Thursday, November 20, 2008

THURS. NOV. 20- The Rich Are Getting Poorer Too

According to an article on the Bloomberg news wire on Saturday, the average wealth of an Indian billionaire has declined by 62% this year. While most of us would love to be worth a mere $380 million, it is a bit harder to know you lost $620 billion in less than 11 months. State-side, scions of wealth such as Warren Buffett and partners of once-storied names as the Blackstone Group have taken huge hits to their wallets as well. The old maxim that the rich get richer does not apply in 2008. And that is yet one more problem for the stock market. Huge hedge funds with many former wealthy individuals continue to dump vast amounts of stocks and commodities onto the open market as they simply try to save what they have. Don’t get us wrong; unfortunately, the poor are getting poorer as well albeit less on relative terms, but this breathtaking decline has hurt countless people. Back on point, very wealthy people tend to be in two camps right now: there are those who are doing what they can to save what they have and here are those who are doing nothing out of either shock or fear. Either way, nobody is eager quite yet to plunge back in to equities. This helps explain the seemingly non-relenting pressure in every rally to shove prices back down as occurred on Tuesday despite awesome earnings from Hewlett Packard. For day traders, as we seek to ask ‘why the volatility,’ this is but one more reason for the action. More importantly, it is a concept that will come more and more into focus as the year winds down as the upper middle class all the way to the uberwealthy implement their year-end strategies to not only position themselves for an Obama presidency, but to also see to it that they can play this game this time next year.

Markets plunged throughout the world overnight with Asian markets down 5% across the board and Europe 3%. Oil is down again and bonds up again. The markets will likely test their lows as the low October 7882 Dow number acts as a magnet (S&P500 and NASDAQ have already broken through). The market seems to want to hold this morning, but it is sheer folly to say that with any confidence so we’ll give you two scenarios. If the market does hold this morning, there will likely be a mammoth short covering rally this afternoon. If the selling pauses, but resumes vigorously by mid-morning, the market will likely fall several more percent in rapid fashion.

Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified


INTU- decent earnings

GYMB- decent earnings

PETM- good earnings

CYBX- good earnings

HUM – reiterated guidance

ABK, MBI- ABK somehow paid $1 billion for $3.5 billion of bad CDO’s now off of books…may stabilize the company

C- Prince Alwaleed boosted stake back to 5%


STP- horrible earnings warning for next quarter

WGOV- poor earnings

XCO- closed near a low; looking to short thru 4.35

LNC- terrible performing bank; looking to short somewhere around 6.90-7

FCE/A- looking to short thru 4 as it was weak yesterday

ROC- closed near low; if it opens lower, looking to short thru 5.85

AMB- bad REIT…looking to short thru 11

MEE- terrible performance yesterday- looking to short below 11.80 if it opens higher else A-B-A2 to upside

HIG- life insurer continues to plunge; looking to short thru 6.80ish if it opens higher particularly

PRU, MET- among bigger insurers which got horribly hit; looking to short thru yesterday’s lows (16.85/18.67 respectively)

WCG- closed near low; looking to short thru 8

JOYG- stunningly (or maybe not), at another new low…has huge buyback in price…company may be stepping away from its commitment

BEAV, GD – among others, defense entities were among the worst sectors yesterday

MAR, HOT- likely shorts into strength as they plummeted yesterday as well
JEF- once-staid company seems to be facing a capital crunch; likely a short into strength

PFG_ another financial in trouble…looking for A-B-A2 off of open as a short if market weak

LUK- closed near a low

HPT- closed on a low

DRE- another REIT which may follow in PLD’s footsteps lower today












Good luck today.


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