Fundamental Trading Diary

Fundamental analysis of the capital markets

Trading for the End of the Week

Trading Plan

Freddie Mac and Fannie Mae had a stellar day for equity holders after raising cash was far more orderly than equity trader predicted.  My plan is to hold these for a few months — but not long enough to actually test their medium-term profitability (they are apparently more than 6 months away from insolvency — and it’s pretty well a guarantee that it’ll be left until the last possible moment to force the hands of politicians and executive branch government officers).

It turns out that my short call at 1909.25 was at least temporarily right:  it ended the day up a modest $195.00.

Tomorrow, initial GDP numbers along with unemployment claims come out.  I very much doubt that the current optimism from today’s durable goods and orderly cash raising have priced in what tomorrow will bring:  which likely isn’t good.

Bond yields fell (-1.83%) disproportionately to the dollar (-0.27%) as investors sold off treasury bills for FNM and FRE bonds which have essentially been co-signed by the treasury for 15% higher yields.  Can you even call this risk arbitrage?

Some More Stocks To Think About

As previously discussed, a recession is a time for an economy to recycle its poorly performing resources into better performing sectors.  One of the engines for this process is education.  As a consequence, companies which focus on vocational training tend to fair pretty well during recessions.  I’ve initiated small positions in a few of them:

  • Chinacast Education Corporation (CAST)
  • Learning Tree International (LTRE)
  • SmartPros (SPRO)
  • DeVry (DV)

August 27, 2008 - Posted by | Uncategorized

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