Today (12/10), we are shorting Microsoft with all our big guns, including put option buying.
MICROSOFT- When you try to rule the world, you create many enemies as IBM did in the past and Microsoft does today. The stock is WAY overpriced but industry analysts don’t seem to notice. Now that the stock has split, it will soon run out of momentum as most splits do and THEN VOILA! Key executives are about to leave (jump ship). While Bill may do well with Office 97, by 1998 the N/C will take away a lot of their multi-terminal licensing fees. As one sharp industry analyst told me : " better not buy MSFT: I would add " better still, sell it or short it!"
In response to a readers comment today:
" Monday is the 11th no crash yet. Is there a day or week that you might say is the most likely date to begin the decline. If your predicted decline doe not occur is there a date at which you would change your forecast. In otherwords if November is a good month and closes positive are you going to take another look at your forecast?"
Remember the DIJA numbers we gave of 6300. If that is taken out, we will need to change course. At the moment, I am suggested to add to selective shorts e.g. TIME to short Microsoft 144 (stop at 152). We are also currently short IBM (Stop 137), and GE (stop 106). Our response is if the market takes us out, we will be regroup our thinking for the March or January/March next decline. I am a COSMIC value player, we have a few cases such as ATT that I am comfortable long, as well as special situations like MO next year, but overall I would rather be sidelined if not actively fighting the market at strategic times. Anyway our annual report will be issued December 7 with any revised views if needed.
HOW WAS OPTIONS CLOSE FOR US? Well personally I made money Friday buying the OEX put option WC for 1 1/16 and selling it for 4 7/8. This was great fun for me and more than made up for a loss Thursday from another OEX put option. However gambling pleasures aside, to briefly answer a readers letter today which prompted this email:
<< You recommended selling IBM and it has soared. You recommended buying IHI and it has languished. Are you reconsidering the way you are looking at these companies? >>
With the Friday IBM recommendations by Merrill Lynch, our short position was technically taken out, while our GE short, MSFT etc was not. One friend is holding his IBM short UNTIL Tuesday. WHY? The IDES OF NOVEMBER IS OUR DEMARCATION PERIOD. IF THE MARKET TAKES OUT 6363 on a closing basis (6300 + 1%), we have to issue a new forecast to years end and our November forecast was plain wrong. This happens to the best of us (my Leo modesty restrains me from mentioning my accuracy and precision is second to none! :) Some astrologers such as Carol Mull and Greg Meadors have called this post election market rally better than I have. Remember there are different astrological techniques and systems, IF IT TURNS OUT I AM WRONG, then this is a personal failing not a general indictment of financial astrology techniques. However, BE THAT AS IT MAY.... LET US SEE HOW WE GO INTO NEXT WEEK with options unwinding. The Cadbury numbers (now posted on our web site) are for the first time since September pointing to a down market move!
As to IHI, I firmly believe this is a GREAT play. First fundamentally, their November 8 progress report states they ARE FULLY ON SCHEDULE with the construction of their first factory mid 1997. Over 130 panels have been completed etc. So I see the stock in a countdown period between now and Summer 1997 blastoff. True, all this has taken much longer than expected. But this often happens with new and revolutionary technology but the fact is it IS happening. Personally I bought some more recently and expect to be a very happy camper on this one next year at this time. Also remember I am anticipating an early 1997 move for IHI with the Jupiter-Uranus conjunction across their IC/MC axis I wrote about on pages 175-178 in my book INVESTING BY THE STARS. I suggest you check out their web site: http://www.ihiintl.com or call investor relations for 1-800-838-8090 for an update or investor package if you haven't already.
SO, I hope I WONT have to be sending you all a new market report Tuesday.
Aura Best,
Henry 11/16/1996