http://www.economist.com/node/1270474
'In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could.' -Rudiger Dornbusch
(a) The Euro off another -0.75% this morning.
(b) Crude off another -3.8%, extending the fastest collapse in oil prices since 2008.
(c) Copper futures at a 52-wk low.
(d) Brazil's Ibovespa off another -2.27% in early trading. After spiking +8% (in five trading days) from its mid-December lows, the index has now given back -6.8% in six trading days.
YANG - Short China ETF might be something to consider? Based on the premise China is slowing and this is a large part of why commodities (Iron Ore) have been trending down for so long.
ReplyDeleteHip-hip hurray for the big pump and dump!!!
ReplyDeleteBXE - Sheds $0.20 at the drop of a hat. We need another pump and dump SA article to get this one up a dime or two.
ReplyDeleteSPXS - At least this one's working for me. Not sure what makes you guys not take on a short at low risk points, all new highs have been great opportunities for placing a hedge and at some point the market will roll over (if europe does QE or if europe crashes?).
ReplyDeleteMarket was priced for perfection?
Insurance - So how do these Treasury buyers make money by loading up on high-priced treasuries and holding them to maturity?
ReplyDeleteHere is 20 of the strongest SP 500, if you owned these last year you had been up about 40%.
ReplyDeleteALL
CFN
CHD
CME
CVS
ED
GPC
KR
LNT
LOW
MAC
NU
ORLY
PLL
PNW
ROST
SCG
SIAL
TEG
TJX
Time to get back into it boyz.
ReplyDeletedue to what? whatcha buying?
DeleteEurope and China are slowing so quickly, Saudi Arabia has to lower their prices by 50% in order to keep their economy from crashing too.
ReplyDeleteOf course I'm the only one posting on TT who has noticed this, excess current accounts from europe are responsible for the US market rally, misplaced capital bubble created by central banker policies creating mega bubbles (China has been one of these mega bubbles and now will return to 3~4% growth.
http://blog.mpettis.com/
YANG is a great find, thanks CP.
ReplyDeleteBXE - Wow, what a turd full of debt.
ReplyDeleteTBT - Okay, wondering why this one is crashing too. Is it b/c the global economy is expanding at an impressive clip or is it more likely that markets are considerably overvalued?
ReplyDeleteThere's a lot of near deflation in the air so bonds are getting a bid. Not sure which one prevails longer term.
DeleteI would also add that yields are falling in Europe and investors are looking for yield.
DeleteThe gov'ts have totally f--ked retiree's who want to live off their principle through fixed income investments.
Welcome to the new normal.
T3 - I honestly think this has nothing to do with the governments of the world. There was way too much debt and I think the desire to add more is gone. Everyone continues to avoid risk.
DeleteI would respond by saying governments and central banks are tied at the hip. The central banks of the world are driving
DeleteZIRP policies throughout the globe.
If they were not printing money and and buying hand over fist rates could have an opportunity to find natural levels.
It would not surprise me to see rates go to 1% or less in US on the long bond.
DeleteYep, central banks are causing volatility b/c each bout of QE results in another bull trap bubble. Bubble creation isn't accomplishing anything aside from trading opportunities for computers.
DeleteThis sums up what they done.
Deletehttps://www.youtube.com/watch?v=wrPvZg042RA
This guy understands it. Notice, he's not a gold bug or even a conspiracy theorist.
Deletehttp://blog.mpettis.com/
ALDW - Hopefully you weren't under the impression diesel fuel prices in West Tx. have bottomed, there could be considerable downside?.
ReplyDeleteI was busy selling all of my FCAU this morning in pre market and after the open. Not sure what my average was but I took a 2% or so hit. I'm 100% cash now.
ReplyDeleteMy main concern is the euro bringing down the rest of the market (and FCAU). I think it's susceptible to a crash at this point which is crazy to think given how weak it is, but that's how crashes work. I feel like if the market is going to tank 10 to 15% it would be right here at the open of the year because no one seems to be positioned for that right now. Probably wrong but I feel its prudent to take it off here and wait for a cleaner entry or one on sheer panic.
Yep, could be auto industry sales subsidies have peaked. GM seems to have setup a bull trap.
DeleteFCAU failed at the 50 dma
DeleteThis one's racking up losses for me as well.
DeleteMore Sugar! All we need is another promise of central bank QE and we can add to shorts into the resultant rally. If emerging markets can't get traction then nobody can.
ReplyDeleteFRO - Rent a tanker. LOL, you'd be better off shorting $SPX, IMO.
ReplyDeleteThey love Marks ENPH
ReplyDeleteSP slice thru 50 dma
Now the US will allow importing of european horse meat labeled "beef"?
ReplyDeleteGas tax - Repubs want to raise gas taxes since the economy is doing so well. Say what? Oh please, these guys really don't have a clue as to what's really going on?
ReplyDeleteFCAU - $20, you say? How about $5, instead?
ReplyDeleteI don't know man I think it will be really hard to get it below $11. Look at the ridiculous amount of volume that went through after the secondary / convertible which priced at $11.
DeleteI'm looking to re-enter here with the thought it's low risk.
KMX isn't a subsidized bubble either, nothing to see.
DeleteAlright, but I'm starting to get tired of this BS.... The only thing that's working is shorting new highs but eventually those new highs will stop happening.
DeleteBut the high-end $$$ supercar theme is a huge plus considering they may sell more of those than subcompacts.
CP - I'm not sure what you mean by the BS.
DeleteRegarding subsidized, I do see that the rise in the average selling price is higher than the rise in sales. Perhaps there were more incentives included but that industry always offers incentives. FCAU is all about Ferrari and their premium brands in my opinion, like Alfa Romeo coming to the US and expansion of Maserati. When you have an entire company trading at less than 1/10th their revenues and a division is going to IPO at like 20 or 30 times higher valuation relative to sales, then it makes the entire company worth more. Additionally, I think the expansion of Jeep into China will be a positive.
Who knows man. I'm still liking the story a lot. 20% sales growth is no joke for such an enormous company.
By BS I meant price action.
DeleteOUTR - This one's going that way at the moment too, buy low sell high is the mantra.
"Chesapeake Bay is in imbalance due to runoff from farm fields."
ReplyDeleteUmm, what farm fields? Piss on my shoe and tell me it's raining, farms are few and far between in comparison to previous decades. What about all those new sewage treatment plants built in the last decade that overflow into the rivers at most heavy rainfall?
SPXS - Notice this one is up 5% for no particular reason, mostly just b/c the economy is growing rapidly. Do we have some idea of how much of US growth from the past couple years is attributable to the oil industry growth?
ReplyDeleteF - "Sales below expected", "GM's recalls weighing on stock"
ReplyDeleteDB - Under $30 is not good
GREK - Merkel refers to "Grexit"
EPV - This one has broken out, much like SCO did.
ReplyDeleteOne of my long shots of the year is STXS. They got FDA approval today and the stock is up about 25%. But the bigger positive is they're steadily creeping toward breakeven. Last quarter they only had a $1.1 Million operating loss thanks to gross margins expanding significantly as a percentage of revenues and cost reductions.
ReplyDeleteFD: I bought some shares today. I've had this one on my radar for a while and was looking at it a little closer a few weeks ago but unfortunately passed on it around $1.50 or $1.60 bc of this FDA ruling. They sell systems and get recurring revenues much like ISRG on a much much smaller scale.
it's still a speculative stock but if they can get to breakeven this could easily double from here.
The FDA approval isn't that big of a deal its the progression toward breakeven. Even if the approval is a marginal improvement for sales going forward it could be enough to propel them over the hump. Insiders have been buying some shares lately.
DeleteISRG could buy this at the blink of an eye.
DeleteRobot short from 2046, a couple days late IMO.
ReplyDeleteSo let's say the truth comes out in 2015 that Europe must break up b/c it's an unworkable system. How should we position ourselves? Is long FCAU and DB good places to have capital allocated?
ReplyDeleteThat's a dream scenario by permabears and doom and gloomers in my opinion. Highly doubt anything remotely close to that happens. Maybe a few more days of selling to get people all frantic then the ECB drops a QE bomb on the market, the euro rallies and european stocks rally hard.
DeletePermabears I dunno but isn't this why Europe can't escape their slide? The common currency won't allow rebalancing that needs to take place?
DeleteFind me a stock that's trending up on the good news you say is occurring and I'll consider it, fair enough?
DeleteHere, read this carefully and tell me if it seems to make any sense (all except for India might buy iron ore, India needs steel yes, but they have plenty of iron ore and no coal, so he's not exactly right on that idea (assuming I know what I'm talking about and my info is correct) but his concept seems sound:
Deletehttp://blog.mpettis.com/2014/10/how-to-link-australian-iron-with-marine-le-pen/
Jesus. Glad I had to work today.
ReplyDeleteGee, here's another person who thinks we get a 1% handle too.
ReplyDeletehttp://www.zerohedge.com/news/2015-01-05/scotiabanks-haselmann-30-year-will-trade-one-handle-2015
I agree with you FWIW, there's no reason for rates to lift and plenty reason for them to fall. All you have to do is look over a few charts and you'll clearly notice that most stocks are moving down, not up. Start with BDI for one, and explain how that chart is bullish.
DeleteJNUG - Wow, look at this thing. Now $32 from a high of $400.... What are the chances it regains some of that?
ReplyDeleteWonder if Silicon Valley can survive a Chinese transition? Are we about to discover China is shifting their emphasis from infrastructure build-out in favor of technology? Just a thought, wonder if the next computer I buy will have an operating system developed in China?.
ReplyDeleteVNM - Kinda surprised this one is getting smacked too.... EPI has held up well so far.
ReplyDeleteEWI - Fell out of it's channel, the press would have us believe today's selling was due to oil but I'd go further and say it was due to Europe and specifically "Grexit"
EWS Could be a good entry here.
ReplyDeleteVE - This ticker is gone?
CAT - Downgraded too, construction equipment isn't needed when there are no infrastructure projects globally (Panama Canal comes to mind).
ReplyDeleteFRN - No growth?
$US - Man, this thing just can't seem to take any breaks.
ReplyDeleteGermany will probably make out like a bandit with the lower euro. Why mess with success? France likely doesn't mind either. Wonder if the Swiss gave up on their euro peg?
ReplyDeleteHABT - New low for this burger joint that was formed circa 1969 How many stores, with 2800 employees must be quite a few? I guess each one might be worth $1M, rough generous guess?
ReplyDeleteEWJ - This one sucks, considering all the billions thrown at markets.
ReplyDeleteKITE - Good name for a stock that keeps going up.
ReplyDeleteSPXS - Taking this one off here.
ReplyDeletePCRX - In @ $86.82
ReplyDeleteBALT caught an upgrade today.
ReplyDeleteFRO is the one to own today, just don't keep it too long I guess?
DeleteGetting back into the swing of things.
ReplyDeleteGenerally, I think I like what I am seeing in the markets with the market fear starting to ratchet up, but the economy seeming to continue to do well - at least auto sales are.
I think the Euro is in a long term downtrend, but that makes sense as the European economy needs a lower currency to fix things and the US is doing so much better. If you look at long term charts for the Euro / US$, it bottomed in 1985 around $0.65 and in 2000 around $0.85, so I don't see any reason it couldn't happen again.
For the Euro stocks, it is both good and bad. It helps exporters of course and companies with high debt, but does mean stocks denominated in Euro's lose value as they translate to US$. Each company is different, so you want to buy the winners of this environment.
FCAU's business seems to be rocking and is approaching Ford and Toyota sales levels in the US. Marchionne appears to be a man on a mission and good to ride along for the next couple of years. I think the end-game is he sells out to one of the big guys.
If we get ECB QE at the Jan 22 meeting, the market probably starts to rally in advance of this, but could be the catalyst for the next broad leg higher. I think the Euro stock market weakness is just the market telling the ECB they better go ahead and do this now or watch out - same as happenned in the US before QE announcements the last few years.
DeleteHave a good trip amigo?
DeleteSo DB is probably not good to own due to the currency devaluation, same for AEG/ING, is that correct?
DeleteYeah,. great time. Beautiful weather. Stayed just on the edge of Play del Carmen, really nice beaches. Took the kids with us, so a lot more drinking than usual, but kept up pretty well.
DeleteGot out of the airport last night to 5 degree Farenheit weather - no-one was too happy to be home!
"Took the kids with us, so a lot more drinking than usual, but kept up pretty well."
DeleteIs that how they do it in Canada?
All-inclusive resort and my kids are in the early 20's, so prime overindulging ages and they took advantage
Deleteoh, very nice! i was just kidding of course.
DeleteGreek business liking the dropping Euro and oil prices:
ReplyDeletehttp://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_04/01/2015_545932
It's easy to find misleading articles.
DeleteWhy would you think this is misleading? For a tourism heavy, oil importing country, lower Euro and energy prices would probably be 2 of the best things you could hope for.
DeleteFrom the point of view that everything I've bought in the past several months drops like a rock. So maybe in a couple years, or some time following "GREXIT" there will be an entry.
DeleteFirst, we deal with reality.
BXE - Still dragging me to the poor house, amazing stock.
ReplyDeletePCRX - Good God......
ReplyDeleteOut at $83.11 - Market is looking really good today???
DeleteI'm feeling awfully stupid today. I bought a big position in TZA pre market at $11.63 and then for some idiotic reason sold at a minor loss at $11.6 and now am watching them print $13.06. I also sold FCAU at $11.4 yesterday and almost added back at $11.17 yesterday only to watch it roar to $11.69 today. Oh well.
ReplyDeleteAdded a little STXS but sitting on 95% cash for now. I like the europe idea. Maybe we will get some more pain first. Have to dust off the 2012 S&P charts vs the dates of when QE was announced / started.
Re the Euro:
ReplyDeleteDB is a global investment banks and large local German bank, so lower Euro hurts local profits, some global repatriated profits would be better, but overall negative. But it is a very cheap global bank, so if you beleive they can work through things and not raise more capital, the upside outweighs.
ING is turning into a mostly European bank, so lower Euro would hurt, but the Dutch property market is improving, they are implementing a dividend in 2015 and it is still good value, so I would hold.
For AEG, the currency doesn't matter much as much of the profits come from the US, so the bulk of the profits in US$ get translated into more Euros, but the stock is priced in declining Euros, so it kind of offsets each other. Also, it is very cheap because of some past issues and the cleanup seems to be proceeding well, so I will hold.
My way of thinking is no-one really knows what will happen. Probably the Euro continues to decline, but maybe not. Europe will not be horrible for ever, so you want to buy the Euro-stocks you like when they are cheap due to currency or other reasons and then sell them when they get revalued higher.
CP, when you talk about GM being a "bull trap", what are you saying? I like the fundies of GM and their business appears to be getting better and I think the stock is acting well, but like to understand other perspectives like technical charting.
ReplyDeleteActually from the point of view of the chart it doesn't look too bad actually but at top of BB now so maybe needs to consolidate?
DeleteYou need a subscription, so I pasted here. These guys are contrarian bottom pickers with an excellent long term track record. They typically hold 3 -5 years, so not short termers. Worth a read if you are thinking Russia worth a shot:
ReplyDeleteRussia-linked stocks
Dec 29, 2014 by The Contra Guys
Odds are that if Pyotr Ilyich Tchaikovsky somehow has access to the world today, he would be far less concerned about the price of oil and the gyrations of the Russian economy than how many places are playing his creation, The Nutcracker. Perhaps global stress would be reduced if more people dropped their gazes from how much it costs to fill up the tank and watched his (arguably) greatest work.
Let’s face it; the Russian economy is a mess. Earlier this month, the interest rate was pumped from 10.5 per cent to 17 per cent like a nightmare from A Town Called Panic. A primary goal was to reduce the fall of the cascading ruble, which seems to be going down almost in tandem with the slippery slide of oil prices. Plus, the powers that be in Mother Russia hope to restrain capital flight as corporations and citizens do not want to be caught with a currency that is rapidly losing its buying power. The government has been extolling the virtues of the lid on inflation to the citizenry, although that cap could be blown asunder with the assault on the ruble’s value.
As contrarians, when a catastrophe is the order of the day, our attention turns to the investment opportunity and Russia is certainly easier to buy into than the old days. There are numerous ETFs that will cater to those wanting Russian exposure, as well as a number of American Depository Receipts listed in the United States. One that is on our Stock Watch List is Mechel OAO (MTL-N). This is a huge mining and steel outfit that had revenues of about $8.6-billion last year. It lost more than $2.9-billion, the second year in a row the bottom line was particularly ugly.
DeleteThe first nine months of this year was not an improvement as revenue continued to tumble to $5-billion and the red ink bled to the tune of $1.2-billion. The stock price that tickled $57 in 2008 and started this year above $2.50 currently is fighting to tread water at $0.75. It might get worse quickly as the company has suspended principal and dividend payments on the fat debt of almost $8-billion. That news led Moody’s to downgrade the company to a limited default designation. Bankruptcy is quite possibly looming on the horizon, although a deal was just announced with the Eurasian Development Bank pushing out some payments to 2016. The extent of the problems made us decide to view this one from a distance.
There is also another major reason to stay away. Corruption is rife in Russia and doing business there can be difficult, with different parties often taking their piece of “skin”. Given the level of dishonesty, we simply find it better to invest in safer climates. It can’t be ignored that President Vladimir Putin can change the rules pretty much on a whim and that means more instability for investors. This does not preclude us from buying into this market; it simply means that the positives have to be really powerful to counteract the negatives.
These problems have impacted our view of Kinross Mining (K-T), a classic contrarian play. The stock price was hammered with the battering of the gold price and the enterprise’s heavy debt load. In addition, the corporation garners about a quarter of its revenue from Russia and many potential investors – including us – are quite concerned that President Putin might decide that Kinross should suffer repercussions, perhaps even become a Russian entity, as he engages in verbal fisticuffs with Prime Minister Stephen Harper.
Overall this company that currently trades at around $3, down from north of $20 in 2009, is attractive by many metrics. The cost of production last quarter was only $698 Au eq. oz; all in sustaining cost was $911 Au eq. oz. The current debt is a mere $60-million with the repayment timetable on the $2-billion of long-term debt fairly reasonable. In addition, the company has a rich history, operating since 1972, and has been able to ride out previous storms in the commodity patch. At this point we are watching it closely, comparing it with other gold producers in the field, none of which are close to slam dunks in our minds as investments. However that Russian bear is unpredictable and people choosing to buy into this company are taking on significant risk. It is akin to playing Russian Roulette.
Its just my gut instinct but I believe we haven't seen the bottom in Russia. I think the panic a month ago was a taste of it but I think we will see new lows and then a final flush lower where it drops relentlessly for a couple of weeks. It's at that point that I hope to pick up some YNDX.
DeletePCRX - WTF happened to PCRX man, it blew a gasket?
ReplyDeleteLook up...the sky is falling!
DeleteYeah, it fell on me! :(
DeleteIt moves faster than I can submit a bid. by the time my bid is ready to submit price has changed $1
DeleteThis thing trades really thin with wide bid ask spreads.
DeleteI'm 95% cash with just 4 LT holds which generally bleed.
RJA PCRX HAL FCAU, inclined to add PCRX when mkt stabilizes. Health Care was a strong sector last year and they just seem to be selling everywhere for now with a little love for the miners and a heart of gold.
Doing nothing is just fine here, too.
Solar flares anyone?
Seems like anything that pays a dividend is holding up?
ReplyDeletewow this is ugly. i'm thinking my decision to sell a 50% position in TZA this morning at $12.60 was a bad one. effin A
ReplyDeleteYeah, market looks fantastic as long as I don't pay any attention to price action.
DeleteSP 1980-1960 seems likely
DeleteLong a little JDST at $9.75 just hoping for a reversal. Seeing lots of gloating in the permabears / gold bull camp.
ReplyDeleteAdded some more at $9.55.
DeleteShould've known today would be a down day, joe sixpack saw the news last night and responded by hitting the sell button.
ReplyDeletePCRX - I am so pissed! :(
ReplyDeleteI have no clue who jigs this stock but they are experts at taking you out of your position.
ReplyDeleteYeah, they did a good job today. Too good for me.
DeleteCMC - Better than expected for this steel play. Down on good news isn't bullish.
ReplyDeleteTook a loss on JDST at $9.5. Trend day all day looks like
ReplyDeleteJust thinking, if Greece does leave the Euro, I bet it will be a great place to vacation this year. I bet we'd see nice hotel rooms going for US$40 if they go back to the Drachma.
ReplyDeleteI'd love to see that happen, the nightmare would finally have an ending and long term they could move on with control over their destiny instead of Germany feeding them rope to hang themselves then calling the shots.
DeleteBut, wouldn't the euro rally? I'm sure Germany wouldn't want that, nor would France.
NEWS FLASH!!!! MOG HAS SURFACED AND AM EMAILING BACK AND FORTH...TRYING TO PIN HIM DOWN.
ReplyDeleteGood, any info is welcome despite being super late and financially disruptive. A good portion of my life savings has vaporized.
DeleteJust another commodity in oversupply though, he might not have noticed.
DeleteFCAU - Missed forecasts.....This little tidbit wasn't noted here, was it?
ReplyDeletehttp://www.valuewalk.com/2015/01/fiat-selling-sex-seduction-immigrants/
DeleteYeah man, he's got the right idea.
DeleteCRUDE - The H&S should be about done somewhere near here. I didn't think it would make it quite there but the timing coincided with Europe's disagreement deadline and Draghi your foot's empty promises "Whatever it takes" QE.
ReplyDeleteWe got any targets for this one, somewhere between $9, $6 or $3 maybe?
GREK - Target for GREK....
DeletePlacing chips on the 4+10 and 5+9:
ReplyDelete(a) RYWVX (Rydex 2x Emerging Markets)
(b) RYEUX (Rydex 1.25x Europe)
(c) RYEIX (Rydex Energy)
(d) RYVIX (Rydex Oil Services)
I like the moves. I daytraded and lost some money in ERX / RUSL. I probably should have held on to them since they were only 10% positions each but I lost a quick 3% on them so I bailed. I'm down 3.5% so far this year and I've had little more than 30% on at any one time since bailing on FCAU. Wicked way to start the year.
DeleteThis market is becoming quite treacherous. I'm sticking with a large cash position for the time being.
ReplyDeletePAL vs BXE - About even I'd say.
ReplyDeleteLet's say you had an agenda to reduce or eliminate carbon emissions completely. Probably the quickest route from point A to point B I can think of is by stifling economic growth. I'm pretty sure this would also be considered by think tanks, to be the socially responsible and ethical approach, given the generally accepted urgent circumstances.
ReplyDeleteBut, you couldn't shut down defense contractors, that could put national security in jeopardy. More likely you would have to increase defense spending in order to provide an enhanced response in case of social unrest and/or terrorist attacks.
Doesn't this suggest we should be super bullish since now governments are stocked with tons more capital they must find ways to distribute?
ReplyDelete"Bonds were also in rally mode around the world, with the yield on US 10-year Treasury bonds falling to the lowest since the October 15 "flash crash" while German 10-year bunds hit records lows of 0.44%. Business Insider's Sam Ro also highlighted commentary from Citi's Steven Englander, who noted that the average yield of 10-year G3 bonds — that is government bonds from the US, UK, and Japan — was below 1% for the first time ever. Englander said it's striking this decline in yields isn't happening during the panic phase of a crisis, and reflects that investors think we are going nowhere for a long time.
We also got some less-than-stellar economic data Tuesday morning, with two service sector reports showing slowing expansion in that sector while factory orders that disappointed. Markit's services PMI reading fell to 53.3, a 10-month low, while ISM's non-manufacturing PMI slipped to a six-month low of 56.2. In its release, Markit's Chris Williamson said that the US economy lost "significant growth momentum at the close of the year," and noted that the employment component of Markit's report suggests payroll growth of below 200,000 in the US. The December jobs report is set for release on Friday. The latest data on factory orders also showed orders fell 0.7% month-on-month in November, the same decline seen in October and worse than expectations for a 0.5% retreat."
JCP in AH, upside surprise news.
ReplyDeleteMIght see quite a few good surprises in retail in Q4 and going forward with the lower oil prices.
DeleteJust finishing up my spreadsheets for 2014 and was a +21% year on my portfolio, +23% on equities only.
ReplyDeleteFortunately, my largest positions did well and I avoided hits in these - the only exception of my large holdings was ORI, but it was only down 2%. My hotel stocks were the big $ winners with the Canadian ones up over 50%, the insurers did well, but the energy stocks, which looked good at midyear turned out to be the worst. On an individual stock level, AA was my best stock of the year and UNP was steady and ended surprisingly up almost 50%. FCAU, GM and GIB were also good. The Euro stocks were down slightly as well, but had a good 2013, so were hopefully just working that off and rebuilding for the nest up move.
I think 2015 is a positive year again, but will be tough to pick the right stocks again. I think financials do well, Europe figures things out and does well and I think you want to watch consumers versus energy as one of these should do well also.
Might be the the year stocks like UNP do nothing as they have gotten quite expensive, but still don't think I would sell.
Nice BB - Congrats on a great year. It was a tricky one for sure. Could you fill me in a little more on your strategy for finding stocks to purchase? Reason I’m asking is I’m trying to come up with a better strategy to make my life less stressful so that I can spend more time with the family and manage side businesses etc.
DeleteI decided to shift around my schedule quite a bit for this upcoming year. I'm stopping work a few hours earlier every day so I can spend more time with the kids, give my wife a break, and force myself to become more efficient. Part of the efficiency stuff is setting up a portfolio strategy that is easier to manage and allows me to be more hands off. Which means I'll probably be shifting to a strategy more in line with what you're doing - i.e. focusing on larger #’s of holdings. I need to stick to it because holding fewer positions has made me become too obsessed about researching those individual stocks and watching the movements too closely, which prevents me from working on other stuff like setting up passive income streams for our family to live off of. I have come to grips with the realization that there's no way I can sustain the returns I've had the past 5 years and still live a low stress life that allows me to enjoy time with the family. Plus, I have a pretty strong feeling that I’d be a fool if I didn’t diversify my holdings now after a 5 1/2 year bull run that makes the market riskier that it was the past few years.
I've been reading a ton about different strategies that disciples of Graham used...guys like Buffett, Walter Schloss (http://www.gurufocus.com/news/138200/walter-schloss-the-essence-of-value-investing) and others. The I think I can still generate above average returns while managing a larger portfolio of stocks. The hardest part is changing my mentality surrounding my investments…i.e. not being concerned with price gyrations in the short term if nothing fundamentally has changed while having faith that my analysis is correct. A fun challenge for the new year…
I also decided to pay down all of our credit card debt last weekend and will probably pay off our car loan. When we got married 4 years ago I put the cost of our wedding on our credit cards because at the time I had a lot less money and wanted to keep the money in the markets because I felt like I could outperform any interest rate on the credit cards.
DeleteWe paid off the minimums every month and ended up paying a lot in interest but it was the right move as our money multiplied over the years. On top of that, my wife had over $150k in student loan debt that we kept paying minimums on with the hopes that I would be able to invest well and then pay that off later on down the road. This was a big hurdle to overcome but we're at a point now where I can do this and still have enough to live off of and I'm seriously considering paying it off now. The main issue as I mentioned before is our money is tied up in our retirement accounts and we get penalized every time we withdraw money (bc its an early withdrawal) so if I do it in one year we will get killed with taxes.
Yes, nice year BB.
DeleteTOF, AAII (american association of individual investors) have screens for about 30-50 of the best strategies with results over usually the last five years. They probably will give you a 30 day trail. You may want to check it out.
You are an excellent trader, it will be interesting how you handle a shift in approach. And its always good to pay down debt. Life without debt is wonderful.
Here is a link, not sure if its open to all.
Deletehttp://www.aaii.com/journal/article/aaii-stock-screens-2014-review-active-strategies-lag
This one may be better.
Deletehttp://www.aaii.com/stock-screens
TOF,
ReplyDeleteI don't know if you've seen this, but it is one of my favourites - http://www.tweedy.com/resources/library_docs/papers/WhatHasWorkedFundOct14Web.pdf
I've read lots of investment books, but this Tweedy Browne one and the Intelligent Investor book are the 2 sources are the ones that I would say I base my strategy on.
Generally, I follow the Buffet / Benjamin Graham approach of trying to be business-like in choosing investments - thinking of a stock as partial ownership of a business and the value of that business relative to the stock price. The reason it is easy for me to hold onto investments long term is if I am confident that I am getting a stock for less than it is worth, I know I have that safety net to prevent a long term loss and pretty much all stocks will approach their fair value over time. It is harder in the current market, but I love to find stocks that are half of their real value. If I can find a stock like this, and it gets to fair value over 3 years, that is a 25% annualized, which I am very happy with and outperforms pretty much everything else.
Finding stocks to buy is more work than a lot of strategies as I tend to buy ignored stocks and few large caps. I'd say my general approach is to read stuff from other investors I respect and looks at what they are buying and see if there is anything smaller and cheaper than that. A lot of it comes from stuff like - if Buffet and Tepper are buying GM, automotive must be in a good spot, so first I'll validate that and then I'll look down the supply chain to see if there are any auto parts companies that are too small for them, but cheaper or better growth that I can buy. I also consider economic trends like currently with lower oil which should help consumer stocks.
I also always set price targets when I buy a stock, so I'll have something to tweak me to consider selling. It can be things like "target price = $40", but usually it is "target price is 100% of book value" or "target price is when p/e hits historical norm of 15"
I also track my stocks across the 4 major (in my mind) market sectors - Materials, Industrial, Consumer, Finance and try and maintain a 10% minimum exposure to each in order to ensure diversification. I'm not sure if this has hurt of helped over time, but it does let me feel more comfortable about the overall portfolio.
The final thing I do is try to be aware of where we are in the broad economic and market cycles. When we get into big market sell-offs, it is great to find super-cheap stocks and just buy them. Now that we are mid-cycle, those double over 3 years stocks are getting hard to find, so I am buying more stocks that should grow with the economy and return say 30% in a year or two. My way of buying and my market outperformance is concentrated in years at the start of a market cycle, so I am trying to improve this.
But generally, to find new stocks, it is mainly just reading the news and trying to figure out what is going on in the market. I set up google alerts for stocks I am interested in and also people/funds (like Tepper, Wilbur Ross), follow guys on Twitter, sign up for fund newsletters (http://fundamentalis.com/). Then I read through this stuff and find stuff that makes sense to me. I'd never buy a stock "because David Tepper bought it", but if Tepper did buy a stock, given his track record, I'd take a quick look at and, if I liked what I saw, do more research to see if it is worth buying.
I think for you, the difference will be taking on the downside of diversifying and balancing that against your new lifestyle.
DeleteIf I look at my stocks, every stock is cheap to me in some manner, but they can work against each other (eg. my energy stocks versus my airline), but if they are both cheap, the overall return should be good. Of course not as good if you can pick the price of oil correctly and just bet that one way, but I am good with knowing I should do fine either way over time.
EDC - Capital needs somewhere to go unless we're headed off cliff and the rush to safety keeps up momentum, So, what makes sense? How about emerging markets?
ReplyDeleteALDW - I'm thinking if the West Texas oil patch is closing up shop again, then this refiner won't have as much sales as they're forced to compete with refiners outside this oil field.
ReplyDeleteBXE - What's kind of amazing is, with oil under $50 these oilers aren't trading at multi year lows.
ReplyDeleteThat is one of my concerns too. A number of these energy stocks are still higher than say 2012, but the price of oil is much lower. Looking at a chart like SU, you'd figure oil was in the $80's. I guess investors are expecting oil prices to bounce, which means if oil stays at these levels, the stocks could move lower still.
DeleteDefinitely something to monitor.
It's no surprise oil is under $50, the chart predicted it. And, the ema's rolled over on the oilers, which confirmed rough times were coming. $10 for BXE without considering the price of energy would drop considerably as new wells came on line was about as dumb a mistake as any I've witnessed, despite the flurry of bullish articles painting a rosy picture.
DeleteWhat other dumb mistakes are lurking, what happens when the EU doesn't follow through with QE?
JCP - Are these results real and sustainable? I doubt it, today's pop is to be sold, IMO.
ReplyDeleteGood report out of Saut this week - http://www.raymondjames.com/inv_strat.htm
ReplyDelete"I want to see boring, sideways charts where volume is drying up and the only articles I come across on the underlying instrument are about how poorly it has done."
For 2015, looking at small caps, Brazil and Gold - quite a contrarian set of ideas.
What will a stronger $US do to Brazil's oilers and gold? Certainly China isn't expanding infrastructure again, which requires iron ore and concrete, right?
DeleteThe place to be if any are India and Africa I think. Was Saut the one hyping bulk shipping at the top? I had major concerns about that one if you will recall...
Nothing worse than these bull traps in a downtrend.
ReplyDeleteCAH - Nice trend, too bad I'm not long this one as capital flows like water into healthcare.
ReplyDeleteMOG thinks oil will settle in around 50. His question is how long it stays there. I think for a longer term trader this is probably a good call. For us though I suspect a couple of drops lower that he wouldn't even consider noteworthy.
ReplyDelete$50 is going to bleed these guys dry till they die, isn't it?
Delete$50 makes sense. It is low enough to hurt supply decisions, but not so low that it crushes it. We need less capital going into energy to reduce the supply growth to better match demand.
DeleteMy guess would be it grinds out a bottom over the next few months.
$48 is right at the uptrend line from the lows 15 years or so ago. Seems like a logical spot for bulls to defend. I would buy UCO here.
DeleteENPH at sell by GS with a $11 pt.
ReplyDeleteI still think it needs to test 8.
DeleteCP,
ReplyDeleteYou always have to put your own take on top of things and nobody gets everything right, but generally I think Saut has been pretty good the last few years and I certainly think he is worth reading every week. Bottom picking is tough, but certainly the sentiment and chart for Brazil and Gold are beaten down. He's also not saying to buy now, he's saying:
"Being a believer in the cyclical nature of the markets, these are situations I look to add to my radar for the coming year, but I would not go so far as to call them predictions. They are more like watchlist entries, and I will then follow them each day to search for a favorable entry point to begin building a position."
I prefer to think things through and then see if charts confirm my thesis. As far as I know Saut is talking his book, or describing a scalp trade.
DeleteMy feeling is as long as capital isn't flowing into developing countries that's a signal there's more pain ahead (contraction). Lower rates don't necessarily translate into growth, a much more efficient use of capital would involve EM growth (CAT orders).
AFK isn't lifting, thus capital is being allocated towards safe havens. If VNM is sinking, that means sales of frivolous consumer junk are weak and Chinese factory workers are still sitting on their hands with nothing to do. China will try to pump demand up and thus neglect EM's? Meanwhile capital flows to safety due to contraction.
It doesn't have to be from a happy story from a stock pumper, I can see prices move. Right now some of the tanker stocks are moving b/c there's no place to put oil (excess oil due to increased production and falling demand. That will be a scalp trade, bankrupt tanker operators will dilute to raise capital.
Got back into FCAU this morning, much smaller position.
ReplyDeleteBB - Thanks for sharing your info with me. I think I have some other questions after I get a chance to read through your comments more. I think I use very similar strategies so good to know my methodology would work with a more passive strategy. I do use stock screens a lot of find stuff, though...particularly Finviz. And then I use Gurufocus for 10 year financials.
SDRL - Not much of a rally there.
ReplyDeleteBXE - See, it's red. Isn't this b/c it's bleeding money?
ReplyDeleteEuro is definitely a negative for FCAU. Look at how the stock is trading in Europe:
ReplyDeletehttp://www.marketwatch.com/investing/stock/FCA?CountryCode=IT
Up 1%
In the US its down 1.55%.
Euro is down 0.63%
I think Europe is just playing catchup from yesterday. When Europe closed yesterday, FCAU was around $11.35, but finished at $11.60.
DeleteI guess this means the debt is denominated in $US, that's why they were able to obtain financing (Cerberous?) from fat cats.
DeleteThen just publish a bunch of flashy stories about Ferrari (racing team or car builder?), oh, and Europe is not making progress as long as it remains together (no currency flexibility) it's just a play for more of the same German style lower wages imposed on workers?
So, German autos will soon be cheaper than Korean cars as well? Except for self-navigating Porches, of course.
If Europe doesn't QE, what will happen to the euro, up or down?
DeleteIf you look at a stock like SNE which makes a lot of its products in Japan and sells overseas it's a positive if their currency is lower as it reduces the price of their goods or increases their profits, relatively speaking. However, Fiat is different because they're not making cars in Europe and then exporting them out to the US for sale in the US. Instead, they're making and selling them in the US and then converting their revenues to Euros. Big difference and a major concern I have with this when I consider it from a longer term perspective.
DeleteI really thought the Euro would stabilize with QE but I'm beginning to doubt this in light of what is going on in Greece. Consider the potential for the Euro to go back down and retest the lows from 2001 of about 0.9 EUR to USD. That's a 24% drop from current levels. Obviously if everything goes as planned per Marchionne then it won't matter, but it does make a big difference. Consider the potential for the stock to go to $30. If the euro drops by 25% then this would translate to a $22.50 stock.
I think this skews the equation quite a bit and makes me think a stock like GM has just as much potential.
I hope I'm wrong and I hope the euro does rally a lot from here. In seeing how this market has worked over the past year its quite obvious that when a strong trend begins its nearly impossible to stop (eg falling Yen, rising US stocks, falling oil, rising dollar, etc etc)
Fiat isn't building cars in Europe? Not good, current Yellen FED policy is to raise US wages (higher $US does that). Fiat should be building cars in VietNam if they aren't receiving a US government subsidy.
DeleteThat's the thing, at the end of these subsidy periods the shares get dumped on retail at high prices so they are left holding the bag. Along with a fancy P&D story of course (lipstick) and scant detail about how the debt is structured.
so basically i think the stock has a good deal more upside but i think it’s not going to be as good as i previously hoped for. A good example is TM. That stock has managed to rally about 55% or so from the October 2012 lows while the Nikkei has rallied almost 100% since then. The reason for the underperformance is most likely because of the falling Yen.
DeleteThe best play on the euro dropping to 0.90 would be finding stocks that export their goods out of Europe to places like the US. Look back at stocks like SNE from the 2012 lows. That's a good example of a company taking advantage of a falling local currency.
DeleteBuffet chose GM, not FCAU...... Wonder if there's something important about that decision? Surely GM's debt is in $US?
DeleteFCAU - Red now, can't say it's trending up I think. Have autosales peaked? Too many rosy pumper stories out there all about how robust autosales are?
ReplyDeleteA broken oil patch buys no pickup trucks. Search some oil patch photos, you'll see a pickup truck for every 4 workers. Connect the dots.
DB is a gnat's butt from turning red. Downtrend remains intact, we need to see this one moving up if Europe's economy is repairing.
ING - Going to low $10, maybe lower, see chart. Europe is in trouble and it's dragging us down. China is going through a rough patch, trying to make it look good but capital is fleeing China, selling into strength and huge rotation into Chinese technology.
Come on guys, we need some real comprehensive vision here, not more of the same P&D stories.
92.33 is top of 10yr channel for $US, almost there.
ReplyDeletePCRX - Now I'm really f'in pissed.
ReplyDeleteTOF,
ReplyDeleteMaybe I should try finviz. Most screeners I have tried really haven't worked that well, so I've pretty much given up and once I find a company I'm interested in, I use Yahoo Industry profiles to see other companies that might be of interest.
I also use gurufocus. I particularly like their interactive charting, which is great for showing how a company's p/b, for example, has evolved over time.
It does sound like we use similar strategies, but you've had a more concentrated approach and pay more attention to the small moves. I think having the larger portfolio takes away the need to follow small moves. Plus, I have not done well trying to trade the small moves, so easy for me to ignore.
Yeah Finviz isn't perfect. But it helps in screening a lot of stuff. I figure it misses some and maybe some really good ones but there's so many stocks out there that its pointless to worry about the few it misses.
DeletePart of my desire to change strategies has to do with having a larger portfolio. It was a lot easier to buy $50 or 100k of something and just sit on it and not worry about getting in and out of things. Having several positions of this size will help me worry less and it will also allow me to invest in some stuff I otherwise wouldn't because of liquidity.
Being able to buy low liquidity stocks is a big advantage we have over the funds.
DeleteI own GM and FCAU, so like them both.
ReplyDeleteWith FCAU though, it is complex. The repatriated US$ profits will convert into more Euro's driving a higher EPS in Euro's, so assuming people don't adjust the p/e for this factor, the price in Euro's will also rise, but of course, this then gets adjusted back down as it translates to US dollars.
A lower Euro should help FCAU globally at some level though as I assume their debt is mostly in Euro's (haven't checked) and all their head office / corporate costs will be in Euro's, so these should come down.
GM's has good drivers with new products, lower oil prices helping truck sales (their December numbers were huge) and their large China exposure which still has a very low car/population ratio.
TOF,
ReplyDeleteI've also tried to find European export-oriented companies which are cheap and easy to buy over here, but haven't had any luck.
Let me know if you come across any.
Here's my starting point:
Deletehttp://finviz.com/screener.ashx?v=111&f=geo_europe&ft=4&o=marketcap
That actually seems to work quite well. Better than any other one I've tried I think.
DeleteWho loads tankers with oil? Does TDW have anything to do with this?
ReplyDeleteNatuzzi, the Italian furniture company (NTZ) is one I've looked at a few times and fortunately stayed away from. But it does seem like the type of company that should benefit from a lower Euro. They are in turnaround mode and about 1/3 of book value. About 40% of their revenues is from the US, so they will be more competitive there and should help.
ReplyDeleteI was just looking at this one and CBI
DeleteWow, wonder if they actually manufacture in Italy and employ real Italians? Perhaps they should move that to VietNam where they can hire eager kids for much less?
DeleteHELI - Wow, down 30% this week. Wonder if they will be transporting workers on and off oil storage barges anytime soon?
ReplyDeleteDB - I have to think these guys aren't stupid and have a good grasp of where capital is flowing thus can take advantage but my broker says they're over levered. What that means exactly I have no idea, if levered to a higher or lower euro, to oil, or whatever, I don't know.
ReplyDeleteDB is highly levered in that it's capital position is pretty good, but not great and they have the risks of lawsuits eating into it.
DeleteI think you want to buy DB if you believe Europe and the Global Economy will improve as they are mainly levered to these 2 through their domestic banking business and their global investment bank.
The stock is very cheap, which more than offsets the risks in my opinion, but I could be wrong and the stock will get hit hard if they have to raise capital again. But I like the cheap stock valuation and having exposure to Europe and global banking, both of which are beaten down too far in my opinion and should rebound over the next year or 3.
I think Europe will improve, but before that can happen there may be a substantial shock or series of shocks.
DeleteAREX, they came and hit my bid at 5.17. This is playing with fire
ReplyDeleteMy results for the year sucked, I was flat.
ReplyDeleteBut in the scheme of things I won huge as I beat Lymphoma and Leukemia at MD Anderson.
Pretty much makes the markets irrelevent - how are you feeling now?
DeleteSide effects of chemo are something else. I suppose my chief complaint would be fatigue, still up or down with no in between and my mind seems less sharp. I been told it takes about year to get back to feeling normal.
DeleteAttitude for 2015 is Blue Skies Ahead.
Stay warm up there.
Huge beat man! I'm surprised you're not all into the cancer treatment stocks based on learning probably more about them than most people could possibly know.
DeleteAll the equipment for drug delivery was CFN, Carefusion.
Deletethat's so awesome. you had the best year out of any of us.
DeleteYep, I carried someone to the hospital last week and while there noticed the CFN equipment once again, still everywhere in every room. Just seems bizarre government can force us to purchase healthcare, may as well charge us a carbon tax but not give us any carbon credits for conserving.
DeleteCFN - Another example of legislated success. There's just nothing more powerful. Take a look at coal if you disagree.
ReplyDeleteSSYS - Last week some dude on TV recommended this one. Hmm, seems to be sinking... Maybe he was selling?
ReplyDeleteStocks are sold, not bought, we have to keep this in mind when reading those rosy SA articles that don't even reference or consider the underlying fundamentals such as currency rallies, exchange rates, QE, booming expensive oil production while price is at resistance and supplies are balanced.
BB any insight on ITUB?
ReplyDeleteNever looked it. Would seem to be a good play if Brazil comes improves. I haven't really put much thought into BRIC countries lately as I think the developed economies are a good place to be as the economic cycle matures, but I'm really not sure on this.
DeleteWhat I can't figure though is how the Shanghai Stock Exchange is up 65% in the last 6 months, but the China ETF's like FXI are up less than 25%. Perhaps Shanghai is the internal market for Chinese investors, but still the discrepancy seems huge.
YANG - Another new low. Don't trade against government computers b/c they lift indexes without lifting any stocks. "Buy the index" Buffett
ReplyDeleteSXC - These guys make coke for the steel industry. I came across an article written about the time they put their coal assets up for sale which said at the time they were running at capacity. Well, the stock has crashed, so perhaps that was a pump article mentioning their great news in a misleading way?
ReplyDeletePinch me, I have two stocks that are green today despite they're under water. Oh, and my trading account is about half of what it was when I first opened it.
ReplyDeleteGEVO - Trading at $0.32 now. So I'd like to know.... when are those environmentally conscious stewards who increased my gasoline taxes going to finally get serious about investing in renewable energy?
ReplyDeleteAt least they realize the Earth isn't 6,000 years old but I have to wonder if they realize that if not for global warming, Minnesota would be 300 ft deep in ice?
RSX - Only -42% from 52wk highs, does it not track Russia?
ReplyDeleteENPH....POW!!!!
ReplyDeleteLooks like GS has bigger balls than Needham.
DeleteCP- You mentioned that some energy stocks hadn't hit five year lows like WTI. I quickly looked at OIH and XOP and both those are near 5 year lows...and shouldn't we really look at production levels over the past 5 years? A lot of these have increased production 10 fold....which is why WTI is down so much no?
ReplyDelete(a) EEM (Emerging Markets) +2%.
ReplyDelete(b) VGK (Europe) +0.9%.
(c) XLE (Energy) and OIH (Oil Services) flat.
(d) The $USD hit another 52-wk high, and appears to be pulling back.
(e) DBC (Commodities) set a new 52-wk low intraday.
(f) USO (Crude) +1.7%.
Reopened positions in EWZ (Brazil), BRF (Brazil small caps), PBR (Petrobras), RSX (Russia) and FCG (Natural Gas) early this morning.
Plan to open half positions in RYWBX (Rydex 2x Weakening Dollar) and RYMBX (Rydex Commodities) at the close.