Believe the charts, ignore the story.
Greetings from New York where I was going to write in a "tone befitting the markets' decline" before I realized that stocks are pretty much back to where they were near the close on Wednesday. As I often tell my son (but rarely my daughter; I'm an open double-standard guy), "boo boos happen; suck it up". Here's what I'm watching when I'm not busy emotionally damaging my children:
- Crude and its ETF buddy the USO is obviously the story of the day. I hear the "long term fundamental growth story" argument for the price of crude. I also heard the "long term explosive growth story" about the Internet a decade ago. My ancestors heard similar about The Nifty Fifty, Electronics, Automobiles, Railroads and North America (the entire continent and the companies setting up shop there in). Every bubble in history had a good story. If you want to get out of trading oil alive you'll believe the charts and ignore the story because the story is eventually going to get people killed.
- Bubble or not, the economic impact stemming from companies that have to buy fuel to operate (airlines and autos) is working its way horribly upstream. We've known General Motors (GM) and the airlines were in trouble for ages. The knowledge of what the changes in those industries means to companies like American Axle (AXL) and Boeing (BA) seems to only just now be dawning on traders.
- I appreciate the idea that the NBA would delay starting games until after the second airing of Fast Money but it would be better for my Disney (DIS) position, the NBA as a whole and my restfulness in general if games could end before midnight. There is zero chance that I'll see the end of a single game in the Celtics–Lakers series and I actually have "a dog in the fight" (go Celtics!).
- How can I call myself a New Yorker and root for a Boston team? Because Kevin Garnett is a high-strung class-act and my loathing of Boston is still building while my feelings about LA were set in stone through the 90's.
- Two trading constants have been in play for 2008 so far: Buy every dip in crude (obviously) and Make the Hardest Trade. On the latter, the financials (Lehman (LEH), Citi ( C ) and the XLF) have been nothing but trading vehicles where buying the shrieks and selling the giggles was the only way to play. Anyone who tells you they really "know" what any of the big banks are worth is selling something you don't want to buy.
- Consider Lehman. The company may or may not report early. It probably doesn't know what's on its balance sheet and could raise $5 billion in capital in any number of ways. Create an earnings model if you want but your Magic 8 Ball's guess is just as good as an analysis of Lehman.
- 100 degrees in NYC this weekend and next week. If you're in the City come on by Nasdaq market site and see if you can catch a glimpse of "naked from the waist down" television!
Is oil the next bubble?
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