Today, I listened to a 2 hour analyst call of Chesapeke (CHK).. The stock was trading at $40 last month and is at $16.. Most of the last weeks drop in share price is attributed to the insider selling (The CEO of the company had to sell 31M shares to meet his margin calls). I was tempted to buy the stock during the call, as the management was pretty bullish on the outlook of the company. I stepped back after I plotted the price action of Natural gas and XTO (another natural gas company). Historically the stock price has closely tracked the price of Nat Gas, but off late there has been a big digression,.. Now again, they are hand-in-hand.
The best thing to do, now, is to stay side lined till there is a recovery in Nat gas Prices. Well, I do not think the prices of Nat gas are going to improve in the short term (1-2 months). Ac to the U.S. Energy Department Nat gas inventories increased 88 billion cubic feet in the week ended Oct. 3 to 3.198 trillion cubic feet. The department's next supply report is scheduled for tomorrow, and the average estimates predict an increase of another 63B cubic feet. Add to it, a mild weather prediction that would curtail the demand for heating the homes. I would rather stay short these Nat gas stocks.
Rating agencies have coem to their senses more than needed I guess. Last week Moody's played around with MS credit rating (jeopardizing the Japanese bank and MS deal).. Today, S&P said it may downgrade $280.1 billion of Alt-A mortgage securities. Last month, ratings companies downgraded about $118 billion of prime- jumbo and Alt-A bonds. In August the figure was $ 200 Bn.. This is going to make the things even worse.. Banks would have to shore up cash to meet the capital requirements, and they can raise neither equity nor debt as the equity and debt markets are in deep kaka. More selling of assets follows.
Today, Intel (INTC), JPMorgan Chase (JPM), and Wells Fargo (WFC) should be doing well. They earned the right with outstanding numbers for the last quarter. But, each is up only modestly, 1% or a bit better. They have been dragged into the pit by the news that retail sales were poor last month, down 1.2%. There was not much surprise in the retail figures. The economy is in a recession. It was bad, and there is more coming. However,10 Reasons why you should be bullish..
A couple of days back I heard a tune on my radio and was trying hard to recollect the singer, the song and the movie.. Struck me today that the song is "Bitter Sweet Symphony" by Verve, and the first time I heard it was in the movie "Cruel Intentions". I have been playing that song on my comp since noon.. :).. ( The tune, supposedly, be pretty similar to "The Last Time" by Rolling Stones..
No comments:
Post a Comment