** On the Sidelines, For Now
We are fully invested in the sectors that I want to be in right now. We have exposure to the precious metals with Coeur D’Alene (NYSE: CDE), which is moving up nicely. Our Microsoft (Nasdaq: MSFT) calls are also doing very well, with MSFT benefiting from the move into technology shares. The last two days have seen strong moves by Oracle and Research in Motion, which bodes well for the sector in general. Our Sun Microsystems (Nasdaq: JAVA) pick is lagging, but we have a long way to go on that pick as well.
As for financials, we have the Bank of America (NYSE: BAC) calls – if you don’t own any, buy some – I expect a strong move in the financial sector next year once the quarterly numbers are reported in late January. These companies, like BAC, are not going out of business. To the contrary, the Fed, private investors and the government are doing everything possible to send a signal to investors that no major bank will fail – people are just not listening right now.
While Mylan Labs (NYSE: MYL) has been a disappointment this year, I expect that to change in dramatic fashion next year as the hangover from the Merck AG (Germany) acquisition subsides and as it begins reporting consolidated numbers and projecting the strong growth that awaits this super combination of companies. If you don’t have Mylan calls in your portfolio, add those as well.
The current market is very volatile, which is good news for short-term options but not so good news for us. The intense volatility has added 30% to 40% in premium to LEAP options prices and that makes it very expensive to enter into a new position without overpaying. Sometimes, it is best to be on the sidelines for a few weeks than chase a position that is overpriced. We will jump back in as soon as the market displays some clearer direction… up or down.
Have a super holiday week and I will be in touch soon.
Karim
