Keep Your Mind On Your Drivin' 

 We all know who Paul Evans is right.  You all look puzzled, except Butch S., who probably does know who he is.  Evans is a song writer/singer who wrote and recorded a few hits in the 50s and 60s.  His biggest claim to fame was writing "Roses are Red" for Bobby Vinton.  Evans and his group the Curls recorded a song called (Seven Little Girls) In The Back Seat.   

 The crux of the song boils down to the gang of girls and this lucky guy named Fred are telling the driver to pay attention to what lies ahead and quit worrying about what is going on in the back seat. 

You might remember the refrain:   

Keep you mind on your drivin'.

Keep you hands on the wheel.

Keep your snoopy eyes on the road ahead.

We're having fun sitting in the back seat kissin' and a huggin' with Fred. 

Later in the blog we will explain why this may be good advice for investors today after the slappin we got. 

Our day started out in the wee hours of the morning when one of our big dogs, Max insisted on going out back.  Devin graciously (I was comatose with my breathing machine on.) took Max out not once, not twice, not three times, but four times in about 45 minutes.  Max's behind was exploding all over the back yard.

While on trip number two about 1:45 am Devin heard aloud crash from in front of the house.  Our friendly neighborhood hooligan's tipped over the port a potty that has been in front of the houses.  This is the fifth time they knocked it over.  Don't know why they think that is fun?

Around 4:00 the old lady dog Lucy insisted on going out and Devin, once again, (this is going to cost me jewelry) got up and took the old poodle out. 

I got up around 6:00 and woke man child who had an early morning meeting with one of his teachers.  We were quite proud to turn an emergency homework grade crisis into just a couple hours work over the weekend to get him all caught up.  He done great, but had to do the "show me" thing to the teacher this morning.  He was tired and his stomach was bit off, but made it through his classes and basketball and football and we are very proud to say the least.

Because we had to head out early this morning, I was not able to get in the pool and missed my morning chore of pickin' up gonkers in the back yard.  This gave me a great excuse to head home for lunch.  Mission accomplished.

Got back to work, watched the miserable closing of the market and saw the AA Alcoa results while cleaning up e-mails and reviewing some strategic planning notes from a meeting earlier in the day.  It was also time to do the monthly reviews for each of our operating units and there are always interesting pieces of information in those.

Devin enjoyed one of her first days off of the summer.  She had to take the old lady poodle to the vet, but was able to return and relax in the backyard for all of nine minutes.  Then she was up looking for things to do.  (I have actually seen humming birds lite more than Devin does.)  She decided that it was time to go to storage and start moving boxes back into the house.  And so she did.

We all enjoyed a delicious New York Steak Dinner with Baked Potato.  Sorry Dave we cheated on you at home.  Jack and I watched about half of Forrest Gump, a movie he had never seen.  Then we all went for a swim and now it is time to finish the blog so let's get to it.  

For The Fearless

Ok, here is where we kick it up a notch.  It only seems fitting that we take a look at the first pitch into the new earning seasons.  AA Alcoa kicked off this season with a meet.

Analyst expectations were 32 cents a share and they nailed it.  There were some whisper numbers last week at about 42, then softened to 41 and by markets opened today 40 cents.  So by those standards it was not a glowing earnings report.

Should you and how should you play the news?  WE DO NOT OWN AA Alcoa.

Fundamentally it has a forward looking P/E ratio of 11.14 which makes it cheap to the S&P 500 and the industry at large.  A price to book looks cheap as well at 1.2.  While this report had a very positive bump in top line sales its 3 year history of sales and profit are terrible.  (-12% and -54%)  It carries twice the debt of the industry.  Their margins do not allow much room for error.  The report today suggest an 11% increase in revenues, but most of that can be attributed to the rise in aluminum prices.  Alcoa has some of the lowest cost of aluminum and alumina, but that price advantage is eroding as players in Russia the Middle east and of course China.  China seem to be the lynch pin as it is the largest consumer and is becoming a huge producer, but its current cost of production makes AA products look like a bargain. 

The play on this stock has to be determined by your time line.  The current price of $15.91 is just under what some say is a fair value of $17.00.  Target prices range from 17-20 dollars.  Because of Klenfeld's positive comments, we might expect a 4-5% bump in the next few weeks.  If you can buy into that, you could either go long, or buy the August $16.00 call for 70 cents or less.  Assuming a quick 5% bump, you could see 16.80 and a nice gain of the call before the August expiration.  The other way would be to go deeper into the money with the August $15.00 call for 1.30 or better.  This may be our play.  We will watch the opening tomorrow to see of we can catch that call at $1.30 or less.  We would be looking for a quick in and out.  Less than 3-4 weeks and a 25-20% gain on the option.  We don't like the play for any long term position.  We ran the Buffet Eval Sheet and the numbers are too bad to even fill the spread sheet.  Alcoa had to get a few good quarters behind her before we could consider it for a watch list.  We have entered our buys for the August $15.00 calls for a limit order of 1.29.  We will get out at $1.65 if we catch the 1.29.

Salve Lucrum