HP readers will know I've been skittish about going short - especially the builders, which seem manipulated after their 50% haircuts.
Well, it feels like it's time to go short. Dow hitting an all-time high against a backdrop of a plunging dollar, soaring gold, higher interest rates, plunging real estate, which will create plunging consumer spending, record high gas prices, war with Iran and Iraq, and the Fed sending confusing signals.
Someone will lazily post some stock symbols we kicked around a few months back as possible shorts - lenders and builders, and say they were HP recommendations. As readers know, my holdings are all longs - COP, gold, foreign funds, cash, and small bites of ebay, aapl, sbux and yhoo. Builders are still getting killed and dropping, while the lenders are going up (go figure). I think you'll see acquisitions and manipulation among the builders, so scarey to short - you could get killed.
Here's some new short candidates to kick around. My thinking is to buy put options 6 months out.
Wal-Mart (consumer spending dries up, record gas prices crimp core customer spending)
GM (hummers, trucks, no hybrids, ugly balance sheet, pensions, health care)
Loews (nobody buying lumber and home improvement materials anymore)
Fannie Mae (new oversight law, bagholder for bad loans, accounting tricks)
Sonic (gas prices, cuts in consumer discretionary spending)
DIA (record high, but due for a fall)
Thoughts? Candidates? And no, these are not HP recommendations, they're thoughts. HP recommendations continue to be ConocoPhillips, Gold, Foreign Funds and Diversified Cash!
May 09, 2006
Going Short
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14 comments:
in general, nonprofessional investors should be cautious about shorting stocks. there are a lot of ways to lose, and lose quickly. I like gold, cash, and betting against the dollar more than a lot of half-baked short ideas.
I predict that the Dow will close at 8800 on December 31,2006.
I would short TGIC, CFC, and FBR.
I am a smart man.
Lenders continue to rise because people are being forced to refi at HIGHER RATES by 2 factors;
1) Need Cash
2) get out of ARM's that will rise
even Higher
Increased activity will postpone the pain at CFC until 2007 or 2008
Best shorts for the next 6 months;
The War Stocks (CAT,BA,UTX)
These 3 will be used to get the DJIA to new "Highs" above 11725 but then, with election looming, talk of pulling out of IRAQ will send them plummeting. CAT itself accounts for almost 22% of the DJIA's 4000 pt gain since 10/9/02.
With divisor at approx .14 & CAT gaining 125 pts(from 35 to 160) - 7 x 125 = 875 pts!
Donning my tuxedo and with a tip of my beaver top hat to the late Louis Rukyser:
Dow finishes 9000 after Sept low 8800.
Short FBR, PKS, WB
Avoid trying to time the HBs. Hasn't worked, no reason it should start working now, 3/4ths institutional holdings anyway. Float too thin to be a real market.
I'd disagree with Walmart dropping if consumer spending goes down. People still have to buy basic consumer needs such as diapers. Many Walmart stores are "super centers" where you can buy food as well as everything else.
Just about everything you might have to buy (especially if you only rent and don't need to buy lumber or drywall), you can get in one-stop-shopping at walmart. As gas prices go higher, people will be less inclined to go to multiple locations for the shopping and would rather do everything at one spot.
Separately, people shouldn't invest in the stock market with anything other than a buy and hold (for multiple years) unless they really understand what they are doing. "Hot tips" or trickiness with options is a sure way to lose money.
The "war stocks" will keep going. The worn-out stuff needs to get fixed and that means lucrative spart parts. Iran, NK, China loom.
I would not short these. But I am not a short either.
One thing I am watching develop is synthetic fuel - they are jumoing into making it from natural gas in Qutar but for North America coal is the preferred feedstock besides biomass which I am told can include "black liquor". That is a byproduct of paper mills. Maybe paper companies are a good bet. Right now they dispose of a bunch of biomass and this "black liquor" is enough to supply the whole DOD jet fuel needs - and the DOD is leading us into synfuels.
Be careful about shorting Lowe's & Home Depot. If hurricane season is even half as bad as last year, there may be lots of demand for (re)building materials.
autofx - what are your currency recommendations - I don't want my dollars anymore!
i'm with autofx on the stock market; don't invest long, short, or otherwise.
Bet on the Aussie$
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