Ford.....The Obama BOUNCE!!!

[fdjake]

Since Rookie, Mike, and I have an agreement to post buy in prices and dates for investments, I'll let you all in on a little theory I've been developing....

Trade at your own risk!!!!

Friday Ford's January 2010 $2.50 calls opened at .30......dropped to .27....rose to a high of .90.....and closed at .80.

THAT Gentlemen is 300% worth of VOLITILITY!!!!   That's MONEY!!

So......with that in mind....let's look at some probable outcomes for the upcoming week....

Obama originally decided to stay out of the news  inorder to let President Idiot finish out his term in his usually DO NOTHING style.
That was until Wall St. looked like it was headed for ANOTHER implosion.
So he announced his Treasury Secretary EARLY.  That lead to an almost 500 point gain on the DOW (Another beautiful call by Rookie!!)

Now early December will bring the Big 3 BACK to Washington.....My guess is Obama will take a MUCH MORE active role behind the scenes this time.  We all now how hard "W" has been "working" on this.

So....I will be buying, and letting you all know the times, dates, and prices.....For the January Ford 2010 $2.50 calls.

Once this money is in the pipeline Ford should get a nice boost.  It won't last long, but it could be a beautiful trade for a very short amount of time....

There it is......all for the bargain basement price of........NOTHING

[jabber]

FDjake do you think we missed the boat on these 2.50 calls??  Fords back up over 2 now, do you think it will drop back down before the bailout? Thanks- Chris

[propertymanager]

jabber,

Stocks of companies that are near bankruptcy are very volatile.  I believe FDJake's assessment that we are no where near the bottom of this market is accurate.  I would not chase stocks or options in either direction.  Decide what you want to pay; put in your order; and buy at your price.

Mike

[fdjake]

You'll get another shot at them.....this is just started.

[phlemboy]

fdjake, (or anyone else who knows the answer) . What would be the best way to buy Ford stock? Is there just one symbol? What's the difference between Common Ford Stock and Ford "preferred stock"? What would be difference if I purchased 1000 shares of either common or preferred as opposed to the option to buy ford in the future. From what I understand about options, you agree to purchase a stock in the future at a predermined price that's (hopefully) lower than its future share price. If a company's stock goes to  "0" Is it considereed bankrupt? O.K I'm done with stupid questions for now. I'm just trying to figure this stuff out.

[propertymanager]

Phlemboy,

I wouldn't buy ANYTHING until you've spent some time learning about the stock market.  Buy some books and read, read, read.  The CBOE (www.cboe.com) has a good basic training course on options (free). 

If you want to buy Ford stock, you would just buy symbol "F".   

From what I understand about options, you agree to purchase a stock in the future at a predermined price that's (hopefully) lower than its future share price.

It's a little more complicated than that.  There are basically two types of options, "CALLS", and "PUTS". 

A Call option gives the buyer of the option the right, but not the obligation, to purchase the stock at a given price (strike price) for a given length of time (until the expriation date).  You can either buy or sell calls.

A Put option gives the buyer of the option the right, but not the obligation, to sell the stock at a given price (strike price) for a given length of time (until the expriation date).  You can either buy or sell puts.

Mike 

[fdjake]

Be patient....

This market is headed LOWER.  All the "chasers" will be piling into the automakers this morning.   You can buy in now, or you can wait for the eventual drop and get in a little cheaper.

Here's the bottom line.....

5 years from now NO ONE in this country will even REMEMBER this recession.  They'll be to busy buying their new cars, which will replace all the junkers that they drove during the "bad times."

Buy in over a period of time.

Hope you guys all noticed that the loan money is contingent on the Big 3 dropping wages and costs to JAPANESE COMPETITOR LEVEL.  The UAW is going to take a HIT here.....That means MONEY for US!!!

Buy it now.......or WISH you had later.

Phlemboy.........

Just buy the stock.........F

[propertymanager]

5 years from now NO ONE in this country will even REMEMBER this recession.  They'll be to busy buying their new cars, which will replace all the junkers that they drove during the "bad times."

This is where we disagree.  I don't think that our economic problems will be over in 5 years.  In fact, I'm not sure that we'll even have a good start on our economic problems in 5 years.  The REAL problem is not the credit crisis; the auto industry; the subprime crisis or any of that nonsense.  Those are just very minor issues compared to the REAL problem.  The REAL problem is that the country has been living above its means for decades!!!  We've made a million promises that we can't keep (social security, medicare, welfare, Section 8, foodstamps, etc, etc, etc) and we continue to make additional promises.  A significant portion of our population is too lazy to work and the taxpayers support all those lazy deadbeats (a group that is breeding at a phenomenal rate).  In addition, the baby boomers are rapidly passing their peak spending years and the baby boomers will soon retire.  We are in a horrendous mess and the pain hasn't even begun!

Hope you guys all noticed that the loan money is contingent on the Big 3 dropping wages and costs to JAPANESE COMPETITOR LEVEL.  The UAW is going to take a HIT here.....That means MONEY for US!!!

That provision of today's bailout is worthless for two reasons. 

1. It isn't required until the end of 2009 and the next administration can change it.
2. to a level "competitive" with foreign automakers is so vague as to be meaningless!  Those are just quibble words designed to make the ignorant American public feel good and to let the UAW know that we aren't serious.

Mike

[fdjake]

I think your wrong Mike.....Here's why...

Just predicting BAD doesn't tell us anything.

First off.....

FORGET Social Security......Here's why..

This stock market crash has actually BAILED OUT SOCIAL SECURITY!!!

Let me explain.....

All those baby boomers you worry about RETIRING.....CAN'T.....They just got their @SSES handed to them by way of their 401K's IMPLODING.......BYE, BYE RETIREMENT.......Hello working until you DIE.  My Engine company responded to a local Walmart last week...A 70 year old man had a MASSIVE heart attack while AT WORK.  We did CPR/defibbed him for 15 minutes(from the minute we got to him, till we went through the doors at the ER).....Couldn't save him...His wife told us he was working at Walmart because he his 401K and Social Security weren't enough to live on.  THAT'S the new AMERICAN Retirement plan.....Work until your DEAD.

MIKE........NO ONE is retiring in this country for a LONG, LONG TIME!!!
401K's are wiped out.....as a result the FEDERAL GOVERMENT has just been given the ULTIMATE Get out of jail card!!!!   They move up the AGE limits on Social Security, cut benefits, and blame it all on the drop in the stock market and at that point the REMAINING WORKING PEOPLE (folks that STILL have jobs) will completely understand and support the lowering of benefits.  I don't think there has been, or ever will be, another time when voters will actually support these decisions.  No better time to tighten the belt than when the population is tightening also.  This time, our goverment will be FORCED to do this...The only question now is HOW THEY SPIN IT?????

As far as us living beyoind our means.......YOU ARE 100% correct!!
BUT..................your missing an important piece of the puzzle...

Our markets.....RIGHT NOW....are addressing this mess....The idiots who purchased homes they could not afford are LOSING THEM....In addition to their homes......They are NOW LOSING THEIR JOBS!!!!!
Credit card companies are now CUTTING credit limits, and banks are INCREASING lending standards.....What is the result?????

For the FIRST TIME in DECADES...The SAVINGS RATE IN the U.S. is actually INCREASING!!!!!  People (including YOU) are not SPENDING.  They see friend, relatives, co-workers getting really HURT....THEY ARE CHANGING BEHAVIOR....

As far as Ford's 2010 contract concessions go......I assure you....I am MUCH MORE familiar with those concessions than you are.  THEY ARE COMPARABLE to the Japanese automakers.  Right down to HOURLY WAGES.

These market events we are watching are taking place on a GLOBAL SCALE.....It's like being IN A HURRICANE....There's so much going on it's hard to see the small things.... Those small things are the FOUNDATION of an eventual recovery.  We are now going through what has been referred to as......

"GETTIN' YOUR MIND RIGHT."

There's a whole lot of people in this country doing that RIGHT NOW.  Look at what going on as far as Christmas shopping goes.  I see article after article about how people are not buying ANYTHING for gifts...They are DOING THINGS with, and FOR their friends and relatives.  The funny part about these stories are........Both the giver and recepient actually ENJOY this more than just BUYING something.

We're at a cross roads here......The days of GROSS OPPULANCE are OVER.  We are headed for a time so tough most people won't believe how bad it will be.....

IN that misery....Is our eventual salvation.

[propertymanager]

We're at a cross roads here......The days of GROSS OPPULANCE are OVER.  We are headed for a time so tough most people won't believe how bad it will be.....

IN that misery....Is our eventual salvation.

I agree with that, which is why I don't think this will be over in 5 years.  I think we'll have at least a decade of this mess and probably MUCH longer than that.

They move up the AGE limits on Social Security, cut benefits, and blame it all on the drop in the stock market and at that point the REMAINING WORKING PEOPLE (folks that STILL have jobs) will completely understand and support the lowering of benefits.  I don't think there has been, or ever will be, another time when voters will actually support these decisions.  No better time to tighten the belt than when the population is tightening also.  This time, our goverment will be FORCED to do this...The only question now is HOW THEY SPIN IT?????

I hope you're right about the goverment actually cutting the myriad of unfunded promises it has made.  However, that certainly isn't what's happening right now.  In fact, right now the government is doing just the opposite.  The government fails to allow anyone to fail:  big business can't fail; wreckless homeowners can't fail, AIG can't fail; Freddie and Fannie can't fail; the automakers can't fail, etc, etc, etc.  This move to socialism is the exact opposite of what you're talking about.  We're drowing in a sea of debt and the government's response is to print (borrow) more money!  Brilliant!

That's why I say that this won't be over in 5 years and probably not even 10 years UNLESS we have a major DEPRESSION and economic COLLAPSE which is MUCH, MUCH worse than what is occurring now.

Mike

[fdjake]

No one said anything about being OVER in 5 years....

For Ford..... All we need is BETTER in 2 to 3 years and that stock is FLYING.

[propertymanager]

So, so you think that either the economy or the stock market has hit bottom?  I don't think either is at the bottom yet.

Mike

[phlemboy]

Thanx for answering my questions guys. That clears a lot up. Let me be very clear. I asked the questions not so I could invest, but to learn. I have no intention on buying anything anytime soon (although I'm seriously considering coatailing fdjake on the long term Ford position ). The contrarian investment strategy makes sense to me. It's a matter of getting my mind to see what my eyes can't. Recently, I've been just watching the "herd". I look at what they're running away from and ask myself, "Is the fear justified?" "What potential possibilities can I see?" I think I can almost do exactly the OPPOSITE of what the "experts" on CNBC are advising and use that as an investment strategy! I'm actually having trouble coming up with my own ideas because I don't have the experience/education about how this works. Its not until you guys mention it, that I can see it. But here's one observation I've noticed about people's psychology. In general, people have a VERY short memory. There will be some that actually change their financial habits for the better. But I believe that most won't. That includes lenders and credit card companies. The appetite for easy money will not be ignored by financial institutions. I know I've "got my mind right" (just like in Cool Hand Luke). But I'm sure there are many people out there that are just waiting for the credit crunch to be over so they can spend money they don't have.....again.

[fdjake]

Mike,  with Ford at $2.80/share I don't see it making a HUGE difference whether the "market" is going lower or not.  How much further will Ford go???  I mean really...If you believe in the investment, does it really matter if you buy in at $2.80 vs. $1.99???   We literally almost had a GLOBAL economic collapse a few months ago.  If that event caused Ford to drop to $1.20 how much more do you plan on saving??  GETTING IN and STAYING IN is the key to this investment.  The other point you better start thinking about is how YOU handle this stock when it hits $10/share.  It's going to be VERY HARD for you to stay with it if your constantly moving in and out of it.  These events take YEARS to line up.  I've learned (the hard way) NOT to get out too early.  The BIG part of the move ALWAYS comes AFTER the mutual funds and pensions get in at multi year highs.  This is the difference from buying Ford and making a 100% return, or buying Ford and making a 1000%.   Believe me.....If you think taking a LOSS is hard, wait till you feel the pain of selling Chrysler in 1994 at $60 (up from $12) THINKING YOUR A GENIUS, then watching Mercedes buy them out at $168/share!!!!!   THAT'S PAIN!!!  The funny part of this is......NO ONE will be talking about how Ford almost went under.....It'll all be about HOW HIGH the stock could go from here!!!!   That's when you SELL!


Phlemboy, (dude you REALLY need another name)

Banks aren't letting just anyone borrow money right now.  That will stay in place for years.

The main thing I would ask you to watch is this.....

Right now EVERYONE is saying "THIS is the time to buy stocks....THEY'RE CHEAP....Look at how far they've fallen." ect. ect.

A TRUE contrarian would look at this and ask.....

HOW MUCH FARTHER WILL THEY FALL????

If you want to learn a little bit here watch this...

QQQQ  is the symbol.....It's an ETF that tracks the NASDAQ.
The JUNE 09 $16 PUTS are now trading at .35 to .40
As I wrote in a previous post I own these.  I have been adding to that position during this rally.

I make money IF I am correct in thinking that this market goes LOWER from here. 

As of today I have 1000 contracts in this position.  You can watch these options over the next few months.  To estimate your costs on this trade remember that options are quoted in what looks like CENTS.  IE .40 for the above example.  Each "contract" represents 100 shares of the underlying stock.  So in order to determine how much a single contract costs, just slide that decimal point over 2 spots.  So......The June 09 $16 PUTS would actually cost you $40 per contract.  If you bought 1000 of them at .40 it would cost you $40,000.  A option quoted at $1.80 would actually cost you $180/contract and so on.
Should the market tank from these levels, you will now understand how putting money where your mouth is works when it comes to investing.

[phlemboy]

fdjake, I picked the name "phlemboy" beacause I'm a Respiratory Therapist. It was the best I could come up with at the time I registered. I think it's too late change now  . Anyway, I'm sure that the banks will start lending and extending credit to people when the economy improves. That may be 3 - 5 yrs. away, but I believe that most people will return to their old spending habits when they get a little more money in their pockets. I can definitely see the market going downward. How far? I don't know, but I'm hoping to learn how to position myself to profit in bothe good times and bad. At this point, I'm just trying to keep up witht he terminology you guys use ( like PUTS, Calls, Contracts, etc..) Its a lot to digest, but I find it ineteresting and I'm eager to lean. I hope these stock market discussions stick around, I'm learning a lot. It all boils down to put our money to work for us.