Thursday, March 26, 2015

3/26/15 Fear

If there's one 'secret' to trading success, it's the ability to manage fear.  There are two components to managing fear: (a) refusing to act on it (the fear of missing out on gains, the fear of losses), and (b) managing risk to avoid placing yourself in a position of fear (managing trading risk, size, and frequency).  Successfully managing fear then allows you the composure to buy when others exhibit maximum fear (ie, panic).

(a) Following Wednesday's rout in global markets, additional fear played out overnight in market futures.  DJIA futes were down as much as -200 points, and have now recovered to -87.
(b) INTC (Intel) has slid further to 29.50.  Note that scaling in yesterday with a quarter position now allows me to consider adding on further weakness.
(c) EEM (Emerging Markets) off -0.3%.  SPY (S&P500) off -0.5%.  Anyone who bought last Wednesday's post-FOMC breakout (fear of missing out) is likely at the point of stopping out around here (fear of losses).  In contrast, by reopening partial positions on yesterday's weakness, I'm free to either add or give the positions more time.

Ramping up position size (which increases position risk) can easily introduce fear.  I plan to simply exit positions on further weakness (for a minor loss), or close positions on strength (for a minor gain).  No point in 'doubling down' in this environment.  Neither do I believe we bounce back quickly, so no point in hoping for more than minor gains.

202 comments:

  1. My primary weapon against fear is stupidity. Problem is, stupidity is a component of fear?

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  2. I closed out my position in VA at $30 and added to FCAU down around $15.93. I prefer FCAU and cash to VA at this point.

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  3. I took the 2% hit on SPXL. Luckily it was a small position. I might move to cash today and this would have more to do with the Saudi strikes than anything else as I am more concerned about that causing significant fear. I doubt I will but considering it.

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    Replies
    1. The Saudi air strikes? I dont see those as a big deal.

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    2. Yeah I don't think so either. But you never know with traders. Honestly, it's all bullshit just to get people to sell and create volatility. They should be able to pummel those rickshaw driving Yemenis into the ground pretty quickly.

      Ultimately, I'm just going to hold FCAU until the Ferrari spin. I think we run into trouble with the market in a couple of months, but that passes and we end the year higher. I'm thinking I don't want to be anywhere near the market for most of next year and 2017 with the upcoming change in presidency.

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    3. What happens to defense contractor stocks if peace in ME breaks out?

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  4. (a) I closed INTC (Intel) on the morning bounce @ 29.95, then reopened the position @ 29.50.
    (b) A wave of selling hit the tape around 0715. I added EEM @ 39.21, EWZ (Brazil) @ 30.85, and PBR (Petrobras) @ 5.87.

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  5. VA - Someone coming to their senses or what?

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    Replies
    1. not me I sold like a fool!

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    2. $35 target with "underperform" at my broker.

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  6. If I was flying that plane it wouldn't have crashed.

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  7. These guys are self-conflicted, I really don't understand why/how they keep getting re-elected?

    http://www.politico.com/story/2015/03/report-cites-favoritism-for-terry-mcauliffe-and-brother-of-hillary-clinton-116370.html

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  8. The Saudis were becoming more and more
    uncomfortable as they saw an Iranian force now fully
    established in Yemen on the Saudi southern border. This
    was, and is, unacceptable to Riyadh and Riyadh has
    acted. It had no choice. The US has failed the Saudis yet
    again even as the Obama Administration is making
    invitations to Tehran regarding that nation’s nuclear
    capabilities all the more likely.
    Some are saying that the situation in Yemen was about
    to become a civil war; it had gone far beyond that point,
    for this was a civil war months ago. Now this is a fullyfledged
    international war, with the Saudis and the
    Iranians facing one another rather directly.
    To this end, Saudi Arabia had moved heavy military
    equipment including artillery to areas near its border with
    Yemen late Tuesday, raising the risk that the Saudis
    would be drawn into the worsening Yemeni conflict. Now
    they have been and no one really should be surprised.
    The buildup of men and materiel to the Saudi/Yemeni
    border followed hard upon the southern advance by
    Iranian-backed Houthi Shi'ite militants who took control of
    the capital Sanaa in September and seized the central
    city of Taiz this past weekend as they move closer to the
    new southern base of U.S.-supported President AbdRabbu
    Mansour Hadi.

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    Replies
    1. Yes, we need to get all those young men to work and fight a war for us instead of us for them.

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    2. Thus far and as far as we know, there have been few or
      no Saudi “boots on the ground” in Yemen, with the
      incursion overnight being solely from the air. However,
      as we have learned time and time again over the years,
      air strikes can do damage but only foot-soldiers actually
      seizing real geography can turn political tides. If the
      Saudis do move to send ground troops into Yemen to
      defeat the Houthi, then Iran may have no choice but to
      come to the air of their puppet regime and then the game
      shall become truly… very, very truly… serious. Then the
      game becomes Sunni vs. Shi’ia of the first order.

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    3. I suspect Iran isn't a sponsor of terrorism, my suspicion is Saudia Arabia is the antagonist? I dunno of course what's really going on, we never get the truth seems like.

      Delete
  9. LE - That's "up on bad news", isn't it? That seems mighty bullish to me..... (so far).

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  10. MCP - Everyone seems really hot on EV's, aren't RE's necessary to build them or is there a workaround/supply in progress? I suppose China has offered to make the parts in country...?

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  11. BAC - This one's green too, obviously the world is falling apart..... Well, at least not until Greece hits their brick wall but pushing that day out makes the pie much sweeter?

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  12. BXE - Red now, time to short oil?

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  13. "I think we run into trouble with the market in a couple of months, but that passes and we end the year higher. I'm thinking I don't want to be anywhere near the market for most of next year and 2017 with the upcoming change in presidency."

    I'm pretty much in agreement. I think April is strong after a weak March, followed by some more weakness, then a strong (maybe very strong finish) to the year. But, I'm also concerned about the next couple of years too.

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    Replies
    1. Yeah I feel myself having less and less conviction the higher the market goes.

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  14. MAT - GI Joe has contracted a contagious venereal disease.

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  15. FCAU - What a nice day...... Who's trading this thing anyway, a herd of turds?

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  16. I think I get it, someone's computer is blowing up and trading like a crazed robot from hell?

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  17. Who would have thought we'd be in the green this afternoon? Be interesting to see where it finishes.

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  18. this chart really puts things into perspective (for me at least) with regards to the dollar move:
    https://pbs.twimg.com/media/CBCe_5BWQAIRxFu.jpg

    Now we just need to line these moves up with market moves to see if there's any tradeable correlation.

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    Replies
    1. http://www.bloomberg.com/news/articles/2015-03-26/extreme-dollar-gains-turn-into-s-p-500-hurdle-chart-of-the-day

      A couple of weeks ago it really did seem like a blowoff top (at least in the short term) for the dollar. I remember watching it gap up every day in amazement and this typically happens at the tail end of moves.

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  19. SCO - Pretty big move, is it justified?

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  20. One thing I meant to mention about WTT is that they have like $20MM in NOLs that they can use over the next 15 years. Presumably they get eaten up over 6 years. That's $7M in after tax boost to the value of the company, or about 13% of the total value of the business. Add that to a net cash balance of $9M and you're talking about 30% of the value of the business. It's a microcap so anything can happen in the short term, but it's fairly easy to see the value in this company. It reminds me of NOIZ which I bought at like $7 and was bought out a few months later for $15 or so. NLS had significant NOLs as well back when it was around $2 or $3.

    Assuming earnings keep trending positively I think WTT could get to $6 or so.

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    Replies
    1. It is at 10 year valuation highs on p/e, p/s, p/b basis and highest earnings in last 10 years is $0.16, so over 18 times that at current price. Looks like they had some problems back in 2008 - 2010, but since they have shown a steady increase in EPS and BV, so that helps. I read their business description and it is hard for me to understand it (pretty broad set of products), but I assume you must see some good growth coming for them to target $6.00.

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    2. I don't think you're looking at the right metrics (p/e in particular). Since there are lots of one time items impacting earnings including NOLs, let's look at market cap to operating income.

      Year P/Op Inc Mkt Cap Operating Inc
      2005 21.24 49.27 2.32
      2006 15.56 67.84 4.36
      2007 15.73 65.92 4.19
      2008 13.75 43.44 3.16
      2009 31.14 8.72 0.28
      2010 (19.80) 18.22 -0.92
      2011 27.56 22.32 0.81
      2012 15.36 28.41 1.85
      2013 10.43 28.79 2.76
      2014 23.15 50.94 2.2
      2015 11.72 56.96 4.86

      Here are the averages (I exclude the highest # and the negative # to get a true average): 17.17. Right now the multiple on TTM oper inc is 11.72 and last quarter they had a run rate of over $8M in operating income.

      I also look at P/FCF:

      Year P/FCF Mkt Cap Operating Inc

      2005 35.70 49.27 1.38
      2006 21.54 67.84 3.15
      2007 346.95 65.92 0.19
      2008 (42.59) 43.44 -1.02
      2009 4.00 8.72 2.18
      2010 6.44 18.22 2.83
      2011 (14.88) 22.32 -1.5
      2012 (81.17) 28.41 -0.35
      2013 16.64 28.79 1.73
      2014 17.04 50.94 2.99
      2015 11.87 56.96 4.8

      Again, if I exclude the negative years and the really high # I get an average of 16.17 P/FCF. Right now its 11.87 on TTM FCF, with almost $2M in FCF last quarter alone.

      I've found much more reliability on focusing on trends in operating income than anything else, as the bottom line can be more manipulated. This was the key in seeing turnarounds in NLS and YRCW.

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    3. I'm not saying they will continue to increase operating income and FCF like they have the past few years but for a company growing 20% top line and 100% operating income, I think it should be trading at above historical averages which are 40% or so higher than current valuations. And if the most recent trends in operating income continue then there's potentially a lot more upside. At the very least, I think there's a good margin of safety and the balance sheet is strong.

      Delete
  21. Heading into the final stretch, the DJIA + SPX are poised to close flat.

    (a) Taking EEM/ EWZ off at 39.45/ 31.09, mainly to lower overnight risk exposure. Still holding a partial position in RYWVX (Rydex 2x Emerging Markets) opened yesterday.
    (b) Still holding a partial position in RYTNX (Rydex 2x SPX).
    (c) Adding a small position in RYEIX (Rydex Energy) at the close. XLE (Energy) spiked higher this morning on a +4% move in oil futures. As of right now, XLE has given back all of its morning gains, whereas USO (Crude) has continued higher (+4.75%).
    (d) TLT (the long bond) is off -1.7% today, on top of yesterday's -1% decline. A notable sell-off. Not sure what it means, but I'm backing away from the temptation to open a position here.

    I would describe the market dance this week as 'complicated.' There's no guarantee any of the above positions will prove profitable tomorrow.

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    Replies
    1. It looks like it is just the near term oil futures contracts, which USO uses, had the big move. Futures out a couple of years were up less than 1%. Says to me people are concerned about short term energy prices because of the Saudi war, but not concerned too much about the longer term, which is what the energy companies and XLE trade off of.

      Delete
  22. I'm long the global markets, so treat the following comment accordingly.

    Snapback on Friday.

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  23. "Highlights
    Consumer confidence climbed last week to match the second-highest level since July 2007, propelled in part by gains among lower-income earners and job seekers as the labor market improves.

    The Bloomberg Consumer Comfort Index rose to 45.5 in the period ended March 22 from 44.2 the prior week. Measures of the economy, buying climate and households' financial well-being all improved.

    Spirits brightened for those making less than $50,000 a year in wake of bigger February job gains in services that include the retail and restaurant industries. More confidence about finances signals consumers may be inclined to step up purchases and drive the economy after a projected slowdown in the first quarter.

    The index was "bolstered by improved ratings of personal finances, gains among women and improvement among lower- and lower-middle income Americans that may signal a widening recovery," Gary Langer, president of Langer Research Associates LLC in New York, which produces the data for Bloomberg, said in a statement.

    Among the three components of the Bloomberg comfort index, the gauge of Americans' views on the state of the economy rose to 37.7 last week from 37.2. An index of the buying climate, showing whether this is a good time to purchase goods and services, increased by 1.5 points to 39.8, matching the second-highest reading since April 2007. A measure of personal finances climbed to 58.9 from 57.1.

    Confidence improved for three of four groups of wage earners making less than $50,000 a year. Sentiment among Americans making $25,000 to $40,000 was the strongest since February 2007.

    Women were more optimistic than at any time since July 2007, while confidence among seniors, the unemployed and renters was the highest since the start of the last recession. The comfort index for Democratic voters was the highest in 14 years."

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    Replies
    1. I do think we are at the part of the economic cycle where more of the benefits of the improving economy start going to the workers and less to company profit margins. This should result in a growing economic pie, so the question is whether the growth offsets margin pressures. Some more inflation would help as well. If we could get real GDP of 3.5% and inflation of 2.5%, then we'd have nominal GDP growth of about 6%, so then a cut to margins of 1% - 2% should be manageable.

      Also, improving consumer confidence should push more money into the stock markets and increase valuations.

      Delete
  24. Tof, thanks for the details on WTT. Sounds like a good approach and is a good way to find stocks that aren't obvious (like me, looking at Morningstar p/e's, etc)., Nowadays it is so easy for people to run screens for "low p/e" stocks and things are picked over, we need to use approaches like this to find good stocks.

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    1. I found these guys (and several other big winners including REED and a couple of others over the years) but searching for:

      Down 20%+ 1 Year, Above 200 DMA

      After that I would pull up the 10 year financials for every one of them and see if any were exhibiting nice trends in operating income / revenues / cash flow. Something that could confirm the turnaround in the stock that was occurring.

      Delete
  25. Hopped back into KORS for a day trade (or possibly more) at $66.77

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    Replies
    1. Took the loss at $66.37.

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  26. Bidding ROSE @ 16.46, S2. Big.

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    Replies
    1. Well, not Big Brass Beach Balls like Tof.

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    2. My balls have been purposely clipped down to a normal size this year as I'd like to avoid the same fate as the Dan Zangers and Jesse Stines of the world.

      Delete
  27. Harlan is just starting soccer. He's had about 4 practices, and last night I told him how well I thought he was doing. He said, "Looks like all that training is finally paying off."

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    Replies
    1. Haha - with dedication like that, watch out Beckham

      Delete
    2. haha. that's funny.

      I was telling my brother how I was talking to my son (3 years old) about how I love him no matter what and he goes "I love mommy a lot. I love you too daddy...a little." My brother said his oldest son said something similar. He said "Mommy is the best mommy in the world. Daddy, you're the best daddy in town."

      Delete
    3. I love mommy a lot. I love you too daddy...a little. Daddy, you're the best daddy in town."

      They see who feeds them, lol, too funny man! :)

      Delete
  28. Contra the Heard guys, who have done very well over time by buying out of favour stocks and sitting on them until a catalyst emerges to move them back up, did a bunch of buying last quarter in energy, golds and even a dry shipper, DSX.

    Now they are often early and bought HMY (Harmony Gold) way too early in Dec, 2013, and bought PWE (Penn West Energy) around $3.00 Cdn and now near $2.00 last December, but certainly areas worth thinking about if successful contrarians are hunting there.

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    Replies
    1. Yeah thanks for pointing these guys out. I follow them now and usually follow their picks closer about 6 months or so after they start picking them as they have been early on a lot of stuff lately.

      Delete
    2. Hard to know the truth when we plainly say we don't care, tends to be something to avoid based on that.

      Delete
  29. INT - This one hasn't broken down at all, to speak of.

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  30. "SEATTLE , March 27, 2015 /PRNewswire/ -- The least affordable housing markets are those where new housing permits have not kept up with population growth, according to a Zillow® analysis of U.S. rental and mortgage affordability

    Affordability is best in places that either have slow population growth – such as Detroit – or have met new growth by building new housing units. Chicago , for example, permitted 906 new housing units in 2012 and 2013 for every 1,000 new residents between 2013 and 2014ii. Chicago renters can expect to spend about 31% of their income on rent, while homebuyers there can expect to put 13.9% of their income toward house payments.

    It's easy to see how San Francisco has become one of the country's least affordable housing markets: Zillow's analysis showed that for every 1,000 new residents, there were just 193 new housing units permitted. Residents of the San Francisco metro can expect to spend 44 percent of their income on rent, or 39.2 percent on a monthly mortgage payment.

    The short supply is no secret to policy-makers. The mayor of San Francisco has pledged to add 30,000 housing units by 2020iii, and a Boston city report made a similar recommendation to meet demand with 53,000 new housing units by 2030

    "As the economy continues to improve, more Americans are slowly moving off of their buddies' couches and out of their parents' basements into homes of their own, first likely as renters and then eventually as homebuyers," said Zillow Chief Economist Dr. Stan Humphries . "Unfortunately, the supply of affordable homes, especially affordable rentals, is insufficient in many areas to meet this growing demand. As a result, the competition for those homes that are available can often be fierce, driving up prices and contributing to worsening affordability. More construction will help ease the crunch, and getting a mortgage is also getting easier, which will help more current renters transition to homeownership and further ease rental inventory shortages. But these fixes won't happen overnight."
    Since 2000, rents have grown at roughly twice the pace of incomes. Partially as a result, the percentage of Americans citing "cheaper housing" as a reason they moved to a different home has almost doubled since then, from 5.6 percent to 9.6 percent currently, according to the U.S. Census Bureau.

    Over the past several years, renting – historically a budget-minded choice – has become increasingly less affordable. Meanwhile, recovering home prices, along with historically low mortgage rates, have made buying more affordable than it was historically, on a monthly basisvi.  Zillow's February Real Estate Market Reports showed home values up 4.9 percent year-over-year to a Zillow Home Value Index of $178,700 . U.S. rents rose 3.4 percent to a Zillow Rent Index of $1,355 ."

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  31. EYES - Testing the 200SMA here...

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  32. JONE - retests $8.08ish a lot, decent money pump seems like?

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  33. PAL - LOL, at the giant 1 year C&H

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  34. Hopped back into VA at $30.4. Grabbed some YY at $55.05

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  35. TOF - Took the loss at $66.37

    They keep nailing you for buying out of the gate, seems like?

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    Replies
    1. Yeah seriously. I'm playing with like 3% at a time so not a big deal but I've noticed good buying opps in the middle of the day, moreso than beginning. Only daytrading this stuff because it's boring watching my few holdings every day.

      Delete
    2. The timing would've worked with EYES looks like, so who's to know (not me)...

      Delete
  36. No snapback. More like a failed snap. EEM +0.09%, SPX +0.08%, XLE (Energy) -0.8%. Closing PBR (Petrobras) @ 6.70 for a minor loss. Closing all Rydex funds end of day. This trading week looks to be a wash. Back to 100% cash.

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  37. Replies
    1. In talks to buy Altera? Steal or buy when you cannot innovate.

      Delete
  38. I'm going to get killed next week. 5/5 this week on serious positions.

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    Replies
    1. Wow good job. I believe I have had 2 winning trades on serious positions this year: EYES and FCAU. That's it.

      Delete
    2. Great Mark. All on ROSE trades?

      Delete
  39. GTN - Do these guys benefit from all those millions to be spent on political advertising? (please don't pay any attention to my ideas)

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  40. EXXI
    Oil drillers push Moody's list of financially stressed firms to two-year high

    The number of companies with the worst below-investment grade debt ratings has jumped to a two-year high of 184 firms, with the oil price rout pushing a record 25 U.S. energy producers onto this month's list at Moody’s.
    The oil-and-gas and oil services companies listed account for a record 13.6% of the total of stressed companies rated B3 - six notches into junk territory - with a negative outlook for future ratings changes or lower; historically, oil firms have averaged ~8% of the firms on the list.
    During Q1, a dozen oil companies including Energy XXI (NASDAQ:EXXI), Midstates Petroleum (NYSE:MPO) and Halcon Resources (NYSE:HK), were added.
    If oil firms’ liquidity issues do not get fixed and they keep getting downgraded, the industry likely will see more debt defaults, Moody’s analyst Julia Chursin says.
    The total of 184 financially stressed companies is up 16% Y/Y but still far short of the 290 borrowers at the peak of the financial crisis in Q1 2009.

    ReplyDelete
    Replies
    1. Late comers paid premium prices for their leases, probably mostly those?

      Delete
  41. JD - Appears to have a larger presence than BABA? Strange we weren't following this alternative in comparison, no mention at all..

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  42. Crude Oil And USO - Get Ready For Another Perfect Storm

    "The new fracking regulations: The Obama administration announced last Friday the long-awaited new fracking rules that will take effect in June 2015. The new rules prohibit operators from storing fracking wastewater in open pits and order them to test the integrity of well bores to ensure that no water or hydrocarbons can leak out underground. The operators also must disclose within 30 days of a fracking operation what chemicals they included in their operation and will have to submit detailed information on well geology to the Bureau of Land Management, a part of the Interior Department.

    The new rules will apply only to oil and gas wells drilled on public lands. Although most production is coming from private properties, the new rules will definitely slow or freeze the development programs on federal lands setting one more barrier to growth, given that they raise the cost of fracking among others. The rules will cover about 100,000 wells, according to the Interior Department.

    Friday's regulations are expected to be the first in a series of new rules governing fracking safety. The Obama administration is also expected to issue rules designed to curb the release of methane, a planet-warming greenhouse gas, from fracking wells."

    http://seekingalpha.com/article/3028936-crude-oil-and-uso-get-ready-for-another-perfect-storm

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  43. EYES, does anyone know if this is their product?

    http://www.piercepioneer.com/hawaiian-woman-receives-first-bionic-eye-transplant/39545

    ReplyDelete
    Replies
    1. Argus II is made by Second Sight, so yes it appears that is the one.
      http://www.medicalnewstoday.com/articles/291598.php

      Delete
    2. Not sure what an implant transplant is......This isn't the only company working on this and not the first implant done?

      http://en.wikipedia.org/wiki/Visual_prosthesis

      Delete
    3. As far as FDA clearance for devices goes, EYES is the only game in town and will be so for at least 5-6 years. No one else is even in human trials in the US. There's some competition coming down the pike from stem cells and other areas, but based on the little I know about biotechs, EYES has a long window of time before anyone else is on the scene. Their main hurdle is getting insurance reimbursement.

      They're also trying to get their Orion product approved which would be hooked up directly to your brain instead of to your eyes.

      I love the technology.

      Delete
  44. http://jeffhirsch.tumblr.com/post/114695469003/april-almanac-top-performing-djia-month-since

    April actually best month of the year for the year

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  45. I sold my YY and VA today at small profits. I rolled that (about 5% total) into LEVY. LEVY is an interesting one. If you live in California you know Del Taco, a large regional chain that is about 2x the size of El Pollo Loco (LOCO). Del Taco is going public through a weird merger with LEVY (a blank check acquisition company). I’m not sure why they aren’t just doing an IPO but this LEVY could be a good buy here even after this run its had. The reason being Del Taco is about 2x the size of Pollo Loco, yet LEVY, which owns about half of Del Taco, only has 1/4 the market cap of LOCO.

    Anyway, I bought some around $12.45.

    ReplyDelete
    Replies
    1. I believe there's some risk the deal doesn't get done (its valued at $500MM enterprise value and LEVY needs to raise the rest of the funds to give it 100% ownership (right now they own 46%)) which is why it is so cheap vs any other restaurant chain. But if it does go through then LEVY should be worth about 2-3x its current valuation, even after assuming significant dilution to be able to fully fund the acquisition.

      There's also LEVYU and LEVYW which I believe represent warrants to some degree.

      Delete
    2. Since LEVY owns nearly half and the value is $500, then LEVY market cap should be almost $250 instead of $60, right? Split that in half and it's still a decent gain from here.

      Delete
    3. I am showing a market cap of $230Million for LEVY. Assuming a 100% ownership of Del Taco through dilution would theoretically get them to a $500M or so market cap. Del Taco does about 2x the revenues of LOCO and LOCO is worth $1B. LOCO trades at about 20x Operating Income so its expensive, no doubt. But apples to apples would put LEVY at a $2B market cap. If we knock off 50% to be conservative, it's still a double from here. I added more at $12.49. About a 10% position. That's the max I'll do b/c of the potential risks associated with not knowing what the future dilution factor will be to complete the deal.

      Delete
    4. Yep, I see $237.2Million is market cap.

      Delete
  46. I guess if you don't like the current price just wait a couple hours for the reversal?

    ReplyDelete
  47. Here you go TOF...


    Lululemon (LULU +2.1%) trades higher in early action as the stock recovers from a mini-slump last week.
    The company's new line of men's pants are a "smash hit" with consumers, according to CNN Money.
    Other publications are also giving Lululemon some free pants publicity.
    The $128 slacks are made with a high-tech fabric and are being promoted as comfortable in all the right places.

    ReplyDelete
    Replies
    1. Hmm, I'd much rather have a good view of the camel toe myself.

      Delete
    2. Dear Lord. I believe they refer to the "smash hit" as the Moose toe

      Delete
    3. No wonder there's so much confusion.

      Delete
  48. VNCE - Long way back up from the December gap.

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  49. UBS/BAC/DB - All in the green. Nobody seems to want to acknowledge these TBTF guys will be the welfare winners over everything come hell or high water.

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  50. BXE - The unloading is relentless, must be about to file BK?

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  51. I'm looking to build exposure to the rebounding US Home Building market. The obvious ones are the home builders and companies like HD and WHR, but they've had pretty good moves over the last few years, so hesitant to pay up. Same with the forestry companies. And most have a decent amount of growth built into their stock prices. I'm thinking that buying a large mortgage lender like BAC might be a better way, because it is cheaper and gets leverage from housing.

    But regardless, seems like the US homebuilding market continues to improve and has good upside for the next few years. Will do some more digging, but I do think this a good trend to play to make some money.

    ReplyDelete
    Replies
    1. Yeah I think this is a smart move (BAC). It's getting harder and harder to ignore the value.

      Hey I've been looking into FLY and AIR. I know you're in FLY. Any reason why there's so much more debt at FLY? FLY is much cheaper relative to income / EBITDA, but their cash flow is shit and they have huge debt.

      Delete
    2. Yeah I think this is a smart move (BAC). It's getting harder and harder to ignore the value. And the ridiculous undersupply is causing significant some cities to panic a little bit about not having enough places for people to live, especially here in southern California. I've been thinking about this more...what would be the major beneficiary of this? Home builders I guess but what about the companies lending to them? BAC seems good.

      Hey I've been looking into FLY and AIR. I know you're in FLY. Any reason why there's so much more debt at FLY? FLY is much cheaper relative to income / EBITDA, but their cash flow is shit and they have huge debt.

      Delete
    3. Airlines have been buying used aircraft at end of lease and mothballing them for parting out, it's one aspect that has pressured replacement parts sales as low fuel prices have removed incentive from purchasing new aircraft. FWIW.

      Delete
  52. BAC - what exposure do they have to energy? Ideally I'd prefer to be exposed to construction building in California. It's badly undersupplied here.

    ReplyDelete
    Replies
    1. See SIVB, I can imagine this bank grows nicely going forward. I've been looking at EVBS as well, I don't believe these promises US government growth is going to slow.

      Delete
    2. SIVB doesn't look that cheap. EVBS does

      Delete
    3. Yes but SIVB has an almost cultic clientele, they're very loyal. And they're right in the "hub of innovation".

      Delete
  53. What about BSBR. That sucker took a major hit. DB and BAC look to be the cheapest of the big banks. JPM looks cheap too.

    ReplyDelete
    Replies
    1. I guess BSBR has more upside potential assuming some large bank like JPM doesn't force them off the road into the ditch?

      Delete
    2. I've got some DB (not enough to offset the damage BXE has done unless DB goes on a huge unanticipated rally).
      How about RBS?

      Delete
    3. BSBR got bought out by SAN, so I'm not sure why BSBR is still trading. I know there were some tax issues, so perhaps people preferred to hold onto the BSBR ones, but I just sold and have moved on and haven't looked at since. Not sure what the public float for BSBR is now.

      Delete
  54. ROSE - LOL, $16.34 low..... Okay Mark, where's the puck going next?

    ReplyDelete
  55. Just checking in with the markets now. There's a global rally underway, sparked by 'market friendly' comments by China's Central Bank on Sunday (the Shanghai Composite jumped +2.6% overnight to close at a 7-year high).

    Every position I closed on Friday is rallying today.

    (a) SPX +1.34% right back to testing the top of its recent trading range.
    (b) EEM +2%. EWZ (Brazil) +2.7%, PBR (Petrobras) +3.8%.
    (c) XLE (Energy) +2%.
    (d) INTC (Intel) pulling back -2% from Friday's end of day +7% spike.
    (e) The long bond and miners selling off modestly.

    For most investors, it's days like this that make it all worthwhile.

    https://www.youtube.com/watch?v=BteIwbKU_iQ

    ReplyDelete
    Replies
    1. I'm not a great short term market caller, but seems like it could be the beginning on the big April rally I think we get this year.

      Delete
  56. FLY is cheaper on most metrics than AIR and pays a better dividend.

    I'm looking for it to get a pretty good premium to BV by the end of this cycle (as they all did last cycle) and get the almost 7% yield in the meantime.

    Debt is high, but I think it is OK because:

    1. They are shareholder friendly and smart - they bought back debt at less than 50% of value and shares on the cheap during the last financial crisis, so aren't just empire builders. Now they have been heavily expanding their fleet during the strong part of the economic cycle with travel growing strongly.
    2. They manage their business well - they have staggered leases on their planes and spread their exposure across a lot of airlines, so so no big risks that way.
    3. Pretty much all planes they have sold have been above book value, so they are managing their accounting conservatively.
    4. They have been consistently profitable, even through the financial crisis (part of this was done by buying back debt on the cheap, but I don't care how my companies make money)

    The knocks against FLY is their fleet is older and there is more risk of plane values falling off - that is true, but they are working to get their plane age down and they are selling them above BV, so not a problem.

    Also, their debt is high, but I think you want your companies to be increasing leverage early in and industry cycle and then reducing it later in the cycle. This is what FLY is did by buying back their debt on the cheap previously and now expanding as the economy and travel grows.

    I guess the other point is a lot of smart people and companies (Berkshire, AIG in the good part) have gotten into plane leasing, so it is an overall attractive industry too.

    ReplyDelete
  57. Re BAC, I 'm not sure what percent of their business is Texas, but I'm sure it is large, but it is pretty much everywhere.

    The good thing about BAC is the underlying business is strong, but the last few years they have continually had their earnings crushed by lawsuits related to Countrywide, etc. But the law suits are pretty much done, so I think we will see a lot better earnings out of BAC going forward.

    You guys would know the California banks better, but BOCH is a California bank that the Contra the Heard guys like 88% of BV and 7.4 times 2016 earnings,

    ReplyDelete
  58. Bought a small position in Canadian Truck Maker MA.TO. They are doing a strategic alternation review to sell the company. I think there's a good chance it works as the company is majority owned by the president and a hedge fund and I think they both want out.

    I think its the type of business people will want to buy - "Manac is the largest manufacturer of trailers in Canada and a leader in the manufacturing of specialty trailers in North America. "

    ReplyDelete
    Replies
    1. Was a bit of an impulse buy and I didn't do a lot of due diligence, but I have heard good things about the company before and, while there 2014 earnings were weak, 2013's were good. Will look into it more tonight and either buy more or sell.

      Delete
  59. One of the downsides on my way of trading - a small fertilizer company in Brazil, MBC.TO, declared bankruptcy today.

    Bought it at $2.56 and almost sold it in the $3.75 range, but instead held on as I believed their story - fertilizer plant in the Brazil farming region, 1,000 miles closer than the stuff which needed to be shipped in - made a lot of sense.

    But they had problems getting the plant to run well and ran out of working capital and the bankers cut them off. Had lot of chances to sell on the way down, but kept thinking they could turn things around, but never did.

    Oh well, for every one of these, I probably get 8 that do turn it around and work it out, so, even though I try really hard to avoid things like this, it's kind of the cost of doing business.

    ReplyDelete
    Replies
    1. Was also a fairly small position. I knew it was risky,so only put about 1% of my portfolio in it.

      Delete
    2. I'd have to imagine anything overseas in countries like the emerging ones have a good deal of risk involved like this.

      have you given any thought to setting limits on how much you would lose? i guess that would keep you from keeping some big winners that turn around after being down big.

      Delete
    3. I've tried doing stuff like that, but haven't had much luck and often ended up selling right near the bottom before a stock turned back up.

      Even FCAU (which I bought early last year when it was still FIATY) had almost a 20% drawdown before turning around into a big winner.

      But I'm starting to think it may make more sense to cut losses faster in commodity stocks after seeing things like MBAC.TO and how fast the small energy stock got trashed this year.

      Delete
    4. Aren't large scale corporate farms taking over in Brazil?

      Delete
  60. Good numbers out of SORL, which I am still holding. Tried to buy more earlier this week at $3.10, but didn't get filled and it now looks to open at $4.14, so should have paid the $3.20 they wanted I guess. Got to be one of the absolute cheapest stocks in the market, but it is China and their is no dividend, so quite risky, but if their financials are legit, should be trading over $8.00.

    ReplyDelete
  61. Ouch...looks like you were right on WTT, BB. Luckily I only had 2.5% in it. Will decide today whether or not to sell.

    I boosted my position in LEVY to 20% before the close yesterday so that is softening the blow.

    ReplyDelete
    Replies
    1. Ended up taking the hit on WTT. Sold my shares

      Delete
    2. My first impulse was to buy, lol...

      Delete
    3. Yep probably smart to buy that dip. But they said they expect softness for the near future so I'm assuming no need to rush in and buy.

      Delete
  62. TWTR - Let's ride this to $100+ ?

    ReplyDelete
  63. Interesting article on LEVY:
    http://seekingalpha.com/article/3037196-levy-acquisition-corp-a-hot-taco-at-a-not-so-loco-valuation

    The background on SPACs is particularly interesting since there's a chance there may be others offering pretty good terms like this one did to their original holders. I see WRLHU (I can't pull up this ticker) is a SPAC set up for Wilbur Ross to find investments (hopefully not XCO or dry bulk shippers!)

    ReplyDelete
  64. HTZ - PE looks high enough for this one to rally? After all, if you're flying you probably can't take your car.

    ReplyDelete
  65. Just to show you how many people don't pay attention to their stocks. MBAC.TO went through a process to sell the company, but couldn't find a buyer, so declared bankrupcy, but I was still able to sell my shares at the open at $0.03, down from yesterday's $0.035. Looks like around 1.5 million shares traded at that price.

    ReplyDelete
  66. KORS - My broker has a $100 target on this one.......

    ReplyDelete
    Replies
    1. I read a negative article on them vs KATE today for what its worth. Based on trends they see in Google searches.

      Delete
    2. Okay I'll have a look at that, thx.

      Delete
  67. good article on potential bubble in biotech:
    http://microfundy.tumblr.com/post/115113982285/how-bubbles-are-blown-biotech-edition

    ReplyDelete
    Replies
    1. You know its going to end badly. People think they will get out, but they thought the same in dot com bubble and almost no-one did. Reality is people concerned with value stay away and traders have no way of knowing if the next pullback is buyable like the last dozen or the beginning of a serious downturn, so they eventually buy the wrong one and get crushed giving back much or even more than all their profits.

      Delete
    2. Does everyone think it's a bubble, that makes it sustainable? I dunno, seems there could be a big rotation into something else like banks or energy?

      These bio companies are supposedly on the verge of unleashing new revolutionary technology, sorts like revolutionary technology will give us free energy thus we don't need oil.

      Anyway, sour crude requires catalytic crackers to break down the heavy crude, lighter oils make better fuels for this reason so I don't understand why refiners prefer heavy crude.. The implication I've heard is US refineries are tuned for heavy crude?

      Delete
  68. MCD - Old Bay fish sandwich... Sounds gross.

    ReplyDelete
  69. BTU - Another new 52week low, to continue the string of lower lows.

    ReplyDelete
  70. BAC - "Bullish squeeze alert" Okay, I guess we can get this one lower after the breakdown washes out?

    ReplyDelete
  71. The market isn't making it easy. Giving back about 80% of Monday's gains heading into the close.

    ReplyDelete
    Replies
    1. There is one trade worth making. Scaling into RYWYX (Rydex 2x Inverse Emerging Markets) at the close.

      Delete
  72. Alright, I guess we're booking gains for the quarter in preparation for the big rotation, or if that doesn't work we'll just get back in at higher prices?

    ReplyDelete
  73. TVIX - Reverse split soon, or a heck of a rally.. lol, it's been dying a quick death.

    ReplyDelete
  74. DJIA futes dropped from -102 to -202 in under 5 minutes. Anyone else see that?

    ReplyDelete
    Replies
    1. Any futes trader who bought the ES @ 2033 can cash in now @ 2048.

      Delete
  75. Got the ridiculously large iPhone 6+ today because my old phone was acting glitchy and they gave it to me for free (I just paid taxes). Not sure if I'm going to keep it because of the size but its nice having a much bigger screen.

    ReplyDelete
    Replies
    1. Is it tough to see the screen outdoors? I found a cheap droid pad I've been playing with and indoors it's fine but outdoors I doubt I'll be able to see the screen.

      Delete
    2. I bought a Samsung table last year for around $150 and it works great outside - take on vacation with me as it is great by the pool. I remember when I used to take my laptop and it was a huge pain trying to see.

      The funny thing I have is I own one of those Google Nexus Phones, but with my sunglasses on, you can only see it in a vertical mode, but if you turn it horizontal, it looks black.

      Delete
    3. I'll have to try this one outdoors, honestly haven't yet. Last year someone was playing with their Apple tablet at the lake and didn't seem to be able to see the display so my expectations are low. :)

      Anyway, I wanted to play with an android device and the price was right but it doesn't have bluetooth, only wifi. Doesn't look like I can install bluetooth either....

      Delete
  76. AFK - She's up, baby.... Rotation begins?

    ReplyDelete
  77. We buy the close tomorrow right?

    ReplyDelete
    Replies
    1. Sounds good, is Friday no trading day or Monday?

      Delete
  78. The single share of BMRN is now up 1,000%.

    ReplyDelete
    Replies
    1. Can't recall - was it a big position for you initially and you sold down or did you just buy the one share tfor tracking?

      Delete
    2. Long time ago. Good sized position and sold for maybe a 20% return and kept 1 share for tracking.

      Delete
  79. EYES - Losing focus? Hard to see why it's dropping,

    ReplyDelete
  80. We probably should keep an eye on what's holding up here over the past week or so. TWTR comes to mind. As does emerging markets.

    ReplyDelete
  81. Wrong call. The US indexes are continuing to sell off (DJIA -150), but Emerging Markets are rallying on slightly positive China manufacturing data + a bounce in the Ibovespa. EEM currently +1%. I plan to take RYWYX off at the 1030 window.

    ReplyDelete
  82. tof- I switched to the 6+ last November, and have nothing but good things to say about it. Screen size about right for my aging eyes.

    ReplyDelete
    Replies
    1. Yeah its not really good for holding in one hand though. Only negative about it.

      Delete
    2. I bought a case that clips on to my belt if I need to carry it around with me.

      Delete
  83. Do I need a password to access the password to obtain my password?

    ReplyDelete
  84. Do icebreaker ships kill polar bears?

    ReplyDelete
  85. Been waiting for a time to buy back into YNDX and I feel like this is a decent entry (would have liked to buy earlier today). Bought some at $15.5. RSX and the whole EMs space is breaking higher so feels right. I've yet to have much luck with this stock so my expectations are low.

    ReplyDelete
  86. April Fools Day and we rip higher?

    ReplyDelete
    Replies
    1. Or maybe an april fools rally attempt.

      Delete
  87. My somewhat aggressive NAT purchase is now up almost a dollar. It's a good story with floating oil storage becoming more profitable and popular, plus tankers having to transport crude further as less is going to the US. While it is near 2 year highs, on a weekly chart, it still looks good.

    I do not see this as a long term hold, but it might be one of those that grabs some good momentum and maybe doubles this year.

    ReplyDelete
  88. GOGO - This puppy sure has been dancing.

    ReplyDelete
  89. CVEO - Even the sweat lodge is hot.......

    ReplyDelete
  90. Cyber security is top of agenda, sell HACK and buy aircraft carriers.

    ReplyDelete
  91. BRMN - good you made the 20%, but too bad you didn't hold it for the 1,000%

    If it was me, I'd be selling it and getting it off my screen and never looking at it again!

    ReplyDelete
    Replies
    1. But the single share is destined to be worth a fortune.

      Delete
  92. Gotta love your job......
    http://www.globalresearch.ca/the-cia-was-training-isil-and-now-it-being-asked-to-go-after-isil/5402964

    ReplyDelete
  93. "Ripken Stadium to be Renamed “Leidos Field at Ripken Stadium”

    Leidos is a local US defense department contractor......

    ReplyDelete
  94. GEVO - Looks like there just isn't going to be enough critical mass to get this company going despite the US military agrees they can burn isobutanol made from yard clippings vs isobutanol made from fossil fuels. Umm, maybe this company should suggest using yard clippings from the California central valley desert, grown from magic bean seed.

    ReplyDelete
  95. "Flame Grilled" Cologne, by Burger King sold out in Japanese BK stores.

    ReplyDelete
    Replies
    1. Funny - just come to my house and bbq a dozen burgers and I'll let you smell like smoke for free

      Delete
  96. I ended up taking a 40% position in YNDX and got saved by a run into the close. I took the entire position off probably irrationally but I actually had a really good today as all 3 of my positions were up. Still sitting with lots of cash, for better or worse.

    I sold 1/2 of my LEVY and am just holding that and FCAU now, essentially two special situations in my opinion, with upcoming IPOs. Still having a difficult time finding big values in the market. Every time I get excited about something I find a wrinkle in it that keeps my enthusiasm capped, like warrants that will cause extra dilution, off balance sheet transactions, a huge hedge fund shareholder looking to exit, etc.

    ReplyDelete
    Replies
    1. Not that investments are supposed to be risk-free, but many of these wrinkles that I find with these stocks seem to be too much to ignore. Maybe that's why the market keeps going up and down as people are trying to come to grips with these risks and pricing them in. I don't think the market is that expensive as a whole so not really looking for a big drop. But the past 6 months has been the first time in a while that have been able to wait for things to come in so we can buy em lower...things like INTC, AXP, TIF, MSFT, QCOM, KORS, COH, RL, WYNN etc. All of those are on my watch list.

      Delete
    2. It seems to me that most stocks are trading in ranges right now. So rather than expect to hold anything other than FCAU for a substantial period of time, I'm leaning toward just focusing on trading the ranges and only look to buy stuff after false breakdowns...stuff that I would be comfortable holding if anything bad happens...and keeping any swing / longer term trades to a max position size of 20%. This just feels like one of those years where it pays to be conservative and wait for opportunities.

      Delete
    3. European stocks having a good year so far. Valuations are cheaper than the US and their economy is improving and now QE is kicking in.

      So you've got some price momentum behind them (YTD wise) and valuations support - usually a very good combination.

      Delete
    4. You know what else - US stocks have probably been pretty picked over the last couple years with the small caps being top dog in 2013 and the S&P 500 in 2014. It wouldn't surprise me that we get into a momentum market in the US this year and push stocks up high this year anyhow, but that is a tougher game to play.

      I don't think people have scoured the foreign, non-commodity markets nearly as much, so should be more pricing inefficiencies to exploit in those markets.

      Delete
  97. Did you guys see the insider buy at CHK?

    ReplyDelete
  98. Funny - the following 2 headlines appeared right after each other in my Yahoo News Feed. DIdn't read them, but wonder if they were looking at the dame data:

    U.S. auto sales demand begins to thaw in March at Reuters Wed 5:11pm
    Auto sales tap the brakes in March at Los Angeles Times Wed 5:10pm

    ReplyDelete
    Replies
    1. I don't ever recall a 700hp production muscle car....

      Delete
  99. WFM - This company can buy beef at below fair price from the Hurst estate b/c the Hurst estate is one of the largest grass fed producers and they operate with state subsidized losses.

    ReplyDelete
  100. Patents filed from companies domiciled in the DC area are the highest of all US regions. Gotta think that contribution originates with military contractors.

    ReplyDelete
  101. GILD - Fell out of the bottom of the triangle, fake move?
    YNDX - The way to trade this one involves not holding over the weekend?

    ReplyDelete