Monday, December 7, 2015

12/7/15 Two Riders Approaching



One might think that a pullback today might have bullish implications (a pause before the next leg higher).  On the contrary, what I see this morning as I look out from the watchtower:

(a) Heavy selling.  According to one trader I follow (James DePorre), 'breadth is not just the inverse of Friday, it's a magnitude or two worse.'
(b) Emerging Markets.  Despite +2% rallies in the US indices on Friday, Emerging Markets failed to follow suit.  As of this morning, my positions are [again] approaching the threshold at which I begin paying attention to 'noise:' I have now given back half of recent gains (a +10% gain in EM trading the late September lows). 

I closed positions in CAF (China 'A' Shares) and FXI (China 'H' Shares) in the opening minutes, for a +5.15% gain and -4.71% loss respectively.  Flyers in both PBR (Petrobras) and FCX (Freeport McMoran) were closed at nose-dive losses in the -25% range (but of course both positions were quite small).

VEIEX (Vanguard EM) will be closed end of day.  I gave the sector 3+ weeks to play out on a 'buy and hold' basis, but in the end I will always respect my stop losses.  

The only sector that appears attractive on today's across-the-board declines is miners.  I may open a position or two.

112 comments:

  1. It's got to be the morning after..... (Poseidon Adventure)

    Refiners rolling over sorta looks like, too much finished product backing up?

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  2. BABA - China has all those empty shopping malls, same thing going on there as here where AMZN is spanking them for hanging onto the same old business model?

    Oh, and now the USFED is backing down on the rope they've been pushing so that must mean their future employers are all on the starboard side of the boatload of debt?

    Personally, I don't see how TESLA can compete against Detroit in any sense, and possibly mass transit is the next big thing assuming people don't want to drive their commute and sit in traffic anymore?

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  3. SWHC - Get your new rifle on backlog while you still can. I hear some euro countries are loading up too, with intent on having something in case of terrorist infiltration.

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  4. 2nd said, "I gave the sector 3+ weeks to play out on a 'buy and hold' basis, but in the end I will always respect my stop losses.'

    I get what your saying, but isn't it amazing that we now consider three weeks buy and hold.

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  5. My thoughts on the current market environment, in no particular order:

    (a) Looking under the hood, market leadership has significantly narrowed. Gauging market strength using only the major indices has been misleading, with out-performance in large-caps masking high-percentage declines in small- to mid-cap stocks.
    (b) The playing field has changed. Market movements are increasingly driven by so-called 'quant' strategies. These strategies are then executed by 'black boxes.' Fading trades generated by emotionless computers rather than placed by highly emotional crowds may result in entirely different (and unpredictable) outcomes. The use of technical analysis (at least in the traditional sense) to explain price movements then leads to distorted pictures of 'what's going on' and is no longer reliable.
    (c) I suspect much of the recent 'improvement' in macro-economic indicators are an 'artifact' of QE, and unsustainable in the long term. One obvious example would be the accelerated purchases of homes, cars, and durable goods encouraged by suppressed interest rates- all of which 'pull demand forward in time,' reducing future demand for these assets.

    None of the above is meant to 'excuse' my exit from a buy-and-hold strategy (I've always declared that half of my takes are wrong, at which point I exit quickly). But I think each point goes a long way toward explaining the difficult trading terrain in 2015, and will force traders to adapt accordingly.

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  6. SIVB - Does this action look suspicious, or healthy?

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  7. Anyone still following OUTR? Down 24% after hours on an earnings miss and Redbox CEO leaving.

    Shares are at their lowest levels since Nov. 2012. With Redbox-related fears running high, Outerwall now trades for just 5.6x the midpoint of its revised 2015 core EPS guidance range.

    I know DVD's are going away, but at this price, I am really tempted to buy. Will have to take a look at their balance sheet and revenue trend what they are doing with their profits, but I have done well with other "dying" companies like Supremex (an envelope maker in Canada) when it go down to under a 4 p/e.

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    Replies
    1. And b/c streaming isn't gonna catch on.

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    2. 5.5 times earnings, company committed to returning 75% - 100% of free cash to investors.

      No doubt the business is shrinking, but the question is the value of the money coming back to investors over the next few years more than the stock price. If the business drops by 5% year, you'll do well, but if it drops by 20% a year, probably not.

      AOL still has something like 2 million people paying for dial-up, it takes a long time for technologies to go away. I guess you could call this a Ben Graham "cigar-butt" stock.

      Still haven't figured out what happened to their balance sheet. They had a book value over $20 a couple years ago and now it is negative. I assume it was a special dividend or something, but haven't got that far yet.

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    3. Buying back stock wouldn't account for that would it? Maybe expansion?

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  8. SPXS off in the great disco inferno, goes on and on keep dancin' to the beat that just don't stop till the break of dawn. So you say that's it I gotta leave this place, I don't care what these people think.

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  9. YINN - Ouch, China's not doing well, must be the smog?

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  10. "Rumors of a potential attack in S. Cali warning for months." Umm, weren't we hearing there were no "credible" indicators?

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  11. TOL - Home sales off the hook?
    "Low oil prices aren't sue to falling demand" - Another lie?

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  12. NWLI - Why is this down almost $10?

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    1. 0.09% relative volume on nearly 200 shares, lol! :)

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    2. And the ask is $266, so looks like we gotta pay up if we want some. Especially during AH, where the ask is over 2,000 and the offer is in the $20's

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  13. "Rising Corporate Bond Rates"
    Sounds like opportunity knocking to me!

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    Replies
    1. SPH has a pretty good dividend here, if you believe the economy is strong then propane sales should be pretty decent, no?

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  14. PSEC - Alright, I added to this down here.

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  15. WOR - I think Worthington makes propane tanks, right? A friend of mine works for a private company installing new commercial and all types of propane tank systems in the Shenandoah valley told me they're having difficulty obtaining new replacement propane tanks as the entire poultry business is growing leaps and bounds with older unsterile coops that don't meet dode requirements are being knocked down and updated with new USDA-approved ones replacing those. He also said the mom and pop farms don't have the money to compete so corporate farms are the shiz, taking over. These tanks must be replaced periodically sur to corrosion (Why not stainless or zinc galvanized?)

    So, Propane equipment might be a good place to be, especially considering prices of the liquid are in the weeds?

    This is why I've been trying to figure out the action. SPH seems to have a bunch of debt so maybe the div gets cut? I dunno, seems like propane equipment sales must be strong considering tanks are in short supply?

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  16. Maybe I should feel motivated to read the Koran, especially considering there's a couple big round potential targets right in my back yard.....?

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  17. "the number of Asian customers swarming on the Bahnhoffstrasse in Zurich to buy Swiss watches has dwindled to almost nothing. The change in just two years has been nigh on unbelievable."

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  18. How can we short commercial real estate, specifically? With the BABA and AMZN's of the world, surely the migration to 7x24 internet shopping must be having a tremendous impact on demand for commercial real estate?

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  19. SIVB - Oh no, dropped under the 50SMA... Is Silicon Valley experiencing a cleansing?

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  20. Replies
    1. Puerto Rico extended some negotiations to Dec. 17th. Good risk reward now as people seem to be pricing in a worst case (and it's really not bad for AGO), so little downside, but probably a bump to around $30 on a favourable settlement.

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  21. CMG - Where are the food inspection equipment stocks?

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  22. LRCX - Varian Thin Film (Metal Film Physical Deposition Technology IP and Patents) was gobbled up by a couple companies over the last decade and now are owned by Lam. This technology is used to deposit metal films by plasma method (reverse etch!) onto semiconductors and thus by solar cell manufacturing.

    Also Lam is one of, if not THE Premere thin films etch expert also necessary for manufacturing thin film solar cells.

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  23. TEP - ? I'm burned out on excess energy, myself.

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  24. PSEC - Sure was nice of them to take this back to $7 again allowing me to add, looks like I should've loaded the boat but trying to be extra cautious considering my BXE-decimated tyvm portfolio destruction cancer monster.

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  25. SPWR - Probably time to negin a position here, and add in case lower prices present themselves. Again, energy trades like wet ass.

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  26. Burn treatment center in Philladelphia? I'd rather go to Charlottesville UVA, myself. Just don't expect UVA to hold your hand constantly and they will let you lay in urine soaked bedding.

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  27. REXX - How much you wanna bet this one pops very soon?

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  28. Maryland Congressional districts drawn up by Democrats in such a way to take territory from Republicans. So funny how these two parties consensually swap spit in order to continue hijacking taxpayers.

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  29. BAP - They say the banks are leading indicators, right?

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  30. AINV - I don't get it, sure looks like someone was in there buying this today.

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  31. JNS - So then, Gross's performance at JNS stinks, Bernanke at Pimco is probably knocking his butt in the dirt?

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  32. BXE - Only down $0.03 at close, that's a great day.

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  33. Checking in on Tierra Del Fuego........

    "Residents of the city of Río Gallegos in the province of Santa Cruz, Argentina, witnessed a surprising sight yesterday afternoon when at least five bright yellow armored trucks accompanied by heavily armed police paraded through the city.

    The trucks reportedly arrived empty to the local airport Piloto Fernández, where they were loaded up with an estimated AR$1.3 billion in cash. Three of the five trucks delivered their load to banks in the city of Río Gallegos, while the other two continued on likely to Tierra del Fuego further south."

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  34. AMLP - Pretty decent dividend there, wonder if it's sustainable?

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    Replies
    1. I guess if oil is backing up in the pipe these guys can't transport it anywhere, refiners have been running full tilt on this cheap oil so if these guys have run out of storage space for finished product would it be reasonable to think refiners might have to throttle back?

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  35. SCCO - Back under $25, ready to rock and roll?

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  36. LC about to go nuts on the terrorist funding news?

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  37. AVAV - We didn't like this one, right?

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  38. KMI coming up to my buy price. I should sell right?

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  39. (a) Reopening FXI (China 'H' Shares) @ 35.95 (about a -2.7% discount from where I closed on Monday). CAF (China 'A' Shares) have spiked too hard, and I won't chase.
    (b) Reopening FCX (Freeport McMoran) a few pennies below where I closed Monday. Note that it's up +9% today. I was able to bypass yesterday's steep decline, and might have reopened at that point, but risk was just too high.
    (c) Opening a position in EWZ (Brazil) @ 24. A bet that investors will view the Rousseff impeachment move clearing the runway.
    (d) Probably RYWVX (Rydex 2x EM) at the 1030 est window.

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  40. I've done well with SEDG, but obviously SUNE would have been a better choice.

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    Replies
    1. Shit, even VSLR would have been better.

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    2. TERP - My lame broker has an old price objective of $9, why the hell are these guys so negative on solar? Well not totally, they have a higher ($42) price for SPWR but it's not an obscene estimate IMO that would happen if the world really did implement solar in the magnitude professed.

      Solar simply wouldn't work for me, but vertical geothermal heat pump would.

      So why the hell isn't SPWR on a tear today?

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    3. What do you think of a possible battery technology marriage with solar? Is battery technology holding back solar or what, anything to that?

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  41. FCAU - Seems like this needs to begin moving up or else the ih&s is false. Automanufacturing will move to Mexico, that should be positive for Cemex I'd guess, Cemex hasn't joined the concrete party on cheap energy.

    CX might take off soon?

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  42. Electricity - How much is your electric bill (ie: How much CO2 does your home produce)?

    My electricity bill hasn't benefited from the death of commodities thus remains between $70 and $125 during short weather extremes.

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  43. WHR - What happened to home appliances, is the housing sales boom taking a rest?

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  44. This chop is reminiscent of the 2000 top.

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    Replies
    1. 1 week to Fed meeting date - hard to see how things turn around before that, but maybe once the news is out, we can build from that. 2015 could also turn out to be a basing year after the good run we had the last couple years, setting us up for the next leg upwards.


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    2. Like a rounded top on the chart?

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    3. CP, take a look at this chart from Ryan Detrick comparing 2011 to 2015 - 2012 was a good year after a very similar year to this. Not saying it will happen, but very possible given we have a good economy still:

      https://twitter.com/RyanDetrick/status/674351840654286848

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  45. Not a nice turnaround in the markets today - oil and the markets both now in the red.

    Let's see what the afternoon brings.

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  46. HAL - Amazing this refuses to remain under $26.9, it's only tested that support way too many times.
    USG - Explain how this debt doesn't sink this company?

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  47. PSEC - Okay nice, "an undisclosed SEC probe." Probesreporter.com calls management "dirty"

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  48. After rallying +200 points, the DJIA proceeded to drop -364 points over the following two hours to 17,404-> all but guaranteed to shake out the Nellies. Now -45 points heading into the close. Brazil's iBovespa closed near the high of the day, up +1664 points (+3.75%). CAF (China 'A' Shares) +2.26% despite a flat close in Shanghai overnight. EEM -0.46%. Reopening VEIEX (Vanguard EM) at the close, probably about -2% below Monday's exit.

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  49. Martin S. Krackhead was a hedge fund manager, the guy looks more like a smartass kid to me.

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  50. I'm starting to see a lot more value popping up in the market. Only problem is if we're heading into a recession or a substantial pullback then this value will only become larger.

    I mentioned to BB when he came out here a few weeks ago that my biggest concern for the market is that people fail to make money for an extended period of time because if that happens then confidence will evaporate and multiples will dwindle.

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  51. CP- Solar wont exist without storage in the near future. That's the whole key. Solar rebates will be pinned to solar storage capacity. Ca. Gov. Jerry Brown had some good lines about it recently.

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    Replies
    1. That's why TSLA is up so much...the Powerwall

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    2. Okay so how does ENPH implement DC storage, they certainly don't use an AC battery and if I understand they convert the panel DC to AC on the roof, right? AC cannot be stored, has to be converted back to DC first or use the DC from the panel so no need converting to AC on the roof unless that's where the DC batteries are.

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    3. And the powerwall is just a frickin' battery with a charge controller, Panasonic is great at making batteries so is Energizer (maybe panasonic is their OEM source?) and a bunch of others.

      It's the guy who makes the best who wins that one, and the guy who makes the best solar contraption be it utility scale or rooftop, whichever is most adaptable for the particular purpose.

      Wonder whatever happened to the biofuel story, supposedly the energy czar said many times US should first use biofuels due to abundance.

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  52. I'd say its definitely debatable if we're still in a bull market:
    http://stockcharts.com/c-sc/sc?chart=%24SPX,uu[700,a]waclyyay[pb40!f][vc60][iue6,12,9!lj[$spx]]

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  53. SCCO - Didn't remain under $25 for long, let's see what happens now...
    UACL - Been waiting for trucking to come back from the dead?

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  54. URI - These guys seem to have a ton of debt, not sure if they've diluted yet or plan to or if dilution is priced in bla, bla but not long ago they took a loan from PSEC

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  55. Mike, a recession is a risk to the market, but really hard to see one anytime soon with the US employment situation getting better, housing improving, autos doing well, etc. I think the only way we see one is if something really bad happens as QE ends and rates rise, but I see that as quite unlikely.

    Personally, I think markets like we've had this year, while not fun, are good ways of washing out excesses without a major pullback. The best situation would be if the broader market was dragged down by the FB, AMZN, GE's of the world causing people to panic sell, but meanwhile, the broader markets like IWM outperformed. I think that would set us up well for the next upleg.

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    Replies
    1. The other thing I wanted to mention is that it is usually just the value guys buying at bottoms. Most other traders wait for stocks to stop going down, but value can be a catalyst on its own, so when something get's cheap enough, you can just buy if your time horizon is long enough.

      Not sure if you saw reminiscences update this week, but he pointed to a good article on seeingalpha about shipper NMM. Dividend will more than pay for the stock purchase in under 4 years and it is pretty much locked in through contracts for 5 years. Sure, there are risks like some of their customers going bankrupt, debt covenants, etc., but sure seems like a good way to play the shipping revival with a 5 year horizon and a $0 cost base assuming dividends do get paid.

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    2. Just saw his article. Interesting, I was looking at ICON as well.

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    3. May the odds be forever in your favor.

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  56. I'M pretty sure I'll buy any weakness at the open.

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  57. CP- I have no freaking idea how the ENPH storage system works, but it's supposed to be UPNP. I like that.

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    Replies
    1. Also, fairly soon i suspect all panels will become AC like the integration with LG. SPWR has AC panels now but they are really expensive...I know because I'm going to try them on MOG's house!! :)

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    2. I don't know what UPNP is, so I guess this conversation goes nowhere as usual.

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    3. Feel free to continue sounding mysterious if you must, I'm not really interested in riddles though.

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  58. Corporate profits: http://charlessizemore.com/wp-content/uploads/2015/04/fredgraph-1024x614.jpg

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  59. Poof, the oil is gone?

    http://washpost.bloomberg.com/Story?docId=1376-NZ1VJP6VDKHV01-69FGBLBFPGIV2O9S8E7P5AHIR1

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  60. Why would they be doing this, the sector has a pretty good chance of a monster rally just b/c of climate change itself.
    "Dec-10-15 07:45AM Short Sellers Boost Positions in Solar, Alt Energy Stocks at 24/7 Wall St."

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  61. Just an observation, seems like the 3 day rule has been thrown out of the window.

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  62. UACL/YRCW - Not sure why going after these isn't a bad idea... I guess the shortage of drivers has been demand from the oil patch (now ~> zero).

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  63. ENOC - Good uncle Enoch is suffering from slings and arrows but ASYS for some reason seems to be hanging in there. I'm not sure why really b/c this is such a small POS company but there might actually be a chance for a period of growth.

    I worked with a "software engineer" at AMAT and wow man I wanna tell you he had no idea of what he was doing... I guess the real S/W engineers had moved on.

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  64. Burn this into your brain, this happens every time our head-lopping Saudi Arabia allies feel threatened by competition.

    "Sandridge Cash Crunch Gets Real; Bans Free Soda in Break Rooms "

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  65. WFM is getting pretty attractive. Trades at about 13x FCF

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    1. My leper broker has lowered objective to $31 and neutral now, so there's a very positive indicator from the pie in the sky lie your ass off previous value. Funny how that works, all after the facts are in, huh?

      They have the price/cash flow at 9.8 while finviz has it at 115 so who knows what it really is but that's the point you're making isn't it?

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  66. PSEC - No big deal tyvm, regained the 6 months of dividend given away yesterday.

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  67. Anyone wanting to make a quick $900 or so, the KCLI trade is still working.

    Buy 249 shares at $48.90 and they will be bought out from you at $52.50 in about a week, a quick 7% return.

    Limit is 249 shares per account as I described before.

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    Replies
    1. Awesome idea BB. I'm already up $700 so that's (700+900)4= $6,400!!

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  68. CP- UPNP is 'universal plug and play'. It's very common in high tech products and I suspect would be a strong selling point. People don't even like to download drivers for simple stuff anymore...I don't blame them.

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    Replies
    1. It basically means plug it in and it will work with anything so designated.

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    2. Can see why - here's an example:

      Just upgraded my laptop to Windows 10 and the mouse pad stopped working properly. Windows-10 thought it was OK and I spent close to an hour going to the Windows, HP and Synaptics website reading help logs and finding drivers to download.

      I took computer science at school and worked in IT my whole career - no way my wife or mother or 2 of my 3 daughters would have figured this out.

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    3. You should see the home automation/music server crap we do. Yikes.

      mb

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