Thursday, July 9, 2009

"That's the story, and we're sticking to it"

Every couple of months, I have lunch with a highly decorated, ex-NY City police officer. He was an expert at testimony. I asked him, what was the secret of his success on the stand. He said, "Remember, your opponent is a bad guy. And sometimes, we always don't have what we need. But we always have the story. And we stick to it."

Today we heard about China's auto sales. They were up 34% last month, and up 36.5% in June. That's the story, and we're sticking to it. After all, China gave us the figures.

Enter Exhibit A in today's trading. Alcoa. The proxy for the materials and the metals. Less bad, means better. China is turning, auto demand is up, and so is beverages. And aluminum is leveraged to the economy. The ATOI (after -tax operating income) is better than expected, so buy. My words? No Goldman's. That's the story, and we're sticking to it.

Enter Exhibit B in today's trading. Amazon. The proxy for the NAZ. Late yesterday, they cut the Kindle price. But don't worry, the $60 they were making per unit in May, when it was $359, is still there because of cost efficiencies. And the average reader, will buy 3 e-books a month. An extra $360 a year, accruing to AMZN. That means, we need a $103 six month target on the stock price, on a DCF (discounted cash flow basis). My words? No Goldman's. That's the story, and we're sticking to it.

So check out Goldman's morning research, and know the story that Wall Street is spinning.

Two stories, with the same spin. The bullet stocks, for today's action.

That's the story, and we're sticking to it.

After all, isn't Goldman, Wall Street's cop?
gs main 070909


Anonymous said...

whats your point? Are you still "sticking" to "do everything opposite to GS"? As you did for oil, BIDU,... Or are you switching to the police side?

palmoni said...

Goldman spun these two stories bullishly in an attempt to blunt the selling.

And Wall St trades off of perception, and Goldman, with their research, wants to mold that perception.

So they did it today, with two stocks people were keying on AA and AMZN.

Early this morning, the debate on CNBC was if we all think it's better, it will be. Santelli's response "Belief doesn't help if you don't have a job."

The market sold off, supposedly, on the bad job numbers. So now the spin machine takes effect, to get the believer to tow the line again with the green shoots.

And like the cop, it doesn't matter if the story is true, it's what they say...because the net result is a bigger good. Put away the bad guys. The bad guys are the bears.

I'm not on Goldman's side, but their influence affects what others believe.

And that affects prices.

And with oil at 60, S&P at 880, 10 year at 3.37-you can make a case for the market to rally.

And Goldman, being the cop of the Government will push that story.

Even if the case for that is flimsy--ie AA is going to change the world? The Kindle is going to save tech?

Because doesn't the stock market trade on the perception?

Yesterday it was the IMF upping forecasts; today it was claims number going down.

I'm not saying the figures are real, but I'm saying that Wall Street will believe those numbers, and they'll use any excuse to find it.

Why not create charts that say something?

So Goldman will help--with their morning research.

Anonymous said...

ok, i guess the conclusion is - buy AMZN. Do you still hold your puts?

palmoni said...

I'm short AMZN with a stop at 78.77