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July 14, 2005

Mixed Nuts

A few nutty things happened in equities today, which more or less makes today a normal day. Research in Motion got ratcheted 3.7% on no news that I could see. The action in the stock appeared to be totally technical and momentum-driven. It’s nutty solely because the present value of future cash flow for this company is probably south of $20 per share. But anything can happen when liquidity is flowing.

Bag o’ nuts number two was the metal stocks, particularly the silver miners. These equities fell 2-3% today on minor drops in the underlying metals. Furthermore, crude oil shed almost 5%. Wasn’t it concern over energy prices that was previously hurting these stocks? One would think weaker oil would bolster the miners.

Bag o’ nuts number three bleongs to the homeys, which were down about 1.5% across the board. With the S&P setting (but not holding) a new 4-year high today, one would think these barons of excess would have put on a show. Well, they did initially, opening up across the board. But it was downhill from there. KBH closed 2.7% off its high, CTX 3.4% off its high, and TOL 3.4% off its high. Today was a bigger reversal day overall than the KBH earnings day almost a month ago which many traders, including myself, thought may herald a top. Today was the kind of day that could herald a top, as well. With the S&P500 setting a new 4-year high, perhaps enough bears have been shaken for us to begin the inevitable wealth deflation.

Disclosure: Short RIMM, CTX. Long TOL Puts


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