Thursday, August 12, 2010
8/13/10 Freddie Freeloader
Before rap, before disco, before herpes/chlamydia/HIV/safe sex, before Yul Brynner and the American Cancer Society sounded the death knell for tobacco- one could walk down to the Village and hear real music in the intimate company of total strangers.
Lost in the excitement of snagging the lowest rate ever recorded for a 30-year fixed was a $185 gain trading a small position in TZA. Somehow it sounds like chump change given the volatility we've had. Well, it's the tortoise that wins the race, no?
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HPQ- You have to wonder when it becomes a buy. Similar to BP, at some point the smart money moves in.
ReplyDeleteWell, at least I "tried" to get back in today. Not very hard, 2 came with in about .05.
ReplyDeleteTomorrow's another day.
By Colin Twiggs
ReplyDeleteAugust 12, 2010 5:30 a.m. EDT (7:30 p:m AET)
Dow Jones Industrial Average
The Dow fell sharply in early trading, retreating from the upper border of the broadening wedge formation. Twiggs Money Flow penetrated its rising trendline, warning of another correction. Reversal below the former primary support level at 9900 would confirm the primary down-trend. Upward breakouts in a bear market are notoriously unreliable, with roughly two-thirds of such breakouts ending in a bull trap.
Just wanted to point out that I called a bull trap at least 12 hours before Twiggs did, haha.
Oh no- the Hindenburg Omen resurfaces in the CC blog=
ReplyDeleteDanger: The Hindenburg Omen was triggered today.
Submitted by papadynamite (180 comments) on Thu, 08/12/2010 - 22:12 #67187
A confirmation is required within 1-36 days. A severe downturn is a result of the confirmation. To learn about it:
http://ewtrendsandcharts.blogspot.com
vb- Hope you had a good day. The only way I could have capitalized on the gap down this morning was to have already been positioned in ultrashorts. Unfortunately, I don't have the stomach for the kind of pain tolerance needed to hold them during the inevitable tests of conviction.
ReplyDeletejb- In reply to your earlier question: my Dad did just that last year- he used part of his savings to pay off his mortgage, figuring earning 5% on the funds was good enough.
ReplyDeletePersonally, I'm still optimistic I can do better than 5% in the market.
"In fact no crashes in the last 22 years have happened, that did not first have a confirmed signal of a Hindenburg Omen." I wonder how many total "omens" were triggered.
ReplyDeleteGreat 2nd. Thanks. Now I wont be able to sleep for the next 1-36 days ;)
ReplyDeleteTOF- Between 2 and 68 signals have triggered in the last 22 years. It all depends on whether one wears Depends or not.
ReplyDelete"UPDATE - Seawell to buy Allis-Chalmers Energy for $308 mln"
ReplyDeletehi 2nd,
ReplyDeleteI am in town. Maybe time for a summer reunion.. Don't know how long I will be here so impromtu better for me. Like a flower in the wind ...
vb
hi mark
ReplyDeleteare you talking to me?
vb
sharkie,
ReplyDeleteisn't this creepy Tonight paypal wants to make things easier.. did they read our comments. eeeeek
http://finance.yahoo.com/news/PayPal-hopes-to-make-apf-1379058706.html?x=0&sec=topStories&pos=1&asset=&ccode=
Hi vb! Does this mean you're looking for an EBAY long position now? he,he!
ReplyDeleteI gotta go beddie-by, night-night all!
ReplyDeleteLandry-
ReplyDeleteRandom Thoughts:
The market recouped some of its earlier losses. This has the media very excited.
However, it still closed down significantly.
A lot of areas that have recently broken out have come right back in.
This is why I preach to wait and not anticipate during a range bound market.
Futures are soft (I'm publishing early today so that's obviously subject to change).
Best of luck with your trading (or sitting on your hands) today!
The most expensive pussy (cat) in world history:
ReplyDelete"Tiger Woods is banned from letting girlfriends near his kids in a divorce deal netting his ex a record $750 million settlement, The Sun reported Wednesday.
The golfer agreed to keep single women away from daughter Sam, three, and son Charlie, one.
He can bring a new flame into their lives only if he marries her. In return, former wife Elin Nordegren ,30, gets the biggest payout ever seen in a celebrity divorce."
Wowee. 750 big ones.
Damn. That's a WHOLE lotta lucre friends....one healthy stack of jack. Oh and if Elin gets 750, that leaves Tiger with....what? 50 bucks and a Metrocard?
You've been airbagged, my friend.
Yes VB very creepy.
ReplyDeleteOnce I did something and that next night it was on CBS New York tv.
Very creepy.
How's life?
looking back at the weekly chart of the s&p over the past 5 yrs and it's a bit scary. almost the same pattern we had early/mid '08 before the big collapse came.....however, depending on how I draw the trend lines, we could be in a healthy consolidation phase before we push higher.
ReplyDeletehopefully I will have time today to provide more useless opinion/information.
We all strive for the same thing bro ;)....
ReplyDeletethe more time I spend messing around with charts the more i realize i know absolutely nothing, this however, will not stop me from trading today....:)!
ReplyDeleteGood lord...I don't think anyone is trading today. Slowest start I can remember.
ReplyDeleteEnergy getting a solid bid.
ReplyDeletemaybe folks are waiting on cons sentiment?
ReplyDeleteis there going to be a battle at 1080 today?
Made a hundy trading TNA.
ReplyDeletegood job 2nd! tna has been a very tricky one for me this past week, probably down 1k on that bitch alone
ReplyDeleteI'll take a battle at ANY level...
ReplyDeleteunless sentiment comes in way below expectation I would think we will rally nicely off 1081....but I'm too scared to trade that opinion after the past 3 days.
ReplyDeleteok, sentiment came in just a tad higher than expectations, and we did indeed bounce - now, will it hold?
ReplyDeleteShanghai +1.21%
ReplyDeleteMy thought is that the Rubicon deposit is a great one. This stock is obviously much in demand and I am eager to re-buy.
ReplyDeleteCheck out the weeklies on this one.
Also have you heard the news fron Chatham MA? They've closed the beaches due to SHARK sightings. And I'm not going to Chatham until NEXT week:)
JCP - "Unusual Uncertainty" for guidance.
ReplyDeleteHEK- This might have been capitulation day...
ReplyDeletei think it was the bad biz inventory #'s rather than the philly fed (restating what most folks have been saying for the past 5-10 days or so) that killed the rally...5 red candles and we're sitting right on 1080...s/b very interesting morning.
ReplyDeleteNo capitulation yet for AONE though :)
ReplyDeleteHEK - How'd those earnings go, not well I take it.
ReplyDeletecan we ban any HEK discussions until my wife leaves for the shelter? it's a SORE subject here (apparently I'm one of the largest shareholders, since I missed the day ya'll posted you were getting out!)...;)
ReplyDeleteCADC - Doing it's own thing again today.
ReplyDeleteJB- You bet. I get banned all the time from a variety of things :)
ReplyDeleteCP- Got to run. I'll let you know about the HEK call tonight.
GL guys....
OK...Stinky's in place for HEK/AONE/CADC...
ReplyDeletePAL - And of course this one goes green on news of the Sleepy Giant initial gold production cost of $1500/oz.
ReplyDeleteAfter all, what else would one expect?
weird...my post didn't go through. if you're interested...IMMR is probably a capitulation trade at this point. they are down from $5.8 to $4.9 in 4 days on no news. they just beat and raised a week and or two ago. they make haptics (force feedback when you touch a touchscreen device) for touch screen devices.
ReplyDeleteFD:
long from yesterday at $5.1.
why do i get a sense the markets have bottomed here? sure growth is going to be slow but it's growth instead of negative growth right?
ReplyDeleteby the way, there is a major carry trade going on with corporations. they're able to issue bonds at rates lower than their dividend rates. if that's the case, why wouldn't you just issue bonds and then use the proceeds to buy your stock? granted, the stock could go down but you can use the dividend yield to pay off your debt (which is at a lower rate) and then keep the proceeds at income.
ReplyDeleteStrange: the ECRI WLI Growth index has recovered two weeks ago from -10.7% to -10.3% and then last week to -9.8%. Maybe the economy is not going to fall apart in 6 months -- maybe it'll take 9 months for it...
ReplyDeleteSo maybe it's too early to designate my large TWM position (1000 shares) as a long-term one and I should trade it more aggressively. In that case, if there is a time to take some TWM off the table, then it is now. So I just sold 100 shares at $21.97 and placed a sell stop order for 400 more shares at $21.80, just below today's low for TWM.
I also decided to move up my sell stop order on SGG to $51, so as to definitely make some profit on it (I re-opened SGG at $50 a few days ago).
ReplyDeleteFinally, WATG saw my buy stop order at $8 for 250 shares, reached up an triggered it ($8 was its high for the day). I thought that people at GS didn't bother with faking people for *such* small amounts -- they must be really desperate now, I guess. :)
ReplyDeleteThe market seemed to be range-bound this morning until I placed my sell stop on TWM, and right after that a spike up has begun. I really don't feel like selling my TWM into a market spike, so I have just lowered a little my sell stop on TWM from $21.80 to $21.75. Maybe THAT will save me from being faked out. :) Yeah, right...
ReplyDeleteAs soon as I moved my stop down, TWM has moved up from $21.81 to $21.86 -- do my stops really act as magnets???
ReplyDeleteWow, what a turnaround for IMMR
ReplyDeleteHEK - Nice turnaround there...
ReplyDeleteI just looked at the chart for SD and noticed that the stock is now touching the lower trendline and is due for a rebound. Also, I just read through the transcript of their latest earnings announcement and it looked rather encouraging. So I just bought 500 more shares at $4.66, in addition to the 750 shares I already had.
ReplyDeleteMark -- what's your latest opinion of SD? Maybe you can ask MOG for an update about it?
Check out TLT.
ReplyDeleteNow that the spike up in the market has ended, I have moved up my sell stop on TWM back to $21.80. If it gets hit NOW, then it will be no accident, and maybe the market is indeed set on going higher today...
ReplyDeleteAlright, another $156 on TZA. Done for the day.
ReplyDeleteLooks like a few capitulation trades today. How bout RAS. Any take here TOF? Can't believe I sold it for 2.33 about a week ago.
ReplyDeleteBelow is an interesting excerpt from the SD earnings call transcript, which discusses SD's decision to close their NG hedges in June (I believe they shorted some NG for the whole of 2010 at $7+ on the futures and then covered their shorts in June when NG futures were around $4). They are doing some smart trading, IMO, and that by itself is a good reason to bump up my exposure to SD, which I did a little earlier today.
ReplyDeleteScott Hanold - RBC Capital Markets Corporation:
Back to sort of your plan on monetizing some of the gas hedges. It looks like in June, gas did have a little bit of a bump. So when you made the decision, I just want to be clear, was it a call that gas has bottomed, in your opinion? Or was there some sense that you were just trying to capture some extra liquidity? And, I guess, the hedge position that you do put into your presentation, obviously, is not the current one, but you also took off some things post-the quarter?
Tom Ward (from SD):
Yes, in both cases, it's a call on gas bottoming an overly bearish market. And I still believe we’re in that type of an overly bearish market, even though each week, it appears that the market’s a little tighter, the actual supply’s a tighter than what the market believes. I think, as you guys know in dealing with industry and investors, it’s just a very negative time for natural gas, and for good reason on a lot of fronts, but, I think, overly bearish as far as price. And we're only looking at a few months, not years, and so that was the reason we decided to make the call.
We think that there is still, in the market today, a perceived thought that gas supply will be higher than we think we’ll be end of October. We're more in the 3.75 to 3.76 Tcf range. We think there's some constraints coming out of the Haynesville and maybe in the Marcellus and that, that might not into the marketplace, but still believe that 2011 could be challenged as you bring on Tiger out of the Haynesville and have other capacity constraints relieved. And also, we think wells aren't coming on quite as quick as the market might be believing, in the gas market, anyway, for 2010. So if you look at a harder time to bring gas wells on, just because of -- in the Haynesville, especially, having a longer time to bring wells on because of fracking, and then maybe some pipeline challenges, we believe it was a good time to take off gas. If you look at our history, we haven't done that very often. In fact, only one other time in the history of the company have we pulled any hedges off, and that was, I think, in 2006. So it isn't something we do very often, but in the short-term in both of these cases, we felt that it was the appropriate thing to do. And that doesn't mean that we won’t be putting back on gas hedges by the end of the year.
REDF is clearly in play now. I have a very large position in the company now at about $2.04. Out of any company in the market I think this small cap has the best possible upside potential. I'm sure you've heard of this company. They're an internet search engine/portal in India. They are the 9th most trafficked site in India and have about 90 million subscribers to their email service. India currently only has a broadband user base of about 10 million people (versus 1.1 billion total population). The Indian government just auctioned off the rights to the broadband spectrum in June and bidding ended up at levels of about 9 times above the opening bid prices. All told, several companies ended up paying about $23 Billion for the rights to lay down broadband lines throughout India.
ReplyDeleteREDF has been around for a while and has never really had a ton of success in most part because the internet advertising industry over there is almost non-existent. They reported a profit of about $0.25/share in 2007, their best year. In that year, they raised capital when the stock was trading at about $25/share...great move now that the company is at $2/share. The money they raised has allowed them to basically operate at a break even level given the interest they earn on their cash balance pays for the small losses they incur in operations.
About a year ago, they completely revamped their site, take all of the ads off the home page in an effort to eventually focus on search ads when the markets got bigger. The result was a drop in revenues but an improvement in the look and feel of the site. Subscriber growth continues...
In the past quarter they announced a clear resumption of growth in advertisers and had revenue growth of 15%. They said ad rates increased 26% (which implies that # of advertisers went down to get to the 15% overall growth rate so I'm not sold that growth has "clearly resumed" as they say).
The company currently trades at a valuation of $62 Million. With $41 Million in cash and not debt and about break even ops after including interest income on their cash balance, the companies enterprise value is about $20 Million. I think that is way too low given:
(1) the potential significant growth in internet subscribers in India coming down the pike very soon
(2) the rebound in ad spending
(3) the overhaul of their site to a more minimalist site focused on potential search revenues
(4) the amount of traffic coming to their site
It's a risky investment, no doubt. But 2nd - I think this is one you can stow away for your kids and come back in the next 5 years or so and be very happy. The downside is limited to their cash balances so now its just a waiting game...hoping that India's internet market grows in the same manner China did in the early 2000's. If so, this could be a SINA or SOHU in the making, both of which traded at a valuation of around $50 Million in 2002 (they're now at $2 to $3 Billion or about 50 times their value back then).
One other thing: Make My Trip (MMYT), an India internet travel site, had their IPO yesterday. I suspect this caused a little spike in REDF as a result (volume in REDF between yesterday and today has been pretty high). If this is the first of many IPOs in India, I think people will be clamoring for ways to invest in India and REDF will be a big beneficiary. With the China growth story beginning to have been fully tapped into, the next obvious target is India in my mind.
ReplyDeleteI've had some good success with selling PXP options on the past -- all the puts and covered calls that I sold on it have expired, and I have lowered the cost basis of my initial small position (200 shares purchased at $25.60) to about $20 now. Let's see if I can continue making money off my small PXP position in the same way: I just sold 2 September $25 covered calls against my shares for $1.10 each. If the shares get taken away from me, my sales price will be $26.10, which will give me a very decent profit relative to my cost basis of $20.
ReplyDeleteTOF: thanks for the story about REDF. Their chart does indeed look like it is in a value region. I have just placed a buy limit order for a small position (1000 shares) at $2.05 and immediately 2 shares were purchased! :) Let's see if the rest of the order gets filled today. :)
ReplyDeleteNatty's hanging in there.
ReplyDeleteI just sold 100 more shares of TWM at $22.05. Now at least I'll have something to do if the market rebounds next week to test 1100 on S&P as TOF has predicted -- I'll reload the 200 shares of TWM I sold today!
ReplyDeleteYou make a compelling case TOF. OK, bidding @ 2.02.
ReplyDeleteTOF -- my REDF order was filled, so now we are in the same boat. :) My position size is still "nominal" though, and I might add to it at the March 09 low of $1.50.
ReplyDeleteDavid- I'll ask MOG for an update, but I'm interested here none the less.
ReplyDeleteMark, $2.02? Be reasonable! It hasn't dropped below $2.04 for the past few hours.
ReplyDeleteMark / David - Don't hold my feet to the fire if it goes back down to the $1.70ish level ok!?!? Having said that, the potential for outsized gains is definitely here with this company. It kinda feels like when I invested in BIDU at $70 (pre split in 2006, only to sell at $120), except at an even earlier stage than that.
ReplyDeleteI'd be up 10% on HEK if I just to action on my call. Weenie.
ReplyDeleteTOF- Don't bother with the qualifiers for me, my friend. Hell, I've been talking about HEK from 6!!
ReplyDeleteReally pissed I sat on my hands.
HEK- I still wouldn't chase here. Let's see if it get's any follow through.
ReplyDeleteThe long-term HEK chart suggests that the current price is a good entry point, and a company that has such a good day after a looong decline can easily keep going up at the same rate for a while (MON is a recent example of that). Given that I folded my HEK investment at $5.60, I figured that reloading it now is very justified, and I have just repurchased 1000 shares at $4.17. Let's see what happens next...
ReplyDeleteDavid- GL, I'm going to try and get a little better re-entry. They do have 2.50/share after all and zero debt.
ReplyDeleteSince I already sold 200 shares of TWM today at $22, I decided to cancel the sell stop order I had at $21.80 and instead place sell limit orders for 100 shares at $23, $24, and $25. Such sales would give me more profit. :)
ReplyDeleteI figure the extremely low volume here isn't a good omen for lifting prices but I do see several very compelling entries on most of the above.
ReplyDeleteIt seems the selling just has only taken a breather long enough to fool a few unsuspecting longs.
Maybe I'm wrong and my port ends the day an Irish green...
Mark - I haven't been able to get my interest level in HEK up enough to a point where I will buy it. It's just too much of a concept stock to me. Too many unknowns right now. That's kinda the way I felt about financials up until 2009...too much going on that I just don't understand. I'd rather stick to easier stuff. It's hard enough thinking about whether my shirt matches my shorts, let alone if a bank that holds a CDO of a CDO that is leveraged 11 to 1 and is based on a mix of underlying mortgages in Arizona, California, and New York has the potential to fuck up my investment in said bank. Same goes (in my mind) with the whole nat gas shale crap...
ReplyDeleteLooking at the sell inbalances for the big financials, the close will be tough.
ReplyDeleteTOF- I hear you, and if you had listened to the con. call I doubt you'd be any more assured.
ReplyDeleteBidding GMO @ 2.90. Sometimes these babies hit in a thin market going into the close.
ReplyDeleteIs GMO trying to close it's gap @ 2.74???
ReplyDeleteTOF - Go for it!
ReplyDeletehttp://en.wikipedia.org/wiki/File:Trews_07SV_109.jpg
Mark- This can't be good for mortgage rates going forward:
ReplyDeletehttp://www.marketwatch.com/story/hoenig-calls-fed-policy-dangerous-gamble-2010-08-13?dist=afterbell
GMO - It could conceivably more than close it's gap, which is why I'm not buying unless/until a significant haircut materializes. No news is bad news in a falling market and the lack of a close for financing the mine is far from positive in such an environment.
ReplyDeleteOr, I should say: "not adding"
ReplyDeleteBelow is an interesting excerpt from
ReplyDeletehttp://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2010/08/10/gavekal-five-corners.aspx
****
However, while we think further asset purchases [by the Fed] are warranted, we are of the belief that they should take the form of more private assets—e.g., securities backed by mortgage, auto or consumer credit; unfortunately, recent comments by the Fed would seem to convey no further scope for such ‘credit easing’ (see Lessons from Bernanke’s Testimony). And Bullard’s comments seemed to suggest that not only should the Fed stop ‘credit easing’, it should move straight on to outright ‘quantitative easing’ (which is what the purchase of further UST would likely be, depending on how they are financed).
Thus, unless or until commercial banks are in a position to increase their claims on the private sector, or the private non-bank sector decides to increase its claims on itself (the shadow banking system), the Fed needs to fill the void by increasing its claims on the private sector. In other words, the Fed needs to change course, and discussions revolving around a lower rate paid on excess reserves, on asset sales, on the purchase of UST… are nothing but counter-productive noise.
Once again, if there is no growth in broad money, no increase in velocity and no increase in Fed credit (hybrid money), then the only source to finance growth in the real economy will remain the sale of risky assets [of private investors to the Fed]. When confidence seems to be stuck in a low plateau and talk of reigning in fiscal deficits is growing louder, a policy of undermining the value of risky assets couldn’t be more counterproductive to growth.
****
If the above view is correct (and it is supported so far by the data, since the stock market made its high in late April just when the Fed stopped purchasing MBS securities), the we should not see any growth in the stock market in the near future because the Fed so far is not set on resuming its MBS purchases...
Let's review again the words of SD's CEO Tom Ward in the latest earnings call (http://seekingalpha.com/article/218905-sandridge-energy-q2-2010-earnings-call-transcript):
ReplyDelete"What we did was, as you know, we did not have hedges in place post-2010 but did feel that the market was overly bearish on natural gas and even, for a short period of time, oil and pulled off hedges on natural gas early through the rest of 2010. The reason to do that is just that we're making a long-term call on natural gas being higher, but we were making a short-term call that, looking out through the August through December period, when we pulled some gas off of June, that the prices would be higher than what they were in June when we thought it was an overly bearish situation. We still believe the market is overly bearish, and therefore we have not hedged any of our 2011 gas yet. That doesn’t mean that sometime this year, we won't hedge 2011 gas. We think that there is still, in the market today, a perceived thought that gas supply will be higher than we think we’ll be end of October."
When they pulled off their NG hedges in June, UNG was trading between $8 and $8.80. Let's say it was at $8.50. Now it is at $7.29. So it looks like Tom was fooled by that NG rally, believing that it was sustainable. That is probably a large part of the reason for the recent severe drop in SD. Their latest quarterly data shows that they sold around 19MMcf of NG for $6.06/Mcf (because of their NG hedges), receiving $117M for it. They also sold 1433 MBbl of oil for around $67/Bbl, receiving around $86M for it. Now that they took off their hedges, their NG revenue can be reduced by 30% during the fall quarter if NG stays at around $4/Mcf. No wonder their stock has tanked.
However, let's recall the latest lesson from Hussman. He wrote last Sunday: "Just a note - if there is one weekly comment that I hope that regular readers of these comments will not miss, it is last week's piece - Valuing the S&P 500 Using Forward Operating Earnings." The main lesson from that piece was:
"It is impossible to properly estimate long-term cash flows based on a single year of earnings, regardless of whether one uses actual net earnings or projected operating earnings. It is impossible to properly value the stock market based on a single year of earnings, regardless of whether one uses actual net earnings or projected operating earnings.
Writing each of these sentences only once is woefully inadequate. If I had my way, investors would have to write them over and over five days a week. Wall Street analysts would have to write them a hundred times a day, immediately upon arriving to work."
Thus, if Mark's MOG is correct and SD's purchase of Arena will help them in the long term (since they will start deriving much more of their revenue from oil, which is priced much better than NG), then the current "blues" in SD (due to their unlucky decision of removing NG hedges during the June bump in NG) is just a "blip on the radar," and we have a great buying opportunity here.
Naturally, one should not open a 100% position in SD right now, since NG can easily drop another 10-20% before October, which will bring SD's stock even further down. But some long-term position in SD is probably warranted now.