Sunday, November 21, 2010
11/21/10 The Girl With The Dragon Tattoo
Downloaded this one from Netflix last night. Based on a story by the late author Stieg Larrson. Awesome commentary on one of the greatest/oldest 'social equity' challenges we face.
'At his death in November 2004, Larsson left three unpublished novels that made up the trilogy. It became a posthumous best-seller in several European countries as well as in the United States. Larsson, who was disgusted by sexual violence, witnessed the gang rape of a young girl when he was 15. He never forgave himself for failing to help the girl, whose name was Lisbeth - like the young heroine of his books, herself a rape victim, which inspired the theme of sexual violence against women in his books.'
Thanks to the person who supplied the link to the Black Dub video. It led me to another of their recordings, one which combines a driving bass line with a stark upper-register single-note piano line:
http://www.youtube.com/watch?v=9_0zrd2u3uk&feature=fvw
The market rocks into year-end, further surprises in January, then swoons briefly before breaching 1300 in the spring of 2011. Predictions just for laughs, but that's my take.
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Looks like Ireland is going to take the cash.
ReplyDelete156 billion does not seem like much in the age of bailouts, but when you figure in that Ireland only has 4 and a half million people that is a lot of money per person.
ReplyDeleteRe: Chartwatchers Newsletter from John Murphy/The One-Liner newSubmitted by 2nd_ave (4984 comments) on Sun, 11/21/2010 - 13:32 #74649 (in reply to #74648)
ReplyDeleteOn Friday, Bill wrote "Traders ought to be more focused on the rapidly improving picture of corporate fundamentals, I think."
J- The time to act on one-liner takes by experienced traders is more or less the moment they print. Six months later, when the market has priced in these kinds of prescient observations, you're left with 1000-word retrospective essays on the same subject + a ton of regret over procrastination.
Let's look back six months and arbitrarily select an oversold stock. That's easy. If you'd purchased BP when analysts were prematurely proclaiming the demise of the company, you'd be doing well right now. One reason I picked up BAC/CSCO last week.
I'd be surprised if the market doesn't gap up tomorrow on the Ireland news. Craziness that a $140 Billion bailout doesn't mean much these days. Just wonder how long it will last before Portugal/Spain/California/Illinois is next in line. Commodities should continue to do well.
ReplyDeleteRINO specific, but uncertainty concerning other Chinese stocks, esp reverse merger?:
ReplyDelete"After a series of events with almost comical dimensions, we now have the first case of fraud on the Nasdaq, involving a Chinese small cap company. RINO International (RINO) admitted Friday that it did not enter into two contracts for which it reported revenue during its 2008 and 2009 fiscal years. The stock has been halted by the NASDAQ Stock Market around noon on November 17, and it will remain halted until RINO has fully satisfied NASDAQ's request for additional information. NASDAQ has not specified what kind of information they are looking for, but at this time it seems unlikely that RINO will be allowed to remain listed on the prestigious NASDAQ market. Investors should be prepared to find the stock on the pink sheets in a couple of weeks."
China firms may eye MBO as cure for U.S. depression
ReplyDeleteOn Tuesday November 16, 2010, 9:03 am EST
"BANGALORE (Reuters) - If two's a trend, expect more management/private equity buyouts of U.S.-listed Chinese companies -- taking advantage of big discounts to peers on the Hong Kong and Chinese stock markets.
The chief executive of Fushi Copperweld Inc (FSIN.O: Quote, Profile, Research, Stock Buzz) and private equity fund Abax Global Capital recently offered a 26 percent premium to take the Chinese wire maker private.
A month earlier, Harbin Electric Inc's (HRBN.O: Quote, Profile, Research, Stock Buzz) CEO and Baring Private Equity Asia Group Ltd offered a 20 percent premium to buy out the Chinese electric motor maker."
http://finance.yahoo.com/news/China-firms-eye-MBO-cure-U-S-rc-3250260049.html?x=0&.v=91
we are in a global hurricane.
ReplyDeleteride it out with alot of candles
,sorry but I can't get into a day to day analysis.
Live More in the valley
For those who don't read Hussman every Sunday night, here are some excerpts from today's letter:
ReplyDeleteThe historical evidence is very consistent that low yields (elevated valuations) are accompanied by dismal subsequent returns. At present, the yield on the S&P 500 is just 1.95%. This level can be expected to be followed with S&P 500 total returns of about 2.2% annually over the coming decade, with a confidence interval that easily includes zero. Based on normalized earnings, our projections are somewhat better, at about 4.8%. Meanwhile, our estimate based on forward operating earnings (see Valuing the S&P 500 Using Forward Operating Earnings) gives a 10-year total return projection of about 4.7% annually. Again, this is not simply a dividend story.
From our standpoint, it isn't likely that investors will get their expected 5% return over the coming decade in a smooth, diagonal line. Our guess is that they will instead see a large negative return over the first two years or so, followed by subsequent returns that are much closer to the historical norm. The third alternative, of course, is the bubble scenario, where stocks achieve returns above 5% annually in the immediate few years, followed by flat or negative returns for the remainder of the decade. That is certainly the pattern we observed beginning in the late-1990's.
Here is Hussman's plan of action as of right now:
ReplyDelete"Presently, we have a combination of overvalued, overbought, overbullish, rising yield conditions that have been very hostile for stocks even in post-1940 data. We also have not cleared our economic concerns sufficiently to lift that depressing factor on the expected return/risk profile for stocks. It follows that changes in some combination of those factors - valuation, overbought conditions, sentiment, and economic conditions, provided that those changes aren't accompanied by a clear deterioration in market internals - would prompt us to remove a portion of our hedges (most probably covering short calls and leaving at least an out-of-the money index put option exposure in place). Unfortunately, with stocks overvalued, a shallow decline that simply clears the overbought condition would not leave much room to advance until stocks were overbought again, so the latitude for a constructive position would be limited. Ideally, we'd prefer a very substantial improvement in valuation, that is, significant price weakness that would also be accompanied by internal deterioration. In that event, as in 2003, we would look for early divergences and internal strength as an indication to remove the short-call portion of our hedges, and possibly more depending on the status of valuations and other factors at the time."
David,
ReplyDeleteI don't get the point of all of Hussman's hedging. How is ever going to make money. All he can hope for is the market to decline and then he can say his fund out preformed his bench mark by not losing money, but I would venture a guess due to his hedging he has underperformed. He seems so ultra risk averse its a wonder he canever makes a trade.
Einhorn interview
ReplyDeletehttp://www.investmentpostcards.com/2010/11/21/wealthtrack-david-einhorn-%E2%80%93-tread-cautiously/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed:+wordpress/VYxj+(Investment+Postcards+from+Cape+Town)
Hope everyone had a good weekend.
ReplyDeleteSold BSX calls at about 7 to 10% profits. Holding on to SPY puts and TZA.
Hey Guys- Got back late yesterday and found my internet connection down. Everything seems fine now.
ReplyDeleteWell, Kendra's team won the Championship game 2-0. I honestly can't believe it. I actually wish she was a little older so she would have a chance to remember it better. This is a huge tourny, and do do it again is VERY hard.
OK, on to the market. YIKES!!! This might be a really slow week. I might just sit on my positions, not many, and see what happens next week.
Mark - That's awesome man. Sounds like you have another Mia Hamm on your hands.
ReplyDeleteRE: Markets > I think we're going down. My sense is we have pretty much hit our peak. I think the world has hit its debt peak. It's just a sense I'm getting but I could be wrong.
FD:
Long SPY Puts, long TZA, just entered long ACI Jan $32 Puts at $3.15.
TOF- Could be. No question the rally has lost some steam, and this whole insider trading crap can't help. I'm only about 35% long and 1/3 of that is UNG/UCO and my BAC is a LT hold, so really, it's SSO/TIE/WATG/BYD that are in play.
ReplyDeleteBidding C @ 4.15 for a LT hold.
ReplyDeleteyeah BAC tempts me from time to time. but i just can't get myself to buy these financials yet. i don't know why. the only one i've gone long on is GS. i guess at some point we just have to buy and hold BAC. it's kinda like the big cap techs in 2002 that were so badly beaten down and everyone knew they sucked...but if you bought them then you could have sold for 100% gains in a couple of years.
ReplyDeleteInteresting article on QEII:
ReplyDeletehttp://seekingalpha.com/article/237878-whats-really-behind-qe2
BAC - There's a heavy real estate burden there and I don't see marked employment improvement happening yet. I'm looking for SPY of 1050 or thereabouts along with RSI's turning up, then I'll think about adding to longs.
ReplyDeleteIs the global economy improving or not? I think so, generally speaking.
Or, maybe prices simply won't fall much from here and the rally resumes once everyone realizes prices refuse to fall?
ReplyDeleteAdded more SPY puts...added Dec 31 $122 Puts at $4.3 average. I think we at least test the 1,170 level.
ReplyDeleteInteresting article - Yes, it's nice to see there are some folks putting real effort into they're analysis of the QE2 subject instead of making snap judgments based upon simplistic alternative realities.
ReplyDeleteoops, "their analysis"
ReplyDeleteOINK - squeelin'!
ReplyDeleteSetting Sell limit on my SPY Nov 26 $122 puts that I bought on Friday at $2.2. Sell limit is $4.2. I think it's inevitable we test 1170-1174.
ReplyDeleteI found this to be the case with my broker as well; tells me Munis rebound is going to be short lived and another crash is coming in that space:
ReplyDeletehttp://slopeofhope.com/2010/11/munis-short-em-if-you-can-find-em.html#comments
Newest weekly article from Jeffrey Saut:
ReplyDeletehttp://www.minyanville.com/businessmarkets/articles/buy-stocks-stock-rally-natural-gas/11/22/2010/id/31280
The 5-year chart for NOT.V looks very interesting: a spike up, then a slow grind down, then another spike up and another grind down. The most recent grind down was long enough to set up another spike up. So I just bought 2000 more shares of NOSOF at $1.01, as a call option on it without expiration. :)
ReplyDeleteAt the same time, I just sold the 4000 shares of PNPFF (PNP.TO) I had at the current bid of 2.53 (it is up from $1 to $2.50 since July, up 6% today).
ReplyDeleteStop hit on my Nov 26 SPY $122 Puts at $2.55 that I bought at $2.2. Oh well. So much for the aforementioned selloff to 1,170 for now.
ReplyDeleteThis morning, HNUZD hit my sell limit order at $6.50 for the remaining 50 shares. I called Scottrade and they said that partial fills over the same day would have a single commission, but over separate days would have one commission per day, so I paid extra $7 for this execution. Had I checked this out ahead of time, I would have canceled this small sell limit order.
ReplyDeleteEspecially because HNUZD just hit my sell limit order at $6.75 for 250 shares. Nice. I am finally reducing my NG exposure and raising up cash for other endeavors, such as continual scaling into WATG (which is down again today -- the damned dog...)
tof- Nice move on the SPY puts.
ReplyDelete.The Three Horsemen + A Pale Rider> CSCO/INTC/MSFT + BAC newSubmitted by 2nd_ave (4985 comments) on Mon, 11/22/2010 - 14:52 #74714
ReplyDeleteNo plans this time around to lower exposure to these companies, and may elect to add into further weakness.
No reason to think the Market is headed for the showers.
Man this is a tough market to trade from the short side...sold my TZA at $20.25 that I bought Friday at $20.35. It pays to take profits early.
ReplyDeleteAlso bought some BYD at $9.26, some GLD Dec $132 Calls at $3.15, and hedged my ACI Jan puts with Dec $31 calls.
Long UGL at $65.5. I think I'd rather play the positive effects of bailouts at this point than going significantly long anything until I feel more comfortable doing so.
ReplyDeleteStill holding a few SPY Dec 31 $122 Puts in the event we crater on a blowout in Portugal/Spain CDS spreads.
ReplyDeleteSo basically, I'm long GLD, long BYD, short SPY, hedged on ACI (thinking it will move big either way if they buy out MEE, as is rumored, or if they don't buy MEE but MEE gets bought out).
ReplyDeleteClosed my BYD at breakeven and moved that money into UGL at $35.6. Now have a full position in long gold (through UGL/GLD in the money calls).
ReplyDeleteI'm trading too rapidly right now. I feel like a HFT machine.
ReplyDelete"I don't get the point of all of Hussman's hedging. How is ever going to make money. All he can hope for is the market to decline and then he can say his fund out preformed his bench mark by not losing money, but I would venture a guess due to his hedging he has underperformed. He seems so ultra risk averse its a wonder he canever makes a trade."
ReplyDeleteRoBear, Hussman's goal is to outperform S&P over the whole business cycle, and so his strategy is very long term oriented (say 10 years). Over the period of time, he can afford to stay fully hedged for a year or two when he feels the market is overvalued and then remove his hedges when the market valuation finally improves. He actually adjusts his positions more often than that -- when the market becomes oversold (even if still overvalued), he usually purchases some index call options (so as to have a limited downside). If the market will become oversold AND will offer a good 10-year value, he will probably remove his hedges (which would be equivalent to buying stocks out right). It seems clear to me that the above strategy will beat S&P over the next 10 years. It is just not as exciting as I want trading to be, and that's why I am not Hussman's client. I just use him as a reliable resource to find out what the statistically expected prospects are for the next 10 years.
Still long RBY, adding here and there on panics, balance long DGP this am when gold went under $1350. Trying not to trade. Thinking about just turning off the screens till May...
ReplyDeleteATNI/GMO/CADC - CADC The only one of my laggers today and the one I'm most confident should move higher.
ReplyDeleteThey're playing into my hands on that one. ;)
There are 4 main reasons why I decided to reduce my exposure to the markets / increase my exposure to gold:
ReplyDelete1.) I mentioned it at the time, but I was really surprised to see the Fed go forward with QE II in its last meeting and at the size that it decided to do it at. I figured with the batch of stronger than expected economic news coming out and with a stronger stock market, they would have waited for more evidence of weakness.
2.) It took me a while to conclude this, but given the recent rout in the treasury market and municipal market, I came to the conclusion that the Fed is doing QE II to aid the federal/state funding issues that aren't going to go away in any way they can.
3.) The recent continued weakness in CDS spreads in Europe suggests that debt fears in Europe won't go away...so when Ireland gets bailed out, Portugal will definitely be next, and then Spain will most likely be next after that. This is exactly what happened with the investment banks 2 years ago and it ultimately ended in massive bailouts. Even if it takes a while to happen, it will provide a long term support for Gold.
4.) After reading Hussman's articles that David pointed me to and doing more research on corporate margins, it's pretty clear to me that margins have peaked, and so too most likely have earnings. Earnings could go up slowly with rising revenues, but as cash builds up companies will be pressured to grow through acquisitions / capital expeditures (i.e., diworsification) / hiring, which will ultimately hurt margins and earnings. While P/E valuations and the seemingly positive momentum in the economy suggest that stocks should be going up, Hussman's valuation model suggests that the markets are overvalued. It looks like a large chunk of Fed induced stimulus found its way into the stock market. Jeremy Grantham suggested this too in his most recent report titled Night of the Living Fed.
All told, I think the market CAN definitely go higher, but I don't think we're out of this debt bubble and I think the risks to the downside are high enough to warrant caution. It seems to me that it's best to trade this market for the foreseeable future.
Turning off the screens till May - Not a bad idea but in that case you might miss a unique bargain opportunity! ;)
ReplyDelete"1.) I mentioned it at the time, but I was really surprised to see the Fed go forward with QE II in its last meeting and at the size that it decided to do it at. I figured with the batch of stronger than expected economic news coming out and with a stronger stock market, they would have waited for more evidence of weakness."
ReplyDeleteThe FED has clearly stated their recovery estimates are unacceptable and they intend to accelerate the process.
I'm anticipating considerable business tax concessions from Congress.
HIT - Still humming right along...
ReplyDeleteWow, just think of all the copper that's going to be required to make electric cars work. Aside from the electric motors themselves, they've got to double the size of quite a few power transformers in developed countries and the developing countries are going to require transformers with twice the capacity.
ReplyDeletehttp://www.marketwatch.com/story/ireland-bailout-eases-tensions-in-credit-markets-2010-11-22?dist=countdown
ReplyDelete"The Portuguese CDS spread widened to 460 basis points from 421 on Friday. "
Spreads on Portuguese debt are now almost as high as Ireland.
"2.) It took me a while to conclude this, but given the recent rout in the treasury market and municipal market, I came to the conclusion that the Fed is doing QE II to aid the federal/state funding issues that aren't going to go away in any way they can."
ReplyDeleteThat's exactly the point that was recently made by one very respected market observer (I forgot who exactly it was) -- he noted that QE2 is just enough to offset the new bond issues by US Treasury over this time period (this was also observed in this article: http://www.financialsense.com/contributors/chris-martenson/alert-qe2-has-lit-the-fuse), and so it should not motivate any of the existing bond holders to sell their bonds. So after the initial transitionary period of bond reshuffling between the holders, everything will get back to norm and the interest rates will not be reduced at all.
Having said that, I decided to place a buy stop limit order for 200 shares of TBT at $36/$36.03. I bought 200 shares of TBT on the FOMC day at $34.60 and recently sold it at $36.50, so if I can now get in at a lower price, I will be happy. TBT has corrected its overbought condition now and has returned to its lower trendline, so technically right now is a good place to buy it.
I decided to keep my 300 short shares of SLV, even though SLV already rose above the level where I shorted it ($25.95). Instead of viewing it as an independent trade, I would rather treat that short as a reduction of my exposure to silver through ECU.TO. How high could silver go until its next peak? 37% = $10? If so, I'll lose 3K on that short, but ECU.TO will rise at least by 75% in that case, say by $0.8 (SLV is up 1.61% today but ECU.TO is up 3.51%), so I'll make $48K on the 61K shares I currently own. All in all, I am willing to pay $3K in order to make $48K. :)
ReplyDeleteDavid - what's your take on Gold?
ReplyDeleteI think I already said it before: if there was a single security I had to buy and hold for 5-10 years, it would be gold. Bill once put out a theory about gold, which I still like a lot. He said that the price of gold will keep going up as long as the amount of paper money in the US economy keeps increasing at a faster rate than the economy itself (say, measured via GDP) and vice versa. Over the next 5-10 years, it is very clear that US will have a very sluggish economic growth (due to huge levels of debt that need to be written off before real economic growth can pick up its pace), while the amount of paper money will keep increasing at a much faster rate, given the current predisposition of those in power to solve all problems by printing money (rather than letting all reckless investors take the deserved cuts on their principals).
ReplyDeleteHSY - Could be a buy here, dividend.
ReplyDeleteDitto here...
ReplyDeleteI noticed starting back about 2005 that what was really going on was that they were printing their way to mask or hide the depression that should/would have been caused by the nasdaq bubble burst, creating reason after reason to spend like drunken sailors, and when the rest of the world couldn't or wouldn't buy the debt, they printed more to buy it. Of course as time has gone by, its just gotten worse, fundamentally, both here and the rest of the world, in terms of printing, and I've begun to look at it as the total of all paper money and debt around the world as compared to the quantity of gold and maybe silver, those being acceptable as money.
Looking at stock market charts priced in gold tells a much truer version of recent history, IMO. Those in power and their predecessors, especially since the nasdaq bubble have basically been trying as hard as they could to debase and devalue the dollar in order to slow/stop/reverse the trade deficit, I think, but have failed miserably in all aspects except for speed of debasement. They now are REACTING to each threat as they appear, and obviously they see a huge threat or wouldn't have reacted.
Yes, WHO will lend California or Illinois money? Or the US government, for that matter? Who in their right mind would lend big money to the drunken sailors of the world, knowing it can NEVER be repaid? So the Fed prints, and Prints, and PRINTS, just to keep the music from stopping and the Ponzi debt scheme being revealed to the world...
Note: I do have a degree in this crap, but they never taught anything like this. It was all graphs of supply and demand, etc., and nobody ever would have suggested it was all a big fraud.
Interesting take TOF. Thanks.
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