Indices around the world dropped to a new low today. The Toronto Stock Exchange crashed today after falling 4.75%, marking its biggest one day plunge since 2001. The S&P 500 should follow this same pattern, so the bounce I was hoping for might not happen until hobo Ben cuts rates by a huge margin. Since last week, the S&P has erased all gains made in 2007 and rumor has it that a live S&P chart shows that in one day, all gains made in 2006 have also been erased.

Tips: In times like these, look into ultrashort ETFs like QID, DXD, and SDS to hedge your long positions…or even short emerging markets with EEV. Also, by studying the chart below you will have a better understanding of where this market is heading.

Richard
richard@hedgeagainstspeculation.com

As of today, the markets are oversold short term. There were signs of a bounce early Friday morning, but this light bounce was met with heavy resistence going into president Bush`s speech. His speech left the markets in a blood bath once again. Yes, the overall trend in this market is down, but Friday`s close has left us with a huge support level, so again, I am expecting a significant bounce either on Tuesday or Wednesday. However, due to the human factor and fear in the economy, oversold conditions can last much longer in a bear market than a bull market. One has to be immensely tough in a market like this. This will be no ordinary bear market, this will be more like Japan’s in the late 80’s early 90’s which is still unfolding…

Richard
richard@hedgeagainstspeculation.com

I may not agree with everything Cramer says but whenever he yells “the Fed knows nothing!” I nod in agreement. Look at this mess we’re in right now…the United States’ economy is in the shits right now. It’s obvious that inflation isn’t as high as we all thought it’ll be…so come on Bernanke, step up and do something! My initial intention was to vent about Bernanke but I’ll let this video do that for me. So let us talk about Apple a bit…I got hurt on Macworld day? Ouch, eh? Like I said from the beginning “2008 might be the year of exceptions” and “being long in todays market CAN hurt you”…this reminder woke me up as I forced myself to take a $363.90 loss. To me, Steve Jobs’ announcement of a superthin MacBook Air laptop computer was good news. The markets are so messed up now that people take this news as bad news…come on, there’s nothing wrong with this company, they sold 4 million iphones thus far and this laptop is still better than just about anything being introduced by any other company in the electronics world.

Now on to the market. Indexes are showing a bullish pattern right now. Ha, nothing has changed, I’m still waiting for a bounce. Using candle stick technical analysis, you can see that pattern developing. You must remember that the best rallies to the upside happen in a bear market, but these rallies don’t last long, so be careful, remember, our economy is still in the shits as I speak.

Now my cousin asked me this earlier today, hope he doesn’t mind me sharing…anyways he wrote: “I see you bought American Apparel. Is that a bargain, you think?”

YES! Let me explain, but first you must keep in mind that I am a bit biased on American Apparel because I’ve fallen in love with this stock overtime (never do that lol). Anyways, here are some notes I wrote down about this company back in December: Endeavor Acquisition (EDA) merged with American Apparel (APP) on the 13th of Dec. This was when the stock shot up, now APP should earn around 450M in revenues in 2008 and trade at 2X EV/sales. Once APP reports their 1st quarter as the new company in mid-Feb I see a dramatical revaluing of its stock price. In Q2 they made 95M in sales, in Q3 they made 106.5M. Now analysts are projecting 110M in Q4. But wait, weren’t they able to already increase sales 11.5M from Q2 to Q3? Q4 is X-mas holidays where sales typically rise 20%, I expect at least 125M in sales. Ok, but please remember that these were my thoughts back in 2007…we know now that consumer spending ended up lower than expected this year. This should have an affect on this stock, but I would believe that its already been priced in. As expected, people don’t care much for this stock right now. But lets just put it like this…its the next Lululemon. People will start talking about APP and Cramer will start telling you to “BUY BUY BUY” and those who phone in during the lightning round asking about APP will hear his “HOUSE OF PLEASURRRRE” buzzer…so why not buy now? It’s a great buying opportunity going into Feb.

Richard
richard@hedgeagainstspeculation.com

By the looks of it, I was wrong last week. We did not get the short rally I was hoping for; as a result, I’m still stuck in my long positions. Nevertheless, I remain optimistic going into next week. Why? Well, while others expect the markets to tumble further this week from more sour news I believe that these poor expected earnings have already been priced in. Everything has been oversold to the extent that any good news or even NO news could potentially rally the markets. I strongly believe in this because people already expect CitiFinancial (C) to have poor earnings this quarter, we have such low expectations right now that as long as C doesn’t surprise us with even worse reports the market will stay afloat. Now I wouldn’t be surprised if the markets crash lower Monday morning, but we could easily rally back up in the afternoon because of Apple (AAPL). People have overlooked the tech sector these past weeks, but AAPL should catch people’s attention again with their Macworld conference and expo starting Tuesday. To sum it up, people are going into next week with such low expectations that NO news could=GOOD news and GOOD news=GREAT news!

Richard
richard@hedgeagainstspeculation.com

News of McDonald’s introduction of its own specialty coffees more than a year ago caught my attention. Finally, after eyeing McD’s for some time now, and having a significant position in it, a video has been released talking about McD’s jump into the $8.9B coffee market. Lets hope this move will be as successful as McD’s introduction of its breakfast menu in the 70s. MCD is adding lattes, mochas and an ice-blended frappé to its menus, plus a broader range of “grab and go” beverages such as iced tea, smoothies and bottled drinks…I am long on MCDs. Cramer believes McDonald’s stock should not have gone down because of Wendy`s poor fourth-quarter numbers, noting that big overseas business should shield McDonald’s from a downturn. True…but seriously, who cares what Cramer thinks!

Richard
richard@hedgeagainstspeculation.com