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The main news of the day during trading hours was Ben Bernanke's testimony. He said QE3 is back on the table if conditions warrant. Quite frankly, I'm tired of all of this, much like the Greek crisis. Unfortunately macro events are dominating the market right now and we've still got to pay attention for portfolio positioning.
If the politicians don't come to an agreement, I've been thinking of the potential consequences and how to protect against them. My initial thought was that treasury bonds would take a hit, so shorting them would be a good option. I think shorting them is a good idea whether we're talking about the debt ceiling or not, but Business Insider had a good piece today on why that may not be a good way to play it. The market knows this train wreck is coming, so why is the 10 year below 3%? That's the problem with my original approach. The article makes the point that a default, technical or not, will spread fears throughout the market, so the natural response for many would be to buy treasuries, even if the treasuries caused the problem. It's perverse, but it makes sense. If markets crash and uncertainty reigns, you know treasuries will be repaid, even if just a few days late. I'm still thinking through scenarios, but perhaps just shorting the market or buying gold would be good options. Of course, holding cash never hurt anyone either.
On to stocks. Rupert Murdoch is attempting to mitigate the News Corp scandal. He's withdrawn his bid for Sky Broadcasting after previously shutting down News of the World. The question is whether this is a buying opportunity or not. Shares are only down about 10% over the past week, but Citi put out a note saying the stock is more than 20% undervalued. That's not enough for me to get excited about given the risk. Who knows, though, if the stock drops another $3 or $4, then a lot of value investors will probably be salivating. It will be interesting to see who picks up shares this week. Seth Klarman, Louis Moore Bacon, and Donald Yacktman, among others, currently hold shares.
Apparently Amazon will be coming out with a 9 in. tablet computer this quarter. This article pits the company against Apple's iPad, but I think it's a bigger threat to Barnes & Noble's Nook. Many owners use the Nook as a small tablet. That being said, Amazon does have a lot of tools in place to compete against the iPad. And, they've got a great way to distribute it, much better than the android-based knock-offs. The stock is near 52 week highs and has a P/E in the 90 range, so for me this is just an interesting story but not actionable.
Disclosure: No positions
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