Sunday, November 2, 2014

11/2/14 Defiance

Were I to characterize the 2009-14 bull market in one word?  Defiant.  It has consistently defied both expectations and precedents, most recently reflected in the pace and extent of last week's rebound to new highs.  We've seen similar rips higher, but usually in the context of bear markets.

What's next?  I don't have a clear take.  The closest I can come is the Summer of 2000, the week I happened to tune in to Bob Brinker's Marketimer when he casually suggested to a listener who asked whether she should hedge her bets, 'How many times do you expect the market will allow you to return to the trough?'  I expect weakness in the weeks ahead (and therefore have no interest in going long), but I also respect the bullish tone (and don't plan to fight the trend).

216 comments:

  1. Interesting. I was thinking it felt more like 1998 when we had Russia financial crisis and had a sharp pullback for a couple of months before a strong bounce (like we just had), then a ramp up into the end of the 1999 and the eventual blowoff top in 2000.

    But I am more positive on the markets in general, and we all tend to look for anecdotes that support what we want to see, so I don't think you can put too much faith in stuff like this and you just have to play the market as it comes along.

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    1. 98 is what I was thinking too.

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    2. The dow index only rose 10% in the span of a few days, it shouldn't be too difficult to pick a move like that out of previous charts, I guess.Wonder how risky the VIX is here?

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  2. CP, be pretty rare to get a spike top in Natural Gas in November. February makes a lot of sense as that is middle of winter.

    Right now, nat gas seems to be trading on weather patterns and expected weather for the winter. They've been able to catch up storage injection with the warm fall, but are still below normal and the winter forecasts seem all over the place.

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    1. Yep, despite natty production is probably at all time highs still storage isn't exceeding 5yr ave., thus consumption demand must be strong? Oh, but what's the incentive for producers if price remains low or crashes?

      I look at BAS and wonder how much of their business is oil vs gas, the Permian is primarily oil, I think. And look at that volume, woo-hoo!

      Insiders dumped though, same for ENPH.....???.

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    2. With these important commodities (people staying warm is more important than trading them), information is quite plentiful:

      http://www.eia.gov/naturalgas/weekly/#tabs-supply-2

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    3. Yeah, I see that. Still don't get your point, assuming there was one.

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    4. You asked (I thought) about "consumption demand must be strong?", so I was just pointing out this web site which has consumption demand stats for the last week by source (click on demand table on the 3rd chart) and the yearly chart for consumption is you click on "Daily Supply/Demand Graph".

      So it is a good source to understand Natural Gas consumption trends, in my opinion.

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    5. Ah yes, I see the daily supply/demand growth. It seems they're both trending upward and supply appears to have been on a leg up from beginning of Oct.

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    6. Not sure what you meant: "be pretty rare to get a spike top in Natural Gas in November."

      b/c it's not clear if natty has bottomed although it may have done just that. Thus, a spike bottom in late Oct / early Nov. is more along the lines of what I'm anticipating.

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  3. SPX - ~1905 Gap up remains open, right at that support level of Aug. low. hmm... If we came back to retest that level successfully, a giant iH&S would be fprmed, huh?

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  4. Does it look like Retail got the hose on the Sept/Oct dip?
    http://www.finviz.com/futures_charts.ashx?t=ES&p=d1

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    1. Similar situation on this chart:
      http://www.finviz.com/futures_charts.ashx?t=NKD&p=d1

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  5. If this can be trusted, looks like people are buying the dip in good. It's interesting because I saw another report which said gold bullish percent was at 0%, which you think would be a good sign to buy, but last 3 signals of this were during the current downtrend and have lost money.

    http://thereformedbroker.com/2014/11/02/the-riskalyze-report-advisors-buy-the-dip-in-gold/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+thereformedbroker+%28http%3A%2F%2Fthereformedbroker.com%2Ffeed%29

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    1. I guess they're betting the US dollar can't keep going up forever? I guess a big part of the US dollar tailwind is energy production.
      http://www.finviz.com/futures_charts.ashx?t=DX&p=d1

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  6. NWLI has outperformed CP off the recent lows, but not the 52wk low..

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    1. NWLI now up 21% YTD. Most of the other life insurers flattish this year. But easier for NWLI to go up when it is so undervalued compared to the market, its industry and past valuations. Larger ones like MET are still cheap, but need signs of improving business to get a higher valuation.

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  7. Jeep and Ram pace Chrysler's sizzling October • 8:46 AM
    Clark Schultz, SA News Editor
    Chrysler Fiat Automobiles (NYSE:FCAU) announces it recorded its best October since 2001.
    Brand sales growth: Fiat +1% to 3,725; Chrysler +17% to 27,456; Jeep +52% to 55,198; Dodge -8% to 41,512; Ram +36% to 42,499.
    The automaker says it ended the month with 84 days supply of inventory vs. 71 days last month.

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    1. Ram is a brand now I guess, not the same thing as a Dodge Ram.

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  8. BXE - If I can catch a low bid buyer to dump a few shares onto then I can sell fewer shares to lower/eliminate my '14 tax liability.

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    1. Does it make any sense to do that? Which one of you guys wants to be my low bidder?

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  9. Sold that Redding Bank, BOCH, and am looking to potentially redeploy into FCAU. FCAU has pulled back some this morning, but just watching for now.

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  10. OIBR - Hoping this one comes back to me, stick bid @ $0.41

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  11. AGO - I probably shoulda bot this or NWLI on that last pullback... Just trying to figure out what to do with BXE, it's been consuming me, distracting me.

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  12. KB - Could be a good opportunity to jump on this one at some point, Japan's QQE stimulus is likely the cause of the pullback. Consider, Japanese autos are cheaper than Korean autos now. Or, maybe that's bullish for Korean aluminum, not sure. At least I can say KB does move in both directions, unlike BXE

    Does it seem like autos are moving toward aluminum instead of steel?

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  13. Those October sales numbers were pretty amazing man. Jeep is on fire.

    I found out from my old boss that he bought 200k shares of FCAU at the market on Friday which was obviously the reason the price spiked so much. I never understand why he does that when you can buy just as many shares over 20 trades and only pay $200 and probably avoid a $60k jump in your cost basis.

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  14. Just in case your wondering I'm still alive. FCAU @ 10.82 would entice me though.

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    1. Hey that's my average price

      How was your weekend?

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    2. put yourself in the mindset of someone that wants a piece of the ferrari brand. in 6 months people will be clamoring for shares of FCAU to get in ahead of the IPO. shit people pay gobs of money for those hats and shirts with the horse on it, how much do you think they will pay to actually own a piece of the brand?

      i'm mentally prepared for $2 downside risk vs $20 upside over the next 12 to 18 months.

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    3. Good. Sacramento for State Cup tourney for Hailey. Thankfully the weather was great. How about you?

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    4. How did she play? We had a solid weekend. My son Jett got to sit in the cockpit of an air force helicopter which was pretty awesome.

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  15. BWA/GT - Shouldn't these be in the mix, does it make any sense these should move up?
    NWLI - Oh no, someone already wants to take gains?
    PCRX - I guess the bounce is over and now we should expect a bull flag formation (successively lower closes for up to ~ a week or so?) going into the launch.

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  16. BALT - This sucker is truckin.... But this isn't likely to be a good Q, maybe need to raise cash?

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  17. Whoa what happened with BSBR? dividend?

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    1. Seeking Alpha:

      BSBR
      Santander Brasil slides continues as Banco Santander boosts stake
      It's a second day of sharp losses for Banco Santander Brasil (BSBR -7.8%) after Banco Santander (SAN -1%) on Friday announced plenty of willing takers for its exchange offer for shares in BSBR it didn't already own. About 13.65 of BSBR's share capital tendered, boosting Santander's stake in its Brazilian unit to 88.3%.To pay for the deal, Santander will issue 371M shares, or roughly 3.09% of its share capital.Also not helping BSBR today is a 2.3% decline in Bovespa.

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    2. Is this a buying opp?

      TOF- She played well. They advance to the semi-finals in 2 weeks in Manteca.

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  18. BALT- Won't the HAVE to raise capital?

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  19. Holy crap, look at WTIC dive. Interesting, we can't even break up through the BB and close at all times highs despite energy prices fell into the crapper? BXE trades like AUMN and SVM did before going sub $2

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  20. Oops, Twinkle Toes slipped in the mud, so it's Hoof Hearted by a whisker in the forth turn..

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  21. Re BSBR, I took the buyout and moved on and can't really comment either way.

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  22. Crude Oil: I really have zero interest right now in playing these. Despite what everyone says, this is a cyclical industry and it was on the mother of all bull runs for 15 years and has gotten everyone convinced its a long term bull run with many many years left. No thank you. I'd rather focus on companies that will benefit from lower oil. Companies selling gas guzzling SUVs and race cars is one idea I have in mind.

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    1. I'm sure there will be plenty of opportunities ahead and am not going to rule anything out. But bigger picture charts suggest to me that there is a lot more downside risk if this is a cyclical downturn in crude oil.

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    2. This is an older chart but look at it:
      http://www.marketoracle.co.uk/images/2010/Dec/crude-oil-forecast-8-2.gif

      Could it come all the way down to its old breakout level of $40? Why not? We know how these cyclical downturns work. That would obviously cause some major pain for the market & economy I would think. But from a sentiment standpoint it kind of makes sense give how everyone assumes higher oil prices are a part of life and everyone bought into the energy independence idea. Remember coal supercycle? I don't really know enough about energy to give an educated opinion but nothing would surprise me.

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  23. Added 50% to my FCAU position earlier today at $11.20. Should have waited as $11.15 now, but had some stuff to do.

    My average cost is now $10.63. Would likely add 1 more tranche if we got a decent pullback.

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    1. Nice entry. Anything under $15 I think is a very good entry, even assuming a substantial market correction and a weaker IPO for Ferrari. Marchionne laid this all out perfectly. Speculation about future production increases will only drive the value higher and he was smart to talk about it on the last call.

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  24. Opening a position in the long bond via RYGBX at the close.

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  25. PCRX went long 90.89

    Oil would not be surprised to see $75 WTI

    looking at FCAU

    would feel better in SPX did not Vee gee

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    1. quick someone go short opposite me so someone wins!

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  26. Looks like the Saudi's are going "all-in" on oil.

    http://www.theglobeandmail.com/globe-investor/inside-the-market/market-updates/saudi-arabia-pricing-move-sends-us-crude-tumbling-to-two-year-low/article21427416/

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    1. Ha, special discount for US customers only? Too funny.

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  27. Mazerati sales continuing to grow. People liking the new less-expensive car. Could be like when BWM introduced the low end 3 series for aspirational buyers and to grow profits without diluting the brand

    http://www.virtualpressoffice.com/publicsiteContentFileAccess?fileContentId=1795906&fromOtherPageToDisableHistory=Y&menuName=News&sId=&sInfo=

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    1. I'm interested in seeing what they do with Maserati. I think it has the potential to be a Porsche like brand. Porsche's valuation, standalone, is right around $18 to $20 Billion in my opinion, based on the $11 Billion valuation in 2012 it received from the VW acquisition, and adding in substantially increased sales since then as well as an improved market.

      The Cayenne, when it was introduced, was seen as something that would really dilute the Porsche brand but it is now their best selling car and has helped boost sales for Porsche to close to $10 Billion. I think it now accounts for about 50% of Porsche's sales. Maserati has plans to introduce a SUV.

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    2. Dont forget one other thing with Ferrari - They sell their engines to Maserati and this will be a good revenue source going forward. I think Ferrari will be pitched as a technology company just as much as a car company and will demand a premium pricing for this. Maserati has been growing revenues really really fast. In October, sales grew like 200% year on year and they're expecting about 37k to 40k sales vs 15k sales last year. Maserati will be introducing a Ferrari engine SUV next year as well.

      Also, based on average selling price, at 37k sales Maserati should be able to do $3.5 Billion in sales, which is starting to creep up into the Porsche territory. With a SUV and expanded dealer network I would think they could get to $5 Billion in sales. So if the Ferrari IPO goes off well I bet there will be speculation about a Maserati IPO some time later next year. The two combined assets should be worth at least $15 Billion and possibly as high as $20 to $25 Billion by the end of next year after accounting for growth. By comparison, FCAU is worth about $14 Billion.

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    3. They really do have a lot of good assets and Marchionne looks to be trying to surface this value.

      The other thing I was thinking is that they are very few independent car companies out there, so that could add to Ferarri's uniqueness value. But, on the other hand, it could be a target for many companies (maybe Asian) trying to get better brand recognition. Like what Tata

      Tata bought Jaguar and Land Rover from Ford for $2.3 billion back in 2007 (Ford needed cash then). Ford bought Jaguar in 1990 for $2.5 billion and Land Rover in 2000 for $2.8 billion.

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    4. I still can't believe what a steal Tata got back then

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    5. Good to be a buyer when you have a desparate seller.

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  28. TWTR - Twooter got smacked, cheap enuff here?

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    1. Love it in the low to mid 30s for a trade

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  29. Wonder why Saudi Arabia doesn't just buy US oil interests? One of the best tactics I know of is to hire your enemy.

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    1. What I think they are doing is what you see low cost producer often do in commodities. When prices are weak, flood the market and drive the weak competition out of business and set yourself up the next cycle.

      You see the same thing now in iron ore with BXP and Vale or RIO (can't remember which) bringing big supply on, even though the market is weak now.

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    2. Okay, that could be another possibility. Wonder if SA is short, big pockets can burn the candle at both ends.

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  30. WTI breaking down

    trading at 75.99

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  31. Good numbers out of BXE and looks like a big beat. Hope the market recognizes it though and the news doesn't get swamped by the oil/saudi news.

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    1. Down on good news, not sure how to interpret that considering it's down more than most (which has been a theme all along).

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  32. BXE - A price leader, this morning.

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  33. I would think low oil prices should lift indexes, maybe the price war is priced in?

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  34. Added some @ $4.13 ugh, couldn't help myself........ Due to this alone it's gonna go LOW, LOW, LOWER.

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  35. LGCY - This one pays a nice dividend,

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  36. Buying the morning selloff in miners. High risk trade, backstopped by extreme negative sentiment/position size.

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  37. Do you guys know, if I sell a partial position can I take the tax loss or do I have to exit the entire position?

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    Replies
    1. You can take the tax loss on a partial position.

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    2. Cool, thanks! :) I gotta save some cash in case the entire sector manages to catch the price leader and if that happens will shift stuff over/around maybe. LGCY knows how to pay a dividend, some others might learn how too....

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    3. So perhaps I can take advantage of first in first out to push my tax liability into '15 or beyond.

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  38. Wonder if SA can wave their magic wand and cut natty prices too, doesn't seems possible.

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  39. Looks like the oil to gas ratio is correcting back to historical norms via a huge drop in oil. That thought was in the back of my mind when I first looked at that. $40 oil and $3 Natty?

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  40. I'm still thinking we correct 2-3% heading into the Thanksgiving day week, then rally into year's end. hopefully we don't give back more than that.

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  41. BXE for its stellar earnings, the mwkt it treats it like s--t

    just an observation

    XLE low around 77.50, most big caps above previous panic lows, testing those lows will be interesting points of interest for traders. The small caps oils/NG's just seem to break to new lows.

    I will not be surprised if we break 70 WTI going forward.

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    1. also BXE went on short sale restriction on IB, that's usually bad for the stock for three days including today FWIW

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    2. Okay, thanks. I think I see a potential target of $3.50ish from Aug 2012

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    3. basically given back that whole move from that point CP and down 64% from this years highs



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  42. XLE

    previous lows come in at 37.40, 2009 and 54.26 2011

    long term trend line coming in around 72.50

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  43. Duh the obvious play on weak oil was FDX and UPS and JBHT. Shit even YRCW. That was boneheaded of me no to think of that. They are one of the world's biggest consumers of oil. Its the golden age of shippers.

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    1. And hotels, except for ebolatels.

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    2. Cruiselines too. I was cautious on airlines / cruiselines just because I thought the ebola fears would linger but that's obviously not the case.

      I still think the autos are the next logical beneficiary. The majority of profits come from truck sales and they do well with lower gas prices.

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    3. Yep, definitely pickup trucks and SUV's, once market anxiety settles down. TVIX @ $2.80 woulda been a nice trade, huh? WTIC Oil -10% in two days is a sight to behold.

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  44. Nobody wants it, they just want out. Not sure if fading the crowd is the right move.....?

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  45. 2 leads to 8, so $3.82 -> $3.88 Someone opened a position, it seems.

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  46. LGCY - Closed the gap up, this was one clue not to but any y-day. Now where, lower or not is the Q, gotta think lower.

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    1. Maybe retest previous low, anticipate a ton of bids around $18.22?

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  47. TLM - This one had earnings today as well,

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  48. NWLI - Ton of volume y-day as well, two consecutive days.

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  49. STX - This one's green, maybe with cheap oil aluminum econobox cars are unnecessary? I'd rather have an aluminum car myself, or one with plastic exterior panels like GM used on some vehicles for a good while now. Rented an wheezer Pontiac Bonneville in early 2000 and drove that thing all over Tx. one just one tank of fuel. I think it had the tiny 3100 V6 in it but man fuel mileage rocked big time and who needs to race anyway? (Okay, maybe race a rental)

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  50. RTH - Wow, retail hell's been kickin' it.

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    1. Yeah man another oil beneficiary for sure.

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  51. DB - Gaped down, so far a higher low over the past 5 days... Seems pretty low risk if you think Germans are weak as opposed to obstinate.
    BWA - These guys make the turbochargers required to make tiny hot econobox sewing machine motors with sprayed-in iron cylinder liners scream bloody murder.

    Even Ferrari realizes turbo is the future, no more unturbo'd engines in the lineup. So your Maserati is turbo too, right? Not sure who makes these turbos, Italian company? The Varian molecular turbo pumps were all made in Italy, Japanese (Ebara) really put the squeeze on the sector.

    Wonder who makes the cylinder liner coatings and spray guns?

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    1. It might be APD, those guys were looking high and low for anything and everything they could spray about 10 years ago. They kept asking me if we had anything that might need spray coating with metal particles.

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  52. Nice red to green flip in the coal stocks. Those look interesting for a trade, especially if the GOP sweeps. I wouldn't trade it for more than a week or two tho

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  53. Guess I was wrong on thinking BXE quarter beat expectations. Saw the EPS expectation and that was beat, but missed on cash flow. Going to listen to the concall and see if I can figure out what happened.

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    1. Yep, looks like estimates must've been a bit "frothy".

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  54. Bought a whack of shares in DM.TO at $0.415. They are small Minnesota miner being bought out for $0.45 in January by Angofasta.

    The way I look at it is a pretty guaranteed 8.4% return or over 50% annualized. The risk is that if the deal collapses, I probably lose 75% of my money, but that rarely happens and over the long term, I've done well with these arb type plays,

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  55. This bull market could really be fueled significantly higher if oil makes its way down over time to $50. Could you imagine that? There would obviously be some pain in the energy sector but think about the impact that has on profitability of so many industries.

    Granted this is all probably just politics as I believe oil dropped hard right before the 2012 elections too.

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    1. Interesting, huh? Perhaps SA is proactively popping bubbles before they get too far out of hand?

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  56. Remember when everyone hated nat gas and wanted oil - tables sure have turned.

    Some talk nat gas could have a really strong winter if it is cold again.

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    1. Probably too early to talk about everyone hating oil. Lots of dip buying going on in oil / energy sector still. Not even close to capitulation from an sentiment standpoint.

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    2. I agree about too much sentiment towards oil remaining too high, especially from the perspective if global markets roll over oil will likely continue the slide.

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  57. According to Canadian Inaider, BXE has the most institutional buy filings on the TSX last week.

    A lot of this was Orange Capital continuing to buy.

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    1. Yep, the (US$8.50?) offering looks well executed from down here as well.

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    2. Orange's cost basis was recently around C$7.90, or so?

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  58. LEJU has been on a nice run of late.

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    1. I'm comparing it to XIN, from a book perspective seems vastly different. Same for P/S.. When you're hot, you're red hot.

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    2. well they have far less risk than XIN. they're basically a nationwide brokerage with the ability to scale easily and without much $$...and with no debt risk.

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    3. Good point, risk assessment! NATI wasn't terribly risky at $27 a couple weeks ago, BXE was highly risky at the time, at least as risky as NATI is right now.

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    4. CP - It's all about risk assessment..especially if you take a large position in something. I won't be able to sleep at night without knowing what's my downside risk. With FCAU, in particular, you have an asset that will be IPO'd at a valuation of anywhere from 60% to 80% of the entire company's market cap, along with another asset (Maserati) that makes up the difference. Both brands should do very well in a sharp drop in the economy as they sell out every year.

      Nothing is perfect, though, and the market can often do some really irrational things, like trading BITA down to $3 a couple of years ago, for example.

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  59. So due to today's purchase then in order for me to avoid qualifying for a "wash sale" and actually process my FIFO the intended way then I need to hang onto my new shares for at least 30 days?

    "Generally, you can't claim a loss for tax purposes on a trade if you bought what the IRS calls "substantially identical" shares within 30 days before or after the trade that generated the loss. This is called a wash sale. Brokers such as Merrill Edge will report wash sales only if the securities are "identical" (and not merely "substantially identical").

    So it seems like 31 days or so and also 62 days before end of year might be key areas to watch for tax loss transactions?

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    1. Currently: 57 days, 8 hours, 16 minutes, 40 seconds until Thursday, January 1, 2015 (Annapolis time)

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  60. http://www.bloomberg.com/news/2014-11-04/bellatrix-to-mull-orange-capital-changes-correct-.html?cmpid=yhoo

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    1. damn that stock is cheap

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    2. And mainly natural gas, so shouldn't be getting hit as nearly as hard as it is by falling oil prices.

      Oh well, I plan to just sit and wait. The Saudi's could make the next year tough for everyone, but in the long term they need high prices as much as anyone.

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  61. Very interesting article on FCAU today:
    http://www.bloomberg.com/news/2014-11-04/vw-combining-with-fca-would-be-brilliant-krafcik-says.html?cmpid=yhoo

    Interesting that Marchionne discussed this at length on the conference call last week and also here:
    http://www.bloomberg.com/news/2014-10-08/fiat-chrysler-s-marchionne-foresees-car-deals-creating-new-no-1.html

    This all ties in with a Ferrari spinoff right now.

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    1. Makes a lot of sense. Would be easy for VW to afford FCAU.

      VW actually has a lot more high end brands than I thought, so would know how to leverage Maserati and Aston Martin (and Ferrari if they are quick enough)

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  62. Here it comes, typical P&D handiwork: Adam Gill, an analyst at Canadian Imperial Bank of Commerce, said as he downgraded his rating on the stock today. “We no longer see the deep value we once saw in the story,” Gill said in a note to clients.

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  63. (a) Reopened GDXJ two minutes before the close @ 24.43 (bidding 24.64 after hours, so hoping I bottom-ticked this sucker). Also holding half positions in SLW and ABX which I opened on afternoon weakness (but somewhat above closing prices).
    (b) Opened XLE @ 84.27 after hours. Gas and oil service companies have sold off hard the past two days.
    (c) RYGBX closed up just +0.35%.

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    1. RYGBX closed end of day (it was a one-hand bet, and I had 62% of the port riding on that one).

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  64. How did we all miss the NGas rally?

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    Replies
    1. Did you think cheap SA oil fire sale would make NG production increase or decrease?

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  65. More of the same, stocks are sold, not bought. "we are lowering our target price to $7.00 from $10.00"

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    1. $C by the way, don't confuse that meaning either.

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  66. Republicans gained control of Senate? Wonder if that's coal bullish/NG bearish?

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  67. BDI - Sure has risen, cheap commodities I guess? Or Chinese buying season maybe and this time India probably more than ever. Rail did note their coal transport were up 7%

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  68. Gold is plunging almost -30/oz in London, with silver futures -4.5%. Helped in no small part by a spiking $USD (+0.7%). A strong dollar is taking its toll on emerging markets currencies as well, with most Asian markets trading lower and EEM off -1% pre-market.

    (a) I'll take the hit on miners today, which even at half-position sizing will likely eclipse gains booked yesterday. Might an oversold bounce be around the corner? Sure, but I don't have the luxury of waiting.
    (b) XLE bidding higher pre-market (+0.5%), in line with opening indications for US indexes in general.

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  69. ING confirmed today that they are making the final payment to the Dutch government this week, so setting themselves up to reinstate dividends next year. Profits were also up, and the stock is up 2.5% in Europe this moring.

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  70. Another 476,000 shares of insider buying (buyer not identified, but assume Orange) for $2.2 million yesterday. Seems like they are going all-in.

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  71. I'm tempted to add big to ING, although I'd like to do so on a pullback.

    Anyone looking at coal companies today?

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    Replies
    1. Brad, the one I've been looking into is Standard Chartered in the UK. They are a UK listened and governed bank with trustworthy accounting , but do all of their business in the emerging markets. Sub-10 p/e, below book value and 5% yield. Seems like a good way to get emerging markets exposure with less risk.

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    2. Thanks, I'll take a look at it. I need to allocate some savings into stocks, and a dividend payer would be good to have.

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  72. The Contra the Heard guys, who have an excellent long term track record posted this on the globe today. They often buys stocks that I shake my head at and are easy to dismiss, but they are quite good at picking bottoms and getting very good prices:

    "Currently, our stock watch List includes coal, oil and gas, drillers and gold outfits. U.S. financials, which have been heavily featured in our purchases over the past number of years, still offer potential."

    The contrarian buying season starts now
    Oct 31, 2014 by The Contra Guys


    Yes folks, this is it, the time of the year when we typically do the vast majority of our buying. Why? Well think of your job or hearken back to your student days when faced with a distant deadline. Of course, you got things done well in advance but so many of your colleagues waited until the last moment. Such is the way with tax loss selling season, which is moving into full swing.

    While people have all year to sell faded positions, many delay their decision. Then they dump their losers, increasing the supply of certain companies, and lowering the price as per Economics 101. That’s when we like to get in on the demand side of the equation.

    What usually follows is the Santa Claus Rally and the January effect where stocks have a tendency to do well. On average, this works out to about half a per cent. Historically we have noted that the companies we buy tend to bounce upwards even more after tax loss selling abates and attention is garnered from a new crop of investors.

    This annual cycle never seems to change. It proves reliable year after year. Worth noting is that our buying is not extensive - in a normal year one to four positions will be added to the two portfolios.

    Our cherry picking is very company specific. Beaten up positions that institutions would steer clear of are those that capture our interest. But we do love sectors that are out of favour. Currently, our stock watch List includes coal, oil and gas, drillers and gold outfits. U.S. financials, which have been heavily featured in our purchases over the past number of years, still offer potential.

    That does not mean that we will necessarily buy anything in these arenas as we still need to find a few candidates with suitable balance sheets, income statements, cash flow and financial ratios, along with numerous other metrics. But these are indeed playgrounds that offer intriguing possibilities.

    Unfortunately, not all of our picks work out, so tax loss selling becomes a wise move at our end too. It is important to take advantage of the rules of Revenue Canada’s system to reduce our annual pledge. As a general directive, our losers are weeded out in the spring, long before tax selling. Sometimes, we will even repurchase these stocks later in the year, obtaining the benefit of cheaper prices and hopefully, future capital appreciation.

    Currently, our focus is to pare down the many nominees that we scrutinize throughout the year to reduce them to a short list of contenders. Out of those, the goal is to pick our future all-stars. Upcoming columns will feature a number of those. Call this the teaser. Please stay tuned.

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  73. The Senate is about to get a lot more polarized. Political scientist Alan Abramowitz put it flatly in a
    discussion with the Washington Post's Greg Sargent: "We'll have a Republican caucus that is more
    conservative than it is now, and a Democratic caucus that is more liberal than it is now, [because] you're
    subtracting moderates from the Democratic caucus, and adding very conservative Republicans to the GOP

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    Replies
    1. caucus." If one of the problems voters had with Washington was that nothing got done, it's not going to
      get better after this election.
      The Election – And The Fed – The Republicans taking the Senate may make things uncomfortable for
      President Obama but it may also present problems for Janet Yellen and the Fed.
      Rand Paul may push his plan to audit the Fed. There is already a proposed bill in the House that would require
      the Fed to put forth a plan specifying just how they would raise rates.
      Senator Shelby of Alabama, a vocal Yellen critic may get the Chair at the Senate Banking Committee.
      Stay tuned, things may turn different quickly.

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    2. They'll still find something that went right to take credit for!

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  74. Poor gold! (Yes of course, and poor oil too). Reps are dollar bulls, right?

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  75. Out of all positions. A +1% gain in XLE (sized at 4x my positions in miners) outweighed a -3% loss in miners. You could say I made a getaway in my Aston Martin by greasing Goldfinger's windshield.

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  76. Brad,

    here's a take on ING from a smart, deep value guy from Canada. He's sees the stock as having a great balance sheet, very cheap still, a catalyst with the dividend - thinking US$25 in a couple years, plus dividends, so 85% upside say. Says it is getting hard to find cheap stocks, so if he sees ING as cheap, probably still is. Hard to buy when up so much of course, but still well down from 2007 highs.

    http://www.bnn.ca/Video/player.aspx?vid=484283

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  77. OIBR - When you see those tails like on those first 3 bars, does that indicate short covering? I never could figure those out.

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  78. BXE - Maybe I shoulda' added twice y-day...

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    Replies
    1. CP- Here's a neat trick I do. Just look at the position value and not the basis :)

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    2. TD downgraded BXE from buy to hold today. Love how stocks can be buys at $10, but holds at $5.00. Target is C6.00.

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    3. BB - I also like when analysts recommend holds on stocks they have price targets of 30 to 40% higher. Then what the hell is a buy!?

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    4. Big haircut on the position value! I think I kinda get what you mean but didn't bump up the position size enuff?

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    5. Nice to see BXE working today for you guys

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  79. Replies
    1. Not sure really but if they do a raise maybe I can get back in around $3? Shipping has me nervous b/c I dunno how many newbuilds are being splashed.

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  80. Contra the Heard - are those the guys that were buying that gold stock, HMY? That thing is down 50% in 3 months.

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    Replies
    1. That is them. Although their purchase on HMY was $2.42, so down 30% from their purchase.

      It's not that unusual for a stock to go down on them after purchase. I think it is to be expected when bottom fishing that you buy too early sometimes. And they certainly get some wrong. But overall their track record, while lumpy, is very good (18% annualized for 15 years)

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    2. Yeah I hear ya on the going down first. In fact that is pretty much exactly how all of those stocks turn out. I remember SUNE back when it was at like $3 and it collapsed to the $1's shortly thereafter, only to skyrocket to like $20. I've found more luck waiting for what I perceive to be clear signs of a bottom, then jumping in.

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    3. Yeah, it's an art, not a science for sure.

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  81. I'm opening one small long-term position: GDX @ 17.05. Miners are now trading -20% below their 2008 low. If we define 'long-term' in years, this is a tradeable low. Famous last words, perhaps.

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  82. Wow. Really good numbers out of Chrysler just now. They did sales of $20.9 Billion and Profit of $610 Million in Q3 alone. I take it the Fiat brand is the dog of the group then. If I combine a reasonable valuation of 10X annualized profit of $2.4 Billion I get $24 Billion. Again, this excludes Ferrari, Maserati and Alfa Romeo (another $12 to $18 Billion, depending on who you ask). Compare this to the mkt cap of FCAU

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    Replies
    1. Chrysler makes up 70% of sales. they did a run rate of $2.4 Billion in net profit. let’s say Ferrari is worth $10 Billion. That means the company excluding Ferrari is worth $4 Billion. What the market is saying is that the remaining company is worth 0.05 times annual sales of $82 Billion and 1.5 times net profit. By comparison, the average of Toyota/GM/Ford trade at 0.6 times annual sales and 12 times net profit

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    2. joined you guys on FCAU at 11.05

      MDW spatic, but you have to expect that with these things and the price of gold did fall out of bed this week

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    3. Yeah, if FIAT could get rid of FIAT, they'd be a better company!

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    4. Ferrari is an Italian icon, a big blow to Italian egos. Any big Italian companies that might buy it up?

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  83. BALT - Getting whacked on earnings....

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  84. Report from TD today showing, as of yesterday, gold down 12% from the July 11 peak, but gold index down 38%, some stocks like AUY down over 50%. Today, gold stocks down less than gold, so maybe things are changing.

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  85. BXE - I have to think $4.46 is the resistance and BXE gets rejected numerous times or maybe just once, before the next leg down....

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  86. It's mind blowing that BDI took a dive and of course ran right back up, timed perfectly to make bulk shippers into money losers. Now if BDI takes another plunge from here then holy shirt Batman, shippers get killed.

    Is it safe to think winter coal deliveries and economic growth in general have pushed BDI back up?
    BTU - Hmm, must've received an RFQ for a couple boatloads?

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  87. GGN - If you want to play gold, why not collect a dividend?
    DBC - Surely as the global economy continues it's exponential expansion commodities demand should not shrink?

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  88. BXE - Took gain on y-day's purchase, $4.13 in $4.35 out. Not sure what the tax consequences are, in my favor or not... Most likely not, no doubt.

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  89. PCRX - Oops, looks like my stink bid triggered @ $89.22, and wow, heading down....

    ReplyDelete
    Replies
    1. looks like it wants to go to the 200 day, long it too

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    2. Yeah, unfortunately. You still feeling better, getting your strength back? :)

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  90. BALT- I don't see any earnings report.

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    Replies
    1. Oh sorry, thought there was one for some reason. I was teleported to after market close I guess?

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  91. ENPH- Highest volume other than IPO.

    ReplyDelete
    Replies
    1. Yep, forgot the broker target, was it $10?

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  92. Aramco oil pipeline explodes near Sudair in Saudi-Arabia

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  93. BWA - Kicking some tail, I guess the F ordered a couple pallets of turbo chargers for their aluminum pickups.

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  94. FEYE - Insiders unloading, FireEye 'kicking butt,' CEO says at CNBC -14.98%

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  95. CP- ENPH pt range from 13-20ish.

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    Replies
    1. BACML is $16, currently shown as neutral "Enphase: Strong 3Q14, but margin guidance below forecasts November 05, 2014"

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  96. Weather may be setting up for bad driving, but good nat gas prices:

    http://blogs.wsj.com/moneybeat/2014/11/04/natural-gas-soars-on-fears-of-a-polar-redux/

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    Replies
    1. It has warmed up here for the past few days, we're well into the mid 50's bumping into 60's and kind of a mild fall really but feels like it's on the way.

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  97. Bill McBride, who seems to have a good handle on the economy, does a good job of laying out why the economy and jobs should improve over the next few years - assuming the government doesn't do anything dumb!

    This is in line with my theory that we are in the midst of a long cycle whereby things gradually but continually improve and the market goes up for many years.

    http://www.calculatedriskblog.com/

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  98. NLY - My broker is so negative yet price doesn't fall, "Missed estimates"

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  99. DB - This one is so tempting, b/c I KNOW banks are the recipients of central bank currency manipulation.

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  100. PCRX - Off the cliff, that's what I expected. I think we are being shown what to expect when expectations are not up to snuff. Same thing happened to BXE, a series of disappointments.

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    Replies
    1. PCRX 200 day average is around 85, could be a good place to get long. It came close today, so that may be the short-term bottom. We'll see.

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  101. PETM - We just bought some flea stuff for the dog y-day at this store and damn if it wasn't more than 2x the ebay price, approaching 3x

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  102. ANR is close to a 100% move off the low.

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  103. CLR has exited all it's hedges.

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