Tuesday, January 12, 2010

Bookkeeping: Adding Back to Telestone Technologies (TSTC)

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This is more like it... trading around a position. After a 21% gain in Telestone Technologies (TSTC) in just over a week, we dumped almost our entire position at $23.80 on Jan 5th. At the time we wrote

The stock is in breakout mode so it certainly has a chance to keep running as small cap Chinese stocks are once more the center of attention, but the stock is nowhere near any support. With these very strong charts I start using the 10 day moving average - which is where TSTC falls back to on "corrections" ... and it is now nowhere near the 10 day which is under $20.50. We'll try to buy it back on any pullback (I suppose something under $22); if not - other fish to fry.


So for the first time in over 2 months this teflon stock broke the 10 day moving average.  In fact it looks like it potentially could fall to the 20 day.  For now I'll make a 1.4%ish purchase to get back what we sold in the $23.80s at $21.03.  So not only were we able to lock in a very quick 21% gain on our original purchase, we have been able to get back in at a 12% discount to our sale price - a week later.  Certainly the stock could visit under $20.50 as that's the true support but since we've dumped some other positions today, I'm looking to rotate some money into names whose charts still are in solid position.  Today's purchase is modest in size, we'll see if we can grab more at lower prices... if however the 20 day moving average is broke, we have to rethink things.
 


This is more of our standard mode of operation...
 
.....I see a lot of the nonsense Chinese stocks (not TSTC but many others) taking big hits today as well.  I am kicking myself because yesterday I saw a trio of speculative sectors rising together which should of been my call that the Kool Ais was over flowing and it was time to take profits - drybulk shippers, Chinese solar, and nonsense $2 Chinese stocks.
 
Long Telestone Technologies in fund; no personal position

Bookkeeping: Closing Human Genome Sciences (HGSI)

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I really tried to be more of a traditional mutual fund manager the past 2 weeks, and not trade as much - let the winners run (yada yada yada).  Thus far for many positions I have sat on my hands with, all I've been rewarded with by not locking in gains are stocks that have completely retraced their moves up and all my unrealized gains in those stocks have been vanquished.   Human Genome Sciences (HGSI) is similar to Myriad Genetics (MYGN) in that I had a nice gain - although in this case much larger than MYGN; and that is now all gone. Just as with Myriad, HGSI broke out nicely in a very short period of time as we entered the stock giving us a textbook move - but has now given it all back in just under a week.  I am going to take the 3% loss and leave this position in the $29.40s as I see a gap under $28.50 which is yearning to be filled.




Now I remember why I don't act like a traditional "buy and hold" fund manager - it stinks unless the market is going straight up.  Back to 1000% annual turnover I suppose!

Today has been quite a lousy day.  The S&P 500 can retrace all the way to 1026 before penetrating its 20 day moving average....

Intel (INTC) and JPMorgan (JPM) report Thursday and Friday respectively - unfortunately earnings season is kicked off every quarter by perennial underachiever Alcoa (AA), which appears to be clouding the mood.

No position

Bookkeeping: Closing Myriad Genetics (MYGN) as Oppenheimer Analyst Brings Out the Hammer

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I was a little suspicious something was going to happen with Myriad Genetics (MYGN) as the stock has been acting quite poorly the past 2 sessions - especially yesterday with the volume perking up and the stock down sharply in a benign market.  We never know what is going on behind the scenes but I assume (allegedly) Oppenheimer was getting its clients out of the stock, before today's downgrade



Today's downgrade has effectively destroyed the chart and the "breakout" is done with, which was our reason for buying back into the name.  With that said, I am going to take the 8% loss and run for the hills; this was roughly a 1.7% stake which we had just restarted December 23rd.  The original breakout actually worked to perfection, from mid $25s to $27 in 2 wees, but we did not lock in any profits and in 3 sessions the entire move was erased - through yesterday.  Hence we lost not only our unrealized profit but also some capital.  Can't win 'em all; always difficult when (often wrong) analysts have such impact on stock prices.
  • An Oppenheimer analyst downgraded his investment rating on shares of Myriad Genetics Inc. Tuesday, saying sales of its cancer tests will continue to slump.  Analyst Amit Hazan downgraded the shares to "Underperform" from "Perform" and cut his profit estimates for Myriad in fiscal 2010 and 2011. He said the Salt Lake City company may report sales growth in its current quarter, but he does not think it will last.
  • "We believe the oncology segment is now in sustainable sequential decline," he said. Hazan added that demand for Myriad's BRACAnalysis test for hereditary breast and ovarian cancer is not improving, and fewer women are keeping OB/GYN appointments due to the state of the economy.
  • Hazan cut his fiscal 2010 profit estimate to $1.41 per share from $1.47, for the following year, he now expects $1.47 per share, down from $1.68. According to Thomson Reuters, analysts expect Myriad to earn $1.45 per share for the year ending June 30, and $1.57 per share for the following year.
No position

Bookkeeping: Gap Filled on DragonWave (DRWI) - Limit Order Hits

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Could of not asked for a better outcome in DragonWave (DRWI).  We mentioned late yesterday we were looking for the gap at $12.42 to fill; I placed a limit order for 2.25% exposure at $12.44.  The stock fell to $12.37 this AM and is now bouncing back to $12.60.



Our exposure was increased from 1.75% to about 4% on that dip, I am wondering if I should of bought more...

Our cost basis has now increased from just a tad over $11 to $12.10 but since we began the position the stock has become cheaper based on the earnings beat, and raised guidance.  Unlike the bevy of stocks that will be reporting in the next 5 weeks, we already have the earnings roulette out of the way, and now just have to worry about the greater market as a whole rather than individual stock.  If the stock makes a new high, we'll probably add more exposure - I still find the stock cheap anywhere below $15. 

Long DragonWave in fund and personal account

Jim Cramer is Right

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My editor at Seeking Alpha, also (by some miracle) is the editor for the Jim Cramer content for the website.  Lucky her... what a combo to deal with.  She emailed me about a Jim Cramer clip last night on Mad Money and my thoughts on it - you can see the clip below.  Essentially it says less jobs = more profits = good for corporate America.






My retort?  Jim Cramer is right!  We've been saying the same thing for a long time.

One must realize the "stock market" is heavily skewed to larger companies; many now multinationals.  I heard yesterday 470 of 500 S&P 500 companies have a presence in China.  That is different than the nail salon around the corner, or the 9 person accounting firm 4 streets away.  Small companies have created the majority of private sector jobs as the larger companies punt many of theirs overseas.  But who cares about small business as their lobbyists are weaklings compared to those kings of capital at the large multinationals.

We've pounded the table on how this recent era has been all about capital, not labor.  Labor is to be exploited in the "race to the bottom" - that's the ugly side of "capitalism" which is all about making as much profit as possible. [Dec 8, 2007: Do the Bottom 80% of Americans Stand a Chance?] In a flattening world, borders mean less and less.  Hiring far cheaper labor for similar work is not even a choice for much of the large corporate world - it's a "no brainer".  [Sep 14, 2009: Global Wage Arbitrade at the Micro Level: Marvell Technology] [Nov 5, 2009: Blue Coat Systems - More Global Wage Arbitrage]  Those who remain working, better work harder... and longer - for less (leading to global high productivity) or else! [Sep 1, 2008: AP - Laboring Longer is Growing Trend for Americans]

I've often posted this cartoon in our monthly labor jobs report postings.... it is not tongue in cheek.



In the utopia of corporate America there would be no workers... unless they were C-level executives.  Of course these executives are far smarter than the ones of the 1970s... so instead of being paid 30-40x as much as the average peasant, they must be compensated 300-400x as much.  Because they've just become that much smarter (adapt at moving jobs overseas) in the past 40 years.  [Oct 30, 2007: You're Fired! Now Here is $160M to Help Ease the Pain] [Sep 27, 2008: Heads We Win, Tails We Win] [Oct 4, 2008: Credit Crisis Sharpens Anger Over CEO Pay]  And if you argue that point, you are a socialist, or worst... "European".   You are told the "free market" is setting wages, when a small cabal of board members (many C-level executives at other corporations) engage in "you scratch my back, I scratch yours" compensation setting.  Just imagine if your wages were set by peers in the industry - i.e. the IT guys at the company down the street set your wages, and you set theirs.  Do you think your boss would go for that?  Hardly - but that's the system for the head honchos.  That's the equivalent of the"free market" in C-level compensation in corporate America. Oh yes - if you don't like it, start a proxy war... something that even Carl Icahn with his multi millions has troubles waging.  (Carl by the way calls the corporate "scratch my back" system a complete dysfunction) But I digress.

The % of profits that went to capital versus labor was at the highest level in 2007 since 1929.  The solution to that excess came naturally by an event called the Great Depression.  It was a painful realignment, but set us up for a period of middle class prosperity in the 1950s and 1960s.   Where the greatest percentage of profits went to labor.  (of course there were other factors, such as almost the entire world's production capability being destroyed in WWII)   So what happened this time?  Unlike the 1930s, all the king's horses (and men) cane to rescue those who own the most capital (with their armies of lobbyists) so as to keep the status quo, and in fact reinforce it.  This view is also deemed socialist... which is ironic because those who say this view is socialist call themselves capitalists, but hide behind corporate socialism.  (I call it Reverse Robin Hood - take from the many and give to the few at the top)

Where Cramer differs from myself is he believes (apparently) the government can make up for the job loss with... (drum roll)  more government jobs.  (oh but just until the private sector can recover of course)  Which is the ultimate kick the can solution.  Who knew... Jim Cramer: European Socialist? (tongue in cheek)  People don't seem to understand our government is broke.  It is only creating jobs by borrowing on one credit card to pay for the other.  We've had zero net creation the past decade in America - despite strong population growth. What job growth there has been has all been centered in the public and pseudo public (education, healthcare) sectors for one simple reason.  They can be run at a loss since government is either the entire or large source of funding.  The private sector cannot be run like that, certainly not for decade upon decade.  So despite the best efforts of small business, the loss of jobs through the multinationals overseas has only just been offset by a massive influx of government and pseudo government jobs.




Returning to the private sector, Henry Ford introduced wages in a long ago period so that the people who made his product could afford it.  We are moving in the complete opposite way now.  But you ask "how can this continue!?" "eventually these corporations will see that people in America cannot even afford to buy their own products!"  Well I introduce you to the basic Ponzi scheme economy we continuously harp on.  When less and less of the American populace can afford to buy things, first the homeowners are offered the house ATM.  Then when that implodes we are in the current era of the government ATM.  Where millions are on almost permanent government assistance (extension, after extension, after extension) and even the average Joe (who is working) now gets 1 of 6 dollars of his/her income from government handout.   [Jun 5, 2009: 1 in 6 Dollars of Income Now Via Government; Highest Since 1929] [Jul 30, 2009: Cash for Clunkers a Bit Hit, Government Asks "What Can we Buy You Next?"]  That can continue for a long time - as long as our creditors are happy to look the other way; the largest of which is providing the goods and has many of the newly formed jobs that were once here.

It's a grand economic experiment.  Multinational corporate America can have a golden age.  Labor will be squeezed in the race to the bottom [Sep 4, 2009: Job Seekers Across America Willing to Take Substantial Pay Cuts] , and desperate governments can borrow to make up the shortfall (and win elections by kicking the can down the road!).  Meanwhile, the central bank willingly tries to inflate assets to also help create "wealth" - so that rather than prosperity from wages, we can have prosperity from inflated stocks or housing prices.  (ironically we need DEFLATION not INFLATION to combat the global forces washing at our shores) This is the path we've been on for many years, and like a drug addict each "hit" is having less effect.  But they will keep playing the game until ... it ends.

In Cramer's world, to combat this I suppose we just have a country with 80% government or pseudo government (education, healthcare) workers. [Aug 14, 2009: No New Normal Say Some Economists, Prosperity Without Jobs?] I guess that will be the new American exceptionalism.

[Oct 20, 2009: Slump Prods Firms to Seek New Compact with Workers]
[Sep 22, 2009: BusinessInsider - The Real Problem is the Economy Does not Need you Anymore]


Trend Forecaster Gerald Celente on Yahoo Tech Ticker [Videos]

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I first ran across trend forecaster Gerald Celente, of the Trends Research Institute, on Fox Business' "Happy Hour" show at some point in 2008; I don't recall exactly if it was pre Lehman/AIG/FanFredron or after.  I just remember agreeing with much of what he said (or vice versa).  So I looked him up on the internets (sic) and was quite compelled with some of his history and longer form videos.  Certainly this was a man who had detached from The Matrix.  That said, he makes my views sound happy go lucky - so for all our sakes I hope his track record go forward is much poorer than in the past. 

Since then I've seen some of his videos here or there, and he has not changed his tune one iota despite "prosperity" breaking out all over.  The "mainstream" would consider this guy to be on the "fringe", so I have not posted anything about him on the blog per se, but now that Yahoo's Tech Ticker has brought him to a more financial centric audience, I thought it was a good time to introduce him to the website.

Below are 3 videos on Yahoo Tech Ticker, each the normal 4-6 minutes.  Even if you think his theories to be total crackpot, I encourage you to look over his past history and at least give some thought to what his theories are - let us just say his 2010 views are quite dour, but there are some positive as well such as a return of "Yankee Ingenuity".  As I noted above - I see many similar outcomes Celente does; I just am much more ambigious on timing as I believe great government charades can continue for very long periods of time. 

The more I think about the US government + economy, the more I think of the US auto industry (and eventually housing).  After normal supply / demand petered out (people could no longer consume via normal methods), 0% financing, with $5-$6K rebates became the norm to bribe people to consume.  That can now be parallel to easy money by the Fed, and handouts by government in nearly all major parts of our economy to get people to "buy things" (cars, houses).  Those incentives early last decade created "great prosperity" as Americans rushed in to take advantage of said largess, and an auto "boom" ensued.  A dysfunctional wage / benefit system was able to persist (parallel to our public and pseudo public sector wage / benefits) due to these incentives, and no hard choices really were made in the industry.  This period ended up being a mirage for all involved as in under a decade the costs of said "prosperity" were borne; multiple automotive companies went bust and it took the US taxpayer's money to come in and support the system.  Read what I just wrote about the auto industry, and tell me how it is any different than what we are doing today, not for the automotive industry, but indeed the entire US economy.  We are a country full of citizens (and government) that no longer can function without easy money. [Jun 3, 2009: A Country that Cannot Function Without Easy Money]

As I noted above - the path for America's future seems very clear; it's just a matter of timing; unlike the auto companies the federal government can follow the identical path but for much much longer.  It can be run as a money losing operation (6 decades and running) on faith; private business cannot.  It can throw its people under the bus via higher taxes and money printing (devaluation of lifestyle) - private businesses have no such options. I suppose one day the (responsible) peasants say enough is enough "we want our country back".  That day could be quite a long way in the future as the majority of people appear more than sated with their American Idol and NFL Football, as long as government checks arrive in the mail once a month. Celente seems to have much more faith that the people are not easily distracted, like the Romans a few centuries before, by their games and entertainment.  Perhaps out of necessity.

(I) U.S. Postponed the Great Depression, Not Prevented It, Says Trend Forecaster Celente





A week into the New Year, the consensus among the Wall Street "experts" is the economy and the financial markets will continue to improve in 2010. Unlike last year, when we entered January with so much uncertainty, today pretty much everyone agrees the worst is behind us.
Gerald Celente does not agree.

Celente, the director of the Trends Research Institute, who's been tracking trends for 30 years, thinks 2010 brings with it the Great Depression we narrowly avoided last year. Celente's been making this prediction for several years, and as we know was nearly proved right.

Extraordinary government intervention helped prove him wrong, something he didn't anticipate. "We never thought we'd be buying companies like AIG, we never thought we'd own parts of General Motors," he tells Aaron in the accompanying clip. "The government's never done these things before." (desperate time = desperate measures)



Celente believes the bailouts have just postponed a depression -- not prevented one: "The hand may change but the game doesn't change."

Celente says the recent signs of economic recovery are nothing more than a boost based on "a stimulus economy." [Nov 18, 2008: Minyanville - Our Economy is on Steroids] Once those measures are pulled back and interest rates rise, the economy will once again tank.

It's not all gloom and doom. Eventually, Celente predicts, American ingenuity and innovation will drive a recovery.
 
(II) Survivor, America: "It's Only Going to Get Worse," Gerald Celente Says



 
"It's only going to get worse," is the sobering forecast of Gerald Celente, director of the Trends Research Institute.  Celente believes the "bailout bubble" is going to burst and the U.S. economy will slip back into recession, if not worse, in 2010.

Like all forecasters, Celente isn't always right but he has predicted a number of major events.  So if Celente is right about 2010, what will that mean for the average American? Celente says we're going back to basics, making do with less and adopting the following mantra: "Waste not, want not. Use it up wear it out. Make it due, due without."

Celente offers the following predictions, further discussed in the accompanying video:

  • Neo-Survivalism: "In 2010, survivalism will go mainstream," Celente writes. "Unemployed or fearing it, foreclosed or nearing it, pensions lost and savings gone, all sorts of folk who once believed in the system have lost their faith. Motivated not by worst-case scenario fears but by do-or-die necessity, the new non-believers, unwilling to go under or live on the streets, will devise ingenious stratagems to beat the system, get off the grid (as much as possible), and stay under the radar."
  • Depression Uplift: "As times get tougher and money gets scarcer, one of the hottest new money-making, mood-changing, influence-shaping trends of the century will soon be born; we forecast that this will be "Elegance" in its many manifestations," he opines. "The trend will begin with fashion and spread through all the creative arts, as the need for beauty trumps the thrill of the thuggish. A strong, do-it-yourself aspect will make up for reduced discretionary income, as personal effort provides the means for affordable sophistication."
(III) Buy American: "Anti-China Backlash" Coming, Gerald Celente Says





Recent import/export data show China replaced Germany as the world's largest exporter in 2009, and the U.S. as the world's biggest auto market. [Jan 6, 2010: China Passes Germany as World's Largest Merchandise Exporter] In 2010, China's surging economy is set to supplant Japan as the world's second largest. [Oct 5, 2009: NYT: China Set to Pass Japan as World's 2nd Largest Economy]

With the global economy still in trouble, especially in U.S. Europe, China's rise is spurring a "real anti-China backlash," according to Gerald Celente, director of the Trends Research Institute. "Those who have the gold rule [and] a lot of people don't want to see China rule."

In addition to U.S. tariffs on Chinese tires and rolled steel, Celente says there are already more than 200 different trade barriers erected globally, with more to come: "You're going to see ‘Not Made in China' become a slogan around the world," he predicts.

In part because of anti-China sentiment, Celente says the "buy local" movement is going to pick up steam in the coming years - and not just in the U.S. "We're going to start seeing trade barriers go up more and more and more," he says. "It's not isolationism but survivalism."

Unlike most mainstream economists, Celente does not, however, believe trade barriers are necessarily bad for the global economy, saying there really isn't free trade today but the "dumping of products using cheap labor."

Monday, January 11, 2010

Pledge Update January 2010

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January 2010 pledge update below; as mentioned in previous posts we are on track for a summer 2010 launch.  .

Another record month with just under $1.2 million of pledges; this takes the total amount to 95% of the initial goal of $7M.   The total number of investors is now about 190.  I will continue with a more conservative projection of a $300-350K monthly run rate of pledges go forward for the next 5-6 months, which will take us to our goal for funds necessary by next summer. 

If you are a person potentially interested and new(er) to the website, here are the pertinent posts to become familiar with the specifics.


  1. The overall goal and why I'm aiming for $7 approx million [Jan 7, 2008: Reader "Pledges" Toward Mutual Fund Launch]
  2. Frequently Asked Questions [May 26, 2008: Frequently Asked Questions] Very important to read
  3. Why I need your state [May 23, 2008: Investment Pledges by State] Keep in mind a state's eligibility can be turned "on" overnight once we're up and running
  4. Most recent updates (this November)  [Nov 4, 2009: General Updates]
  5. Our story in Barron's [A New Kind of Fund Manager]

Let me copy the same caveats for pledges as always:

  1. Assume a pledge amount that is firm based on a fund opening in summer 2010.
  2. Assume at any point in 2010 the market may be down 30% from here
  3. Make your pledge based on liquid assets that are not currently in some high octane mutual fund that loses 40% when the market falls 30%, nor gains 50% when the market gains 40%. That money is not something that can be counted on in a volatile market.
  4. Please have whatever monies are pledged to the fund, in money market or equivalent by April 2010 so it is not at risk in the market.

Format for fund pledge: first name, last initial, pledged amount, and state you live in. To be clear, you are not sending me money that I'm going to hold until launch when you 'pledge' - you are simply making a verbal commitment: "when you are up and running, I have $X amount ready to invest". You can attach a comment to this post or as most people do, send me an email (my email address is found on the upper right of the blog) with the above information. I'd prefer an email if possible.


Name
Amount
State/Country



Brian
5,000
???
Heather
10,000
???
Bob B
50,000
AR
Ed S
5,000
AZ
Alan N
15,000
AZ
Armour B
50,000
AZ
Dharminder M
100,000
AZ
Pat L
10,000
AZ
Ron G
10,000
AZ
Art H
50,000
CA
Benjamin W
5,000
CA
Dave K
100,000
CA
Greg B
25,000
CA
Kurt C
10,000
CA
Ron W
10,000
CA
Tom L
25,000
CA
Ted C
5,000
CA
Brian L
50,000
CA
Rich P
30,000
CA
Shannon V
5,000
CA
Sunil K
10,000
CA
Anatoly S
10,000
CA
Wesley W
20,000
CA
Burt B
10,000
CA
John L
5,000
CA
Alven Y
5,000
CA
Piyush M
5,000
CA
Paresh P
5,000
CA
Dinesh K
5,000
CA
Naresh P
5,000
CA
Jay S*
5,000
CA
Shang C
50,000
CA
Henry C
3,000
CA
Charles Y
100,000
CA
George
5,000
CA
Ross T
5,000
CA
James H
5,000
CA
Dana K
25,000
CA
Walt C
30,000
CA
Charles L
20,000
CA
Greg W
20,000
CA
Raj
10,000
CA
Judy M
20,000
CA
Dave H
20,000
CA
Akash A
6,000
CA
Adam S
5,000
CA
F.A.
50,000
CA
Brian C
25,000
CA
Mark R
10,000
CA
Steven L
25,000
CA
Diane H
100,000
CA
Giancarlo S
2,500
CA
Scott W
50,000
CA
Henry C
8,500
CA
Adam B
50,000
CO
Alecia C
75,000
CO
Mike H
15,000
CT
Michelle T (Bob)
20,000
CT
Mark B*
25,000
D.C.
Elaine C
20,000
D.C.
Vic C
10,000
FL
Wes T
10,000
FL
Ron S*
100,000
FL (sailing)
Olivier N
10,000
FL
Bob H
3,500
FL
Chris I
20,000
FL
Dave C
25,000
FL
Kevin D
5,000
FL
Patrick L
100,000
FL
Sandy S
150,000
GA
Andrew L
5,000
GA
Mark L
2,500
IA
Jeff M
20,000
IA
Ian J
5,000
ID
Jay S
10,000
IL
Mike P
500,000
IL
Vivek G
75,000
IL
Ben
10,000
IN
Matt L
5,000
IN
Jake R
50,000
KS
Bill H
5,000
MA
Bruce W
2,500
MA
John B
20,000
MA
Don D
50,000
MA
MB
20,000
MD
Raeann
10,000
MD
Mark
60,000
MI
Ralph B
50,000
MI
May L
30,000
MI
Rich S
5,000
MI
Scott L
7,500
MN
Tom S
20,000
MN
Marshall H
5,000
MO
Wolfgang S
7,500
MO
Nathan J
10,000
MO
George L
10,000
NC
Brian C
5,000
NC
Colleen P
5,000
NC
Paul F
5,000
NC
Adam B
10,000
NJ
David B
50,000
NJ
Frank G
500,000
NJ
Henric B
25,000
NJ
Ryan T
7,500
NJ
B Shah
2,500
NJ
Rama R
4,000
NJ
Richard H
100,000
NJ
Vijay K
75,000
NJ
Howard A
5,000
NJ
Andrew
100,000
NV
Gary M
10,000
NY
Rob T
20,000
NY
Igor O*
500,000
NY
Jason N
30,000
NY
Tim C
20,000
NY
Atul R
5,000
NY
Rob #2
6,000
NY
Marc E
7,500
NY
Bob M
100,000
NY
Felipe V
5,000
NY
Lester B
100,000
NY
Matt Z
5,000
NY
Adam M
10,000
OH
Justin K
30,000
OH
Robert S
2,500
OH
Dilip K
5,000
OK
Blake V
100,000
OK
Ryan
3,000
OK
Bill G
10,000
PA
Jatinder M
10,000
PA
V.K.K.
20,000
PA
Bruce R
100,000
PA
Joe C
10,000
PA
Nathan S
3,000
PA
Robert T
75,000
RI
Heidi H
25,000
RI
Doris S*
100,000
SC
Steve
100,000
SD
Dave S
20,000
TN
Matt S
10,000
TN
Pankaj S
5,000
TN
Joe P
10,000
TX
Doug M
40,000
TX
H.S.
2,500
TX
Ian*
50,000
TX
"Phong"
10,000
TX
Jason D
5,000
TX
AZ
10,000
TX
Glenn J
5,000
TX
Samba V
20,000
TX
Coby S
50,000
TX
Alex T
10,000
TX
Shane V
25,000
TX
Greg R
20,000
TX
Brian J
5,000
TX
Chair
20,000
VA
Lisa
5,000
VA
Zhong L
10,000
VA
Madhu I
25,000
VA
Brian D
50,000
VA
Jake D
37,500
VA
Kevin L*
125,000
VT
Ron
20,000
VT
Linda A
15,000
WA
Scott R
100,000
WA
Mike H
2,500
WA
Eric S
50,000
WA
Cathy K
20,000
WA
"Himalayas"
20,000
WA
Tyler
10,000
WA
Danny N
10,000
WA
Jason E
5,000
WI
Gary S
10,000
WI
Jason
10,000
WV
Paul
100,000
Z-Austria
Stan T
10,000
Z-Canada
Steve L
10,000
Z-Canada
Brian M
5,000
Z-Canada
Stockspeter
7,500
Z-Canada
Anurag V
20,000
Z-Germany
Ken
250,000
Z-Hong Kong
Nick E
30,000
Z-New Zealand
Adrian C
75,000
Z-Romania/EU
S.E.H.
12,500
Z-Singapore
Junyuan
2,500
Z-Singapore
Tomaz K
20,000
Z-Slovenia
Ward P
2,500
Z-Sweden
Anil
25,000
Z-Switzerland
KP
5,000
Z-UK
Nestor T
25,000
Z-Uruguay
Harsh N
5,000
Z-UAE






Total
$6,637,000

Goal
$7,000,000

% of Goal
94.8%




To Go
$363,000


Bookkeeping: Adding to DragonWave (DRWI) on Pullback; Hoping "Gap" Fills

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After a stellar earnings report Thursday night, DragonWave (DRWI) flew higher Friday and I thought I was going to be stuck with my position size unless I "chased".  Chasing has been the way to go for much of this rally since March 2009; it is just not my favorite thing to do.  Thankfully, today we have a pullback into the upper $12s on the stock and the rare situation happens when a stock that smashes estimates doesn't run away from you appears to be in our hands.  Potentially DragonWave could close that gap created by Friday's moon shot either right before 4 PM or first thing tomorrow morning (gap at $12.42)



As I type the stock is $12.71 where I am going to add to my position; I will also place a larger limit order tonight just under $12.50 to see if I can snag it right at the "gap".  After today's purchases we will wiggle our way up from a 1%ish allocation to something closer to 1.75%.  (thank you market gods)  If I can get $12.50 or lower I'd like to get this name well over 3% - perhaps higher.

I also emailed investors relations since we had a question on how many shares outstanding would show for next quarter due to the recent share offering, the answer is just over 36M.  (up from 34.1M last quarter) This makes me comfortable in believing they can make very close to 90 cents on the full year.  This make the stock cheap in my eyes anywhere under $15. To repeat what we wrote Friday:


As for valuation, with 51 cents already in the bag for fiscal 2010, with 1 more quarter to go (which should be a >40 cent quarter) we should see DragonWave worst case hit 91-93 cents on the year. At $12, the multiple of this stock is a fraction of some retailers (picking a completely different sector) which are either shrinking or barely growing. Throwing a 20 multiple on year end 2010 (their fiscal year ends Feb 2010) gets us a $18 price. That's 50% appreciation from here. Is a 20 PE too high for the company? Hard to tell because the long term growth rate is unknown - obviously it won't be growing 400% a year like it has in the past 12 months. Feel free to throw a 16 multiple or whatever you wish and work backwards - it still appears cheap to me.


*please note, I am not sure if the full dilution is yet reflected from the recent share offering, so the analysis above assumes the shares outstanding will be 34.1M next quarter - it could be higher which would marginally reduce earnings per share. For example if they produce $41M in net income next quarter on the same 34.1M shares outstanding that equates to 41 cents in EPS; if instead there will be 37M shares outstanding that will mean only 38 cents. I have an email into the company to ask what the figure will be for Q4 fiscal 2010.


[Jan 8, 2010: DragonWave Smashes Estimates, Raises Guidance for 2010]
[Jan 7, 2010: Reuters: DragonWave Rally May Hold on Another UpBeat Quarter]
[Dec 22, 2009: Starting Stake in DragonWave]

Long DragonWave in fund; no personal position

Bookkeeping: Covering Most of iShares Barclays 20+ Year Treasury Bond (TLT)

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The short of iShares Barclays 20+ Year Treasury Bond (TLT) is our one remaining true short of any size but with the distress in the issue the past few weeks I am going to cover here, and see if there can be an oversold bounce in the next week to re-engage. Frankly I am not sure what would cause a bounce since the US has no viable plan to act responsibly and continues to issue debt as if it's going out of style, but for a "slow money" trade (much like a currency) it's move quite a bit in 3 weeks.



This is another position I expect to be holding for many years.  Need to do a better job of position sizing in this ETF so the portfolio can benefit in larger sums.  For now I am covering almost the entire position in $88.80s and will leave a tiny sliver so it remains on my radar.

If unfamiliar with this ETF or the reasons for the "very long term" reasons US bonds need to be shorted see this piece from 2008 [Nov 21, 2008: Bookkeeping - Initiating Ultrashort Lehman 20+ Year Treasury (TBT)]

*TBT is the Ultrashort ETF which allows you to short TLT in "long only" accounts such as IRAs; in theory shorting TLT or being long TBT should be of similar benefit.

Short iShares Barclays 20+ Year Treasury Bond (TLT) in fund; no personal position

SmartHeat (HEAT) Breaks Out of Double Top

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The "heat" remains on as Chinese heating equipment maker SmartHeat (HEAT) breaks nicely out of a double top.  Somewhere Kenny Loggins is smiling...



I'm tempted to add this to the portfolio but I'm pretty darn long already...

Contemplating.

There is nothing really proprietary about this company's business; it simply has the benefit of 1.3 billion Chinese x 2 lungs x XYZ # of buildings in China = boo yah.  [Dec 3, 2009: IBD - SmartHeat: Heating Equipment Maker Benefits as China Spends to Clean its Air]

No position

Bookkeeping: Closing Gafisa (GFA)

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Almost identical setup and reasons we sold Baidu (BIDU) Friday - except unlike Baidu we benefited greatly the entire year from the huge run by Brazilian home builder Gafisa (GFA) in 2009.  Much like BIDU would be setting up for greater downside if the "double bottom" at $395 broke, the exact same comment for Gafisa at $30.



At this point I will be more interested in Gafisa over $33, rather than down here.

We are exiting Gafisa completely after holding since March 30th (when the stock was purchased under $10!), in various weightings; only a (less than) 0.1% position was remaining.   We were stopped out of most of the position December 15th at $32.30s.




We've owned this name every year of the blog, and I expect to own it every year for the next decade. But for now hasta la vista...

As Ahnold says... we'll be back.

[Oct 21, 2009: IBD - Gafisa: What Housing Slump? Homebuilders Ride Brazilian's Resilient Economy]
[Sep 18, 2009: Brazil's Lula Has Good Chance to Build 1M Low Income Homes by 2011]
[Sep 15, 2009: Gafisa Denies Any Plans to Issue Shares in 2009, but Interested in Debt Offerings]
[Sep 2, 2009: Gafisa Downgraded on Potential Share Offering]
[Mar 30, 2009: Restarting Gafisa as Sam Zell Increases Stake]
[Oct 22, 2008: Sam Zell Increases Stake to Gafisa to 18.7%]
[Nov 19, 2007: Initiated a Position in Gafisa - Brazilian Homebuilder]

No position

Anyone Know the Story on Mercadolibre (MELI)

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Down 10% on huge volume?  This can only be the work of Goldman Sachs downgrade?




EDIT 3PM: Readers point to Venezuela devaluation of currency; I saw the headline last night right before I fell asleep and thought I read a 5% devaluation.  Apparently it's a 50% devaluation by Mr Chavez
  • Mercadolibre (MELI) shares are down sharply this morning after Venezuela over the weekend set a 50% devlauation of the bolivar against the dollar.
  • As the WSJ notes, Venezuelan President Hugo Chavez weakened the bolivar to 4.3 to the dollar from 2.15 “in a bid to shore up government finances, which have been hit by weaker oil prices, and to stimulate economic growth ahead of key elections.”

No position but interested

Bookkeeping: Weekly Changes to Fund Positions Year 3, Week 23

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Year 3, Week 23 Major Position Changes

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

Cash: 34.9% (v 63.0% last week)
29 long bias: 64.5% (v 36.3% last week)  [Includes 1 option position]
2 short bias: 0.6% (v 0.7% last week) 

31 positions (vs 31 last week)

Weekly thoughts
A roaring start to 2010 as both the NASDAQ and S&P 500 gained 2%+ in week 1.  There has been some talk of a "rotation" happening from recent winners in latter 2009 (especially that of a tech kind) to recent laggards (especially those of a banking kind).  Perhaps... but I find it bemusing in our Ritalin fed, "Fast Money" society how 2-3 days of action suddenly becomes the new trend.   Somehow unless we are going to value every tech company at 40-80x earnings, they must take a break to digest massive gains?  The important thing for the bulls is as that happens, other parts of the market take up the baton.  So far, so good.  


We stated through latter November 09 and much of December 09, we expected a large move once we moved out of the "box" aka a long sideways base; the longest we've had in the S&P 500 chart in multiple years (6 weeks).  Knowing if it was up or down was the question and the resolution seems to have been up; once S&P 1120 was cleared we've easily tacked on another 20+ S&P points.  My judgement was due to the width of the box/base the S&P 500 should be able to add 7-10%.  Mathematically that takes us to S&P 1198 - 1232; functionally 1200-1225.  It might not be a straight line because we are approaching some overbought situations but as we said last week, when the market refuses to even sell off and works off moves up (i.e. Monday's large gallop) by churning sideways, you don't want to fight that. 



Another positive factor in these eyes is the participation in the small caps, as evidenced by the Russell 2000 - this index was a laggard for parts of 2nd half 2009, but has now turned into a coincident winner if not a leader. 



The tech heavy NASDAQ has slowed down a bit but after leading relentlessly almost the entire rally from March 2009 lows, it's allowed some slack.  Especially considering we can be sure that many of this top heavy indexes top components were "marked up" nicely to end the year.



The economic calendar - after a bevy of reports last week - turns light again.  Most of the action will be late in the week with Retail sales premarket Thursday morning, and quite a few Friday (CPI, Industrial Production, Sentiment, et al).  Frankly I am not sure if the economic news matters much; a good economic report means "a stronger economy" and a bad economic report means "an extended period of low rates" by the Fed i.e. more easy money pumped into the economy, surely to be followed by new and innovative handouts from federal government. 


The fourth quarter earnings season kicks off this week, although it's more a trickle until next week.  As with the last 2 quarters I'd expect analysts expectations to be widely exceeded because (a) that happens every quarter and (b) the fortuitous nature of a crushed American labor force, drops to the bottom line of corporate America yet again.  Year over year comparisons should also (once again) be very easy - the big theme you will be hearing is, can the top line grow or is this mostly just cost cutting yet again.  One of these quarters seeing top line growth will be a necessity but thus far, as a general rule, investors are content to make numbers by any means necessary even if it's almost all in the cost structure of the P&L statement. 


Overall, short of a "Dubai" surprise or debt loads by countries such as Greece meaning anything it is hard to see serious downside short of a major event out of left field.  Complacency is enormous, as evidenced by the preceding sentence - and in the past complacency would lead to sell offs.  But the new paradigm market doesn't seem to act very much like the past ones... 

Major position moves for the portfolio were relatively light; we were positioned beautifully for last Monday's spurt as of 3:30 PM the previous Friday - but that nasty selloff in the closing minutes of the year pushed us out of quite a bit of long index exposure, costing us some valuable upside Monday.  Not knowing if the early morning strength Monday was a headfake mirroring in inverse Friday's late selloff we initially sold the remaining index long exposure on the morning bounce to S&P 1130, but then scrambled to get much of it back once that level was sliced through like swiss cheese.  We added more exposure as the market continued to roll through the week.  As for individual positions, frankly this is a period I call "we're all geniuses".  Take a dart, throw it at your local newspaper stock listings and buy the stock.  You have a 8 in 10 chance of looking the genius.  While I do like the fundamentals of the companies we own, I won't pat myself on the back thinging some stellar stock picking has focused gains in the portfolio - not when I see my watch lists full of similar moves in myriad other names.  The key view from this seat is to simply stay out of the way of rampaging bulls in a market dominated by technicals (and allegedly invisible hands); focus on stocks above key resistance levels on the charts and hope speculators choose some things you own as 'flavor of the day'.  Hopefully the music can keep going on until we get nearer to S&P 1200. 

Positions added to: (a) Skyworks Solutions (SWKS), Atheros Communications (ATHR) Monday, (b) gold/silver Wednesday, (c)  Braskem (BAK) Friday (d) Sourcefire (FIRE) Friday

Positions sold to lock in profits (a) Telestone Technologies (TSTC) Tuesday

Positions punted: (a) Baidu (BIDU) Friday.


For today's morning moment of zen I leave you with this snippet from some weekend reading on how the census will be adding some 1.2M+ jobs to America.   I've taken that number as gospel assuming this is how many people we hire every 10 years.  Wrong.  We'll put this factoid under the header of "How many Americans does it take to change a light bulb?"


It appears the answer is 3x as many as it took to change said light bulb versus 10 years ago.  Which is convenient when you are trying to shuffle the unemployed from under 1 shell to another. 


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