Thursday, May 7, 2009
(Cont'd from above)...

Jim (cont'd):   

Plus interest rates are going sky high… didn’t you see that big bond auction… wow, bond auction, wow… interest rates up a .000037... look out… oil, done, done… long in the tooth rally… time to ring the register, pile into health care and food stocks… they have lacked, lets buy them… even if they are not even doing… you know, President Obama is going to come after them.

Alright, yeah that is what you heard today… a case for the terrific trinity, banks, tech, oil, all dashed in a single day… of course, the bull grandstand, I mean how many times did you hear that… as surely as if a matador beheaded the poor cornered animal and then chowed down on chuck, t-bone and porterhouse… pass the bull brains… to which I say wait one second… just one second… and do you mind if I misquote Eddie Murphy from “Trading Places”… ain’t you people ever heard of corrections… at the pace we were going we would have been up to 14,000 in August… well, that is not going to happen… that was not in the cards.

What is in the cards is a traditional bull market… now what is that like for those of you who have forgotten… it is big advances followed by sharp pullbacks… major moves in JPMorgan and Goldman Sachs, followed by sharp sell offs that knock off 5% to 8% to 10% of the gains… tech, to me the bears took a decent quarter by Cisco and turned into some sort nightmarish three months that show we who like tech allegedly have no game… do you know what I say… the Nasdaq had just zoomed 11%… it is one of the great nonstop performers from the bottom that I have ever seen… did anyone think that it wouldn’t ever go down… why was everyone so shocked that it was down… why was it so dire… again, when you have that kind of rally you are not going to get a gentle sloping correction… you are going to get a violent one… that is what happens… I have been at it since 1979... this is my 437th of these… I have traded in bull and bear market for years… and I can tell you that in a runaway bull market, you do not get stocks going up 30% and then going down gently… you shake people out like we saw today… when people furiously sold Apple (AAPL), and Research In Motion (RIMM), Google (GOOG), and Amazon.com (AMZN), the old "four horsemen"… and then you further confound them when you send the money to the food and drug stocks… you know that I do not like that counter trend stuff… and it is probably not even over, as the correction in tech has not even reached the minimum, the 5% decline… I do not even know if it ever really will.

How about oil… the price of crude is up 20 straight dollars.. it is a straight line… at last we got a rally in natural gas… the stocks were correctly forecasting this the whole way… no wonder when we finally got the break outs in the commodities today that the stocks sold off.. go back to March when the market bottomed, you saw stocks go up for seemingly no reason at all, right… and then we found out that the reason was that the fundamentals, the underlying businesses had bottomed… of course, it took us a little while, it is rearview mirror, but we found that out… when we all find out that things are better, then it is natural that the stocks that have forecasted that things would be better, the stocks that had bottomed… would take a breather… that is again, that is what always happened… it is what happened today in the oils, techs, and banks… you come to this show because you know that I made hundreds of millions of dollars for my partners spotting these patterns… and now I am trying to spot them for you… most important, it is totally and unequivocally the wrong time to sell the banks… the banks are finally getting their act together… they are down 50%, 60%, 70%, 80% and in some cases 90%… and now we are going to panic… now… you need to buy the banks not sell them… we are taking nationalization off of the table…we are taking the professors and the columnists who said that all of our banks are bankrupt… we are taking them to the cleaners… we are one-hour Martinizing them.

These guys are getting their balance sheets right… and best of all, at least for them, but not for you… they are paying you nothing on your deposits and at the same time they are raising the rates that you have to pay in order to borrow from them… because interest rates, what is known as the long end. are going up… all day today I heard fretting about it… I was thrilled… I know that my bank, I bank at Chase… I think that I am paying them to keep money there… when you add in the ATM fees and the checking fees, I think that I lose money every day at Chase… meanwhile if I wanted to borrow money at Chase, not that they would let me borrow, you know at one time I had a million dollars in my checking account and they would not let me borrow a million dollars… I kid you not… but think about it, they take my money and they lend it at 7%, and I pay them for the privilege of having the money… that is how much they are making… they make up the difference between the rates they pay you for deposits and the rates at which you borrow from them… and it is getting bigger and bigger and bigger… that is how the banks will be making a huge amount of money when they turn the lights on.

No wonder the stress tests released tonight were really a yawner… the profits from banking are simply humongous… I would buy stock in any of the bank deals announced today, or the ones that will be announced tomorrow… Morgan Stanley (MS), I would buy on that secondary… Wells Fargo (WFC), I own that for ActionAlertsPlus.com, my charitable trust, I would like to own more of it… any of the little guys that have to offer stock, all those little guys, like the bottom of the six of the 19... I would buy it… if they offer stock I would take it… I would even buy stock from Fifth Third… if there are companies that do not need to raise equity, that were down today, like Goldman Sachs (GS*)… oh man, I would really want to buy that… why was that even down, what was that all about… the bears are all washed up on these stocks.

You know we do have to obey the market, but wait until the huge winners from this period are down 5% to 10%, as you will hear me advice in tonight’s very special Lightning Round… I even, lets say that it is a typical bull market pull back, not anything to worry about… second, we accept the first phase of the bull run, the kind that took up every kind of cow is now over… and what is next will just be the real long horns… those are the ones that have survived the garden variety depression that ended in March, but are also thriving in the recession that we are still stuck in… with all due respect with my former partner Larry Kudlow, we are still in a recession… if we lost 500,000 jobs a year ago at this time, I would tell you that that was catastrophic… instead we are cheering… I mean come on, lets keep a perspective.

Third, we ignore those who hated it all the way up… and we recognize that there are more managers and retail investors who want into this market then want out… particularly in the bank stocks, because that is what they most need… they are called under weighted, that is what they are hungry for… believe me… all of these deals will be lapped up and snapped up and you want in on them so the jackals do not take everything… both the outsiders, the ones who own little stock, or under invested need it down, and the short sellers need it down… so neither are credible when they come on TV or you read them on the web.

Now, when the market has come down 5% to 10%, here is what will happen… the shorts will press their shorts and frantically add to their positions… betting that the sell off that started today is the resumption of the great bear market… but the sideline bulls will burst out, Pamplona like, and gore anyone in their way as they furiously put money to work in the market… and what will they buy… the stocks that I told you, that define this trend tech, banks, especially any TARP related equity offerings… all of those have worked, including those little secretaries like the First Niagara (FNFG), the FNFG… those have all been working by the way… the oils, they do not own enough oil… so in the immortal words, you know I like to go, you know there is Buffett... Buffett is fabulous… but I have my own guys, one of them is the SOS band… basically they are from my era, baby we can do it, take the time do it right… but if that is too much of a classic for you, then I say we take our cue from a current guru, who is the assistant to Little Wayne, Kevin Rudolph in his modern bull market anthem… let it rock… I want you to turn and chase the dollar right back into the very stocks that sold off today.

Here is the bottom line…

▼   ▼   ▼   ▼   ▼

The Bottom Line!:     Strong sharp rallies lead to strong sharp pull backs… these moments are not reasons to despair, they are moments when you bide your time waiting for the bulls to return… instead of throwing yourself to the bears as a human sacrifice… hey, those of you who do not own stocks… you better hope that it goes down 5% to 10%, it may not even do that... Strong rallies can lead to strong pullbacks - don’t loose your faith in the rally... Alright, once again if I can’t get Kevin Rudolph, I do default to the SOS band… baby take your time, do it right… buy stocks, banks, oil, techs… maybe wait a little down for some of these big winners… but you know what, I say take the time, do it right… hey, and don’t forget to turn the dollar.

[verbatim recap]

[verbatim recap]

[end of segment]

Read Jim's next Segment here  

Read Jim's next Segment here