There is a widespread argument that the falling USD will not affect domestic prices in the US.
This assumption is wrong. I could list some arguments but Mr. Santelli can save me some minutes of typing. Enjoy!
http://www.youtube.com/watch?v=v1COpXKaYWk&feature=related
Me is contemplating shorting US retailers.... Stocks are not my "weapon of choice" when it comes to speculations but in this case I may try it....
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7 comments:
I'm worried Pupkinus!
Does this mean you are abandoning your technical bias for fundamental analysis? More to the point, do we have any reference to how retailers historically fare in times of falling dollar? If domestically manufactured goods rise in price along with imported goods, will the retailer suffer? Or will retail customers more readily accept the new reality of higher retail prices, which will allow higher markup at the wholesale level, and therefore, greater profit to the retailer?
No.
Technical analysis is my bread and butter.
Fundamental analysis is useless for me under normal circumstances, but in this case of liquidity crunch, falling USD and structural crisys of US economy - shorting retailers is something like shooting a shark swimming in a barrel. I don't have a special system for trading stocks but I guess my general knowledge of technical analysis will allow me to make some well-timed bets, I mean shorts.
Trade rationale:
0. Lower interest rates mean
1. Lower USD means
2. Higher prices for Imports (including OIL) that means
3. Higher price for domestic goods (ALL OF THEM) means
4. a lot less discretionary spending means
5. any retailer that does not sell basic stuff for survival is going to get SERIOUSLY hurt.
Now all that remains is to find a temporary retrace (place a protective stop somewhere nearby) and short some of those retailers.
see any flaws in the logic?
btw, if they don't lower interest rates - it will be just as bad.
I see your point. Next Tues, January 15th is the release of Core Retail Sales. If you can reach this link:
http://www.forexfactory.com/
calendar.php?do=geteventinfo&
day=2008-1-15&c=2
Click calendar for January 15, click detail for Core Retail Sales, and the link therein to latest release, (last November). The stats show no slowdown yet, so IF your analysis is correct, your timing could be GREAT. Not sure why I have a funny feeling about it, might be that pizza I purchased earlier tonight at the retail level.
Can't find the link now but the results of all retailers for the holiday season are in and are dissapointing. sole exception afaik - WalMart. So, I basically think the case for retailers is almost closed. It remains to put a tight stop, it's all technicals now. I am not sure I'll pull the trigger for this one or I will find some retailer index... I'll see...
you will possibly see these trades reflected in my portfolio at fool.com - check at the main page of the blog (upper right corner).
best of luck,
pupkinus
Pupkinus,
I just posted on tradingwellandliving.blogspot.com about the Options Industry Council, and the courses they offer. Have you messed about with options. For example, are they good for hedging your short postions in retail stocks? I don't know what particular option you might hedge with. Ideas?
from what I've read OIC is definetely a good educator.
Options can be used as hedges.
For instance, imagine you go long SMTH at $100 (i.e. - "something", it doesn't really matter what - stock, futures, spot fx) if you want some protection to the downside you can buy a put option, say at $5 premium with the strike of $90. If the hedge ratio is 1:1 than if SMTH goes below 85 (90-5) - you can exercise the put and your losses will be capped at $15 (100-85) per one unit of SMTH.
A lot depends on the volatility of the uderlying, your agressiveness etc.
I do not use options for hedging purposes, I sometimes use them as speculation tools.
Anyway, from my point of view it is worth spending some time understanding this stuff. I highly recommend any book of Mr.McMillan (e.g. "Options as a strategic investment") as a guide.
best regards,
pupkinus
Thanks Pupkinus,
as a small diversion, I have posted a link of the naked people on a glacier
as per short YouTube video. At least as much related to trading as cow abduction. Could even be "art"? See my blog, "Does your computer have a cold?"
LF
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