Rick Santorum & the European Debt Crisis

rick santorum first place iowa caucusCongratulations, to Rick Santorum for coming in second place last night in the Iowa Caucus. (Please do not be afraid, this is not a political article, I am here to make money.)  It’s amazing how Rick, who was in single digits, in early December “Surged”  to come in second place. Keep in mind Newt Gingrich was the anointed one by the media and the polls in early December. Before that it was Perry and then Bachmann… or vice versa. So you probably are asking well, I didn\’t come to the site for political commentary. CNN, MSNBC and FOX do a great job of that 24 hours a day.

So as an objective observer, how did Rick “Surge” in the polls? I don’t know, do you? Did he win a debate, did he say something important, or something funny? Not that I am aware of… If I missed something, please leave it in the comments. What I believe is the media was looking for a fresh face, or a new topic, something.  How else can one explain such an incredible increase in such a short time? Can the voting public of Iowa be so fickle, that they can change their position so quickly and based on non events.

So I might be going for a long walk for a short glass of water, but this is generally how I see the market’s reaction to the European Crisis or the American Debt Crisis. It seems the media has a pretty good case of attention deficit disorder. Just yesterday, Greece warned of a Euro exit, but that didn\’t seem to shake the markets, yesterday or today.  I don\’t mean to pound the table, but it\’s hard to miss the serious problems that face Europe. And don\’t worry US banks, were lending money to insolvent European nations just as freely, as they were handing out money to burger flippers and bartenders to buy half million dollar homes in 2006. But the markets don\’t care, nor are they rational. The good news is that Hardline was able to take advantage of yesterday\’s move.

So my picks for the rest of the week will be FCX and SLW.  I like the miners, more so than their respective ETFs.  I am very concerned about the GLD and SLV ETFs, as they have so many stipulations in the prospectus, more on that later. But in the meantime, just ask the holders of VZZ ETFs about their automatic termination. I also sold some puts against my new favorite stock, SHLD. (specifics on the trades, can be found in the newsletter)

Friday, is the big jobs numbers. My estimation on the jobs number = I like Broncos over the Steelers. With that said, I am off to Charleston, South Carolina for my other job, will be back on Monday with more. On a lighter note, if you didn‘t buy congressperson or senator a gift this year it’s never to late.  

2012 Prediction: The market will go up and it will go down.

greenspan predicting markets If Wall Street analysts and CNBC talking heads are so great predicting the events of 2012, how come they missed the one that was sitting right in front of them? Probably because they don’t shop at Kmart.

Let’s also discount the fact that Eddie Lambert has been proven to be incompetent long before today’s announcement.  From a trading standpoint, I went short on 9/23 with Sears at $61.09 based on my model.  The model told me to get out on 10/4. Of course breaking from the model I chose to stay in.  The only saving grace, I was able to sell some calls against the position.  The algorithm told me to go short 11/17.  Roughly since that time Sears has been slowly trading down, until today, Down 27.20%  for the day. (I am know sitting on roughly 47% gain in 3 month.) If you shorted at 9:30 and closed out by the end of the day you would have made roughly 10%. (intraday) The algorithm, couldn’t predict this type of announcement, oddly enough traditional valuation analysis should have…

Over the last few years I have never been able to find a positive article about the turn around at Sears/Kmart. Not once did any question the brillance in the stock buy back at around $64.30 in 2009, instead of reinvesting back into the company.   Yet, I am not an analyst. I don’t get paid millions of dollars to poor over the balance sheet, channel checks, merchandising, debt issuance and so forth. I did see the 18 months of declining sales, but I guess that isn’t a concern for the analysts. What I find most interesting about this is how could all the analyst not foreseen this? I might not be a rocket scientist,  but following a simple Peter Lynch / Warren Buffet  investment strategy, it should have been abundantly clear Sears/Kmart was not a stock one would want to own nor probably shop at.  So if your having a bad day or week  or even month, just consider that Portfolio Manager Bruce Berkowitz, whose $8 billion Fairholme Fund (FAIRX) was holding 15% of SHLD in it’s portfolio today. Bruce and company are really having a bad day, week, and month  because that is roughly a $200 million loss for the day.

Enough about Sears and blue light specials. Let’s not forget about the elephant in the room.  Europe,  really hasn’t gone away nor has it been solved,  it’s just currently on vacation. If you don’t believe me just get a quote on Italian bonds.  The next Euro Zone summit is scheduled to meet Jan 30th. In the meantime, you can do some studying up on what happened at the last meeting.  Ice Cap management provides what I think is one of the most intelligible and realistic analysis of the Euro crisis, titled “The Smiling Faces of Ben Bernanke & Marc Faber.” If you’re just interested in the daily show/cliff notes version, click here for a  3 minute video explaining the Euro crisis.

Sorry no trades today, I am going to have to wait for the New Year when the market returns back to reality.  I will be back January 4th with more trades, have a great New Year!