There's a big market meltdown going on today, filling the airwaves and columns and conversations. What can I possibly add to this white noise that's confusing and hard to understand?
Let me introduce myself, to those of you who don't know me. I'm not the armchair economist talking macro theory and historical perspective. I'm not even the fund manager working with everyone else's money and taking his free 2% off the top, no matter what his performance level.
No, I'm the guy who's stared many, many six-figure daily losses in the face, with my kids' education money and that month's bills on the line and managed to come through it. I know these kinds of markets, I know how they trade and know how to come out the other side -- maybe forced to have a bite or two taken from me in the shark-infested waters, even lose a leg -- but not be a bobbing torso.
OK, maybe that last image was a little extreme, but I know you've got big money in this market and are scared -- whatever that number is. What you need to know when you read my columns is that I'm right there with you. What I recommend to do is precisely what I am doing -- not what I think looks good.
Let's not look any more macro than just today. Let's just get out and look at some trades that will get you through the day and through the rest of the week - and maybe find some ideas in these blood-soaked waters:
Today's 50% partnership agreement between Consol Energy (CNX) and Noble Energy (NBL) in Marcellus assets has made Consol one of the few green spots on the screen. This is really just another of the long line of M&A deals in shale natural gas that has been going on for the past two years, sparked originally by the overpayment that Exxon Mobil (XOM) made for XTO Energy. At a price of $3.4 billion, Consol has raised some significant cash and gained some of the expertise that they need to continue their change from being exclusively a coal company to a much more natural gas exposed company.
I'm not a fan from either side of this -- Noble has been searching for an entrée into shale gas here in the U.S. and is coming into the party pretty late and paying too much, particularly because of the weak natural gas price and the continued weakness out on the natural gas curve. The fact that Consol made a few more bucks on this than they probably should have has raised its share price momentarily, but I wouldn't bank on their continuing move into nat gas as the savior of the coal company. If anything, I'd be a seller if I held it now.
Here's a more positive angle today:
Dividend yielders like super major XOM still look fantastic to me on days like this, but you've got to know that you'll probably take some more pain on it if you choose to wade in today. But it is almost certainly the right thing to do - you've got a sticky high oil price and incredibly steady production that virtually guarantees just incredible profits for the third and fourth quarters, no matter what the rest of the market does. Add that to a dividend that only increases, a huge stock buyback program and even a chance to sell some covered calls as you buy it at massive volatility and this is a trade that should be easy to live with.
There you have it. Some simple ideas in these turbulent waters - good luck and keep kicking.