Tuesday, February 21, 2012

Dow Back Over 13000

     For the first time since 2008. Another reason to re-elect President Obama. Meanwhile the GOP is going to hit Obama how? The latest play is high oil prices.

     The Nasdaq already is higher than it's been since 2000-not only has it made up for the losses of 2008 but it is even making up ground lost in 2000. The Nasdaq is now just 52 points away from another symbolically important number-3000.

     Many on the Street currently believe the market is due for a correction. That could be true on a technical level-not saying that it is but it's not impossible. However in the long term, I am ready to do an Irving Fisher and declare, "The fundamentals of the US economy are strong!" I won't however claim that we have hit a "permanently high plateau."

     If the market does pull back it's only temporary. That's my take anyway. Right now if I were in a position to be a market participant again-maybe I will again soon, I am finally working again...-I'd look at the banks as a major area of being undervalued. Bank of America is a steal at $8. I would either back up the truck and buy a bunch of stock or buy some $12 calls that expire in say a year. The first strategy of buying it outright has very little downside risk.

    Still the GOP is trying to tell us things are terrible out there and getting worse. No. They remain highly challenging, certainly. You don't have to tell me that-before getting my current job in January I was out of work since last May. Incidentally, if you are currently looking for work, one market that definitely is hiring is the one for security guards.

    The GOP is trying to hang high oil gas prices on Obama. To the contrary, a big part of the problem is that the economy has come back. While high gasoline prices put strain on Americans, the fact is that that main reason they're up is because of the improved economy. It was a total drop in demand in 2008 which saw them plummet.

    Still even with gas at $1.87 when Obama came in this was cold comfort for the 750,000 Americans losing jobs every month. Honestly there's nothing Obama can really do about high oil prices. You could argue that a stronger green policy could help but this is hardly what the GOP has in mind.

    Their ideology is that if only Obama opened up off-shore drilling, etc. that would bring down prices. Of course the main thing this is about right now is trying to make the XL pipeline more popular. In reality Obama has opened up off-shore drilling-he already gets a lot of flack from some left-liberals for that.



  1. I sold BAC in 2008 right after they acquired Countrywide for 4.1 Billion. Sold at around 27.00 and the dividend was about 3% per share. The cost to BAC for the purchase of Countrywide, to date, is around 49 Billion. That's about 10 times the purchase price of 4.1 Billion. Is the carnage over, or is there more exposure to come? The recent settlement with the government may help to soften the exposure going forward. I'm just not sure there isn't more losses going forward for BAC. I've been tempted to buy it, but something keeps holding me back.

  2. In 2008 that was my best trade ever-I bought puts on BAC in September of 2008-and Morgan Stanley. In November I did the same again to BAC and Citi.

    I made thousands on that. Of course I got too greedy after that.

    In my opinion there is not much risk to buying BAC stock now at least-the options maybe a little more.

    I think even in an environment with a lot of concern over fundamentals in the future I would even then think BAC might get dropped to like $6 but not much lower.

    Then at some point it would come back. As I'm basicaly bullish on the US economy now BAC should share in the wealth at some point.

    At $8 then I don't see it as dropping much further from this level. If I were going to do anything this would be it.

  3. You get an entry level job in security, and all of a sudden you're bullish? LOL. Seriously though, I wish I shared your optimism. Still too much unemployment, excessive consumer debt, a depressed real estate market, and a batshit crazy wing of the Republican Party having a major impact on policy decisions in Washington and in state houses. And, let's not forget what's happening in Europe. The most recent kicking the can down the road with the Greek crisis, will come to a head sooner or later. Perhaps not before the election in November, but surely by the 1st quarter of 2013. All this additional austerity and additional debt will only increase Greece's debt to GDP ratio. (IMHO.) We may have dodge a bullet with the recent settlement on the mortgage mess, but here too, the devil is in the details. And we don't even know what the details are yet. See the Naked Capitalism post today "Will Expiration of Tax Break Render Much of Mortgage Settlement Moot?" I've got more, but I think this is enough for now.

  4. I certainly agree about the problems in Europe-Britain also looks bad. Last quarter the Eurozone-and Britain-had negative GDP. There is the worry that Europe could drag us back down.

    Or maybe we will be the engine that pulls them up at some point.

    My bullishness is not so much directly about my own job. LOL. I do though even on the "micro" level see a lot more help wanted signs. And no doubt I personally feel a little richer-the wealth effect, LOL and may extrapolate a little of that to the macro level.

    The consumer debt from what I understand is coming down. A dirty little secret is that while the batshite Republicans tell us that the growing public debt is an ourtage, it's actually part of the healing process-the private debts are becoming public which is what we want.

    Unemployment if falling. Really we have dodged a bullet. In fact I think that we owe a lot to believe it or not Obama's handling of the debt ceiling battle in the Summer.

    All the Obama haters over at FDL et al thought he caved. But he succesfully held off the austerity demands that prior to that the GOP did have a level of political support for.

    Now no one talks about this anymore. Austerity has been wholly discredited so we wont go through Britain under Cameron has gone through.

    Telling you, $8 BAC stock looks like a very low risk to me right now. Just one man's opoinion. LOL