The Wheels are Starting to Turn

LIBOR is coming down, which doesn't mean anything, now that most bank debt is guaranteed. Commercial paper rates are coming down, which doesn't mean much since the government is a week away from stepping into that market as well. Treasuries are down. As Rosenberg said, why buy Treasuries when there's guaranteed bank debt?

I think that all this money is setting the stage for a ferocious rally. Just a feeling, but I covered my AMZN short today. I am holding on to DECK for short retail exposure, short ITB for homebuilders, and short COF for consumer credit downside. However, as Rosenberg points out as well,

how can the transports be down 25% since mid-September with the oil price down 27% over the same time period? To have transports down 25% at the same time that utilities are down 20% in the same 30-day period – well, we assure you, this has never happened before after scanning data back to 1960. And in the past, when the oil price is down this much in a month, the transports are up 10%,

I am thinking of L for value, UAUA for transports, ACI for Crack-up-Boom bounceback and maybe General Mills, Kraft, or Kellog for a beaten down consumer staple which will be able to take advantage of falling commodity prices.

Well, a quick look at UAUA shows a bounce from $2.80 at the low to $12. I was thinking I would like about $8. LUV is too high as well. The food co's, KFT, K, and GIS are much too expensive with P/E's of 17 or 18.

The best values I see are MO with a div. yield of 6.6% and a PE of 5. Then there's L with a book value of $40 and $25/share in cash. As far as a crack-up-boom bounce play, I need to find out if the credit crunch is really behind the drop in the Baltic Dry Shipping Index or not. The reason I'm skeptical about this is that the oil tanker rates have not dropped as much. That leads me to think that there may be other factors involved.