Thursday, October 16, 2008

Which is one of the best sectors right now?

IMO it is Airlines if you are looking for one good sector in this tremendously bad economy and markets.
* All airlines have added so many surcharges lated when Oil and jet fuel prices skyrocketed!
So now they are charging for every small thing you need while travelling LOL
* Jet Fuel prices are dropping like a rock. See the chart below. They have comedown by 50%! From $5 per gallon to $2.5 per gallon (Chart: courtsey of IATA website)

* Fuel charges are around 33% of costs for an airline. From the peak, they have come down so that is like 17% improved in costs from the worst days!

Do you know any other sector?

Market Reversal: Where is the bottom?

Where markets are heading? This is a million dollar question. To answer this question can by politically suicidal (and probably financially too).
I think bottom is formed on last Friday when Dow Jones hit below 7900 momenatarily.

* Last Friday, there was a REVERSE signal on very high volume for most stocks.
* Today, right at this moment, Dow Jones has come to positive line after dropping around 400 points. We don't know where it is going to close today but if it does close above today's Open, we will have a CONFIRMMING second reversal signal
* that will also confirm a higher bottom.
* One of the strongest signals for the end of the downtrend- I was in a team lunch yesterday when the dow was dropping around 700. Someone asked me if I was in the market. I said Yes and almost all faced showed pity for me! It is considered stupid to be in market right now... so probably most of the individuals (who by now have figured out it is stupid to be invested in market these days) are all out of the market! What does that mean? There are not many sellers in the market left now (weak hands I mean). When stocks are selling high (expensive), it is fashion to be invested and when there is a sale going on, people are abondoning..

Anyway, for today's post, if someone is to invest,
*make sure the stock or the market closes above today's Open (better if it close above Yesterday's Close)
* keep a stoploss at today's low.

Monday, October 6, 2008

Apple has a strong reversal

Update -Oct 16, 2008--
Look at the recent BUY signals in AAPL- in blue in the chart. (There was on Sell signal too when it opened up in Gap at 116 and closed lower- as shown in Red)
Also compare AAPL to Dow Jones and you will see Selective buying going on in this stock.

Dow broke below 10k today! What a scare out there!! At one point, the Dow was down by around 750 points.
APPLE (stock: AAPL) showed a nice reversal today (Yes, I was wrong earlier on AAPL when a similar signal failed. PFP signals do fail, like everything else in the market and that is the reason we always keep a stoploss)

Apple computer stock AAPL opened in a down Gap at $92 and then went down to $87 but toward close, it was around $98. Volume was also very strong. This gives us a trading opportunity to buy Apple with a stoploss at today's Low price

Wednesday, October 1, 2008

The World After Bailout- How to Profit from it

(This is an article in process. Not done yet but I am publishing it as work-in-progress to get some feedback, ideas from you too.)

Will Bailout pass or not?
Looks like on this Sunday, the answer was mostly Yes. Then on Monday, it became a NO as Congress voted against it. Today as Senate is a about to vote, it looks like a probable Yes. However what will happen when it is voted in Congress tomorrow (Thursday)? This uncertainty about bailout program has made US markets the most dramatic in recent history. Down 778 points on Monday and then up 500 points on Tuesday. Today, the recovered from a 200 point drop in DJI. Looks like what an investor makes in an year can be made by Day-traders and short-term traders in hours this week! Currently we are all focused very short term- will this Bill pass or not. I think it will pass in one form or another.
The important thing in my opinion is now for us to wake up, free ourselves from short-term uncertainty and to start thinking about ways to figure out if we can profit from it. Is there a way to take a bit (I guess a micro-bite LOL) of this 700 billion bail-out monster? Not sure but this has already reached a trillion dollars if FNM, FRE and AIG are included. Remember, money never vanishes- it just changes pockets. So I am trying to see if I can route some of the money into my pockets.

Current State of the Markets
Assuming the Bailout bill will pass, let us think about the world down the road- in an year or over next few years.
* I don't believe the liquidity in the economy has vanished. Money is still there; it is the lack of confidence that is killing the credit available.
* Current inventory of unsold homes- around 4.8 millions. National Median home price is 225k. Assuming 50k of loss per home (to accomodate higher priced markets like California) to a mortgage lender-- the total loss to lenders for currently unsold homes is around 200 billions. Spread it across two years- maybe it is 500 billions but the Bailout is running into a Trillion and banks have already written down 250 billions or so over last few months... There is some money left between what is happening and what is estimated

The World (and Markets) after the Bailout.

* Mark to Market losses-- are paper losses. The market for the problem securities is thinly traded- prices may not be fair representative of reality. Anyway currently write-offs are happening but don't get surprised if mark-to-market bring profits in an year or two.
* Markets always deviate too much from fair-value line. In bull market, they go up too much from reality and in bear, they go down too much too. This always gives nice opportunities to smart investors to buy cheap and sell expensive.
* Government Bailout- Government keeps current problems- 'bad' securities- will revive confidence among players. This should revive the trading in MBS and their derivatives. Once this market revives, bargain hunting should start in this troubled securities.
* Chase, Citi, BofA--- they are acquiring new customers/business in fire sells by other institutions. Their customer/business acquisition costs are rediculously low. On long-term models they will benefit from two folds- increased customer base and also from less competition in the market.
* Goldmon Sacks, ... Investment bankers and Wall-street big dogs who survive this tough time will benefit down the road from reduced competition.