It's window dressing time - actually, that's been happening all week. The beefers run up selected stocks to grab a bit of fee cash or to make their portfolios look good. And new money comes in next week, so they pre-buy the stocks they like.
The unemployment claims number yesterday was down - under 300,000 - that's good news. No economic freefall is happening like the bears were predicting.
Gold is up this morning. Stocks have been consolidating since the Fed rate cut, forming bullish continuation patterns.
It's a bull market. Buy dips. Hold until something changes.
PS: Core PCE year over year inflation is 1.8%. Headline PCE year over year inflation is 1.8%. Inflation is dead and buried. "staggerlee" is walking on one leg, hehe ;-)
PPS: Chicago PMI firm at 54.2 for September. No collapse. Perma-bears were wrong. Fed did its job going neutral with core inflation in the "comfort zone". Inflation at 1.75% plus 2-3% real return = neutral range is 3.75 to 4.75% overnight funds.
Friday, September 28, 2007
Thursday, September 27, 2007
Long Term Investing
The Yale Endowment returned 28% for the fiscal year ended June 30. That's excellent and is the #1 endowment return. The manager, David Swenson, wrote a book about how the individual can invest similar to his methods - as much as possible. The book is "Investment Success" and I recommend it. My Krypto Fund has actually been managed similar to his suggested methods for about 15 years. It's done quite well and the massive diversification really paid off in the Nasdaq bubble and burst periods. So for long term pension money and most other long term money, I recommend following the Swenson methods.
Short term trading can provide much higher returns - 100% or more - BUT that's a really huge amount of work and stress and there are long periods when nothing works. I used to do that with much success, but now don't: too much stress and work and I don't need those returns anymore.
BUT you can make really good returns on a portion of your investment money by long term investing in selected strong groups and strong stocks. That's my Alpha Fund. I limit the amount I risk there to no more than 20% of my market investment assets. I actually limit it more now as the absolute amounts have gotten a bit scary for me.
The beefers sometimes knock a stock or group down as they rotate or get into a shorting binge. That's when a good entry, dip buy can work. For example, CSCO. That stock has been putting up good numbers and is in the fast growing Internet space - it's a leader. The stock has a fine uptrend. CSCO reported great earnings, the stock popped up and the beefers immediately started selling & shorting it. The beefers hit it with their shorts/rotation and "world is ending" mantra. So one could have bought it under 30 AFTER the great earnings were known. I and some commenters did that. Since then, CSCO has done fine and just popped to a new high out of a fine, ascending triangle base.
I'm just using CSCO as an example how the dip buys of good stocks in a bull market can print fine numbers for an actively managed part of your investment mix.
PS: the reason I used the beefers as a whipping boy for creating good entries is because ... often there really is NO real reason for a stock's pullback. The beefers really do cause these moves with their antics. Just sit back and wait and be patient to get a good entry you can hold for a year or so.
Short term trading can provide much higher returns - 100% or more - BUT that's a really huge amount of work and stress and there are long periods when nothing works. I used to do that with much success, but now don't: too much stress and work and I don't need those returns anymore.
BUT you can make really good returns on a portion of your investment money by long term investing in selected strong groups and strong stocks. That's my Alpha Fund. I limit the amount I risk there to no more than 20% of my market investment assets. I actually limit it more now as the absolute amounts have gotten a bit scary for me.
The beefers sometimes knock a stock or group down as they rotate or get into a shorting binge. That's when a good entry, dip buy can work. For example, CSCO. That stock has been putting up good numbers and is in the fast growing Internet space - it's a leader. The stock has a fine uptrend. CSCO reported great earnings, the stock popped up and the beefers immediately started selling & shorting it. The beefers hit it with their shorts/rotation and "world is ending" mantra. So one could have bought it under 30 AFTER the great earnings were known. I and some commenters did that. Since then, CSCO has done fine and just popped to a new high out of a fine, ascending triangle base.
I'm just using CSCO as an example how the dip buys of good stocks in a bull market can print fine numbers for an actively managed part of your investment mix.
PS: the reason I used the beefers as a whipping boy for creating good entries is because ... often there really is NO real reason for a stock's pullback. The beefers really do cause these moves with their antics. Just sit back and wait and be patient to get a good entry you can hold for a year or so.
Wednesday, September 26, 2007
The Beginning of the End
I think the economy has now moved beyond the "end of the beginning" of the Rich Man's Panic of 2007 to the "Beginning of the End."
The Fed did what it needed to do, to redress its mistake in not stopping at 5% in May 2006 and not cutting earlier this summer.
The vultures are raising big money to buy foreclosed homes at bargains. This will re-price housing in many speculative neighborhoods in California, Nevada, Florida and other places. That's how the commercial real estate recession of the early 1990s was cleared. Lenders should renegotiate loans to reduce their losses. Will they be that smart? Maybe, there is talk about that.
Per a recent WSJ, the peak in home mortgage ARM resets is on us. They fall in coming months.
Talk on Babblevision about "Asian decoupling" from the US is correct. I've need writing about the new "Asian Co-Prosperity Zone" for many months - years actually. It's becoming more and more evident. Self-reinforcing consumer and business demand can drive that zone much, much higher and the world economy, too. Exports to the US sparked it, no doubt. But the follow-thru is now intra-zone trade.
The GM strike is over. Futures are up. The markets were up on bad retail news yesterday. The Charts look fine - the Nazz 100 printed a second close over the old high, confirming the move.
It's a bull market. Buy dips.
The Fed did what it needed to do, to redress its mistake in not stopping at 5% in May 2006 and not cutting earlier this summer.
The vultures are raising big money to buy foreclosed homes at bargains. This will re-price housing in many speculative neighborhoods in California, Nevada, Florida and other places. That's how the commercial real estate recession of the early 1990s was cleared. Lenders should renegotiate loans to reduce their losses. Will they be that smart? Maybe, there is talk about that.
Per a recent WSJ, the peak in home mortgage ARM resets is on us. They fall in coming months.
Talk on Babblevision about "Asian decoupling" from the US is correct. I've need writing about the new "Asian Co-Prosperity Zone" for many months - years actually. It's becoming more and more evident. Self-reinforcing consumer and business demand can drive that zone much, much higher and the world economy, too. Exports to the US sparked it, no doubt. But the follow-thru is now intra-zone trade.
The GM strike is over. Futures are up. The markets were up on bad retail news yesterday. The Charts look fine - the Nazz 100 printed a second close over the old high, confirming the move.
It's a bull market. Buy dips.
Great Leaders
I was thinking about who were the truly great leaders of the United States over its history and came up with a simple list and concise reasons why I think these people deserve to be on it.
George Washington: without his timely leadership, the US probably wouldn't exist. He also stepped aside as military general and President, helping ensure civilian democracy would continue and no aristocracy would develop.
Thomas Jefferson: he provided intellectual leadership in bringing the early rural "common man" into the government and had the vision to make the crucial Louisiana purchase.
Andrew Jackson: he brought the western common man into the government and defeated the Eastern money interests in their efforts to dominate the nation. He also stopped early Southern secession-like efforts.
Abraham Lincoln: he saved the nation in its Civil War and led the abolition of slavery and the defeat of the expansionist slave states.
Ulysses Grant: his military leadership won the Civil War and his later leadership as Commanding General and later President helped maintain the victory by defeating southern reactionaries. He crushed the KKK and helped newly freed blacks gain effective freedom and voting rights. He also led the restoration of a gold-backed dollar which provided a sound financial base for the huge industrial expansion of the last half of the 19th century. [I provide more detail for Grant since his inclusion here is probably quite controversial.]
Theodore Roosevelt: he brought a "square deal" to the common man in the newly industrialized nation, leading efforts to prevent trusts from controlling the national economy. He also led the US into the world diplomacy and prevented nations like the Kaiser's Germany from reestablishing colonies in South America.
Franklin Roosevelt: he provided leadership for the people during the Great Depression, thus preventing fascist / communist movements from taking hold in the US. He also led early, prewar expansion of the US Navy and US air force that were cornerstones for the US military power in the entire later part of the century. [Yes, he did mess up much, too, and missed many opportunities, but he did enough to be "great".]
Ronald Reagan: he reversed the tide of creeping socialism in the US by promoting economic freedom and tax reform and reduction; his military expansion and firm leadership stopped the communist expansion that had begun again. This led eventually to the collapse of communism in the Soviet Union and the freedom for millions of people in Eastern and Central Europe.
PS: Why isn't James Polk included for the final continental southwest expansion? Because that was going to happen from the inevitable flow of the people and economy. Texas had already broken off from the corrupt Mexican military dictatorship and the rest would have happened no matter what Polk did. Jefferson's Louisiana purchase set the western expansion of the nation in motion.
George Washington: without his timely leadership, the US probably wouldn't exist. He also stepped aside as military general and President, helping ensure civilian democracy would continue and no aristocracy would develop.
Thomas Jefferson: he provided intellectual leadership in bringing the early rural "common man" into the government and had the vision to make the crucial Louisiana purchase.
Andrew Jackson: he brought the western common man into the government and defeated the Eastern money interests in their efforts to dominate the nation. He also stopped early Southern secession-like efforts.
Abraham Lincoln: he saved the nation in its Civil War and led the abolition of slavery and the defeat of the expansionist slave states.
Ulysses Grant: his military leadership won the Civil War and his later leadership as Commanding General and later President helped maintain the victory by defeating southern reactionaries. He crushed the KKK and helped newly freed blacks gain effective freedom and voting rights. He also led the restoration of a gold-backed dollar which provided a sound financial base for the huge industrial expansion of the last half of the 19th century. [I provide more detail for Grant since his inclusion here is probably quite controversial.]
Theodore Roosevelt: he brought a "square deal" to the common man in the newly industrialized nation, leading efforts to prevent trusts from controlling the national economy. He also led the US into the world diplomacy and prevented nations like the Kaiser's Germany from reestablishing colonies in South America.
Franklin Roosevelt: he provided leadership for the people during the Great Depression, thus preventing fascist / communist movements from taking hold in the US. He also led early, prewar expansion of the US Navy and US air force that were cornerstones for the US military power in the entire later part of the century. [Yes, he did mess up much, too, and missed many opportunities, but he did enough to be "great".]
Ronald Reagan: he reversed the tide of creeping socialism in the US by promoting economic freedom and tax reform and reduction; his military expansion and firm leadership stopped the communist expansion that had begun again. This led eventually to the collapse of communism in the Soviet Union and the freedom for millions of people in Eastern and Central Europe.
PS: Why isn't James Polk included for the final continental southwest expansion? Because that was going to happen from the inevitable flow of the people and economy. Texas had already broken off from the corrupt Mexican military dictatorship and the rest would have happened no matter what Polk did. Jefferson's Louisiana purchase set the western expansion of the nation in motion.
Tuesday, September 25, 2007
More of the Same
The charts look OK. Futures are lower this AM due to some weak sales data from Target & Lowe's. The weather excuse has quite a bit of "reality", though since it really has been warm & dry, hurting sales of winter clothing and lawn+garden supplies.
Beside, what do you expect in a mid-cycle slowdown? Booming sales ?? This is all expected. The last bits of inflation are being ground out, setting up a solid base to the next big move.
GOOG put in a second day over the old high, confirming the move. The Nazz 100 needs another day over its old high.
Often the market puts in major bottoms in October. I note, however, that frontrunning seems to move old seasonal plays forward a bit every year. The obvious example is the old January rally of the 1980s. That move has been drawn forward to December and then November. So waiting for a "clear" signal can be a loser.
I'm being patient. I have plenty of buying power if the beefers decide to push stocks lower.
It's a bull market. Buy dips.
PS: Thanks to mfl59, a commenter here, for suggesting to look at adding to RTP in the pullback to its 200 DMA in August. I added a good bit and that stock has moved up 100 pts. since, a 40% move in about six weeks. One can make great gains with dip buys in strong stocks.
PPS: I think I also need to thank frosty and someone else [mfl59?] for pointing out CSCO under 30 in August. Very good add. Thanks.
Beside, what do you expect in a mid-cycle slowdown? Booming sales ?? This is all expected. The last bits of inflation are being ground out, setting up a solid base to the next big move.
GOOG put in a second day over the old high, confirming the move. The Nazz 100 needs another day over its old high.
Often the market puts in major bottoms in October. I note, however, that frontrunning seems to move old seasonal plays forward a bit every year. The obvious example is the old January rally of the 1980s. That move has been drawn forward to December and then November. So waiting for a "clear" signal can be a loser.
I'm being patient. I have plenty of buying power if the beefers decide to push stocks lower.
It's a bull market. Buy dips.
PS: Thanks to mfl59, a commenter here, for suggesting to look at adding to RTP in the pullback to its 200 DMA in August. I added a good bit and that stock has moved up 100 pts. since, a 40% move in about six weeks. One can make great gains with dip buys in strong stocks.
PPS: I think I also need to thank frosty and someone else [mfl59?] for pointing out CSCO under 30 in August. Very good add. Thanks.
Monday, September 24, 2007
The Other "Overbuilt" Sector
The "business cycle" occurs mostly due to mistakes by people in overinvesting sectors - such as overbuilding plants, facilities, or even inventory. It's not a foregone event caused by some "god of business" sending a few bolts down to shake things up. People get group delusions about profits in a few sectors and ignore the actions of themselves creating correcting feedback. Eventually, due to time lagged responses, the sector finds itself in serious problems from overcapacity and drastic cuts are made, creating a "cycle" downturn.
So for this "cycle", one obvious overbuilt sector was residential housing in many regional markets. What other sectors are "overbuilt"?
First, the housing related sectors such as home mortgage lending and home mortgage brokerage and banking clearly had grossly excess capacity for a stable environment.
Second, I say the hedge fund industry had grossly excess capacity. Rich people greedy for "more" flocked like lemmings to the hedge funds. The industry provided a siren's song to entice them so the fund manager's could get a piece of those fat fees. Stories of trading funds with great profits, or "stable", "absolute" returns were the pitch by the flim-flam men.
So huge sums were invested in beefer trading funds, quant funds, and all sorts of hedge funds that invested in slices of mortgage and debt securities [CDO/CLO/CBOs]. Like fools, they leveraged those illiquid securities, "trusting" the big Street firms that "the markets are liquid". But that "liquidity" was from ... other hedge funds.
Like any "greater fool theory" asset bubble, eventually there aren't any more buyers. Or something occurs to make some question the value of the assets. That was the connection to the subprime loan markets. That caused all complex securities to be questioned. Now most are good paper. But in an "overbuilt" market, that didn't matter. The unwinding was vicious.
The Street firms provided no liquidity and the piranhas at GS and probably other firms shorted paper they had readily sold to their hedge fund clients. And they probably gave them margin calls, too. hence the asset-backed securities market collapse.
Too bad. That paper is "mostly" very high quality paper, but in a panic, rationality takes quite awhile to return.
A flow of funds pulled from trading hedge funds and pyramid leveraged debt funds into truly productive investments could really help the stock market get to much higher levels that are justified from corporate earnings.
PS: use of words like "cycle" are metaphors for events and changes in human society. A fine book I read in the 1970s and am currently re-reading, "Social Change and History", by Robert Nisbet, carefully elucidates the use of biological metaphors, such as "growth" and "cycle" in description of human society over its history beginning with the Greeks and to the modern era. I recommend it if you're interested in scholarly books. It's available on used book sites.
PPS: Not much going on so far - the charts are bullish. Dollar is down, gold is up. We''ll see if the UAW fools cause a strike at GM.
P^3S: I wonder if there's a contagious mental virus going around that drives women to blab on cell phones all the time? I drove to the post office on a little country road. Fresh air and beautiful scenery abounded. And a lady is walking her dog ... blabbing on a cell phone. At the post office, another lady is blabbing in her SUV parked out front. Amazing. What did they do before cell phones?
So for this "cycle", one obvious overbuilt sector was residential housing in many regional markets. What other sectors are "overbuilt"?
First, the housing related sectors such as home mortgage lending and home mortgage brokerage and banking clearly had grossly excess capacity for a stable environment.
Second, I say the hedge fund industry had grossly excess capacity. Rich people greedy for "more" flocked like lemmings to the hedge funds. The industry provided a siren's song to entice them so the fund manager's could get a piece of those fat fees. Stories of trading funds with great profits, or "stable", "absolute" returns were the pitch by the flim-flam men.
So huge sums were invested in beefer trading funds, quant funds, and all sorts of hedge funds that invested in slices of mortgage and debt securities [CDO/CLO/CBOs]. Like fools, they leveraged those illiquid securities, "trusting" the big Street firms that "the markets are liquid". But that "liquidity" was from ... other hedge funds.
Like any "greater fool theory" asset bubble, eventually there aren't any more buyers. Or something occurs to make some question the value of the assets. That was the connection to the subprime loan markets. That caused all complex securities to be questioned. Now most are good paper. But in an "overbuilt" market, that didn't matter. The unwinding was vicious.
The Street firms provided no liquidity and the piranhas at GS and probably other firms shorted paper they had readily sold to their hedge fund clients. And they probably gave them margin calls, too. hence the asset-backed securities market collapse.
Too bad. That paper is "mostly" very high quality paper, but in a panic, rationality takes quite awhile to return.
A flow of funds pulled from trading hedge funds and pyramid leveraged debt funds into truly productive investments could really help the stock market get to much higher levels that are justified from corporate earnings.
PS: use of words like "cycle" are metaphors for events and changes in human society. A fine book I read in the 1970s and am currently re-reading, "Social Change and History", by Robert Nisbet, carefully elucidates the use of biological metaphors, such as "growth" and "cycle" in description of human society over its history beginning with the Greeks and to the modern era. I recommend it if you're interested in scholarly books. It's available on used book sites.
PPS: Not much going on so far - the charts are bullish. Dollar is down, gold is up. We''ll see if the UAW fools cause a strike at GM.
P^3S: I wonder if there's a contagious mental virus going around that drives women to blab on cell phones all the time? I drove to the post office on a little country road. Fresh air and beautiful scenery abounded. And a lady is walking her dog ... blabbing on a cell phone. At the post office, another lady is blabbing in her SUV parked out front. Amazing. What did they do before cell phones?
Sunday, September 23, 2007
What Could Have Been
I wrote a few posts ago how the 20th century could have been completely changed with vigorous leadership in the right place at the right time. Here's another example. Later I'll point out how this mistake repeated itself rather precisely in the past 20 years. Maybe you'll guess as you read.
This is entirely copied from an article about Black Jack Pershing in "Military History" magazine, Oct. 2007, page 52.
***Copy begins***
[ref. the defeat of the German Army at Argonne in France, fall, 1918]
In the end, though, the Germans broke - and it was the end. By the close of the battle, they were left without a single reserve division in the sector, and Hindenburg himself later wrote that the Meuse-Argonne was "our most sensitive point" and that "the American infantry in the Argonne won the war." It may have been more a coup de grace than the decisive blow, but the war was over within days, much to Pershing's chagrin. Alone among the Allied war councils, he had insisted throughout on winning an unconditional surrender from Germany, not merely an armistice.
"We shouldn't have done it," he commented at the time. "If they had given us another 10 days, we would have rounded up the entire German army, captured it, humiliated it ....The German troops today are marching back into Germany announcing they have never been defeated....What I dread is that Germany doesn't know that she was licked."
It was a prescient insight. In 1944, while living out the final years of his long, pleasant retirement at Walter Reed Army Hospital, Pershing received a birthday message from another President Roosevelt that read in part, "None of us will forget that in 1918 you wanted to go through to Berlin. How right you were!" Such was the vindication of a leader who had taken care to understand both his allies and his enemies."
***End of copy***
So had Pershing's advice been followed, one of the key motivating arguments of Naziism - the "stabbed in the back" propaganda, would not have existed. And perhaps the willingness of the German army to enter another war would have not existed, either. Perhaps no World War II.
How did was this mistake repeated? Bush the Elder gave Saddam Hussein an armistice in 1991, instead of letting Schwarzkopf bag the entire Iraqi army. So it survived to bolster Saddam's regime. And about 12 years later, we were fighting it again.
Never let an enemy recover - finish it off completely.
This is entirely copied from an article about Black Jack Pershing in "Military History" magazine, Oct. 2007, page 52.
***Copy begins***
[ref. the defeat of the German Army at Argonne in France, fall, 1918]
In the end, though, the Germans broke - and it was the end. By the close of the battle, they were left without a single reserve division in the sector, and Hindenburg himself later wrote that the Meuse-Argonne was "our most sensitive point" and that "the American infantry in the Argonne won the war." It may have been more a coup de grace than the decisive blow, but the war was over within days, much to Pershing's chagrin. Alone among the Allied war councils, he had insisted throughout on winning an unconditional surrender from Germany, not merely an armistice.
"We shouldn't have done it," he commented at the time. "If they had given us another 10 days, we would have rounded up the entire German army, captured it, humiliated it ....The German troops today are marching back into Germany announcing they have never been defeated....What I dread is that Germany doesn't know that she was licked."
It was a prescient insight. In 1944, while living out the final years of his long, pleasant retirement at Walter Reed Army Hospital, Pershing received a birthday message from another President Roosevelt that read in part, "None of us will forget that in 1918 you wanted to go through to Berlin. How right you were!" Such was the vindication of a leader who had taken care to understand both his allies and his enemies."
***End of copy***
So had Pershing's advice been followed, one of the key motivating arguments of Naziism - the "stabbed in the back" propaganda, would not have existed. And perhaps the willingness of the German army to enter another war would have not existed, either. Perhaps no World War II.
How did was this mistake repeated? Bush the Elder gave Saddam Hussein an armistice in 1991, instead of letting Schwarzkopf bag the entire Iraqi army. So it survived to bolster Saddam's regime. And about 12 years later, we were fighting it again.
Never let an enemy recover - finish it off completely.
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