The RealMoney contributors are in the business of trading and investing all day on the basis of ongoing news flow. Below, we offer the top five ideas that RealMoney contributors posted today and how they played those ideas.
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1. FOMC Expectations
1/28/2009 2:06 PM EST
Here is what is expected of (or hoped for from) the
Obviously, a continued commitment to ZIRP (zero-interest-rate policy).
An exclamation point on the recent foray into the purchase of agency and agency mortgage-backed securities, a strategy that has helped lower mortgage rates.
While few expect the Fed to say that it will begin purchasing long-term Treasury securities, some expect as much, so if the Fed does not repeat its Dec. 16 statement that it is "evaluating the potential benefits" of doing such, Treasuries might weaken. I stress that few expect the Fed to say it will purchase Treasuries, and most would prefer that the Fed focus on other fixed-income products, but an omission of the Dec. 16 idea might weaken Treasuries.
The Fed might tell us when it will begin its Term Asset-Backed Securities Loan Facility (TALF), the facility meant to jump-start lending for credit cards, auto loans and leases and small-business loans. The TALF could begin next week.
Perhaps the Fed will discuss how it plans to help the Treasury cordon off bad assets.
2. They Just Don't Get It
1/28/2009 12:02 PM EST
We must get the banks lending, they say. We must get housing prices up. We must get the consumer restarted they say. They just don't get it.
The biggest financial crisis in history was caused by the banks over-lending to consumers who over-consumed. And now the talking heads say we need to prod banks to force debt down the throats of over-levered households. They just don't get it.
At least infrastructure spending represents an investment in future productivity and quality of life. I can get on board regarding the infra spend.
But to borrow trillions to pay for our current over-consumption as well as stimulate over-consumption is simply wrong. The feds and talking heads don't get it.
Is it any surprise that those clueless contributors to the mess are promoting the wrong solutions?
3. I Prefer the Best Values, Not the Best Companies
1/28/2009 9:28 AM EST
Steve Birenberg made a gutsy self-criticism today by admitting that he has sometimes made the mistake of owning the best companies that nevertheless had problems not anticipated by the markets.
My "Graham and Dodd" take is that I want the companies that are cheapest relative to "known" fundamentals. That is to say, an objectively mediocre company may be attractive if its stock price says (wrongly) that things are "terrible." On the other hand, I don't want great companies where "great" is already in the stock price. That's why I own
, and not "stars" like
Johnson & Johnson
And where do I make my mistakes? With companies like
in the Dow, and the late Washington Mutual outside it, although I was fortunate to get out of both with losses of less than 20%. To paraphrase Warren Buffett, I'm willing to "buy toads at the going price for toads," although this is a Graham construct, not a Buffett construct. The ones to avoid are what I call the "trolls" that are headed to zero.
4. Morning Trade
1/28/2009 9:24 AM EST
Bull market back on ... maybe. I have no clue whether we hold this gap and rocket higher or not, but Kass has clearly seen a nice chunk of his 5%-10% happen fast. I am of the opinion that when we shoot up like this, if you added exposure below (or are sitting on bad positions you wished you had never bought) ... take some off. It is an FOMC day, so things may get stirred up a bit toward the announcement.
If this "bad bank" proposal keeps the bulls excited and the bears petrified, we could break free of our initial resistance at 862 and make a run for the 872.50/873 area. I would expect heavy selling at this area, especially if we get there in a near vertical manner. A break of 872.50/873 and it's on to 882 ... which is my extreme high for the day.
Our initial support area (we are currently printing 859) is 856, but strong support is slightly lower at 850/851. I would want to see the 850/851 area hold if the bulls are going to keep things interesting. Below 850, we have moderate support at 847 and 844. If the bulls are unable to hold it together, we could slip back down toward 835.50 before finding solid support again.
5. Zimmer Options Heat Up Ahead of Earnings
1/28/2009 8:08 AM EST
Surgical implant company
is seeing significant options activity ahead of its earnings report before the opening bell Thursday.
Some 5,100 of the February 40 calls are trading, with more than 86% on the offer, according to OptionMonster's tracking systems, which to us says accumulation. ZMH stock, however, fell 5.6% in after-hours trading late yesterday to $39.66 after closing the regular session up on the day at $42.01.
At the same time,
, a competitor of Zimmer in orthopedic implants, rose 4.75% in after-hours trading following a positive earnings report. SYK options continued to be bullish leading up to the release, and the company expects sales to increase 6% to 9% in 2009.
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