Probably the one song that most quickly takes me back to the Sixties!
The DJIA is currently down -371 points, but that’s following a
+166-point rally off its intraday low of 15842 (-537 points).
+166-point rally off its intraday low of 15842 (-537 points).
My thoughts here:
(a)
Markets rarely bottom on a Friday. More likely to occur on a Monday or Tuesday. They rarely bottom in January, for that
matter.
Markets rarely bottom on a Friday. More likely to occur on a Monday or Tuesday. They rarely bottom in January, for that
matter.
(b)
When long-term trend lines are breached to
the downside, the ‘correct’ trade becomes shorting the belly of the beast
(trend line). We typically see fierce
rallies that fail either at the trend line, or just above (small stab into the
belly).
When long-term trend lines are breached to
the downside, the ‘correct’ trade becomes shorting the belly of the beast
(trend line). We typically see fierce
rallies that fail either at the trend line, or just above (small stab into the
belly).
(c)
It’s nice to see a larger percentage
decline in the FANG stocks than in the indexes.
For a change!
It’s nice to see a larger percentage
decline in the FANG stocks than in the indexes.
For a change!
(d)
There’s nothing wrong with a falling market!
It’s what markets do after an extended rise. Nature (which absolutely includes human
nature) operates in cycles.
There’s nothing wrong with a falling market!
It’s what markets do after an extended rise. Nature (which absolutely includes human
nature) operates in cycles.
(e)
If you’re a long-term investor, embrace the
cycle. Add to your positions on
weakness.
If you’re a long-term investor, embrace the
cycle. Add to your positions on
weakness.
(f)
I’m a short-term trader who dislikes
participating in declines. I also plan
to embrace the cycle, for the opportunities that lie ahead.
I’m a short-term trader who dislikes
participating in declines. I also plan
to embrace the cycle, for the opportunities that lie ahead.
To everything there is a season.
(e) is what I'm thinking. I've bought GPS and VOYA into this decline, but mostly held the rest. I've been selling ORI in pieces as it has held up well and is fairly fully valued and moving into these and others late last year.
ReplyDeleteI do want to avoid 2008 type situations, but most other corrections, I think you do better by mostly riding it out and adding to individual stocks which get cheap and then selling into up cycles. I find many people who try and time these shorter cycles end up buying higher than they initially sold for.
Retail sales fell, this is due to improving consumer confidence?
ReplyDeleteThat was an amazing drop in energy stocks in January! Which implies that the expected return starting from current levels is MUCH better now than it was at the end of 2015. And I haven't even started using credit card debt! :) I think the time has come to do that, and I expect to have new funds into my trading account on Tuesday night. Hopefully, we get another spectacular decline on Tuesday, so that I can buy in at even better prices!
ReplyDeleteBefore you start using credit, let me remind you how traders define a -90% decline. It's a decline of -80% that then suffers an additional -50% decline.
DeleteWell, BCEI has already declined 88% since last April, and if we look back a year and a half, the decline is 95%. ALREADY. I plan to use my whole credit very cautiously, and I doubt I will use it all up as I did during the gold decline -- I started dipping into it WAY too early, in 2012. So I will use, say, 10% on Wed, and will then add 10% for each $2.50 drop in oil. And if oil goes flat for a few months at $20, then I'll call it a bottom and will use some more credit.
DeleteDavid - have you looked at their balance sheet at all? This is a company with $25 million in cash bs $875 million in debt and burnt $434 million in FCF in the past 12 months. Unless oil rallies 150% in a short time frame id think they're dead.
DeleteRemember the mistakes of aumn. You want to wait for bottoms and buy during up trends unless you're so sure of the fundamentals of a business you're willing to sit through a downturn
Hussman is probably happy about the decline in S&P. The problem with him is that he will stay fully hedged all the way back to old highs...
ReplyDeleteMark, what do people who own oil tankers do now? Are they filling them up with cheap oil and parking them somewhere? That's what I would do... And I imagine all oil importing countries are trying to do the same now, filling all their reservoirs with cheap oil. So we should see a pick up in demand at such a price, right? A cure for low prices is low prices?
ReplyDeleteI had an epiphany of sorts driving home, the kind of self-evident yet profound revelation that occurs after decades of observation: it's not possible to make money going long in a bear market. Why would I call it an epiphany? Well, some things just 'click' when the time comes. There's a cartoon of a guy who spends weeks climbing a mountain to find a guru who says, 'You know, it's a lot easier to just follow me on Twitter.' But it's probably the self-reflection that occurs during the weeks of climbing that leads to revelation. You can't get to San Diego from SFO if you insist on driving north, and you can't make money going long in a bear market. Is it a bear market? Well, that takes a different kind of guru.
ReplyDeleteThat's right, you don't make money while going long in a bear market. But if you start buying late in the bear market (like I am doing with oil), then it is very possible to make a ton of money when the bear market finally turns into a new bull. And with oil, luckily, we know that a price under $30 cannot persist for a long time -- it is a local abnormality.
DeleteDavid I still think it makes sense to wait for a breakout above the 200dma for oil with a successful retest. I made a lot of money being long stocks in 2009 AFTER waiting until June / July for this to happen.
Delete2nd - I came to the same realization a month ago that all of my recent winning trades were bearish. Since then I've only made money because I've only been positioned short. Granted this won't last forever so I'm managing my risk but think of it in terms of surfing: sometimes the current is so strong it's not even worth it to paddle out.
Mongolian uranium mine might be shut down.
ReplyDeletehttp://www.japantimes.co.jp/news/2016/01/16/national/media-national/elephant-room-toshiba-nuclear/
1937 analogue?
ReplyDeleteCOWN/ENPH/OZM/BAC/etc.. -> $1 (I upgrade these to buy @ $1!!!, don't forget to diversify)
BOGOTÁ—Colombian President Juan Manuel Santos came under fire Thursday over the government’s sale of state power generator Isagen as both leftist activists and right-wing politicians criticized the transaction.
ReplyDeleteOn Wednesday, the government sold 57.6% of Isagen for $2 billion to a subsidiary of Canadian investment fund Brookfield Asset Management, the biggest privatization in Colombia in a decade.
2nd, I made money in the 2000 bear market by buying undervalued stocks and avoiding the tech and large cap stocks which were way overvalued and brought the broad markets down.
ReplyDeleteI think there is a pretty good chance that 2016 us similar where overvalued stocks like FB, AMZN, IBB bring down the broad markets, but we will be able to make money in this bear year by buying cheap stocks, like financials.
David, don't know what to say, except don't do this. This is not a good way to fund investments and look at the mess it got you into last time.
ReplyDeleteI completely agree. The thing I learned quickly was to never use leverage and never use options. If you want to do that then do it early in a bull market. But I still think it's unwise. Building wealth typically takes time, $1000 at a time unless you get lucky
DeleteOverstock.com Mobile Applications Surpass 5 Million Downloads, Named Best Shopping App Fourth Year in a Row
ReplyDeleteThis is what I mentioned last week. Not a good sign
ReplyDeletehttp://stocktwits.com/CompassCapital/message/48283964
The big question, that no-one can really answer, is how much of that is priced in after the decline we've had. Lots of stats out this weekend about how oversold we are, things like record Puts bought on IWM, stocks most oversold in at least 13 years, etc. So, we should be setting up for some bounce at least.
DeleteAnd what you said about waiting for the 200 day to move up is probably a good approach for most people, but some stocks are getting to levels where you'll almost certainly make money if you can ignore a further drawdown and be patient, so hard to resist and a reasonable chance you are getting them cheaper now than where they will be after the market has turned up.
But I'm probably down 9% already this year, so would have been much better off to have taken your advice late last year. But I'm actually feeling pretty good about 2016 and think it will be a good year by December.
A lot of the recent Econ reports have been weak. Trends in earnings and Econ reports is definitely not good and confirms my opinion that it's best to wait on sidelines while the s&p is under the 200dma and the 200 dma is trending down
ReplyDeleteMan the more I look at this stuff the more concerned I'm becoming about the trends in the market and the economy. I think the risk of a significant (ie 25-35%) pullback are definitely rising. Things have fallen off quite a bit in the economy just in the past month or so. I think it would be very wise for the Fed to make a stand and say they won't raise rates for the rest of the year or however long it is so that people can regain some confidence beause this has the potential to turn into a bit of a wipeout. I know the whole 0.25% raise thing isn't a big deal, but keep in mind the Fed went from $85 Billion a month in stimulus to $0 over the course of a year, then they started allowing things to mature without reinvesting them (ie more tightening) and now they're raising rates....all of this within the span of 2 years. That's a lot more tightening than most people understand and its no wonder we're starting to see some significant deterioration in economic and earnings reports.
DeleteOK, Mike, what do you think about BTE? Its price chart is almost identical to that of BCEI over the past 3 months. Are they in a better shape financially?
ReplyDeleteFinally, what can you say about ECA? It didn't decline that much, but probably because they have a good chance of surviving for a long time?
Not saying this will happen, but it definitely is a possibility:
Deletehttp://www.wsj.com/articles/back-to-the-future-oil-replays-1980s-bust-1421196361
Shoot it's behind the paywall Brent.
DeleteDavid - I think it's pretty important to pay attention to the balance sheet for these companies at this point. I remember looking at PIR under $0.50 back in 09 and looking at their balance sheet which had plenty of cash and thinking there's no way it stays down here. It went like 80% lower before then going up 200 fold. But that's because they had a great balance sheet and people over reacted. I skipped on buying it because I was scared too. But looking at debt / equity levels, cash balances, and FCF is vital. If it has high debt to equity and lots of cash I would still pay attention and dig into the footnotes of their 10-K on www.sec.gov to see if they have any covenants that would trigger a default above a certain debt to equity ratio. But having lots of cash would be able to eliminate those concerns.
This is the deep end of investing but it's where you can get outsized returns. But you have to have a certain level of conviction that you're right and you really need to do your research
DeleteJust google the title and you can get in - Back to the Future? Oil Replays 1980s Bust
DeleteHow's Spain doing these days? Last post here on the subject everything was doing just great and getting better....
ReplyDeleteWho says the market likely will rally on FED rate hikes, raise your hand now and be counted?
ReplyDelete"Kolanovic considers bluster from the Fed and four rate hikes in an election year as potential causation for an event that people don’t want an invitation to attend
It is not just oil that is drawing the fancy of Kolanovic. With the Fed talking up four rate hikes in 2016, he notes another likely causation point for a bursting of a “stock market bubble”"
Mark, in December you sent out a great report from GS on oil stocks. Do you happen to have an updated report from them or from another firm? I would rather rely on them to point out solid companies then rely on my own readings, as I can easily miss some salient points... Thanks!
ReplyDeleteGoldman Sachs’ predicted last July, that Chinese stocks would rally. Looking at the chart and assuming that was in the 1st week, it seems some folks believed them. Wonder if GS was shorting the strength?
ReplyDeleteAMBC - Income is greater than sales, wonder if this is of any interest?
ReplyDeleteLooks like I do have a hedge against China weakness:
ReplyDelete"McCarthy, who leads ESG’s Nexus strategy, was positioned to cash in as the People’s Bank of China acted as he expected. The approximately $500 million fund, which is devoted to a bet that the Chinese economy will deteriorate, gained 16.5 percent in December, according to a person with knowledge of the fund’s returns."
"Billionaire David Tepper, who runs hedge fund Appaloosa Management, said in November that the yuan is massively overvalued and needs to fall further. Dan Loeb told investors in his Third Point hedge fund last year that the “downside scenario for China seems more intimidating than ever before.”"
Wonder if the Chinese students who laughed at Bernanke established their loans in the appreciating $US?
DeleteHeavyweight investor Appaloosa Management sued SunEdison (NYSE:SUNE) to prevent a SunEd yield company from buying Vivint Solar's (NYSE:VSLR) rooftop portfolio, Reuters reported Wednesday.
ReplyDeleteDavid- Email sent.
ReplyDeleteNot sure if I posted this Friday but bought TWTR at 17.50ish I think.
I knew those moves in Nat / fro / tnk etc were fraudulent
ReplyDeleteWish I had shorted em
DeleteOil bull goes all-in on crude, eyes 'meaningful' recovery
ReplyDeleteEric Nuttall of Sprott Asset Management has a warning for energy investors: The worst isn’t over yet. But that doesn’t mean you should wait it out. The lead portfolio manager of the Sprott Energy Fund is fully invested in Canadian oil stocks (after being 70 per cent in cash twice last year), based on a belief that the current oil price below $30 (U.S.) a barrel is “unsustainable.” While Mr. Nuttall admits he jumped back in the market too soon, he’s counting on a “meaningful price recovery” in the coming months.
What’s your prediction for the price of oil?
I think oil will rally to over $50 by the end of this year. There will be volatility between now and then. I think the floor price will be in the next two to three months. I can see a scenario where the market rebounds in the second or third quarter.
How low do you think the price of oil will go?
I have no idea. I never thought we’d be at $30.
How is today’s oil market collapse different than in 2008?
It’s way worse. The losses are larger, which is staggering, and it’s occurring in a more compressed time frame. There are names that have fallen 80 to 90 per cent in the past three months. Look at Boulder Energy Ltd., for example, which is down 80 per cent. Paramount Resources Inc. is down 72 per cent. In December, I had my best and my worst day in the history of managing the fund in over five years. I had a down-11-per-cent day and an up-10.5-per-cent day.
This month, I’m having my worst month in the history of managing the fund, and it’s only been two weeks. I’m not going to tell you how much – it’s embarrassing.
Did you jump back in too early?
Yes. Anybody who has had exposure at any time in the past year has been too early.
What stocks are you buying?
I’m buying stocks that have fallen 70 to 90 per cent from six to nine months ago, with the belief they can rally from 50 to 100 per cent by the end of the year. My key holdings include Crescent Point Energy Corp., Bonterra Energy Corp., Whitecap Resources Inc., Baytex Energy Corp. and Cardinal Energy Ltd.
Why are you only buying Canadian energy stocks?
People see a $29.68 oil price and forget that a Canadian company has its costs in Canadian dollars, and sells product in U.S. dollars. When you convert that back into Canadian dollars, you get about a 45-per-cent uplift. At today’s price, [and including the Canadian oil discount when sold in U.S. dollars of about $3], that’s almost a $40 oil price, versus $30 for a U.S. company. I see absolutely no reason to be in U.S. producers.
How has your investing style changed in this market?
As the stocks rally, I typically sell into strength and deploy cash on weakness. It will be different this year. I’m terrified of missing the turn. I think it will be violent to the upside and occur in a very compressed time frame. There could be more downside, but if I’m correct in my call on the commodity, I’m willing to suffer through the remaining downside and be patient to benefit from the much greater upside.
Are you short any stocks?
Not today. I was short some land drillers earlier this month and made some money. Given how far things have fallen, I don’t feel compelled to be either short or to have cash. I want to be fully invested, to be as exposed as possible when the turn occurs, with the admission that I could be early by another month or two.
What’s your advice to average investors?
The biggest risk today isn’t being invested in energy stocks. It’s not being invested in energy stocks. Given the magnitude of how far many of these stocks have fallen, I don’t know if there will necessarily be the magical pullback people need to buy. That means if they aren’t already in before the lows, they could miss the run. I’ve seen that many times and have been guilty of that myself with stocks.
The above article is from one of Canada's smartest energy investors. Now he is an energy investor, so you do have to read what he says with the understanding that his career success is based on energy success, but he does line up with you David.
DeleteThe catch is, even though he is very smart, he has been very wrong the last while and could be again. but he'll still pull in his big salary regardless.
Someone help us if he is the smartest!!! The fund has lost money over a ten year period in all timeframes.
Deletehttp://www.sprott.com/products/sprott-energy-fund/
You may be right. He comes acrosss as a very smart guy (he knows the companies exceptionally well) and did well early on and pre-Sprott, but that was a major energy bull market. Maybe he just got lucky and was at the right place at the right time. Plus Sprott uses hedge fund fee stucture - 2.5% plus 10% of returns over benchmark - which is good for Sprott but hard for the funds to outperform
Delete"Did you jump back in too early?"
DeleteNo, I rode them to bankruptcy.
I think the title should be
ReplyDelete"Oil bull is down big crude knife catching, prays for 'meaningful' recovery"
Haha - sounds about right!
DeletePuerto Rico payment company EVTC got a good writeup in Barrons this week. I've been looking at it as they have abut 70% of the payments market in Puerto Rico, are moving into other countries, and I think they are quite cheap (10 p.e) with +50% ROE's, but their balance sheet and income statement is somewhat convoluted as they were a spin off from a Puerto Rico bank, so haven't been able to be sure that its worth buying.
ReplyDeletePayment companies are generally good businesses though and with 70% market share, would be hard to displace and a good takeout candidate.
Thank you for the Sprott article, BB! He made a very interesting point about buying Canadian companies vs. US ones. I am glad that BTE is one of his key holdings -- I've been buying it as well.
ReplyDeleteI will heed Mike's advice at this point, though, and with oil under $30, will buy only those companies that can survive for a while at such a low price. But I also want to buy those that fell a lot, so I won't buy the BEST ones -- the time to buy them was at the start of the downturn. I figured that ECA has a good tradeoff between being down a lot but at the same time having the ability to survive this crisis. So I placed a market buy order for ECA for Tuesday -- hopefully, we don't get a HUGE gap up, and I'll still be able to buy it at a great price.
Regarding trusting Sprott because he is a smart guy, I've seen many smart guys who were recommending gold stocks in the past 5 years, so I realized that I cannot delegate my risk management to anyone else. Oil prices can indeed fall to $20 and stay there for a while, and my strategy needs to be able to handle that (that's why I am not using any margin). But having said that, I think that we'll see oil above $60 soon, possibly at the end of 2016, since the current low price is here ONLY because Saudis are pumping oil like crazy. However, they KNOW that the market can easily handle $100 oil, and they will not hesitate to bring the price back up once they achieve their objectives. And I actually think $30 is low enough for their objectives to be achieved, and so oil should not stay below $30 for a long time.
ReplyDeleteHard to know what the Saudi's will do, but they are very long term thinkers and I think they might be willing to live with low oil prices for years in order to crush some of their middle east enemies.
DeletePlus, now you have Iran coming to market. They are only pumping 1 million barrels per day and are looking to add another 500,000 short term, but were are 3 million before the sanctions were invoked, so could be adding a lot.
Realistically, I think the only one who knows where the price of oil is going is the King of Saudi Arabia and he isn't telling anyone.
Personally, I'm not buying any oil yet, but I'm holding the ones I have (about 5% of my portfolio).
DeleteI can understand buying here, but I would take it very, very slow and only as part of a diversified investment plan. Going heavily overweight any industry, especially a commodity is very high risk as we've seen the last few years.
5% now? :)
DeleteBiggest myth in market right now (IMO) is that the Saudis control the price of oil
DeleteIn hind sight, should have sold, was almost 9% of my portfolio a year ago. Who knows what the right thing to do now is, so I figure just hold the small position.
DeleteMike, why do you not think the Saudi's control the oil price. If they wanted to, they could cut production and get rid of the market oversupply. IN the 1980's they cut from 10 million barrels to around 3 million to support the price. I think the market oversupply is only 2 million barrels per day.
I remember saying it seemed really odd to me that oil didn't rise despite everything that the Fed was throwing at the market to keep it up. And if you think about the long term bullish sentiment on oil, it was no wonder that so many companies levered up (ie massive overbuild) to take advantage of the supposed future perpetual rising oil prices which everyone agreed was inevitable. Couple that with improving extracting technologies, tax advantaged structures that provided higher yield in a low yield world and its obvious it was a massive bubble. I had a really strong feeling about 2 years ago that the dollar was about to on a huge run higher...just wish I thought it through that oil would be the area to get hardest hit.
DeleteAlso if you look at the breakdown in oil, it occurred way before that OPEC meeting in the late fall 2014. The market likes to have a simple explanation for everything and pin the blame on just one cause, but I really think Saudi Arabia has far less control then people think.
Speaking of bubbles, I still that Gold bubble needs to pop. I know when my brother and dad are investing in Gold then there's most likely a bubble. I bought a gold miner back in 2003 and made some good money on it. Gold was at $400 I believe. I remember telling my dad and he said was like "You're buying gold after that run?". Funny that he now owns some gold.
DeleteI think there's a big move down coming soon. I can't figure out the timing exactly so I might just wait for a break below $1,070. I thought we might have a chance to short gold on a panic pop tomorrow (was thinking we would get a big move down in the market followed by an intraday reversal), but S&P futures are higher and China turned higher so odds are the pop won't happen. I'm thinking we will get a move down like the Nat Gas move down at the end of last year.
Every time interest rates try and move up, gold heads down. Probably when rates do finally start their real move upwards, that will be the catalyst for golds breakdown.
DeleteMarkets looking positive this morning - being receptive to earnings news and even energy up a little bit. China perceived as doing a bit better. Maybe the bottom is in for now. Would make some sense as my list of good value stocks has grown and the volume last week on market ETF's like the SPY and QQQ were spikey like we've seen at other recent bottoms.
ReplyDeleteEVTC up 10% pre, Barron's roundtable basically bearish or at least rough waters ahead.
DeleteI doubt bottom is in. Volume wasn't high enough if I'm just looking at that...at least that's my take. If we get a 150m to 200m volume day in EEM then I'd say it's in, at least in medium term. EEM is the focal point of this downturn so key to watch it IMO
DeleteWhy are these European banks so weak?
ReplyDeleteDunno for sure but I heard too many defaulting loans. I'm wondering if maybe they're raising cash by selling their US stocks.
DeleteI wonder if some of the middle east countries are selling to raise cash since oil is so low. The Euro-economy is supposedly improving and good banks without any issues like ING are getting pushed down too. It could be interest rates spreads are getting smaller because of Euro-QE and hurting margins, but I don't know that.
DeleteAMSC - ha,ha, sell the 60 minutes news.
ReplyDeleteSean Penn must've traveled into Mexico to toke the ganja with El Chapo?
ReplyDeleteBAC still selling off.... WTF?
ReplyDeleteBernie, I can't locate Ameriker on the map, gimme a clue there bud!
ReplyDeleteGGN - Still falling over a cliff, what might be the cause?
ReplyDeleteTA - Off 8%, wowsa!
ReplyDeleteSooner or later someone somewhere's going to order a ship load of iron ore, just a matter of time....
ReplyDeleteHappy New Year!
ReplyDelete"If USD-based investors in mid-August 2014 bought US$100 worth of Canadian dollars (C$109.50) and invested them in a Canadian index fund that parallels the TSX, they would have lost C$29.67 on those stocks by Friday. If they sold on Friday, they would have obtained C$79.83. They’d then convert that fortune into USD by paying C$1.45 per greenback and end up with US$55.05. A 45% loss. More realistically, including transaction costs and fees at every step, the loss would have been over 50%."
MAC - Looks like the Canadian Teachers Union sidestepped all that CAD downside while collecting a dividend, they did well. Not sure if/when they plan on selling, of course...
DeleteCertainly, owning Canadian Oil has been a hugely losing proposition, there's a good chance they won't recover but chose BK instead, the Canadian system is hostile toward carbon based fuels it's easy to see considering they gladly subsidize higher electricity prices connected to alternatives.
MXC - Someone bought the heck outa this thing. BTW, Texas is a friendly state for oil producers.
ReplyDeleteCLR crashing?
ReplyDeleteWLL
DeleteAdded to AAPL here.
ReplyDeleteLDOS - Government largess hard at work. Don't come to TT for late breaking news or ideas intended to make you money, expect misleading info void of comprehensive reasoning.
ReplyDelete
ReplyDeleteOil and gas companies such as Devon Energy (DVN -6.5%), Chesapeake Energy (CHK -15.2%) and Continental Resources (CLR -15.1%) will be “in a delevering phase for years," Guggenheim analysts say.
Guggenheim says CLR CFO John Hart recently revealed a post-recovery spending plan that still appears within cash flows, confirming its bias that the E&P sector will be in a delevering phase for years, so activity levels will be slow to ramp and will remain subdued.
For levered growth to return, the firm says the sector should first have resized land, equipment and personnel completely; while CHK believes it is sized to run 40 rigs instead of the 12 now active, the firm says it is a good sign the company hopes to delever first.
WLL- Jezus, this fucking thing was 100 higher a few days ago.
ReplyDelete30 minutes to go, as usual advice to remain long proves beneficial to someone other than me. At some point you begin to accept truth based on results.
ReplyDeletenew post
ReplyDelete6.9% China growth, wow-o-wow, much better than I was anticipating!
ReplyDeleteNFLX - Streaming will never catch on.
ReplyDeleteINOV - Government largess?
ReplyDelete