Saturday, January 9, 2016
1/9/16 It Never Rains in Southern California/ Risk Happens Fast
January 1974. Rain fell hard all month in San Bernardino. I finally left the city, crashed overnight in Crestline, and headed for the high desert town of Hesperia. It continued to rain. After another night in an abandoned barn off Highway 138 I turned around and headed for Los Angeles. I recall hitching under an overpass during a downpour in East Hollywood. An overnight trip in a blue Camaro (or something similar) ultimately got me to clear skies in the Bay Area.
Risk to the downside has increased markedly the first week of 2016. There's nothing more bullish than higher prices, and nothing more bearish than lower prices. Price weakness leads to pessimism. Extreme price weakness? Extreme pessimism has already driven oils, commodities and emerging markets deep into bear market territory. It's been bad enough to kill most contrarian trades. Are all traders now contrarians? I'm going to fade the contrarian consensus and place a bet on the 'Don't Pass' line. A few years ago I watched a game clean out a packed table of shooters. The stickman called 'seven out, line away' to end each and every series for over two hours (not even the occasional come-out 'seven, pay the line' to break the boredom). Don't think it can't happen in the markets. Wait for the blue Camaro.
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Has anyone here sold a property (home or rental) without the assistance of a realtor? If so, was the title company able to supply the appropriate disclosure forms, and provide 'errors and omissions' insurance against future lawsuits?
ReplyDeleteInteresting rant on twitter from the Reminiscences guy:
ReplyDeletehttps://twitter.com/LSigurd
I'd bet a lot of people are feeling similar to him and also still feeling the scars of 2008 as well.
Whose knows what it is, but if problems like 08 surface again the FED has no where near the fire power as before.
DeleteSomething feels seriously amiss, proceed accordingly.
Maybe. I think it is just another dip to buy. Normal indicators of a bear market don't seem to be there. Economy is growing, jobs are good, no real bubbles. Maybe China is the catalyst, but I'd be surprised and think we are just building the wall of worry.
DeleteThe FED has authorized themselves infinite fire-power as a criminal enterprise, think of the alternative scenario. Gun sales off the hook for a reason, we're being led to believe gun control is the driving force?
DeleteLSigurd owns an insurance company (PN) with p/b = ~2
DeleteI don't know that they are an actual insurance company - they are classified as a broker and seem be a rollup company. Real insurers are trading on a p/b basis with higher p/b value given to companies which generate consistently higher ROE's.
DeleteBut I have not looked into PN at all.
Two mega-banks Banco Santander and BBVA, oil giant Repsol, telecommunications behemoth Telefonica, and utility Iberdrola – combined capitalization represents 45% of the ibex 35’s total.
ReplyDeleteI see quite a few stocks at support. How to identify a buying dip? Can I ask again, if we're being lied to?
ReplyDeletePuerto Rico defaulting, same for how many others, Brazil, etc....?
Rail car loadings have fallen on their face.
Big rig truck freight has hit the ditch.
Available crude oil storage has almost reached saturation point.
The VLCC’s (very large crude carriers) lease rates are way up, because producers/speculators are using them as floating storage.
The BDI (Baltic Dry) has fallen 96% in the past 74 months.
Oil patch defaulting to the tune of hundreds of billions.
RTH is at bottom of channel, how much you wanna bet this support holds?
World trade has come to almost a standstill.
Historic First: North Atlantic EMPTY of Cargo Ships in-transit – ALL anchored along coasts; none moving
https://www.superstation95.com/index.php/world/750
I can't see the crash myself simply by looking out my back door, I live in a government and military contractor sponsored society.
Stocks are much cheaper now, pricing a lot of that in.
DeleteRail loadings may be down, but UNP, for example, has fallen from a high teens p/e to a sub-13 p/e. That's pretty much the lowest its been in the last 10 years other than the financial crisis.
I'm thinking a lot of people are being overly pessimistic now, which is why we are able to buy many stocks at much cheaper valuations. But I certainly could be wrong.
I'm repairing a power supply and needed a few semiconductors so wound up ordering them from a Chinese vender b/c US venders want twice the price. Even with shipping from China still considerably cheaper, I should go into business importing semiconductors.
ReplyDeleteContra the Heard guys had a rough year too.
ReplyDeletehttp://www.theglobeandmail.com//globe-investor/inside-the-market/contra-guys-our-hits-and-misses-of-2015/article28032291/
"But we do suspect that 2016 will offer us some great picks, better than last annum which had the worst short-term record in this column since we appeared in 2001. Hey, it happens, just hopefully not too often."
Looks like it's behind a paywall
DeleteWhen looking back at the previous year, it normally appears as though a lot has happened.
DeleteSometimes hyperbole is used to make it seem so. But 2015 was indeed a year full of economic craziness, and the stock markets of the world reacted in a strong fashion.
Many of our stock picks last year did also.
The headline of our February article was “Patience is a Virtue with Penn West Petroleum.” Oy, we had no idea just how much fortitude would be necessary when this piece was penned.
At that time, the stock traded at about $3, a blessing from the current value of around $1.20. The question is whether PWT will survive? Though there is no guarantee that it will, especially if oil prices remain in the cellar, we think that management has a pretty good blueprint for the future. Score it: upside potential huge, risk palpable.
Also in February, Alacer Gold was a topic when it was trading just under $3.00. The company has all-in sustaining costs of $672 (U.S.) per ounce, way below the beaten-down price of the shiny metal, is profitable and has $369-million in cash. A credit facility of $250-million is available to expand the Copler mine. The process will take a number of years to be sure. Those thinking of investing in this outfit should be aware that it is located in Turkey, not the most stable part of the globe right now. This entity remains on our Buy list and a double in share price seems feasible from the current level of $2.50.
DeleteThe first line in our March article on Diana Shipping was “Dry bulk shipping has entered turbulent waters.” Indeed, all shipping has and with it the stock price of DSX has sunk from $6.55 (U.S.) when published to around $4.35. One thing that we like to do is cherry pick when a whole sector is hit, as is the case here. That increases the odds of doing well. Still a major concern is the debt level, which is high like DSX’s brethren in the field.
In March, Hartco was featured as Benj did something rare and hit the ask price of $2.69 when the Chairman Harry Hart put in a takeover bid of $3.25. Gallander thought the deal would fly and felt playing the arbitrage spread was wise. Indeed, it turned out that way as Harry ended up offering $3.40 to entice shareholders. This turned into a 26-per-cent gain in a matter of months.
United Security Bancshares is the holding company for First US Bank, a small 19 branch network in Alabama. Trading at $8.30 (USD) in April, the stock price was pretty much stagnant for the year. That seems to belie the potential for this entity that trades well below the book value of $12.64 and has excellent capitalization ratios. A triple is not out of the question, especially if the minor-league quarterly dividend of 2 cents returns closer to the 27-cent level of 2007.
TransAlta was at $11 in May and has been badly beaten since then, now in the $5.00 range. Premier Notley of Alberta has been making her agenda clearer, which is allowing for investors to understand better the future of this company. The majority stake in subsidiary TransAlta Renewables appears to have quite a bit of value and could be critical to a turnaround for this outfit.
Dutch insurer Aegon is another enterprise that turned south after we wrote about it in June. At that point it traded around $7.50 (USD); now at about $5.70. This does remain one of our favourites though and a better bottom line and improvement in the Euro should help. We still believe that this one could turn into a $20+ stock.
Kitchener, Ont.-based Brick Brewing settled at about $1.65 in July when the topic for our piece. Since then it has foamed to $2, out of season according to the stock chart. Better times could be ahead for those looking to quaff this sudsy. Our initial sell target is $2.34.
DeleteIn July, we suggested playing the National Bank of Greece for anything but a trade could lead to negative consequences. Indeed, the stock plummeted after recapitalization caused massive dilution of shareholders. This was definitely a good one to stay away from.
Those attracted to penny mining plays probably found our column on Yukon miner Strategic Metals of interest. It is the largest claim holder in the territory and has positions in numerous other miners. Still gaining traction and pushing into the 40-cent range is proving difficult. Higher commodity prices would naturally help.
The best pick for this column last year was GSE Systems, trading at $1.35 (U.S.) in September. In less than four months, it has jumped to $2.40, and our feeling is much more is in store as the sell target is $5.74. This enterprise focuses on staffing and training, and the nuclear field is one of their bastions. That seems to be coming back into favour.
We’ll ignore our musings since October as they are too recent. But we do suspect that 2016 will offer us some great picks, better than last annum which had the worst short-term record in this column since we appeared in 2001. Hey, it happens, just hopefully not too often.
I mentioned before - we still have a series of higher lows in the market. Until those get knocked out all of this talk about a huge downturn are a little presumptive.
ReplyDeleteI remember in October we were wondering when a decent pullback would occur in EEM, so as to hopefully buy more at $34. But it just never seemed to want to return to $34. In early October I put about 1/2 of my 401k into LZEMX, at $14.21. I decided that it would be a long-term investment, and as such, I will not rush with adding to that position. On Friday LZEMX closed at $12.60, and I think I can now put in another 1/4 of my original 401K into it. So I placed a buy order, which will be executed by Fidelity by EOD on Monday. I'll put the final 1/4 at the 2008 low of $10. I think that in 10 years this will turn out to be an excellent entry point. Possibly even in 3 years.
ReplyDeleteHere is an interesting note about emerging markets released last week by folks running LZEMX:
ReplyDelete"The benefits of lower oil prices have not yet affected equity performance.
We believe there are two reasons for this: (1) While most of
the developing world’s GDP originates from commodity importers,
the 2014–2015 period suggests that in the short run the actual economic
gains to commodity importers are overshadowed by the fear of
losses suffered by commodity exporters. (2) The benefits of cheaper
oil are not as easily quantifiable or as immediate as the impact of oil
industry investment cuts. Hence, while the perceived drag from
lower commodity prices impacts sentiment relatively quickly, the positive offsets (especially to consumers) takes longer to set in. Exhibit 1
shows that current account balances in emerging markets have actually improved since oil prices began to trend down, both among importers and
exporters, although the former have benefited the most. Importantly, the positive direction of their current account balances should allow commodity-importing
nations the flexibility to implement policies that stimulate their economies."
Here is their note about China:
ReplyDelete"China’s New Year Noise
Retail-dominated Chinese onshore (A-share) markets can be very noisy, a fact of 2015 that spilled over into 2016. We believe that their sharp selloff
in the New Year was driven by tactical and headline concerns, not structural ones and should be short-lived due to (1) profit taking; (2) weak
Chinese manufacturing data; (3) renminbi weakness; (4) tapering equity purchases by Chinese insurance companies; and (5) anxiety about the
lifting of a temporary ban on selling by majority shareholders on January 8.
For long-term investors, a more important consideration is the form China’s economic policy will take, as it attempts to steer its economy toward
sustainable, long-term growth. Recent news that Beijing plans to prioritize supply-side reforms over demand-side stimulus is encouraging, as it reinforces
the government’s commitment to advancing structural reforms. This suggests there may be no major Chinese stimulus forthcoming this year;
however, the government appears to be focused on preventing cyclical contraction, aiming to cut capacity and lower leverage while encouraging
private investment through tax cuts and avoiding a hard landing.
US dollar strength and emerging markets currency weakness in 2014 and 2015 weighed heavily on emerging markets returns, especially for
US-dollar-based investors. However, we anticipate that these currency movements have largely run their course. The renminbi’s revaluation is a
much-needed departure from a fixed exchange rate, which gives Chinese policymakers flexibility in carrying out fiscal and monetary reforms."
Be careful David. Putting 100% into anything, even a fund is very risky. No-one ever knows what is really going to happen and if if you are right 99% of the time, that 1% can kill you.
DeleteUS futures were down a lot last night, but now are up .6%. Will be interesting to see how today goes. Shanghai market was down 5.3%
ReplyDeleteTook the miners off at the open
ReplyDeleteDollar is going to spike. I've read multiple reports that Chinese investors are panicking out of yuan and buying dollars
ReplyDeleteSpike against the Yuan or the broad currency market? It has already spiked against most currencies, so it might be just the case of the Yuan depreciating, which would be a healthy thing if it was at a reasonable pace.
DeleteIf there's a devaluation of yuan that is more significant then dollar should rise nicely. I'm looking to short gold if it spikes from a panic
Deletebought a starter position in pension management company VOYA. Seems like quite limited downside and good upside. Funded it by selling off more of insurer ORI as it is cheaper and less risk (and ORI held in well through this recent downturn and was probably my best stock last year.
ReplyDeleteVOYA is the old division of ING that runs in the USA. They pulled back a lot recently. Here's the writeup from BTIG who I think is a good analyst company:
Perhaps more surprising than the fact that shares in VOYA traded off by 12.3% last week is the fact that the stock is now trading at just under 0.57x the company’s book value ex. accumulated other comprehensive income (AOCI) as of September 30, which is not much higher than the level at which the stock was valued when the company went public in May 2013. The reason we find that valuation surprising is that it doesn’t jibe with the amount of progress VOYA has made during the past two and a half years. During that period the company executed on all aspects of its strategy, reaching its 2016 adjusted ROE target two years ahead of time and using its ample excess capital to repeatedly expand its aggressive capital return program. We believe the outsized drop in VOYA last week may have been driven in part by concerns that the market volatility and slowdown in China and various emerging markets could cause the Federal Reserve to slow the pace of interest rate increases. Given the positive impact of higher rates on the performance of and prospects for the use of reinsurance at the company’s Closed Block Variable Annuity (CBVA) unit, the potential forestalling of rate hikes could have dampened enthusiasm for the stock. However, we believe the decline of more than 12% over a four-day period on shares that already looked very inexpensive prior to the sell-off represented an overreaction. The silver lining to VOYA’s share price weakness is that it increases the already steep discount to book value ex. AOCI and makes its share buybacks even more accretive. The company during 3Q15 continued to take advantage of that discount by repurchasing over 11mm shares for $481mm, then at the end of the quarter entered into a share repurchase arrangement in which it is expected to buy back another $100mm during 4Q15. VOYA at September 30 had $170mm remaining under its share repurchase authorization.
ACI bankruptcy rippling thru market in commodity space.
ReplyDeleteThis market is a joke trying to trade. I go to sell a small position and the computer just undercuts me by a penny and than price just drops .50, totally ridiculous.
I really hate that - this is one thing I really think they should make illegal. Makes everyone's trading harder, so some guys with money and big computers can scalp from us.
DeletePSEC - Added some trading shares @ $6.595, goes ex-div 1/27 so no big deal if I'm stuck holding.
ReplyDeleteSPH - Hoping this gets whacked, might be too quick of a spike for me to catch?
Just purchased some more BCEI, as it is hard to believe that oil stays at $30 for a long time.
ReplyDeleteS3 for ENPH is 2.48 today. This would fill the gap.
ReplyDeletePlacing a sell limit order at $4.55 for the shares of BCEI that I purchased earlier today at $3.55.
ReplyDeleteGoing long at the close: VTSMX/ ITOT (total US stock market) + VEIEX/ IEMG (emerging markets) + VGTSX/ IXUS (total international stock market). All markets have corrected significantly, so there's no point in accepting 'single stock risk' when I can expect similar gains even if diversified into the entire global market!
ReplyDelete________________________________________
wonder how high the bounce goes. I sold labd for a 8% or so gain. It was up 90% at one point today. Good god
DeleteMy friend thinks oil will go to near $20, he's an old oil trader that used to store on tankers and he says stay away, even from tankers.
ReplyDeleteDon't forget, CP, that the current oil price already reflects all such opinions as possibilities, weighted by the perceived probability of each possibility.
DeleteThat's why oil topped in 2008 at $120 when GS was predicting $200 oil. GS prediction was already accounted for in the price. Similarly, gold bottomed in 2008 at $750 among the calls for a $500 gold, which were taken seriously and in part drove gold to its bottom.
Deletenothing these days reflects all such opinions it seems. especially when it comes to fossil fuels.
DeleteJP Morgan Chase has turned bearish: http://www.marketwatch.com/story/bearish-jp-morgan-says-sell-stocks-on-any-bounce-2016-01-11
ReplyDeletePerfect timing. Exactly the kind of headline I needed to see in order to turn bullish.
Don't underestimate the panic going on in China. I think odds are increasing we see a spike in the dollar as people flee out of the yuan in fear of a devaluation. Not sure what odds are now but something to keep in mind
ReplyDeleteBXE - Only down 17% on the news oil is going much lower.
ReplyDeleteFED says US isn't closely tied to overseas trouble, WFC prefers EM's to US
ReplyDeleteIF you want a safer way to play emerging markets, you might want to consider Canada. If you overlay the EEM with the EWC, they have pretty much in perfect alignment since the beginning of 2007.
ReplyDeleteAnd with Canada, you can have confidence that the financial reporting is legit and the government is committed to protecting the rights of shareholders.
MU - Nice bounce, not sure why this is so beat up except for I'm sure the new microprocessors have more of the memory integrated into them, VLSI (very large scale integration) with progressive, continuous shrinks?
ReplyDeleteON (or Fairchild?) - The (my personal) idea is for power handling semiconductors (SCR's, Diodes) for solar panels (for inverters converting DC to AC).
GGN - Falling off a cliff.
ReplyDeleteFRO off -8%, crazy man.
AA - "record aluminum demand" Looks like a price war being waged in the industry.
ReplyDeleteKing dollar. Watch for the breakout as people scramble to exchange yuan etc into dollars. I put my in laws and myself into short gold and long uup yesterday. Not a real high reward trade but I think it's wise to be very cautious
ReplyDeleteJust remember what the Swiss did last year, something similar might happen again (Sweden or ?) Fortunately we have powerful central bankers (ie: out of control and either criminal or incompetent?) covering our backs.
DeleteGGN has a nice dividend, or did last I checked. Not sure if that continues.
This the Swiss type move only bolsters the strength of the US dollar. All commodities should be weak on back of even stronger dollar. Gold has a bit of a unique nature to it but if you have a rising dollar and companies like fcx being forced to sell assets to stay in business then both factors should hurt gold
DeleteAnother 6-1/2 hours of blood letting, the Myans would be cheering the FED if they were still around.
ReplyDeletePSEC - Looks like I own a little more of this one.
KCLI - Thoughts, lol?
KCLI is fine for a long term hold. Hard to know how it will trade now that it is on the OTC Market, but it is good value, pays a 3% dividend.
DeleteI prefer NWLI, but you need rates to move up for either of these to really move. Many of the other small life insurers are being bought out, but these 2 are family controlled, so no chance of that unless the family wants out, which neither has given any indication of.
Everything's for sale if the price is right! We've witnessed plenty evidence of this lately.
DeleteKRE - This chart has a nice sawtooth appearance.
ReplyDeleteInteresting
ReplyDeletehttp://stocktwits.com/CompassCapital/message/48057775
Solar - probably should've bought some of this today, POTUS will probably mention it again?
ReplyDeleteI owned oil this day, an ETF: Tuesday, December 23, 2008, of $30.28 a barrel.
ReplyDeletePicked up some SLW at the close
ReplyDeleteAnd a powerball ticket
DeleteAren't they one and the same?
DeleteToday seemed like a short term bottom for sure
ReplyDeleteIn a lot of stuff
DeleteMarkets in Asia perking up. Nikkei +2.46%, South Korea and Taiwan both +>1%, Hong Kong opens +1.5% and back above 20,000.
ReplyDeleteWhat we really need to see is a decisive +5% rally across the globe to repair investor sentiment.
Pretty depressing stuff from gundlachs webcast today:
ReplyDeletehttps://event.webcasts.com/viewer/event.jsp?ei=1084870
Overview is he sees emerging mkts dropping at least another 40%, short term bounce for commodities, higher gold, near term top in dollar, long term bullish on India but don't buy until fall most likely...after the 40% further fall in EMs. Says he sees mkt dropping and heading into potential recession
I do find him generally negative and, while he is a great bond manager, not sure what his record is like on equities. Bill Gross, another great bond guy seemed to always be too negative on stocks - they called him Mr. Dow 5000 for a while.
DeleteMight be good to have a pessimistic disposition to be a bond guy as you are more focused on risk, but need to be optimistic to be an equity person.
DeleteI'm debating taking off my short Gold / Long US Dollar on this bounce but I suspect they will continue to do well after this bounce in the market. Given the market is now firmly below the 200 DMA and the 200 DMA is now trending down, I don't see much of an incentive to rush into stocks right now. I know long the dollar is a crowded traded like Gundlach says so I need to be careful about that. But his reasoning is that most people are long because of Fed hikes while I think being long the dollar is smart because of the potential panic scenario setting up in foreign currencies.
ReplyDeleteI think people will continue to rush into the Dollar and out of the Yuan, Brazilian Real, and Rubles. I am worried about being short Gold in this setup because I think we could see a spike in gold due to panic, but if that happens ultimately I think people will rush into the dollar and not Gold and being that gold is typically traded inversely to the dollar, if the dollar does spike up I think you could see a scenario where there is a significant drop in gold. I could see a scenario where there is forced selling of gold by the hedge funds hiding out in it, funds like Greenlight Capital (10% of holdings), John Paulson (5% of holdings), as well as a huge swath of retail investors who have yet to be truly burned by this up cycle in gold.
My best guess is still that we see a low form some time in August to October this year.
DeleteEuropean indexes also up about +1.5%. Still rather anemic in my opinion, but perhaps a slow(er) recovery indicates it's the real deal (as opposed to being driven by squeezed shorts or computer programs). At some point, however, we'll need a high-volume spike that cuts through some formidable resistance. Monday may have been the low (markets tend to bottom on Mondays/Tuesdays). On the other hand, markets rarely bottom in January- but the speed/severity of the decline in the past two weeks supports the view that a medium-term low for global markets was set on Monday.
ReplyDeleteAEG (Aegon insurance, own Transamerica Life) announced better insurance numbers, a buyback and dividend increase. Up 10%. Life insurers are cheap - actions like this certainly help.
ReplyDeleteLet SLW go will continue with NEM for now.
ReplyDeleteThe opening gap was sold off (which has been the prevailing pattern). My sense, however, is that the majority of investors are ill-positioned for a strong rally. I think the market surprises to the upside.
ReplyDeleteI ended up taking off the short gold and long dollar trade and am playing a gap fill in edz
ReplyDeleteZINC - Wowsa, bad day.
ReplyDeleteWTF, surely it;s takes balls to buy into that weakness.
Deletedeath to smoochie
ReplyDeleteThanks for posting Gundlach.
DeleteRe the life insurers, also meant to mention that MET is also taking steps to get its stock price up by spinning off the SIFI-controlled part of their business into a separate company, so the rest of the business is not affected. People think the life insurers are stuck by low rates, but they are doing things to create value.
ReplyDeleteEDZ gap fill!
ReplyDeleteI love that chart, wonder how that can be real. b/c debt can no longer continue pulling demand from the future?
DeleteGundlach thinks emerging markets have another 40% downside. Who knows but if I look at the chart of eem it broke support and if we go thru a 2008 scenario in EMs (not here) then why wouldn't they drop to 2009 lows?
DeleteAmazing, the huge rally on proposed rate increases, some say 4 of them this year. Glad I was able to front-run the event.
ReplyDeleteUgly day today - IWM now down over 10% YTD - and it's only the 13th.
ReplyDeleteBe nice to see a bounce into the end of the day and positive finish.
Yep, looks like the dump half of pump and dump, central banks reached the limit of pulling forward demand.
DeleteWY - Also cheaper, MOG strikes again.
ReplyDeleteI am glad that I wasn't buying energy stocks on margin. :) Now I can just sit and watch prices get better and better, and when I find some more money to invest (I ran out of what I had easily available), I'll buy some more energy stocks.
ReplyDeleteWhat's interesting about today's selloff is the reversal in 'beta' behavior. Normally we see the higher beta sectors (emerging markets, for instance) selling off harder during market declines. Right now we're seeing the reverse. EEM (emerging markets) -1.01%, VGK (Europe) -1.90%, SPY -2.48%.
ReplyDeleteBack to Monday's lows.
I have a 'theory' that what we're seeing is a rotation from the FANG (Facebook, Amazon, Netflix, Google [now Alphabet]) stocks into undervalued international/emerging markets stocks. At some point, it has to occur. Why not start today?
DeleteI don't know man
DeleteCould be the "they have to sell the winners/market darlings before we can bottom" and that is what we are seeing in FANG.
DeleteAnd I do believe that once we are through this, the market will have new leaders, but I think it will be value / financials, not emerging markets.
Correct me if I'm wrong but didn't apple make up a big percentages of the earnings gain in the s&p last year? What does that look like if apples earnings drop?
ReplyDeleteBEP - "Brookfield Renewable Energy Partners L.P. owns a portfolio of renewable power generating facilities. It owns and manages 204 hydroelectric generating stations, 28 wind facilities, and 2 natural gas-fired plants with 6,707 megawatts of generating capacity in the United States, Canada, Brazil, and Europe."
ReplyDeleteM&A debt: "There's plenty of supply looking to come. But unfortunately none of it is in the shape of what people want to buy."
ReplyDeletehttp://www.reuters.com/article/veritas-ma-carlyle-group-debt-idUSL8N13D3Z620151120
Anheuser-Busch InBev’s acquisition of the world’s second biggest beer conglomerate SABMiller, the
ReplyDelete$106-billion deal is going to flood the market with one of the largest bond offerings in history.
Will AIG carry the bond insurance, if there is insurance?
DeleteThe Japanese are still coming -
ReplyDelete"Qualcomm's power amplifiers and TDK's filters will make "a truly complete solution to the ecosystem," Qualcomm CEO Steve Mollenkopf said in a statement."
How are those Q4/2015 revenue growth results looking?
ReplyDeleteNWLI - Someone was a buyer under $220
ReplyDeleteBuffett bought more PSX, I think he's after chemicals?
ReplyDeleteThe market is under pressure, eh?
ReplyDeletehttps://www.youtube.com/watch?v=YoDh_gHDvkk
Emerging markets are this years version of the 2008 financials. They fell 85% I think. Eem isn't even down 50%
ReplyDeleteCurrency exchange rate phenomenon?
DeleteThe currency devaluations won't help the adrs
DeleteSCCO - Firmly under $25, haven't seen it this low in quite some time, can't remember when.
ReplyDeleteHey Guys- Busy at work again.
ReplyDeleteReopened ENPH AH yesterday at 2.35 and now at 2.30. I'll ry and get SEDG at 20.
VA - Too much good news?
ReplyDeleteTrends in earnings ain't good. Margins are dropping (see intc), bad loans are starting to rise (see JPM) and it seems like just about every industry has too much can inventory. I think we visit the 1700s
ReplyDeleteI don't know about 1700 but agree with the rest so far. Might have to take the loses in QQQ/SPY. We'll see.
DeleteI took most of my losses today, enough is enough.
ReplyDeleteBasically cash and intend to stay that way for awhile. The action is just too random to trade and I'm not about to take positions and hope for some type of spike, just not for me.
Good Luck guys and gals.
I might have if I were home. The only thing saving me was a a big score on ENPH and cash. Other than that my trading has sucked.
DeleteJust checked. 40% cash. Less than I thought!
DeleteThe way this market has behaved for most of the last 5 years is we have these pullbacks on various issues, but they seem to always bottom in earnings season, which is just starting now. My thinking is earnings, ex-energy are fine and that we are bottoming now.
ReplyDeleteI'm also finding it a lot easier to find stocks and industries to buy now, which is another sign we are close to the bottom.
The IIAA Sentiment Survey came out today and bulls were the lowest in almost 30 years other than several weeks in the 1988 - 1990 period and one week in April, 2005. Bears are in the top 6% of ratings. So indicating any good news would support a rally.
One thing to add - every pullback we've had since 2009, people have gotten overly bearish and the right thing was to buy into that bearishness. Maybe this time it is different and we go down, but with rates still low and the economy plugging along, it is hard to see how this happens unless China causes a lot more of a downturn than expected.
DeleteTOF- For 1700 are you simply looking at the 2/2014 low??
ReplyDeleteAnother interesting point - the S&P 500 is actually up slightly this week now.
ReplyDeleteMaybe this whole start of year downdraft will turn out to be just another China scare like August's was.
Not that you can trade off this, but take a look at the attached chart - current market conditions in the past have generally indicated we are quite close to a Major Market Low:
ReplyDeletehttps://www.donfishback.com/2016/01/panic-selling-a-pause-then-another-smash-whats-next/
In fact, the market performs pretty good the following week… most of the time. The problem is, sometimes, it does terrible and the drawdown can be pretty severe.
Not sure if this is good or bad, but Goldman has FCAU on the conviction buy list:
ReplyDeletehttp://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/fiat/
Mark I'm using 100ish earnings * 16.5 to get to 1700 or so. Earnings were down from 113 to 106 last year and quite frankly I wouldn't be surprised to see them down again to 100 or so this year especially if Apple has a down year but more so because I think a lot of industries built up too much supply / inventory and will have write downs due to lower demand. Also the dollar has been strong.
ReplyDeleteI just think there's little need to take risk while the market and earnings are trending down and we are still only 10% from highs and trading at 18 times earnings. I haven't been long more than 10% got more than a day this year and have been mainly playing from the short side. No idea really how low we go but the tends are down and the market is below long term moving averages
Looks like another weak open. No bottom in sight yet...
ReplyDeleteIf He's Worried, Maybe We Should Be Worried? – The incomparable Grant Williams was kind enough to send
ReplyDeleteme the latest edition of his fabulous "Things That Make You Go Hmmm…"
Where do we stand now, economically?
Well, we are right back at it: trying to stimulate growth through easy money. It hasn’t worked, but it’s
the only tool the Fed’s got. Meanwhile, the Fed’s policies widen the wealth gap, which feeds political
extremism, forcing gridlock in Washington. It seems the world is headed toward negative real interest
rates on a global scale.
This is toxic. Interest rates are used to price risk, and so in the current environment, the risk-pricing
mechanism is broken. That is not healthy for an economy. We are building up terrific stresses in the
system, and any fault lines there will certainly harm the outlook.
What makes you most nervous about the future?
Debt. The idea that growth will remedy our debts is so addictive for politicians, but the citizens end up
paying the price. The public sector has really stepped up as a consumer of debt. The Federal Reserve’s
balance sheet is leveraged 77:1. Like I said, the absurdity, it just befuddles me...
per UBS Cashin
What was Lehman's leverage? Of course they do not have a press.
DeleteAlso yesterday's and so far today's action is exactly why I no longer feel its worth the effort to participate for now.
Lehman wasn't able to hold to maturity without marking assets to market. Big difference and why MTM rules should be altered
DeleteI see growth is back on track.
ReplyDeleteZINC - Another fantastic drop.
ReplyDeleteGuy on CNBC was saying you need to pay 95% to short ZINC, so must be bankrupt and you are just collecting the 5% to hold the risk and time of money cost.
DeleteENPH in 3rd account at 2.21.
ReplyDeleteTOF- OK, thanks. Makes sense.
ReplyDeleteCLR- With no hedges this would have to be the most leveraged trade if oil rebounds.
ReplyDeleteRetail sales weakest in years.
ReplyDeleteA lot of that was the oil price. Ex oil, they are up 3.9% year over year
Deletehttp://www.calculatedriskblog.com/
LSG - Getting whacked, if you want gold.
ReplyDeleteZINC - I don't understand, if bankrupt then seems short is good position.
So, almost certainly they are bankrupt, but there's always a chance something else can happen. So, if you want to short the stock to make 5%, just be aware that something good could happen (buyer for assets, sudden commodity shortage), very unlikely. Also, the 5% you get may be this month, or it may be a year depending on how long it takes.
DeleteSo, it's a decent, quite safe return, with a very low risk of a pretty big loss if something very unexpected happens.
You could always get a Martin shkreli come in and do a kbio on you
DeleteYour loss on the short side could be infinite, and 5% is hardly worth any effort to many, I'd bet. I'm not convinced 5% is the potential limit though.
DeleteIf BK, couldn't it trade to 0.01 with a big dilution, that would be a nice gain. I guess I don't understand how getting short is expensive (getting short requires a 95% outlay?), more like someone is being paid to spread disinformation?
Big picture: How many dominos are about to topple and what is the extent of the coming waves of debt default? The new owners of these assets will add them to their portfolios at pennies on the dollar thus their cost to produce will be considerably lower.
So who gets defaulted on?
Inventory report -http://www.census.gov/mtis/www/data/pdf/mtis_current.pdf
ReplyDeleteSupports your theory Mike.
Maybe a plain inventory recession, like we used to have, is what we will get now. They used to be a lot more common prior to just-in-time delivery and computerized supply chains, etc., but we could still have one. They tend to be shallow and short, which would be relatively good after the 2009 one
Yep that's what I'm thinking. The China stuff impacts world gdp but I think we survive it ok. Inventory recession seems very likely given the bloated channels I'm seeing in multiple industries. I bet we see 1700 and maybe people overshoot a bit and go for the 2007 highs
DeleteHard to know for sure as the fed will try its best to stop the bleeding
DeleteAs long as it doesn't get out of hand, I think the FED probably doesn't mind the current market and just sees this as part of the process of getting people ready for higher rates.
DeleteKind of a short term pain, long term gain kind of thing.
U Michigan Consumer survey says:
ReplyDeleteGiven the favorable overall state of the Sentiment Index, the data continue to indicate that real personal consumption expenditures can be expected to advance by 2.8% in 2016.
http://www.sca.isr.umich.edu/
GPS one of my first stocks to turn green.
ReplyDeleteLooking at RTH, retail, excluding AMZN, is outperforming this morning.
Nice, I'm a little jealous!
DeleteNWLI - No debt, someone bought for $215 or fake price?
ReplyDeleteBad sale by someone, current bid is $218 and ask is $227.
DeleteAlarm bell rang at 0:930, lol...
ReplyDeleteWMT - Buy the open.
ReplyDeleteI'm waiting for a heavy vol day in eem to close edz i.e. 100m+. So far it's controlled selling
ReplyDeleteGold short is next. Get dgld ready. I'm thinking Monday could be a bloodbath depending on how we close today so maybe mon or tues morning. Gold likes to spike on panic in mkts but if you notice it's spiking less and less i.e. I think it's getting weaker
ReplyDeleteOh shit market is closed Monday so most likely Tuesday things bottom short term. Just like in January 2008 On day after MLK day
DeleteWas looking at a TD report on Gold Stocks today. They really aren't very cheap on a p/e basis on current prices and a lot are more expensive than they usually were in the past. They are pretty reasonable on a p/nav basis, but that assumes you can get the gold out at a reasonable cost.
DeleteI guess to buy gold stocks now, you have to believe gold is going up in price.
My gold bug buddy is down in South Carolina since Christmas, but will be back next week, so I am very curious as to what he thinks.
WMT closing 250 of their smaller stores, this surprises me a bit b/c my idea was their main business is grocery sales and peeps have stopped buying all the other closet clutter stuff. Where is the pressure coming from, certainly not the corner mom and pop stores?
ReplyDeleteThis was a small pilot to compete with dollar stores. Their neighbourhood stores are staying open and they are investing more in ecommerce.
DeleteLeon Cooperman on CNBC fast money at lunch today and what he said is pretty much in line with what I think about the markets.
ReplyDeleteVideo is here: http://video.cnbc.com/gallery/?video=3000480913
Summary is here http://www.cnbc.com/2016/01/15/cooperman-soft-spot-in-markets-but-no-sign-of-recession.html
But the interesting thing is the writeup makes him seem more bearish than he was on TV - just another example of why you need to vet what you read.
I think I agree no recession but a business or inventory recession to work off excesses. Wouldn't be surprised to see an overshoot to the bottom to like 1600-1650. I might play a v bottom type move but will just wait it out on getting heavily long until my favorite companies get beaten down or there is some stability in the spy. Below the 200dma which is down trending and with earnings down trending is not an environment yet to bottom pick
DeleteInteresting, SPX cash went down for 16-17 months starting in 08. Right now SPX has been going sideways for six months, but we can agree that commodities are in a savage bear mkt. Trillions have been wiped out and the credit freeze is picking up steam and rippling through with ill-liquidity causing dislocation, this is going to take time to work out. Sure we could rip at any time, but.
DeleteI had SPX 1860 as an area that needs to hold today's low 1866.72.
Fib ratios 1794, 1579, 1402 at 23.6, 38.2, and .50 respectively.
I give credit to BB being able to hold through this I know I can't. Personally I'm hoping for a huge crash on Tuesday to set up a good trade-able st bottom, but I'm sure its wishful thinking.
BB" link did not work, I think it this.
Deletehttp://video.cnbc.com/gallery/?video=3000480913&play=1
and m
http://search.cnbc.com/main.do?target=all&categories=exclude&partnerId=2000&keywords=COOPERMANore here
I like Cooperman, he is a first class act who cares. I have a friend who knows him, and wanted to work for just to hedge his portfolio out, but Leon was not interested and my fried is kind of crazy but smart.
DeleteHe basically said that Leon mostly tends to over stay his positions to his determent. But, hey, running billions can not be easy.
And he has one of the best long term track records out there.
DeleteI like Cooperman, he is a first class act who cares. I have a friend who knows him, and wanted to work for just to hedge his portfolio out, but Leon was not interested and my fried is kind of crazy but smart.
DeleteHe basically said that Leon mostly tends to over stay his positions to his determent. But, hey, running billions can not be easy.
TOF said, "Lehman wasn't able to hold to maturity without marking assets to market. Big difference and why MTM rules should be altered"
ReplyDeleteYeah man I get that, plus Lehman did not participate in a hit on an earlier deal, maybe long term capital, and the other banks were pissed and wanted to flush them and did.
But still, do you not think 77 to 1 leverage is not excessive and irresponsible?
Of course it is! It's complacency at the government sprinkled in with some egomania. God help us if there's a real currency crisis here in the us. I don't know what would work in that environment. Owning land and a farm maybe.
Deletenew post
ReplyDelete