Tuesday, June 28, 2011

Yoga Apparel, Watches, and Mexican Food Continue to be Where It's At

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As mentioned last week, we have a small group of "go to" names that are bought almost every day, rain or shine.  Lululemon (LULU) and Chipotle Mexican Grill (CMG) are 2 of those names and are sporting lovely breakouts.




Watch and accessory maker Fossil (FOSL) which I highlighted about 6 weeks ago, is also teflon at this point.



FIO - which I mentioned yesterday, is also having yet another excellent session.




No positions

Carbon Copy

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The moves between 1260s and 1290s on the S&P 500 have been remarkably consistent the past few weeks.  The move the past session and a half is almost a perfect mimic of the 2 day rally we saw about 7 sessions ago.  That one ended in the upper 1290s, and so far we are at the lower 1290s.  All eyes remain on the 1300ish level.




We've had 2 days of light volume and calls of the typical quarter end 'tape painting' but it is what it is.

[Video] Kudlow Interviews Peter Thiel

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Interesting interview with Peter Thiel last night on the Kudlow show - while it starts with a focus on the education (cost) bubble, he is an investor in many of the hottest brands on Earth, and the conversation expands from there.

9 minute video - email readers will need to come to site to view





[Jun 2, 2011: [Video] Peter Thiel Offers $100,000 for Some Bright Minds Not to Go to College]

Monday, June 27, 2011

Chasing Our Tail; 16th Day in this "Box"

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For all the news developments the past few weeks, the S&P 500 has been stuck in a 'box' for over 3 weeks now.  Roughly S&P 1260 on the bottom and upper 1290s on the top.  Bears can claim that the market is working off an oversold state by churning, rather than rebounding.  Bulls can claim the 200 day moving average is holding.  So a little something for everyone.



Usually the longer the market goes sideways, the more powerful the ensuing move.  But there is little to get excited about right now until we break out one way or the other.  Until that point selling/shorting at the top of the box, and buying/covering at the bottom has been the no brainer trade.  It is working yet again today.

CNNMoney: My Degree is Not Worth the Debt!

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Quite interesting slideshow on CNNMoney.com showcasing different people and their views on the debt they incurred to gain their college degree.  I think this topic is only just beginning to hit the national limelight and should be growing ever more prevalent as our universities continue to offer 5-10% annual cost increases, while wages stagnate for the great middle in America.

Go here for slideshow.

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

[Jun 2, 2011: [Video] Peter Thiel Offers $100,000 for Some Bright Minds Not to Go to College]
[May 20, 2011: NYT - Nearly 50% of 2009 College Graduates are Either Jobless, or Working in Degrees that Don't Require a College Degree]
[Feb 7, 2011: BW - The Youth Unemployment Bomb]
[Dec 21, 2010: Video - CNBC, the Price of Admission - America's College Debt Crisis]
[Dec 14, 2008: WSJ - K-12 Schools Slashing Costs, College Bills Wallup Families]
[Dec 5, 2008: NYT - College May Become Unaffordable for Most in US]

Fusion-io (FIO) - Not a Disappointing IPO

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Unlike some of the IPO crop of late, Fusion-io (FIO) has delivered, despite coming public in a rough patch for the overall market.  After the traditional intraday run up on the first day of trading, the stock actually closed near the low of the day in the mid $22s.   It flopped around and fell a bit as the market was selling off sharply, but during the past 7 sessions has notched a gain of some 40%.  Indeed each day it has made a higher closing high, in impressive fashion - regardless of what the overall market has done. 



While it is now officially very pricey, and I'm worried about the market reaction to its first earnings report considering the company already warned the Facebook revenue would regress - the price action is hard to argue with.  Even those poor souls who bought at the height of the day one frenzy are now at least break even.


[Jun 7, 2011: Fusion-io Ups Pricing from $16 to $18, from $13 to $15]
[Jun 2, 2011:  The Hot IPO of Next Week? Data Storage Company Fusion-io

No position

WSJ: China's 'Twitter' Has Big Dreams

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It's about 6 months late, but the Wall Street Journal finally wrote an in depth piece on Weibo.  Of course a huge run in the stock was missed if you focus on the 'old news' outlets solely.  But with the big selloff [May 16, 2011: Sina Breaking Down so Tread Cautiously], I suppose one saunter in hoping for another run.


This pieces focuses on the next leg of the transformation of Sina, and specifically Weibo (becoming more "Facebook-like"), and sizing up the competition, mostly focusing on Tencent.   [May 11, 2011: Tencent - a Real Chinese Internet Juggernaut - Delivers Outstanding Earnings]
  • Charles Chao has built Sina Corp. into a Chinese Twitter. Now he wants it to be a Chinese Facebook, too.  Mr. Chao, Sina's chief executive, has led the company's transformation from an online portal focused on news and blogging to China's most talked-about social-media company. 
  • Since he launched Sina Weibo—which lets users send short, Twitter-like messages to their followers—less than two years ago, the service's popularity has exploded, with more than 140 million users as of March, by Sina's count. RedTech Advisors LLC, of Shanghai, estimates that Sina Weibo has 57% of China's microblog users and 87% of its microblog activity
  • But in the ultracompetitive world of China's Internet industry, such leads are hard to keep, and Sina faces pressure from rivals, who are pouring resources into the social-networking sector. Chief among them is Tencent Holdings Ltd., an industry giant with a big pile of cash that has been aggressively promoting its own microblogging site.
  • In an interview, Mr. Chao laid out a series of changes he is making to Weibo (which literally means "microblog") to broaden its offerings and attract more users.  A new version of the site, now being tested, will change its look with prominent sections recommending users of interest and offering games and other applications. Mr. Chao is trying to make it easier for users to define their relationships with other users—such as by labeling those who are real friends, as opposed to those who are just "fans." 
  • ....unlike many other markets, China—which has more than 450 million Internet users, more than any other country—isn't dominated by big U.S. companies like Twitter Inc. and Facebook Inc. In fact, China's government blocks access to those two sites for users inside the country.   
  • Instead, a host of domestic Chinese companies are competing to fill the space.  RenRen Inc., which runs one of the biggest Facebook-like sites in China, raised $743 million in a U.S. initial public offering in May that it is using to beef up its offerings. Rival Kaixin001, held by Happy Networks Ltd., also operates a social-networking site similar to Facebook. Chinese search giant Baidu Inc. is trying to turn its popular message board, Baidu Tieba, or Postbar, into more of a social network, and had its own microblogging service, Baidu Shuoba, or Baidu Talk, which failed to gain traction against Sina and now has been suspended. Sohu.com Inc. and NetEase.com Inc. offer microblogs.
  • Tencent has a successful online-game business, but executives say they are focusing their efforts on social networking and on their Weibo site in particular, including efforts to have third-party developers make applications for it, as Sina is doing. Tencent's challenge lies largely in Sina's users, generally a cosmopolitan set of social "influencers" from which Sina can expand outward and downward, compared with Tencent's younger users in China's lower-tier cities, from which it is harder to move up, analysts say.
  • Weibo won't be turning into Facebook, Mr. Chao said, but will have more Facebook-like features to allow for "stronger social relationships based on our new applications."
  • Analysts say the transformation will be a challenge. Tencent has significantly more resources to spend on marketing, with $1.7 billion in cash as of March, compared to Sina's $577.6 million.  In addition to the more than 200 million users Tencent claims for its microblogging site—it's hard to compare the companies' user counts, with their different methods of counting—Tencent has legions of users of its flagship product, QQ, China's most popular instant-messaging platform, and runs a social-networking site called Qzone.
  • Although Sina is known for its heated discussions, at times over controversial issues such as local government corruption and soaring property prices, most talk on the site isn't political. When sensitive topics arise, the company can be creative in limiting conversation without cutting it off altogether—for example, by blocking searches of sensitive keywords but not stopping people from publishing them on their own microblogs.
  • When asked if he was concerned a government crackdown might affect the outspoken nature of Weibo, Mr. Chao said that Sina had years of experience in dealing with content regulations while maintaining its websites and that he was confident the company could handle it.

[May 13, 2011: Sina Misses EPS Targets Slightly as it Invests in Weibo, Guides Down Slightly for Q2 Revenue]
[Mar 8, 2011: Forbes (SINA) Weibo]
[Feb 18, 2011: BW - A Twitter Knock Off has China Talking
[Jan 11, 2011: Word is Getting Out on Sina's Secret - Weibo]
[Dec 9, 2010: The Twitter of China - Weibo]

No position

Need Panic

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Despite being the second longest selloff since the March 2009 bottom, there has not been significant emotion to this selling.  Aside from one day I can't recall much panic at all.  Do we 'need' panic to create a bottom.  Not always.  But it sure helps.   As we sit right above the 200 day moving average (yet again) another rule comes to mind - the more times you test a level (support or resistance) the more likely it breaks.  We have been testing this 200 day quite often the past few weeks.  I still believe it breaks, and we finally get our panic and people throwing in the towel.  Then I'll be interested in a tradeable intermediate bottom.



This morning's consumer spending numbers, in a word, suck.  But as gas prices tumble, we should see a rebound in the coming months.  Also auto production should bounce back August-ish so for once I might be somewhat more bullish than others ;).  At least for a while.  [Obviously this assumes Greek gets its bailout and the Greek people and government are happy to bail out German and French banks]

Talk in D.C. is the Dems want another stimulus program as part of the debt ceiling negotiations.  The patient needs its constant steroids, and the last batch is wearing off.

Reinvestments of Bonds aka QE2.5 Will Still Yield $300 Billion in Annual Fed Purchases

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As is well known by now the Fed will not be 'expanding' their balance sheet any further (for now), but will continue to keep the balance sheet constant in size, by purchasing new bonds to replace those which have run off.  After some 2+ years of QE measures the Fed balance sheet has now expanded from some $800B to nearly $3T in size, so simply reinvesting run off, is a QE onto itself - estimates are $300B over the next 12 months, or approximately $25B a month.  While not as huge as QE1 or QE2 on a monthly basis it's still a very hefty support... and if my prediction for QE3 comes to fruition (perhaps "operation twist") by next winter you'll have the $25B a month (QE 2.5) running concurrent to QE3.

As for claims the Fed is not monetizing the debt because "eventually" they will sell the bonds back into the market, one wonders how the Bernank can say that with a straight face when short term bonds are obviously being held to duration and expiring - requiring the Fed to replace them on the balance sheet.

Via Bloomberg
  • The Federal Reserve will remain the biggest buyer of Treasuries, even after the second round of quantitative easing ends this week, as the central bank uses its $2.86 trillion balance sheet to keep interest rates low.  While the $600 billion purchase program, known as QE2, winds down, the Fed said June 22 that it will continue to buy Treasuries with proceeds from the maturing debt it currently owns. That could mean purchases of as much as $300 billion of government debt over the next 12 months without adding money to the financial system.
  • A total of $112.1 billion of the Fed’s government bond holdings will mature in the next 12 months, 7 percent of the $1.59 trillion in Treasuries held in its system open market account, known to traders as SOMA. Replacing those securities will require the Fed to buy an average of $9.4 billion of Treasuries a month through June 2012.
  • The Fed also held $914.4 billion of mortgage-backed debt and $118.4 billion of debentures, the debt of government sponsored enterprises Fannie Mae and Freddie Mac, as of June 22. UBS AG, Citigroup Inc., Bank of America Corp., JPMorgan Chase & Co. and Royal Bank of Canada say $10 billion to $16 billion will mature each month, depending on the pace of prepayments.
  • The Fed began its first round of quantitative easing in November 2008 after the collapse of Lehman and the central bank’s $85 billion bailout of insurer American International Group Inc. with a program to buy $500 billion of mortgage securities and $100 billion of agency debentures. In March 2009 it boosted planned purchases to include $300 billion of Treasuries and raised its target for mortgage debt to $1.25 trillion and $200 billion of government agency bonds.
  • Asset purchases, even at a smaller scale, “still promotes what the Fed was trying to accomplish,” said Tony Crescenzi, a money manager and strategist at Newport Beach, California-based Pacific Investment Management Co., which runs the world’s biggest bond fund. “Even with the stoppage of QE2, the fundamental forces remain intact.”

Friday, June 24, 2011

Irony

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As a great fan of irony, I could not help myself from getting a grin out of 2 competing Bloomberg news items this morning.

#1) Italian Banks Plunge on Debt Concern

  • Italian banks slumped in Milan trading amid concern the European debt crisis may spread just as lenders face scrutiny from regulators over capital levels.  UniCredit SpA (UCG), Italy’s biggest bank, and Intesa Sanpaolo SpA (ISP), the second-largest, led lenders lower, tumbling as much as 8.9 percent and 7.2 percent respectively.
  • Moody’s Investors Service said yesterday it may downgrade 13 Italian banks because they are vulnerable to a cut in the government’s credit rating.
  • Prime Minister Silvio Berlusconi said today the country’s banks are “well capitalized.” 8

(*well if there is one bank analyst I trust, it's Silvio Berlusconi!)


#2) Italy's Mario Draghi Wins Top ECB Post


  • The European Council on Friday appointed Italian Bank Governor Mario Draghi as the next president of the European Central Bank.  Draghi will replace the current ECB president, Jean-Claude Trichet, when his term expires on Oct. 31, according to the European Council. Draghi will serve as president until Oct. 31, 2019.

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

It appears, much like in the U.S., good stewardship of your own banking system as a chief central banker, has little impact on your potential for either keeping your job and/or being promoted.

BW: The Rise and Inglorious Fall of Myspace

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The fall of MySpace over the past 3-4 years has been stunning in nature, probably only rivaled by that of Yahoo (YHOO) mid decade.  Both were usurped by a competitor who has become a household name - in MySpace's case we are speaking of Facebook, while Yahoo was taken out by Google (GOOG).   BusinessWeek's cover story details the rise and fall of MySpace who 4 years ago was the dominant social network.

  • At its December 2008 peak, Myspace attracted 75.9 million monthly unique visitors in the U.S., according to ComScore. By May of this year that number had dropped to 34.8 million. Over the past two years, Myspace has lost, on average, more than a million U.S. users a month
  • Because Myspace makes nearly all its money from advertising, the exodus has a direct correlation to its revenue. In 2009 the site brought in $470 million in advertising dollars, according to EMarketer. In 2011, it's projected to generate $184 million
  • In February, News Corp. (NWS), which bought Myspace and its parent company, Intermix, in 2005 for $580 million, started officially looking for a potential buyer at an asking price of $100 million, according to a person familiar with the sale process. Yet even in the midst of a frenzy for social media that has seen LinkedIn (LNKD) valued at $6.4 billion ... barely anyone wants to buy Myspace.
  • Mismanagement, a flawed merger, and countless strategic blunders have accelerated Myspace's fall from being one of the most popular websites on earth—one that promised to redefine music, politics, dating, and pop culture—to an afterthought. But Myspace's fate may not be an anomaly. It turns out that fast-moving technology, fickle user behavior, and swirling public perception are an extremely volatile mix. 
  • Interviews with more than a dozen former Myspace and News Corp. insiders reveal how a rocky six-year marriage ultimately undercut Myspace's once-dominant social media position, leaving the field wide open for Facebook's rise and potentially squandering billions of dollars of future revenue along the way. According to two former News Corp. executives, Murdoch, who was initially enamored of his new digital plaything, lost interest in Myspace as his pursuit of the Wall Street Journal, which News Corp. bought in 2007, consumed his attention.
  • While developers at Facebook, Tumblr, and Twitter—startups backed by venture capital—were more free to design their products without the immediate pressure of advertising goals, Myspace managers had to hit quarterly revenue targets. That pressure increased dramatically in the summer of 2006, when Google paid $300 million a year for three years to be the exclusive search-engine provider on Myspace on the condition that the social network hit a series of escalating traffic numbers.  In retrospect, DeWolfe says, the imperative to monetize the site stunted its evolution: "When we did the Google deal, we basically doubled the ads on our site," making it more cluttered. The size, quality, and placement of ads became another source of tension with News Corp., according to DeWolfe and another executive. "Remember the rotten teeth ad?" DeWolfe says. "And the weight-loss ads that would show a stomach bulging over a pair of pants?"

Jeez... even in this story on social networking Detroit takes a beating!
  • Myspace's inability to build an effective spam filter exacerbated the public impression that it was seedy. And that, says Boyd, contributed to an exodus of white, middle-class kids to the supposedly safer haven of Facebook—a movement she compares to the "white flight" from American cities in the second half of the 20th century. Myspace was becoming Detroit.


[Jun 16, 2009: MySpace Axes 30% of Staff - News Corp (NWS)]

Number of Asian Millionaires Surpasses Number of Europeans, and on Pace to Pass North Americans Soon

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While there are obviously far more Asians in the globe than Europeans or North Americans, only now is the wealth at the top starting to catch up with levels seen in those continents.  With current trends, rich (defined as $1M+ excluding their homes) Asians should take the top spot globally very soon.

Via AP:
  • Booming Asia had more millionaires than Europe for the first time last year and is fast closing in on North America for the top spot, a report released Thursday said.
  • The Asia-Pacific region was home to 3.3 million people in 2010 worth $1 million or more, excluding their homes, an increase of roughly 10 percent from the year before, according to the 15th annual World Wealth Report by Merrill Lynch's wealth management division and consultancy Capgemini.
  • Asia's growth outpaced Europe, where so-called high net worth individuals increased 6 percent to 3.1 million, and puts it within reach of North America, where the number of wealthy rose 8.6 percent to 3.4 million.
  • "It is entirely conceivable that Asia would overtake North America in the near future," said Wilson So, a managing director at Merrill Lynch Global Wealth Management. "I would be surprised if that does not happen very soon."
  • The U.S., Japan and Germany still account for just over half the world's 10.9 million wealthy, while China is in fourth place with 535,000, about 58,000 more than in 2009. Australia has moved up one notch to ninth place, edging out Italy, while India cracked the top 12 for the first time. It replaced Spain, which fell to 14th.
  • The world's wealthy were worth a total of $42.7 trillion in 2010. Asia's share of that wealth amounted to $10.8 trillion, putting it in second place for the second year in a row, just behind North America's $11.6 trillion.
  • Six of the 10 economies with the fastest growing millionaire populations were in Asia, led by Hong Kong and Vietnam, which each saw annual growth of 33 percent. Others included Sri Lanka, Indonesia, Singapore and India.
  • Globally, women are increasingly in the ranks of millionaires. The report found that 27 percent of the world's wealthy last year were women, up from 24 percent in 2009.
  • The superrich, defined as people worth more than $30 million, also fared well. Their numbers grew 10 percent to 103,000 last year.

Gary Shilling Calls for Recession in 2012

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It has been a few months since we last checked in with Gary Shilling, who has been in 'defensive' mode for much of the past 4-5 years (one could say even longer actually).  Despite being off on some market calls the past two years, his grasp of the bigger picture fundamental issues has been amongst the best for many years.  So I'd concentrate on the economic views rather than specific investing advice. He is still a bond bull, thinking the 10 year could go to an extraordinary 2%.

Via Marketwatch:

  • I’m predicting another recession next year,” he (Shilling) told me.  Not a double dip, he emphasized, because we’re already two years from the end of the last recession and 3 ½ years from the business cycle’s previous peak, in December 2007. Historically, he said, economic expansions last about three years, especially in long down cycles of the kind he thinks we’ve been in since 2000.  So, he’s looking for a brand new cyclical recession beginning in 2012.
  • Many Americans will be forgiven if they can’t see the difference between that and the recovery we’ve been experiencing.  That’s Shilling’s point. Usually, deep recessions like the one we just lived through are followed by strong snapbacks, like a growth slingshotThis time, however, the recovery has been “distinctly subpar,” in his words. “As of the first quarter, ..real GDP is barely above its peak in the fourth quarter of 2007, whereas earlier recoveries were well above their previous tops 13 quarters later.”Translation: More than three years after the peak, we’re still not back to where we were.   There are good reasons for that, beyond the particularly tough toll financial crises take on growth.
  • The economy, he says, is like a four-cylinder engine, and a recovery usually requires all four to be firing. They are consumer spending, employment, housing and the reversal of the inventory cycle.  Shilling thinks only the last is really recovering — i.e., companies that brutally liquidated inventories during the recession have had to rebuild them through boosting production and some additional hiring as demand bounced off its lows.
  • But consumer spending has made only a partial comeback, concentrated among more-affluent buyers. Everyone else has been weighed down by weak job and income growth and the continued housing catastrophe.
  • We have seen some improvement in employment, albeit slow of late, and it’s nowhere near what we’ve had in past recoveries. Mostly employers have just stopped laying people off, and when they hire, it’s often on a part-time or temporary basis.
  • And then there’s housing. Shilling, of course, isn’t one of the optimists. He’s actually looking for another 20% drop in housing prices before we hit bottom in 2013.  Since housing prices nationally already have fallen by a third from their peak, that means that, if he’s right, they’ll end up a stomach-churning 45% off their early 2006 highs. Yale Prof. Robert Shiller, co-creator of the Standard & Poor’s/Case-Shiller Home Price index, has a similar prediction.  
  • For Shilling, it’s all about inventories: He estimates there are upwards of two million homes on the market that people want to sell but can’t. That’s deflated new-home sales, which now stand at about a third of their normal 1.5 million a year. 
  • Lenders have foreclosed on 3.5 million American homes since 2007; Shilling expects millions of more foreclosures in the years ahead.  If this happens, “you know what that will do to consumer spending,” said Shilling. “That’s a recession — an easy forecast.”
  • But slow growth will get politicians of both parties antsy to “do something” in an election year. “If the economy is still weak going into next year, we could have fiscal stimulus,” he told me. Politicians do not “want to face voters with a weak economy,” he said.
  • As for investing, Shilling has returned to an old favorite: the 30-year Treasury bond, which is currently yielding around 4.21%. “I think they’re going to 3%,” he said. “I think [the 10-year is] going to 2%.” The 10-year Treasury note was yielding near 3% Wednesday.
  • Naturally, Shilling’s not looking for much from equities, and he recommends only blue-chip dividend-paying stocks.
  • Shilling’s not infallible, of course. He has been predicting deflation since the late 1980s and in earnest since 1998. We’ve had two potentially deflationary episodes, in 2002 and after the financial crisis, but the Fed was able to dispatch them.  He also was very bearish on stocks, expecting new lows in early 2009 and pretty much missed the recent bull market. So, he’s not the guy who’s going to call bottoms or identify bullish inflection points.


[Mar 24, 2011: [Video] Yahoo Tech Ticker  - Gary Shilling "The Two Tier Recovery"]
[Jul 7, 2009: Gary Shilling - Recovery a Year Away]
[May 14, 2009: Gary Shilling's Latest Thoughts]

Thursday, June 23, 2011

Big Time Buying Spike

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I found it hard to believe the market would reach back to lows of the days with all the strength in the tech stocks a few hours ago, but just before 3 PM markets seemed poised to retest lows and I thought my assumption would be wrong.  Then out of the blue the market went vertical (9ish S&P points) in a span of 5 minutes.  Urgent buyer?

Or maybe this one?
Greece reaches agreement with EU/IMF inspectors on 5-year austerity plan - sources


EDIT 3:30 PM - let's see how they close 'em! If the market fades it would be quite bearish. It would have been better to leak this news at 3:51 PM rather than 2:51 PM. Also as a footnote Greece has to approve the austerity imposed on them, which logically they don't like. 5 years of pain so that French and German banks can be made whole on bad investments.

[Videos] CNBC Interviews Some CEOs of China's Recent Internet IPOs - YOKU, RENN, DANG

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Mark Faber has some interviews with some of the recent hot to trot IPOs out of China this week.  Of course, there is a bias in these interviews but if you are interested...

Today: Youku.com (YOKU) "Youtube of China"*




Tuesday: Renren (RENN) "Facebook of China"*




Monday: E-Commerce China Dangdang (DANG) "Amazon of China"*  (interview starts at 2 minute mark)




*of course these are the labels put on them, however misleading

No position

Half the Gains over the Past Year Have Been in the Overnight Session

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One thing I've bemoaned since 2009 has been how so many of the gains have come in the overnight session.  For those who carry a lot of cash, and in a market that has generally been upward trending, it is hard to keep up with the averages when so much of the advance is not happening during the normal session.  Indeed what we have seen during much of this period is a market that gaps up, and sells off during the actual normal hours of operation- making it even more difficult to keep up with the averages.

Bespoke has run an analysis over a shorter time frame (the past 12 months) of the gains during the normal market hours versus overnight session.  It shows a 50/50 split between the overnight v regular session. 



While informative I personally would love an analysis that starts around 9:40 AM EST rather than 9:30 EST and consider that first 10 minutes part of the overnight session because when markets gap up they tend to surge forward in those opening 5-10 minutes.  Hence the momentum of the overnight session (especially if news driven) carries forward and while technically is part of the 'regular session' is essentially due to the momentum from the overnight session. 

If I had all the data and many hours to waste, it would be fascinating to see how much of the advance from March 2009 was between 4 PM and 9:40 AM the following day.  And how many of the 'magical moments' came on no news at all (recall so many rallies of 0.3-0.6% between 6 AM and 8 AM on no news at all).

Like Clockwork, the Same Go To Names

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Surprisingly my main watch list has a (relatively) decent amount of green on it today; just eyeballing it I have 40% of the names positive despite a -1.4% S&P day.  Some strength out there in the networking space, "social media", apparel (knee jerk reaction to lower oil prices), auto suppliers, and then the "go to" names.*

Netflix (NFLX)
Priceline.com (PCLN)
Salesforce.com (CRM)
lululemon (LULU)
Chipotle Mexican Grill (CMG)

Sometimes a name, or three, joins this group - but it seems like this group is considered teflon through thick and thin.

*airlines are also up but not on my watch list - they are just purely an anti oil trade.

No positions

List of Chinese Reverse Mergers

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There have been quite a few Chinese frauds exposed in the past 6 months - many of these were listed on U.S. markets via reverse mergers.  Essentially this is an old shell of a listing that an existing company can move into - sort of like when crab sheds its old shell and moves into better digs.  Many of these companies have been exposed by a handful of firms who specialize in shorting (i.e. the Muddy Waters types).

Bloomberg has a list of all Chinese reverse mergers so one can assume someone at these handful of firms is looking into each and every one.   I am sure some babies will get thrown out with the bathwater but I would not go near these with your 10 foot pole, since waking up one morning to a -80% return is not my cup of tea.   In full disclosure I've spoken (and been bullish) on a few of these over the past 3-4 years.  The extent of fraud from the Chinese has been a bit stunning to me - I guess being like Enron is cool.

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The following companies are based in China and gained listings on U.S. exchanges after conducting reverse mergers, in which a publicly traded shell corporation is purchased, according to data compiled by NYSE Euronext. (NYX) Stocks that have been delisted from the Nasdaq Stock Market, NYSE Amex or New York Stock Exchange have been omitted.

The Securities and Exchange Commission cautioned investors on June 9 about buying stakes in Chinese-based companies when they gain listings through reverse mergers, avoiding the regulatory and investor scrutiny of initial public offerings.


NAME                                      TICKER       EXCHANGE
AgFeed Industries                         FEED US      Nasdaq
American Lorain                            ALN US      NYSE Amex
Aoxing Pharmaceutical                      AXN US      NYSE Amex
A-Power Energy Generation Systems         APWR US      Nasdaq
AutoChina International                   AUTC US      Nasdaq
Biostar Pharmaceuticals                   BSPM US      Nasdaq
China Armco Metals                        CNAM US      NYSE Amex
China Auto Logistics                      CALI US      Nasdaq
China Automotive Systems                  CAAS US      Nasdaq
China BAK Battery                         CBAK US      Nasdaq
China Biologic Products                   CBPO US      Nasdaq
China Botanic Pharmaceutical               CBP US      NYSE Amex
China Cablecom Holdings                   CABL US      Nasdaq
China Ceramics                            CCCL US      Nasdaq
China CGame                               CCGM US      Nasdaq
China Finance Online                      JRJC US      Nasdaq
China Fire & Security Group               CFSG US      Nasdaq
China GengSheng Minerals                  CHGS US      NYSE Amex
China Gerui Advanced Materials Group      CHOP US      Nasdaq
China HGS Real Estate                     HGSH US      Nasdaq
China Housing & Land Development          CHLN US      Nasdaq
China Information Technology              CNIT US      Nasdaq
China Infrastructure Investment           CIIC US      Nasdaq
China Jo-Jo Drugstores                    CJJD US      Nasdaq
China Marine Food Group                   CMFO US      NYSE Amex
China Natural Gas                         CHNG US      Nasdaq
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China Shen Zhou Mining & Resources         SHZ US      NYSE Amex
China Shengda Packaging Group             CPGI US      Nasdaq
China Shenghuo Pharmaceutical Holdings     KUN US      NYSE Amex
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China Yida Holdings                       CNYD US      Nasdaq
China-Biotics                             CHBT US      Nasdaq
ChinaCast Education                       CAST US      Nasdaq
ChinaNet Online Holdings                  CNET US      Nasdaq
Cleantech Solutions International         CLNT US      Nasdaq
Cogo Group                                COGO US      Nasdaq
Deer Consumer Products                    DEER US      Nasdaq
Dehaier Medical Systems                   DHRM US      Nasdaq
Ever-Glory International Group             EVK US      NYSE Amex
Feihe International                        ADY US      NYSE
Fuwei Films Holdings                      FFHL US      Nasdaq
General Steel Holdings                     GSI US      NYSE
Guanwei Recycling                         GPRC US      Nasdaq
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Harbin Electric                           HRBN US      Nasdaq
Highpower International                    HPJ US      Nasdaq
Hollysys Automation Technologies          HOLI US      Nasdaq
Jiangbo Pharmaceuticals                   JGBO US      Nasdaq
Jingwei International                     JNGW US      Nasdaq
Jinpan International                       JST US      Nasdaq
Kandi Technologies                        KNDI US      Nasdaq
Keyuan Petrochemicals                     KEYP US      Nasdaq
Kingold Jewelry                           KGJI US      Nasdaq
Longwei Petroleum Investment Holding       LPH US      NYSE Amex
New Energy Systems Group                  NEWN US      NYSE Amex
NF Energy Saving                          NFEC US      Nasdaq
NIVS IntelliMedia Technology Group         NIV US      NYSE Amex
Orient Paper                               ONP US      NYSE Amex
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Orsus Xelent Technologies                  ORS US      NYSE Amex
Puda Coal                                 PUDA US      NYSE Amex
QKL Stores                                QKLS US      Nasdaq
Shengkai Innovations                      VALV US      Nasdaq
Shiner International                      BEST US      Nasdaq
Sinohub                                   SIHI US      NYSE Amex
Sinovac Biotech                            SVA US      Nasdaq
SkyPeople Fruit Juice                      SPU US      Nasdaq
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SORL Auto Parts                           SORL US      Nasdaq
Sutor Technology Group                    SUTR US      Nasdaq
Telestone Technologies                    TSTC US      Nasdaq
THT Heat Transfer Technology              THTI US      Nasdaq
Tianli Agritech                           OINK US      Nasdaq
Tianyin Pharmaceutical                     TPI US      NYSE Amex
Tiens Biotech Group                        TBV US      NYSE Amex
Winner Medical Group                      WWIN US      Nasdaq
Wonder Auto Technology                    WATG US      Nasdaq
Wuhan General Group China                 WUHN US      Nasdaq
Yongye International                      YONG US      Nasdaq
Yucheng Technologies                      YTEC US      Nasdaq
Yuhe International                        YUII US      Nasdaq
Zhongpin                                  HOGS US      Nasdaq
Zoom Technologies                         ZOOM US      Nasdaq

Oil Falls Below $90 for First Time Since Mid February as IEA Announces Release of 60M in Oil Reserves, including 30M from U.S.

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While Wall Street hates lower oil since it signals "growth slowdown", recent action in oil continues to become a net positive for American consumers.  (as does the bounce in the dollar)  Today we have oil down below $90 for the first time since mid February, as the International Energy Agency announced the release of 60M barrels of oil from strategic reserves.  30M of this comes from the U.S. - the first such release since 2008.

  • “Today, for the third time in the history of the International Energy Agency, our member countries have decided to release stocks.” IEA Executive Director Nobuo Tanaka said. “I expect this action will contribute to well-supplied markets and to ensuring a soft landing for the world economy.”   
  • The IEA said it would release 2 million barrels per day (bpd) over 30 days onto the world market to fill the gap in supplies left by the disruption to Libya's output. Libya was exporting about 1.2 million bpd. 
  • The Energy Department said Thursday it will release 30 million barrels of oil from its 727 million barrel reserve, about half of the 60 million barrels to be released globally. The U.S. release would be equivalent to about a day and a half of total U.S. oil consumption. 

I Guess it Was 'That Predictable'

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Tuesday as the S&P 500 neared 1295 I wrote it simply could not be that predicable that we tease up to resistance and than falter.  It was too obvious.

After a methodical run up this morning, the S&P 500 has stalled at the way too predictable 1295 level as I type.  Would seem far too simple and easy to simply stall out here and reverse down, right? 

Well lo and behold.  We are in another round trip between the 1260s to 1290s; it's been like stealing candy from a baby to get long at the bottom of the range and short at the top of the range.  Eventually we're going to break out of this range, and my obnoxious prediction is we'll break out of the range to the downside.

Chinese flash PMI was weak, and new orders in Europe were negative for the first time in 2 years.  U.S. unemployment weekly claims continue to be punk at well over 400K.  More signs of global slowdown - this is not all about Greece.


Wednesday, June 22, 2011

[Video] Goldman Sachs Jan Hatzius - Fed Between Rock and Hard Place

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The closely watched economist from Goldman, Jan Hatzius explains to CNBC late this afternoon, the same theory I've been pointing out.  The Fed is basically damned whatever path it goes - slow growth on one end, higher inflation on the other, especially the more it acts.

4 minute video






ZeroHedge has his bullet points on the news conference

MAIN POINTS:

1.    Fed Chairman Bernanke’s press conference included many details but few major surprises. On activity, he expressed relatively low conviction, saying “We don't have a precise read on why this slower pace of growth is persisting” (note that quotes come from the real-time transcript, which may be revised slightly). However, consistent with the FOMC’s forecasts (see below), he emphasized that he thought that some factors restraining growth were temporary.

2.    On inflation, Chairman Bernanke also cited temporary factors, particularly a pickup in auto prices related to supply chain disruptions in that sector.

3.    Guidance on the near-term policy outlook was relatively clear: more quantitative easing is unlikely due to reduced deflation risks. He gave two lengthy responses on this issue, and made clear why conditions last year differed from today. Most importantly: “at that time inflation was low and falling, [and] many objective indicators suggested that deflation was a non trivial risk”. He also noted the pickup in payroll employment over the last few quarters.

4.    At the same time, his remarks hinted that the FOMC has in fact discussed easing options. Specifically, he said options could include: 1) securities purchases, which could be structured in various ways; 2) a cut in the interest rate on excess reserves; 3) guidance on how long the Fed will wait to sell securities; and 4) or “a fixed date to define extended period”. With regard to the extended period language, he revised his remarks from the last press conference, in which he said the extended period language meant “there would be a couple of meetings probably before action”. Today he said: “I think the thrust of extended period is that we believe we're at least two or three meetings away from taking any further action, and I emphasize ‘at least.’”

5.    The Fed revised down its central tendency forecasts for GDP growth in 2011 to 2.7-2.9% to from 3.1-3.3%. It also reduced its 2012 GDP forecasts. For 2011, the cut was slightly smaller than we had expected, but for 2012 it was a bit larger. The committee also revised up its forecast for core inflation by 1-2 tenths, a bit more than we had anticipated.

Thumb Twiddling Ahead of Fed

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As mentioned yesterday, it would be too simple for "them" to run the S&P 500 to 1295 and then reverse back down.  We've broken above that level today (after teasing above it yesterday) and simply are twiddling thumbs ahead of the early Fed announcement and conference with The Bernank.   While I don't expect a thing new to be mentioned (other than a weaker economic outlook) some traders seem to think there will be a new liquidity program announced.  Not sure why they are of this thinking considering the Fed telegraphs any change ahead of time by floating things in newspapers.

(for some reason I cannot add charts to my entries today, so just imagine a big spike upward over the past few days in the S&P 500 up to 1297, with the 100 day moving average just above it at 1301)

For now people are just twiddling thumbs.

Edit: ZeroHedge posted earlier this morning a tweet from Bill Gross in which he thinks we'll mimic last year with a new present to speculators at Jackson Hole, Wyoming.  If so more devaluation of the U.S. peso, and another run by gold silver oil and the rest.  You know the story by now - punish Main Street so Wall Street is happy....err, so millions of jobs are created due to the Fed.  (my call of course was QEinfinity would continue by this winter, so fall would be ahead of my schedule)



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