Random Thoughts: The Crying Game - Financials in Drag
By Todd Harrison Oct 01, 2008 11:00 am
Keep aim on companies that are not what they seem.
Editor's Note: The following was posted in real time on our premium Buzz & Banter. It's being shared here for the benefit of the Minyanville community. See also Where We Are and Where We're Going and Welcome to the Grand Illusion.
- Does the positive divergence by the financials---the BKX is green--mean anything given that the construct of capitalism is broken?
- In addition to General Electric (GE) (-8%), keep tabs on IBM (IBM) (-6%), Ford (F) (-9%) and Daimler (-10%). Financials in drag (companies with finance-based operations) are coming into the crosshairs.
- If they suspend of shift "mark-to-model," I'm gonna perceive myself to be ten pounds thinner with a full head of hair. I mean, if we're gonna start making things up, why stop there?
- Green beans in the Red Sea? Consumer non-durables such as General Mills (GIS), Coca-Cola (KO) and Campbell Soup (CPB). Those names will work in a deflationary environment but if the government begins to hyper-inflate, they'll give it up as quickly as they got it up.
- What's the proxy for hyperinflation? The greenback, natch. Keep in mind that financial assets as a whole would rise rapidly but the measuring stick by which they are measured would decline with a greater rate of change.
- Ever since my Conversation with Mr. Practical, I can't shake the sense that China is gonna revalue the Yuan.
- Remember, there are two primary focuses here: structural and psychological. The former will manifest either as cancer or a car crash (please don't shoot the messenger, we've been saying this for some time) while the latter is a function of faith.
- To that second point, the Reserve Primary Fund--remember that?--said it would reimburse investors for 30-40% of their original investment. Why? According to a spokeswoman, that is what's "currently available at the fund at this time." Isolated incident? Perhaps and hopefully.
- Just putting it out there--don't be shocked if they suspend trading entirely at a point as they figure out the particulars of a rescue package. Keep that in the back of your crowded keppe just in case.
- Breathe, Grasshopper, Breathe.
No positions in stocks mentioned.
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