Friday, November 5, 2010

Bookkeeping: Selling Another 1/3rds of Magna International (MGA) on Earnings Spike

If Magna was viewed like Netflix, Priceline, or Las Vegas Sands I'd just sit in my position but I would be a tad surprised if this stock gaps up and then just runs and runs for weeks on end with no pullback.  So I am going to sell another 1/3rd of the position here (sold 25% going into earnings) in the $99s and see if I can purchase some exposure back on a gap fill.  If not, I'll be chasing ever higher to get exposure back.

Other thoughts:

On the greater market, I find it remarkable that in back to back days we broke over the 200 week moving average, and now broke yearly highs as if neither resistance levels even existed.  Cutting through level after level as if resistance is only a word, not an actuality.   Nothing matters anymore - just QE.

Jobs report was "good" (relative to what we've seen the past 2 years) but not that surprising!  I wrote Wednesday we should beat well to the upside due to ADP [ADP Report Should Signal Significant Beat by BLS Report]... when the government adds its birth death model people should have expected a print well north of 100K.   It just shows you how lazy most market participants are - almost no one is doing any independent thinking, and just sits there waiting to be spoon fed estimates and guesses by brokerage houses.  Thirty seconds of thought would have led you to a view of 110-120K jobs gained based on the past few years of history between ADP v BLS.  It's truly the 1st grade logic market on all fronts.  Further some portion of the 'beat' are seasonal retail workers, which will be back on the doles come January.  (as always note we need about 150K jobs gained to keep unemployment flat, due to population growth)

I won't bother with any other details of the report since data does not matter to this market but please note the labor participation rate CONTINUED to shrink (64.5%!)  Meaning if we had a normal labor participation rate (where are all these people!???) we'd be close to a 12% unemployment rate, even in the massaged data set.*  A boggling development... all these people cannot be in early retirement or on disability.

*As I wrote in many pieces in 2007, 2008 all these unemployment rates are trash as well - the government has changed the way they figure unemployment rate to make it "look better" the past 2 decades (both GOP and DEM administrations).  If we still measured unemployment as we did pre early 1990s we'd be roughly 4% higher immediately.  i.e. the early 80s methodology would have us around 13.6% unemployment.   Which is why all these numbers are not worth even analyzing as we live in a world of massaged data because frankly "we can't handle the truth".

Long Magna International in fund; no personal position


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