Tuesday, June 15, 2010

Bookkeeping: Short Celanese (CE)

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This rally has finally starting waking up some of the stocks on my limit short list and got them moving up.  Celanese (CE) has a fantasticly low risk short set up as it has been slapped back each time it rallies to the 200 day moving average the past 6 weeks.  Obviously in 'student body left' trading if a V shape move is afoot all shorting will be mocked, and buying anything (with a dart) will be worshiped.  It does not seem to be so much about individual equities anymore as I have written non stop for a few years.  That said, since the market is moving in such extremes - with much of the movement overnight, I'd rather use individual stocks as hedges for now.

I have a nice entry of $29.01, and I'll only risk a 1.5% loss with a stop out @ $29.45.  (1.5% allocation)  It either breaks over the 200 day moving average (and 50 day) or does not.  It's as simple as that.



Since my 'short book' has filled nicely the past 24 hours, I will consider adding some long exposure in individual equities a bit more aggressively but until we get over S&P 1120 I will focus on the index plays - since once again so much of the movement of late is violent, news driven, and/or overnight. 

As for index longs I added on this break over 1108, I am hoping for a big squeeze of shorts into the close in the remaining 30 minutes so I can dump much of it.   Then if the economic data is "good" tomorrow I'll jump back in over 1120 but frankly the market is up almost 70 straight points so we are switching from oversold to overbought right quick!  (just a note, I am using JULY SPY calls, not JUNE for my index speculatio since the latter expire in 72 hours)

Short Celanese in fund; no personal position

Bookkeeping: Adding to First Trust ISE Revere Natural Gas (FCG)

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Despite a massive glut of natural gas in what appears to be a slowing economy (hence even less need for natural gas) the computers have been loving it the past 2 weeks.  Since we are all slaves to the algo's and fundamentals (supply v demand) are for weenies, I'll continue to respect the price action.  In thinking about adding long exposure my first thought was F5 Networks (FFIV) but every time I make a transaction on this name the past 3 weeks the market reverses; so I am want to be generous to bulls and hence won't add to the position.

Instead, I'll add a 1% allocation to First Trust ISE Revere Natural Gas (FCG) which is moving up solidly and today looks to have broken over a recent range.  Plus they both start with F.



While this intraday break over the 200 day is positive, it is seemingly so obvious.  And shall we really bet on a 3rd day in a row of +0.8% in premarket?  Seems improbable - if it continues each day we'd be up 4% in premarket alone this week.  But since everyone is now a technical currency analyst, we have to adhere to any changes in conditions, and respect a market that can go up in premarket 4 out of 5 days just like most of 2009.  Over S&P 1120 I'll feel more comfortable, and from that point until we reach 2010 highs we'll be subject to hearing about head and shoulders formations, but that's a body part for another day.

Long First Trust ISE Revere Natural Gas in fund; no personal position

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Morgan Stanley & UBS Upgrade Auto sector, Including BorgWarner (BWA)

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It is strange to see auto suppliers gapping up and such... such a staid business, but in 'student body left' trading as long as the market is happy (almost) all stocks are the same stock to the computers.  On days like today when countless stocks gapped up, it was difficult to discern that there actually was a catalyst other than "everything must be bought", but the sector was upgraded by both Morgan Stanley & UBS; including fund holding BorgWarner (BWA).  TRW Auto (TRW) which was another name in the group I considered also was upgraded, and both have bounced smartly lately and look much better technically  now.



Morgan Stanley's generic upgrade via Marketwatch:
  • The auto industry view was raised to attractive at Morgan Stanley on Tuesday, including buy recommendations on Johnson Controls  (JCI), BorgWarner (BWA), and TRW Automotive (TRW).  
  • The investment bank boosted annual earnings expectations by about 25% for 2010 to 2012, leading to higher sustainable margins for the sector. With better-than-expected profits in recent quarters, Morgan Stanley says the auto suppliers have made structural improvements that outweigh recent sell-offs over news from Europe.
  • US SAAR has been running at approx. 11.2 mm units in 1H2010, which is slightly above the 4Q09 run rate of 10.9 mm. Despite the sequential improvement and the start of a V-shaped recovery, the pace of recovery in the SAAR has been a bit slower than Morgan Stanley had hoped reflecting the impact of adverse weather conditions and the Toyota recall related sales stoppage in Jan-Feb and the choppy nature of the economic recovery.
--------------------------------

    While the market nowadays treats all stocks in the sector the same since computers only buy sectors and individual names mean nothing, there is a good story brewing specific to BorgWarner. 

    UBS was much more specific focusing on BorgWarner:
    • UBS is out with a lengthy note titled: "Which Technologies Will Benefit Most from Fuel Economy Regulation?" In this report, they have identified the lowest cost technologies needed to meet US fuel economy targets. Based on their analysis, they forecast that dual clutch transmissions (DCTs) and turbochargers will have the best growth prospects. The firm is raising their 2012 to 2014 EPS estimates for Borg Warner (NYSE:BWA) to reflect the outsized growth of these technologies.
    • According to UBS, BWA currently has a 35% share in turbos and is the only global supplier of wet DCTs. Consequently, BWA’s organic growth should significantly exceed that of the industry. UBS forecasts that BWA’s sales will double in the next 4 years.
    [May 10, 2010: Beginning Stake in BorgWarner]
        Long BorgWarner in fund; no personal position

        Back to Test S&P 1108

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        Now we all sit and wait on the computers to see if they push us through.  There used to be a time when levels like this, once broken, were traps for the obvious trade (i.e. further upside) but in the past few years we hardly ever reverse right back through a level 'trapping' either long or shorts.  I assume this is due to the influence of HAL9000.



        Tomorrow is the only day of the week I see any economic news that will actually move markets, so it is the only day premarket magic is threatened.   As we have seen for well over a year, in the absence of news we almost always go up in premarket but generally it is 0.3%, 0.4%ish.  This week has been very special since we have received back to back 0.8% days on really no news in particular.

        But for now all the market is a Euro trade - the bad unemployment and retail data meant nothing ... bad unemployment hurt the market for 2 days, and retail data hurt the market for 25 minutes..



        Now that $1.2250 has been broken, the next levels are $1.24 and $1.26.  Since the algorithms have some sort of Euro to S&P correlation maybe $1.26 = S&P 1130 or whatnot if and when.

        Looking ahead, we have end of month/quarter approaching and for those who believe fund managers stuff the market up ahead of the quarter you are bullish.  Since economic matters are just a sideshow, I guess just cheer the Euro and premarket magic until July when earnings season starts anew.

        (if we break S&P 1108 I'll probably throw an index trade on ti the long side for the remainder of the day at least)  EDIT: with the S&P 500 over 1108 I am buying index positions - the normal TNA, and SPY calls.  I'll hold unless 1105 breaks to the downside.  As mentioned earlier, a reversal would be too cute today after yesterday's performance so I could see a squeeze into the close.  There is really no issue until 1120 if 1108 holds..

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        So Far Monday & Tuesday are Identical

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        I can't tell what day it is, thus far today and yesterday have been identical sessions.  A 0.8% spike in the S&P 500 in premarket (both days originating from almost the exact same spot), taking the S&P 500 to 1100 in the opening hour.  This is mild resistance.  Then a jump over 1100 as the market grinds higher in the 2nd hour.

        From here, yesterday we spiked to S&P 1108 (200 day simple moving average) stayed over 1100 for most of the mid day period, and then reversed hard back down in the closing hour.  It would be too cute for this to happen 2 days in a row so my useless speculation of the day is we at close at day's highs and there is no drama in the closing moments.  (this of course would allow for a break over 1108 in tomorrow's premarket)

        But the similarity of yesterday and today thus far is uncanny - almost carbon copies.

        Real or Memorex?



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        WSJ: Default, not Thrift Pares U.S. Debt

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        It is truly an amazing juncture we have come to in the United States.  The large scale sacrifice of American savers so that their fellow debtors may prosper has reached a fervor.  If you are unfamiliar with the game plan of Geithner, Summers, Bernanke, et al it is quite simple if we strip it down.

        1. No large U.S. bank may fail per directive by government - the cartel must be supported at all costs.
        2. All U.S. banks shall prosper via huge subsidization via Federal Reserve offering money at essentially free.
        3. U.S. banks can borrow from Fed at nearly free and lend to U.S. consumer at much more than free, making loads of money simply by turning on the lights each day. [Apr 20, 2009: How Banks will "Outearn" their Losses]
        4. Historical losses on balance sheet can be taken at leisure in the mortgage market since national accounting board was pressured politically 18 months ago to change rules; to allow banks to mark assets at their own discretion rather than a price they could get in an open market.
        5. U.S. debtors, struggling under massive debt load, are defaulting in large waves - not just in mortgages but in credit cards and autos (to lesser degrees).
        6. The banks are ok with item 5, due to items 1-4. i.e. they cannot fail, they can lose money on their 'own schedule' due to new accounting, they can pay savers almost nothing, and the Fed shall keep rates low for ages so that this game can continue.

        It sounds like a perfect world, eh?  It is - except for the nation's savers who due to lack of return on their savings are running a massive (secondary) subsidization scheme, parallel to that of the Federal Reserve, to service the banks and their fellow citizen debtors.  [Mar 31, 2010: Ben Bernanke Content to Sacrifice American Savors to Recapitalize Banks and Benefit Debtors]

        I noted a piece maybe 6 months ago (can't find it in the 6000 historical posts on the site!) that U.S. debtors debt was being reduced but apparently on a net basis none of it was due to actual pay downs of said debt.  All of it was due to defaulting on debt.   That is not to some folks are not adding to debt while others are paying it down; we are talking in aggregate.  Effectively debt levels in America would remain at staggering high levels, if not for a nation wide move to default on debt.  Which is now winked at and supported (not that they could admit it) by government and Federal Reserve.  Welcome to your Banana Republic where good behavior is punished and bad encouraged.

        But it is worse than that - in that story from 6 months ago it was assessed that all the paydown was due to default but new debt was not being added in aggregate... in fact as the WSJ story explains below, on a net basis American debt is actually now headed back UP ex-default.  Which means while the total debt is going down, this is due to default, whereas if you peer under the surface - the non default debt is growing yet again.  (and why not? we now have trained our human Pavlov dogs there is no risk in taking on more debt... when it gets to onerous you just default)

        Unfortunately with the wild orgy of spending excess across all income strata, even with 3 years of rampant default, we're still at extraordinarily high levels of debt.  [Dec 3, 2009: Debt to Income Ratio Essentially Doubles for all American Households in Past 2 Decades]  So this 'scheme' by the Fed must continue on for a long time.  I once had a thesis that Americans would not "see the light" and rather be forced into a return to their historical savings rate.   [Dec 29, 2008: What Happens if America Returns to a Historical Savings Rate?].  But no more.  Transfers from the saver class to the debtor class is much more easy than asking the greater populace to sacrifice.

        -------------------------

        The latest statistics from the Wall Street Journal:
        • 122%: U.S. household debt as a share of annual disposable income.
        • U.S. consumers are paring down their debts faster than many economists had expected. To understand what that means, though, it helps to know how they’re doing it.
        • As of the end of March, the average U.S. household’s total mortgage, credit-card and other debt stood at 122% of annual disposable income, meaning it would take a bit more than 14 months to pay it all off if everyone stopped spending money on anything else. That sounds like a lot, but it’s better than it was before: At its peak in the first quarter of 2008, the debt-to-income ratio stood at 131%. Economists tend to see 100% as a reasonable level.
        • The falling debt burden conjures up images of a nation seeking to repent after a decade of profligacy, conscientiously paying down mortgages and credit-card balances. That may be true in some cases, but it’s not the norm. In fact, people are making much more progress in shedding their debts by defaulting on mortgages and reneging on credit cards.
        • Since household debt hit its peak in early 2008, banks have charged off a total of about $210 billion in mortgage and consumer loans, including credit cards. If one assumes that investors suffered at least that much in losses on similar loans that banks packaged and sold as securities (a very conservative assumption), then the total — that is, the amount of debt consumers shed through defaults — comes to much more than $400 billion.  (what's half a trillion among friends?)
        • Problem is, that’s more than the concurrent decrease in household debts, which amounts to only $372 billion, according to the Federal Reserve. That means consumers, on average, aren’t paying down their debts at all. Rather, the defaulters account for the whole decline, while the rest have actually been building up more debt straight through the worst financial crisis and recession in decades.



        But we have to look at the silver lining - all this defaulting allows consumers to spend their cash flow since they no longer need to service debt and (a) build up new debt (b) shop or (c) invest in the stock market!
        • In a sense, people who default on onerous debts — including the “strategic defaulters” who still have jobs and could pay — are doing the economy a favor. They’re freeing up cash to spend on other things, which can boost demand and give companies the confidence they need to start hiring again. If everybody just hunkered down and tried to pay their insurmountable debts, we might never have gotten out of the recession. Defaults are bad for the banks, but taxpayers already covered the cost of the losses through federal bailouts.  (reporter forgot to mention the multiple subsidization schemes I did; the federal bailout is a tiny piece compared to the constant handouts given each and every day)

        Summary:  As long as all major banks are backstopped by U.S. taxpayer (i.e. will not be allowed to fail), said U.S. taxpayer may default on her debt as much as she wants since banks can take as many losses as necessary to keep the economy 'booming'.

        Do you see how circular Banana Republic logic is?


        I did love the last paragraph of the piece.
        • The bigger question, though, is what we as a society will learn from the experience. The lesson seems to be that the way to get ahead in the world is to take huge risks — buy a house you can’t afford with no money down, or invest huge amounts of borrowed money in risky loans — but let somebody else pick up the bill if things go wrong.
        Works for the oligarchs, and now the citizens too.  Boo yah!

        Bookkeeping: Will Cover Green Mountain Coffee (GMCR) Short on the Open

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        A lot of times things in the stock market make little sense.  For example, coffee and sugar are rallying - coffee at a 23 month high.  So how do you play that?  According to CNBC's Joe Terranova on Fast Money - you buy a company who sells do it yourself coffee in the U.S.  A sensible connection? (higher coffee prices mean Americans will rush out to buy K-cups?)  Not in my eyes - frankly I'd expect higher coffee prices to be a negative to margins but what do I know about stock market logic.  The market is about perception and if this is 'the trade' I don't want to get in front of it.  My shorts are simply technical in nature so this is a piece of fundamental news (a commodity surging) combined with some simplistic logic, which can make the trade go awry.  I will stand out of the way and take a quick 2.5ish% loss and look for something not subject to "Terranova logic"

        I will be covering on the open on Green Mountain Coffee (GMCR) which is mid $25s in premarket aka its 50 day moving average. 



        In a shocking development I see S&P 500 futures up strongly in premarket!!

        No position

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        [Video] Nouriel Roubini Speculates on Double Dip Chances on CNBC

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        Not sure why they call Nouriel Dr. Doom - everything he says sounds quite realistic from this vantage point.  The latest from this morning's appearance on CNBC.

        (email readers will need to come to site to view) 15 minutes



        The risk of a double-dip recession is growing, especially in the euro zone, where restructuring Greece's debt is inevitable, famous economist Nouriel Roubini told CNBC Tuesday.  "I would say that the risk of a double-dip recession is highest in the euro zone… I would say there is a more than 50 percent probability," if not of a technical double-dip then of economic stagnation in the area, Roubini said.

        "The downside risk to growth is significant so taking stimulus away now is a huge mistake," he warned.
        There will be "massive deleveraging" of the consumer and of the private sector in the euro zone and in the UK, according to Roubini. 

        "What we have to do is avoid a double-dip recession," because authorities will not be able to fight it this time, he said. "The trouble is if there is a double dip there won't be the policy bullets."

        Greece should restructure its debt "in an orderly manner" because even with the EU/IMF help it will not be able to shake off the burden of debt, Roubini said.  "Take Greece, even if they follow the IMF program… their public debt is going to stabilize at 145 percent debt to gross domestic product. What joke is that?"

        Spain Is Worse?
        In the case of Greece, the debate is not likely to be whether to restructure, but how – chaotically or in an orderly manner, he said.
         
        Spain "is worse in some ways," according to Roubini, because unemployment there has reached 20 percent, not 10 percent like in Greece, the country's housing bubble has burst and it is one of the top four economies in the euro zone. A Spanish breakdown would be "a disaster," he said.

        Yields on Spanish T-bills jumped in an auction Tuesday, raising doubts over the country's credit rating as they were much higher than those on T-bills of triple-A rated peers.

        "There is no calm" in the markets, Roubini said. 

        "Markets are now realizing that this is going to be a period of slow economic growth. I'm not doom and gloom, I'm talking about slow economic growth over the next 3 years," Roubini, who has been nicknamed "Dr. Doom," said.

        Economic growth below 2 percent in the US would make for a negative outlook, and this scenario is very likely, he said. 

        The US economy needs to create 150,000 jobs per month to stabilize the labor market, and it is creating fewer, according to Roubini, who sees unemployment staying close to 10 percent.

        The US must take advantage of the fact that euro weakness is sending money into Treasurys and think about economic growth in the short run, while having a credible fiscal plan in the medium term, Roubini added.

        Monday, June 14, 2010

        Premarket Action Priceless; Regular Session - Not So Much

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        So what happened today?  Premarket (including first 5 minutes of the regular session when all the magical pre opening prices become 'real') up 0.8? 0.9%?  Regular session after 9:35 AM down 1.1%?

        Again, I call on Larry Summers to stop the regular market session. The actual matching of buyers and sellers in any volume (I believe they call that a 'free market') only hurts us.  By closing shop at 9:30 AM the government can continue  begin helping "guide" the market where it "should" be [Jan 6, 2010: Charles Biderman of TrimTabs Claims US Government Supporting Stock Market]  in the 7 to 9:15 AM time frame (government help to make sure prices are 'corrected' from 'too low' levels is working like a charm in the housing market), and we can call it a day with positive closes 9 out of 10 days. Well technically there would be no closes 9 out of 10 days, since we'd never open. What's not to love?  401k balances would swell, pension funds would be able to deliver on their 8-9% assumption each year forever.  And we'd all be rich via wealth effect.  All that money 7M households no longer 'waste' spending on a mortgage could be rolled into the stock market.  As an added bonus this leaves more times for shopping in those 6.5 newly freed hours each day, which is an added benefit to help the service economy.

        I am available for consultation Larry - call me.  I am all for efficiency and really it's only fair.  Bernanke gives banks guaranteed risk free returns, so why does not the common man deserve the same in equities?  If not for the market being open between 9:30 to 4:00 PM and allowing any form of liquidity over and above what can be done in the thinly traded premarket ($5B SPY can go a long way - wink wink), we could have Dow 18,000 by now.

        p.s. I also recommend releasing all good economic data between 7 AM and 9:15 AM so we can say "look there is a great reason for the S&P to be up 0.8% in premarket", whereas all bad economic data shall be released around 3 AM EST.  (sort of like announcing on Christmas Eve the U.S. taxpayer will be on the hook for all losses at Fannie and Freddie for the next 3 years)  Then of course when futures react negatively to the bad news we can begin 'God's work' at 7 AM.

        p.s.s. If we must keep the facade of a market between 9:30 AM and 4 PM, I propose a ban on selling in those hours.  But of course allowed during premarket when 'market forces' can offset it (hint).  There are many ways to handle this Larry - think outside the box.

        Until tomorrow. (premarket!) 

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        S&P 500 Fails at Today's Attempt to Break Resistance

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        This most recent attempt has thus far failed as the 200 day (simple) moving average held yet again.  Providing 'support' ironically is the 20 day moving average.  I've charted the 'simple' moving average below simply because this is the one that seems to be respected by the market the last 6 weeks.  You can see 4 separate days in the past 3 weeks where an intraday high as hit the 200 day simple moving average and that's been the high of the day... almost as if computers are running the show. ;)

        [click to enlarge]



        Some other interesting thoughts:

        1. We gapped up today, so this faltering down to the S&P 1094 level is helping to fill the gap; which can be construed bullish in my eyes because if we are about to break out to a big run, taking care of gaps is a good thing.
        2. As I type this with the market +0.3%, if you exclude the premarket follies, we are down for the day. (please note I am excluding the first few minutes of the session in which the "gap up" is followed through during normal market hours)  That should sound familiar since it happens week after week.  So many days that are negative during market hours (post 9:35 AM) yet "positive" in premarket when the trading is thin and 'someone' can influence things.
        3. I have NO idea if we rally or falter from here.  Everyone who trades on technicals knows the key levels and we're all watching the same thing.  All you can do here is stay small, be hedged, or partake in rampant speculation betting on one side or the other knowing you have zero advantage other than your lucky rabbit paw.  But one thing I can be sure of, is whichever way we end up going someone will be happy to let us know "I told you so!"  For all I know we finish +3% today, or in the red.  I'll adjust when the market gives much better signs.  We still remain in the 'range' as far as I am concerned.

        If you are a long time reader you know how often I've said this market is acting atypical.  Since March 2009 "resistance" has not been resistance and we've blown through levels as if they are swiss cheese.  Which makes the bears nervous because rules that *should* work, have not worked.  It's like Charlie Brown running to kick the ball, and Lucy pulling it away.  Lately, on the other hand... the market has respected technical levels far more.  Which is very comforting for those of us who have been around a while.  For much of the past year and a half it's been like walking around a dark cave, with a blindfold and someone with 1 day experience in the market can make better calls than someone with 15 years.

        One of my favorite guys to read during the day, Rev Shark at Realmoney.com completely agrees with these thoughts (we've both been extremely frustrated this past 18 months as 'old rules' have meant zilch):

        During the market rally that began in March, 2009, many technical traders struggled because the resistance levels often meant nothing. We'd rally on light volume and cut through obvious resistance, as if it didn't even exist. Anyone who had become more cautious, or had the audacity to actually put on shorts, felt very frustrated when the market keep on running without a care in the world.  

        Since the top in April, the role of key resistance levels has changed. After the flash crash in early May, we bounced back and quickly failed near the 50-day simple moving average on the S&P 500 around 1172. We rolled over and found support almost exactly at the 1050 February low. Next came a number of bounce attempts, each failing around 1100-1108, which is the 200-day simple moving average.

        The way that resistance and support have worked over the past month is almost too perfect, but given how much they didn't matter for well over a year, it's a refreshing change. Now we are at a level where it is going to be very interesting to see if the bulls have the capacity to make it through that 1108 level. It will be a substantial technical hurdle, but the bounce leading up to this attack doesn't have much momentum. It is going to take some work to hold the 200-day moving average breakout. 


        [Video] The Downside to Natural Gas Drilling - Your Tap Water Becomes Flammable

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        I saw a news report on ABC last night,on natural gas fracking - essentially using water to help force out the natural gas from its hiding spot.  In the report they showed a guy who lives by the shale and he literally put a lighter under his water faucet while it was running and was able to cause it to go up in flames.  Water!  Here is the clip.



        Apparently there is a movie out called Gasland which is where that clip was pulled from.  Quite amazing stuff.

        Here is the trailer, the 'flammable water' is after the 2 minute mark.


        Bookkeeping: More Shorts Added and Ryanair Holdings (RYAAY) Stopped Out

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        A week ago on Tuesday all the world was going to hell in a hand basket, US employment stunk, copper was at 6 month lows, and the S&P was falling to yearly lows.  Not 4 sessions later all is great in the world because the stock market bounced.  Boo yah bipolar world...

        The Ryanair (RYAAY) short I put on late last week has stopped out with a 2% loss; this one was a simple "are you going to go over the 200 day or not?" and the answer is yes - just barely though.  Not my favorite type of chart to short but it was such a simple set up and all other stocks I was interested in were still too far from resistance to begin the trade so I took a flier. (pun intended!)  I don't think the coast is clear yet for the name but I am staying disciplined and adhering to my original trade.




        Three other shorts limit orders I had out have hit mid day, so I am up to a basket of 5.  In terms of executing correct prices to short at that would coincide with the S&P 500 at 1100ish I am very happy.  I said for my limits to hit most stocks that I really wanted to short would need to rally 4-6% from where they were Thursday and here we are.  Now we just have to see if the student body moves right or left.

        #1 - Energizer Holdings (ENR): simple story here, the 20 day is lower than the 50 day is lower than the 200 day; a poor chart.  It has been rebuffed on any move to the 20 day for 6 weeks; my trade was simply to place a limit short at the 20 day and then we'll see if the trend continues.  If not, I'm out with a low risky entry.

        1.75% exposure @ $55.50.  My stop will be $57.50ish which is the 50 day and would signal a new higher high; that would garner a 3.5% loss.



        #2 - Pitney Bowes (PBI) - this is "slow money" but just a simple hedge as part of a portfolio in case the market retraces back down.  Just like Energizer not exactly a name HAL9000 and crew will jump in and out of based on the day's headlines.   Very simple set up - the 50 and 200 day moving averages are converging in 1 spot, so I placed my limit order there.  The stock rallied to that spot today.

        1.7% exposure @ $22.92.  My stop will be a clearance of the 50 day moving average allowing for a little market maker shake and bake so let's say $23.35 or just under 2%.  Again not a 'fast money' trade either to the upside or downside.



        #3 - Green Mountain Coffee Roasters (GMCR) - yeh! Love to short old momo plays.  This was the hottest stock in the market for 4-5 months in 2009.  Until it finally guided to a level the momentum players were disappointed in, and then they left en masse.   Similar to Pitney Bowes I places my order hoping for a rally into resistance which is here at the 200 day.  Now it will either "student body left" dance over and above resistance or fall back.

        1.6% exposure @ $24.76.  My stop will be $26.00 or a break over the 50 day moving average AND 200 day, which should be a low risk probability.  Unless we gap up in the stock market .75% tomorrow of course.  This is a volatile name hence the 5% berth for stop loss.



        Short GMCR, PBI, ENR in fund; no personal position


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        Bookkeeping: Some Limit Short Orders Hit

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        A few of my limit short orders have hit this morning which coincides with the move to S&P 1100 - as was the original plan.  With the market seemingly gapping up or down almost every day now on random news I feel more comfortable with holding individual stocks overnight as hedges than any sort of heavy index exposure.  I will keep these with a short leash (i.e. tight stops) so any losses are minor.  Again, these are all technical set ups and have little to do with fundamentals.  The first two to hit are Hartford Financial (HIG) and Netease (NTES).

        HIG was shorted at a 1.5% allocation @ $24.93.  I will give it 4% leeway i.e. $26.00 which is above the high water mark of 2 weeks ago.  This is a "risk on" type of trade as higher risk insurers have become fast money favorites.  The original intent when the order was entered last week was to short right at the 200 day moving average, assuming it would be difficult to jump over, but so much for that (in 'student body left' market world you can see so many stocks 'gap up' together as computers rush in guns blazing).  I'm down 35 cents thus far.



        NTES (Chinese video games) was shorted at a 1.75% allocation @ $31.49.   Likewise, I'll give it a 4.5% leeway i.e. $33.00 which would take it over its 50 day moving average of $32.80 and falling.  The stock has had all types of problems of late, not even able to get back over its 20 day.  It has cleared that hurdle this morning (on a 'gap up' of course), but we'll see how long it lasts.


        Again bigger picture, I want to build a decent size portfolio of shorts here in the 1100-1108 range in case this is yet another rejection on the S&P 500.  If it is not, and we're off to the faces, I'll take modest losses on these and then turn the switch and focus on the long side over the 50 day moving average of 1121.   Since there is a 50/50 chance of going either way (up or down) and due to all the focus on premarket movement, I'd rather build a portfolio of diversified names at this time (so no individual equity can hurt me) rather than do index positions for overnight positions.  I have about 5 other limit orders waiting and we'll see if any of those hit today.

        Short both names mentioned in fund; no personal position

        x

        Polaris Industries (PII) Gets an Upgrade

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        Recent portfolio addition Polaris Industries (PII) continues to act very well - while we are hostage to a 'student body left' trading environment (risk on, risk off!) when the market is relatively stable we can see which stocks act well on their own.  This morning the company received an upgrade as signs of discretionary spending due to large scale mortgage non payments by Americans economic recovery takes hold.  Remember 4-5 skipped mortgage payments for Joe 6 pack = new Polaris toy.


        • A KeyBanc Capital Markets said Monday that the leisure vehicle market is continuing to gradually improve, with the ATV market showing the most growth.  News that consumers are confident enough to spend money on discretionary items like ATVs, snowmobiles or RVs is a good sign for the economic recovery.
        • Analyst Scott W. Hamann said it appears manufacturers' inventories are much lower than in the past. Hamann noted that financing for these types of purchases remains stable so far this year, although it's still easier to get than a year ago.
        • Hamann said Polaris Industries Inc. will likely benefit the most from the improving ATV industry. He said the maker of snowmobiles, ATVs and Victory motorcycles is gaining significant market share in that sector.
        • He raised his rating on Polaris shares to "Buy" from "Hold" and set a $73 price target on the stock, indicating growth potential of 21 percent over the next year.
        • Hamann also thinks the company will continue to be aided by recent restructuring efforts (read: sending American jobs to Mexico) and a partnership with Bobcat Co. in which the two companies will develop vehicles and share technology.
        [May 25, 2010: Bookkeeping - Beginning Starter Stake in Polaris Industries]
        [May 25, 2010: Polaris Industries to Move American Jobs to Mexico - Great for Profits and Shareholders; Not so Much for American Workers]

        Long Polaris Industries in fund; no personal position

        Bookkeeping: Weekly Changes to Fund Positions Year 3, Week 45

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        Year 3, Week 45 Major Position Changes

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

        Cash: 85.6% (v 84.8% last week)
        16 long bias: 10.6% (v 13.1% last week) [Incudes 1 option position]
        4 short bias: 3.8% (v 2.1% last week) [Includes 1 'long dollar' position]

        20 positions (vs 21 last week)

        Weekly thoughts
        The first positive week in the markets in 4, a series of premarket mark ups were once again a key component in last week's rally.  Last minute flurries of buying or selling have also been a hallmark lately, similar to what we say in much of 2009 where the last 30 minutes dominated each day's trade.  "Student body left" trading remains the name of the game as it has been for the past 2-3 years... what you own has little importance... if the market is up, you can buy almost anything, if the market is down, you can sell almost anything.  Each day is news driven and without memory of the previous day.

        Technically, we have a quite simple setup really.  Either we've just come off a 'double bottom' and are ready to rock and roll, "V shape" style once some resistance is punctured.... or we've simply bounced to the top end of a recent (large) range and will soon be hitting a brick wall.  Obviously no one knows the answer in advance.

        [click to enlarge]



        I've mentioned this large range as S&P 1040 to 1100ish, which has been split into sub categories of 1040 to 1070, and then 1070 to 1100.  But I also want to note there is a distinct level of resistance if you are using the exponential 200 day versus simple 200 day, about 9 points: 1099 v 1108. Why is this important?  Because on the last rally attempts it was the simple moving average, rather than the exponential where the market actually topped out, albeit it the 2 figures were much more closer back then.



        Other than that, the other main focus continues to be the Euro which is heavily shorted and continues an oversold bounce.  It seems every computer on earth is triggered to but "risk on" (wax on, wax off) when the Euro is headed upward, and take "risk off" when the Euro falters.  We'll see how far the Euro can go as it probably faces some stiff winds in the mid $1.22s and then $1.24.



        As for economic news, the U.S. has shown some weaker signs the past few weeks with a shoddy labor report along with weaker retail sales.  But as last Friday showed, the market will do what the market will do and economics is many times just a sideshow (in the near term).  At this point the market seems much more technical in nature and the economic data - aside from the 'big name reports' - has been largely ignored as we are slaves to Euro moves and charts.

        This week the economic data are focused on Tue-Thur, with Wednesday being the most interesting day.

        Tuesday: Import Prices, Empire State Mfg - neither really move the needle

        Wednesday: Housing Starts, Industrial Production, Producer Price Index - most likely there will be a move in premarket based on this data set

        Thursday: Consumer Prices, Leading Indicators, and Philly Fed survey

        ---------------------------------------

        In the portfolio, I used last week's strength to lighten up on positions that were not performing.  Of course if "V shape bounce 8.0" is in the offing all sales will look foolish.   Bigger picture we are in a large range and nearing the top of it, so my inclination is to assume a failure and retreat but I am in 'wait and see' mode.  Further, China's market remains weak, (doctor) copper is bouncing off 5-6 month lows, and stimulus measures shall begin to slow down 2nd half 2010.  On the flip side the Euro banking system is engaging in their own form of 'liquidity' and in a world where economic activity is weak in most developed markets (Asia is another story), all this liquidity needs to find a hope and is happily gathered in financial markets.

        Since the market is in one of those rare times below the 200 day moving average one should still skew to caution as that is a very important line in the sand.  If we get back over it in the coming days or weeks then one has to change assumptions - it really is as simple as that. Hence the area of interest this week is 1100 (200 day exponential) to 1108 (200 day simple) and seeing how the market acts in this area.  Near term game plan is to see if some of my limit short orders hit here in the 1090 to 1110 range, with tight stops in case the market does another "V shape" bounce.  If the market can burst over the 200 and 50 day moving averages, I will change themes and focus on the long side again - this would be over 1120 or so.  So the next 30 points will make a big difference to my intermediate term views.  Staying below 1100 = bearish, getting over 1120 = bullish.

        On the long side:
        • Early in the week I cut back Tibco Software (TIBX) and F5 Networks (FFIV) as they both broke support, once again marking a short term reversal (when I buy these, the market reverses down, when I sell them the market reverses up!)
        • I closed TriQuint Semiconductor (TQNT) which is simply not performing.
        • I created a starter position in Salesforce.com (CRM) when it fell to initial support, as I create a wing of the portfolio where valuation means nothing.
        • Wednesday, I put on some modest index long positions expecting a bounce - but was shaken out by the late day reversal.
        • I closed SL Green (SLG) and Riverbed Technology (RVBD) as the stocks had rebounded a bit from their worst levels but there are many other stocks with far better conditions right now in their charts.

        On the short side:
        • Tuesday, I sold all my SPY 107 puts and 2/3rds of my SPY 106 puts as the market went down into the 1040s, for a nice profit. I sold the rest as the market began to bounce over 1050.
        • I shorted Irish airline Ryanair (RYAAY) with a simple technical set up - the stock is near the 200 day moving average.  Either it will run through it or fail. 

        To our English readers - a big shout out to Robert Green.  Your check is in the mail.



          Updated Position Sheet

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          Cash: 85.6% (v 84.8% last week)
          Long:
          10.6% (v 13.1%)
          Short:
          3.8% (v 2.1%) [long US dollar positions are considered "short"]



          This data is updated weekly and can be found on 'Performance/Portfolio' menu tab on the website. As always the total gain/loss (both dollars and percentages) only apply to the open portion of the position; it is does not apply to portions of the position sold earlier.

          [click to enlarge]


          LONG (1 photo file)



          SHORT



          OPTIONS



          Friday, June 11, 2010

          More "Valuation is for Sissies": American Tower (AMT)

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          As I wrote earlier in the week I am trying to build a wing of the portfolio for companies with insane valuations that people just buy hand over fist on every rally because... well, they go up.  Another name I looked closely at was American Tower (AMT) - this is a hedge fund favorite.  Simple business description - all the towers needed for mobile communication.

          American Tower Corporation, through its subsidiaries, operates as a wireless and broadcast communications infrastructure company. It develops, owns, and operates communications sites. The company operates in two segments, Rental and Management, and Network Development Services. The Rental and Management segment leases space on its wireless communications towers to customers, including personal communications services, cellular, specialized mobile radio, WiMAX, paging, and fixed microwave. The Network Development Services segment provides tower-related services, such as site acquisition, zoning and permitting services, and structural analysis services. As of March 1, 2010, the company owned and operated approximately 27,000 communications sites in the United States, Mexico, Brazil, and India.

          Rather than just buying as the chart turned positive when the stock broke over all key resistance areas late last week I made the mistake of checking out its EPS estimates.  The stock was around $42 ... in return I get $0.87 EPS for 2010, aka a forward PE of just under 50 for a company growing about 20%.  Not a 1 PEG (PE to Growth ratio), and not a 2 PEG, but a cool 2.5...

          But who cares?  The stock goes up... and that's all that seems to matter to the computers.  I suppose if you are paying 50x forward, there is no shame in paying 80x and then 150x.  This is 1999 logic. A missed opportunity as the stock has gone off to the races today.



          No position

          Should Have Bought More Salesforce.com (CRM)

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          I bought a starter position in Salesforce.com (CRM) earlier this week and forgot how 'easy' it is to make money when valuation does not matter and momentum is all that does.  The stock is already up 9% in a herky jerky tape.  If I had a large position I'd take quite a bit off here as the stock is testing recent highs and either is about to make a double top or go off to the races (and I'd add back that exposure if it raced to new highs)... but since I only began with a 0.4% exposure I am just sitting and reminding myself the joys of buying stocks at 80-90x forward estimates.



          Long Salesforce.com in fund; no personal position

          CBSMarketwatch: More Investors Turning to Flexible Mutual Funds

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          The twin bear markets in a decade are finally starting to turn Joe6Pack onto the fact that the "all in long, cash is trash" mutual fund model that dominated int he 80s and 90s works quite well in a 17 year bull market, but no so much during more normal times.
          Hence alternative options - long overdue - are finally catching on... which I am very happy to see.
          1. [Nov 24, 2009: Bloomberg - Investors Rushing into Alternative Mutual Funds
          2. [Aug 4, 2009: WSJ - Mutual Funds Try "Hedge" Approach in Effort to Trim Stock Losses]
          3. [Apr 10, 2009: More Stock Mutual Funds Declare Cash is King
          4. [Nov 12, 2009: WSJ - More Mutual Funds Attempt to "Time" the Market

          While the Morningstar "style box" still captures the hearts and minds of most investors (and their financial planners) - the 'go anywhere' approach is starting to attract those who are paying attention.

          Via CBS Marketwatch:
          • Sometimes it pays to be in the right place at the right time, as the managers of the Osterweis Fund (OSTFX) can attest.  As the stock market tanked in late 2008 and investors watched their losses pile up, Osterweis Fund saw a dramatic increase in new money. The reason: while the fund invests primarily in stocks, its managers are free to hold cash and even some short-term bonds if they think it's appropriate.
          • That's exactly what happened in the fourth quarter of 2008. As the market fell, Osterweis Fund's portfolio held 50% of its assets in cash and short-term bonds. The fund lost 29% that year -- nine percentage points better than the Standard & Poor's 500-stock index  -- and management's only regret is not being quicker about leaving stocks.  (geez if -29% attracted a 'dramatic' amount of money I wonder what my flat to small positive return would have done
          • Osterweis saw $67 million of net inflows in the fourth quarter of 2008, and $399 million in 2009. The pace of flows has since slowed, but the $1 billion fund still saw $88 million in inflows in the first quarter this year.  (allright, I'm officially jealous)
          • Osterweis falls into the stock fund category, but its tactical approach to leaving stocks if necessary distinguishes from many of its peers. It's a strategy that often preserves capital -- and one that seems to be increasingly popular with investors still reeling from heavy losses
          • The idea of giving fund mangers total freedom is catching on with investors. A small but growing category known as global tactical asset allocation funds are increasingly popular, garnering $20 billion of net inflows since the start of the fourth quarter of 2008, according to Strategic Insight.
          • "Investors have been drawn to these funds in reaction to the financial crisis," said Loren Fox, senior research analyst at Strategic Insight. "Managing funds in an unconstrained or tactical manner can, theoretically, provide downside protection and some sort of absolute return during further episodes of extreme market volatility -- goals may appeal to more risk-averse investors." 
          • "Some investors like the fact that these funds give their portfolio managers greater flexibility than funds designed to plugged into style boxes -- it can allow the managers to be more nimble," added Fox. 

          You may ask why the style boxes dominate?  Mostly because financial planners wants to make the decisions on how to invest their clients money.  If you are a small cap value fund, then you must stay as one to get their dinero..
          • That flexibility is often absent in other mutual funds, in part because many managers run their funds for institutional clients, whether large investors or financial advisers. These clients typically allocate money to a manager based on a certain strategy -- U.S. large-cap, for instance -- and any reallocation is made by the client, not the manager.
          • But individual investors can suffer under this approach because they don't have such rigid allocations and rely on their managers for both achieving gains and minimizing losses. As such, it's likely that flexible funds' popularity isn't going to wane any time soon -- Fox noted that several funds of this type are being primed for launch. (no reporter called me for this story... I am dabbing my tears)

          Some of these figures are staggering!  $60 Billion in just these 2 funds.
          • Among funds with a go-anywhere, tactical approach, two of the largest are BlackRock Global Allocation Fund (MALOX) with $40 billion in assets, and the $20 billion Ivy Asset Strategy Fund (WASAX).  Recent net inflows into these funds attest to the popularity of their approach. In the two years through April 30, Ivy Asset Strategy saw net inflows of $10.3 billion, second only to the $80 billion Vanguard Total Stock Market Index Fund.
          • The funds' ability to hold stocks, bonds, cash or even alternatives meant many of them outperformed the market in 2008 -- Ivy Asset Strategy was down 25.9% and BlackRock Global Allocation lost 20.4%.

            As Long as S&P 1070 Holds Don't Expect Much Damage

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            S&P 1070 aka Dow 10,000 remains the level.  To repeat (like a broken record) we have 2 ranges: (a) 1040 to 1070 and (b) 1070 to the 200 day moving average, roughly 1100.  I continue to read nothing into any movement in this 60 point range unlike many others.  It's simply white noise from this perch. As long as 1070 holds we should remain in this 30 point range and ping pong back and forth.  Remember, the market no longer has a day to day memory, so this news will be forgotten by Monday. (EDIT 10:15 AM - Retails sales data forgotten by 10:15 AM, not by Monday)

            With this morning's selloff all we've done is moved to the lower end of the top range.  If 1070 were to break later today, which I would paint as unlikely then we are talking about the lower range.  But until a breakout over the 200 day moving average or a breakdown below 1040 occurs this is all just fodder for quants and daytraders, and it means nothing to the intermediate term.  Unfortunately, I was hoping for a move up today to see trading near the 200 day moving average, to have some of my limit short positions lock in - but that now appears highly unlikely.

            [click to enlarge]


            Retail Sales Data Sadden Bipolar Speculators

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            Once more each day is upon itself revolving around that day's news, and the previous day means nothing.... a truly bipolar world of speculation, now that we've chased off all long term investors.  This morning's "good news" (in my book) has the savings rate up; but unfortunately that means despite 7M some American households not paying for their housing, that retails sales fell.  I assume a lot of this is because many Americans received their tax returns as soon as possible (since half the population no longer pays federal taxes and hence gets 'paid' early in the year) - so we're losing that beneficial effect.

            Frankly, I give little credence to government data and if I want retail sales I'll go observe the retailers earning reports, but in this market every data point must be worshiped as if it means a complete 180 degree change in the world.
            • Sales at U.S. retailers unexpectedly dropped in May, signaling consumers boosted savings as employment slowed and stocks fell.  Purchases decreased 1.2%, the biggest drop since September 2009, following a 0.6% April gain that was larger than previously estimated, Commerce Department figures showed today in Washington. 
            • Retail sales were projected to increase 0.2%.
            • Demand plunged at building-material stores, reflecting the end of a government appliance rebate, and sales fell at auto dealers, in contrast to industry figures which showed a gain. (exactly my point, why do people listen to government reports rather than the companies? boggling)  The decrease at building-material stores followed an 8.4%jump in April and a gain in March that may have reflected a surge in appliance sales propelled by a provision of the government’s stimulus package last year that provided rebates for purchases of more energy-efficient products. 
            • Spending also decreased 3.3% at service stations, 1.3% at clothing stores and 1.1% at general merchandise stores, which was the biggest drop since December 2008

            Rather than listen to government, I continue to use Target (TGT) as the best tell on the great American middle class. [Dec 26, 2007: Target Shoppers Turning into Walmart Shoppers] .. Walmart (WMT) is thriving due to many former middle class now becoming lower class, [Oct 30, 2009: Costco to Roll Out Food Stamps Nationwide]
            [Nov 10, 2009: Walmart Executive - "There are Families Not Eating at the End of the Month"] and the higher end is the high end - mostly immune and now embracing the new American upwardly mobile - the federal government worker.
            • “Comparable-store sales were somewhat below our expectation,” said Gregg Steinhafel, chief executive officer of Target, in a statement May 19. “Our recent experience reinforces our belief that we will continue to experience volatility in the pace of economic recovery.”

            If you believe in (somewhat) efficient markets, the retailing stocks - after galloping in Q1 2010 - were telling us something the past 6-7 weeks, deadcat bounce the past 3 sessions notwithstanding.



              George Soros: Financial Crisis Has "Only Entered Act II"

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              Love or hate his politics, there is no doubt George Soros is one of the brightest investment minds of the past few generations. Hence when you have Soros on one side saying we have only begun the 2nd stage of the financial crisis, and on the other hand you have "Unicorns and Butterflies" Bernanke telling us all is well (kumbaya!) [and coming off one of the worst economic forecasting records the past half decade you could put together], you can guess which side one might be better off listening to.


              The collapse of the financial system as we know it is real, and the crisis is far from over,” Mr. Soros said at a conference in Vienna. “Indeed, we have just entered Act II of the drama.”


              NYTimes DealBook has a full transcript of the speech Soros gave at the Institute of International Finance in Vienna here.  Remember, you can choose to accept the red pill or the blue pill; if you choose the blue pill Ben Bernanke has solved all your ills... if you choose the red, please read on for some excerpts.
              • Soros, 79, said the current situation in the world economy is “eerily” reminiscent of the 1930s with governments under pressure to narrow their budget deficits at a time when the economic recovery is weak.
              • “We find ourselves in a situation eerily reminiscent of the 1930s. Keynes has taught us budget deficits are essential for counter-cyclical policies, yet many governments have to reduce them under pressure from financial markets. This is liable to push the global economy into a double-dip.” 
              • Europe’s debt-ridden nations have to raise almost 2 trillion euros ($2.4 trillion) within the next three years to refinance, according to Bank of America Corp.  
              • When the financial markets started losing confidence in the credibility of sovereign debt, Greece and the euro have taken center stage, but the effects are liable to be felt worldwide,” Soros said.

              Obviously the big fear here is what Nassim Taleb described yesterday; one day we wake up to a failed bond auction.  I mean how *much* money is there in the world?  China only has $2 Trillion in reserves and can't buy everyone's debt.  And for all we know central banks are already doing bidding behind the primary dealers to make everything appear rosy.  Without audits we know nothing.

              ---------------------------------------

              He also shares our thoughts on the use of credit default swaps by those who have no interest in the underlying debt - which was just rehashed on the blog Wednesday in terms of BP.  But bless their hearts our investment bank oligarchy and their top hedgie customers say all is well, they are self policing, and just trust them.
              • Credit default swaps, which aim to protect bondholders against the risk of a default, are dangerous and a “license to kill,” Soros said. CDSs should only be allowed if there is an insurable interest, he said.
              Please note the above words are coming from one of the largest hedge fund managers in the world
              • “Regulators ignored systemic risks. The positions of all market participants – hedge funds and sovereign wealth funds – need to be monitored.” 

              [Feb 17, 2010: George Soros Calls Gold a Bubble, then Piles Into It]
              [Oct 26, 2009: George Soros Interview with Financial times - October 2009]
              [Apr 7, 2009: George Soros on Yahoo Tech Ticker]
              [Mar 31, 2009: UK Times: George Soros Sees Global Meltdown]
              [Feb 23, 2009: George Soros - This is the End of the Free Market Era; Situation Similar to Disintegration of Soviet Union]
              [Apr 9, 2008: Soros Believes Global Subprime Costs to Reach $1 Trillion]
              [Jan 22, 2008: Soros Says World Faces Worst Financial Crisis Since World War II]

                Thursday, June 10, 2010

                Bookkeeping: Closing Riverbed Technology (RVBD)

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                When high beta stocks do not rally strongly on a +3% day, it makes me worried.  The warning by peer Blue Coat Systems (BCSI) in late May seems to have deflated Riverbed Technology (RVBD).  This type of name should be up 4-5% on a day like today.  With a chart that is ho hum, I am going to sell the last 0.4% for a 8% loss and continue to cull weaker longs and look to roll into stronger names.  Such as my 80x forward estimates Salesforce.com (CRM) which is rocking and rolling and looking to go to 100x earnings.  Boo yah.


                A lot of these positions I am selling of late are small exposure since I cut them back when they broke support in the past 4-6 weeks and I've been waiting to see how they react during strong days.  The ones who are lagging are worthy to be cut.


                Long Salesforce.com in fund; no personal position

                x

                Bookkeeping: Closing SL Green Realty (SLG)

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                My timing on REITs has been horrific the past year and a half; I will wipe away the egg on my face yet again and sell SL Green (SLG) on strength here.  If the stock moves over $64 it could begin a new leg up but I want to use our +3% days (which now come every 4th or 5th session) to lighten up on losers.  I have about a 0.5% exposure left over in which I am taking a 11% loss on.  Which is better than the 16% loss I was staring at yesterday.



                I am interested in how bullish many people have become today... at this point this bounce is no different than the two 3% moves we've had in the past 10 sessions.  A print anywhere between 1040 and 1100 really means very little in my vision; we're just ping ponging in a big range.  In retrospect perhaps one of these times we'll look back and say "that 3% move actually meant something" but no one can tell yet.  Until we get over the 200 day moving average on the S&P 500 I see little to get excited about. That said, I see today easily ending at highs of the days as computers rush in to mark up the close.

                I now have 9 outstanding limit short orders, each about 1.5 to 2.5% in exposure.  I am hoping 4-5 hit if we get a Kool Aid rush tomorrow and get near 1100 on the S&P.  If this is a new V shape bounce (of which I believe there is a 10% chance happening - i.e. unlikely) I will cover those as all entry points are very near resistance areas.  But for now I still need many of these stocks to rally another 3-6%.  As I wrote last week this market is not easy for the bears even thought we're in a downtrend as the multiple +3% days have dashed many a profit for those who do not take their gains immediately.  Holding risk overnight long or short is a pure gamble nowadays as each day ignores the previous.  The market's attention span gets shorter and shorter, it used to be that of a 7 year old... now it's closer to a 3 year old.


                No position


                x

                China's Thirst of Any Commodity that Moves Leads to Thawing of Relations with Russia

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                China is now the world's great locust... hopping from land to land in hopes of ever more commodity resources to placate its massive demands for growth  [May 13, 2009: Commodities - It's China's World: We Just Live in ItAustralia, Brazil, Canada, Africa, Southeast Asia, and now even its neighbor Russia with whom it's had an icy relationship.



                Via NYT:
                • The Kimkan open pit mine in Siberia is a muddy square mile surrounded by birch and cedar forests so vast they seem to stretch to the ends of the earth.  As with many places in Siberia, it is nearly impossible to drive here. Yet just under the surface, Russian geologists say, lies enough iron ore to build hundreds of millions of cars. That is why Chinese government officials and business executives are interested, despite a decades-old legacy of bilateral distrust along this stretch of Russia-China borderland. 
                • The Chinese bank whose delegation stood on the lip of the Kimkan pit is in advanced negotiations for a $400 million loan to enable the developer, the Petropavlovsk mining company, to begin excavating ore. The reserves Mr. Ryabov spoke of are in Kimkan and a sister mine to the north, and would require 100 years or so to extract.
                • Petropavlovsk, whose shares trade on the London Stock Exchange, plans to transport ore directly south from the Kimkan mine by train to Chinese steel mills that now import iron ore from as far away as Brazil. Mine managers say they will have no trouble beating the Brazilians on price.
                • The encounter was emblematic of a business frenzy in this foreboding region, as Russian companies clamor to sign deals over Siberian resources — including iron, coal and timber — to sell into the insatiable Chinese market. Russian oil, too, is an increasingly sought-after commodity passing through Siberia to China. 
                • For resource-starved China, overland supply of Russian metals and oil is an important diversification away from seaborne shipments. The transborder commerce in this region helped China surpass Germany to become Russia’s largest trading partner early last year, with $39.5 billion in goods and services passing between the two countries in 2009.  Last year the Russian Far East was the only region in Russia for which investment grew, rather than contracting.
                • Russia and China make a perfect couple,” Kingsmill Bond, the chief strategist at the Moscow investment bank Troika Dialog, wrote in a research report. “Russia has resources that China needs, while Russia needs capital and China has excess savings.” 
                • Skeptics of further economic development between the countries also point to deep mistrust dating to border skirmishes fought on Damansky Island in the Ussuri River in 1969 that put the Soviet Union in a defensive crouch along the border and froze all development for decades. 
                • The Russians have long harbored fears that broadening economic contact with China would lead to a wave of Chinese immigrants taking over the sparsely populated Far East.
                • The bigger cross-border event now planned, though, could be the trans-Siberian oil pipeline, which is being laid through the region’s dense forest, or taiga, and is scheduled to reach China in 2012 and begin carrying a million barrels a day. By then, about a quarter of Russia’s crude will be exported to Asia.
                • For China, oil now transported overland from Central Asia today, via a pipeline from Kazakhstan, and planned to flow from Russia in two years, is meant to further a policy goal: diversifying petroleum supplies now heavily dependent on the Middle East and shipments through the Malacca Straits chokepoint between the Malay Peninsula and Indonesia.
                • Chinese companies, meanwhile, are renting vast swaths of agricultural land in the Russian Far East left fallow by the shrinking population of ethnic Russians, and are encouraging Chinese migrants to work there as seasonal laborers. Chinese companies have rented 850,000 acres so far.

                  [Apr 13, 2010: China's Quest for Resources Makes Billionaires Out of Some Australians]
                  [Feb 16, 2010: India Worries as China Builds Ports in Southeast Asia]
                  [Dec 15, 2009: China's Economic Power Unsettles Neighbors]
                  [Nov 11, 2009: China Continues Expanding "Infrastructure for Resources" Policy with Agreement in Malaysia]
                  [Sep 30, 2009: China Attempting to Secure 1/6th of Nigeria's Proven Oil Reserves]
                  [Jun 13, 2009: Australia in Perfect Position Aside China, but at a Cost?]

                  My Choices for President and Secretary of Treasury 2012 or 2016

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                  Can you imagine a world where people at the top were more focused on the country's self interest rather than sacrificing all so their party could advance the ball.... or every action they do is not singularly focused on making sure they get re-elected?  People who look out for the masses (the middle 80%) rather than those who fund elections and offer the most lobbyist pressure?  What a concept.

                  Below I have my roster for the President / VP Secretary of Treasury slots in 2012 or 2016.  And I don't care which goes into each slot.



                  [Mar 31, 2010: David Walker - U.S. Standard of Living Unsustainable Without Drastic Action]
                  [Jan 6, 2010: David Walker CNBC January 2010 Video]
                  [May 23, 2008: David Walker on CNBC this Morning]
                  [Nov 23, 2008: David Walker in Fortune Magazine]
                  [Mar 26, 2008: Annual Spring Entitlement Warning Falls on Deaf Ears]



                  [Feb 2, 2010: Elizabeth Warren Explains (Part of) Financial Crisis so Even 3rd Graders Can Understand]


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