Saturday, January 29, 2011

1/29/11 Hard Rain, No El Nino> Headed Higher



We finally got a decent pullback, which cleared the air like a hard rain. A few more showers over the next week or two, perhaps. But I see no end to the bear drought. Certainly no El Nino. The problem with thinking we sell off hard is I can't think of any reasons not to hold stocks right now. Sure, I try to open on weakness and take profits on strength, but that's within the context of playing dips/rises on a road that leads higher.

The first rain tends to wash rusty nails onto the streets, which can flatten a few tires. I would view the pullbacks in stocks like CSCO/GE/INTC/MSFT as flat tires. Patch 'em and get back on the road.
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48 comments:

  1. ChickenpookieJanuary 29, 2011 at 8:54 AM

    Gone are the dark clouds that had me blind?

    Catch you guys later, me and Pooch-La-Rookie are headed out to care for Doodle-Ducks. Sad note, Chickie Bock-Bock is AWOL and we believe Raccoons are the culprit! ;(

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  2. 2nd_aveJanuary 29, 2011 at 9:07 AM

    cp- You and Pooch need to grab the shotgun and go after Rocky. Real life drama. We want real-time video feeds.

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  3. 2nd_aveJanuary 29, 2011 at 9:32 AM

    Re: Traffic Tickets/ The other city by the Bay
    Submitted by 2nd_ave (5190 comments) on Sat, 01/29/2011 - 12:31 #78585 (in reply to #78583)
    Speaking of Oakland, I've never seen a major city head downhill as fast. 10-20 years ago, I used to dine/shop in the Grand Lake area around Lake Merritt, or meet friends for dinner at Jack London Square. In contrast, here's a story printed in today's Tribune:

    http://tinyurl.com/475lx47

    I can't remember the last time I took an Oakland exit.

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  4. ChickenpookieJanuary 29, 2011 at 9:40 AM

    Okay, all points bulletin red alert, here's Chickie Bock-Bock's picture with her babies from last spring:

    http://www.flickr.com/photos/58908945@N07/

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  5. 2nd_aveJanuary 29, 2011 at 9:49 AM

    What's with the 1997 date stamp, CP?

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  6. ChickenpookieJanuary 29, 2011 at 9:49 AM

    Oakland is a great place to turn around when you forgot something and have to run back home. Just don't exit the clover-leaf.

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  7. ChickenpookieJanuary 29, 2011 at 9:55 AM

    Sorry about date, my camera batteries are always dead and setting date/time is low priority when the urge to point and shoot beckons.

    Last known where-abouts: Fly-pen, 1/27/2011

    Be on alert for chubby looking predator types wearing masks.

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  8. teamonfuegoJanuary 29, 2011 at 10:08 AM

    Good post 2nd. I totally agree. I don't see major reasons for a massive selloff yet. The sign posts are still pointing to greener pastures. There are things in the background (rising commodity prices turning into weaker margins, required US govt spending cuts (due to worries about govt debt) hurting revenues at major corporations) that might spell trouble but they are still at least 6 months off.

    By the way, did you guys see that ANR agree to buy out MEE? The coal sector, what with civil unrest in the middle east causing oil prices to rise and it being a major source of electricity and energy in rising emerging markets, should continue to rise over time. I'm long BTU and BTU calls and expect them to reward me nicely.

    I'm working today on one of my clients that is an energy hedge fund and man did they make some awesome bets. They loaded the bought short Jan 2011 puts on OIH, SWN, Suncor, EOG Resources and a few others in June 09 and again in July 09. They netted the fund massive gains.

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  9. ChickenpookieJanuary 29, 2011 at 2:27 PM

    Missing Chicken Report Resolved

    "Cloud-9, Somewheresville — An Red Alert was canceled Saturday afternoon following a missing chicken report and thorough investigation by authorities. A 5+ year-old chicken was found well hidden but accounted for in good condition, the alleged offending intruder was promptly apprehended and taken into custody.

    "Fortunately, there was just one resident casualty noted." said authorities, "an otherwise useless male duck." Local residents remain somewhat shaken and unsure but life should soon return to normal."

    Peace Out ;)

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  10. ChickenpookieJanuary 29, 2011 at 3:14 PM

    What does Morgan Stanley say about inflation expectations? I recommend reading the entire article (In case my clip distorts the spirit of this article).

    1/28/2011
    "1. Super-expansionary monetary policy in the major developed economies is imported by emerging economies' central banks through (US dollar) soft and hard pegs.

    2. Having gained a toehold in EM, inflation is re-exported into developed economies through more expensive goods exports.

    3. Rationally inactive central banks in developed economies accommodate this imported inflation, ultimately risking a domestic inflation take-off.

    Note that this global inflation loop will remain operational until one of the two sides decides to normalise its monetary (or exchange rate) policy. Whether this will happen in time to prevent the global inflation merry-go-round from becoming an upward spiral remains to be seen.
    • Reduced visibility because the bumpy, below-par and brittle (BBB) economic recovery implies that it is better not to act. Put differently, given that inflation is the lesser evil - compared to the risk of a double-dip and/or deflation - we think that central banks will be inclined to act in a way that makes inflation, rather than deflation, more likely (see The Global Monetary Analyst: Better the Devil You Know, August 18, 2010)."

    http://www.morganstanley.com/views/gef/index.html

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  11. illiniJanuary 29, 2011 at 3:17 PM

    Michael Santoli in Barron's with a report from "the mystery broker" who is usually right on. Jan 15 is the date.

    http://online.barrons.com/article/SB50001424052970204555504576075912564465004.html

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  12. ChickenpookieJanuary 29, 2011 at 3:22 PM

    Could someone please translate this, is there a double negative in here? My question is, was this a net short or net long position? Thx!

    "They loaded the bought short Jan 2011 puts"

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  13. illiniJanuary 29, 2011 at 3:24 PM

    CP-- Seems likely that inflation is finally coming, per the MS article. It's what Uncle Ben wants to boot. He thinks he can contain it.

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  14. ChickenpookieJanuary 29, 2011 at 3:27 PM

    TOF - Did you note that Chevron just announced their intention to jettison their coal interests?

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  15. ChickenpookieJanuary 29, 2011 at 3:31 PM

    illini - Yes, "Better the devil you know". It's a long and arguably in-depth report/article/advertisement I wanted to somehow share without colorizing.

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  16. ChickenpookieJanuary 29, 2011 at 3:34 PM

    BTW - I found the MS article practically the best means I know imaginable, almost completely by accident.

    Was my stumbling on this really a coincidence? Yo no tengo!

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  17. illiniJanuary 29, 2011 at 3:36 PM

    Oh Oh, the MS guy says it's the wrong kind of inflation (wonder what the right kind is?):

    "The wrong kind of inflation? We have long been of the view that central banks in the major developed economies will likely generate, or at least acquiesce to, some inflation - given the backdrop of a shallow recovery, lower trend output growth in the medium term as well as high public and private debt levels (see The Global Monetary Analyst: Debtflation Temptation, March 31, 2010). Having inflation arise from external sources would, however, be the wrong kind of inflation. More expensive imports mean a reduction in disposable income for households and in profits for companies - hardly helping overlevered public and private sectors. However, with imported inflation pushing inflation expectations higher and central banks unwilling or unable to respond to the rise in non-core inflation, the chances are that domestic wages and inflation will also pick up eventually."

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  18. ChickenpookieJanuary 29, 2011 at 3:43 PM

    I'll add that from my perspective, inflation is finally upon us in many ways with few exceptions. IMO, Ben's primary targets of course are housing and imports, so I'd say we're not quite there yet.

    He's got just one shot at it and he's likely to err on the inflationary side.

    So I don't comprehend gold falling off, aside perhaps for a brief period in the "super-special-enhanced" cycle?

    Allow me to add in a secret-squirrel hand-shake at this juncture as a special good luck precautionary measure. IOW, WTFDIK!

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  19. ChickenpookieJanuary 29, 2011 at 3:54 PM

    Please be advised, I want to reiterate that many years ago I suffered a severe attack of Boolean Brain-lock that I have never fully recovered from, so my personal conclusions should always be suspect.

    As a result, I always solicit thoughtful argument.

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  20. illiniJanuary 29, 2011 at 4:06 PM

    What I know is that my pension got no inflation increase this year nor last and neither did Social Security recipients (I am not one of those). Insurance premiums continue to rise though, including Medicare Part B. And now many other things are rising, including food and chicken feed, I hear.

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  21. ChickenpookieJanuary 29, 2011 at 4:06 PM

    illini - He didn't state if that was the "wrong" kind of inflation, he questioned if it was.

    I say it's precisely the type of inflation Ben is anticipating and further, it is his target and that he's going to embrace it for much longer than you and I can imagine.

    If allowed to pursue his path, He won't react meaningfully until after a capitulation event.

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  22. ChickenpookieJanuary 29, 2011 at 4:26 PM

    CALM - Speaking of chicken food, I stand firm on my belief that CALM is at a wonderful entrypoint b/c personally, it wouldn't make much difference to me if a dozen chicken eggs cost $1.50 or $3 assuming I were craving a chicken egg breakfast (not that I ever would).

    Keep in mind, prices don't always follow conventional wisdom.

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  23. teamonfuegoJanuary 29, 2011 at 4:37 PM

    CP - Sorry meant to say "They sold Jan 2011 puts on OIH, SWN..." that is, they sold a crapload of puts on all of these energy names during both selloffs, probably because they knew that the Fed would do whatever it took to inflate things and that would basically jack up all commodity based names. The 2008 selloff was probably the greatest opportunity to buy energy names that we will ever see again. There are only a certain amount of finite resources that we have and when they're gone we either need alternative sources or we're effed. I have faith in mankind but until then I think we will be dealing with much higher prices across the board. And much more rioting.

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  24. illiniJanuary 29, 2011 at 5:19 PM

    Calm--Looking at the 3 year chart you can see a lot of CALM-ness in that stock. Pays a good dividend too.

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  25. ChickenpookieJanuary 29, 2011 at 6:13 PM

    TOF - Thanks for the clarification, puts/calls references are frequently "black-magic" terminology to me.

    "they sold a crapload of puts"

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  26. ChickenpookieJanuary 29, 2011 at 6:24 PM

    CALM - Igor recently shared this idea and I've been struggling to follow. I'm impressed by his run-away January AMAT pick.

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  27. DavidJanuary 29, 2011 at 9:51 PM

    Here is a great article from John Mauldin about the latest GDP number and about our unsustainable government spending trajectory:

    http://www.investorsinsight.com/blogs/thoughts_from_the_frontline/archive/2011/01/29/a-bubble-in-complacency.aspx

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  28. ChickenpookieJanuary 29, 2011 at 11:33 PM

    David - How does any of this qualify as new information when he doesn't even consider cutting the military budget? My gauge of when Congress is inching towards change begins to move only after something realistic happens to the military budget. That's when we know they're getting serious, all else is just empty rhetoric IMO.

    Remember when Obama publicly told McCain last year that the election had ended? Well, the election may have ended but the political campaign never did!!! In otherwords, they still haven't accomplished jack squat. Their standard mode of operation relies heavily on problems resolving themselves without any coherent action on their behalf, which explains why we are where we are today. Why should we think they might implement any time soon?

    Remember all the hemming, hawing, and foot dragging while Wall Street was collapsing? If not some form of diversion, then it must certainly be a display of incompetence.

    It's mostly up to Ben's hustle, IMO.

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  29. IgorJanuary 29, 2011 at 11:35 PM

    CP - I sold my AMAT position on friday at $16.23. I got INTC to replace it at 21.75. It is my third time of taking a shot at the stock but seems like lot of investment guru's see value in it and with 3.5 % divident and 10 P/E things probably won't get much worth. Sorry did not get around to posting on Friday, too much excitement from the dip.

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  30. ChickenpookieJanuary 30, 2011 at 10:52 AM

    FTWR - Is it cheap enough yet?

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  31. JBmaderaJanuary 30, 2011 at 11:40 AM

    not for my pocket book CP, FTWR will need to come down a lot more before I wade back in.

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  32. ChickenpookieJanuary 30, 2011 at 11:59 AM

    JB, Yeah, I kinda agree re:FTWR. Anyway, do you have any feeling for CSCO's opportunities in the cloud space?

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  33. ChickenpookieJanuary 30, 2011 at 12:08 PM

    Reliable Wealth Creation Metric?

    "America’s Best and Worst Wealth Creators
    The EVA/MVA Ranking is a Trailing Four Quarter analysis of covering the Russell 3000 companies across approximately 60 major sector aggregates - now it is available daily upon request."

    http://evadimensions.com/products-services/data-services/ranking-files/ranking-sample-file-request/?redirect_to=&freq=4

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  34. ChickenpookieJanuary 30, 2011 at 12:40 PM

    Egyptian Fallout?
    Wonder if Egypt's ousted leader has a Swiss bank account loaded with his fortune and if his dirty Swiss laundry will be aired just as happened with Tunisia's Ben-Ali?

    The Swiss will be under pressure to cough up the info, which might result in a cascade to convert a few/numerous very large Swiss accounts held on behalf of global royalty into physical gold, etc.?

    This could get interesting...

    http://www.zerohedge.com/article/tunisiaswiss-banksgold-%E2%80%93-what%E2%80%99s-next

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  35. JBmaderaJanuary 30, 2011 at 1:09 PM

    CP - interesting that you ask about CSCO, certainly they are a critical component of the cloud backbone but what I would like to see would be for them to make acquisitions and get into the apps host, AMS, SAAS, private cloud space...they have the cash to do it. F*ck the telepresence bs, and go enterprise apps in the cloud!

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  36. ChickenpookieJanuary 30, 2011 at 1:20 PM

    JB, thanks. Incidentally, CSCO ranks fairly high on the wealth creation metric list I found earlier today.

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  37. illiniJanuary 30, 2011 at 2:55 PM

    Here is another interesting site for evaluating a stocks value: http://www.valuepro.net/index.shtml. It is an older, little known site that uses fundamentals. You can use the default values or your own guesses for things like interest rates and growth rates. You can see how sensitive the valuation is to different parameters. CSCO fair vaue is 35.73 using the defaults. If you up interest rates or reduce growth rates, valuation declines well below $30. Note : ValuePro is not good for financial stocks, per FAQ.

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  38. MarkWJanuary 30, 2011 at 2:55 PM

    That's about as much girls soccer as I can watch for a weekend. Time to get back to work.

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  39. MarkWJanuary 30, 2011 at 3:42 PM

    ES @ 1264. Let's see if it will hold support/50dma @ 1260ish.

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  40. DavidJanuary 30, 2011 at 3:53 PM

    Here is an interesting article that explains how a perception of improving situation in Europe was probably the main cause pushing the US markets to a new high last week:

    http://www.financialsense.com/contributors/chris-puplava/will-subsiding-fears-over-euro-lift-markets

    Here is a link focusing exclusively on the progress in Europe:

    http://dianchu.blogspot.com/2011/01/euros-reversal-of-fortune-outlook.html

    So I guess we should all watch JPY:EUR closely at http://www.x-rates.com/d/JPY/EUR/graph120.html and if the chart breaks out to a new high following a strong down day on Friday, then we should turn our bullishness up a notch (or decrease our bearishness down a notch).

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  41. MarkWJanuary 30, 2011 at 4:10 PM

    David- MOG's business' have a lot of exposure in EU. Last time we talked about it, about a month ago, he said it was strong.

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  42. MarkWJanuary 30, 2011 at 4:44 PM

    Wouldn't it be a riot, pun intended, if the events in Egypt prompted renewed interest in the streets of Iran?

    http://online.wsj.com/article/SB10001424052748704832704576114341062301846.html

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  43. 2nd_aveJanuary 30, 2011 at 5:50 PM

    I don't understand the implications of unrest in the Middle East sufficiently to guess how the US markets react tomorrow.

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  44. 2nd_aveJanuary 30, 2011 at 5:58 PM

    What I will say is that the negativity is welcome relief from a sentiment standpoint.

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  45. MarkWJanuary 30, 2011 at 6:15 PM

    ES green. Kinda looks like the Egypt thing for now is a fart in the wind....So to speak :)

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  46. MarkWJanuary 30, 2011 at 6:16 PM

    Have a good weekend 2nd?

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  47. MarkWJanuary 30, 2011 at 6:18 PM

    RB- Is this the last weekend you need to spend in the county jail to finish your sentence? Next time opt for the work release program. Goes much faster.

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  48. MarkWJanuary 30, 2011 at 6:20 PM

    Not that anyone gives a rats ass, as JB is so fond of saying, but CNBC is actually doing live coverage right now.

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