buying PWE, bidding on VZ, and VLO

Current market conditions are nearly unprecedented, and the scope of the crisis suggests things could still get much worse very quickly.

Or perhaps not. Perhaps finally governement will do something that works. Perhaps they'll merely spook people further.

"President George W. Bush will address the nation this morning to tell Americans they should remain 'confident' amid falling stock markets and a worldwide credit crisis."

We reiterate what we wrote on September 15, that "President Bush announced that the markets are fine, a clear indicator that things are much worse than they seem." This is no comment on President Bush. It is simply obvious to us that any time a head of state takes time to broadcast nationally that all is well it means in fact all is not well. Severely so.

We reiterate what we've been saying all along - that the markets can and possibly will go very much lower at some point. Perhaps without even a bounce.

Currently markets overseas are selling-off again severely. If there's no turnaround in sentiment, and nothing from government to allay fears, the North American markets could open significantly lower. That may be "the" low. For now. Or just the start of another very bad day in the markets.

Certainly fear is pervasive and widespread, so of course we'll go long. We hope to have come across a relatively safe idea. Just in case.

In case of what? We suggest that no one should be surprised to find any of their holdings as much as 50% lower by the close Friday or Monday, or at some other point in the near future, with no chance to sell before it happens if at all.

As we also wrote on September 15, "We will not be fooled into the idea that these markets offer "investment opportunities" or "value"."

May 7 - "While the DJIA has recently tentatively breached 13000, we continue to see significant resistance above that level thus we have not turned away from our bearish stance and we proceed with caution since we continue to believe that the general markets, commodities, and the majority of individual stocks are considerably overvalued and overbought at present."

It's frightening looking back at the chart.




June 11, 2008 - "It would not surprise us to see the general markets much lower in the coming days, weeks, or months."

June 26 - "Our outlook remains unchanged. Bearish the general markets, bullish gold and silver, expecting a coming deflation in the pricing of nearly everything else."

We've been asked why we don't buy gold stocks if we're bullish gold. It is simply because we are bullish of gold and not of stocks. Stocks, even gold stocks, in a true bear market liquidation falls under "everything else" as we have recently seen. Perhaps the time will come to speculate in gold stocks again, but for us that time has not yet come.

We're happy enough with our holdings of physical gold, though we understand that gold too could sell-off rapidly at any time. True liquidations are about panic, not logic or inflation hedging.


The last time we entered a trade on the long side was in early July, at which time we wrote :

"We finally add long holdings, with an initial entry in refiner Valero and telecom giant Verizon. These last traded at $36.79 and $35.43 respectively. Our simple view is one of near value, given the market and economic environment, and of somewhat oversold conditions.

However we remain in a bear market and it'd not surprise us to see these trading much lower in the coming weeks, at which time we might say they've become true "value plays" and enter additional long positions. Should there be a near-term market bounce however, or especially should we prove to now be at a market bottom (which we very much doubt but must prepare for all possibilities), the upside move in these shares should be quick and very profitable.

In any case, we shall continue to accumulate relatively attractive "blue chip" holdings as the markets wither."


At times it is painful to be correct. The markets are nearly 30% lower, as is VZ while VLO is lower still. These are possibly good entry points for someone that has no, or very little, general long exposure already however we seldom like to add to losing positions and certainly not given current market sentiment. Instead we'll bid as low as $20.20 on VZ and $12.20 on VLO.

Those figures are not typos. Just in case they get that low we'd be buyers, though perhaps even then reluctantly if markets are selling-off so badly that we see those prices for shares in these companies. We'd like to hedge by selling uncovered "naked" puts up-front, but find no strikes that low. Instead we simply lowball bid, though any bidding currently makes us nervous.


We barely have enough faith to enter this relatively secure idea. Penn West Energy, PWE on the NYSE and PWT.UN on the TSE, is an energy trust. We trust investors understand what that is and how they are taxed, or not, on its dividends. For us, those dividends are currently the main attraction, and at the current stock price the dividend is nearly 25% per annum and it is paid monthly.

We believe that might attract others to the stock, along with its valuation, if or when buying returns to the markets. If so, there is the potential for excellent capital gains on the stock as well as the dividend. Read more about it here.

PWE last traded at $15.41

To those who are also options speculators we note that $20 December calls on PWE are currently under $1, last ask at $0.85 A significant market rally would likely lift the majority of stocks a fair bit higher and in the case of PWE could result in a significant spike in the price of these options. Of course, as always with options and too often recently with even "blue chip" stocks, these could soon be worth zero. We currently hold some of these calls.

Options traders of course realize that there are no dividends collected by call option owners. Further, we trust that to options traders our BUD idea yesterday was clearly an uncovered "naked" put idea. Some believed it to be a typo, perhaps that we meant "call" rather than "put". We indeed meant "put". Those unfamiliar with the strategy may read about it here and note the caveat : "While the premium collected can cushion a slight drop in stock price, loss resulting from a catastrophic drop in stock price of the underlying can be huge when implementing the uncovered put write strategy."


We applaud the Canadian Banking system.

We hope for panic to ebb from the markets.


We receive no remuneration or incentive directly or indirectly in any way, shape, or form for buying or selling the stocks we do, or mentioning them in this blog. If we hold existing positions we divulge the fact, otherwise we generally buy and sell as diarized here. This blog itself is merely a diarizing of our thoughts and trades and is in no way whatsoever to be considered investment advice of any kind. Always without fail consult your broker or investment advisor before making any investing decisions.

To be notified when this blog is updated :
Please e-mail christianguinness@hotmail.com with "Subscribe to blog" in the subject line or click here to do so automatically if your computer is configured accordingly. We have never shared our mailing list with anyone, nor have we ever sent anything other than update notices for this blog to our mailing list. We only send update notifications when a trade idea is diarized, not if an update only contains general market commentary.