Darn, the Quarterly Pig Crop report by the USDA showed more pigs than I expected. Commentators say it's marginally bullish, but not enough for me. I'll close that position out Monday.
The USDA crop & pig reports show how game theory really does explain some human choices. The farmers planted too much corn & raised too many pigs. By just planting 5% less corn and cutting back on pigs a few %, the prices of both would have risen sharply and farm profits would be much larger. But without coordination, each got a little greedy, so all will earn less. That's the lesson of the Game Theory example of "The Prisoner's Dilemma". Without coordination & communication, competitors will make individual "optimal" decisions that collectively cause them to earn less than optimal amounts.
Well, I don't have many commodity positions left now that the news is out. Some marker positions in coffee and sugar and those December corn calls I have left from the straddle. My account is up 28% year to date - that's good, but I was up 35% at one time. Oh well, you always lose some when the trend changes. But getting out saved that 28%. Time to start looking again.
PS: I had two successful hog plays earlier this year, based on lower weights caused by high feed costs. The rationale behind this play was lower breeding for the same reason. That might still show up later. February's cold weather might have hurt conception rates. I'll monitor it for a future play.
PPS: clarification - the 28% gain is in the commodity account. The stocks are the Alpha Fund and the Krypto Fund which I manage separately with completely different tactics & strategies.
Saturday, March 31, 2007
Friday, March 30, 2007
Why Does China Get Special Treatment?
It's about time Lyndon stoppped giving these Chinese companies special treatment. Why the heck should they be treated better than companies in our Allies? If Japan or Britain subsidized an industry, you can bet that they'd be subject to countervailing duties. So why should Chinese companies get a free ride?
What's wrong with these commentators? Are they just stupid? Or do they think US workers should suffer while Chinese companies get unfair subsidies? Sheesh.
What's wrong with these commentators? Are they just stupid? Or do they think US workers should suffer while Chinese companies get unfair subsidies? Sheesh.
Bear Raid
Beefer bears are raiding again, I guess on that China tariff news. Now why it's "bearish" for China to be treated like any other country (and not a command economy like the old Soviet Union) is hard for me to understand. Hence I re-entered my bid for the S&P index calls. I might get them this time.
PS: I got them. Now the worry begins. I am pretty net long now, effectively. India stocks are getting hammered as the India Central Bank raised rates again to control inflation. My India stocks are a very LT play. I'll wait & watch & add selectively when the dust settles.
PS: I got them. Now the worry begins. I am pretty net long now, effectively. India stocks are getting hammered as the India Central Bank raised rates again to control inflation. My India stocks are a very LT play. I'll wait & watch & add selectively when the dust settles.
Crop Report; Other News Ongoing Today
Huge corn acreage. Wowza. Bubblevision very slow LOLOL
[many "PS" comments here as I add them - see below]
PS: I think I mentioned this a few weeks ago, but I played this crop report with a widely split straddle of December corn options. [besides longs in new crop (December) oats & cotton] I figured we might get a big move one way or the other. So the plan was to take profits on a swing one way of enough to get the other free. Then wait for weather to swing corn the other way. So soon I will take profits on the puts & wait for a long hot summer to bring the calls in for a home run. Well, that's the plan, lolol.
PPS: the problem with soybeans is that there was a huge carryout from 2006 plus a huge South America crop. And the beefers are already very long. Flip side is biodiesel demand of soybean oil. We'll see. I'll wait to play there.
PPPS: that PCE year over year core inflation number was troubling. Maybe it's expected since the CPI numbers have been hot. But the trend is not good at all, as we have three straight monthly increase in the yoy core PCE inflation.
PPPPS: big Chicago PMI number -> 61.7 Hmmm. The stag in stagflation might be weakening, while the 'flation gets a second wind. Gotta watch this.
PPPPPS: Out of oats & cotton. Darn, made OK money but their acreage didn't drop more than the range of estimates, so no poparoo today. Would have done better selling both yesterday. I thought oats acreage would drop more. And although cotton dropped a lot, there is a big carryout there, too, & the acreage is still too high. Too much US cotton is low quality due to subsidies, so demand is weak. But the corn split straddle worked great. I sold my puts for enough to get a free play on summer weather on corn. :-) Bring on a long, hot summer! Now I have to work on new ideas.
[many "PS" comments here as I add them - see below]
PS: I think I mentioned this a few weeks ago, but I played this crop report with a widely split straddle of December corn options. [besides longs in new crop (December) oats & cotton] I figured we might get a big move one way or the other. So the plan was to take profits on a swing one way of enough to get the other free. Then wait for weather to swing corn the other way. So soon I will take profits on the puts & wait for a long hot summer to bring the calls in for a home run. Well, that's the plan, lolol.
PPS: the problem with soybeans is that there was a huge carryout from 2006 plus a huge South America crop. And the beefers are already very long. Flip side is biodiesel demand of soybean oil. We'll see. I'll wait to play there.
PPPS: that PCE year over year core inflation number was troubling. Maybe it's expected since the CPI numbers have been hot. But the trend is not good at all, as we have three straight monthly increase in the yoy core PCE inflation.
PPPPS: big Chicago PMI number -> 61.7 Hmmm. The stag in stagflation might be weakening, while the 'flation gets a second wind. Gotta watch this.
PPPPPS: Out of oats & cotton. Darn, made OK money but their acreage didn't drop more than the range of estimates, so no poparoo today. Would have done better selling both yesterday. I thought oats acreage would drop more. And although cotton dropped a lot, there is a big carryout there, too, & the acreage is still too high. Too much US cotton is low quality due to subsidies, so demand is weak. But the corn split straddle worked great. I sold my puts for enough to get a free play on summer weather on corn. :-) Bring on a long, hot summer! Now I have to work on new ideas.
Commodities I.
Bubblevision is really talking up this crop report, which is very important, no doubt. But if you're a commodity trader, after this report and a couple days of adjustments, the grain markets become a weather market. Summer weather expectations will dominate price moves until the crops are made.
OK, if you're not a commodity trader but want to try it out, here's some advice.
First, don't. No joke. You can expect to lose money for awhile while you learn. And if you don't listen to my later advice on position size, you'll blow up & lose a LOT of your trading capital. Unfortunately I've seen this exact scenario play out over the past year or so for an acquaintance who ignored my advice on position size - very sad. In my own experience, I lost the price of a business school education in the mid-1980s learning. I've done very well since then, but that was painful.
OK, so you want to do it. Operationally, find a discount broker & start small. I use XpressTrade which is now part of OptionsExpress. They have enough free research & decent chart capabilities. I use the advanced commodities service of barchart.com for longer term charts & spreads ($20/month). I pay eSignal for realtime quotes on the various exchanges I trade - commodity quotes are fairly steep as there are many exchanges seeking to get a little of your blood. It's good having eSignal for both stocks & commodities. You can put a lot of your capital in T-bills (stagger the maturities so you can let some run off if you need the cash for draws or , uh, losses). I keep about 80% capital in T-bills & have them staggered to mature every week so IF I screw up I can get $$$ cash fast (that has not happened, thank goodness).
Position size. Ignore the actual margin for the positions. You should NEVER get close to hitting those limits. Margin is just "assurance" money you have to assure the exchange you'll pay your losses. Every evening the gains & losses are cleared in CASH. Focus on the true $ value of your position. For corn, the contract is 5,000 bushels. At $4/bushel, that's $20,000. If you trade 10 contracts, that's $200,000. You bear the losses on $200,000 of corn. If corn goes limit up this morning IIFF the crop report shows farmers are only planting 85 million acres, it was go up 20 cents - a one way, non-stop elevator ride - no exit or entry. It will then probably go limit up Monday, too, for a 10% move like when earnings come out for a stock. If you were short, you just lost 40 cents on 50,000 bushels, or $20,000. This is why position size is so important and so deceptive. The initial margin on those 10 contracts was only $1,485/contract, or $14,850 for your 10 contracts.
YOU MUST create a spreadsheet to monitor position size. I almost never go over 5:1 leverage. When active, I try to keep it at 3:1. I might go to 5:1 if I have some relatively uncorrelated positions, like T-Notes plus grains and coffee.
In truth, I love commodity trading. I love to think about the fundamentals & interrelationships, the roles of the beefers and commercial traders, and the charts to figure out a trade to try out. It's predicting the future. And they are ALL TRADES. There is NO "investing" in commodities - only speculation. You gotta get out when "they" ring the bell. LOLOLOL. Ok, that's when a technical sell signal occurs or all the news you expect is in. Because the beefers sell on the way down. Get out of their way, fast.
PS: a benefit of having a futures account is that you never have to worry about getting SPY or QQQQ or IWM to borrow for shorts - you can ALWAYS short the e-mini futures.
OK, if you're not a commodity trader but want to try it out, here's some advice.
First, don't. No joke. You can expect to lose money for awhile while you learn. And if you don't listen to my later advice on position size, you'll blow up & lose a LOT of your trading capital. Unfortunately I've seen this exact scenario play out over the past year or so for an acquaintance who ignored my advice on position size - very sad. In my own experience, I lost the price of a business school education in the mid-1980s learning. I've done very well since then, but that was painful.
OK, so you want to do it. Operationally, find a discount broker & start small. I use XpressTrade which is now part of OptionsExpress. They have enough free research & decent chart capabilities. I use the advanced commodities service of barchart.com for longer term charts & spreads ($20/month). I pay eSignal for realtime quotes on the various exchanges I trade - commodity quotes are fairly steep as there are many exchanges seeking to get a little of your blood. It's good having eSignal for both stocks & commodities. You can put a lot of your capital in T-bills (stagger the maturities so you can let some run off if you need the cash for draws or , uh, losses). I keep about 80% capital in T-bills & have them staggered to mature every week so IF I screw up I can get $$$ cash fast (that has not happened, thank goodness).
Position size. Ignore the actual margin for the positions. You should NEVER get close to hitting those limits. Margin is just "assurance" money you have to assure the exchange you'll pay your losses. Every evening the gains & losses are cleared in CASH. Focus on the true $ value of your position. For corn, the contract is 5,000 bushels. At $4/bushel, that's $20,000. If you trade 10 contracts, that's $200,000. You bear the losses on $200,000 of corn. If corn goes limit up this morning IIFF the crop report shows farmers are only planting 85 million acres, it was go up 20 cents - a one way, non-stop elevator ride - no exit or entry. It will then probably go limit up Monday, too, for a 10% move like when earnings come out for a stock. If you were short, you just lost 40 cents on 50,000 bushels, or $20,000. This is why position size is so important and so deceptive. The initial margin on those 10 contracts was only $1,485/contract, or $14,850 for your 10 contracts.
YOU MUST create a spreadsheet to monitor position size. I almost never go over 5:1 leverage. When active, I try to keep it at 3:1. I might go to 5:1 if I have some relatively uncorrelated positions, like T-Notes plus grains and coffee.
In truth, I love commodity trading. I love to think about the fundamentals & interrelationships, the roles of the beefers and commercial traders, and the charts to figure out a trade to try out. It's predicting the future. And they are ALL TRADES. There is NO "investing" in commodities - only speculation. You gotta get out when "they" ring the bell. LOLOLOL. Ok, that's when a technical sell signal occurs or all the news you expect is in. Because the beefers sell on the way down. Get out of their way, fast.
PS: a benefit of having a futures account is that you never have to worry about getting SPY or QQQQ or IWM to borrow for shorts - you can ALWAYS short the e-mini futures.
Homeowner Purgatory
I've been in homeowner purgatory for about ten weeks and expect to be there another month. That's what home remodeling is, sheer endless torments. Whether you own a house or a condo, when one remodels, everything is aggravation & stress. At least I have reliable people to do the work. For ten weeks, I've had people working here - that's tough for a natural recluse like me ;-) We've been repainting, putting up new wallpaper, installing new "window treatments" (ugh, what a term to denote $$$), refinishing cabinets, replacing old fixtures, rebuilding a sunroom, and the ultimate torture - the new kitchen countertop.
Arghhhhhhhh!!! Replacing a kitchen countertop is an endless burden, like that of Sisyphus in Hades. We're putting in a new granite countertop. First you pick out a new sink & faucet & granite type. Then you pay a large sum to a worthless middleman. Then you endure out-of stock conditions, etc. and delivery delays to mess up the timing of your project. Then drive miles to an industrial building to select your actual slab. Then you have your plumbing disconnected & old sink removed. Then you take off the old countertop. So now you have no workable kitchen. Then the granite people create a "template" of your countertop. You need to check this as you have a large sum riding on it. Then you get your new sink delivered and - arghhhhhhhhhhhhhh - it's not the advertised size. So you have to re-order. More delays and no kitchen. So the new sink arrives & you have to take it to the granite cutting building (an hour's drive each way) so they have its shape. There you approve the layout of the template so unfavorable occlusions are cut out. Then you beg for a nearby install date so you don't have to wait TWO MORE WEEKS with no kitchen. Next Wednesday for me is the date. So now I have to call the plumber & get him in as soon as possible thereafter to hook up the faucet & sink. After that, I still have the tile work to have done. Endless torment.
Arghhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh!!!!!!!!!
Arghhhhhhhh!!! Replacing a kitchen countertop is an endless burden, like that of Sisyphus in Hades. We're putting in a new granite countertop. First you pick out a new sink & faucet & granite type. Then you pay a large sum to a worthless middleman. Then you endure out-of stock conditions, etc. and delivery delays to mess up the timing of your project. Then drive miles to an industrial building to select your actual slab. Then you have your plumbing disconnected & old sink removed. Then you take off the old countertop. So now you have no workable kitchen. Then the granite people create a "template" of your countertop. You need to check this as you have a large sum riding on it. Then you get your new sink delivered and - arghhhhhhhhhhhhhh - it's not the advertised size. So you have to re-order. More delays and no kitchen. So the new sink arrives & you have to take it to the granite cutting building (an hour's drive each way) so they have its shape. There you approve the layout of the template so unfavorable occlusions are cut out. Then you beg for a nearby install date so you don't have to wait TWO MORE WEEKS with no kitchen. Next Wednesday for me is the date. So now I have to call the plumber & get him in as soon as possible thereafter to hook up the faucet & sink. After that, I still have the tile work to have done. Endless torment.
Arghhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh!!!!!!!!!
Thursday, March 29, 2007
What Now for Ms. Market?
So far this pullback is normal - about to the principal Fibonacci level (38%) of 1,411 cash S&P 500. On Daily Graphs the top of the "W" looks like 1,410; that's also the open price of the IBD "follow-thru" day, so it must hold for this "rally" to stick. No war overnight, so Asia markets rebounded. Jesse Livermore's writings illustrate the importance of accepting & recognizing a "normal" pullback.
There's a lot to worry about - see recent post titled "Iran, etc. Worries" for some political and economic ones that trouble me. But without a recession, the valuation of US big caps is cheap, imho. [I will write about those values soon.] The real pain in housing seems to be concentrated in the old rust belt (per foreclosures, etc.). The surrounding farm belt is probably going to have a record year, however, due to corn prices. In 1983-5 the rust belt was crushed due to Volcker's insanely strong dollar, but there was no recession. Stocks consolidated in 1984, then took off in 1985 for a huge run up. That's what I think will happen some time soon. We have too many apocalyptic bears around. They'll buy our stocks at higher prices when they capitulate or get liquidated or get funds pulled out. Barring unforeseen events, of course.
There's a lot to worry about - see recent post titled "Iran, etc. Worries" for some political and economic ones that trouble me. But without a recession, the valuation of US big caps is cheap, imho. [I will write about those values soon.] The real pain in housing seems to be concentrated in the old rust belt (per foreclosures, etc.). The surrounding farm belt is probably going to have a record year, however, due to corn prices. In 1983-5 the rust belt was crushed due to Volcker's insanely strong dollar, but there was no recession. Stocks consolidated in 1984, then took off in 1985 for a huge run up. That's what I think will happen some time soon. We have too many apocalyptic bears around. They'll buy our stocks at higher prices when they capitulate or get liquidated or get funds pulled out. Barring unforeseen events, of course.
Sky King
Sky the puppy seems to believe he's boss around our home now. It's a remarkable example of how well adapted dogs are to people that one can take an 10 week old puppy from a sheep ranch in Australia, put him on a plane & in a few days he's lounging on a waterbed comfortably, making me rub his belly. ;-)
The other dogs have adapted, too. Spikie think he's a twerp, Ava thinks he's a brat, and Krypto thinks he's an adorable nephew. [I'm anthropomorphizing hehe. ] I've got to keep an eye on him, too - he likes to gnaw on the corner of my computer tables. So far a box of chew toys & talking toys (the elephant is cool) has prevented serious damage.
The other dogs have adapted, too. Spikie think he's a twerp, Ava thinks he's a brat, and Krypto thinks he's an adorable nephew. [I'm anthropomorphizing hehe. ] I've got to keep an eye on him, too - he likes to gnaw on the corner of my computer tables. So far a box of chew toys & talking toys (the elephant is cool) has prevented serious damage.
Wednesday, March 28, 2007
Pray for Me ;-)
I bought some S&P 500 calls just now & put in a bid for more. I wanted a dip & I figure this a just that. The cash & futures are close to the top of the "W" bottom. I bought calls instead of futures in case a war starts in the Gulf. I don't think that will happen, but the governments of both sides (Iran & US) seem very off-balance lately. Call me paranoid. Pray for me ;-)
More Activity - buying hogs this time :-)
Per my post on March 21, titled "Alpha Fund changes" - the second "PPS" item, I bought some December Lean Hogs on the break of 66 yesterday. My thinking is that hog conception rates were low during the cold February and that farmers planned to raise fewer hogs due to the high price of feed (corn, etc.). Since hogs need about 9-12 months to be produced start to finish, I figured that December was the play for my ideas. NB this is a re-buy as I played them successfully before on the recent big move in corn.
A Chart Buy Example
Here's a chart buy I did yesterday (a "real" buy hehe ). I learned this technique a few months ago from a pretty good trader who holds some stocks a good while. I thought about his tactic & liked it as it made sense. The stock is ADBE. Their new product piqued my interest. Also, I just recently bought Acrobat Pro 8 for my own business use.
Look at their weekly chart on Daily Graphs, if you subscribe to that fine service, where you can see about two years history. ADBE just broke to "blue skies" over the two year time period [NB, not just a 52 week high - those are overmined], which means there are few, if any, remorseful sellers awaiting at higher levels. And in my judgement, it's not very extended, since it just broke out of a seven month base. In fact, the weekly chart looks like a bullish cup & handle. Putting that all together, it's a "buy" to hold awhile & give it time to develop. Maybe the real buyers [whose presence is indicated by the consolidation pattern on the daily chart] figure that new product will start new growth in earnings.
That is what this stock needs. It's earnings growth vs. its current PE is not good. But the chart seems positive. So I bought some & will add higher or lower and give it time to develop.
Look at their weekly chart on Daily Graphs, if you subscribe to that fine service, where you can see about two years history. ADBE just broke to "blue skies" over the two year time period [NB, not just a 52 week high - those are overmined], which means there are few, if any, remorseful sellers awaiting at higher levels. And in my judgement, it's not very extended, since it just broke out of a seven month base. In fact, the weekly chart looks like a bullish cup & handle. Putting that all together, it's a "buy" to hold awhile & give it time to develop. Maybe the real buyers [whose presence is indicated by the consolidation pattern on the daily chart] figure that new product will start new growth in earnings.
That is what this stock needs. It's earnings growth vs. its current PE is not good. But the chart seems positive. So I bought some & will add higher or lower and give it time to develop.
Time
I'm going to write a series about "time" in trading and investing over the next few days. I've become motivated by Bud's disbelief in "virtual buyers" in his comments to a recent post [ giving credit here to a reader ;-) hehe ] and a post on time & mathematics on that fine blog by Lubos Motl. [The post link is -> http://motls.blogspot.com/2007/03/role-of-mathematics-in-science.html ; the general blog link is -> http://motls.blogspot.com/ ].
Galileo Galilei expressly added time to our concept of the physical world on local scale. Before him, understanding of the world was dominated by static Aristotelian concepts. [Actually, that great Polish scientist, Copernicus, started the shift in thinking towards a dynamic universe.] So chart analysis is often dominated by looking at a chart shape as a static figure [e. g. a bull flag, or an ascending triangle]. One really needs to include "time" in chart analysis, beyong simply using it as the x-axis.
Galileo Galilei expressly added time to our concept of the physical world on local scale. Before him, understanding of the world was dominated by static Aristotelian concepts. [Actually, that great Polish scientist, Copernicus, started the shift in thinking towards a dynamic universe.] So chart analysis is often dominated by looking at a chart shape as a static figure [e. g. a bull flag, or an ascending triangle]. One really needs to include "time" in chart analysis, beyong simply using it as the x-axis.
Iran, etc. Worries
More deja vu all over again ;-) Yogi Berra was right.
Iran kidnaps some British sailors. And now the rumors fly about shooting in the Gulf. Reminiscent of the first Iranian kidnapping of the Carter era. And possible shells flying in the Gulf reminds me that a similar heavy shooting occurred in the week prior to the Crash in 1987 (Reagan shelled an Iranian oil platform in retaliation for something).
And reading the Tuesday WSJ re ultra loose corporate debt terms reminded me of the greater fool theory deals of the late 1980s, too. And the talk in the article about no one doing fundies on that debt, just looking at everyone else was troubling, too. The fine book, "The Wisdom of Crowds" showed how that is a source of bubbles.
All this is very troubling. I wonder if a correlation of forces is setting us up for something. Or not. History often doesn't really repeat, it makes us think it will, then throws us a curve.
Iran kidnaps some British sailors. And now the rumors fly about shooting in the Gulf. Reminiscent of the first Iranian kidnapping of the Carter era. And possible shells flying in the Gulf reminds me that a similar heavy shooting occurred in the week prior to the Crash in 1987 (Reagan shelled an Iranian oil platform in retaliation for something).
And reading the Tuesday WSJ re ultra loose corporate debt terms reminded me of the greater fool theory deals of the late 1980s, too. And the talk in the article about no one doing fundies on that debt, just looking at everyone else was troubling, too. The fine book, "The Wisdom of Crowds" showed how that is a source of bubbles.
All this is very troubling. I wonder if a correlation of forces is setting us up for something. Or not. History often doesn't really repeat, it makes us think it will, then throws us a curve.
Tuesday, March 27, 2007
Real Buyers vs. Virtual Buyers
I made this reply just now to a comment a few posts ago, but thought I should make it into a full fledged post to make it more visible. In the physical world, there are real particles & a sea of virtual particles. Similarly, in the markets there are "real" buyers and a sea of "virtual" buyers.
A "real" buyer is a buyer who is neither (a) covering a short, nor (b) a flipper/slut beefer trading/computer trading fund which intends to flip the stock within minutes/days. The contraposition to a "real" buyer is a "virtual" buyer which is one of items a and b aforementioned. I've borrowed the particle physics terms: a real particle has staying power and can exist forever, while a virtual particle is quickly destroyed by its anti-particle and has a very short lifetime. A virtual buy is soon eliminated with an offsetting sell.
It's important to try to interpret market moves as those due to real buyers from those of virtual buyers. Otherwise you'll be chewed up & spat out by the beefers like so much cud.
PS: by the way, there are also real sellers and virtual sellers. The action since about 10AM looks like some real sellers. Still waiting to buy here.
PPS: imho, this is why Bill O'Neill requires a follow-thru day to be no earlier than Day 4. He wants to get rid of the effects of the virtual buyers. The time delay does that.
A "real" buyer is a buyer who is neither (a) covering a short, nor (b) a flipper/slut beefer trading/computer trading fund which intends to flip the stock within minutes/days. The contraposition to a "real" buyer is a "virtual" buyer which is one of items a and b aforementioned. I've borrowed the particle physics terms: a real particle has staying power and can exist forever, while a virtual particle is quickly destroyed by its anti-particle and has a very short lifetime. A virtual buy is soon eliminated with an offsetting sell.
It's important to try to interpret market moves as those due to real buyers from those of virtual buyers. Otherwise you'll be chewed up & spat out by the beefers like so much cud.
PS: by the way, there are also real sellers and virtual sellers. The action since about 10AM looks like some real sellers. Still waiting to buy here.
PPS: imho, this is why Bill O'Neill requires a follow-thru day to be no earlier than Day 4. He wants to get rid of the effects of the virtual buyers. The time delay does that.
Valuation II. Earnings Declines
So now we have a baseline zero growth PE range, let's consider an example of a low PE -> XOM, with a current PE of about 11x, well under the baseline range. Further analysis is indicated.
What cash flow time series has a PE below the zero growth baseline? Answer: a declining / amortizing earnings stream. Example: Using 5.5% as a good quality corporate discount rate and a 20 year fully amortizing cash flow (i. e., the earnings are level and will disappear after 20 years, like a fully-amortizing mortgage), the annual payment is 8.37% which is a "PE" of 11.9x. Hmmm, pretty close.
So now you have what's necessary to evaluate XOM based on your outlook for its ability to find more oil & gas and for oil prices. The "efficient" market seems to be pricing XOM as if it will (a) disappear in about 20 years, (b) that it cannot replace its reserves, and (c) that oil & gas prices will not rise sufficiently to increase profits and ration demand much longer.
So if you have a different opinion of that, you know what to do. Buy XOM on any dip for a long term hold. They in fact ARE doing well in replacing reserves and have profitable refining & retail marketing businesses & have huge gas reserves, too. They have refining operations in China jointly with Aramco and have pieces of deep water oil off Angola. Management seems to care about shareholders & not waste money in poor investments or overpriced acquisitions.
You conclude correctly if you think that XOM is a substantial holding in my Alpha Fund.
What cash flow time series has a PE below the zero growth baseline? Answer: a declining / amortizing earnings stream. Example: Using 5.5% as a good quality corporate discount rate and a 20 year fully amortizing cash flow (i. e., the earnings are level and will disappear after 20 years, like a fully-amortizing mortgage), the annual payment is 8.37% which is a "PE" of 11.9x. Hmmm, pretty close.
So now you have what's necessary to evaluate XOM based on your outlook for its ability to find more oil & gas and for oil prices. The "efficient" market seems to be pricing XOM as if it will (a) disappear in about 20 years, (b) that it cannot replace its reserves, and (c) that oil & gas prices will not rise sufficiently to increase profits and ration demand much longer.
So if you have a different opinion of that, you know what to do. Buy XOM on any dip for a long term hold. They in fact ARE doing well in replacing reserves and have profitable refining & retail marketing businesses & have huge gas reserves, too. They have refining operations in China jointly with Aramco and have pieces of deep water oil off Angola. Management seems to care about shareholders & not waste money in poor investments or overpriced acquisitions.
You conclude correctly if you think that XOM is a substantial holding in my Alpha Fund.
Big Sky
Sky the puppy is a big, big eater. At 13 lbs. he eats as much as Krypto, his 40 lb. Kelpie cousin. We feed him a good quality puppy kibble plus many treats & some fruits & vegetables such as carrots, dried apricots, peaches, and pears, and some banana, too (all organic). He also gets some smoked salmon (from my breakfast), and a bit of peanut butter early mornings and a squirt of salmon oil on his lunch. Hehe, a balanced diet. He likes to sit on my lap & help me read the news & look at charts lololol. I have to be careful walking around as he follows me everywhere. He's great fun and is fitting in well.
Path of Least Resistance
From yesterday's action, the market's path of least resistance sure seems to be up. The dip buyers were there to scoop up the beefer index shorts yesterday, and the beefers had to cover. That's the sort of action we had all last fall & winter. A slow grind higher as real buyers bought the beefer bear raids at low prices, then a move back up higher as the bears cover.
I'm contemplating buying some index options - that was the best play last fall/winter. I'm still looking for a 20% gain in the S&P 500 this year. I'll have to evaluate the price of those options vs. trying to find leaders. I'm fairly long in the Alpha Fund - about 120% - with my Oil + Deep Water Drillers, other energies, miners and select picks like AAPL, ORCL, EDU, GOOG, CSCO, HD, etc., plus many India plays.
How to Play this Leg ??? Thinking ..........................................
I'm contemplating buying some index options - that was the best play last fall/winter. I'm still looking for a 20% gain in the S&P 500 this year. I'll have to evaluate the price of those options vs. trying to find leaders. I'm fairly long in the Alpha Fund - about 120% - with my Oil + Deep Water Drillers, other energies, miners and select picks like AAPL, ORCL, EDU, GOOG, CSCO, HD, etc., plus many India plays.
How to Play this Leg ??? Thinking ..........................................
Monday, March 26, 2007
Two Fun Movies
We watched "Men in Black" and "Men in Black II" over the weekend. Hilarious - what fun movies! Highly recommended, especially back to back.
The Charts
Today the index charts sure look like a bullish flag across the board. And they are over the 50 DMA. So without bad news, I'm in dip buying mode. But what? I suppose I could just buy index calls. Or find some leaders to buy for trades. Gotta do some work.
PS: Hmmm, the Alpha Fund is up 9.7% this year to date. Not bad. :-)
PPS: Added some HD to the Alpha Fund - it sure looks like LBO material to me, and they have a pro-shareholder director now & Nardelli is out. It's at the 200 DMA, 13x PE, relatively stable E and lots of assets. I'll add more on a move up over the 50 DMA or down at LT support near 34.
PS: Hmmm, the Alpha Fund is up 9.7% this year to date. Not bad. :-)
PPS: Added some HD to the Alpha Fund - it sure looks like LBO material to me, and they have a pro-shareholder director now & Nardelli is out. It's at the 200 DMA, 13x PE, relatively stable E and lots of assets. I'll add more on a move up over the 50 DMA or down at LT support near 34.
Blackstone = Black Hole
Imho, one either has to have taken a stupid pill or simply is relying on a "greater fool theory" trade to buy the Blackstone IPO. From Friday's WSJ: "And Blackstone made it clear that public shareholders will have little, if any, say in its decisons." It's pretty obvious that to keep top talent, Blackstone will have to pay big bucks. And it's pretty obvious we are near the saturation level on the private equity growth curve. Mostly what these guys are doing now is buying a company, pay themselves an acquisition fee and then leveraging it up to pay themselves a dividend. Then they resell the rump equity left over. Not exactly rocket science. The game depends on favorable tax law, the public market exit strategy, the junk bond market froth, and the willingness of current stockholders & management to accept a quickie payoff instead of just doing the same thing themselves. Any part fails and they can't do a deal anymore -> zero fees.
So it's sort of like buying a stock or bond issued by a Donald Trump controlled company -> severe haircut expected on short notice. Or a hog slurping down the chow at the trough, not realizing you're in a slaughterhouse feedlot. Or being a sheep heading being led to shearing.
Be wary. When the music stops, be sure you've got a chair.
So it's sort of like buying a stock or bond issued by a Donald Trump controlled company -> severe haircut expected on short notice. Or a hog slurping down the chow at the trough, not realizing you're in a slaughterhouse feedlot. Or being a sheep heading being led to shearing.
Be wary. When the music stops, be sure you've got a chair.
Valuation I. Baseline Zero Growth Values
Rational valuation of stocks needs to be self-consistent with the valuation of bonds, which are just a stream in time of future cash payments. Stock investors usually use a Price-Earnings ratio (PE), but they rarely consider what the baseline PE is for a bond. The bond market determines the value of relatively certain cash flows, so consideration of the PE of a bond for a baseline valuation is critical for a market-wide self-consistent valuation. A bond has no growth, so this is a zero growth value.
On Friday the US Treasury 10 year note was priced near par to yield 4.61%. Taking the reciprocal we obtain the "PE" of a riskless cash flow stream with no loss of principal, viz., 21.7x. Now corporate earnings have risk. So let's include some risk by using corporate bond yields to obtain a closer baseline estimate for fair value, zero growth PE: Barron's high grade bond index had a yield of 5.83%, and Barron's intermediate grade bond index has a yield of 6.77%. So depending on the risk of earnings, a corporate zero growth PE is worth between 17.2x and 14.8x
Now a bond risk is downside risk only - a bond payment never increased. In a default, it goes down. So this zero growth valuation is rather stern, being stressed by bad events, but not good events. Hence it's a good baseline for further incremental analysis. Companies with valuations near this range are obvious LBO / private equity candidates. Companies with higher valuations (higher PEs) need growth or something else to justify the price. More later in part II.
On Friday the US Treasury 10 year note was priced near par to yield 4.61%. Taking the reciprocal we obtain the "PE" of a riskless cash flow stream with no loss of principal, viz., 21.7x. Now corporate earnings have risk. So let's include some risk by using corporate bond yields to obtain a closer baseline estimate for fair value, zero growth PE: Barron's high grade bond index had a yield of 5.83%, and Barron's intermediate grade bond index has a yield of 6.77%. So depending on the risk of earnings, a corporate zero growth PE is worth between 17.2x and 14.8x
Now a bond risk is downside risk only - a bond payment never increased. In a default, it goes down. So this zero growth valuation is rather stern, being stressed by bad events, but not good events. Hence it's a good baseline for further incremental analysis. Companies with valuations near this range are obvious LBO / private equity candidates. Companies with higher valuations (higher PEs) need growth or something else to justify the price. More later in part II.
Sunday, March 25, 2007
Sky the Puppy
Sky, our new Kelpie puppy, is 11 weeks old and weighs about 13 pounds. He's got a bold personality. Sky went to his first class of puppy "kindergarten" today. His teacher whispered that he's the smartest puppy she's ever seen. :-)
He knows commands to "sit", "down", "leave it" and "come" already. He's playing with Krypto very well - they took a couple days to figure each other's capabilities out & now have lots of fun. His paws are bigger than Krypto's already, so we estimate he'll be 45 lbs when fully grown. Krypto weighs about 40 lbs at four years old. He's learning the geography here, and seems to tell us when he needs to go out (uh, most of the time).
Sky also had two "circus dog" sessions. I have all the dogs do "circus" tricks on Friday & Saturday nights for fun - they love those sessions - lots of easy treats. I play Louis Armstrong music from the 1920s. Sky has picked up "two legs" (standing on two legs), "high five" (really high ten - both paws at once), and "hoop" (jumping through a hula hoop). He also loves pistachio nuts, just like Krypto.
He knows commands to "sit", "down", "leave it" and "come" already. He's playing with Krypto very well - they took a couple days to figure each other's capabilities out & now have lots of fun. His paws are bigger than Krypto's already, so we estimate he'll be 45 lbs when fully grown. Krypto weighs about 40 lbs at four years old. He's learning the geography here, and seems to tell us when he needs to go out (uh, most of the time).
Sky also had two "circus dog" sessions. I have all the dogs do "circus" tricks on Friday & Saturday nights for fun - they love those sessions - lots of easy treats. I play Louis Armstrong music from the 1920s. Sky has picked up "two legs" (standing on two legs), "high five" (really high ten - both paws at once), and "hoop" (jumping through a hula hoop). He also loves pistachio nuts, just like Krypto.
Whisky / Whiskey
If you like to drink quality whisky / whiskey occasionally, you might enjoy "Whisky Magazine" -> see www.whiskymag.com
I subscribe & it's an enjoyable read. The magazine covers all whisky / whiskey the world over, from the fine Scotch whisky to fine American whiskey to every other country's variety. The magazine is part travel magazine, too. The writers visit fine & famous distilleries all over the world and describe the processes & locations with fine writing.
I subscribe & it's an enjoyable read. The magazine covers all whisky / whiskey the world over, from the fine Scotch whisky to fine American whiskey to every other country's variety. The magazine is part travel magazine, too. The writers visit fine & famous distilleries all over the world and describe the processes & locations with fine writing.
Friday, March 23, 2007
Wild Puppy
Wow, what energy! Our house sounds like a jungle with all these toys that make noises like elephants & birds & tigers. Sky roars through them. He also wants to get the older dogs to play, but so far they are a little indifferent. Except Krypto, who tried to get Sky to play outside, but Sky thought she was a little big (just wait a few months). He knows his name, and is very "full of himself" as the breeder said. Sky keeps working on Spike and I think he'll succeed getter her to play soon.
Spending a hundred $ or so on toys really helps save the furniture, etc. :-)
[btw, I am waiting to buy dips for add to my Alpha Fund margin level, unless we get bad news]
Spending a hundred $ or so on toys really helps save the furniture, etc. :-)
[btw, I am waiting to buy dips for add to my Alpha Fund margin level, unless we get bad news]
Thursday, March 22, 2007
New Puppy
I'll probably be busy today - we got a new Kelpie puppy from Australia. It was quite an experence bringing him here. His name is "Sky" & I have to make sure he doesn't destroy my office. What energy!
PS: "Sky" is named after Sky Masterson in "Guys & Dolls" in my mind and after the "sky" in Mrs. Bunker's mind. hehe
PPS: we got him from super breeders www.noonbarra.com in Australia.
PS: "Sky" is named after Sky Masterson in "Guys & Dolls" in my mind and after the "sky" in Mrs. Bunker's mind. hehe
PPS: we got him from super breeders www.noonbarra.com in Australia.
Wednesday, March 21, 2007
Huh?
[please read whole post & comments. I keep adding PS's & thinking]
I don't see anything good about that Fed statement. I suppose the bears figured the Fed indication that the economy was still strong made them concerned about their subprime blow-up spreading thesis. I guess they are covering. I tried a quick short but after it held for 15 minutes, I covered. Oh well.
No doubt if this holds the charts will look bullish, as I discussed in prior posts. Gotta go with the charts until I see a reason. Maybe the Fed will wait a long time & give inflation a chance to weaken this summer. That's gotta be the only reason to be a bull. Maybe that will work out. I'm wary but will go with the trend.
PS: update - I heard Bill Gross on Bubblevision. Erin re-read the statement & from that & Bill's comment, the prior "tightening bias" was removed. So that's what my first post had anticipated - I missed that in listening the first time. I should have read it myself. Darn. So the beefers are running prices up on that removal. The Fed now has a neutral bias - no bias. Purely data dependent. Erin is by far the best commentator on Bubblevision.
PPS: After thinking it over, I think the Fed interpreted the subprime problems as proof their prior tightening policies worked AND that they had gone far enough. Hence no tightening bias. That makes sense to me. So they wait until the subprime problems work through the economy. I presume their model indicates inflation will lessen this summer. I hope it does. Uh oh, that word, "hope" is dangerous.
PPPS: That qualifies as an IBD followthru day - the Nazz was up over 1.7% on higher volume. So the trend is up, buy dips. The path of least resistance is now up. Don't fight the tape. Don't fight the Fed. What a change! I'll write more in the AM.
I don't see anything good about that Fed statement. I suppose the bears figured the Fed indication that the economy was still strong made them concerned about their subprime blow-up spreading thesis. I guess they are covering. I tried a quick short but after it held for 15 minutes, I covered. Oh well.
No doubt if this holds the charts will look bullish, as I discussed in prior posts. Gotta go with the charts until I see a reason. Maybe the Fed will wait a long time & give inflation a chance to weaken this summer. That's gotta be the only reason to be a bull. Maybe that will work out. I'm wary but will go with the trend.
PS: update - I heard Bill Gross on Bubblevision. Erin re-read the statement & from that & Bill's comment, the prior "tightening bias" was removed. So that's what my first post had anticipated - I missed that in listening the first time. I should have read it myself. Darn. So the beefers are running prices up on that removal. The Fed now has a neutral bias - no bias. Purely data dependent. Erin is by far the best commentator on Bubblevision.
PPS: After thinking it over, I think the Fed interpreted the subprime problems as proof their prior tightening policies worked AND that they had gone far enough. Hence no tightening bias. That makes sense to me. So they wait until the subprime problems work through the economy. I presume their model indicates inflation will lessen this summer. I hope it does. Uh oh, that word, "hope" is dangerous.
PPPS: That qualifies as an IBD followthru day - the Nazz was up over 1.7% on higher volume. So the trend is up, buy dips. The path of least resistance is now up. Don't fight the tape. Don't fight the Fed. What a change! I'll write more in the AM.
Alpha Fund changes
I added some GOOG and some CSCO to my Alpha Fund, and some ORCL, too. Btw, I bought the ORCL when it hit and bounced on the 9 bar MA on the five minute chart. That's a place I like to buy after a strong open on good news. GOOG and CSCO look like divergences to me vs. their stochastics, viz., the stock hit a swing low but the stochastics did not. I have room to add more later, either higher or lower. I also like the fundie stories on all three and the PE vs. growth rates.
PS: Out of cocoa now. I'm pretty sure I posted that long awhile ago. I have a rule to get out when a story gets onto CNBC more than once. I've heard that story three times today. Sayonnara for now. Might re-buy later.
PPS: Another trading observation is that obvious stops levels are likely to be run by locals/beefers. So if I like a commodity/stock for fundie reasons, I like to buy when those stops get run. Then I get a good entry that is more likely to keep me in IF I'm right on the fundies. Today I'm watching Lean Hogs- December. I figure for several reasons there will be a hog shortage late this year. LHZ07 looks like 66 is a logical place for stops. I'm going to re-buy that position on a break of 66.
PS: Out of cocoa now. I'm pretty sure I posted that long awhile ago. I have a rule to get out when a story gets onto CNBC more than once. I've heard that story three times today. Sayonnara for now. Might re-buy later.
PPS: Another trading observation is that obvious stops levels are likely to be run by locals/beefers. So if I like a commodity/stock for fundie reasons, I like to buy when those stops get run. Then I get a good entry that is more likely to keep me in IF I'm right on the fundies. Today I'm watching Lean Hogs- December. I figure for several reasons there will be a hog shortage late this year. LHZ07 looks like 66 is a logical place for stops. I'm going to re-buy that position on a break of 66.
David Stockman to be Indicted
Well, I guess a tiger doesn't change its stripes. I just heard on Bubblevision that David Stockman, who betrayed Ronald Reagan and then went to the Street and then to a private equity firm, is about to be indicted for participating in fraudulent accounting in Collins & Aikman, now in bankruptcy. That figures. Truth and fidelity were unknown to him.
Amazing Stuff
I was watching a show about the US Olympics training center & saw some relatively small women lifting huge weights. Amazing what the human body can do! I remember from my weightlifting days doing some pretty heavy lifts, and then seeing a 120 lb. lady (good looking, too) lift more. That was remarkable. Today they can lift even more.
First Day of Spring, etc.
First Day of Spring .... and it's 10F here this morning. Brrr.
We also have about 8 inches of snow & ice covering everything. This is unusual even for here in Massachusetts.
Those pioneer ancestors of mine on the Virginia & Ohio frontier were tough.
Uh, here's a headline: "Rove offered for unsworn testimony" ... Isn't "unsworn testimony" an oxymoron? I suppose they really meant "offered for a chat" but that didn't sound right.
Our new puppy is now on the plane from Australia. We should have him here later tonight.
Yesterday was the first closing day over 1410. We need one today to turn the chart bullish. [btw, S&P futures need a close over 1425 to be bullish.] I'll wait for the proof before trying the long side.
We also have about 8 inches of snow & ice covering everything. This is unusual even for here in Massachusetts.
Those pioneer ancestors of mine on the Virginia & Ohio frontier were tough.
Uh, here's a headline: "Rove offered for unsworn testimony" ... Isn't "unsworn testimony" an oxymoron? I suppose they really meant "offered for a chat" but that didn't sound right.
Our new puppy is now on the plane from Australia. We should have him here later tonight.
Yesterday was the first closing day over 1410. We need one today to turn the chart bullish. [btw, S&P futures need a close over 1425 to be bullish.] I'll wait for the proof before trying the long side.
Tuesday, March 20, 2007
Pure Chart Point of View
If I put my fundie outlook thinking aside and look only at the S&P 500 chart (cash), I would conclude that two consecutive closes over 1410 would signal that the "correction" is over. Even though we are in no man's land with no clear support and have a system of lower lows & lower highs, that event would break the pattern, creating a "W" pattern. Then first support would be 1410 and second support would be the 1370-1390 range.
This reminds me a little of the fall of 2005, when we broke down hard after Katrina in October. Then suddenly we started to move up [albeit, on incorrect expectations of a Fed ease in that case]. A good rally occurred. I remember disbelieving it, but turned around when a similar chart event occurred. We could be repeating that situation.
Just thinking. I suppose my expectations in the prior post of Fed "balanced" risk could be misinterpreted by the beefers as a similar signal of a Fed rate cut. And a rally could occur. Maybe my thinking in the prior post re expectations of market response to the expected statement were wrong. If the beefers incorrectly this such a statement means a Fed rate cut, they'll take the market up.
I will wait for the trend to show itself in the charts.
This reminds me a little of the fall of 2005, when we broke down hard after Katrina in October. Then suddenly we started to move up [albeit, on incorrect expectations of a Fed ease in that case]. A good rally occurred. I remember disbelieving it, but turned around when a similar chart event occurred. We could be repeating that situation.
Just thinking. I suppose my expectations in the prior post of Fed "balanced" risk could be misinterpreted by the beefers as a similar signal of a Fed rate cut. And a rally could occur. Maybe my thinking in the prior post re expectations of market response to the expected statement were wrong. If the beefers incorrectly this such a statement means a Fed rate cut, they'll take the market up.
I will wait for the trend to show itself in the charts.
Fed Meeting
The Fed meets Wednesday. That they will do nothing is as certain as any event under the control of human beings. The statement will likely change, though, imho.
With a Democratic Congress, the Fed must acknowledge part 2 of their statutory mandate, namely to have high employment. Ignore the gurus on TV - they tell you what "they" think the Fed "should do", not what one thinks the Fed "will" do. So with year over year core inflation ticking up, the Fed will clearly keep the inflation risk at a high level. But now with the subprime mortgage weakness and a clearly slower economy, I think they will acknowledge more risk on the downside.
So I think they will have a "balanced risk" statement - equal on the high/raise side & low/drop side. I think the risk of them raising rates is now balanced with them lowering rates. Future data will govern. And I think if the market gets the statement I expect, it goes down again. Hello 200 DMA?
With a Democratic Congress, the Fed must acknowledge part 2 of their statutory mandate, namely to have high employment. Ignore the gurus on TV - they tell you what "they" think the Fed "should do", not what one thinks the Fed "will" do. So with year over year core inflation ticking up, the Fed will clearly keep the inflation risk at a high level. But now with the subprime mortgage weakness and a clearly slower economy, I think they will acknowledge more risk on the downside.
So I think they will have a "balanced risk" statement - equal on the high/raise side & low/drop side. I think the risk of them raising rates is now balanced with them lowering rates. Future data will govern. And I think if the market gets the statement I expect, it goes down again. Hello 200 DMA?
Schools as Indoctrination Centers ?
What the ?! I pick up the WSJ and there's an article about the Supreme Court deciding if some kid can be suspended for 10 days (!) for holding up an outdoor sign that reads, "Bong hits for Jesus" lol.
How ridiculous!. Now wonder they can't teach reading & math - those dope school "educators" are spending time indoctrinating students. And they drug the ones that resist. Sheesh, they probably would have put Benjamin Franklin on Ritalin.
High school science fairs are full of PC "environmental" science projects. Hallways are full of multi-cultural crap posters. A kid gets in trouble for learning something true & repeating it. Argghhhhhhhhhh. We're doomed. :-(
How ridiculous!. Now wonder they can't teach reading & math - those dope school "educators" are spending time indoctrinating students. And they drug the ones that resist. Sheesh, they probably would have put Benjamin Franklin on Ritalin.
High school science fairs are full of PC "environmental" science projects. Hallways are full of multi-cultural crap posters. A kid gets in trouble for learning something true & repeating it. Argghhhhhhhhhh. We're doomed. :-(
Unfair Soldiers' Disability
Army Times this week had an article with some facts that Army soldiers are not treated fairly for disability claims, even though they are bearing the brunt of fighting in Iraq. From the numbers, they get lower disability ratings (i. e., less money) than other services and lower than Army officers. The article had personal examples of very unfair treatment, too. Apparently the bureaucrats just grind them down in paper work, trying to get them to settle for less than they are entitled - like insurance companies do. Grrrrrrrrrrrr.
Monday, March 19, 2007
Leaders for the Next Leg
I was asked a few months ago what groups I thought would lead for 2007. My reply was the oils, miners & golds. I include deep water drillers & some other oil service stocks in the term "oils".
I don't expect a recession and I think the bull market for oil & minerals will end only when China says so. The action in copper recently proves this. Once copper destocking in China & scrap supplies were used up, copper prices began to rise again. I expect oil prices to move up strongly this year as China & other emerging market demand continues to grow (as does US demand unless prices go back to the highs) and supply from many big producers drops (such as Mexico, Norway, the US and others), negating new finds. Ditto iron ore, etc. Gold is a world prosperity play - physical demand in India & China will drive gold up as mine supply continues to drop.
I don't expect a recession and I think the bull market for oil & minerals will end only when China says so. The action in copper recently proves this. Once copper destocking in China & scrap supplies were used up, copper prices began to rise again. I expect oil prices to move up strongly this year as China & other emerging market demand continues to grow (as does US demand unless prices go back to the highs) and supply from many big producers drops (such as Mexico, Norway, the US and others), negating new finds. Ditto iron ore, etc. Gold is a world prosperity play - physical demand in India & China will drive gold up as mine supply continues to drop.
Some Movies
We subscribe to NetFlix and get about four movies a week. Cable TV is a wasteland, so it's essential along with Tivo to have anything good to watch when you want it.
We recently finished watching all the original "Avengers" series with Diana Rigg as Mrs. Peel. Those shows are excellent with Mrs. Peel being a smart, beautiful and cultured "talented amateur" partner of the 'top pro' agent, John Steed played by Patrick McNee.
For movies, we saw "Tony Rome" and "Lady in Cement" where Frank Sinatra plays Tony Rome, a private detective. The setting is Miami in the early 1960s period. Both are fun & interesting to see how the US worked then. Then we saw "Walk the Line" - about the life of Johnny Cash and his long simmering romance with June Carter. At the end, they are happily married as they stayed for 35 years in real life. I remember that from the 1960s when I was a boy. Our household then watched the Johnny Cash show on TV regularly and I remember his marriage to June Carter and his redemption.
We had a laugh talking about that movie. I was reminiscing about Johnny Cash with Mrs. Bunker & she piped up that living in the NYC, the "Johnny Cash Show" wasn't her childhood household TV fare. Neither were "Green Acres", "Hee Haw" or the "Beverly Hillbillies", all of which my family watched every evening in our rural small town. Oh well, I always thought Arnold the Pig was a pretty funny character.
:-)
We recently finished watching all the original "Avengers" series with Diana Rigg as Mrs. Peel. Those shows are excellent with Mrs. Peel being a smart, beautiful and cultured "talented amateur" partner of the 'top pro' agent, John Steed played by Patrick McNee.
For movies, we saw "Tony Rome" and "Lady in Cement" where Frank Sinatra plays Tony Rome, a private detective. The setting is Miami in the early 1960s period. Both are fun & interesting to see how the US worked then. Then we saw "Walk the Line" - about the life of Johnny Cash and his long simmering romance with June Carter. At the end, they are happily married as they stayed for 35 years in real life. I remember that from the 1960s when I was a boy. Our household then watched the Johnny Cash show on TV regularly and I remember his marriage to June Carter and his redemption.
We had a laugh talking about that movie. I was reminiscing about Johnny Cash with Mrs. Bunker & she piped up that living in the NYC, the "Johnny Cash Show" wasn't her childhood household TV fare. Neither were "Green Acres", "Hee Haw" or the "Beverly Hillbillies", all of which my family watched every evening in our rural small town. Oh well, I always thought Arnold the Pig was a pretty funny character.
:-)
Sunday, March 18, 2007
Some Ramblings, etc.
I noticed that yields on medium grade bonds have upticked while Treasury yields have downticked [weekly changes from Barron's]. This needs to be watched. Per my post a few days ago I pointed out how the subprime residential problems can be passed to corporates & commercial mortgage securities and other debt via the CDO/CLO/CBO markets. Barron's has a few mentions of this possibility [Barron's 3/19/2007, pages 27 and M10], basically giving more detail. The WSJ had a minor blurb, too, a couple days ago. Glad I could get that to you first :-)
We are freezing this morning - we got about 10 inches of snow the past 48 hours and it's 15F now. I had a warning about this cold wave, but it's a little worse than predicted. The first day of Spring is March 21 - three days away :-(
This Presidential election campaign is going to get really tiring soon. They are starting very early, due to the front-loaded primaries & the need to raise mega-$$$ for TV ads. I don't know who I will support, yet. I'm trying to ignore it for awhile.
China raised interest rates over the weekend. That might give the bears some motivation to push the markets lower Monday.
The WSJ had an article about how ETF trading is dominated by beefers & how intraday prices can get way out of whack, even for US only ETFs. They gave an example how the IWM was about 1% off vs. the underlying stocks in the recent swoon. That is very troubling. More market maker looting, I guess. The greed of the Street is without limit.
We are freezing this morning - we got about 10 inches of snow the past 48 hours and it's 15F now. I had a warning about this cold wave, but it's a little worse than predicted. The first day of Spring is March 21 - three days away :-(
This Presidential election campaign is going to get really tiring soon. They are starting very early, due to the front-loaded primaries & the need to raise mega-$$$ for TV ads. I don't know who I will support, yet. I'm trying to ignore it for awhile.
China raised interest rates over the weekend. That might give the bears some motivation to push the markets lower Monday.
The WSJ had an article about how ETF trading is dominated by beefers & how intraday prices can get way out of whack, even for US only ETFs. They gave an example how the IWM was about 1% off vs. the underlying stocks in the recent swoon. That is very troubling. More market maker looting, I guess. The greed of the Street is without limit.
Saturday, March 17, 2007
Dogs
For my 101st post I thought that one about dogs would be a timely topic [get it? hehe ;-) ].
I've always had dogs for pets since I was, well, born, from the old family films. [OK, I concede, cats are good pets & lovable, too, but Mom is allergic to cats.] Recently, we had four dogs - all different breeds. Then we lost two to long-term kidney disease. That was very hard, but we cared for them for about two years with the disease and prolonged their lives many, many months - maybe almost the entire two years for one. They were happy pets all the time, and the effort was worth it. If you do the best you can while they are alive, the loss is more bearable. I know that applies to people & loved ones & friends as well. You have few or no regrets if you do your best while they are living.
With only two dogs, our home felt empty. Two weeks ago we adopted a rescue dog - one that had been abandoned. She's a seven year old rat terrier named "Ava" (20 lbs.) and is settling in well. From her personality, it's clear she was terribly mistreated. We'll slowly get her back to normal. We've been successful doing that before, but it takes about a year or two for them to put the bad times out of their minds.
Next week we are getting a new puppy, a male Kelpie to be named "Sky". We figured that Krypto needed a playmate with some energy and size. This should be an exciting time.
I've always had dogs for pets since I was, well, born, from the old family films. [OK, I concede, cats are good pets & lovable, too, but Mom is allergic to cats.] Recently, we had four dogs - all different breeds. Then we lost two to long-term kidney disease. That was very hard, but we cared for them for about two years with the disease and prolonged their lives many, many months - maybe almost the entire two years for one. They were happy pets all the time, and the effort was worth it. If you do the best you can while they are alive, the loss is more bearable. I know that applies to people & loved ones & friends as well. You have few or no regrets if you do your best while they are living.
With only two dogs, our home felt empty. Two weeks ago we adopted a rescue dog - one that had been abandoned. She's a seven year old rat terrier named "Ava" (20 lbs.) and is settling in well. From her personality, it's clear she was terribly mistreated. We'll slowly get her back to normal. We've been successful doing that before, but it takes about a year or two for them to put the bad times out of their minds.
Next week we are getting a new puppy, a male Kelpie to be named "Sky". We figured that Krypto needed a playmate with some energy and size. This should be an exciting time.
Best Ground Coverage of the War
If you want the best coverage of the war at the GI level, see Soldier of Fortune magazine. Their website is www.sofmag.com
This month's issue (May 2007) has articles on ground action in Afghanistan and more coverage about the gross misuse of Army sniper teams in Iraq. SOF sends reporters who are combat veterans into the front lines. They patrol with the Soldiers or Marines for many days, and write their stories. There is a delay because of this level of thoroughness (no fancy electronics), but the first hand, experienced coverage is the best. SOF has covered every conflict since Vietnam, including the Central American civil wars, the first war in Afghanistan vs. the Russians, and the Persian Gulf wars. I've subscribed for almost 30 years.
The Army tactics for sniper teams is a disaster. Instead of hunting down terrorists planting IEDs that kill GIs, they waste them on Humvee patrols where they are targets, not hunters. A letter to the magazine points out that Marine sniper teams are properly used. The letter was from a soldier who served in both forces with first hand experience. In Afghanistan, the story shows first hand how Taliban tactics use Pakistan as a safe haven at the patrol level.
This month's issue (May 2007) has articles on ground action in Afghanistan and more coverage about the gross misuse of Army sniper teams in Iraq. SOF sends reporters who are combat veterans into the front lines. They patrol with the Soldiers or Marines for many days, and write their stories. There is a delay because of this level of thoroughness (no fancy electronics), but the first hand, experienced coverage is the best. SOF has covered every conflict since Vietnam, including the Central American civil wars, the first war in Afghanistan vs. the Russians, and the Persian Gulf wars. I've subscribed for almost 30 years.
The Army tactics for sniper teams is a disaster. Instead of hunting down terrorists planting IEDs that kill GIs, they waste them on Humvee patrols where they are targets, not hunters. A letter to the magazine points out that Marine sniper teams are properly used. The letter was from a soldier who served in both forces with first hand experience. In Afghanistan, the story shows first hand how Taliban tactics use Pakistan as a safe haven at the patrol level.
Friday, March 16, 2007
It's Raining Beefers
Sheesh. Blackstone, KKR, Carlyle talking about IPOs. Sounds like it's going to rain beefers. What hogs!
I suppose combined with the CNBC trading contest & the jester & college students talking about trading & Business school students talking to hedge funds, we have to wonder what type of bubble is getting set up to blow up in a year or so. My guess is a beefer-hedgie-private equity-money manager-Street-trading blow up. Together they represent the entire money management industry.
A massive shift back to indexing would kill them all.
I'm open to other ideas.
I suppose combined with the CNBC trading contest & the jester & college students talking about trading & Business school students talking to hedge funds, we have to wonder what type of bubble is getting set up to blow up in a year or so. My guess is a beefer-hedgie-private equity-money manager-Street-trading blow up. Together they represent the entire money management industry.
A massive shift back to indexing would kill them all.
I'm open to other ideas.
Plame Nonsense
This Plame business is such nonsense. She hints she was in a sensitive area, yet used her position to get her husband a high profile public assignment. Then he goes public massively, attacking Lyndon. Anyone who knows anything about covet operations knows that her own actions brought about the risk of disclosure, since the press would have certainly investigated Wilson then. Then we find out that her "cover" was no secret anyway, that all sorts of press & others knew she worked for the CIA long before Novak wrote the article. Certainly any enemy intelligence knew she worked for the CIA. And we now know she was not a "covert" operative anyway. It's pretty obvious this was a political set-up by hubby and her to get attention and notoriety and hurt Lyndon.
I don't really care about Libby since I understand he helped Marc Rich get a pardon from Clinton. But this pompous talk by Plame & Wilson is so much crap.
I don't really care about Libby since I understand he helped Marc Rich get a pardon from Clinton. But this pompous talk by Plame & Wilson is so much crap.
The Chart
I just glanced at the S&P 500 daily chart again & noticed a pattern of lower highs and lower lows SINCE the big drop day. That's bad. It means there's been more real distribution despite the "relief" rallies. Be wary, imho, unless something changes. We could get hit hard again.
Outlook
We still are probably "no man's land" on the index charts, between the 50 dma and the 200 dma (btw, "dma" = day moving average - simple average). With a good CPI number this AM (viz., a decline in the year over year core CPI), maybe the approximate 38% retracement will be the extent of the correction.
I deployed some fresh cash in the Krypto Fund per prior post and my Alpha Fund has full allocations, but no margin. When I think we've made a base and an uptrend is imminent, I'll start to go on margin. And IIIFFF a new trend gets established, I'll go to 200% long in the Alpha Fund by buying dips.
Until those events occur, I'll wait. With a so-so or poor CPI number today, it might be a good time to take time off & do my taxes (arghhhhhhhhhhh).
PS: we got a blah number - neutral. the stock market will probably chop awhile, forming bases. Time to start preparing buy lists & watch for news.
I deployed some fresh cash in the Krypto Fund per prior post and my Alpha Fund has full allocations, but no margin. When I think we've made a base and an uptrend is imminent, I'll start to go on margin. And IIIFFF a new trend gets established, I'll go to 200% long in the Alpha Fund by buying dips.
Until those events occur, I'll wait. With a so-so or poor CPI number today, it might be a good time to take time off & do my taxes (arghhhhhhhhhhh).
PS: we got a blah number - neutral. the stock market will probably chop awhile, forming bases. Time to start preparing buy lists & watch for news.
Private Property in Red China
The new law "protecting" private property in Red China might be a significant development. Or it might not be. Time will tell. I understand that it still leaves legal ownership of land with the government. I'll have to read up on the lease rights that it conveys.
Fundamental philosophical change can take a generation and another generation to become solidly entrenched. [btw, a generation is about 20-25 years] The principal problem with completely relying on this "law" is that Red China is still a military dictatorship at its core. The Central Military Commission still has absolute power. Until a system of checks & balances develops, one must be wary.
But the trend is good, no doubt.
Fundamental philosophical change can take a generation and another generation to become solidly entrenched. [btw, a generation is about 20-25 years] The principal problem with completely relying on this "law" is that Red China is still a military dictatorship at its core. The Central Military Commission still has absolute power. Until a system of checks & balances develops, one must be wary.
But the trend is good, no doubt.
Thursday, March 15, 2007
Mad Magazine
I admit it - I subscribe to Mad Magazine at age 52. It's great fun. I get cheap laughs and some exposure to popular culture. Uh, it requires reading, so I suppose the circulation is dropping ;-)
It's a little different than when I read it at age 12 (or less). The magazine is in color now & has some ads (well-disguised and they fit the style well).
This month's cover had Alfred E. Newman picking his nose with two middle fingers and some guy named Dane Cook flipping the reader off with two middle fingers. That must be some TV show thing.
Anyway, they still have Spy vs. Spy and the Mad Look at ______. This month's was a Mad Look at Insects. One panel that really made me "lol" has a guy in a control room in a uniform seeing a fly buzz around. He watches it & gets ready to hit it, and then smacks it on the desk. The last panel shows an ICBM launching. roflmao.
See how idiotic & just funny it can be. Try it.
It's a little different than when I read it at age 12 (or less). The magazine is in color now & has some ads (well-disguised and they fit the style well).
This month's cover had Alfred E. Newman picking his nose with two middle fingers and some guy named Dane Cook flipping the reader off with two middle fingers. That must be some TV show thing.
Anyway, they still have Spy vs. Spy and the Mad Look at ______. This month's was a Mad Look at Insects. One panel that really made me "lol" has a guy in a control room in a uniform seeing a fly buzz around. He watches it & gets ready to hit it, and then smacks it on the desk. The last panel shows an ICBM launching. roflmao.
See how idiotic & just funny it can be. Try it.
Topped Off India
I topped off my India "Alpha" position with some IBN, IFN and IIF. So now I'm at my target 6.7% allocation.
Patience Grasshopper
This AM's PPI numbers provide no relief. The CPI number tomorrow is more important. Waiting patiently for news. The trend / "path of least resistance" is down without good news.
The New Inquisition
There's a very humorous cartoon posted that great blog site: http://motls.blogspot.com/ and click down about 4.5 screens. It show a scientist on the rack being tortured and recanting, screaming, "Okay. I believe mankind causes global warming" The robed Inquisitor says, "Very well ... give the heretic back his research funds."
That's the reality in climate science. If you challenge the deemed authority, you're de-funded even if your data is unquestionable. Few resist.
That's the reality in climate science. If you challenge the deemed authority, you're de-funded even if your data is unquestionable. Few resist.
Total Portfolio Structure
A few weeks ago I described how I run the "Krypto Fund", which is the name for my long-term investment portfolio where I keep the bulk of my investments. The Krypto Fund is completely indexed across several asset classes and is aggressively rebalanced. The amount I keep in it as a percentage of net investable assets varies with my inclination to work & opportunities. In my current state of semi-retirement, I keep 70-80% of net investable assets there. [Fwiw, when I was aggressively trading short-term, I kept less in the Krypto Fund as I was able to get 50-100% returns by working very, very hard at trading very aggressively with mucho margin and options.]
What about the other 20-30%? That includes all my "alpha" plays - the "Alpha Fund" - where I invest in stocks & sectors that I think will outperform. My time frame varies and can change, especially with significant news. I try to get long-term capital gains, but will sell if I think the news merits. For example, as I posted in mid-February, I sold many positions to cut back when the CPI news was unfavorable, even though that realized short-term gains. [Better a ST gain than lost profits]
The Alpha Fund is now 24%. I have about 6% in India stocks, about 12% in oil and oil service stocks, about 3.5% in mineral stocks, and assorted others such as AAPL, EDU, ORCL, CRXL etc. The Alpha Fund can use margin, btw. I had it 200% long until mid-February. Now it's about 120% long - my oil plays are using some margin as I keep finding good stocks there and don't want to sell until I can realize long-term gains in midsummer (I loaded up the big dips last summer).
I think by compartmentalizing investments this way one can control risk, yet "stay in the game" through the "Alpha Fund". I can keep position and sector size under control while having a stable core base of investments to let me stay "semi-retired". [btw, my commodity speculation funds are completely separate.]
What about the other 20-30%? That includes all my "alpha" plays - the "Alpha Fund" - where I invest in stocks & sectors that I think will outperform. My time frame varies and can change, especially with significant news. I try to get long-term capital gains, but will sell if I think the news merits. For example, as I posted in mid-February, I sold many positions to cut back when the CPI news was unfavorable, even though that realized short-term gains. [Better a ST gain than lost profits]
The Alpha Fund is now 24%. I have about 6% in India stocks, about 12% in oil and oil service stocks, about 3.5% in mineral stocks, and assorted others such as AAPL, EDU, ORCL, CRXL etc. The Alpha Fund can use margin, btw. I had it 200% long until mid-February. Now it's about 120% long - my oil plays are using some margin as I keep finding good stocks there and don't want to sell until I can realize long-term gains in midsummer (I loaded up the big dips last summer).
I think by compartmentalizing investments this way one can control risk, yet "stay in the game" through the "Alpha Fund". I can keep position and sector size under control while having a stable core base of investments to let me stay "semi-retired". [btw, my commodity speculation funds are completely separate.]
Longer View
OK, it's time to step back and wait for a trend to develop. I am mostly a month+ trader - the recent excitement got me involved in quickies again with the usual result, namely a waste of effort & small losses.
Yesterday both killed the prior IBD rally count due to the new low and then the rally to green made it a new "Day 1". We have inflation data today (PPI) & tomorrow (CPI). Those are very important numbers. We need a drop in core levels year over year for a sustained move up, imho.
Oil & product demand numbers yesterday were strong as usual: four week moving averages for demand was up about 5% year over year in most products and the total. No drop off at all.
Yesterday both killed the prior IBD rally count due to the new low and then the rally to green made it a new "Day 1". We have inflation data today (PPI) & tomorrow (CPI). Those are very important numbers. We need a drop in core levels year over year for a sustained move up, imho.
Oil & product demand numbers yesterday were strong as usual: four week moving averages for demand was up about 5% year over year in most products and the total. No drop off at all.
Wednesday, March 14, 2007
Too Much Money with Beefers
Well, I suppose I have to repeat that recent events again prove that too much money is run by beefers. They flood liquidity into markets & pull it out. QED. :-( ;-)
Bubblevision Babble
Bubblevision just put on an analyst regarding oil. A couple months ago when oil was trending down, he said that oil was broken & going to $30 or so. Hmmm. Sounds like a "guru" to me.
For a guru, past performance is irrelevant. Sheesh.
For a guru, past performance is irrelevant. Sheesh.
Ugh. Back to Waiting
I ws troubled by that trade when I went out for pizza & saw more homes for sale in town. So I closed it first thing this AM.
Also closed gold, silver, corn and other grain trades. Beefers are pretty long those & I fear more liquidation. I can always re-buy them.
I thought there was a twinge of fear showing as the Countrywide Finance CEO was interviewed on Bubblevision yesterday at the close. There must be a lot of doors slamming in the faces of people trying to re-finance.
PS: That's a mistake I still make too often - trying to catch a swing to early. Still learning.
PPS: I also saw an article saying that two homes on my street were in foreclosure - I was really surprised by that as this is a fairly high value, stable area.
PPPS: by the way, in boxing the instructions are always, "protect yourself at all times"
PPPPS: I wish I had a trader parrot to tell me to not try those little countertrend chip shots. I always lose money on those. :-(
PPPPPS: these "PS"'s are added after the original post as such for clarity. For example, I put this one in about three hours later.
Also closed gold, silver, corn and other grain trades. Beefers are pretty long those & I fear more liquidation. I can always re-buy them.
I thought there was a twinge of fear showing as the Countrywide Finance CEO was interviewed on Bubblevision yesterday at the close. There must be a lot of doors slamming in the faces of people trying to re-finance.
PS: That's a mistake I still make too often - trying to catch a swing to early. Still learning.
PPS: I also saw an article saying that two homes on my street were in foreclosure - I was really surprised by that as this is a fairly high value, stable area.
PPPS: by the way, in boxing the instructions are always, "protect yourself at all times"
PPPPS: I wish I had a trader parrot to tell me to not try those little countertrend chip shots. I always lose money on those. :-(
PPPPPS: these "PS"'s are added after the original post as such for clarity. For example, I put this one in about three hours later.
Tuesday, March 13, 2007
Bought some S&P
I bought some S&P futures around 3:40 PM EST - I didn't see a lot of downward pressure around 3:20-3:40 when market on close orders are disclosed. I am thinking short term selling pressure is drying up. Pray for me. ;-)
By the way, this will negate the IBD "Day 1" setup. We start over.
By the way, this will negate the IBD "Day 1" setup. We start over.
More Liquidation / Margin Calls ?
There were some odd simultaneous selling events today. Stocks, corn and soybeans got hit around noon. Then around 2 PM EST stocks, gold & oil got hit.
I wonder if some big beefers got margin calls & liquidated? Bloomberg said some stocks were being hit with big blocks. Some were not larege weights in the S&P, so probably not program trades or asset allocations. One was CVS. So I suspect beefer liquidations.
Still waiting.
I wonder if some big beefers got margin calls & liquidated? Bloomberg said some stocks were being hit with big blocks. Some were not larege weights in the S&P, so probably not program trades or asset allocations. One was CVS. So I suspect beefer liquidations.
Still waiting.
How Subprime Problems Can Spread
I was thinking more about how subprime problems can spread.
For background, the Street has been packaging many types of debt into securities. They deposit the debt (loans, bonds, mortgages, etc.) into trusts. The trust issues securities (e. g. a "collateralized loan obligation" = "CLO", etc.) in many layers of priorities & payment ranking. Most of the trust securities are highly rated based on statistical default analysis. But there are always a few layers of low rated securities and residual or equity in the trust. Who bought those? Beefers greedy for high returns, mostly. They are probably getting margin calls from their Street "buddies" who care only about their annual bonus.
So what can happen? Suppose the beefers can't / won't buy these anymore. The CBO-CDO-CLO etc. might (or has) frozen. This happened to the entire corporate bond market in 2002 after Worldcom and Enron. If the exit strategy for bonds & loans via CLO/CBO/CDO market is gone, then the debt itself might not be created. Hence a source of loss of "liquidity" for the world markets.
I think watching high yield bond spreads might give us a clue if this gets serious.
For background, the Street has been packaging many types of debt into securities. They deposit the debt (loans, bonds, mortgages, etc.) into trusts. The trust issues securities (e. g. a "collateralized loan obligation" = "CLO", etc.) in many layers of priorities & payment ranking. Most of the trust securities are highly rated based on statistical default analysis. But there are always a few layers of low rated securities and residual or equity in the trust. Who bought those? Beefers greedy for high returns, mostly. They are probably getting margin calls from their Street "buddies" who care only about their annual bonus.
So what can happen? Suppose the beefers can't / won't buy these anymore. The CBO-CDO-CLO etc. might (or has) frozen. This happened to the entire corporate bond market in 2002 after Worldcom and Enron. If the exit strategy for bonds & loans via CLO/CBO/CDO market is gone, then the debt itself might not be created. Hence a source of loss of "liquidity" for the world markets.
I think watching high yield bond spreads might give us a clue if this gets serious.
What to Do?
Fundie-wise: We seem to be in no man's land, needing more data on inflation & growth to have a vision on which path the economy will proceed. The perma-bears are screeching about subprime loan defaults. I wonder if they are not too shrill? It's pretty clear that industry was rife with speculation & fraud. Some departments of big Street firms are going to be hurt & some beefers are going to the slaughterhouse. But I don't see how those woes can infect the normal home mortgage underwriting, though. Without a recession soon, stocks are very cheap on simple valuation metrics. Time will tell. No need to be a hero. Waiting.
Tech-wise: S&P cash 1410 seems to be resistance on many levels. Two closes over that level probably signals an end to the correction. We are waiting for a follow-thru day for the IBD system this week. remember, Friday is a triple-witching day. No need to be a hero on tech grounds, either. Waiting.
Tech-wise: S&P cash 1410 seems to be resistance on many levels. Two closes over that level probably signals an end to the correction. We are waiting for a follow-thru day for the IBD system this week. remember, Friday is a triple-witching day. No need to be a hero on tech grounds, either. Waiting.
Monday, March 12, 2007
More Barfaroo, deja vu
Sheesh, I must have a stomach disorder. Watching Bubblevision babble about their idiotic stock trading contest - now with celebrities. Arghhhhhhhhhhhhhhh.
Trading & investing is serious business, not a game show. This stuff is sickening. I wonder how many individuals they bury with this garbage.
Trading & investing is serious business, not a game show. This stuff is sickening. I wonder how many individuals they bury with this garbage.
Global Warming
Check out the new documentary about global warming: "The Great Global Warming Swindle" to appear on the BBC channel 4 and available on Google video. [Go to www.google.com, click "video" and search for "The Great Global Warming Swindle" - it's the first entry that shows up. The movie has lots of facts.
Festival Express
Sunday evening we watched the movie, "Festival Express" which is about series of rock concerts moving through Canada in the summer of 1970 via a train. The movie itself was made in 2003, but almost all the footage & video is from the original train and festivals. Wowza, did that bring back memories! The Grateful Dead, Janis Joplin, and The Band were the main groups. The train was a continuous party & music festival. They sure had fun. Here's a great line [from memory]: "Drinking was a new experience for us". Being on a train, they couldn't use their usual, uh, chemical stimulants, so resorted to liquor. The train had an unscheduled stop at a liquor store in Saskatoon when the train ran out of liquor. That reminds me of college rugby bus trips for out of town games.
We had a good time watching and I recommend the movie, If you lived through the period, you'll have enjoyable recollections. If not, you'll see a slice of the craziness of the period.
We had a good time watching and I recommend the movie, If you lived through the period, you'll have enjoyable recollections. If not, you'll see a slice of the craziness of the period.
Sunday, March 11, 2007
Rebalance
If you follow David Swensen's advice or mine [ hehe ;-) ], you'll probably need to rebalance your long term portfolio now. Actually Monday AM was the correct time, but I mostly do this on Friday or Saturday. The sharp pullback in stocks worldwide created a re-balancing event according to my spreadsheet for the Krypto Fund. I was adding money to it this week, so I simply bought the underweighted asset classes in the necessary amounts: US stocks, all world stock groups and the REIT index fund. I did this on Friday around midday via the applicable Vanguard index ETFs in my Krypto Fund brokerage account.
In my opinion you are better doing this mechanically and not to use your short term trading outlook as a guide. I make that mistake once in a while - this week for example. I could have done better doing this on Wednesday when my funds cleared, but I figured the market would pull back more. It didn't, so I realized a sliver of opportunity cost. Ms. Market is a stern school mistress.
In my opinion you are better doing this mechanically and not to use your short term trading outlook as a guide. I make that mistake once in a while - this week for example. I could have done better doing this on Wednesday when my funds cleared, but I figured the market would pull back more. It didn't, so I realized a sliver of opportunity cost. Ms. Market is a stern school mistress.
Friday, March 9, 2007
Forgotten Inflation
All the babblers doing the high fives on the moderate jobs number this AM seem to have forgotten inflation. The S&P futures popped 8-9 points up. Hmmm. From my bunker, the big problem is a possible re-acceleration of inflation. Last month's CPI number set off the correction in my view, as it possibly flagged a true inflection point: a change in trend from decreasing inflation to increasing inflation. So I'm going to sit & wait.
PS: I remembered the productivity number stunk, too. So that's not going to reduce inflation pressures.
PS: I remembered the productivity number stunk, too. So that's not going to reduce inflation pressures.
More Barfaroo on Bubblevision
I just grabbed the barf bag again. Bubblevision endlessly talks about the "carry trade" as if the world evolves around the Yen and the "carry trade". What garbage. Sure, we get big swings in some markets & commodities as beefers roll into & out of leveraged plays. That's a problem with having too much money run by beefers. But I see that mainly as swings caused by real events. The leveraged bets of the beefers can make the swings go to silly extremes - those are opportunities if you have correctly interpreted the real events igniting the swings. Carry trade babble is just worthless.
Market Statistics Misleading?
An article in today's WSJ provides more data on how massive beefer trading in ETFs is distorting market statistics and volume indicators on many small stocks. Fund flows caused by trading in three large small cap ETFs accounts for 20-40% of the trading in many small cap stocks. Regular small cap index funds have no such effect as fund flow variations are much smaller since they are not beefer trading vehicles.
So what does this mean? Obviously volume indicators are distorted, but advance-decline ratios are also distorted. I suspect even new high/new low indicators and many other market statistics are distorted. The statistics were designed to capture information from many independent investor/trader decisions using the power of statistical aggregation. But if the data are NOT due to independent decisions, but are instead driven by bulk flows of money into or out of a few ETFs, the statistics lose their value.
So what does this mean? Obviously volume indicators are distorted, but advance-decline ratios are also distorted. I suspect even new high/new low indicators and many other market statistics are distorted. The statistics were designed to capture information from many independent investor/trader decisions using the power of statistical aggregation. But if the data are NOT due to independent decisions, but are instead driven by bulk flows of money into or out of a few ETFs, the statistics lose their value.
Thursday, March 8, 2007
Market Tactics for Next Few Days
The late selloff yesterday was a sign of more mutual fund redemptions for me. It hit around the time "market-on-close" orders must be disclosed. My thinking barring news that changed my outlook is to sell breaks of S&P 1405 cash (that's the 38% retracement of the down move) and / or buy a retest of the 1430-1435 range. These will be short term trades with tight mental stops.
By the way, I was a little sloppy on my calculation of the original 38% retracement level of the bull move from 1224 to 1462. I was eyeballing the high. A more precise retracement level was around 1372, hence the spike down Monday at the close in fact did hit that level and we rebounded strongly there. I would never have bought that close, though. Memories of October 1987 prevent such boldness.
By the way, I was a little sloppy on my calculation of the original 38% retracement level of the bull move from 1224 to 1462. I was eyeballing the high. A more precise retracement level was around 1372, hence the spike down Monday at the close in fact did hit that level and we rebounded strongly there. I would never have bought that close, though. Memories of October 1987 prevent such boldness.
More Ivory Tower
Here's a quote of Alan Greenspan from a good site (see www.globaltechstocks.com and subscribe) =>
"Innovation has brought about a multitude of new products, such as sub-prime loans and niche credit programs for immigrants. . . . With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. . . Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in sub-prime mortgage lending . . . fostering constructive innovation that is both responsive to market demand and beneficial to consumers." Alan Greenspan, April 8th, 2005
These clowns have no concept of the practical world. They sat on their butts while the financial industry created products to loot money from financially unsophisticated people who now can lose their homes & savings. All DC is culpable as problem was discussed widely and they did nothing.
"Innovation has brought about a multitude of new products, such as sub-prime loans and niche credit programs for immigrants. . . . With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. . . Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in sub-prime mortgage lending . . . fostering constructive innovation that is both responsive to market demand and beneficial to consumers." Alan Greenspan, April 8th, 2005
These clowns have no concept of the practical world. They sat on their butts while the financial industry created products to loot money from financially unsophisticated people who now can lose their homes & savings. All DC is culpable as problem was discussed widely and they did nothing.
Wednesday, March 7, 2007
Rally?
Tuesday was pretty unimpressive to me as there was no news to indicate the causes of this correction have been obviated. No favorable inflation news occurred - in fact the high Q4 unit labor cost number was nominally worrisome although it's probably overstated by year end bonuses. The productivity number was low, imho. So Fed rate cuts are off the table without a big downturn, which would be bad for stocks. And further bad news on inflation might even bring the Fed back into play. This is a risky point in market "phase space". "Phase space" in classical physics is a multidimensional space comprised of position & momentum. For the market, it's the concept of the markets level and its trend. The level of the market is not at any logical stopping point for the correction [see recent post] and the trend seems down. News can change this but we have none. Monday could just be a "4" wave of a 5 wave down move [cf. Elliott Wave concepts] which would be appropriate for a major correction. Shorting this bounce for a short term trade is very tempting.
Still, the higher close means this is an IBD "Day 1" - see http://www.investors.com/ & subscribe. I'll probably do nothing & wait for news and a new intermediate term trend to develop. On more bad news I'll try a short in futures if I am nimble and at my "turret" if it hits.
PS: changed my mind & started a S&P short futures a little before 6 AM EST. The 5 minute chart looked tempting. I won't take much of a loss as this is a quick hitter.
PPS: oh well. I covered that for a small loss when the futures held green a few minutes after 10:30 AM EST. I've used that sign as a "tell" for awhile & am following the sign.
Still, the higher close means this is an IBD "Day 1" - see http://www.investors.com/ & subscribe. I'll probably do nothing & wait for news and a new intermediate term trend to develop. On more bad news I'll try a short in futures if I am nimble and at my "turret" if it hits.
PS: changed my mind & started a S&P short futures a little before 6 AM EST. The 5 minute chart looked tempting. I won't take much of a loss as this is a quick hitter.
PPS: oh well. I covered that for a small loss when the futures held green a few minutes after 10:30 AM EST. I've used that sign as a "tell" for awhile & am following the sign.
Monday, March 5, 2007
Grabbing the Barf Bag
I'm grabbing the barf bag as I listen to more gurus talk about the "market repricing risk". What nonsense! Whatever happened to fear & greed? Bubblevision blabbermouths talk about the god-like traders reevaluating a concept of "risk" - barfaroo. What we are seeing is a bunch of beefers panicking and the Street giving them margin calls to protect their own butts.
When they put on a guru who was long and sold at the top for a real reason, I'll listen. Otherwise all this technical talk & VIX garbage, etc. is just babble for the boobs.
PS: Bubblevision just put on a guru who "called" the decline [they're calling it "collapse" now]. Of course, he missed the entire bull move & is just a perma-bear. Sheesh.
PPS: On the other hand, unless the bullish gurus sold some before the drop, where are they going to get the $$$ to buy?
When they put on a guru who was long and sold at the top for a real reason, I'll listen. Otherwise all this technical talk & VIX garbage, etc. is just babble for the boobs.
PS: Bubblevision just put on a guru who "called" the decline [they're calling it "collapse" now]. Of course, he missed the entire bull move & is just a perma-bear. Sheesh.
PPS: On the other hand, unless the bullish gurus sold some before the drop, where are they going to get the $$$ to buy?
Where to Buy?
When being patient waiting for a turn, it helps me to figure out logical buy points. From the cash S&P 500 index, I see the recent bull move was from 1224 to about 1460, a 236 point move. So I computed the Fibonacci retracement levels. The 38% retracement is around 1370, which is the low of Thursday. We'll probably open below that today - any support there intraday would be interesting as would be a close today at or over that level.
The 50% retracement level is around 1342, which [coincidentally??] is around the 200 DMA. That is a logical buy point, too.
The 62% retracement level is down at 1314, which is [coincidentally??] right at the magical 10% correction the seers on Bubblevision like to talk about.
Those are the levels I'm watching. The "real" news flow might help us select which would be a good spot. I expect to average into stocks at those levels unless something changes.
PS: [posted at about 10AM EST] I bought the last slug of India stocks at about 9:35 AM to get my India long term investments up to 6.7% of the value of the Krypto Fund (India specific investment is NOT included in the Krypto Fund amount).
PPS: the times the blog site gives for my posts seem to be PST - I suppose because Google is in California
The 50% retracement level is around 1342, which [coincidentally??] is around the 200 DMA. That is a logical buy point, too.
The 62% retracement level is down at 1314, which is [coincidentally??] right at the magical 10% correction the seers on Bubblevision like to talk about.
Those are the levels I'm watching. The "real" news flow might help us select which would be a good spot. I expect to average into stocks at those levels unless something changes.
PS: [posted at about 10AM EST] I bought the last slug of India stocks at about 9:35 AM to get my India long term investments up to 6.7% of the value of the Krypto Fund (India specific investment is NOT included in the Krypto Fund amount).
PPS: the times the blog site gives for my posts seem to be PST - I suppose because Google is in California
Saturday, March 3, 2007
Market Update
I bought some more oil stocks early afternoon Friday. I think the selloff in those is stupid as the data show very strong demand for gasoline. I added to positions in CVX, XOM, DVN, MRO, and COP. I added a little CHK, too, as the natural gas excess supply has been whittled down nicely and prospects of a hot summer are good.
I am planning to start to buy US stocks soon to replace some of those sold recently. I think this is a correction in a bull market, not a change to a bear market. Of course, more bad news could change that.
I am planning to start to buy US stocks soon to replace some of those sold recently. I think this is a correction in a bull market, not a change to a bear market. Of course, more bad news could change that.
Who Believes Govt. Data Overstates Inflation?
Wowza, talk about the ivory tower.
Ben Bernanke, quoted in a Reuters story as seem on Yahoo News today:
"Bernanke also told his audience the Fed agrees with studies that say government data overstates inflation data. 'I still think that there's still some overstatement, and Federal Reserve estimates are, depending on the indicator, somewhere between half a percent and a percentage point of overstatement of the inflation rate,' he said in response to questions."
I suspect that the overwhelming majority of people OUTSIDE of Washington DC and university faculties would say that government data UNDERSTATES inflation substantially. I agree with that. I think the government data uses so-called "quality" adjustments to cause large understatements.
I suppose IF I was paranoid or believed in conspiracies I would think that the government does this to rob people of the benefits of their Social Security and to under-index tax bracket intentionally so the government can collect more tax money from its inflation. Hmmmm.
Ben Bernanke, quoted in a Reuters story as seem on Yahoo News today:
"Bernanke also told his audience the Fed agrees with studies that say government data overstates inflation data. 'I still think that there's still some overstatement, and Federal Reserve estimates are, depending on the indicator, somewhere between half a percent and a percentage point of overstatement of the inflation rate,' he said in response to questions."
I suspect that the overwhelming majority of people OUTSIDE of Washington DC and university faculties would say that government data UNDERSTATES inflation substantially. I agree with that. I think the government data uses so-called "quality" adjustments to cause large understatements.
I suppose IF I was paranoid or believed in conspiracies I would think that the government does this to rob people of the benefits of their Social Security and to under-index tax bracket intentionally so the government can collect more tax money from its inflation. Hmmmm.
Friday, March 2, 2007
More Gold
Added another 1/3 position in gold futures. I'm averaging in for a month trade.
PS: just added some more silver, too. Still not a full position.
PPS: as of 11:44 AM EST, have full positions in gold & silver for this month trade
PS: just added some more silver, too. Still not a full position.
PPS: as of 11:44 AM EST, have full positions in gold & silver for this month trade
More Madness
Sheesh. I just heard a guy on Bubblevision talking about the "meaning" of the "VIX" and options on the VIX. Those are a derivative of a derivative of a derivative of a derivative - a fourth generation of a derivative. He was seriously saying how the "market" in those meant something about the size of the correction for the future, sort of like the "market is always right" crowd. That's just ridiculous. A bunch of beefers swinging money around means nothing except in their own crowd & P&L, like a ping-pong game among themselves.
Thursday, March 1, 2007
The Market is Often Wrong
I hear the comment often that "the market is never wrong". That statement reeks of implying a godlike status to "the market", like the early gods of nature such as the sun, moon, wind, and the forest gods. Whilst properly defined in time extent and as groups, a static market level of prices of liquidly traded securities is never wrong in my humble opinion, when examined in detail in smaller time slices and for individual securities and for dynamical changes, I believe it's clear that "the market" is often wrong.
Obviously the market miss-prices securities when material news is not available to the public. And the market clearly makes mistakes in interpreting economic trends and the thinking of public officials such as the Fed. And daily errors are obvious in prices of momentum stocks, some IPOs, etc. Sector valuation errors occur all the time. Moreover, the existence of profitable stock trading ipso facto proves the "market" is often wrong in small time slices.
I make successful intermediate term trades by discovering errors in "the market". Market prices at any point in time are determined by motivated sellers & buyers. When groups of these collectively make mistakes, they cause market prices to be wrong "at that time". Beefers make errors all the time and drive "market" prices to wrong levels. I make money finding their errors. Uh oh, maybe I should like them. :-(( & ;-)
Obviously the market miss-prices securities when material news is not available to the public. And the market clearly makes mistakes in interpreting economic trends and the thinking of public officials such as the Fed. And daily errors are obvious in prices of momentum stocks, some IPOs, etc. Sector valuation errors occur all the time. Moreover, the existence of profitable stock trading ipso facto proves the "market" is often wrong in small time slices.
I make successful intermediate term trades by discovering errors in "the market". Market prices at any point in time are determined by motivated sellers & buyers. When groups of these collectively make mistakes, they cause market prices to be wrong "at that time". Beefers make errors all the time and drive "market" prices to wrong levels. I make money finding their errors. Uh oh, maybe I should like them. :-(( & ;-)
Bad News for Beefer Bubble
I read that business school students are flocking to presentations by hedge funds, and that some hedge funds are looking there for some new hires. That reminded me of the rage in 1999 or so of B-school students going to high tech start-ups instead of traditional employers. As that was a sign of peaking then in the high tech bubble that soon blew up, I wondered as I read the article whether this interest by B-school students is another sign of a top in hedge funds - namely, their number, size, performance and ability to attract money. I'll write more on this subject later, but you can guess my answer - yes.
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