What a difference a day makes

Wow - did anyone see that huge move in the financials yesterday? I was feeling pretty good about my positions until all of the banks and real estate related stocks took off on Friday. Also DOW is within 150 points of its all time NOMINAL high of 11,723. I can't imagine the stock market blasting through that major resistance to make new highs - however as long-time readers well know - I can envision a retest of the highs followed by a monster decline. We even have the perfect catalyst in the fed meeting to generate the change in trend. Probably just wishful thinking on my part however.

Still, I am so glad that I put the gold ticker on the blog. It constantly reminds me of the importance in distinguishing between nominal and real returns. Even if the Dow was to reach its former high of 11,723 - that does not take into account INFLATION. Assuming a conservative inflation rate of 4% compounded over the past 6 years (since 2000) - I arrive at a 26% change in the price level. If we compare that to the Dow - the Dow would need to hit 14,833 in order to reach new REAL highs and I definitely do not think this is in the cards for this short cycle.

Anyways back to gold - it reached $680 per share last week and has had a huge move from the $450 level last summer/fall. I am not sure if this is sustainable in the short run and I expect a correction back to the low 600s before an advance into the 700-900 area later this year. So whats goin on with the portfolio? It is really too early to say. I will know a lot more by options expiration two Fridays from now. If my options plays work out I may liquidate PDLI and the shorts and take the extra capital and add a new speculation in PolyOne (POL) which is a competitor to GGC and is also reporting phenomenal earnings growth year over year and is in my humble opinion undervalued.

If they do not work out I will likely just liquidate the PDLI position and remain the small cash allocation along with the GGC call options. For some reason I feel a big move coming in both POL and GGC (possibly down first) but I could see a 40-50% advance over the remainder of the year. This is probably just wishful thinking on my part. :)

Best regards,

BG

PS - take a look at the positions to see just how nailed I got after the financials decided to levitate. I was flabbergasted to say the least: