Trade Alert – Dog days of summer
It’s the dog days of summer, and my own Australian Cattle Dog rescued from a NYC shelter and my Great Pyranees rescued here in NM, are sleeping as I type this. The bailed out bankers are out spending their ongoing welfare income on boats, party beach houses and helicopters rides to and fro wherever they want to sleep this weekend. Dogs indeed.
On the other hand, those of us who actually produce and contribute to the economy, are still hard at it, as always. And I’m sitting here actively studying the markets, the economy, the politics, the companies, the trends, the technologies and the gestalt of it all as busily as ever. And it sure seems about as good out there in the markets and in the corporate economy as it has since probably 2007 before the bank bailout crisis started. There’s been a rather remarkable steady rally for this entire year, and the last twenty days has been one of the most profitable for most long investors as any short-term span as I can remember since back in 1999 when the dot com bubble went through the roof.
I remember when I first closed my hedge fund and started anchoring a TV show for Fox, that I got in a huge debate with famed investor, Mario Gabelli, on Neil Cavuto’s show because he was telling everybody why it was a great time to be buying because the economic outlook was so good. I was adamant that I thought it was a great time to sell and get out of the markets as I just had indeed done. A year or so later, I sat on a panel with Mario again, this time listening to him argue that the banks and financial sector needed trillions in bailouts and new welfare to “save the system”.
See, when charts are straight up, when stocks seem like they won’t ever go down again, when our own portfolios are through the roof and when my subscribers are thanking me for all their huge gains and profits and it seems like we are all on top of the world…well, that’s just about the time that the last greedy buyer buys and the last scared seller sells and we get at least some sort of a reversion in the markets.
It’s time to buy some more puts to hedge our portfolio because I don’t like the short-term set up here at all right now although in the larger context of the ongoing stock market bubble, I don’t think we’re quite to the end yet. I wrote earlier this week that if we go back to the baseball game analogy that I used back when I called it the first inning of the new stock market bubble in 2009 that we’re probably at least in the seventh inning now. A lot of homeruns can still be hit before this baseball stock market bubble game ends and the dowturn/crash/panic comes again, so let’s not head for the exits just yet. But as any good baseball manager would do, we make some strategic changes and some tactical moves to adapt to where the score stands today.
I asked my old mentor, Richard Gobel, who has recently had the hottest hand in trading I know of. I asked him to run our Social Network Decade Basket stocks through his algorithmic system and get a quantifiable result on the sentiment and momentum for each of the stocks. LinkedIn, as I would have guessed is in overbought territory although not extremely according to his readings. I’ve hedged my LNKD homerun common stock profits with some puts heading into tonight’s earnings report.
Facebook is actually still rather neutral in his system rankings right now, which surprised me. I’ve sold down more of my Facebook calls with 1000% gains and am still looking to trim some of those calls down further to raise yet more cash while the cash-raisin’s good.
And he says Zynga looks like a good short-term longside bet, but I’m not going to add or do much buying for the near term and so I’ll just hold my ZNGA position steady.
I’m also buying a few more SLV calls today (August $18.5s for about 80 cents each). There are fireworks daily in the SLV action and I think we can buy intraday weakness and look to sell it on what I expect are some upcoming short-term pops.
