Tuesday, July 13, 2010

Fear subsides, prices rise



Meanwhile, what's not to like about this? The fears of a double-dip recession were rampant not too long ago, and now they are being slowly replaced by facts which suggest a double-dip is far from imminent (e.g. declining swap spreads, strong corporate profits, strengthening federal revenues, to name but a few). The Vix is declining as fears decline, and stock prices are moving up.

11 comments:

John said...

Intel hit a home run. Stock is up $1 per share after hours. Looks like ANOTHER gapup opening in the AM.

Oh yeah. Intel's mgmt is saying they expect demand to remain strong 'for the forseeable future'.

Very different song from what the 'analysts' were telling us over the past weeks.

John said...

It is NOT too late IMO to buy into this market. Pessimism STILL abounds. There is a BIG shift by hedge funds to reposition coming. Individuals have not been in in many quarters. However both of those factors PALE in comparison to what will happen if bond investors who are in funds begin to worry about their gains and see a rising equity market.

I say again: it is NOT too late.

Benjamin said...

Lots of good posts.

John-I hope you are right. I think we need an activist Fed, and move to quantitative easing.

The US needs to target real growth of 4-5 percent for several years.

Inflation is wearing cement shoes, and riding in a car owned by Jimmy Imperialali. Near the docks.

John said...

Benj,

You are correct about inflation. For the near future there is very little...and many companies will be delivering STELLAR earnings and dividend increases over the next several quarters. Many are yielding as much or more than 10yr treasuries. Their share prices have been sold down hard by fearful people listening to the dubbledip, deathcross and eurocliff crowd. Therein lies opportunity.

Benjamin said...

John-

I am out of the individual stock game for now, but I always liked dividend stocks. And now they make more sense than ever.

BP is interesting.

John said...

Benj,

BP will likely not survive this in its current form. The liabilities are probably going to exceed the $20B already reserved. There are rumors swirling everywhere but my guess (and it is precisely that) is they will carve off piece after piece until they have satisfied the wolves. They will be a shadow of their former self when this is over. I continue to suggest you stay away. There are too many undervalued things out there with fewer problems.

If you are interested in a dividend from an energy company look at ConocoPhillips or Chevron. Clean companies with good dividends. Do your own homework but I believe both will beat the pants off a 10yr treasury over the next 5 years.

Just my cheap opinion.

Public Library said...

I went long BP in the mid 29s. They have plenty of cash, time, revenue streams, and ability to raise debt to pay into a pension scheme. Oh, I mean a disaster relief fund...

Benjamin said...

My guess is that BP can pay off liabilities, even at current oil/gas prices...and we may see a run-up in prices in next several years.
They almost have Macando plugged.

Dr William J McKibbin said...

Prosperity is just around the corner...

John said...

Public,

Your entry point on BP looks quite good. You might have a good value there.

A couple of things to keep in mind:

1. The extent of the liabilities are still unknown. The well is still not capped and the relief well, while ahead of schedule, is not a slam dunk to 'connect' on the first try.

2. Our government will soon be considering a bill to ban BP from bidding on offshore leases for 7 years. Not a high probability of passage but it would not be good for BP if it did.

No one is pulling harder than me for that well to stop spewing its filth into our Gulf. I spend most of my time at Miramar Beach, Fl. While not exactly on the front lines, we consider our beaches among the most beautiful in the world and they are definately being threatened.

I wish you well with your BP position. Its just not for me.

Lump Sum Annuity said...

oh nice discussion it was Great in every way....i agree with this....!!