Monday, June 22, 2009
(Cont'd from above)...

Jim (cont'd):   

Have things really changed so dramatically that today’s plummeting market makes sense… have we really become so much more negative about the economy so quickly… since say like maybe last Tuesday…nope, that is not it at all… look, journalists and especially their editors are always on the look out for a quick and easy explanation for every sell off… something that makes sense of the action… in seven words or less… even if it does not make sense at all… and every time the market takes a big hit… it is easy to spin a half dozen reasons as to why we fell… I could tell you that today’s action was entirely about the market not tolerating lower oil prices… but shouldn’t some stocks rally off of cheaper oil.

Today’s action was not caused by resurgent fears about the struggling economy… as we have been struggling for ages now… and it was not about the falling crude… because, well, we are all coming around to the idea that $3 gasoline is a ticket to the financial bone yard… so what did it… why did we get smacked in the face with such a brutal sell off… simple… it is all because of price… price, stock prices… every night I come out here and try to explain just how much price matters… last week I said prices had gotten to high to be justified… it was based on that very sophisticated John Maynard Caine/Harvard economics department Pushmi-Pullyu… the animal that could not make any headway because prices were too high… and today’s decline is a total illustration of that fact.

We reached a point where they had run up too far, too fast… and we don’t have the fact to substantiate the kind of move that we had… earnings season is too far out for us… to have a solid idea of how many of our companies are really doing… so stocks had to come in… there was simply no justification for what was happening… not for now… no justification for paying ever higher prices without new data showing that things had gotten better… not just less bad… or to put it another way.. today’s sell off had nothing to do with how we feel about the economy… and everything to do with how we feel about how stocks are being valued… the reason for the sell off is not that something changed… it is that nothing changed… except the stock prices… which kept going up… and we simply do not have any fundamentalist catalyst to justify them continuing to go higher… I am just asking you to apply the same logic to stocks that you would to any other kind of merchandise… you go to a store, things seem overpriced… so we take a pass… we do not want to buy… we wait for a sale… in fact, we always feel pretty stupid the days that we do not buy on a sale… we pay like last Tuesdays prices… you really do not want to wait for a red tag Macy’s sale… how about a Mark Jacobs trunk sale, where I got the kids some cheaper wallets, and they were fooled… oh maybe not… I am sick of paying retail too… but I did get 60% knocked off for heaven sake.

The market is sick of paying retail… that is what is going on here… we are getting a really good sale… and people know that this one is like the old Feline’s basement… each day you come back you see cheaper prices… by the way, Feline’s never said that this merchandise is coming down because the world bank lowered its growth projections… this merchandise is coming down because of fears of the economy… it never tried to pin the sale on the Democratic donkey either… the sale occurred because they were long on merchandise… and they wanted to get rid of it… that is what happened today… remember how I described the Pushmi-Pullyu situation last week where the market wants the Feds help to combat a slowdown… but also wants much better than expected earnings to justify the higher stock prices… the situation where to quote noted stock guru and lifetime philosopher of the stock market, Mick Jaguar, you cannot always get what you want… believe me that song has much more to do with the stock prices than any of the silly headlines that were trotted out today.

So, if it is just a big sale after a big run… as I think that it is… how do you do after a sale like this… how do customers do who waited and then bought… lets see, we have been down for 5 out of 6 days… we had that same pattern last month… we had a May red tag sale… how did you do… let me see, you caught a 5% rally in 4 days if you waited for the red tag sale… so where are some good places that are red tagged… we are almost at the end of the quarter where money managers like to buy winners so they can show their clients how smart they are… so we turn to the top ten performing S&P 500 stocks for the quarter… and sure enough we spot two that we think warrant investing right here… the red tag sale on Huntington Bancshares Inc. (HBAN), down 9.5%, but still above where it priced its huge secondary… hundreds of thousands of shares bought by insiders right around there… for the red tag sale… I guess it was one of those employee sales, you know, like GM was always throwing.

Or how about Lincoln National Corp. (LNC)… we have been pretty down on these guys… but you know what, they raised a ton of money last week… and they have gone from one foot in the grave to a grave dancer… thanks to TARP and a huge stock and bond offering.

Hey, I have got another one for you… red tag sale on Apple (AAPL)… Steve Jobs coming back… memo to all of the press in the world… can’t we just cheer for the guy instead of worrying about corporate convenience disclosure… is that really the essence of what the man is about, or the company… anyway, I am cheering for him… and I am cheering for his stock… I think that it goes higher… I think that that is another red tag sale that you need to take advantage of.

We know history repeats does not always repeat itself… but sales have been know to clear a lot of inventory… and stocks are just inventory… which then recharges the market… and all day we heard about how we took this moving average line and that moving average line, therefore we are finished… and remember, that is all just Mrs. Cramer’s lovey blanket.

The bottom line…

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The Bottom Line!:     Grab your lovey blanket if you want to… I just say do not panic… do not think of this as a scary sell off… when it is simply a good old fashioned Macy’s red tag sale… except that it is not thrown everyday like that place does… the kind the market throws when merchandise gets too expensive… and know it is starting to look cheaper… maybe so cheap that you want to start buying some of the seriously discounted, but not damaged goods… like Huntington Bancshares Inc. (HBAN), like Lincoln National Corp. (LNC), like Apple (AAPL).

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