Out and about...
Well I got stopped out of my GG and SLW trades both for gains (4% and 12% respectively) which was a bit of a surprise. I expected them to stay in their uptrend trading range. The metals came back hard Friday and Monday and it looks like my comment regarding the "short-lived" rally in the metals might be true. You'll recall I discussed how the GLD was outperforming (up strongly) the metal stocks (down mostly) towards the end of last week and how this may be the markets indication that the leverage offered by the metal stocks was not considered valuable in relation to the metal itself. If the overall market can stay flat to up, the prospects for a metals rally will be strong. I'm not sure though. The Dow is teetering right at a key support level at 10,700 which if it breaks will likely crumble down much further. Then again, if you read the post last week http://theskinnyreport.blogspot.com/2006/07/this-week.html you would have known the bottom was going to fallout again. The possible continued breakdown could be entirely driven by what happens in the Middle East. Interesting how the fighting broke out just as the G-8 nations were meeting to discuss the worldwide energy crisis. Trust me, oil companies are licking their chops. A full-out war in the middle east will easily mean $100+ oil and gas at $4 at the pumps here in the states. Which means the fat cats at the oil companies can continue to pay themselves those ridiculous salaries.
Anyways, I'm actively looking for some bargains and perhaps some hedged trades (buy a stock and short the market where I'm confident the stock will outperform the market). If the trend in GLD itself breaks I'm willing to go short, the market is awfully volatile and there is likely the potential to make money in either direction. Perhaps the better play may be to short the stocks since they seem to be underperforming the metal. Some heavy due diligence this weekend should come up with some trades.
On another note I was talking to an individual in real estate here in Baltimore who said the local governments are "busting their asses" to keep foreclosure numbers down. Check out Barry Ritholz's article today about ARM's and I/O loans (http://bigpicture.typepad.com/comments/2006/07/the_impact_of_v.html#comments) . I think we could be looking at a major problem in key markets. I'm smiling though, it only makes for more potential gains later. We'll see, this could be next year's big story.
Anyways, I'm actively looking for some bargains and perhaps some hedged trades (buy a stock and short the market where I'm confident the stock will outperform the market). If the trend in GLD itself breaks I'm willing to go short, the market is awfully volatile and there is likely the potential to make money in either direction. Perhaps the better play may be to short the stocks since they seem to be underperforming the metal. Some heavy due diligence this weekend should come up with some trades.
On another note I was talking to an individual in real estate here in Baltimore who said the local governments are "busting their asses" to keep foreclosure numbers down. Check out Barry Ritholz's article today about ARM's and I/O loans (http://bigpicture.typepad.com/comments/2006/07/the_impact_of_v.html#comments) . I think we could be looking at a major problem in key markets. I'm smiling though, it only makes for more potential gains later. We'll see, this could be next year's big story.
posted by Brian P. Egan at 6:04 PM
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