Upcoming Calls

A few readers have inquired about upcoming stock calls, after correctly calling GOOG below 350 before year-end back at the end of June, and then calling Lehman out for death two weeks before it disappeared.  So here are my quickies through, oh, the end of January:

• Citi: It’s a goner, but not today.  The shorters have been pounding C as options expirations have approached, but it’ll survive to this weekend, when November opts expire.  That’ll buy it a lifeline into December, but the wild swings up and down the single digit valuations will continue.  As one analyst noted, “They need to dump pieces or wind up another AIG.” The problem now is that there’s not enough money to purchase the good stuff from C at a price that’ll keep the rest afloat.  Probably should continue shorts or straddles into mid-Dec but get out ahead of the options expiration.
• AAPL: It’s been testing the current $100 bottom for a couple of months.  It has no killer new xmas product intro, it has its visionary CEO in it for the short term, and it’s a pricey high-end niche going into an age of bargain hunting.  Remember how Apple did in the contractionary market in 1992?  Yeah.  Not much upside potential here, but huge downside risk with a broad market valuation per share target swag of $50-75.
• GM: How are they not gone yet?  GM and Chrysler have been zombie firms for years, with the good fortune of IVs of SUVs and then hybrid mania.  If you looked at their hypergressive financing–0% interest for 60 months comes to mind–it was apparent that they were just riding the cash float like the airlines traditionally do.  This means they are so substantially over capacity that one entire firm could disappear without adverse long-term economic effects.  As I noted to a colleague: It’s no longer a question of GM being to big to fail.  It’s a question of it being to big to save.  Straddles on this one too, because they either get the bailout and soar, or don’t get the bailout and bust.  In either case, don’t get caught sleeping if they serve up a surprise Chapter 11 filing in spite of Waggoner’s Fuldesque refusals.
• The Dow 30: It’ll bounce around like crazy through mid-Jan, when the inauguration and the year-end retail slaughterhouse finally reveal themselves.  An ETF in-and-out play is good here–not on the basis of value, but strictly on the basis of volatility.  An index of below 8000 feels unrepresentative of the structural value, so if C and GM cough up lungs and take it down much further, it smells like there is substantial upside going into the new year.

Posted at 8am on 11/21/08 | no comments; | Filed Under: drink, finance, economics, business