EOT Position Update – December 10, 2008

| December 10, 2008

December 10, 2008

Market Snapshot

New Trade Today:  Check your e-mail or the website for the latest recommendation.

We’re slowly headed upwards now on the Dow.  We’ve managed to put together a few days of upward momentum.  I’m hopeful the market bottomed in late November.  I’m watching closely to see if it holds.

The big news this week . . .

Despite my thoughts on the Automaker bailout, it looks like they might be getting some money from the government.  The market seems to be buoyed by this idea… I still think it’s horrible.

Samsung announced this week they would miss earnings expectations.  This might be a good time to buy that big-screen TV you’ve been eyeing.

Bank of America (BAC) approved the acquisition of Merrill Lynch.  They may have paid too much for the deal.  It’s interesting to see the entire industry I grew-up in slowly disappear.  I wonder how long it’ll be before B of A looks to spin off Merrill.  My thinking is 10 years.

Merck & Co (MRK) warned that profits in 2009 would be tough to meet.  I’m surprised they didn’t announce major layoffs.  This week the news seemed to be full of layoff announcements.  AT&T (T), DuPont (DD), Dow Chemical (DOW), 3M ((MMM), the list goes on and on.  Lots of people are losing their jobs.

Freeport McMoRan (FCX) plummeted on the news they’d suspend the dividend and might enact a few write downs.  They won’t be the last.

Oil prices continue to move lower… I filled up this week for under $40!

Now for the trade updates.

Position Updates

Just a quick note:  Remember, we won’t update every open position every week.  I try to focus on the positions that have some significant news or price movement.

 GVA January 2009 $55 CALLS (GVAAK)
This was a new trade that just went out today.  Check your e-mail or the website for more details.  Resistance is $50 and $55.  Support will be at $41 and again at $37.50.

  IBM January 2009 $60 PUTS (IBMML)
IBM’s stock jumped from below $78 to over $84 in the last 5 days.  Obviously not good for our option.  I’m still expecting IBM to fall on bad business news and lower business spending.  Watch this one closely, I’m expecting it to move in our favor in the next few weeks.  Resistance is $90 and $95.  Support will be at $72.50 and again at $70.

  SU January 2009 $17.50 PUTS (SXHMW)
A few days ago, SU dropped below the first support level of $17 again (it got close to the second support level of $15).  We didn’t set a new high on the option, but I know some of you took advantage of the move to take profits.  We’re back up around $20 now.  If oil keeps falling we might see the stock fall and big profits in this option again. Resistance is $23 and $25.50.  Support will be at $17 and again at $15.

Parting Shots…

The End of a Giant

This year’s been full of great change.  We elected a new president and handed control of the government over to the Democrats.  We’ve seen the entire investment banking – and traditional banking industries change.  We’ve seen the mortgage industry collapse and the homebuilders fold up shop.

Now we’re watching the end of an era with investment managers.

Legg Mason Value Trust (LMVTX) is the name of the fund industry giant Bill Miller manages.  He started running it in the early 1980’s.  What set Miller apart from anyone else was his uncanny ability to beat the market.

From 1991 to 2005 he’s the only fund manager to beat the market every year.  It’s a record I’m sure that will last quite a while.

This year, however is the end of an era for Miller.

To say his fund imploded would be an understatement.  In the last year fund investors have lost 58% of their total investment.

As the economic crisis hit, Miller bought all he could of AIG (AIG), Wachovia (WB),  Bear StearnsFreddie Mac (FRE), Washington MutualCitigroup (C), Countrywide, and a bunch of others.

It seems like everything he bought died.

And now it seems his fund is dying.  A year ago the fund held $16+ billion in assets… now it’s down to $4.3 billion.  The losses are devastating.

The next question is will Miller quit, or will he be forced out?  Any way you slice it, the Bill Miller era is over.

Category: EOT Update

About the Author ()

Comments are closed.