Wednesday, May 20, 2009

The search for alpha

Paulson & Co has accumulated major positions in gold. But I used the strength in it, to sell FCX at 50, and to sell the rest of my fertilizer stocks. They've had a good move, and the selling the last hour was enough for me to book some nice profits.

I put the money into some of these cheap shippers (avoiding DRYS though--too much inventory overhang), as a derivative play on commodity price increases, as I go where the most leverage is available in this market, and into some of the cheaper gold plays as a leveraged play on reflation. Unlike these institutions with unlimited dollars, I need to get the most bang for my buck.

Every time we have a pullback, the world seems to think the market is just going to roll over. I don't think that's going to happen. What we do see, however, is a bit of a roll-over in some of the extended financials. Of the majors, I'm only playing BAC, as I think that number still has some good upside, unlike WFC, JPM, COF, AXP and GS, which are still extended, and are still sells on any rallies. I advertised my sales on these numbers on May 7, and I still think they have a little more downside work left.

These numbers will give you another chance to get in, as the bears now have some new faces to pimp their case, and today, Whitney Tilson wants his day in the spotlight. Did anyone see the nonsense on CNBC on him today? The so-called "subprime savant?" Now he's giving baseball analogies on timing on housing and commercial real estate. Last I remember, Richard Fisher from the Dallas Fed was the last guy to give baseball analogies. How did that work out?

The only thing that has changed on Wall Street is that a ton of stock was issued in these numbers, and these players will gravitate to those plays that they can goose the most. So we always have this rotation. That's all these pullbacks are.

Traders are looking where they can make the most money, as quickly as possible, and this market is setting up very good trading opportunities. But so many people freak out when any of these groups have any weakness, that they miss the action under the surface.

And all it is, is traders looking for alpha!


Anonymous said...

so you are holding BAC...are you still holding the regional ones you touted earlier?

Also, would you consider buying C?

where do you think BAC is headed?

Palmoni said...

Holding all the regionals also. I like C, but it just doesn't have enough action yet..but it's getting closer to being a buy.

I think BAC goes to 14, and then probably to 24 in a year.

I'm buying a lot of speculative names. I traded CNB on the last spike, and will get in that again if it trades around $1.40ish.

I just think the bigger names trade heavy, and I think it's going to get hard to dampen the speculation that I see starting to take place in the smaller names. So I'm trading down in quality, for the action in the spec pile.

They have these 2-3 day moves that just scream, and then you have to be gone, until they work off their overbought position.

Sometimes the worst stocks, get the best moves!

Anonymous said...

thanks for your insight. I appreciate the response.

keep it up