Wait And See, NOT!

 

 

We really were prepared to sit back and let the market move on with out us, but there was a blip on my radar that got my attention. You know we have a few folk we co-manage accounts with and this was the note we sent them this morning.

 

 

"After that great week last week, I was inclined to take a wait and see attitude today, but something popped on my radar we could not ignore.  OmniVision designs integrated circuits that are used to electronically capture images in gadgets such as phone cameras and digital still cameras. The company outsources the manufacturing of its image sensors to foundries such as Taiwan Semiconductor. Most of the company's revenue comes from sales to the handset industry.  They are out of Santa Clara, CA.  On the 25th they reported earnings of 76 cents a share which beat analysts estimates and most whisper numbers.  We have played OVTI as a long and an option and usually done well.  They have a solid history of "bouncing" nice after a good earnings report.  (Up in the 9% range for the following 30 days.)  They took a huge hit on Friday and we think they are oversold.  Here is what we did, we bought some "out of the money" 20 dollar October calls at $1.05 cents a contract for OVTI.  In essence, if we see a recovery in price towards 20.00, we should the see the calls appreciate.  We are looking for a 30% return ($1.37 ish) in 10-20 days.

 

 

 

Most of you will also notice we sold our PFE Pfizer calls for about a 28% profit.  Those were about two weeks old so not bad return for 9 trading days.

 

I know you have other investments (Though we do not know why when we are doing so well :') ), but despite the nice numbers in the market, the pending home report came is weak as we suspected, consumer spending was better than expected, but the one thing that had me concerned was the Dallas Fed report this morning was weak.  That may be a tell for Thursday's ISM manufacturer's report.  The two big economic reports this week are the ISM Survey and Friday's job report.  FYI, just be limber and be defensive. 

 

If you have any questions about the trades, let me know."

 

So we did not take a wait and see strategy. On top of those actions, we increased our position in SSN Samson Oil & Gas Limited, together with its subsidiaries, engages in the exploration, development, and production of oil and gas properties in the United States. Our average cost is $2.40 a share and though this is a very speculative almost penny stock, we are looking for a double by Q 1 2012.

 

With all the damage up and down the east coast, we are expecting some runs on lumber so we increased our falling knife position in Weyerhaeuser. This is our last bet on WY. We have seen a 22% loss improve to a 12% loss. We have stuck with because of the dividend and our feeling that wood would rule. The dividend yield of 3.5% makes it look attractive. When we ran our Buffet Analysis, we came up with a 10% loss every year going forward? Perhaps it was right. We are looking for a $21.00 stock by Q 1 2012.

 

Why ask Why

 

 

 

 

As we have said many times Mr. Market is a quirky dude. We are searching for a valid reason for the 2.2% gain today. Here is what we found. The Irene hurricane was not as bad as expected? Consumer spending was better than expected. Two Greek banks merged? Pfizer and Bristol Meyers got approval for a new blood thinning drug. That was all we could come up with.

 

Let's take a quick look at each of them. The hurricane? Boys and girls, when the market is reacting to the weather, it is not a good sign. If this was really a way to measure the market, we should be using tide charts to determine the market swings.

 

 

 

 

Consumer spending was better than expected? Ok let's take a look at the numbers. Consume spending is on target for a 16% increase over last year (5.1% from 4.4%). Yeah that is what I am talking about. NOT! Look at the Consumer Price Index (aka inflation) It is tracking for an 81% increase from last year (1.6% to 2.9%) So we are actually loosing ground. This will probably be reflected in the ISM report on Thursday and the jobs number on Friday.

 

Now let's look at the Greek banks. Alpha Bank and EFG Eurobank merged as a strategic move to strengthen the private sector economy in Greece. We will now explain that in blind casino monkey speak. The two banks (some of Greece's largest) had to merge in order to meet certain stress tests in order to qualify for IMF and ECB funding. Had they not they would have to default bring Greece lower to its knees. So that is what we are calling good news?

 

 

Now the PFE and BMY blood thinner group called Apixaban enters a 15 billion a year global market and is expected to have annual sales of 2.4 billion in 2013. So this is good news for the two drug makers who were desperate for a new widget. From the sounds of this stuff it will be the best on the market and by 2020 have almost half the blood thinner market share. This is good news but should not have propelled the market 2.2%. 

 

We also had a dismal Dallas Fed Number which was entirely ignored.

 

So tomorrow we have consumer sentiment for the month of August. It is expected to be down from 59.5 to 52.5. Now this was the same month when the parliament of whores were telling us the sky is falling, the dollar will collapse, we will all need to carry bricks of gold and Uzis, so how do you think consumer sentiment will be? Jobs were flat, the market and everybody's 401K are down, and no one was buying homes, so how do you think the consumer sentiment will be? We think it will be just below 50 and Mr. Market will wake up and say, hey what has the hurricane, blood thinning drugs, and Greecian banks have to do with the direction of the market? Look for the market to give back most of the 2.2% it made today and maybe more.

 

  

Salve Lucrum