Someone! Quick! That squirrel needs a bailout!

Hey everyone,

Anyone else think that the stock market has bipolar syndrome?

...and do you think that Paulson, when he was CEO of Goldman Sachs, ever thought that would end up being the Treasury Secretary during the biggest financial collapse in nearly a century?

Most of the business news media has been discussing whether bailouts are ethical or not and a lot of philosophical questions associated with what has happened over the last few days.

Considering I graduated with a double major in chemical engineering and biology, I'm not interested in discussing philosophy. I want to know what to expect come the opening of international trading on Sunday night (and the opening of the NYSE on Monday morning).

Immediate effects and recent events:

1. Oil
Spiked from its recent low of around $92 all the way back up to $105. Not suprising considering the dollar depreciated about 2% versus the euro.

2. Heavy rallies from the financials - and satellite companies?
However, there was another effect - other non-financial stocks which were heavily shorted also rebounded significantly. Sirius XM is a great example - outperforming the S&P by 15% this week.

3. The miracle company - CapitalOne

I've been extolling the positives of CapitalOne for quite a while now. Their stock - DESPITE NOT BEING ON THE SEC's NEW ILLEGAL SHORTING LIST - SKYROCKETED FROM 46 TO 56! By the way...for those of you who are paying attention - I recommended this stock when it was at 36.

4. I'm Eddie f***ing Lampert.

Eddie Lampert got his first job at Goldman Sachs when he was 15. He was a child genius who became one the best traders on Wall Street. He now owns Sears.

Now, his company's stock is under attack. TWENTY-FIVE PERCENT of outstanding shares were being sold short.

So what does he do?

He says, "I'm Eddie f***ing Lampert" and then...

...proceeds to buy back 4% of shares in THREE MONTHS (normally takes 1-2 YEARS).

The price of the stock goes from 70-ish to 100/share.

Some people shorting his company lose as much as 33%.

Why did he do that?

Because...he's Eddie f***ing Lampert.

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So, what does all of this actually mean?

1) Trust the book value. Companies that should not be trading below book values - such as Sears and CapitalOne - are now buys.

2) If you lost money on energy companies recently, I would use the momentary spike in oil prices - and the increased price of oil companies - to sell off the energy companies. Collapsing demand can only be buoyed by the weaker dollar for so long.

3) Covered calls are probably a winning strategy for companies whose only major concern is consumer slowdown. I would be more reluctant to do very specific retail -such as Guess and Ralph Lauren, but I think covered calls on APPL and BBY are probably solid strategies. Don't touch Circuit City or Gamestop. Circuit City is slowly dying and Gamestop is just too risky as their trade in service is starting to upset customers. I think covered calls on pharmaceuticals are a great idea too - especially GSK and SNY are great too. I don't expect the market to be up 30% in the next year or so and a covered call can often net you 30% with only small upward movements of the stock.

I think that's all I have for right now. Keep on reading!

-Mansij Hans, E.I.T.
Member, Intigril Capital Management