June 5, 2009

REFLATION TRADE IS CROWDED

Market participants have been indiscriminately running up all stocks that they perceive as part of the reflation trade. This herd behavior has created significant shorting opportunities in individual names.

Fundamentals of coal stocks have not changed, while the stocks have doubled. Our data shows that exports of coal from the US have neither gone up nor are likely to go up.

Within the US utilities are the major users of coal and they all operate on long term contracts. Our data shows that due to lower electricity demand inventories of coal at power plants are unusually high.

Now for the first time since the rally began, we are beginning to see bearish put option flow in coal names.… Please click here or the title below to read more.

June 5, 2009

CONSIDER SHORT SELL ON BA (BOEING) AND ON COL (ROCKWELL COLLINS)

Irrational exuberance has taken hold of BA (Boeing). It started with a positive article last weekend in Barons. yesterday’s news that United Airlines may buy $10Billion of new aircraft ignited the overbought shares even higher. Then last night Jim Cramer poured fuel on the fire by declaring BA a must buy.

In our opinion, BA and other aerospace stocks have become over hyped without any material substance behind the price move. Our analysis shows that over all landscape for both commercial and defense aerospace has not changed as the market participants seem to believe. Consider scaling a short sell on BA around today’s highs at $53.26 or lower if the market does not cooperate.… Please click here or the title below to read more.

June 5, 2009