WASHINGTON, August 29, 2014 – Thursday’s trading was moderately unpleasant. Today’s trading may be moderately okay, although there’s always a tendency for markets to sell off late Friday whenever a long, tradeless weekend looms.
Both Vlad the Impaler and the Islamofascist goons of the all-new, 8th century-style “Caliphate” loom large in any bear scenario, and who knows what they’ll do on a long, Western holiday weekend. Neither band of thugs faces any credible opposition, so the logical answer to this query is: Anything they want to.
Whether it’s business or politics, the Dark Side seems to be what’s driving the world these days, leading to nonstop confusion and lack of conviction in world stock markets, U.S. markets included. That’s made this pre-holiday, thin-trading week into a real coin-toss trading game, in which any trade is a guess, giving you 50-50 odds that it will work.
A couple of relatively risky bets have been paying off for us after stumbling initially. During the company’s almost inexplicable late June swoon, we picked up shares of major refiner Valero (VLO) little by little as they got cheaper and cheaper. Now we’re wondering whether to sell them, or maybe pad our quick 8% profit (roughly 48% annualized) with some covered calls and see how long we can continue to ride the rally.
Ditto our position in the otherwise dismal stock and company known as Yahoo! (YHOO). Like AOL, this early Internet pioneer has been left in the dust and floundering by the juggernaut that is Google (GOOG) and has yet to prove that it’s back in the game.
Fortunately for current investors, Yahoo! is riding the Alibaba IPO wave. The American company owns a good chunk of this Chinese web giant which, according to street buzz, is likely to launch its IPO in mid- to late-September. Yahoo! will be selling a portion of its shares into the IPO while retaining an as-yet unknown percentage.
As a result, regardless of YHOO’s dismal numbers, traders are riding the shares, which are being goosed daily by the growing Alibaba excitement. We’re not sure when to exit our position, but it will likely be on or about the day Alibaba goes public. Don’t miss the next thrilling episode.
Finally, there’s that position we mentioned in an earlier column, those volatile little Bank of America “A” warrants (BAC/WS/A at Schwab, different symbols elsewhere). Our position got whacked unpleasantly in yesterday’s low-volume market smackdown.
But we’re already nicely up, given Bank of America’s (BAC’s) nice rebound based on the likelihood that they’ll finally agree to Eric Holder’s plus-or-minus $17 billion shakedown, a portion of which, BTW, will be going to the reformulated ACORN, La Raza, and other defenders of American capitalism and democracy. How much further up we can go in these warrants will depend on how financials decide to trade in September.
Aside from those three admitted gambles, we’re going to sit tight today otherwise and wait for what Tuesday will bring. We have cash on hand to start loading up on shares of the short S&P 500 ETF—SH—so we’ll see where things go after the holiday weekend.
Meanwhile, be sure to enjoy yours. Stay out of trouble and join us back here on Tuesday. We’re taking the weekend off ourselves.