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Market, Trades & Watches: 09/12/2008 September 12, 2008

Posted by Who? in Business, Random.
Tags: , , , , , , , , , , ,

Haven’t posted my take on the market for a while…since February?  Due mostly to the fact that I haven’t been doing very much in the market; I did take a small position in WaMu stock this week, but exited quickly.  My strategy is still to watch the mess shake out, but now could be a good time to start SLOWLY buying solid co’s that have been beaten up.  The safest play is to just build lists and follow along rather than buying. 

It looks like the critical level is still around 11,200 on the Dow.  They’ve been battling it out, but it seems for now that this level of support may hold.  BUT it is still in a very fragile state and a barrage of bad news, economic data or unexpected financial/real estate bombs could break this support.  I’m not a pro but I think that the big boys are re-balancing and reallocating NOW to what they want to be in AFTER all this subprime/recession stuff shakes out.  But whudoo-eye know?

I’m only in two positions right now, WaMu LEAPS ($10 Jan 2010) and Boeing, and outside of that I’m just watching and building my watch lists.  For the people that ask me, I still tell them to sit on the sidelines and let this mess settle.  WaMu LEAPS are a long shot, but that is the point with this position.  If they manage to survive, the returns are huge (1,000% if they get back to a 15 multiple, Net recovers after the losses and revenue remains stable after the drop it took).  If not, I’m out the premium.  The odds are against me; the CEO shuffle is being directed by the Office of Thrifts to facilitate either a massive asset restructure or a buyout. 

Good lesson to learn as far as Board/Executive relations when outlier events, like SubPrime Meltdown, happen.  Killinger lead the bank for 18 years and built into what it was.  But when the shit hits the fan, sometimes the board/mgmt has to make tough decisions to avoid increased fallout.  In theory, it is the board’s job to make business decisions with detached, profit-focused objectivity AND to make sure that the C-level can and will do the same.  In practice, personal relationships and heartfelt respect can lead to bad decisions in the boardroom and unintended consequences.  This could have happened here.  The board, because of personal relationships built over years and entire careers, may have not been able to pull the trigger and make the tough call to oust Killinger.  They probably needed to bring someone else in that had less emotionally attachment the company- someone that can look at the facts and make tough decisions that Killinger, understandably, couldn’t.

Anywho, the safe bet is to just watch.  If you’ve got a couple long-term plays that are solid, try em.  Otherwise, no need to try to catch the bottom.  But like I said, I think the big boys are re-balancing now to get ready for after the storm blows over.

Disclosure: I work for BA.



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