Luckily we got the macro picture right for the most part and that guided us through a scary early part of the week. My suggestion that we just let the U.S. dollar burn (inflate) to fuel the market rally was my most controversial article since "Inflation Nation" earlier in the month -- I guess people really don't like inflation...
Still I was confident enough in our heroic team of Super Banker and Chair Man (of the Fed) as they headed off to China to do nothing (which is just what the markets wanted) other than maintain the status quo (we buy stuff -- they buy dollars) and put on a show for the international press corp!
We wisely took some Flight Insurance before departing, and our insurance picks did just what they were supposed to do -- they went up when the rest of the market stalled early in the week. Our stock of the year selection, Berkshire Hathaway Inc. (NYSE:BRK.A), in fact gained $5,700 since Sunday's mention while junior selection (NYSE:BRK.B) added 6.7% for the week!
Monday I said "There is almost no point trading today" and there wasn't -- but we did get some nice entries on calls, as we kept the faith! We had a flawed forecast from Forrester that scared people out of tech. My premise on Monday that 213K open oil contracts were far too many played out at the end of the week (down to 101K at yesterday's close), but crude finished up for the week anyway.
Tuesday I predicted a "gauntlet" of economic news and recommended "patience Daniel-san." But perhaps we should have given more weight to the brewing IRS crackdown on options shenanigans. We dismissed Tuesday's quick dip as an air pocket -- attempting to force us to eject so the markets could take off without us -- and we did not go for it! The Manufacturer's report was our confirmation that things looked better than they seemed.
We started Wednesday off checking our calculations and determined we were indeed about to break orbit, and it's a good thing we can now recognize a hyperbolic move when we see one or we wouldn't know what to call BRK.A's day on Friday! On Wednesday morning I said that the BOJ rate hold, "hurts our Mitsubishi UFJ Financial Group Inc. (NYSE:MTU) Jan '08 $10s, but they are way up at $3.50 (up 25%) and we only just got them so I'm going to give it a little slack." Let's hear it for slack! The lower trade deficit gave us a little boost and we called the VIX DOA on Wednesday night, setting up for a nice rally!
More fuel was added to oil and pharma on Thursday as Tim Johnson's emergency brain surgery threatened to put the Senate back in the hands of the Republicans, whose supporters handled it with the usual sensitivity. Our Super Friends showed up in China and the market was greatly relived to see the same old BS they were used to. Thursday was, of course, our big market pop.
Friday the Senator stabilized and the oil sector backed down as a class action lawsuit was filed against 17 gasoline retailers (Valero Energy Corp. (NYSE:VLO), ExxonMobil Corp. (NYSE:XOM), Chevron Corp. (NYSE:CVX), ConocoPhillips (NYSE:COP)...) for (and you'll love this, it's a shocker!) overcharging consumers $2B a year because they have been selling gas that was warmer (so you get less) than federal standards!
You know they're in trouble when the industry spokesman can only come up with: "When you buy a gallon of gas, you buy a gallon of gas. Sometimes you get a little more, sometimes you get a little less." No Jackass -- that's WHY they HAVE standards!!!
Just holding our newfound highs was a great way to end the week!
This week was so stunningly good that we only closed out 13 positions for an 87% average profit on 12 average days held. Without our ridiculous 1,400% gain on DALRQ we would have had a 41% average gain.
American Electric Power Co. Inc. (NYSE:AEP), ConAgra Foods Inc. (NYSE:CAG), and my original Phelps Dodge Corp. (PD) Dec $90 puts from 11/17 were pretty much total wipeouts but Las Vegas Sands Corp. (NYSE:LVS), Oil Service HOLDRs ETF (NYSEARCA:OIH) and Energy Select Sector SPDR ETF (NYSEARCA:XLE) were good to us in addition to Delta.
That puts our average gain for the month over 75% on 43 closed positions with an average hold of (as usual it seems) 9 days.
What is really stunning (and a direct product of having a week where pretty much all of our expectations were met) is that our remaining 70 open positions already have a 64% average gain, which is especially unusual as that included A LOT of new positions taken this week!
Breaking it down gives us short-term positions -- 48 positions, 21 average days open (due to an MGM Mirage (NYSE:MGM) that is closing out after 170 days), 36% average gain, and long-term positions -- 20 positions, 31 average days (lots of new ones) and a 130% average gain (69% without Station Casinos Inc.'s (NYSE:STN) ridiculous 1,375%).
As in October, having so many positions that didn't close is merely a sign of a very healthy market!
Have a great weekend,
Read all of Phil Davis's articles on Seeking Alpha