TCM Notes : 8/31/09

• This is end of the market commentary, but better late than never. I had warned in a note to my partner on Friday that the market was not discounting for a Shanghai index 10% drop, or a sharp dollar rally either. I also noted that the new risk with oil is being long into a weekend for the previously noted scenario. Remember when the risk was being short going into a weekend with the continuous Iranian saber rattling? Anyway, all my scenarios kind of played out today (including KFN popping 20% on an analyst upgrade.) I'm kind of at a loss to whether this marks a trend shift of the recent bull, or rather it's the welcomed dip the street has been waiting for. We buy moving average support until it is violated.
• KFN as noted above saw a sharp move of this upgrade: "KKR Financial Holdings (KFN, $3.80, +$0.55, +16.92%) was upgraded by JMP Securities to outperform from market perform and set a $5 price target. The firm said the upgrade is based on recent actions taken by management at KKR Financial, which have improved the liquidity position of the company and have restored cash flows to equity holders. The firm also said it believes that investors should also consider positive trends in the credit markets." That speaks to our target of management's stated book value of 5.79. Here in lies the dilemma. Do you chase after what is mispriced? The analyst community seems to be doing just that. So what we may think is overbought; to them is not even close to being at fair value.