New Speculation and New Worries - Who Can Save Us Now?

obama and jay lenoPresident Obama made history last night as he became the first active President of the US to be on a late night talk show, in which he made a visit to The Tonight Show with Jay Leno as his last stop in California. Once again he was quick to describe his disgust for the corruption of Wall Street and the greed of executives. However, he was quickly able to shed that problem onto Tim Geithner, as he kept referring to them as "his" or "Tim's" problems. Good job Obama, I would be doing the same thing in this mess.

After more than a week of rallying, we have now had two days straight of downward trading. Both days being led down by, once again, financials. This is why I did not get too excited to excited to jump into banks after Wednesday's Fed announcement. For even though it looked good on paper and sounded good when it was announced, the consequences of such a move that was and is being made by The Fed, is something our children will also assist in fixing. To take such extreme measures as printing/taxing multiple trillions of dollars for the sole purpose to write off debt that has no intrinsic value, but is just air and numbers on a paper, will be devastating to the economy. It may take a bit for this to come full circle, but in my opinion, we will definitely see it.

So for me, I am remaining distanced from banks for the time being and will most likely be ready for a full entry of short for banks very soon. The recent slaughtering in Treasury interest rates have actually sped up the deflationary process a bit, believe it or not. So the storm is very near in my opinion. Also, having the S&P trading at 13 times its earnings is not very reinforcing that we've reached bottom. That is a very high number for these times.


In this type of environment, it's hard to pick stocks to go "long" in, as I feel most, no matter how strong a company's balance sheet is, are vulnerable to being dragged down in this market crash. However, the most healthy companies in this type of market are those that are very cash liquid. Cash is king right now.

Today, Treasure Island of Las Vegas was sold by MGM to a buyer for $775 million. That sounds like a lot of money for some, depending on which market you live in, but is a huge steal for the Las Vegas Strip, considering Treasure Island's rooms were just recently upgraded and their location is center right on the strip. A much more worn down hotel, in a worse location on the strip was sold in 2007 for $1.2 billion. The reason why the buyer of the deal was able to get Treasure Island at such discount is because they had $600 million in cash to put down on the project, in which the rest was financed in a 36 month carry from MGM. Being that MGM is in a heap of debt from their newest project, their problems became someone else's opportunity. The point is, in this market, cash is king, and those companies that are prepared with liquidity, will make a killing the next few years. For some, generations of wealth will be created from just the actions of the next few years.

With this in mind, I feel it is important to be aware of those companies that are cash liquid. Most likely, they will be able to jockey for a larger market share and position themselves as more dominant companies in their sectors (even though most are already dominant). Below are a list of the top cash liquid companies (from Seeking Alpha):

1. Exxon Mobil - (XOM), Chart, Total Cash: $32.007 Billion
2. Cisco Systems - (CSCO), Chart, Total Cash: $29.531 Billion
3. Apple - (AAPL), Chart, Total Cash: $25.647 Billion
4. Berkshire Hathaway - (BRK.A), Chart, Total Cash: $25.539 Billion
5. Pfizer Inc - (PFE), Chart, Total Cash: $23.731 Billion
6. Toyota Motor - (TM), Chart, Total Cash: $23.151 Billion
7. Microsoft - (MSFT), Chart, Total Cash: $20.298 Billion
8. Google - (GOOG), Chart, Total Cash: $15.846 Billion
9. Royal Dutch Shell - (RDS.A), Chart, Total Cash: $15.188 Billion
10. Wyeth - (WYE), Chart, Total Cash: $14.54 Billion
11. IBM - (IBM), Chart, Total Cash: $12.907 Billion
12. Johnson & Johnson - (JNJ), Chart, Total Cash: $12.809 Billion
13. Intel - (INTC), Chart, Total Cash: $11.843 Billion
14. Hewlett Packard - (HPQ), Chart, Total Cash: $11.255 Billion
15. Oracle - (ORCL), Chart, Total Cash: $10.646 Billion

Like I said, I believe everyone is vulnerable to more downside risk, especially if we reach numbers that I believe are coming for the Dow and S&P, but I would also expect some of the companies mentioned above to make some big, critical moves during this time to position them even better in the years to come. So keep an eye on them, and if you're looking to close your eyes for the next few years, and put something in your IRA or 401K, you may want to consider some of the above.

SRS and FAZ enjoyed very large gains today, which I was able to reap with my FAZ call options. However, once again I waited too long for SRS. I still think there is risk for more price slashes to both of these stocks, so I am not loading up quite yet on them.

As I said yesterday, GS has been on my radar for shorting for quite sometime now. Due to the ties that GS has with AIG, their stock has been appreciating, mostly based on the government aid that AIG has received. However, with more problems heading towards AIG, that will most likely reflect back on Goldman's stock price as well. You think it is any coincidence that Ex-Secretary Paulson decided to bailout AIG, when he used to be the Chairman for Goldman Sachs? I believe his retirement is doing much better than others. This is just one example of some of the corruption that has been going on for years now.

I still don't think we're out of the woods yet for this bear market rally. If we continue to see some more downward pressure on trading, my position could swing, but as of now, I still believe there is enough technical support to keep us going a bit longer. However, financials may be sluggish. They're in a league of their own these days. For those looking to trade options, like myself, Zecco.com offers some of the best per contract prices I've seen out there. Worth checking out.

I hope everyone has a good weekend. Next week should be another exciting one. We should expect more news from the government as spending is definitely on their mind. Happy Trading!

15 comments:

  1. Boogy Says:

    FF,
    What is or have your target buy in prices for SRS and FAZ changed since the run up ? Well FAZ is lower but SRS got some serious steam behind it w/SPG issuing stock to get rid of debt.
    Still sitting in cash and wanting to go short just not sure of when to start building positions adnd at what price?
    Oh BTW great posts as usual !
    Thanks.

  2. Anonymous Says:

    http://online.wsj.com/article/SB123758981404500225.html

    U.S. Sets Plan for Toxic Assets

    Will this matter for next week?
    What about the uptick rule and M2M?
    Falling Dollar?
    Rising Oil?
    Inflation?

    In addition:
    http://online.wsj.com/article/SB123759048676700307.html

    Obama Seeks to Soften the Punitive Legislation

    Looks like the Bulls will run next week. Or maybe a lot of short covering... Any thoughts??

  3. Joe Says:

    I think you meant $775 million, not billion.

  4. Joe Says:

    I think you meant $775 million, not billion.

  5. Anonymous Says:

    While we may be in for some hyperinflation at some point in the future, but I think 775 BILLION for Treasure Island is a little early. Similar issue with MGM having 600 billion in cash. Perhaps you mean millions?

  6. LamaTroutTrader Says:

    Bene reading your blog for awhile, and appreciate the comments. I especially liked your roundup tonight on cash liquidity. Definitely made me stop and think for a few minutes.

    Cheers!

  7. Dinadur Says:

    Just wanted to post that I really like Zecco... might be influenced by all the green the last couple of days on my FAZ...

  8. Pro Says:

    He has hurt many families in America. He needs to say he is sorry in the public, not to an organization.

    In addition, someone who claims to have experienced prejudice and stereotypes throughout life, and has written about them in great detail, should be more sensitive and refined from life's lessons.

    Furthermore, Obama claimed he was going to have the world think 'highly' of America again. Will this joke help?

    For someone who spoke of equality as a creed. Does this joke match that philosophy?

    For someone that said he would stand for all people. Does this stand up for those that participate in the Special Olympics?

    The fact is Obama claimed a higher standard. To much is given, much is required.

    Obama has just showed us that 'yes we can' destroy what a campaign stands for with a single joke.

    During the campaign for the White House in 2008, the media criticized Palin for being ‘common,’ 'not-polished,' 'not-compassionate' and ‘not presidential.’ However, compare Sarah Palins attitude in this video created three weeks ago for the Special Olympics in Boise, Idaho.

    You decide the more ‘presidential’ among them. Watch: http://tinyurl.com/ccz6nj

  9. Finance Fanatic Says:

    Boogy,
    I don't use "entry points" as much for the etfs as I do normal stocks. I more base it on the momentum on the market. Sure, I do factor in the price, but it's a bit more of a complicated decision for me. However, I think if we see SRS dip back in the 50's, its prime picking for me. Faz may hit around $30 again. I'll know more by next week most likely.

    Joe, good catch on the billion million swap! :)

    Appreciate the comments

  10. Tim Says:

    You also have 600 million listed as 600 billion :)

    Thanks for the continually awesome posts!

  11. Finance Fanatic Says:

    Ha.. Thanks Tim, I blame it on the Fed... I'm so use to working with the billion and trillion number, millions seems like pennies now :)

  12. Sid Says:

    FF what's your opinion on the Geithner plan? Are you going to post again this weekend?

  13. sc Says:

    I am getting ready to load up with shorts on JPM. With so much exposure to credit cards, commercial real estate, prime residentital real estate, they will be the next major one to go down.

  14. cash Says:

    Google cash

    Google cash : Yes, Google cash is the answer to all your problems, The real cool thing about google is that you can earn part time income with very little effort.

  15. QUALITY STOCKS UNDER 5 DOLLARS Says:

    Its going to take more than a sweet talker to fix things.