Bookkeeping: Short Valueclick (VCLK)

We are actually down on the day, but then again we don't really move with the market many days with our strategy.

I'm adding a new name to the short side, as Valueclick (VCLK) just reported, gapped down off a poor report and now has rallied back to just under support. A perfect low risk set up. I am risking a 3% maximum loss by shorting at $10.90 and I will stop out around $11.25. We are using about 3% of the portfolio. I would enjoy seeing mid $9s again which would net us 17%.

This exposure is completely for technical reasons, although the fundamentals don't seem too great either.

• Citigroup's Mahaney told clients in a research note that based on the second-quarter report, ValueClick's lead generation segment, which accounts for about 20% of its revenue, "appears in free-fall," having dipped 39% from the period last year.
• The loss of revenue from the lead generation business, which provides data to clients aiming to target Internet users with e-mail and other campaigns, could pressure ValueClick's margins, Mahaney noted.
• In addition, Mahaney noted that ValueClick's display advertising business may see increased competition from Yahoo Inc and Google.
  

I am also looking at Transocean (RIG) as a potential short - you have a "double top" and a stock breaking below support - but since I am already weighted net short at this time I decided to go with VCLK for now. I don't want to be 40% short going into a Monday where China surely will release a Green Shoot report to stoke the world's markets ;) Until we stop being 'surprised' by the same news day after day, week after week we have to hold off being too aggressive on the dark side.

As outlined a few weeks ago, beginning with a break over S&P 1000 and (hopefully) concluding at S&P 1050 we want to become increasingly short. The higher we go into September and October the more bearish I become. A lot of our green shoots based on housing are going to lose their seasonal positives as we enter fall... and whatever the government is reporting for economic stories is for Wall Street stock jockeys to enjoy. I continue to believe Main Street is in a world of hurt ex government transfer payments - this was shown in yesterday's retail reports and will be continue to be shown in back to school sales (ex laptops and cell phones of course) as well as this Christmas. ISM Services which is 90% of the American economy also disappointed but no one spent more than 5 minutes discussing it since we were in joy over Cash for Clunkers. You don't bounce back so easy when 70% of your economy is "shopping" and the 14% truly unemployed (not 9.4%) and additional 6% underemployed are staring at walls in disbelief at their situation; no matter how much money you take from future generations.

Nothing has changed in the long run for me - our jobless recovery will continue and Americans who no longer have house ATMs have a whole new paradigm to face in the coming 3 years. (granted the house ATM has been replaced by the government handout ATM) Only on Wall Street is the loss of hundreds of thousands of jobs a green shoot. We need to be creating 150K jobs a month just to be treading water (due to population growth) - and they can't all be in federal government, or federal government proxies such as health care and education. (but we're trying valiantly) - 16.7% of all jobs are now government, 12.3% healthcare. That's 30% of our workforce that is bulletproof from job loss since the costs of those 2 sectors are just piled into a heap of IOUs; hence we can only fall so much in employment.

Short Valueclick in fund; no personal position

Bookkeeping: Selling Most of First American (FAF)

Enough is enough - pigs get slaughtered. (but only after bears) I am selling all but 25 shares of First American (FAF) at around $31.90 - I wish I could say there was some special insight I could offer here on reasons for the run. I see many stocks with the same look... parabolic.

[Jul 30, 2009: First American Profit Triples]
[Apr 30, 2009: First American Beats by a Mile]



We'll buy back when the market next falte... ah, nevermind.

p.s. a moment of condolence for anyone trying to short commerical REITs: many of which have rallied 30-40-50% this week alone. I was once one of you circa spring 2009... I'm sorry for your losses.

Long First American in fund; no personal position

Shanda Interactive (SNDA): Weak

I've been trying to short Shanda Interactive (SNDA) for a week now but my limit orders appear to be pathetic. I like this setup as the stock has fallen below both the 50 and 20 day moving averages - in a steroid like strong market mind you - and the 20 day has crossed below the 50 (bearish). Since anyone attempting to short has had their teeth knocked out the past month, I wanted to place the limit order around the 50 day moving average so if I was wrong, my losses would be minute. I started this week with a $54 limit order, than went down to $53 Tuesday, and finally today placed the order just below $52. Why this stock could not spike just one day this week during all the rallies is beyond me. I'd be sitting pretty today. I am just highlighting this as a name of weakness... down 4% in a tape like this? Hmm... and it's not the only Chinese stock acting this way.

Always a bear market somewhere.

No position

Baltic Dry Index has Worst Week Since October 2008 - Blame China. Precursor to Loan Growth Slowing?

I continue to be amazed how the Chinese are dominating so many markets - if they say jump, the market jumps. If they back off, said market usually crumbles. [May 13, 2009: Commodities - It's China's World: We Just Live in It] [Mar 23, 2009: FT.com - Chinese Stockpiling Spurs Copper Price Rally] [Feb 9, 2009: China and the Baltic Dry Index - What's Really Going On?]

Looks like this week was "break time" as the Chinese backed off on iron ore and coal. Since market participants are using the Baltic Dry Index as a "health of global trade" proxy (when in reality it has become a ward of the state of China) I wonder why no one is talking up the worst week in nearly a year? Ah yes, that would not fit into the mosaic of recovery... shhh.... I had to sneak this off the back pages of Bloomberg.com. BDI lost almost a fifth of its value in a week - have you been seeing that on CNBC? Just wondering? ;)

• 

Remember, good news is to be trumpeted, and bad news (or anything perceived as such) is to be ignored. ;) But lest you worry, with the index down so severely THIS week when it invariably rebounds it won't be ignored - it will be a lead story for 'reasons you need to buy stocks' on certain financial entertainment TeeVee stations.

• The Baltic Dry Index, a measure of shipping costs for commodities, had its worst week since October as Chinese demand for shipments of coal and iron ore slowed. The index tracking transportation costs on international trade routes today slid 135 points, or 4.6 percent, to 2,772 points, according to the Baltic Exchange. That took its weekly drop to 17 percent, the most since the end of October.
• “The Chinese have backed off and it’s starting to show in the number of shipments this month,” a Cape Town-based official at Island View Shipping SA, Africa’s biggest commodities shipping line, said by phone today. “Iron ore and coal seem to be slowing down.”
• China’s record coal and iron ore imports in the first half helped the index to advance as much as fivefold this year, reversing some of the record 92 percent collapse in 2008. Demand rose after the country’s government announced a 4 trillion yuan ($586 billion) stimulus package.
• The Baltic Dry Index has slumped 35 percent from this year’s high on June 3.
  

I am going to repeat what I said earlier today again - China's market started moving up before the rest of the world late this winter. China is coming off its worst week since February 2009. If China does not bounce next week let us begin to think about the implications - even if these questions are not convenient to the bull case. Now is this slowdown on imports at all related to the signs we are getting that loan growth is potentially ratcheting down after a massive sugar high in the 1st half of 2009? Or just a temporary respite as the Chinese negotiate on iron ore prices. Too soon to tell. But right now I am reading every article I can on the loan growth of China in 2nd half 2009. The story seems to change by the day but it is the most important variable in the world right now - their Super Keynesian policy has been the driver for much of the world's surge. I can't see them taking away the punch bowl already but don't lose track of it.... we're starting to get some interesting cross currents.

• China Construction Bank’s President Zhang Jianguo said new loans will fall by about 70 percent in the second half compared with the preceding six months, helping the nation’s second-largest bank avert a surge in bad debt.
• “We noticed that some loans didn’t go into the real economy,” Zhang, 54, said in an interview yesterday at the bank’s headquarters in Beijing. “I feel that some industries are expanding too rapidly. For example, housing prices are rising too fast, and housing sales are growing too fast.”
• Zhang’s comments add to evidence that Chinese banks may curtail credit after they advanced a record $1.1 trillion of new loans in the first half, almost equivalent to India’s gross domestic product last year.
• Excess capacity in some industries and a property bubble has led to increased risks for banks, Zhang said.
• The central bank said on Aug. 5 it would use “dynamic fine- tuning” and guide “appropriate” loan growth. The statement suggests the central bank will tighten monetary policy, said Galaxy Securities Co. chief economist Zuo Xiaolei. Construction Bank said last month it plans to follow the government’s monetary policy.

As always we're usually early here on Fund My Mutual Fund... ahem. [Feb 16 2009: Is China Pulling an Alan Greenspan?]

Now the Chinese are asking the same questions we proposed 3 months ago [May 27, 2009: How is China Spending their Stimulus Money; and How many Loans will go Bad?] We already know much of this money is going into the stock market [Jun 29, 2009: China Business News - $170B of Bank Loans Funneled into Stock Market], and now real estate - instead of the 'real economy'. Now the Chinese are looking in the mirror and admitting as much. Many of these loans rushed out will go bad over the coming year(s) - I am sure we will never hear the full story. Just as in the US we have a sugar high in China in the near term; when we'll look back sometime in 2010 I believe we'll see it much more clearly.

[Jul 28, 2009: FT.com: China Warns Over Asset Bubbles]

Niche Play on China Telecom: AsiaInfo Holdings (ASIA)

At heart I enjoy finding longer term secular growth stories and investing accordingly; unfortunately the world is not exactly awash with them since most developed countries seem to be relying on bubble creation for prosperity, rather than actual paradigm changing innovations. Plus with almost every stock moving together in "student body" left trading for the better part of 18 months individual stock selection has meant little. However if we ever return to a more normal market, something that is catching the fancy is the mobile internet - which we've been talking about for quite a while. Basically repeating the late 90s thesis, but "in the air" rather than "by landline"- hopefully without Pets.com v2.0. A related secular growth story is the telecom buildout & modernization in China. Even as I am wary of the conditions created by the massive loan growth in that country - which are affecting real estate, stock market, and commodities; I think the telecom modernization is the real deal. Now if China corrects seriously will this secular growth story matter? No - not one bit... student body trading morphs into "baby out with the bathwater" once the music stops. But we still want to develop lists of interesting ideas to which to wrap the intermediate to longer term portion of the portfolio around.

I've had AsiaInfo Holdings (ASIA) on 1 of my "to do" lists to research for 6 months now and only in the past 2 weeks have created some time to actually dig into it. This is a $800M market cap company, growing at a stellar rate, profitable, no debt, reasonably valued unlike much of the nonsense being run up at 50, 60, 80x forward estimates. In other words it is not that fashionable of a stock to buy - much hotter are unprofitable, very expensive, and debt laden. But we'll stick to our knitting. Their website is here, and a good overview of the company via .pdf file can be found here. Specific info on their product lines here.

Interestingly enough, this company was actually founded in Texas in the early 90s but by 95 had essentially moved most major operations to China. Much like the niche telecom players in the US, the company is reliant on a small cadre of big telecom service companies (i.e. in the US these would be the Verizon's, AT&Ts et al) so this creates both a blessing and a curse.

AsiaInfo Holdings, Inc. (Nasdaq: ASIA) is a leading provider of high-quality telecom software solutions and IT security products and services in China. In the telecom market, our software products and services enable our customers to build, maintain, operate, manage and continuously improve their communications infrastructure and services. Our largest customers are China's major telecom carriers: China Mobile, China Unicom and China Telecom. In addition to providing telecom software solutions and services, we also offer sophisticated IT security products and services, such as firewall and Virtual Private Network (VPN) products in China.

I ran the name past Zach of Zachstocks.com since we generally have similar taste in "themes" and stock ideas and after a cursory look he also found the company attractive. He was interested enough to do a lot more digging and has provided us with another excellent write up. Now in great irony, since we've been trading commentary back and forth via email the past few days on this company - the stock has done nothing but go down.

Technically there is a little gap around $17.60s and the 50 day moving average is around $18.30. So I've been waiting to see how the stock acts if and when it fills the gap. To the topside it has been struggling at the $20.50 area so for now it appears range bound - also negative is that recent highs have been lower than early June highs. Therefore this stock would not be attractive to the current "momo" crowd (buy high, sell higher - valuation means nothing) which is dominating the stock market right now. I would love to be a buyer down near the 200 day moving average ... but I suppose that would require the stock market to fall. So we can't count on such an improbability such as that. (ahem)

From there, I'll let Zach go in more depth on this idea that I believe will be joining our portfolio in the future.

Guest Post from Zachary Scheidt – Zach manages ZachStocks.com which focuses on uncovering investment opportunities in growth stocks – trading from both the long and the short side. Zach also is the Principal and Chief Investment Strategist at Sound Counsel Investment Advisors – a boutique investment company which seeks to provide independent investment advice to individuals while minimizing conflicts of interest or biases which are typically represented at larger investment firms.

AsiaInfo Holdings – An Attractive Value in the China Telecom Market

It seems that in today’s market, any stock associated with China is bound to be trading in a positive trend. It’s no wonder as the Chinese equivalent of our Federal Reserve Board has made it clear that the country will continue to keep monetary policy loose in order to foster growth. The policy has driven investors to bid up stocks in a seemingly endless parade of capital, regardless of the price.

While all too many Chinese companies are now trading at multiples that are similar to the Internet bubble of the late 90’s (and we all know how that turned out), there are a few growth opportunities in China that actually trade at a reasonable price. Picking up a Chinese growth stock in the neighborhood of 20 times earnings not only gives you the chance of experiencing multiple expansion (imagine the price of the stock if it rose to 30 times earnings), but if you pick your candidates correctly, you should see upward revisions to the earnings expectations which can compound gains.

---

Today there appears to be an attractive opportunity in AsiaInfo Holdings Inc. (ASIA). The company is one of the leading telecommunication companies in Mainland China and offers software and solutions, as well as IT security products and services. ASIA is actually broken into two separate business divisions:

• AsiaInfo Technologies
  This division offers traditional telecom software and solutions to telecommunication carriers. The division is broken into three primary categories which include Business Operation Support Systems, Service Application Systems, and Network Infrastructure Solutions. If all of that sounds like alphabet soup from the '90's, you can boil it down simply by saying that ASIA partners with carriers to help with processes like efficiency, connectivity, billing, and customer care.


• Lenovo-AsiaInfo
  The Lenovo division could actually be compared with Mcafee Inc. (MFE) or Symantec Corp (SYMC). With expertise in IT security, antivirus and other network protection technologies, Lenovo has built a reputation for security. Landing contracts with the Chinese government is certainly a ringing endorsement of the divisions skill in protecting customers.

Although both divisions are showing significant growth, the first business line actually accounted for 83.7% of revenue in 2008, and for the first two quarters of 2009 that level has actually been closer to 90%. Still, Lenovo could eventually morph into a much larger portion of the company’s business as cross-selling opportunities emerge. Lenovo has also landed quite a few recent contracts with government agencies. If the company manages these contracts well, it is easy to see how business could pick up substantially.

AsiaInfo is actually a bit constrained as to who it can deal with when it comes to landing new contracts. In the most recent quarter, management noted strength in “all three major customers” in the telecom business. These three players are China Mobile, China Unicom, and China Telecom. The existence of three major semi-state-owned players as the primary customers can offer investors both risk and stability. Obviously diversifying to more than three primary customers would reduce risk as no one damaged relationship would be as material to long-term earnings.

But at the same time, as ASIA makes inroads and establishes a reputation with the major players, investors can be confident that the major customers will be able to pay invoices and will likely represent a long-term growing relationship as China’s population increasingly moves toward a higher quality of life with more services demanded.

---

Looking at the most recent quarter, ASIA exceeded revenue and earnings guidance and offered some very positive commentary. To quote Steve Zhang, AsiaInfo’s president and CEO,

“[the company]… Continues to benefit from increasing expenditures on telecom software, as operators build out and further optimize IT infrastructure and integrate fixed line broadband and mobile businesses to provide bundled service offerings.”

Revenue for the quarter came in at $58.6 million which was an increase of 39.3% over last year and 14.9% from the first quarter. Earnings were posted at $0.25 per share which was nearly double the 13 cents earned in the second quarter of 2008. And most impressively, profitability metrics improved with gross margin coming in at 49% compared to 45% last year. The higher margins is a direct result of the company selling more software which has better profitability than hardware products.

While we have discussed the “three major customers” as pseudo government agencies, ASIA was able to land seven new contracts with subsidiaries of these customers which gives a bit more diversification to revenue streams. These contracts were primarily to upgrade business intelligence systems as China Mobile rolls out its expanding 3G network.

---

On the security business side, there were several key contracts signed with government agencies, but as you can imagine very few details were given.

AsiaInfo has a strong balance sheet with no debt and unrestricted cash of $177 million. The cash balance is up from $172 million at the end of last year which proves that even as the company invests in future growth, it is able to retain a good portion of its earnings. At some point investors will likely begin to ask management to do something productive with the cash, but for today I prefer to hold stocks that have given themselves financial flexibility and have no risk of missing debt payments or falling behind on debt covenants.

Analysts are expecting ASIA to earn $1.05 next year which means the stock is trading at just below 20 times forward earnings. That price is not exactly cheap, but compared to many other Chinese stocks that are showing similar growth – it is a “relative value.” With a strong management team, proven success in landing contracts, and a fiscally conservative approach to growth, this stock appears to be a worthwhile investment with a very attractive potential return.

No position

Bookkeeping: Stopped Out Most of Starent Networks (STAR)

I didn't see this yesterday but in the last 10 minutes I was stopped out of 95% of my Starent Networks (STAR). I gave it a wide berth (so I thought) and had a stop sitting at $22.15. Looking at the intraday chart there was a mountain of volume in the last 90 minutes that forced the stock down to $22.00.

We had expanded our exposure a week ago Tuesday, with shares at $23.10 so booking a manageable 4.1% loss on the batch - about a 3% exposure. This is the 2nd time we've been stopped out of this name in 2 weeks, so the weakness is telling us something.

This is one of my favorite names fundamentally but I won't ignore technicals - any stock falling in this type of market where Kool Aid is dripping off keyboards across the world has to make us take notice. It has not really rebounded today either, and is stuck below the 50 day moving average for now - we want to buy when it gets back over this level or it if falls say - to the 200 day. For now it is no man's land. (is that a tiny gap at $20?)

[Jul 24, 2009: Rebuilding Starent Networks on Good Earnings]
[May 11, 2009: Starent Networks on Mad Money]
[May 8, 2009: Bookkeeping - Beginning Starent Networks]
[Apr 29, 2009: Starent Networks (STAR) 3G Player with 4G Potential]

Long Starent Networks in fund; no personal position

Bookkeeping: Adding Back to Short of Riverbed Technology (RVBD)

So who was long Crocs (CROX) going into earnings last night? They only lost $30M, just imagine if they make money one of these days.

Anyhow, I was not so fortunate .... we are going to re-establish our short on Riverbed Technology (RVBD) that we covered for a 5% profit ahead of Cisco's earnings, Wednesday. The stock is back up to near $20.50 so we have a nicer entry although I was hoping for just above $21. Even with this euphoria the stock just has lot its mojo.

We had cut this down from 4%ish short to 0.1% Wednesday, and now we are getting it back up to previous levels. Over $21.50 and we'll exit.

Short Riverbed Technology in fund and personal account

Fibonnaci's Last Stand

As we mentioned in the weekly summary, we had a "double top" with November 2008 highs in the low S&P 1000s - I didn't check back for an exact number but looking at where we stalled all week intraday it appears around S&P 1006... once broken the computers would rush in which is what happened today.

We have a very similar situation to the January 2009 highs, early June highs and the setup we were at a few weeks ago - lots of congestion at S&P 950s. Once broken, we flew higher. Now we repeat that exercise with low S&P 1000s aka November 2008s peak. If that breaks, the super computers will rush in again.

Whatever caused the algorithms to run happened around 10:30 AM, and we basically went in a straight shot from S&P 1006 to S&P 1015. This is where Fibonnaci make's his last stand (in progress), at least for his 38.2% retrace. [Aug 5, 2009: Fibonnaci Calls: The 38.2% Retrace Approaches]


If that fails, Kool Aid man scores a knock out punch versus the Italian stallion, and takes us from here - my assumption is 2 more weeks of rallying to get the market to S&P 1050.

Looking back S&P 1050, looking back through the charts we fell so dramatically in October 2008 (remember we lost 20% in 1 week alone!) there is mountains of upside north of that level.

So at this point, with the potential for another quick 35 S&P points staring us in the face if Fibonnaci falls we have to consider dropping more of the short exposure in the near term. Will assess as the day goes by. This is going to be the 20th day in a row without anything greater than a 0.5% correction in the S&P 500 - effectively a month straight of rallying at this point. And yes that gap at S&P 906 still exists...

For the last 2 bears remaining, what you want to see is the market (a) react badly to good news - or its perception of good news and (b) euphoric blow off buying. We are not seeing (a) yet, but the past few days we have started to see (b). I am not sure what good news is left to rally on, but I am sure China can come up with something over the weekend. By the way this week was China's worst since February 2009 - they led the world up; if weakness continues next week we'll see if they can be ignored.

I am not surprised by the number of job losses (in fact I was surprised last month's figures did not improve as much as I thought), although the unemployment rate dropping was a surprise. But again the way the government figures things, if Americans give up looking for work, they drop out of the workforce and the unemployment rate drops. It's just the math of it. But it is hard to tell with all the adjustments what exactly is going on. I will do a separate entry later in the day on the unemployment picture - keep in mind, if we measured it as we did pre early 1990s we'd be cheering something around 13.4% (down from 13.5%). The positive is hours worked "surged" from an all time low of 33.0 to 33.1, and there were actually wage gains. Considering all the treasure taken from future generations let us be happy we have such fantastic results. But in reality it doesn't seem to matter anymore - if the news is bad we are told it is backwards looking, and if it is good we run the market up on it. Which is what we said would happen :)

India's Growth May Suffer Due to Weak Monsoon Season

This is getting little play in the US, but the monsoon season in India is getting off to a poor start - thus far rains are 25% below normal. With half the country's agricultural production non irrigated this could cause some issues down the pike if things don't turn around - both for India's growth itself and in soft commodities as India will be forced to import more. We've discussed last year how India is very much below potential in their agriculture. [Jun 23, 2008: This Day in Agriculture - India Falls Below Potential]

Already sugar is at a 28 year high. [Jun 20, 2009: The 10 Hottest Commodities of 2009]

This would fit in the theory I advanced many times last year that the globe will be going through continuous shortages of 1 commodity or another of foodstuffs as too many humans are moving out of abject poverty and actually demanding goods. And less land that is arable is available due to urbanization. Sort of like rolling blackouts but of various foods. Whichever food has a price spike, farmers will rush into the following year, leaving a shortage somewhere else. With 5% of the world's population but consuming 25% of its stuff, I don't think Americans are ready to realize what is coming down the pike. [Mar 24, 2008: WSJ - New Limits to Growth Revive Malthusian Fears] [Jun 20, 2008: World Population to Hit 7 Billion by 2012]

Bloomberg:

• India’s economic growth may slow by as much as 2 percentage points in the year to March 2010 if monsoon rains remain deficient and hurt farm production, according to UBS AG.
• “If rainfall fails to improve more significantly we fear a supply shock and a drop in agricultural output,” Philip Wyatt, a senior economist at UBS in Hong Kong, said in a report today. “This would mean real gross domestic product growth could be 1 to 2 percent lower than our current expectation of 7 percent.”
• India relies on monsoon rains to produce food for its 1.2 billion people, as more than half of the nation’s arable land isn’t irrigated. Lower farm output may cut incomes among the 742 million people who live in the countryside and erode their purchasing power, weakening an economy already forecast by the central bank to expand at the slowest pace in seven years.
• Rainfall of 5 percent below average would see farm output “stay static” and may knock less than 0.5 percentage points off India’s growth rate, Wyatt wrote. A rain deficiency of closer to 10 percent would reduce gross domestic product growth by 1 percentage point and a 20 percent shortfall may chop off 2 percentage points, according to the UBS report.
• India’s monsoon, the main source of irrigation for the nation’s 235 million farmers, is 25 percent below average so far this season.
• Insufficient rain has caused acreage of all major crops to lag behind year-ago levels, denting prospects for bigger harvests of rice, oilseeds and sugar cane. India, the world’s second-biggest rice producer, planted monsoon paddy crops in 28 percent less area this year because of scant rain in the main growing regions, according to Farm Minister Sharad Pawar.

************************

Via NYTimes:

• ... A year later, after Mr. Gujar and thousands of other Indian farmers abandoned sugar, prices are surging. The price of refined sugar on international markets has jumped 60 percent since the end of last year, to 23 cents a pound, even as other food commodities have stabilized or fallen.

[click to enlarge]

• Volatility is aggravated — some analysts say caused — by government efforts to control prices to balance the interests of farmers and consumers. When prices were rising, for instance, policy makers restricted exports, which helped create a glut. By the time the government reversed course and subsidized exports, many farmers like Mr. Gujar had switched crops.
• “Sugar is a political commodity,” said M. R. Desai, president of the National Federation of Cooperative Sugar Factories, and “the government is not ready to let go.”
• Even as India rushes toward a future as a technology and services powerhouse, there has been slow, halting progress in its agrarian economy, which still sustains more than half of its 1.1 billion people. Hobbled by small farm sizes, an intense reliance on fickle monsoon rains and extensive government control, Indian farmers are less productive and more vulnerable than their peers in other developing countries like Brazil and China.
• Even now with sugar prices up sharply, demand is growing, because India’s population is growing, said Sanjay Manyal, a sugar analyst at Icici Direct.com, a securities firm.
• To meet that demand, India will probably import 20 to 30 percent of the sugar it uses this fiscal year. Less than two years ago, the country exported 20 percent of the sugar it made.

To my urbanization point above....

• Mr. Gujar, the banana grower, expects that he will be able to farm for another decade before his land is swallowed up by the urban sprawl around Pune, which is home to many growing manufacturing and technology companies. Many of his relatives have already quit farming and his teenage son and daughter have no interest in growing bananas or sugar cane.

Obviously India is meddling with the free market in sugar...

• Economists say India’s approach to regulating sugar is an example of how populist policies can hurt the very people they were meant to help: farmers and the rural poor.

Only a "free capitalist" market, as we have in the U.S. can work...

• India, of course, is far from alone. The United States restricts imports and uses subsidies to help producers maintain domestic prices at about twice the level of world prices. (Sugar retails for 56 cents a pound in the United States, up 5 percent from December.)

Errr.... oops.

• Sugar policies in the West are typically intended to bolster the incomes of politically powerful farmers and factory owners, (wow - was that actually printed in the mainstream media?) but here in India, policy makers try to walk the line between helping farmers and consumers. An estimated 28 percent of Indians still live below the poverty line.

I thought that was an excellent place to conclude so I can finish with a tangent. I just have to laugh at what I just read above in that last bullet point. It really dove tails with so many things we say in these virtual pages each day. Summary: If you give handouts to powerful interest groups and corporations - that is a good thing. Just don't call it socialism; it's the invisible hand of US free markets at force. Applaud it. If on the other hand you dare give handouts to the consumer - quickly label it as socialism and say people are lazy and the last thing we want to be are like the Swedes! [Feb 18: Economic Woes Reveal a Long-Felt Unease & Denmark is the Happiest Place on Earth?]

The fact the special interests and corporations actually have succeeded in perpetuating the thinking that handouts to them are not corporate socialism, is a magic trick I have to applaud. Reverse Robin Hood is smiling somewhere.

[Mar 6, 2008: Two new India ETFs]

Ron Paul's Son, Rand Paul, Announces Run for Senate

As long time readers will know I am apolitical; aside from a few exceptions in each party most everyone else is part of the "system" and doing an equally excellent job at running the country down the sewer, in their different but special ways.

Hence do not take this as a political plug for a party but I was heartened to see Ron Paul's son announce his candidacy for Senator. As I sit tonight reading about Fannie Mae asking for another $10.7B in bailout funds, with Freddie Mac on deck tomorrow I have a sliver, ever faint, of hope now. (p.s. Fannie Mae still paid out $400M+ in dividends even as it asks for handouts from taxpayers - a direct transfer from the taxpayer to investors - amazing)



In a VERY related note - I was given this handy link (which is now in the right margin under "Industry Focus Sites") which is a real time calculator of all our debts - with US federal debt at $11.63T and US unfunded liabilities at $58.85T (both of course growing by the second). It also comes in a handy "oh my gosh!" format since its broken down by the cost to every living man, women, and child that walks our fine soil. US Debt Clock.org. Enjoy!

**********************
Unlike most politicians Rand seems to understand the term "representative" does not mean a "career" in politics. Via CNN

• "I'm very worried about our country; I'm worried about the debt. I'm worried about what the debt will lead to," Paul said in an interview on CNN's "American Morning" when asked why he's jumping into the political arena. "Both sides of the aisle -- Republican and Democrat -- have been unwilling and afraid to address the deficit, and someone's got to."
• "You need people outside of government. If your primary goal is to continue your career, you tend to do things that are good for you, but not necessarily good for the country," he said.
• He says the government needs to stop borrowing money, because "we cannot borrow our way into prosperity."
• "For example, with the stimulus project, my little town -- they brought $1 million to. Republicans and Democrats clapped their hands and said, 'We have $1 million!' But no one asked the hard question: Where did that million dollars come from? "If we have to borrow it from China, Japan or foreign countries, is that good for our country to go further and further in debt to build a new ballpark or a new a parking garage? We have to understand where does the money come from. But debt leads to inflation," he said.
• "I have a lot of older patients who have grandkids. They come in to me, and I say, 'Would you borrow money to buy a gift for your grandkids?' No, you pay for gifts out of your savings. But you don't borrow money to give people cash for clunkers.
• "I don't know how you get rich as a country by borrowing money and giving it to people and saying, 'Go to the mall and spend it,' and somehow we're supposed to be richer as a country," he said, echoing the sentiment his father shared during his 2008 presidential bid.
• Paul is expected to compete in the GOP primary next year with Kentucky Secretary of State Trey Grayson. While Grayson is considered the frontrunner in the Republican primary, "Paul will make things interesting for sure," said Al Cross, a veteran political writer in Kentucky and director of the Institute for Rural Journalism and Community Issues at the University of Kentucky.

Blackstone Group (BX) Beats, but Already Ran into Earnings

Blackstone Group (BX) has really turned into a daytraders field unfortunately. The stock made a massive move ahead of earnings and now is giving up some of it. I don't think this is so much an earnings story - more of a return to health of capital markets. At least that is how I am treating it... the company has a war chest of cash akin to Apple (AAPL) at $29 billion. (aka 1 tranche of federal AIG bailout or 29 cash for clunker programs). We don't have much of a position now but will look to add on a pullback.

I'm just going to pull the Reuters report up on the site for brevity, although there are a lot of nuggets within the actual press release here, and a quick summary of the conference call here.

• Private equity firm Blackstone Group (BX) reported a jump in second-quarter profit Thursday, topping Wall Street expectations, and said it was sitting on its biggest cash pile ever, with $29 billion to deploy.
• The company has $14 billion worth of dry powder to invest in private equity and $12 billion in real estate. Those two businesses make up more than half of Blackstone's assets, a reversal from last year, when the hedge-fund portion of the business made up more than 53% of assets.
• The credit crunch and lack of financing have meant private equity firms have struggled to spend money on leveraged buyouts over the past year, and thus have large amounts of cash, known as "dry powder," to invest.
• Asked about the potential for more banking deals, James said there are about three transactions he is "looking hard at."
• Second-quarter earnings before income taxes, noncash charges for vesting equity-based compensation, and amortization of intangible assets -- a measure it calls "economic net income" (ENI) -- were $173 million, up from $100 million a year earlier. On an after-tax basis, ENI was 16 cents a share, compared with 15 cents a year earlier. Analysts polled by Reuters expected, on average, 9 cents per share.
• Blackstone prefers to focus on the measure of ENI because of the big payouts associated with its more than $4 billion initial public offering.
• James said Blackstone wrote up the value of its private equity porfolio by 3 percent for the quarter, meaning its value is essentially flat for the year so far. However, Blackstone wrote down the value of its real estate portfolio by 19 percent.
• One problem private equity firms have faced during the market turmoil is the inability to exit investments through inital public offering. However, James said if the markets hold up and continue their present trend, there could be some IPOs from Blackstone's private equity portfolio in the next 12 months.
• The company said it would pay its regular quarterly distribution of 30 cents a share.

Key point:

• Blackstone has almost no debt coming due in its portfolio companies until 2013.

[May 7, 2009: Blackstone Group Narrows Loss]
[Mar 31, 2009: Bookkeeping - Starting Blackstone Group]

Long Blackstone Group in fund; no personal position

Why are Natural Gas Producers Expanding Production So Aggressively?

While the price of natural gas is in the dumps US producers continue to expand production. Why? Oh I think it's pretty obvious. And it's nothing to do with the magical V shape recovery in the U.S.

As I often say as people mix natural gas and crude together as if its the same thing (hey "it's energy") - unlike crude which can benefit from economic growth in Asia, natural gas is largely a domestic commodity despite efforts to make it more transportable. [Mar 24, 2009: Will Liquified Natural Gas Turn this Commodity Global?] In fact the divergence between the price of oil and natural gas tells you all you need to know about the reflective economies of the globe versus US.

Global economy - huge drop in 2008 and then stabilization as weaker parts of the world offset stronger for the better part of 10 months



US economy - weak, weak, weak, weak, stabilizing the past 4 months at ... weak. No real bounce in the real economy even with constant feeding of money, taking from future generations.


It really is as simple as that when you break it down in the language of commodities.

But as this Bloomberg report says - the natural gas producers continue to churn out product: Gas Glut May Grow as XTO Energy (XTO), Devon Energy (DVN) Wells Prove Prolific

• The largest U.S. natural-gas producers may be doing too well at the wellhead for their own good, pumping so much of the heating and power-plant fuel that prices won’t soon recover from last year’s market collapse.
• XTO Energy and Devon Energy, two of the five largest producers of U.S. gas, yesterday reported record output and smaller declines in earnings than analysts estimated. Anadarko Petroleum Corp., London-based BP Plc and Chesapeake Energy. previously reported second-quarter output gains that helped them beat estimates.
• Even as they lament a gas glut, the companies have been reluctant to let revenue and profits fall further in the short term by being the first to curtail output. Second-quarter production at Fort Worth, Texas-based XTO jumped 32 percent, and Devon of Oklahoma City had a 12 percent gain.

CEO talking to other CEO:

"you go first." "no you!" "no you!!"

"there is no way I'm cutting my production because my bonuses are based on stock prices going higher... my genius is reflected in the stock price. I don't care if the price of the commodity is going through the floor, I need my bonus." "good point! no one cuts!"

Ah the "market" efficiencies that arise when the self interst of those who build generational wealth as long as they hold their jobs for a few years.

• “I think they might be cutting off their nose to spite their face here,” said Jim Byrne, an analyst at BMO Capital Markets in Calgary who rates Anadarko, Devon and XTO at market perform. “Everybody’s kind of worrying about themselves, and obviously that’s going to happen, but it doesn’t really bode well in our view, certainly for gas prices.”
• “We’re growing production too fast,” said Scott Hanold, an analyst at RBC Capital Markets in Austin, Texas, who has outperform ratings on XTO, Devon, Chesapeake and Anadarko. “We need to slow down..."
• The companies are pumping more gas than ever in the face of a demand slump and a supply surfeit that caused prices to plunge 72 percent from their 2008 high. U.S. gas supplies are 19 percent above their five-year average, driven by output from so- called shale plays. The U.S. Energy Department estimates that industrial gas demand will drop 8.2 percent this year.

Clearly our "price mechanisms" are broken in market after market when "the carrot" for those running the companies is based on things that have very little to do with adjusting to the market. Mmmm... love it; really no different from the banks. I wonder if the decisions would be different if CEOs made European style CEO wages and bonuses were based on 5 year targets that had nothing to do with stock price stoking. Nah.

• One consequence of overproduction amid a recession-driven slowdown in demand is narrowing profit margins. For instance, Devon’s net income per unit of production tumbled 78 percent from a year earlier.

So how do you get around that problem? Just pump more of an increasingly unprofitable product into a supply glut. I mean if you can't make it up on margin, make it up on volume... anything to get that EPS to the "right spot".

• Anadarko, based near Houston, raised its production forecast Aug. 3 and said it’s responding to low prices by cutting costs rather than slowing production.

*Scratching head*
*Pulling out Economics 101 High School Textbook* - ah yes right here: the rational response to lower prices, and gluts of supply are to curtail production of said item

(sic)

(new American edition of said Textbook) the rational response to lower prices and gluts of supply, is to lay off workers and increase production of said item - hence maintaining EPS, retaining bonus, while still flooding the market with more of said product.

**************

It's all connected folks - dysfunction throughout the system based on "free market" (free market as in fellow C-level executives and ex politicians setting your pay) compensation packages for a select few based on completely incorrect short sighted measures.

• Oklahoma City-based Chesapeake said all U.S. gas-storage facilities will probably be full by the end of this year, increasing pipeline pressure and forcing production lower.

Then what? haha. Maybe they will sell natural gas to Goldman Sachs (who will not actually take delivery of it but let the producers shoot it off into the atmosphere) in return for future investment banking business. Anything to keep this silly game going. CEOs say "hey we found a buyer" and Goldman just racks up that future backlog of investment banking fees. We are all winners here.

And who better to display the excess CEO compensation than Aubrey C himself [Apr 3, 2009: Chesapeake Energy CEO with New Shady Compensation Deal, Old Deal Suddenly Replaced with New 5 Year Contract - I was Right in my Prediction]

• “There was no reason for us to voluntarily curtail gas when pretty soon, everybody is going to start involuntarily curtailing gas, and so we didn’t see any reason to take it on the chin for the team more than we did,” CEO Aubrey McClendon said this week on Chesapeake’s earnings conference call.

That would be funny if not for the fact none of the major parties are curtailing production. But there is hope on the horizon. Foreigners!

• International oil majors, not producers like XTO, will drive voluntary output cuts, Chief Financial Officer Louis Baldwin said.

Aha. So someone will blink - it just won't be anyone under US C-level compensation practices. Thank gosh for those international guys - go team Europe! They don't have much to lose compensation wise by adjusting to the market in a rational way. Whew, our saviors.

So the international guys will take one for the "team" and the US guys know where their bread is buttered... mmmm

• Investors are rewarding companies for production gains. Devon rose 3.3 percent in New York trading yesterday after reporting higher-than-estimated output and profit. Chesapeake and Anadarko also had gains after their reports. XTO, which rose as much as 1.8 percent after its earnings statement went out, ended the day down 1.5 percent as all but four of the 19 oil companies in the Standard & Poor’s 500 fell.
• “There’s a pretty clear correlation between production growth and stock performance,” Hanold said. “These exploration and production companies want to take advantage of that.”

And that folks is the reality of natural gas - at least my version of it. Even when the CEO's do stoopid things to destroy their net wealth, like going on leverage and selling all their shares via margin calls [Oct 11, 2008: Chesapeake Energy CEO Forced to Sell Nearly All Shares to Meet Margin Call]- the company is there to support them. Such as new compensation deals just 1 year into an old 5 year contract ... struck on New Year Eve's when no one is paying attention. Right Aubrey? You know all about taking one for the team? As long as its not you - and it's your company that took it for the team ... the team named Aubrey.

• Chesapeake, an oil and gas producer in Oklahoma City, awarded the $75 million to Mr. McClendon as a result of a new, five-year employment agreement struck on New Year’s Eve by directors and the executive. Mr. McClendon’s new agreement replaced a relatively new, five-year contract struck in 2007 that, obviously, had yet to run its course.
• ... the board also awarded him the $75 million bonus.
• “Given that Chesapeake’s earnings dropped by half,” said Marc I. Gross, a senior partner of Pomerantz, Haudek, Block, Grossman & Gross, which represents the Louisiana retirement system, “the $75 million bonus appears not attributable to Mr. McClendon’s exemplary performance but rather to the extraordinary losses he sustained when his Chesapeake shares declined by 60 percent. As such, the bonus appears to be a C.E.O. bailout, while ordinary shareholders got stuck with their losses.”
• So who are the Chesapeake directors? In addition to Mr. McClendon, they are Don Nickels, former United States senator from Oklahoma; Richard K. Davidson, former chairman of the Union Pacific Corporation; Breene M. Kerr, an M.I.T. trustee; Charles T. Maxwell, an oil industry analyst; Frank Keating, former governor of Oklahoma; Merrill A. Miller Jr., chief executive of National Oilwell Varco, an oilfield services company; and Frederick B. Whittemore, an advisory director of Morgan Stanley.

There is an "I" in team in our public corporations. It's all about the brilliant and 1 in a million talent than runs the US public troughs... err, public corporations. [Sep 27, 2008: Heads We Win, Tails We Win] Throw out your economic text books - supply and demand is for Europeans (i.e. socialists).

[May 6, 2009: Natural Gas Continues its Run, XTO Energy Reports]
[May 4, 2009: EOG Resources - Solid Execution in a Horrid Environment]
[Jun 27, 2008: Natural Gas 75% Gain Speeds Horizontal Drilling]
[Feb 29, 2008: Natural Gas Focused Exploration & Development Companies Continue to Shine]

No positions

Update on "Stopped Out" Positions

We were stopped out of quite a few long positions as I tried to keep my long exposure in case the market continues running. As I still like the fundamental story of each, I want to do a quick update - I'm content with the sale of all 4 for technical reasons on first glance, although 1 of them is still holding a lower support (but trading below where we sold it).

Let's start with that one - Allegiant Travel (ALGT) which is still holding support and many times moves inverse to the market. Reason? The market loves when oil goes up - commodities up = everything is fine in the world = dollar down. Airlines on the other hand usually are punished when oil is up. So this stock trades to its own beat. Continue to be a huge fan of the fundamental story. Technically it is compressed in between a whole slew of moving averages... I'll continue to monitor it as it's dirt cheap IMO.


We sold all of Quality Systems (QSII) in error yesterday, I like this stock and like to keep my "history" by not completely exiting a position (hence all our 0.1% stakes). But it continues downward after a poor earnings report that it first ignored.


Ocwen Financial (OCN) I'm thrilled with our exit just under $14 - I was scratching my head why the market was not punishing its massive dilution, we got out in the morning - it crumbled that afternoon and again yesterday before a late day rally. Really a shame here because the fundamental story is intact and improving as more taxpayer money is being funneled by the day to US homeowners and Ocwen gets 'paid off' for each homeowner it helps under Obama-care. It would be very healthy to get back over $13.00 which in my mind would mean the dilution is then priced in... I assume every stop loss in the stock was triggered with the death drop to the $11s yesterday.


O'Reilly Automotive (ORLY) - I continue to like the story here but Obama-care in this case hurts since it helps new car sales with Welfare for Clunkers. Still hanging around support but stuck underneath. Hopefully it bounces back soon.


As you sadly see by the comments above, so many stocks are now affected by Washington D.C. rather than their owm merits, but this is our corporate socialistic (not the European type) system. Capitalism you say? (chuckle) Sure.

With these sales we are back down to about a 1:1 long short exposure... waiting to see the next move by Goldman Sachs. The speculative nature of the stocks that ran yesterday has me more cautious but it's not your daddy's market anymore, so I'm going to wait for more signals to increase short exposure. For example Lloyd Blankfein saying "Larry Summers ok'd a 10% correction here" would be the most prominent sign but since I am not on that memo list we'll have to watch the markets for hints. I am bearishly bent for the intermediate turn UNLESS the S&P gets over 1010 or so.

Obviously the very faulty, but taken as gospel, monthly jobs report is tomorrow morning and will sway the action.

Long Allegiant Travel, O'Reilly Automotive in fund; no personal positions

Excel Maritime Carriers (EXM) to Dilute Shareholders by 13%

We will all look fondly back at the period of this March and April when companies were rewarded handsomely for diluting their shareholders by 20, 40, 50%+ - I will remember seeing my REIT shorts destroyed as REITs diluted shareholders in excess of >50% and yet the stock went up. But that fairy tale era seems to be over. Being serially diluted is fun when you fear for the life of your company but not so fun in normal times. It appears we are heading back to normal.

Excel Maritime Carriers (EXM) announced a dilution today of about 13%, 6M shares. Compared to peer DyrShips (DRYS) who has diluted shareholders around 84 times in the past year (I exaggerate) it's a small dilution. [May 8, 2009: DryShips Joins the Dilution Parade] What I love about these companies is they don't announce it at the same time as earnings - EXM announced earnings just yesterday and then waited another day to drop this on shareholders. That's a bit uncouth, but I've seen many company do this in the past few months.

• Excel Maritime Carriers Ltd (NYSE:EXM - News), an owner and operator of dry bulk carriers and a provider of worldwide seaborne transportation services for dry bulk cargoes, announced today that it has priced its offering to the public of 6,000,000 shares of its Class A common stock.
• The Offered Shares have been priced at $8.00 per share. The net proceeds from the Offered Shares will be approximately $45.1 million (approximately $51.9 million if the underwriters exercise in full the over-allotment option).
• The Company expects to use the net offering proceeds for repayment of debt as well as to build up its committed capital expenditure reserve account, which the Company may utilize for future capital expenditure requirements.

Much like with coal there are any number of names to play the dry ship sector. I am ambivalent on which one most of the time - this happens to be our horse. We sold out almost our entire position about 3 weeks ago (we sit with a whopping $300 worth of shares) and today's stock price has actually broken the deal price of $8. Further there is a gap in the chart down in the low $6s. I'm going to be patient and see if we can fill "down there" in the future - so we'll place a limit buy order down there and see if one day in the next 3 months the market corrects and we can get filled. It's a potential short after today's action, but this type of stock is like the Las Vegas casinos in that they can move 10-15% a day so it's a tough one on either the long or short side.

I didn't bother posting earnings because it's irrelevant - basically these stocks are a play on the "return of global trade/growth/China". But since we have another reason to talk about the stock...

• Dry bulk shipping company Excel Maritime Carriers Ltd (EXM) posted a 37 percent drop in quarterly profit, hurt by the decline in the charter rates for its ships and higher expenses. Net income for the quarter was $78.0 million, or $1.05 per share, compared with $123.6 million, or $3.06 per share, in the same quarter last year. Excluding items, the company posted a net income of 86 cents a share.
• Voyage revenue fell 25 percent to $98.4 million. Total expenses rose 4 percent to about $89 million.
• Excel said that 66% of its fleets' operating days for the second half of 2009 are now locked up in long-term charters, and 53% for 2010.

These are not "buy and hold" type of stocks as you can tell by the volatility... unless we're in the middle of a bubble (i.e. decoupling circa 2007) in which case you can buy and hold them for a few months. [Oct 1, 2007: A Chorus for Dry Bulk Shippers - Enough Already?]

Long Excel Maritime Carriers in fund; no personal position

A Quick Look at Gold (GLD) and Silver (SLV)

It's been a while since we've looked at the precious metals and as instruments galore are attempting to inflate via joyous pushing by central banks, let's see how gold and silver are reacting. Technically I am looking at the ETFs for gold and silver rather than the actual commodity but the charts are virtually identical. Both metals are rallying in the past week but let's take a bigger picture view.

First we have gold etf (GLD), which is within a large triangle that is narrowing. On the lower end we have nice support and a series of higher lows. That's bullish. However, on the top side we are (thus far) creating a series of lower highs as early June's peak did not match the spike in February 2009. Of course late February was the peak of worldwide fear at what virus the US has spread to all our global friends.


Next we have the silver ETF (SLV), which is part precious metal and part industrial metal - this one is perhaps a bit more bullish in that while we have the same nice support trend line and higher lows on the bottom end, the early June high surpassed the February 09 peak. For a technical breakout here we'd want to see that June high surpassed and than you'd have HAL9000's across the land bursting a microchip to get in.


Just for comparison sake I am posting the chart for copper to overlay versus silver. Of course China is not buying hordes of silver as it is copper, and distorting the normal supply and demand dynamics so at this point any commodity China is after is hard to compare apples to apples.


Now if the stock market is ever allowed to go down by Goldman Sachs decision (who has a 97% chance of making money today) I want to see how these precious metals act. Since our correlations are now at record levels - the "dollar down, commodities & emerging markets up" has been ingrained into every motherboard across the world. If Goldman Sachs allows and we fall, the dollar should (in theory) rise - if for nothing else than an oversold bounce. If when this happens, gold and silver can flatline and not give back a large part of this move or indeed even advance - then the case for the defeat of deflation and the "success" of the central banks bringing us inflation of the highest order might be secured.

Personally I hope our fearless leader Ben Bernanke is successful in his campaign of reflation aka crushing the lower end of our society via the most regressive tax on the planet. Then maybe Americans can begin asking the questions why they are paying $4 gas when the economy is in shambles (err, just recovering) along with $4.50 a loaf for bread. Because unless it is this "in their face" Americans seem not to ask the questions - since economics classes are just for nerds. (have you seen the price of cookies of late? gosh!) Then the government can begin to send out representatives to blame the OPEC nations for the oil situation (or the evil oil companies - I can hear Sarah chanting "drill, drill, drill" from here) and shoot talking points to the mainstream media about how the middle class in China and India are causing Americans not to be able to afford foodstuffs. Remember, it's never our fault - we are a harmless people with benevolent leaders who enjoy running printing presses for pleasure.

Meanwhile a select group of blog readers will know the reality.

Bookkeeping: Stopped Out of Quality Systems (QSII), Adding to TriQuint Semi (TQNT) and Skyworks Solutions (SWKS)

A very strange day - financials, especially those rescued by the government are flying today - everything from AIG to Fannie Mae to Bank of America. Meanwhile technology stocks are weak by and large after being the markets favorite for weeks. And somehow I've been stopped out of 3 long positions. (Looks like Ocwen Financial (OCN) was pummeled since I sold it yesterday morning)

Won't try to explain it, there is no explainin' anymore. This is what the algorithms are doing today - respect it. Our 4 hour correction is over and its time to cream some bears it appears.

I had a stop loss for Quality Systems (QSII) outstanding but mistakingly it seems to be for the entire position, I had been planning on keeping 0.1% around. Apparently the whole thing went early this afternoon. This company reported a pretty bad earnings report but for some reason was not affected by it at first. Now it seems to be. The stock fell from $54 to $53 first thing this morning and since then has been churning in the mid $52s to $53 area... we were stopped out at $52.85. A close back above $54 would negate the bad formation forming and let me stress again the overall stock market is 70% of the story nowadays so if we begin a new leg up this stock should reverse back through the line it crumbled under this morning.


TriQuint Semiconductor (TQNT) finally fell to a support area ($6.50) - so I am increasing from my starter stake of about 0.2% to about 2% as we hit the 20 day moving average. I'd much prefer to buy lower but I am trying to be somewhat bull oriented and finding something to purchase.

Similarly Skyworks Solutions (SWKS) is also weak today and is back at its 20 day moving average ($11.50) so I'm adding 1% to our 2% exposure.

With both TQNT and SWKS if the market corrects (don't laugh) - I'll be paring these if they fall below the 20 day in a meaningful way since there is a lot of hot air between the 20 day and 50 day. I'd much rather be a buyer lower for both.

Buying the stocks dipping to support really has not been the way to win of late - you want to buy the stocks running away like mad nowhere near support as they seem to go up in relentless fashion. Sometimes the way you invest is in vogue and sometimes not. Pure momentum guys are running the market right now and that's not my style - but if you want the fast money you want stocks making new highs and nowhere near any support line... those are unstoppable right now.

Long TriQuint, Skyworks in fund; long TriQuint in personal account