Intel on Intel

 

We are writing this at about 9:00 am on Thursday so the recap is about Wednesday, not Thursday.  I'd like to recap Thursday at 9:00, but that would be a greedy wish.

 

We added another distribution day to the DOW on Wednesday so that makes three.  We are still in a confirmed uptrend (GREEN FLAG), but it seems to be faltering.  Today was my doom and gloom day, but it started out nice.  The nicety is dwindling as I write this, but we'll see. 

 

We also saw an unexpected jump in oil supplies yesterday.  As a result, we saw the energy sector take a hit.  Boys and girls, if your investment window is longer than 12-24 months, look at this as a buying opportunity.  We are long CVX, XOM, and OXY (New Position as of Tuesday.  We will do a summary later in the week.)  We are buying into the weakness and suggest you do some homework on the subject and the sector.

 

Obama is ignoring the issues in the middle east, like "peaceful protests gone bad" resulting the attack of an embassy and an ambassador being assassinated, as to not rock the boat in the oil reach region of the world.  No sitting President has ever been re-elected with 8% or higher unemployment.  If you add to that a 10-15% increase in energy cost, he will not get re-elected. So do nice nice talks in the UN building and visit the set of The View, but don't rile the Oil Rich Arabs until after the election.

 

There might be your play.  Obama, has to do something in the middle East and Romney has already said he would.  Any scenario other than the "bury our head in the oil soaked sand" which we are seeing at the moment, will have a speculation lift of 10-25 dollars a barrel.

 

Don't get me wrong there are several very wise people saying we are in a long term bear market for energy.  They site the slowdown in China and Europe.  They are correct. 

 

But if you go back to this blog last Novemberish, we explained the three legs of the commodities stool.  Demand, Currency, and Speculation. 

 

Demand is an issue with China looking for a soft landing.  (By the way they are spending fortunes to get things going again and they have a way of doing what they say.)  Demand is also impacted by what is going on in the economies of Europe and the US.  BUT (Behold the Underlying Truth), what are these economies doing to stimulate their economies. 

 

Yes, Quantitative Easing in all shapes and forms.  In other words they are printing money.  The are devaluing their currencies (Second leg of the commodity stool.)  Eventually, inflations will creep and creep fast making oil, nat gas, silver, and gold more valuable or should we say expensive. 

 

Then you have the speculation, the wild card.  Opec had been drilling and pumping for an "in case" scenario (one more reason the inventories are high).  Iran has the potential of something crazy.  Mother nature had been doing her fair share of oil logistic disruptions.  These things will not go away and you can plan on unplanned events to force occasional price spikes.

 

So look at the oil drop as another, probably not your last, chance to get in the energy game.  If you are in it, you might look at adding.  Do your homework and set your stops. 

 

Here are four reasons NOT TO BUY INTC at these levels.

 

The PC industry is in the doldrums.  Demand across the board for chips are down.

 

Any slip in technology by INTC will open the door for AMD, ARMH, BDCM, to name a few.

 

AMD, with their acquisition of ATI several years ago, has given them a slight and temporary edge on some tech.

 

The ARMH business model has edged INTC out of many mobile device arenas.  This could be temporary, or not.

 

So Don't buy INTC at these levels.  Phsha!

 

They are the leader.  I only know a few companies with obscene market share and Intel is one of them in the microprocessor market.  They have invested more money in R&D than most of the other players out there.  The have pockets bigger than a politicians at a Lobbyist convention.  Their ability to bundle processors on chipsets provides a diversity of product offerings.  Their brand recognition is fully subsidized by their buyers.  (Powered by Intel).

 

They are committed to innovative chip architecture and have announced a plan for new chip design every two years.  Their Sandy Barge chip allows computational and graphical processing simultaneously.  INTC's buy out of Infinneon last year gets them back in the mobile device game. 

 

In establishing a value, yes we agree this year will be soft and we might see more of a downside to the stock.  We are near our stop point of 22, but after doing the homework and planning to keep the stock at least 18 months, we will lower our stop to 21.50 and add to the position.  We are also selling Dec 22 dollar puts in the 85 cent range.  If we get stuck with the puts, we will buy INTC at 22.  Not a bad thing.  If they improve their number we keep the premium of 85 cents a call.

 

WE ALRE LONG INTC