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December 1, 2005

No Such Thing As Bad News

I stand corrected. Or perhaps I should say I stand reminded. After receiving a body blow when its purported settlement with NTP was thrown out the courtroom window yesterday, Research in Motion shares gain back all of their loss from yesterday and then some. Since the stock behaved differently yesterday than on previous days of legal distress, I believed that the shares may follow-thru to the downside. Apparently, I had forgotten the lessons of early summer that all news is good news. Perhaps RIMM aficionados believe that yesterday's defeat only means that they will settle more quickly and have this whole patent dispute behind them. While the part about settling quickly may be true, interpreting yesterday's defeat as positive would be a spin job to put George Bush to shame.

Both the dollar and equities put in strong performances today. If it were not for the dollar strength, I would write today's market action off to beginning-of-month portfolio adjustments by fund managers. That may still be the case, but until the dollar substantially weakens, the October rally is still valid in my mind.

Despite the dollar strength, the shinies had another golden day, with gold up 1.5% and silver up a whopping 3.2%. Mining stocks followed suit, with gains of 3-4% across the board. The equity markets have remained resilient in the face of underlying economic problems, but the performance of the metals betrays those problems. I believe the shinies are heralding an end to the dollar's run, and the equity markets will follow the dollar down. I have stated this opinion many times here, but today's polar action brought the theory to mind again. The trader's task, as always, will be to recognize the inflection points.

Disclosure: Short RIMM; Long RIMM Puts


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