Looking at Steel

Cleveland Cliffs continued its slide today, even with the market up 73 points.



The jobs report came out at -69,000, -114,000 if you include downward revisions to previous months.



The ECB raised rates a quarter point.



Here's a story about IndyMac. Looks like they might be the next big bank to fail. Regulators have ordered them to raise capital. Over the past year, their stock has fallen from $31.50 to $0.67 (98%).

Financial records indicate that they have $2.5 billion in loss reserves, and $17.8 billion in deposits.

With IndyMac, National City, WaMu, and Wachovia all looking like they will fail, the FDIC's $50 billion looks paltry in comparison to insurance liability. In fact, with the Fed's asset holdings of only $473 billion, even they might have trouble covering everything that may fail.

Again, this is looking more and more deflationary. If there is any inflation in our future, it will be in dollar devaluation plays. In the meantime, I am thinking about what deflationary plays will coexist with a weak dollar. That way, my risk is minimized. Could oil be a great short here? Perhaps, but it could also jump on a weaker dollar. Let's move a little further up the production ladder. Steel? I'm thinking this is more like it. CLF looks like the one to short, with a P/E of 39. Even with today's 73 point rally, they continued to slide. Every analyst opinion over the last two years has a buy on the stock. Earnings estimates are expecting 111% growth. However, CLF has missed estimates three out of the last four quarters.

I'm going to think about this one some more....