I think the stock market is mellowing!
We only went down 500 and up 250 so far this week, that is MUCH less volatile than last week and we are still essentially flatling for the past month. That's why our Long-Term Portfolio, which we've barely touched, is doing just fine - not touching it has been a brilliant strategy! We sold most of our calls on the 19th and 20th and the Dow is off about 100 points in the 2 1/2 weeks since. Sure it was up 500 at one point and down 350 at another but, today, it's pretty much back to flat.
We're certainly not out of the woods yet - after all, we're in the middle of a recession, but it's a pretty mild one so far and we had some very encouraging news today from our ISM report, which came in at 49.3, which is contraction but not as much as the 47.3 estimate and much better than last month's 44.6, the main cause of the big dip we had on 2/5 that send the Dow from 12,600 to 12,200 that day.
Considering oil is up 20% since that date and gold has climbed
another 10% and the dollar has dropped over 5% - we're not doing so bad
to be holding 12,200. Someone must be buying something besides oil for
our indexes to hold up like this for a month despite the reams of "terrible" news we are subjected to day in and day out.
After 7 weeks of inventory builds we finally had a draw
in crude this week as a few refineries came on-line and sucked up 2Mb
more than were processed last week. Any reason is a good reason over
at the NYMEX and oil finished at $104.52 on a $5 gain for the day after
touching $104.95 before stopping. We gave up on the DIG puts we wanted
but did switch to the SU $105 puts, hoping this move was a blow-off top
and not just a brief rest on the way to $125.
As you can see from this chart, we've passed our April
1980 inflation-adjusted high of $103.76 and we did it without even
waiting in a single gas line, truly amazing! OPEC did, in fact, keep
production levels unchanged with a spare production capacity (NOT a
shortage!) of 4 Million barrels a day.
The decision not to cut did not sit well with OPEC President Chakib Khelil, who said "I would prefer in this situation to lower production, as Algerian minister," he told reporters. "The second quarter we are definitely going to have lower demand."
Khelil said global oil demand could fall by as much as 2 million
barrels per day in the second quarter noting that crude and gasoline
stocks in the United States, the world's largest energy consumer, were
already at multi-year highs. Khelil said he did not believe any OPEC
action could influence the current oil price since the market was being
driven largely by speculative funds and a weak dollar.
We saw a huge uptick in airlines in late-day trading
with CAL jumping 6%, DAL 9%, AMR 8% from it's bottom (3% for the day)
and UAUA up 6%. While this may seem strange behavior on a day when oil
almost touches $105 a barrel (close to double last year's price for a
component that makes up 1/3 of airline costs). you have to wonder what
the airlines see that energy traders do not.
We'll see if we can break our weekly pattern of Wednesday
being the high for the week. Wilbur Ross purchased $1Bn worth of muni
bonds and this comes fresh on the heels of Pimco's $1.5Bn purchase.
Bill Gross said of the bonds "Yes, they're risky because the prices are moving at the moment down. But they're not un-credit-worthy."
That's kind of how we feel about our own positions at the moment!