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SSI Update

[Printable Version of This Page]

Apple tumbles, RIMM looks better and better. Is it time to short oil?

Update #080  June 23, 2008

Dear SuperStock Investor Subscribers,

A short while ago this article hit the wires from Reuters...

Goldman cuts U.S. financials, admits goofed on upgrade
Monday June 23, 12:49 pm ET

(Reuters) - Goldman Sachs & Co strategists urged U.S. stock investors to "underweight" the nation's financial and consumer discretionary sectors, admitting that it was mistaken when it upgraded both sectors just seven weeks earlier.

The downgrades sparked selling in stocks in both sectors, as investors feared that weakening consumer demand and deterioration in the credit markets would weigh on profitability.

"We boosted our consumer discretionary and financials weights in May on the belief the sectors would benefit from bank recapitalizations and fiscal stimulus," Goldman strategists led by David Kostin wrote. "Our thesis was clearly wrong in hindsight."

Goldman had previously urged investors to overweight consumer discretionary stocks, and maintain a neutral weight in financials....

This is a serious signal at least the short term. Steer clear of the banks and financials. I still like Visa and today I personally added shares of RIMM on the strength of the downward move in Apple computer.

 

Persistent rumors about Steve Jobs health are rattling the company’s share price. As far as the public has been informed Jobs is in remission and has no health problem short of a bad cold recent during a recent public appearance. All I know is I rather own RIMM at this point and wait and see if the rumors are true.

 

An article in Fortune making news may be the catalyst for today’s weaking of apples shares...

 

"The trouble with Steve Jobs

Jobs likes to make his own rules, whether the topic is computers, stock options, or even pancreatic cancer. The same traits that make him a great CEO drive him to put his company, and his investors, at risk."

By Peter Elkind, editor at large

(Fortune Magazine) -- In October 2003, as the computer world buzzed about what cool new gadget he would introduce next, Apple CEO Steve Jobs - then presiding over the most dramatic corporate turnaround in the history of Silicon Valley - found himself confronting a life-and-death decision.

During a routine abdominal scan, doctors had discovered a tumor growing in his pancreas. While a diagnosis of pancreatic cancer is often tantamount to a swiftly executed death sentence, a biopsy revealed that Jobs had a rare - and treatable - form of the disease. If the tumor were surgically removed, Jobs' prognosis would be promising: The vast majority of those who underwent the operation survived at least ten years.

Yet to the horror of the tiny circle of intimates in whom he'd confided, Jobs was considering not having the surgery at all. A Buddhist and vegetarian, the Apple (AAPL, Fortune 500) CEO was skeptical of mainstream medicine. Jobs decided to employ alternative methods to treat his pancreatic cancer, hoping to avoid the operation through a special diet - a course of action that hasn't been disclosed until now.

Bye, Bubble? The Price of Oil May Be Peaking.”

 

Meanwhile, there’s a great deal of buzz about the price of oil hitting a peak in the media and Wall Street. This week’s issue of Barron’s leads with a cover article, “Bye, Bubble? The Price of Oil May Be Peaking.”

 

I agree with some, but not all, of the article’s conclusions.  I think given the threats to the oil market right now, calling a top is premature.

 

We’re in the notorious hurricane season, Nigeria’s rebels are very active, the Israeli’s are busy practicing for an Iranian strike, and I believe the reduction of oil subsidies in places like China and India may not have the dampening impact some are predicting, either short term or long term. Look at the price of oil today; even with the announcement of a promised increase of daily production from the Saudi’s the price of oil is actually up.  

 

What I expect to see is a major spike in the price of oil to $150, $170 even $200 in the next few months, and at that point, I’m very inclined to insist as I have written in my invitation Gold & Energy Options Trader: $200 Oil Must Be Shorted.

 

It’s important that you become a subscriber of my Gold & Energy Options Trader. Besides the fact that we’re already racking up wonderful profits, being prepared for the spike I see ahead for oil and the pull back which could be precipitous, i.e. a sudden spike that takes oil to as high as $200 barrel would almost certainly be followed by a retracement back down to as low as $100 a barrel. I believe the new equilibrium for oil will be $110 to $120 a barrel when the feathers stop flying.

 

Interesting enough, I believe some of the best stocks to move into during the oil spike I expect to see will be the refiners. This sector has been crushed as the perception of lowered margins and government regulation as a result of these sky high gasoline and heating fuel prices has been in the news. A few more dollars lower on SUN and I have to jump in with either some well reasoned call options or by writing some put options.

 

To paraphrase Betty Davis in her famous movie, All About Eve... “Buckle your seat belts; it's going to be a bumpy” several months!

Have a great trading week.

Best Wishes,

James DiGeorgia

Editor