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January 10, 2006

Sitting on My Hands

Today was another very good day not to be short housing. Though my fingers are itching to enter those short orders, my trading model, in conjunction with a hefty dose of caution, have kept me away. Since the October low, the runs have been startling. Centex and KB Home have tacked on about 33%, Hovnanian about 25%, and Beazer a whopping 58%! I wrote in October that the homeys were due to put in right shoulders, and that the process could take a couple of months, but I did not expect the run to be so sharp.

The elusive Kirk Kerkorian got his name in the headlines again today as his office sent out numerous press releases about GM. Mr. Kerkorian is again taunting GM management about more aggressive action to solidify the auto maker's finances. Various notes from the press releases include call to slash GM's dividend by half as well as cut executive compensation. Kerkorian also hinted that he would be willing to re-purchase GM shares under the right conditions.

GM also had a few, unrelated press releases on the wires today, including announcements about more sticker price cuts and aggressive pricing on the 2007 Tahoe. The slew of headlines gave traders a lot to digest, and GM shares were quite volatile today. The net result was a loss of a little under 2%. I didn't see anything to scare me out of my long trade on GM, which was opened last week on a technical signal, though I may change my mind and dump it if things start out poorly tomorrow.

Finally, Apple shares popped more than 6% on news of tremendous Ipod sales over the holidays. It's not a surprise that sales of this popular device were so strong, though I doubt the increase in Apple's market capitalization is justified. However, anything can happen when hungry momentum players start their games. So, I continue to sit mostly in cash, waiting to see whatever it is I need to see to take action.

Disclosure: Long GM


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