Tuesday, May 19, 2009

Lowe's: Inside the Numbers and Other Market Drivers

What happened today? Some say it was Lowe's numbers. I say that is BS. What happened today was Warren Buffet. The retail investor trusts everything he says and will throw money at anything he says. But before we get into that, lets look at Lowe's numbers.

More than 20% lower revenues. Yikes. But they beat earnings. Yay. But look at what they said. Lower numbers from contractors. Higher numbers from individuals. But those individuals buying lots of little things, like a gallon of paint, some lumber, garden items. Not major items. Home owners are doing their own work now. Not hiring contractors. Yet the market considers that good news. Good luck with that.

The numbers from Lowe's confirms the mess we are in. Less jobs, saving money by doing minor repairs yourself. Not good for the economy.

Then we have Mr. Buffet. News was he invested more in Wells and also more into S&P derivatives, meaning he is selling long term puts on the s&p index. Great move as long as market goes up from here for the next 15 years. but if the market crashes, Mr. Buffet may be putting his company and his reputation on the line. Very risky move and even he admitted years ago that derivatives are just too risky to use as an investment.

But the man knows what he is doing. So he doubled up on Wells when the stock was down. And now he is selling puts on the S&P. That does not mean the economy has recovered.

Today's action will probably be followed up by a move higher in the morning. May be a great opportunity to take profits and/or get some short positions.

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