Monday, January 11, 2010

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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