Monday, July 26, 2010

Bookkeeping: Closing Powershares DB Gold Double Long (DGP) For Now

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My gold position has been my 2nd oldest portfolio holding, sitting with us since March 2009.  I am going to close it out temporarily and return at a later date.  Gold has been out of favor for a month; I don't expect a tremendous selloff but this is now a chart I'd rather short on rallies than buy on dips.  I am not interested in shorting gold per se, but since the technical condition is not favorable I'll instead simply sell and come back to it in the future when it either dips much more or regains strength.


I sold the last batch (0.8% exposure) for a 6% loss but obviously have had many gains and losses on the position in various trades the past year and a quarter.

I am not sure what the weakness is saying if anything.  

No position

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[Video] Dateline NBC: America's Increasing Ranks of Poor

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In case you missed it, a very sobering report on last night's Dateline NBC in terms of what is happening in the underbelly of American society.

NBC's Ann Curry travels to Ohio where the hardworking poor, with deep traditions in mining, manufacturing and military service, are increasingly seen in food pantry lines ashamed and angry.


Many of the themes intersect with stories I've been posting for 3 years - the loss of jobs via global wage arbitrage [Sep 14, 2009: Global Wage Arbitrade at the Micro Level: Marvell Technology] [Nov 5, 2009: Blue Coat Systems - More Global Wage Arbitrage] , the dependence on huge swathes of America on food stamps (now 1 in 8 Americans, including 1 in 4 children)  [Nov 29, 2009: 1 in 4 Children, and 1 in 8 Americans Now on Food Stamps], the distress at food banks, etc.  [Jan 18, 2008: One Lonely Voice Agrees with Me on Food Inflation - Food Bank Needs Surging] [Nov 14, 2008: Wall Street Journal - A Run on (Food) Banks]  [Feb 20, 2009: NYT - Newly Poor Swell Lines at Food Banks Nationwide]  There are many dogmatic "reasons" (people just want to rely on the government!) and/or "solutions" proposed (everyone needs to get more education!) that make great talking points for certain political parties, but the reality in my set of eyes is it is not so simple.  Most people would like to fend for themselves in my view, not rely on government (of course there is a subset of society happy to suck a the government teat forever).   And not everyone in a society is going to be an accountant, investment bankers, government subsidized healthcare worker, or government worker. 

You need to have jobs for the lower third... increasingly the U.S. no longer has these jobs as they have been shipped overseas.  The housing bubble hid this for fact for half a decade as a mass influx of construction jobs was created by a Fed induced misallocation of capital into the housing sector.  Without that crutch things are being exposed.  Hence the inability for more and more to support themselves, and an increasing reliance on government for support.  A government which is technically "broke" of course - hence the irony in this piece for "Obama should do something".  Let us be thankful the federal government simply can borrow more and more (and more) (and more) because if it was constrained, things would truly be epic.  No easy solutions, but a good eye opening account of what is happening "out there".  I liked how Ann Curry mentioned a few times these are conditions you'd expect in a 3rd world country.

*one additional comment: in this series of profiles, I thought one did not fit in well with the others and that was the 21 year old female who had 3 children.  The other profiles were more people of circumstances, whereas I felt the 21 year old made many bad decisions and essentially if you have 3 dependents at age 21 you are going to be behind the 8 ball.  Ironically, at the end of the story she had the best outcome as the government came in and provided her with the best living situation.

I think those of us who follow what is happening in the real economy have an especially difficult time reconciling the "stock market" economy versus the core economy.  But you must remember, (a) many S&P 500 corporations derive much of their income/profits overseas i.e. America means less to less to them, (b) the same factors causing massive distress to the U.S. employment base is a boon to multinationals [lower cost basis for labor], (c) the government has stepped in with never seen before levels of borrowing to mitigate the ugly reality of what is happening under the surface, [May 25, 2010: 1 in 5.5 Dollars of American Income Now Via Government; All time High] (d) despite cries of onerous tax rates for US corporations the reality is with tax loopholes, U.S companies are paying a lower tax rate as % of GDP than in any time in history, (e) income stratification is at all time highs - even surpassing the Gilded Age of the late 1920s, (f) a massive gulf is developing betwen those in the private sector and public sector in terms of wages, benefits, and job security (g) the upper 5% income earners now make up 30% of all spending in Cramerica.   I could go on, but you get the point.  Hence, the dichotomy can stand and in fact continue for a very long time.  I suppose until some point the underclass goes the French route and demands the top "eat cake"... we'll see how long government borrowing and handouts can forestall this.

[Feb 6, 2010: Jobless Rates Across Post WW2 Recessions]
[Sep 22, 2009: BusinessInsider - The Real Problem is the Economy Does not Need you Anymore]
[Aug 14, 2009: No New Normal Say Some Economists, Prosperity Without Jobs?]
[Dec 15, 2008: The Economic "Recovery"]

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Each video below is about 9 minutes - I encourage the full viewing.  Foreign readers might be especially interested as it might shake up your thoughts on what the 'richest country on Earth' is like for many.


Video 1:




Video 2:



Video 3:




Video 4:



Video 5:



Bookkeeping: Closing Netflix (NFLX) Temporarily, Replacing with Spreadtrum Communications (SPRD)

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I like the business model of Netflix (NFLX) more than before the last earnings report, but like the chart much less.  I cut back sharply ahead of earnings and mentioned post earnings I'd like to see the stock regain some key moving averages quickly... it has not.  Therefore, I am going to sell out the small remainder of the position (0.4%) exposure with a 7% loss and look for a new entry point down the road.  I'd rather be a buyer at $115+ in fact since it would signify strength.  The stock is currently in no man's land so I am not sure where it goes next.  If it falls to $90 I'd consider a new purchase if the overall market is in good condition.



Chinese small caps are showing the first signs of life in many months.  I was very frustrated with the cheap Chinese semi Spreadtrum Communications (SPRD) which we held for many months to no avail, despite being "crazy cheap".  I sold out of it July 16th, so we've only been away a short period of time. The stock seems to be waking up today, so I'll move the Netflix money plus a few more sheckles in that direction and give it another chance.  Due to volatility I'll start slow and just go with a 1% allocation.


Spreadtrum Communications, Inc., a fabless semiconductor company, designs, develops, and markets baseband processor solutions for the mobile wireless communications market. It sells products directly to brand manufacturers, independent design houses, and original design manufacturers primarily in the People's Republic of China, Hong Kong, and Macau.

[May 27, 2010: Bookkeeping - Beginning Spreadtrum Communications]

Long Spreadtrum Communications in fund; no personal position


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Bookkeeping: Sold Direxion Small Cap Bull 3x (TNA) as S&P 500 Nears 1113

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I mentioned Friday I went into Dirextion Small Call Bull 3x (TNA) once S&P 1100 was breached with initial target of S&P 1113 (the 200 day simple moving average).  From that post:

Preface: As mentioned earlier I would be likely to go long TNA ETF on a break of S&OP 1102; I've done so - initial target will be S&P 1113.  I had a very small short TNA which I obviously closed out. 

We are here (high of day 1112.80), so I am selling the position for a 6.5%ish gain from late Friday.   I used a 4.25% allocation.

[click to enlarge]


That was almost too easy, but I am not complaining.

The next target for the S&P 500 will be 1130 (mid June highs).  If the market can slice through this resistance I will be looking to buy back the TNA around 1115+ (using a break of 1113 as a mental 'stop out' of sorts), and this time will be aiming for a 15 point move.  Identical trade thesis to what I just employed.

If the market pulls back, I'll consider repurchase nearer to 1100 again to see if I can repeat the trade.

(below is the S&P 500 using simple moving averages)

No position


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Sunday, July 25, 2010

Bookkeeping: Weekly Changes to Fund Positions Year 3, Week 51

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Year 3, Week 51 Major Position Changes

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

Cash: 69.9% (v 77.9% last week)
19 long bias: 26.9% (v 18.2% last week)
2 short bias: 3.2% (v 3.9% last week)

21 positions (vs 21 last week)

Weekly thoughts
Stocks shook off Ben Bernanke's shot of reality Tuesday as corporate multinational dominance showcased the diminishing need of a surging U.S. economy in the fortunes of the new masters of the universe.  Risk was "on" as Chinese stocks and Brazilian stocks both shot up over 6% for the week, copper surged [China, Copper Begin to Change Complexion to "Risk On"] and in the latter half of the week the "hot money" jumped head first into commodities, as the student body left surges en masse in algorithmic fury.  [HAL9000 Starting to Get His Commodity Play On]  This is a very different situation than any of the rallies seen over the past few months, so this change must be respected.

Technically the S&P 500 cleared the hurdle of the past few weeks in the closing hour Friday - that would be S&P 1100.  This will be the next pivot point to watch, and upside targets from here are S&P 1113 (the 200 day simple moving average) and then 1130 which was the mid June intraday highs.  Clearing 1130 will be important as it would be the first "higher high" in quite a few months.



To show what we want to see happen in the United States of Corporations, we look to Brazil which just cleared the mid June high Thursday.  That's promising...



China finally got out of its own way and cleared the 20 day moving average... and went exactly to its 50 day moving average (to the point).  While still a troubled chart, simply moving up to the 200 day moving average would provide 9% of additional gains.



The irony with China is fears of tightening have been the major fear factor, so despite having an outperforming economy the worry about taking away of cheap and easy money has been crushing the market.  Meanwhile, economies doing far worse but with central banks pressing on the accelerator have outperformed this year.

While Treasuries still act punk, the 10 year at least crossed back over 3% in Friday's session.



So all in all, the bipolar market now seems to be running student body left... until it changes its mind.

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Last week was very light in terms of economic news - the big events were Bernanke's testimony and existing home sales.  Despite registering an awful home sales figure for the month of June it was "better than expected" so as we saw in much of mid 2009 even if the figure is awful, as long as it beats expectations we cry green shoots and party like Romans circa 800 AD.  Multinational corporate earnings were solid, and hence dominated the air space for the week.  We do continue with another week of heavy earnings but less of the big names and more of a mix of more U.S. centric companies thrown in.  On the docket this week economically the main focus will be durable goods Wednesday and first pass of Q2 GDP Friday (after such a retrenchment seen the past 2 years, the US economy should be shooting up by 6%+, instead it is doing 3% with government behind almost all growth):

Monday: New Homes Sales (not as important as Existing Home Sales from the previous week)
Tuesday: Case-Shiller Home Price Index, Consumer Confidence
Wednesday: Durable Goods
Friday: Q2 GDP first revision, Chicago PMI, Consumer Sentiment

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For the portfolio mostly we sat on hands early in the week, waiting to see which way the market would break.  The bipolar herky jerky action continued with big moves up and down, with no regard for the prior day's actions making it impossible to build intermediate term positions.  Late in the week the market shrug off Bernanke, and rose on the back of corporate earnings.  As the technical condition improved we expanded the long side of the book.  I threw on a cursory short Friday but with the student body stampeding in one direction I'd expect to be blown out of it in a stop loss if the S&P 500 heads to 1113.

On the long side:
  • Wednesday, ahead of earning reports for each I cut back positions in F5 Networks (FFIV) and Netflix (NFLX).
  • I cut the position in Dr. Reddy's Laboratories (RDY) by 2/3rds as it broke the 50 day moving average a day ahead of earnings.  Thursday, I sold off the rest of the position as earnings were released and the stock continued its sell off.
  • Friday, I added to Rovi (ROVI), Salesforce.com (CRM), and Acme Packet (APKT).
  • As Currency Shares British Pound (FXB) ran into the 200 day moving average, I closed out the position for a small profit.
  • Friday, I started Cirrus Logic (CRUS) as a poor man's play on Apple.  I also added a decent amount of exposure in Direxion Small Cap Bullish 3x (TNA).
  • Almost all remaining F5 Networks (FFIV) was sold into the close Friday as the stock has had a tremendous run.

On the short side:
  • Tuesday as the S&P 500 cleared 1070, I cut back sharply the TNA short position I had put on the previous Friday, at a modest lost. 
  • I shorted Amazon.com (AMZN) post earnings after a sharp rebound from intraday lows.

Bookkeeping: Oops

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In doing my weekly summary I just noticed I still have a big position in F5 Networks (FFIV), which I deemed I was selling the majority of into the close Friday.  It appears my "sell" order was a fat finger and I instead put in a "buy" for the amount of shares I intended to sell.  Therefore I will sell the shares I intended (plus the new shares) at the open Monday - to keep things simple for clerical purposes I "sold" Friday as that was the intent, but obviously whatever price I get Monday morning will be the accurate figure for the portfolio.

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Updated Position Sheet

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Cash: 69.9% (v 77.9% last week) 
Long:
 26.9% (v 18.2%) 
Short:
 3.2% (v 3.9%) 


This data is updated weekly and can be found on 'Performance/Portfolio' menu tab on thewebsite. 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


N/A

Saturday, July 24, 2010

Increasing Evidence that Generation Y Will Not Have the Living Standard of Their Parents*

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I put a asterisk in the title because I am only speaking of Generation Y who works in the private sector; if you work in the public sector (which I encourage every Generation Y to strive for) you will enjoy all the fruits America can offer.  And more.

I was skimming a story in BusinessWeek on retirement investing / 401ks (which I've written are a massive failure) for Generation Y, and some of the statistics in this piece are just scary.  We already know then inflation adjusted wages for those in the private sector are slightly down versus the 70s/80s for the average worker but for Generation Y?  It looks like a waterfall, almost a 20% drop!  [Dec 8, 2007: Do the Bottom 80% of Americans Stand a Chance?]

As for our university system - another unsustainable bubble akin to healthcare - it is saddling these kids with huge debts which will take decades to get out from under, especially considering the dearth of high paying job prospects (outside the public sector), ever rising cost of living and meager wages many of these BA degrees now generate in our "service economy".  I would submit at current pace of tuition increases the return on investment will soon favor those who skip college and just begin work (even at a lower wage) at 18 years old.  You have 4-5 years of extra earnings power (which can be compounded), not much different job prospects than a college grad, and you are not saddled with enormous debt at the age of 23.  [Dec 5, 2008: NYT - College May Become Unaffordable for Most in US]  What good is a degree when many college graduates now are baristas?  In fact we may have already crosses that threshold for many - trying to pay a huge debt off while making $35K in any mid to large sized city seems a near impossible task. [May 9, 2009: The Curse of the Class of 2009 - Lower Wages for Up to a Decade]

Of course we know the unemployment rates cited in this story are government fiction as the way we measure employment now creates much more of a rosy picture than how we used to measure pre early 1990s.  "You can't handle the truth" - government.  So the 15.3% rate is more likely right around 20%. [Jul 29, 2009: Japan's "Herbivore" Men - Young American Men's Future?]


  • DeCherney is typical of America's so-called Generation Y, the twentysomethings who have entered the workforce in the past 10 years. Already saddled with student debts averaging almost $20,000, according to New York-based think tank Demos, Gen Y is in a tougher financial position than previous generations. 
  • The average salary for 25- to 34-year-olds, for instance, fell 19% over the last 30 years, after adjusting for inflation, to $35,100, Demos estimates. 
  • That's if they can get jobs: Unemployment among 19- to 24-year-olds stands at 15.3% vs. the overall rate of 9.5%, according to the Bureau of Labor Statistics. 
  • Gen Y is "the first do-it-yourself retirement generation," says Catherine Collinson, president of the Transamerica Center for Retirement Studies in Los Angeles.

David Rosenberg's 17 Reasons to Be Bullish

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Found this blurb on FT Alphaville - David Rosenberg is listing 17 reasons to be bullish.  In a related note, hell just froze over. [Nov 24, 2009: David Rosenberg Video "US in a Form of Depression"] [Oct 19, 2009: David Rosenberg on CNBC]  Doesn't change his long term outlook of secular bear market but it's nice to see some flexibility.
-------------------------
Count ‘em! We’d better capture these bullish talking-points from Gluskin Sheff’s David Rosenberg, just in case they disappear…
– Congress extending jobless benefits (yet again).
– Polls showing the GoP can take the House and the Senate in November.
– Some Democrats now want the tax hikes for 2011 to be delayed.
– Cap and trade is dead.
– Cameron’s popularity in the U.K. and market reaction there is setting an example for others regarding budgetary reform.
– China’s success in curbing its property bubble without bursting it.
– Growing confidence that the emerging markets, especially in Asia and Latin America, will be able to ‘decouple’ this time around. We heard this from more than just one CEO on our recent trip to NYC and Asian thumbprints were all over the positive news these past few weeks out of the likes of FedEx and UPS.
– Renewed stability in Eurozone debt and money markets – including successful bond auctions amongst the Club Med members.
– Clarity with respect to European bank vulnerability.
– Signs that consumer credit delinquency rates in the U.S. are rolling over.
– Mortgage delinquencies down five quarters in a row in California to a three-year low.
– The BP oil spill moving off the front pages.
– The financial regulation bill behind us and Goldman deciding to settle –more uncertainty out of the way.
– Widespread refutation of the ECRI as a leading indicator … even among the architects of the index! There is tremendous conviction now that a double-dip will be averted, even though 85% of the data releases in the past month have come in below expectations.
– Earnings season living up to expectations, especially among some key large-caps in the tech/industrial space – Microsoft, AT&T, CAT, and 3M are being viewed as game changers (especially 3M’s upped guidance). Even the airlines are reporting ripping results.
– Bernanke indicating that he can and will become more aggressive at stimulating monetary policy if he feels the need and yesterday urging the government to refrain from tightening fiscal policy (including tax hikes).
– Practically every street economist took a knife to Q2 and Q3 GDP growth, which has left PM’s believing we are into some sort of capitulation period where all the bad news is now “out there”.
Of course none of these factors have come near to turning Dave into a bull. As if.
This is a secular bear market, remember, where rallies are there to be rented not bought:
From our lens, this is still a meat-grinder of a market. The bulls have the upper hand, but only until the next shoe drops in this modern-day depression and post-bubble credit collapse. The S&P 500 is still down 2% for the year, the Dow by 1%, the FT-SE and Nikkei by 11%, the Hang Seng by 5% and China by over 20%.
Ask the bullish community if by this time of the year we were supposed to see bonds outperforming stocks – folks like our friends Byron Wien at Blackstone and Jim Caron at Morgan Stanley thought we were on our way to a 5.5% yield on the 10-year T-note. So let’s keep the whippy, albeit positive, action in the equity market into perspective. This is the sixth (!) multi-week bounce in the equity market so far in 2010 and the year is barely seven months old.


Friday, July 23, 2010

Bookkeeping: Selling Most of Remaining F5 Networks (FFIV)

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Usually these post earnings pops last about 3 days before some pullback... we are near the end of day 2, so maybe there is 1 more gap up left in F5 Networks (FFIV) Monday.  I'm not that greedy, hence I am throwing a red flag onto the field and yelling "that's egregious!" as I sell 90% of the remaining position.  A lot of this stock's secondary technical indicators are off the charts right now.  It might be difficult to find a good re-entry point with a stock moving like this but there are plenty of other fish.  (that gap right below $78 would of course be an ideal point to re-engage).  I'll let the daytrader momo boys take it from here.



Long F5 Networks in fund; no personal position

Bookkeeping: Short Amazon.com (AMZN)

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First let me say bravo to the dip buyers - a heck of a performance today on Amazon.com (AMZN).  Now that's a rebound.

That said, the stock has run into resistance again and I have almost no hedges on so this is as good as any.  I will short here in the mid $117s (2.5% allocation) and give it about a 3.5% leeway before stopping out.  The story here after today will have little to do with Amazon and everything to do with the market.  If "risk is on" next week the S&P 500 will blow through resistance higher and almost every stock on earth will rally... or vice versa.  Wax on. Wax off. Risk on. Risk off.



Short Amazon.com in fund; no personal position

Bookkeeping: Starting Cirrus Logic (CRUS) as Poor Man's Apple Play (Also Some TNA ETF)

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Preface: As mentioned earlier I would be likely to go long TNA ETF on a break of S&OP 1102; I've done so - initial target will be S&P 1113.  I had a very small short TNA which I obviously closed out.

A lot of the type of stocks I am interested in are not the huge multinationals so they report in the next week or three - it is difficult to buy them ahead of earnings.  Looking at some other candidates, Cirrus Logic (CRUS) reported earlier this week so we have that headline event risk out of the way.  The report was good - this is generally a 'cyclical' play but now has a 'secular' growth component to it... by the name of Apple (AAPL).
  • Rhode said the company's flagship audio chip lines continued to sell well. One big reason, he said, was that its largest customer was growing fast. He didn't name the customer, but tear-downs by research firms of both Apple iPads and iPhones show Cirrus chips inside.
The company is also entering the smart meter market so in a way the end markets this company is exposed to is not unlike a Skyworks Solutions (SWKS) or TriQuint Semiconductor (TQNT) although the chips are different.
  • Sales of energy chips amounted to $27.9 million for the quarter, up 119%. That was "mainly due to growing demand for both power meter products and energy expiration products," Chief Financial Officer Thurman Case said on the call.
-----------------------------

Techincally the stock is breaking out to new highs today, but has a small gap in the low $18s to deal with as well.  If the market runs into a selloff I assume CRUS will come in and fill that gap but the relative strength in this name has been tremendous the past few months, especially considering the volatile market and sharp selloffs the indexes have experienced.  The stock has barely broken below its 20 day moving average during this mega run. I'm willing to begin a 2% stake here with the understanding a move to lower $18s is more than probable.   As long as it keeps hugging that 20 day moving average and making new "higher highs" the trend should remain up.


The company has already had a huge 2010; eventually this story will end badly as one of these quarters it will blow up on earnings.  But we have 87 days before we have to worry about that.

The stock is "cheap" but that is because it's considered a cyclical semi stock and does not get the premium attached to some secular growth stories in the semi space.  Analysts just bumped up 2010 estimates (year end March 2011) from $1.15 to $1.47 after this report below.

A summary of this week's earnings report:
  • Chipmaker Cirrus Logic Inc (CRUS) posted quarterly results beating estimates and forecast strong second quarter revenue.  Cirrus, which makes high-precision, analog and mixed-signal integrated circuits for the audio and energy markets, sees second-quarter revenue of $98 million to $106 million.  Analysts on average expect $86.2 million, according to Thomson Reuters I/B/E/S.
  • Gross margin is expected to be between 56 percent and 58 percent
  • For the first quarter the company posted net income of $17.6 million, or 25 cents a share. Excluding special items, the company earned 29 cents a share, above analysts' estimates of 28 cents.
  • Revenue more than doubled to $81.9 million. Revenue from audio products segment was $54 million, up from $24.8 million last year. Analysts were looking for revenue of $81.2 million.
  • Gross margin for the quarter was 57 percent, up from 52 percent in the first quarter a year ago, and up from 56 percent for the previous quarter.
(full report here)

Cirrus Logic develops high-precision, analog and mixed-signal integrated circuits for a broad range of innovative customers. Building on its diverse analog and signal-processing patent portfolio, Cirrus Logic delivers highly optimized products for a variety of audio and energy-related applications.

Long Cirrus Logic in fund; no personal position

HAL9000 Starting to Get his Commodity Play On

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The move in copper is setting the algorithms on fire... this is becoming clear in the charts as the student body is running to the right... get your resource stock exposure on.  I like Cleveland Cliffs (CLF) here but it reports next week.  Bucyrus (BUCY) just reported last night, I'm torn on this one - chart nice, but a big move already.  Freeport McMoran Copper & Gold (FCX) [hedge fund favorite] just poked its head over the 200 day. I've chosen a handful of names but to HAL one commodity stock is almost the same as any other... almost all are "good" or "bad".  They appear to be good again.  Risk on, risk off.






No positions but mulling

Bookkeeping: Double Down on Rovi (ROVI), Adding More to Acme Packet (APKT) and Salesforce.com (CRM); Closing Currency Shares British Pound (FXB)

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Rovi (ROVI) is a new name for me, so I started out relatively modestly to get used to how it trades; thus far it has not seemed incredibly volatile which is a nice change.  Looking at the chart, the stock has held its breakout that caught our attention and I do believe this is called a 'flag' by those who have technical analysis skills that dwarf mine.   The company reports on the 29th so I'll cut back ahead of earnings but for now I am liking what I am seeing and doubling my position from 1% exposure to 2%.



Acme Packet (APKT) reports on the same day next week, so I shall cut it back too at that time to avoid headline risk but the stock is consolidating recent gains nicely so we'll add a some here (+1% allocation); I would like to add more on a new 52 week high over mid $32s.



Salesforce.com (CRM) doesn't report soon so we're ok here; as risk is being put on this is a "go to" name - so I am going to it.  Adding a 1.1% allocation as the stock goes to a new 52 week high.  (valuation be damned!)



I am closing the Currency Shares British Pound (FXB) position for now as I am unclear what the currency markets will do next and which horse is currently the favorite.  FXB has run into the 200 day moving average here the past week, so if it clears this level I'll consider getting back in - for now I'll take my modest gains and return the marbles to my pocket.



North of S&P 1102 or so (if and when), I'm very likely to add some index long exposure using 1100 as the new pivot point for support/resistance.

A few other individual names I am interested in adding to or starting a new position all report next week so I am going to wait on those.

Long APKT, ROVI, CRM; no personal position

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S&P 1100 is Tested Again

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A horde of buyers is awaiting to buy on a break over this incredibly obvious level... my main curiousity is will something so obvious be a trap or open the floodgates to the next leg up.  If S&P 1100 clears, 1113 is the next resistance.  Then on to 1130 which was the June intraday high.


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Riverbed Technology (RVBD) Impresses the Street; Announces New Product So It Too Can be Part of the "Cloud"

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I won't spend 10 seconds wasting time on today's "big event", the European stress test - reminds me of the U.S. bank stress tests where almost everyone passes and the U.S. banks got to negotiate with the Fed the terms of the test.   (I would of had a 4.0 in college if I had these terms)  It's like the Wizard of Oz, just don't look behind the curtain and we can be content all is well in the world.

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Riverbed Technology (RVBD) reported last evening (full report here) and what was a muted reaction in after hours has turned into a party today.  A big difference than the reaction of Blue Coat Systems (BCSI) not a month ago. Aside from a solid report and nice rise in guidance Riverbed announced a "virtual" version of its main product (Steelhead) - boo yah!  Now RVBD is a "cloud" play and we can increase its value by 30%. ;)
  • The company also announced a new “virtual” version of its flagship Steelhead WAN optimization product. Riverbed typically sells the software as an appliance, installed on a server; the company says the new version of the software is targeted at both virtual data centers and customers who want to install the software on specialized hardware.


We closed the position in early June which more or less marked the bottom (ding!) so we'll look to rebuy if/when there is any serious pullback.  But at this point, we can mark the stock 'safe' for the next 90 days until the next dog and pony show.  With the earnings and guidance, RVBD should be just north of $1 in EPS for 2010 so you can figure out the forward P/E ratio quite easily.

Via Reuters:
  • Riverbed Technology Inc (RVBD) posted better-than-expected second-quarter results spurred by growth in product revenue, and guided its third quarter above Street.   For the second quarter, Riverbed reported net income of $6.6million, or 9 cents a share, compared with a net loss of $0.3 million, or break even a share, a year earlier.  Excluding items, it earned 25 cents a share.
  • Revenue for the company rose 39 percent to $126.2 million.  Product sales rose more than 40 percent.
  • Analysts were looking for earnings of 22 cents a share, excluding items, on revenue of $119.38 million, according to Thomson Reuters I/B/E/S.
  • Non-GAAP gross margin increased to 77.3%, compared to 77.1% in Q1’10 and 76.1% in Q2’09

Guidance:
  • The company, which provides technology that speeds up applications over networks, projected third-quarter earnings of 27 cents a share, excluding items, on revenue of $132 million to$136 million.  Analysts were looking for earnings of 24 cents per share, on revenue of $126.39 million, according to Thomson Reuters I/B/E/S.
  • The company said it expects gross margins of 76 percent to 78 percent, roughly flat with the second quarter.
  • "Exiting the first half of 2010, we are poised to exceed our growth rate achieved in 2009, a period in which our revenue growth outpaced most technology peers," he added.
[Apr 23, 2010: Riverbed Technology Earnings Report Pleases the Street]
[Feb 11, 2010: IBD - Riverbed Technology: Making the Network Faster Pays Off]
[Jun 29, 2009: Even Handed Story on Riverbed Technology on CBSMarketwatch]
[Apr 8, 2009: Stimulus Fire Hydrant (Worldwide) Should Benefit Networking Companies / Broadband]
[Nov 27, 2007: Riverbed Technology - Fortune Article]


No position

China, Copper Start to Change Complexion to "Risk is On"

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I've been pointing out for quite a few weeks during any rallies in the market that China and copper were not confirming those upward moves.  [Jun 23, 2010: Copper & Baltic Dry Index Not Confirming Any Firm Reason for Rallying] But we might have a change in mood happening on this rally.

I mentioned yesterday that copper made a positive move over key resistance Wednesday; yesterday it continued upward in solid fashion and is now back to levels last seen in late May.  All other things held constant this is a positive.


I've pointed out China has been *so* week that it has had trouble even getting over the 20 day moving average for months.  That changed this week as China rallied 6.1% on the week and the Shanghai index rallied exactly to the 50 day moving average with a Friday close of 2572  (stockcharts.com data for foreign markets is delayed by 1 day).  It appears squiggly line analysis even matters in the Far East.  While breaking over the 20 day moving average is not much to celebrate, in a relative sense to how pathetic that market has been acting since mid April, this is a change for the better, and something to take notice of.



Both charts now are set up for some important decisions in the next few sessions... not surprisingly at the exact same moment every trader in the world is waiting to buy the domestic S&P 500 on a break over 1100.  (200 day simple moving average on S&P 500 is 1113 by the way)


Long story short, a lot of inflection points could be right ahead - if they work out in tandem we could be setting up for the first meaningful rally that need not be sold within 7-8 sessions, in months.

That said, I'd feel much more comfortable with that assessment if 10 year treasuries could get out of their own way.


California City Seeks Dismissal of Highly Paid Officials

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Remember all those comments on this website the past 3 years about the growing chasm and social strife you will eventually see in Cramerica as the lifestyles of those in the public and private sector splinter?   Unfortunately the masses in the private sector still get very little transparency about what exactly is going on in terms of what they are paying their public employee brothers and sisters, but sometimes things get so egregious the press steps in and we have exposure.  Here is an excellent case below.  After you fall out of your chairs when you see the salaries, please take note of the pensions - something that is bankrupting cities, state, police departments, and schools.    [Jan 5, 2010: FT.com - US Public Pensions Face $2 Trillion Deficit] 

To repeat, this situation is so brash as to be an outlier example but directionally it shows the complete nonsense going on.  Now that the tide is washing out in the American economy, these type of things that have been going on for years under the surface are exposed.  This town is so generous that even part time work on the city council gets you a six figure salary; considering the national average pay  in America is about $36K for a full time job, that's impressive!  My favorite quote is "I work a lot" (because those in the private sector do not)


Via AP:
  •  (Bell, CA) - The City Council in this small, blue-collar suburb of Los Angeles intends to ask three administrators whose salaries total more than $1.6 million to resign Thursday or face possible firing.
  • The officials include Chief Administrative Officer Robert Rizzo, who earns $787,637 a year — nearly twice the pay of President Barack Obama — for overseeing one of the poorest towns in Los Angeles County.   The others are Assistant City Manager Angela Spaccia, who makes $376,288 a year, and Police Chief Randy Adams, whose annual salary of $457,000 is 50 percent more than that of Los Angeles Police Chief Charlie Beck.
  • All three officials under question have contracts that protect them from being fired without cause. If they refuse to quit, the city might have to shell out hundreds of thousands of dollars to buy out their contracts
  • Revelations about the pay in Bell has sparked anger in the city of fewer than 40,000 residents. Census figures from 2008 show 17 percent of the population lives in poverty.  Enraged residents have staged protests demanding the firings and started a recall campaign against some council members.
  • The council members are paid well themselves — four of the five members each make about $100,000 a year for the part-time work. The county district attorney's office is investigating to determine if the council's high salaries violate any state laws.
  • "We work a lot. I work with my community every day," the mayor said.
  • The Los Angeles Times reported the salaries last week, prompting a large protest Monday at City Hall in which residents shouted and demanded that Rizzo be fired.   City officials at first defended the salaries.

I know this is a sad situation... especially if they were forced out.  But never fear residents of CA ... you are on the hook to the tune of $1M in pension payments to these folks (at least 2 of them) every 1.75 to 2.25 years.  Yes sir - a million bucks (for life) roughly every 22 to 26 months.  After all "they work a lot", unlike those folk who own their own business or work for "the man".
  • If Rizzo leaves, he still would be entitled to a state pension of more than $650,000 a year for life, according to calculations made by the Times. That would make Rizzo, 55, the highest-paid retiree in the state pension system. 
  • Adams could get more than $411,000
  • Spaccia, 51, could be eligible for as much as $250,000 a year when she reaches 55, though the figure is less precise than for the other two officials, the Times said.


[Jun 17, 2010: NY State Public Worker Pensions Revealed on New Website; Topping the List is a Teacher at $261K Annually]
[Jun 18, 2010: New York Pension Story Gaining Attention in Mainstream Press]


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