Monday, June 8, 2009

Bookkeeping: Weekly Changes to Fund Positions Year 2, Week 44

Year 2, Week 44 Major Position Changes

To see historic weekly fund changes click here OR the label at the bottom of this entry entitled 'fund positions'.

Cash: 55.3% (vs 46.9% last week)
29 long bias: 35.4% (vs 33.8% last week)
9 short bias: 9.3% (vs 9.0% last week)

37 positions (vs 42 last week)

Weekly thoughts
Not much to say, another up week (yawn) ... Groundhog Day. I went back to review the week and was scratching my head at why we gapped up Monday. These gap ups one after the other, soon all start to look the same. I was searching my archives and looking through the economic reports... than I remembered; China PMI. (which is about a 4-5? year old report from one of the least transparent government's in the world - but let's put our chips on it). Strangely Friday, on a "great" employment number the market did not do much. Essentially the gains of Monday was "the move" and the rest of the week was spent rallying in the last 5-10 minutes most days or futures improving premarket. I am thinking in this new era to simply be long the market in the premarket and the last 10 minutes of each day - that's when most of the upward action seems to be ...

I gathered some fun facts below rather than offer any economic analysis - because the only analysis worthwhile now is "buy stocks".
  • The market is up 11 of the past 13 weeks, one of those "down" weeks was something in the range of -0.4%.
  • Stocks in the S&P 500 with positive earnings have underperformed those with losses (or no profits) by a 24% margin since March 9.
  • Stocks that pay dividends have been dragging behind those that don't.
  • The smaller a company, the more money it is losing and the deeper in debt it is, the hotter its stock has been over the past three months.
  • Corporations have unloaded nearly $80 Billion of new stock on investors. ...more than 150 other companies raised $82.2 billion this quarter, beating the record pace at the height of the technology bubble in 2000, according to data compiled by Bloomberg. The combination of adding shares and restricting dividends will reduce annual equity returns as much as 4.1 percent, the data show. (that assumes PE ratios are flat of course, but when money is flown in from helicopters it appears PE ratios can go to whatever we wish)
  • “What we find is that secondary-equity offerings frequently signal a view in management suites that prices are rich.”
I cannot remember any similar period I've been around other than fall/early winter 1999 when we were in the heart of the technology / internet bubble and I was on the other side of the trade than where I am today. I was gleefully buying every dip, not caring about valuations, and laughing at those who were not partaking in how 'easy' this was. Ironic really - when I knew a lot less and had a lot less experience I did a lot better in these sort of maniacal runs. ;) Being a lemming was a pleasant thing - both then and now. We were all laughing at those "value managers" back then who were sitting on the sideline and having the money sucked out of their funds since they did not understand the new paradigm... with that said, I did get splattered on the windshield in 2000. And value managers had a good 3 year run.

All the world now awaits for another "triangle" to resolve. We had a similar triangle about 7-8 weeks ago that once resolved to the upside led to a new leg up, and I'd expect the same here. I keep thinking one of these surges up through a resistance line will create a trap door for longs (i.e. a reversal), but with that insistent bid in the last 10 minutes of the day along with almost every morning between 7 and 9 AM the market is "clearing and holding" each level. Still shaking my head at what happened a week ago Friday in the last 5 minutes So I suppose since we can never expect a reversal once S&P 950 is "held and cleared" another round of desperate institutional money who needs to "make performance" to match the indexes will rush in and away we go. Here is the chart every desk across NYC has ....

So as we've noted this week there are 2 quite different looking charts based on if you use simple or exponential moving average because the 200 day MA is moving downward at such a sharp rate on the "simple" side. In my world, we still have not cleared the 200 day moving average but even if one uses simple moving averages the very obvious level of S&P 950 is the resistance. And once broken a new avalanche of buyers awaits via HAL9000 and friends. (at one point when things were *this* obvious I'd say there is no chance it happens, but that was another era) The upward sloping line connecting recent lows is one side of the triangle and we will resolve this in very short order one way or the other.

... and as always the 20 day moving average is the support in the market as it has been now for 3 months... currently about S&P 912 (rising very quickly). As long as the market holds that there will be no fear.

For those curious I am not necessarily sitting here waiting for a pullback so I can "load up" for the "very easy next leg up" on the "road to S&P 1200". I am just sitting here watching a lot of historical rules completely broken - such as, when one side of the trade is so easy, for so long... the market reverses. Or... the market hates complacency and likes to inflict pain on the "obvious" play. Or... when so many people are in the same trade, it stops working. But the Invisible Hand (grassy knoll alert) was not such an active friend in any other time, so a lot of rules may not apply. But each time in my memory there has been so much complacency about a market, things go in the other direction and it makes the complacent uncomfortable... i.e. in this case all the folks who are waiting for a simple 5-7% pullback to "reload" will lose money on those purchases as the pullback will be far stronger. But I've been saying that for 5-6 weeks now so ignore the broken record...

As for economic reports we have a light week - we have a government retail report (in which we ignore everything the retailers are telling us and instead await the government to tell us what is correct)... with gas prices rising I can already see it now, we see futures surging Thursday as retail sales came in 'better than expected'. No one will point out the fact that gas prices jumping month over month will account for much of the 'surge in spending'. The other main thing will be the 10 year, and 30 year bond auctions coming that we've highlighted the past few days.

Other than that we remain hostage to the dollar and oil. The market loves higher oil and until that changes the same old trades will keep going. We closed out Axsys Technologies (AXYS), (buyout) Regions Financial (RF) (would rather own larger banks that the government has built a ring of fire around) on the long side, and 3 of our then smallish commercial real estate shorts...

In terms of positioning, like a lemming I will be resigned to chase the market ever higher on a close over S&P 950, and then openly rooting for the "futures bid" to stay around so I won't be Charlie Browned* by Lucy and have the football taken away from me. Remember, we are at S&P 940 now but could drop a good 25 points and not fall out of our upward trajectory.

*a market reversal once every last short has thrown in the towel and performance angst has pushed every long fund manager out of cash

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