dilute shares further with a common stock offering to raise capital. That dilution and any surprises could easily push the stock down into the 20′s and create a large profit on the Nov 33 puts.

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Dow and Nasdaq Soar Over 11%

Today will be remembered as a historic day of trading for the US stock markets. The Dow Jones Industrial Average closed up over 1,000 points, the largest point gain in history.

I used this rally to sell aggressively out of some of the smaller, riskier stocks and keep money in the strong, high dividend yielding stocks that will surely weather the coming economic storm. This rally was surely pushed by short covering and could quickly reverse this week and continue a downward trend heading into tough economic numbers that are surely coming.

The movement is due to the coordinated global effort to stabilize the markets by financially supporting banks and ensuring that they will not be allowed to fail and thus cripple the global economy. However, I don’t think this will avert a large scale recessionary period that we will experience through 2009.

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Wall Street Crash Continues

The seemingly unending decline in the stock market will most likely continue into Friday as few investors will want to hold their stocks through the long holiday weekend. Already the selloff has stretched six straight trading days, with each day ratcheting up triple digit losses of the Dow Jones Industrial Average.

Today’s market saw the Dow fall over 600 points, closing below 9,000 and at its lowest point in five years. It would not be a surprise to see Friday’s market close down another several hundred points as everyone gets out before the weekend. Dow component GM’s stock fell 31%, which largely contributed to sending the index 7% lower on the day.

Meanwhile some of the short ETF’s I discussed in yesterday’s post performed very well today including the UltraShort Financial (SKF) up 21%, UltraShort Dow 30 (DXD) up 11%, UltraShort Consumer Goods (SZK) up 12.5%. These ETF’s will surely be highly active during Friday’s session as more investors look to hedge their exposure to more downside potential in the market.

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Emergency Global Interest Rate Cuts

In a coordinated effort, central banks around the world have lowered their respective interest rates to try to save off a worldwide financial calamity. But, it is beginning to look like it is too little, too late. Even after this extraordinary measure, the Dow Jones Industrial Average ended down nearly 200 points. I took the opportunity in the morning, when the market was up, to take some profits. I will be doing this on any upcoming rallies or bounces to get out of most equities.

The Bank of America Oct. 35 put options I bought have gone from 2.95 to 13.40. A profit of over $1,000 per option contract. The overall financial sector still looks messy and there are still more large banks expected to fail, which makes the Ultra Short Financials ETF (SKF) look very attractive right now. I’ve also gone long Silver (SLV) and expect to see a resurgance in metals like Gold and Silver as a safe-haven for all the money that will be flowing out of the market over the next year.

Here is a list of short ETF’s that may be a wise investment for the near term:

ETF Name Ticker Benchmark Index
Short QQQ PSQ Nasdaq-100
Short Dow 30 DOG DJIA
Short S&P 500 SH S&P 500
Short MidCap400 MYY S&P MidCap 400
Short SmallCap600 SBB S&P SmallCap 600
Short Russell2000 RWM Russell 2000
UltraShort QQQ QID Nasdaq-100
UltraShort Dow 30 DXD DJIA
UltraShort S&P 500 SDS S&P 500
UltraShort MidCap400 MZZ S&P MidCap 400
UltraShort SmallCap600 SDD S&P SmallCap 600
UltraShort Russell2000 TWM Russell 2000

UltraShort Style:

ETF Name Ticker Benchmark Index
UltraShort Russell1000 Value SJF Russell 1000 Value
UltraShort Russell1000 Growth SFK Russell 1000 Growth
UltraShort Russell MidCap Value SJL Russell MidCap Value
UltraShort Russell MidCap Growth SDK Russell MidCap Growth
UltraShort Russell2000 Value SJH Russell 2000 Value
UltraShort Russell2000 Growth SKK Russell 2000 Growth

UltraShort Sector:

ETF Name Ticker Benchmark Index
UltraShort Basic Materials SMN Dow Jones U.S. Basic Materials
UltraShort Consumer Goods SZK Dow Jones U.S. Consumer Goods
UltraShort Consumer Services SCC Dow Jones U.S. Consumer Services
UltraShort Financials SKF Dow Jones U.S. Financials
UltraShort Health Care RXD Dow Jones U.S. Health Care
UltraShort Industrials SIJ Dow Jones U.S. Industrials
UltraShort Real Estate SRS Dow Jones U.S. Real Estate
UltraShort Semiconductors SSG Dow Jones U.S. Semiconductors
UltraShort Oil & Gas DUG Dow Jones U.S. Oil & Gas
UltraShort Technology REW Dow Jones U.S. Technology
UltraShort Utilities SDP Dow Jones U.S. Utilities

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The Bailout is a Disaster

The bailout is a disaster, or will be in short order because of all the pork barrel spending heaped onto it in order to get the needed votes to pass in congress.

  • Extended rebate on excise taxes paid by Puerto Rican and Virgin Island rum producers, also applied retroactively. Cost – $192 Billion
  • Income averaging for plaintiffs of Exxon Valdez settlement. While this may seem like a good cause, why not also offer this income averaging to American’s who have to raid their retirement accounts to make ends meet? Cost – $49 Million
  • State and Local Sales Tax Deduction extension. Cost – $3.3 Billion
  • Seven year cost recovery for motorsports track facility. Cost – $100 Million

This is just stupid, this bill should not have any pork spending and should purely be designed to rescue the financial sector and restore credit liquidity in the marketplace.

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Wachovia Wants Deal With Wells Fargo

In an interesting turn of events, Wells Fargo has made a bid for Wachovia after the Federal Reserve brokered a deal with Citibank to help unload the banks assets with the help of the government’s recently passed $700 Billion bailout package.

What is so trubbling about this development is that a judge has moved to block the deal by Wells Fargo citing an exclusivity clause in the government brokered deal. First of all, this is an extreme overreaching by the government because they did not even try to find a better suitor for Wachovia, which Wells is. The deal with Wells Fargo will require NO use of government bailout funds, while the Citi deal will rely heavily on it. Why is the government so adamant about screwing over the taxpayers even more than they already have?

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