Thursday, March 17, 2016

3/17/16 The Blitzkrieg Raged

Sirens sounding off in the Bear Camp equivalent of London since early
morning.
  Let’s listen to Mick Jagger’s
commentary on the fallout. 



I rode a tank, held a general's rank
When the blitzkrieg raged
and the bodies stank

As for FOMO-stricken bystanders, we’re way past the Land of Low-Risk Entry
Points. 

I laid traps for troubadours
Who get killed before they reached Bombay
Pleased to meet you
Hope you guessed my name
But what's puzzling you
Is the nature of my game

Re Brazil’s President Dilma Rouseff (who
recently appointed her former mentor Lula da Silva to a Cabinet post in what
will likely be a failed attempt to avoid prosecution for his role in the
Petrobras scandal).

I stuck around St. Petersburg
When I saw it was a time for a change
Killed the czar and his ministers
Anastasia screamed in vain

The weather report.  Crude oil
+4.52% to 40.20!  DJIA +183 points to 17508.  SPX +16 to 2043 (was it just last week that
2000+ seemed a victory).  EEM (emerging
markets) +2.31%.  EWZ (Brazil) +9.26%.
ASHR (China ‘A’ Shares) +1.5%.
RSX (Russia) +2.65%.  VGK (Europe)
+1%.  VT (total world stock market)
+1.02%. 

The market leaves no stone unturned, and no hedge fund unharmed: CYB
(Chinese Yuan) +1%.

212 comments:

  1. 2 of my clients today had GS wire transfer money to me.

    ReplyDelete
  2. http://www.marketwatch.com/story/impeachment-process-begins-against-brazils-president-2016-03-17

    It was just a matter of time. Remember when Richard Nixon ordered the US Attorney General to fire Archibald Cox, the Special Prosecutor in charge of investigating the Watergate Scandal? Which overnight gave rise to bumper stickers that read 'Impeach the Cox-sacker.'

    Can't wait to see what they come up with for Rousseff's failed bid to grant immunity to Lula da Silva.

    ReplyDelete
    Replies
    1. Why does history so often repeat? Homo sapiens are idiots.

      Delete
    2. We're all idiots. The sooner we understand that, the sooner we're able to fight the tendency to act like one.

      Delete
  3. Picked up some MU today near the closing price. I figure it's a beaten down dog but it's trading below net asset value and does have a potential buyout offer sitting out there.

    Sitting at about +6% YTD now. Not bad for having half my money in cash all year. Still way off my all time peak.

    Also contemplating buying a business for the family and having my in laws run it and giving us some side income. I still am skeptical about the big market rally we have been on given the high valuation.

    ReplyDelete
    Replies
    1. I get the skepticism, which over the past few years has contributed to a Great Wall of Worry!

      Delete
    2. Slowing growth in China has been a big part of it, which makes the Great Wall analogy even more apropos.

      Delete
    3. Mike,

      I'd bet you don't get a chance to buy the market cheaper than today until we get to the next bear market.

      The earnings yield on the S&P, assuming at 18 p/e, is 5.6%, versus 1.9% on treasuries, so way cheaper and the dividend on many stocks is higher than this. It is hard to see valuations getting lower until there is more competition from bonds for places to invest. But the only way rates go up is if the economy improves, but if the economy improves, profits and p/e's generally go up.

      Eventually, this all comes collapsing down, but I really doubt it until inflation and rates rise.

      Not saying you're not right to be cautious, but I do think it could be a really long time and much higher level before the market gets cheap - of course there are lots of individual stocks cheap already.

      We could easily be in a period like the early 1990's where stocks were expensive, but kept going up for a lot of years, because the economy was improving and the internet was evolving, etc.

      Here are the p/e's from the 1990's - every one from 1992 on, except 1995, was above 18, and the market (S&P 500) went up almost 400% from 1992 to the peak in 2001.

      http://www.multpl.com/table

      Delete
    4. BB - Only thing with that argument is in the 90's we had amazing earnings growth:
      1993 28.89%
      1994 18.03%
      1995 18.74%
      1996 7.77%
      1997 8.52%
      1998 0.41%
      1999 16.74%
      2000 8.61%

      Here's the past 4 years:
      2012 0.39%
      2013 10.82%
      2014 5.32%
      2015 -5.92%


      The alternative to bonds makes stocks attractive but relative to earnings and growth (lack thereof?) its pretty bad.

      Also I do think the potential for a drop in earnings from AAPL is more impactful than people think. I believe I read that without AAPL's earnings growth last year the S&P would have had a near 10% drop in earnings.

      Delete
    5. The one wildcard is the positive impact from oil's drop. That will help eventually but I have no idea how much.

      Delete
    6. "I get the skepticism, which over the past few years has contributed to a Great Wall of Worry!"

      Totally, I get it. Sentiment plays a major role. But again, the market trades at nearly 20x earnings with negative earnings growth. In 2011 we had an enormous wall of worry but also excellent valuation (11x earnings)

      Delete
    7. We also had crappy earnings growth from 1988 - 1992 where they were actually down over the 4 year period. So maybe the big earnings growth is still to come? Who knows, but it is something to consider. We haven't had a really good economy in the US since the late 1990's, so it is due. The 2003 - 2007 period was really artificial in my opinion as people ATMed their houses as rates went down. In Canada, we had a great economy in the last decade due to the commodity supercycle, so we probably still have some things to work through here, but many stocks in Canada and, similarly,the emerging markets, have gotten so cheap, there are good things to buy.

      As far as AAPL goes, I'd love to see S&P earnings growth drop by 10% due to AAPL. That would get people all worried and drive broad prices down unfairly and give me good chance to buy non-related stocks. That is what happenned in the early 2000's and made it easy to beat the market (even for Hussman!)

      Delete
  4. I actually like the lackluster earnings growth the past four years. That gives earnings growth plenty of 'room to run' the next four years.

    ReplyDelete
    Replies
    1. I agree. If we can bump up GDP and inflation a bit, we could see strong revenue growth finally, which could be used to drive earnings.

      Delete
  5. Wages are still increasing, right? Some think wages will eat into earnings but I'm not sure I can agree, why would wages increase if earnings weren't increasing, I don't see the corporate incentive?

    Also consider, If China is experienceing a rough go at manufacturing, who's picking up the slack there, or is the answer so simple as demand has fallen thus China hits the skids? I don't know the answer of what's going on but someone does.

    ReplyDelete
    Replies
    1. Wages are increasing, so the good thing is one person's wages are another's demand. The difference this time is many people are using their increase in wages to pay debt and delverage, which is bad for the economy short term, but good long term, as long as it doesn't become deflationary.

      For companies and stocks, it all depends if the increase in wages can be passed onto customers. Either you hold prices and take less margin or raise prices and potentially lose market share.

      As far as China goes, manufacturing is still increasing, but at a slower rate - http://www.tradingeconomics.com/china/industrial-production

      I think this is the natural progression as China moves from an export-driven economy to a domestic focused economy. As china moves towards a middle class economy, demand will go up for many non-manufactured things like improved food, better services, leisure, healthcare. etc.

      Delete
  6. Meant to ask before, Mark, what do you think it means by people paying you from Goldman Sachs? Has this happened before? What is the rational?

    ReplyDelete
  7. I hear ya guys. Same argument for why to invest in India (corruption etc means chance for improvement over time). Plus they have amazing demographics.

    I like small caps a lot right now and have for the past month as I think they got way too beaten down relative to their earnings growth profile and exposure to a solid economy like the US. Plus they have a decent discount to the S&P's valuation. I do see a scenario where the RUT goes up 30% while the S&P only goes up 10% or so over the next year or two.

    ReplyDelete
    Replies
    1. I'm finding lots of cheap small caps too. I've been looking more in Canada, but coming across a lot of small manufacturers, which I like as they should benefit from the low CDN $.

      Delete
  8. BPT - "Due to the Recent Fall in Oil Prices Trustee of BP Prudhoe Bay Royalty Trust (BPT) Attributes No Proved Reserves to the BP Prudhoe Bay Trust Past 2020 PR Newswire"

    ReplyDelete
  9. I was out skiing with my boys today, and when I came back, I saw a couple of nice surprises in the market for me. First, UGAZ hit my sell limit order at 1.05 (new: 26.25) for the shares I purchased at $0.85. That's a very weird price pattern: going down almost every day for a month, and then going up every day for two weeks already. If I thought of myself as an agile trader and was lucky enough to wait for the new uptrend to establish itself, then even if I would have jumped onto this bandwagon last week, I would not be able to hold for more than a day or two, in the fear that the uptrend will give way to a pullback. But no pullback is occurring... My next sell limit is at 1.25 (new $31.25) for the shares I purchased at $1.05.

    Another nice surprise today: after making a double bottom in Jan/Feb, EROS finally jumped above the highest point between the bottoms. This, classically, is an indication that the bottom has indeed been established and now the only way is up, at least for a while. I am expecting my sell limit at $13 to be hit in the near future...

    ReplyDelete
  10. Final note: with SLX surging to multi-month highs today, with RSX surging to a multi-month high today, with Russian ruble falling to multi-month lows today, there is no reason for MTL not to surge to new highs. So I just placed a buy stop limit order for more MTL, at $1.86/$1.90.

    ReplyDelete
  11. Hearing today that the selloff earlier this year was actually driven by people who owned energy debt. They couldn't sell the debt, so were shorting stocks as a hedge and buying CDS's as an offset. Because of this selling pressure, it pushed energy and related stocks like Texas banks down, and this led the whole market down.

    Now that oil has stabilized, the energy bond market is getting better, so all of these trades are unwinding. The CDN $ is up 12% from it's lows in under 2 months - crazy.

    Of course, you'll never know for sure, but I did say how I thought this was just a pullback and no reason for a bear market and it seems that is turning out to be true.

    ReplyDelete
  12. Hey CP - looks like I got this one right:

    BB CanadaJanuary 14, 2016 at 4:20 PM
    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.

    ReplyDelete
    Replies
    1. I'm quite pleased you got it right BB. Now don't let that happen again, okay? :)

      Delete
    2. 10yr Treasury still hasn't lifted, seems like when it does market sells off. Now if this correlation breaks down I'll kiss BB on the lips, online. :) I'm skeptical!

      Delete
    3. There's a ton of debt out there and many companies aren't going to be able to make payments to bond holders thus government pushing risk is simply a transfer of wealth?

      Everybody I know works for government in some capacity, it's about the only thing going around here. Thus I don't see the pain myself, but I certainly read about it and the argument seems validated by price action.

      Consider, if government wants to manage down economic activity all they need do is reduce spending. What are the options, can we at least attempt to identify their motivations?

      Delete
  13. So the 'we are fine' letter has been sent to employee's...and Ackman will pay off some debt??... I guess those two negate each other.

    ReplyDelete
  14. BB- It's typical with a lot of my clients. These invoices get pretty big on a monthly basis, usually around 300K each and that's the easiest way for them to pay.

    ReplyDelete
  15. Damn, if BXE would just follow JONE it would be over 2 again...

    ReplyDelete
    Replies
    1. This stock is being sold, consistently. I think it's sunk.

      Delete
    2. Pretty sure Orange still has a lot of their BXE shares and are not selling yet. May distribute them to their hedge fund holders. Could be causing a big overhang on the stock.

      Delete
  16. GUKYF - I'm watching this thing crater. Intend on investigating WTF, something's up....

    ReplyDelete
    Replies
    1. Kurdistan Regional Government is broke. Considering this, not sure how they can fend off Saudi Arabia's ISIS without help from outside which doesn't seem possible considering SA is a US ally and wants the Shiites the hell out of the ME?

      "Vulnerable

      The price of oil, like the price of metals, has seen a mini-recovery since the lows of earlier this year. However, it hasn’t helped Kurdistan-based oil company Gulf Keystone Petroleum (LSE: GKP), whose shares continue to trade at a depressed level of 12p. Gulf Keystone’s problem is that the Kurdistan Regional Government (KRG) is strapped for cash to pay the company, while the company has massive debts to service.

      Gulf Keystone had cash of $58m on 4 March, following a late payment from the KRG of $12m net for January. The company must have cash in hand of $32.5m to avoid breaching a covenant on its bonds, and has to make an interest payment to bondholders of $26.4m on 18 April. Given the running rate of operating cash burn, Gulf Keystone will need to receive at least $15m from the KRG before 18 April to avoid breaching its covenant when it makes the interest payment.

      If the KRG doesn’t cough up enough, Gulf Keystone’s bondholders will probably play ball for the time being. But, with a further interest payment of $26.4m due in October, and a tranche of $250m bonds maturing next spring, buying Gulf Keystone’s equity today puts you in about as vulnerable a position as a shareholder can be."

      http://cabinet.gov.krd/a/d.aspx?s=040000&l=12&a=54337

      Delete
  17. CP,

    Many smart value guys have been calling for rate rises for several years, but have obviously been wrong.

    Warren Buffett has said the same, and still calls bonds "a terrible investment". The thing I find in my readings about Buffett, is he is often early in calls like this, but very rarely wrong.

    I'm overweight financials in anticipation of this. The nice thing about financial stocks is they are so cheap, you are making over 10% on your investment (p/e less than 10) while you wait and when rates do rise, you'll get the double benefit of rising profits and valuations.

    ReplyDelete
    Replies
    1. Ackman is a smart value guy too. For example, lots of smart value guys didn't realize increased oil production would lead to a price crash apparently?

      Do you remember discussing the oil question a couple years ago, brushing off the concern? I see a lot of companies sitting on piles of debt that looks about ready to blow, this will drag everything down. Meanwhile, US FED has been hostile toward equity markets.

      Next year, smart value guys might be lamenting over the "overlooked" corporate debt burden fiasco.

      Feels like we're being managed down economically, possibly due to climate concerns?

      Delete
  18. Tough entry here on the long side if you missed out.

    ReplyDelete
    Replies
    1. DJX and SPX now quite overbought. RUT still has room to go.

      Delete
    2. I took my TNA off around $56.

      I think it's wise to be careful adding more long exposure up here. I still think you have the issue of declining earnings + a very high valuation which means we could get a sharp pullback out of nowhere.

      Delete
    3. I may actually put TNA back on because I do think it goes a little bit higher. I think the S&P is going to stall here for a little bit before deciding on its next move.

      Delete
    4. It's been tough predicting how the 2nd half of the day goes. Many days there's a swoon following the morning wood.

      Delete
  19. I took the TNA off. Gonna sit on the sidelines. I'm now up about 7% YTD. Had I just held LABD I would have been up huge but just not willing to take a ton of risk yet. Typically major market/stock moves have 3 waves to them. We have only had 2 waves down. Valuations are way too high for this no negative earnings growth market, even if earnings do an about face and go up 10%. At 20x earnings you just don't have the wiggle room. A higher risk entry is coming IMO.

    ReplyDelete
    Replies
    1. higher reward entry, that is.

      Delete
    2. I went to the dark side too with SPXS at $15.735. Day trade.

      Delete
    3. I'm in a similar spot. I found another good company that I'd like to buy, but again it's hard a sharp move up and this near the top of the range.

      I'm still fully invested (around 85%), but am looking for places to add and improve my portfolio.

      The tough thing will be if the market just continues upwards and does not allow for easy places to buy - wouldn't be surprised if it happens.

      After our discussion on valuation yesterday, went through the 35 stocks I own and, other than the energy ones, they are almost all at under 10 times next years earnings and the book-valued ones like financials are almost all less than 1.0. So, pretty happy with this.

      Delete
  20. CP,

    Ackman started another hedge fund around 2000 and it went under and now his Pershing Square thing is in trouble. I think he is smart, but may be too aggressive or stubborn in his approach.

    As far as corporate balance sheets go, I read that they are the best they have been in a long time. Sure energy balance sheets are weak, but that is a small part of the market (6% of stock market).

    But I agree that you should be checking balance sheets and avoiding overlevered companies at this part of the cycle, especially if we do get interest rates rising.

    ReplyDelete
  21. BY the way, I'm finally back to even on my portfolio for the year. The US$ is down about 7% this year, so has been a headwind for my US listed stocks, but things are improving. Still about 8% down from all-time highs from last July.

    ReplyDelete
  22. Sold half of that JST I bought last month for an 11% profit. It's an arbitrage place and they are getting taken out at $6.00 next month. I still have the original half I bought for $3.73 late last year (before the buyout was announced), but the half I sold was in a tax-free account and just wanted to lock in the profit.

    ReplyDelete
  23. Remember this story?

    http://www.cnbc.com/2016/02/01/china-takes-on-hedge-fund-bosses-ackman-bass-tepper-in-yuan-battle.html

    China keeps whacking those guys around, scoring a solid right hook after the close on Thursday after jabbing at them with minor currency fixes the past several weeks:

    http://www.marketwatch.com/story/china-strengthens-yuan-with-largest-increase-since-november-2016-03-17

    A federal judge yesterday blocked Rousseff's appointment of former President Lula da Silva to her Cabinet:

    http://www.bloombergview.com/articles/2016-03-18/president-dilma-rousseff-mocks-brazilian-justice

    It's likely to be a bad, bad weekend for Bears. DJIA powering up +135 points to 17616 heading into the close. SPX +0.5% to 2050! EEM (emerging markets) +0.7%. ASHR (China 'A' Shares) +2.28%. EWZ (Brazil) +0.68%. Crude oil pulling back slightly to 39.40 (after briefly breaching 41 early this morning!). RSX (Russia) pulling back -0.78% in sympathy.

    ReplyDelete
    Replies
    1. Wonder why China seems so preoccupied with a few fund bosses opinion, might have something to hide?

      I've read several sources pointing out that container ships are anchored at sea and rates have plummeted to historic lows. This can't be good for China, land of fraud.

      Canada is fraud too, VRX is but one of the latest examples.

      Delete
  24. BB- Did you read BXE's filling?

    ReplyDelete
  25. I picked up a little PFE and F into the close.

    ReplyDelete
  26. BXE - 16x volume, bond default coming?

    ReplyDelete
  27. Almost bought some CS today too. CS is a global brand that is currently trading 50% down from last July

    ReplyDelete
  28. Didnt look at the BXE report. It is the annual report and will line up with the last quarterly results.

    Good chance it was Orange selling on Friday. They own 30 million shares and there may have been another 20 million after hours. If so, was a good chance to pick up some quick cash from a distressed seller.

    ReplyDelete
    Replies
    1. What do you think of this article, I can't make heads or tails of it:
      http://www.telegraph.co.uk/business/2016/03/16/the-yellen-fed-risks-faustian-pact-with-inflation/

      Delete
    2. So many of these oil companies are screwed man. They're not like the banks that could just wait for their assets' values to come back (banks got killed by having to mark to market which in my opinion mark to market is a pretty stupid rule in most cases). They have to operate with their main assets tied to a commodity that is so depressed it makes it nearly impossible to pay back their debt. Unless of course oil rallies 100% from here.

      Delete
    3. About 40 million shares all together inc AH, on this side. Either someone put on a big short or there was a liquidation. This occurred around a news event, thus I'm hesitant to believe it's a buying opportunity.

      Delete
    4. Events in the ME could make oil rally 100% from here, probably the only likely event ASSUMING oil does rally.

      I don't understand how, given the circumstances, anyone can insist BXE won't default.

      The way JONE has been trading, it appears default is somewhat less likely in comparison to BXE which was one of the very 1st in the long list, to roll over.

      Delete
    5. Must have been Orange. They needed to sell and had the volume, the only other huge holder is Seth Klarman and he is way too smart to dump and push price down like his.

      Delete
  29. KHC - Losing money yet still pays a dividend?

    ReplyDelete
  30. Coming into the week with 9% in BIIB, 7% in PFE, 7% in F, 4% in AMAG, rest in cash. I would consider buying TNA into a pullback. I like biotechs here a lot, especially with the double bottom in IBB and hugely negative sentiment after the VRX crash.

    ReplyDelete
  31. Mike, if energy is bouncing, you want lots of debt to get the leverage. If it doesn't, then you want strong balance sheets. I dont really know, so have some of both. But i'm only at 5 or 6% energy exposure, so not confident enough to make a big bet on it.

    ReplyDelete
    Replies
    1. Absolutely. I know this very well from watching LVS skyrocket up 50x its lows vs WYNN which had a far smaller increase because of the leverage in LVS's balance sheet.

      Delete
  32. $US has rolled over on the EMA's, complete opposite of Goldman's call for higher dollar based on a series of rate increases.

    Thus assuming Goldman is proven correct, $US should begin to rally thus oil fall and by definition commodity currencies such as Canadian Dollar.

    $US is a safe haven, right? So it's not clear to me why Goldman is saying the FED should raise rates pushing the $US higher UNLESS global economic strength justifies.

    Look at China, 8 straight months of export declines, doesn't appear economically bullish.
    Europe - Draghi has to push negative rates to keep the ship from sinking.
    Japan - Again, negative rates.
    How are those shipping indexes looking, any sign of life there?

    Okay, so maybe all this stuff turns back up and the global economy goes on a tear, I just can't predict the future...

    ReplyDelete
    Replies
    1. I don't have the article in front of me but I do know that the traffic at the LA port has been skyrocketing.

      Delete
    2. Although I do believe a good deal of this is due to year on year comparisons being easy due to the port shutdown in PY

      Delete
    3. Warren Buffet - 1993:

      Thirty years ago, no one could have foreseen the huge expansion of the Vietnam War, wage and price controls, two oil shocks, the resignation of a president, the dissolution of the Soviet Union, a one-day drop in the Dow of 508 points, or treasury bill yields fluctuating between 2.8% and 17.4%.
      But, surprise – none of these blockbuster events made the slightest dent in Ben Graham’s investment principles. Nor did they render unsound the negotiated purchases of fine businesses at sensible prices. Imagine the cost to us, then, if we had let a fear of unknowns cause us to defer or alter the deployment of capital. Indeed, we have usually made our best purchases when apprehensions about some macro event were at a peak. Fear is the foe of the faddist, but the friend of the fundamentalist.

      A different set of major shocks is sure to occur in the next 30 years. We will neither try to predict these nor to profit from them. If we can identify businesses similar to those we have purchased in the past, external surprises will have little effect on our long-term results.

      - See more at: http://www.begintoinvest.com/39-years-of-berkshire-buffett-quotes/#more-2334

      Delete
    4. It is pretty much impossible to figure out macro things like this involving so many people and agendas.

      Like Buffet says, ignore all that stuff and just look for stocks you'd like to own and buy them when these things make them cheap.

      Delete
    5. "traffic at the LA port has been skyrocketing."

      Incoming or outgoing, do you recall? May as well provide some detail to amke a point, most claims have weak basis.

      Delete
  33. BMY - Closed nicely green on a ton of volume, exact opposite of BXE.

    ReplyDelete
  34. Global indexes are likely to tilt 'red' this coming week. No worries. We want them to tilt red.

    ReplyDelete
  35. Grabbed some UGAZ on the dip today

    ReplyDelete
  36. Chicago FED activity index fell negative. Obviously we need a rate increase due to the overheating economy.

    ReplyDelete
  37. China autosales - Supposedly autosales were down considerably, KNDI (green as of a moment ago) is one to watch what are some others?

    RH is getting pretty low, no hope?
    BABA ripped, didn't it?

    ReplyDelete
  38. spxs - Back to a little less than I sold early december.

    ReplyDelete
  39. CP,

    LA port traffic

    http://www.calculatedriskblog.com/2016/03/la-area-port-traffic-increased-sharply.html?utm_source=feedburner&utm_medium=twitter&utm_campaign=Feed%3A+CalculatedRisk+%28Calculated+Risk%29

    ReplyDelete
  40. Mike, you probably saw this from jeff Saut and disagree, but in case you didn't, here's an alternative view on stocks being expensive:
    http://www.raymondjames.com/inv_strat.htm

    Over the weekend I heard a number of pundits talking about how expensive the SPX is at 17x this year’s consensus earnings estimate of ~$121. While it’s true the SPX is not trading below 15x earnings, like it was at the February 11th low, 17x doesn’t sound all that expensive to me. I would also remind participants the S&P 500’s bottom up, operating earnings estimate for 2017 is ~$137. If correct, that means the SPX is trading at 14.9x next year’s estimate.

    ReplyDelete
    Replies
    1. Operating earnings is drastically different than net earnings. I wonder why he uses that and what the historical average is on that. The multiple I'm using for historical norms excluding the years of 1998-2000 and the lows in the 70's (ie outliers) is 16.2x trailing. We're currently at 19.5 trailing.

      Delete
    2. Sorry meant to clarify...the multiple I'm using for historical norms is for net earnings, not operating earnings.

      Reminds me of non-GAAP earnings that everyone uses now.

      Delete
    3. Also illustrates well, why the GOP prefers to elect a "communist" leader as opposed to a member of their own party.

      Delete
  41. From the IEA:

    The biggest change between now and a month ago is oil supply that’s been unexpectedly curbed. One pipeline linking the the northern part of Iraq to the Mediterranean Sea halted in mid-February, while another from Nigeria was hit by sabotage. U.S. oil production is threatening to drop below 9 million barrels a day for the first time since November 2014.
    QUICKTAKE
    Oil Prices
    From those three locations alone, combined output was restricted by about 1 million barrels a day compared with a month earlier, according to data compiled by Bloomberg. That’s about half the global surplus. Since then, flow from Iraq’s north has started to resume.

    ReplyDelete
  42. Replies
    1. They had an internal review of their audit practices and shockingly nothing was wrong.

      Delete
    2. Imagine that, as well as buying @ $25 and selling at $11...... Nice setup for someone.

      Delete
  43. I ended up taking off UGAZ for a small loss but I did make some nice money on the biotechs I bought (I added GILD pre market today).

    I'm also holding a position in SPXS at $15.8. Probably got in too early and only looking for a trade as I have an overbought daily / hourly signal to short.

    ReplyDelete
  44. EROS finally hit my sell limit order at $13 today for the shares I purchased at $7.57 in mid-November. I thought it would happen earlier, but for such a percentage return, I suppose, it is worth waiting 4 months. :) This was a large position relative to the first two small bunches I purchased at $13 and $15. Fidelity now shows that the cost basis for my remaining shares at $7.60...

    ReplyDelete
  45. I just placed a buy limit order on UGAZ at $20. My automatic trading strategy will bring me more profit in the end if UGAZ keeps oscillating in the same region, so I don't actually want NG to zoom up and leave me behind with a one-time profit...

    ReplyDelete
  46. Just purchased some more AEZS at $3.53. Its 3-month price chart gives me a distinct feeling that it is bound to surge above $4 in the near future...

    ReplyDelete
  47. Replies
    1. Canada day is July 1st - nothing special here today

      Delete
    2. Must've been a repeat show I was listening to.

      Delete
  48. Heeding the warning from 2nd_ave about the possible pullback in international markets :), I just placed a sell order on the LZEMX international fund in my 401K, to be executed at EOD, for the 1/4 position I added at $12.41. This is my "trading bunch," which I want to free up now so that I would be able to reload it in the case of a decent pullback. My "long term bunch" is 1/2 of 401K that I put into LZEMX at $14.21.

    ReplyDelete
    Replies
    1. The order was executed today at $14.59. If LZMEX keeps rallying, then I'll be happy for the 1/2 of my 401K that is still invested into it. :)

      Delete
  49. Was thinking over the weekend that this market is much stronger IMO than it was last fall. I recall a lot of people positioning for the Santa rally and when that didn't transpire people bailed hard. Now that we have rallied up here, far fewer people are positioned for more upside.

    ReplyDelete
  50. It's only Monday, but I find it surprising that global indexes barely budged. China (+2.15%) and Brazil (+0.7%) continued to rally, taking the Shanghai Composite back above 3000 and the iBovespa back above 51,000.

    The best explanation I can come up? We know that fund managers were under-invested (ie, holding relatively high levels of cash) in the first quarter given the extremely negative sentiment. Perhaps more so than widely thought. Now that we're closing in on the end of Q1 (March 31), many of them are chasing returns in hopes of (i) not looking too much like chumps, and (ii) earning more than a token bonus.

    ReplyDelete
  51. We all know this but still nice to see.

    http://realinvestmentadvice.com/wp-content/uploads/2016/03/Investor-Psychology-011216.png

    Yes David is hot this year, way to go!!

    ReplyDelete
    Replies
    1. That is all thanks to you, folks! You did the hard job of finding great looking investments, such as POT, EROS, UGAZ, etc. I did the easy job -- bought them in small quantities on the way down. After the AUMN/PNPFF fiascos, I realized that investments can go down MUCH further than I initially expect them to, and so I learned to take VERY small positions initially, add them VERY gradually and to never buy on margin. So despite the 50% drops in EROS, UGAZ and oil stocks from the point at bought them at, I still slept well at night knowing that I do not have any margin calls coming and eventually these investments will bottom out and start oscillating in place (or even go back up), and my automatic trading strategy will cover all initial losses.

      Delete
  52. Sold out of TNA after hours at $55.8. I ended up taking a larger position than I wanted to hold and since my motto this year has been to hold more cash I decided to stick with that. Sitting at +7% with minimal drawdowns this year has been good, not anything to get all that excited about but the volatility has made it easy enough to still make decent returns with smaller exposure. I've only really been sticking with ETFs though. Should have been a little more aggressive and bought the gold stocks I was eyeing in Jan and the oil stocks I was eyeing in Feb.

    ReplyDelete
    Replies
    1. "Sitting at +7% with minimal drawdowns this year has been good"

      Steady profits with minimal drawdowns is what all hedge funds are trying to achieve! If you can do that consistently, then you can lever up and make killer returns!

      Delete
    2. Ha. The era of killer returns is gone in my opinion, unless if you want to take extra risk in an aged bull market that is expensive by almost any measure.

      Delete
    3. Not gone forever, obviously. But we had a helluva bull market and it will take time for the valuation to become better if we don't drop.

      Delete

  53. Share on Facebook
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    Enphase Energy Inc., the California-based solar-technology company, is targeting $10 million to $20 million in sales of energy-storage systems in the second half of the year largely in its first markets, Australia and New Zealand.

    Enphase expects its storage products to start generating revenue in those two countries in the second half of 2016 before introducing the technology in Hawaii and then turning to Europe in 2017, Chief Financial Officer Kris Sennesael said by phone Monday. It expects sales of as many as 4,000 systems in the second half, he said.

    “There are multiple competitors out there trying to get to the market in a similar time frame as us,” he said. “Early indicators are showing a tremendous amount of interest for storage solutions.”

    Tesla Motors Inc., LG Chem Ltd. and Panasonic Corp. are among companies jumping into an Australian storage market that Morgan Stanley estimates could be worth A$24 billion ($18 billion) after a surge in the use of solar power. Australia’s residential and commercial energy storage additions are expected to double each year from 2016 to 2018 as an “intense competitive environment” emerges, according to IHS Inc.

    ReplyDelete
    Replies
    1. BTW, I'm thinking distributed storage makes more sense than centralized storage but storage itself isn't very efficient due to inherent losses. On the other hand, terrestrial power lines are pretty lossy too, by about 50% I believe.

      Delete
  54. WTF? I have no idea how Schwab does it's portfolio performance thing. It say's I'm UP 13.1% over the last 3 months and UP .57% YTD? How is that possible?

    ReplyDelete
    Replies
    1. Sounds like you did well the last week of Dec

      Delete
  55. SPH - Am I wrong, thinking this dividend is unsustainable? (For some reason I don't recall my earlier conclusion...)

    ReplyDelete
    Replies
    1. What I mean is, payout seems to be 3x, trying to recall why/how I expected the div wouldn't get whacked. Maybe I thought the earnings only dipped for a quarter?

      Delete
    2. And if I'm right, I'd like to understand how the payout became more than earnings if possible, such as an outsized couple of years..

      Delete
    3. Thanks for the wave of comments, be sure and let me in on the next stock about to crater 50%, thanks.

      Delete
    4. Stocks with low dividend payout ratios have been shown to outperform stocks with high payout ratios.

      Delete
    5. And a lot of these big dividend players work on cash flow or FFO instead of earnings as costs like depreciation don't affect what dividends they can pay out.

      So, as an example, if you buy a rental property, you make make $100 after expenses, before depreciation, but your GAAP earnings will be $40 including depreciation. But the reality is the value of your building is going up every year not down, but you still want to include depreciation in earnings to minimize taxation. But you can safely pay out a dividend of $80, higher than earnings, and still have $20 for fixing up the building.

      Delete
    6. BB is right. I usually look at FCF because it's harder to fudge with cash flow than it is with net earnings.

      The FFO type businesses that have a lot of non cash expenses are a little harder to figure out and given my laziness I usually just ignore those types of companies altogether.

      Delete
  56. Now I recall my idea, I'm expecting a huge improvement in earnings but not right away.

    ReplyDelete
  57. Ran across our good friend John Hussman on Seekingalpha today as one of the top articles. Still consistently negative (and his mutual fund is now down to $8.20):

    The most historically-reliable measures we identify presently consistent with zero 10-12 year S&P 500 nominal total returns, and negative expected real returns on both horizons.

    From a cyclical standpoint, I continue to expect that the completion of the current market cycle will likely take the S&P 500 down by about 40-55% from present levels.

    The only way to avoid global economic contraction and simultaneously raise the prospects for long-term growth is to expand productive investment at every level of the economy.

    ReplyDelete
    Replies
    1. Doug Kass was out yesterday with a pretty negative article...he's been pretty bearish of late as well. Not sure what his track record is like but he's always good at ignoring when he's wrong and pointing only to when he's right:

      http://realmoney.thestreet.com/articles/03/21/2016/second-financial-crisis-looms

      Delete
    2. Tried to find info on his track record a couple times and never could - I don't think it as good as he tries to portray.

      Delete
  58. What’s up with GS? Anyone reading into its relative underperformance for the past 2 months?

    ReplyDelete
  59. Sunrun and Constellation to install free solar in Maryland, you must buy the power but at a discount.

    ReplyDelete
  60. The news from Brussels likely unsettled global investors until Islamic terrorists claimed responsibility. At that point, most indexes quickly recovered. VT (the world stock market) is off -0.2%. The DJIA is off -30 points, SPX -0.08%, and the NDQ +0.25%.

    ReplyDelete
  61. SPH - Yes, I realize upside gains will be limited but I'm after a place to park cash and collect dividend. Thus I'm concerned this div at 3x payout will likely be cut thus share price tanks in response.

    My question is, seems like the div is not sustainable, am I most likely correct? If yes, I intend on waiting on the sidelines till after the cut occurs.

    ReplyDelete
    Replies
    1. I wouldn't feel comfortable giving an opinion either way. I don't know enough about the company or the details of how they are funding their dividend.

      Also, I personally have no interest in these utility type companies at this time due to my belief that we do see higher interest rates coming.

      Delete
    2. Alright, I can't seem to locate FCF, there's columns of numbers in a vast matrix so it's pretty confusing to know which one represents FCF.

      p/FCF is 9.1x so FCF is 1/9 of 29 = 3.22 thus dividend can't be more than this might be as much?

      Delete
  62. Replies
    1. CIE = $3, try making that loss back by riding WY

      Delete
  63. Rob Ford, Toronto Mayer and crack smoker heavy drinker (party friend of local bankers?) 46, passed away.

    ReplyDelete
  64. Why would the police blow up the belt, they should disable and study it for clues like hacking open an iphone.

    ReplyDelete
  65. Mohamed El Erian sounds like a character from Sesame Street.

    ReplyDelete
  66. Technicians - bullish and bearish. It's easy to read stuff either way:

    http://www.bloomberg.com/news/articles/2016-03-22/technical-analysts-are-warning-that-this-stock-rally-is-not-going-to-last

    Analysts at Bespoke Investment Group noted that while the latest rally has pushed more than 93 percent of stocks in the S&P 500-stock index above their 50-day moving averages—which smooths out price moves over the past 50 days—there may yet be cause for concern. The strongest moving average reading since the start of the bull market in 2009 is not necessarily a bullish sign for markets, they warned, as it could indicate that stocks have surged past fair value.
    "In the coming weeks we expect this breadth measure to cool off a bit as the market works off extreme overbought measures. If you’ve been waiting to buy and haven’t yet, it’s best to wait for a pullback at this point," Bespoke analysts wrote in a note.

    Still, Bespoke is far from bearish. The research firm points out that greater breadth is positive for the market's strength over a longer-term time frame.


    Technical Analysts at UBS AG seem far less optimistic.
    "With the rally of the last few weeks and looking at our daily trend work, the S&P 500 has reached its most overbought position since 2009!!" wrote analysts Michael Riesner and Marc Muller, with added grammatical emphasis. "We see the market vulnerable for a significant reversal this week, which we would see as the beginning of a tactical top building process and subsequent correction into deeper [second quarter]. We reiterate ... [that we] would not chase the market on current elevated levels."
    They recommend that investors sell now, rather than await further price increases.

    ReplyDelete
    Replies
    1. Oh gee except consider what these guys were saying at S&P 2100? Yeah, it's hard to imagine upside but what if China and the Euro economy begin kicking up, EM's and we could have a multi year run?

      That said, sure seem like there's a lot of debt out there and share buybacks with debt doesn't seem like a sustainable practice?

      Delete
    2. Thinking about this some more - if everyone is looking for some sort of a pullback/downturn, pretty good odds we just continue upwards and people end up being forced to chase.

      Delete
    3. Yep, also consider though, this has been in progress for awhile.

      BTW, I never saw your full trip report due from the Dominican trip...???

      Delete
  67. SPH - Okay so I'm looking at P/FCF reported as 9.1x thus calculate $3.22 FCF at current price, does this seem correct?

    There's been a lot of propane installed since prices seem to suggest lower for longer and various other reasons such as propane has mobility and has been the cheaper source of heating even before the price crash occurred.

    ReplyDelete
    Replies
    1. I find with numbers like this, you're best to look at the financial statements and calculate yourself. ADn sometimes how you do it varies by industry. Investopedia is helpful with things like this I find.

      Morningstar has free cash flow to Sep-2015 as $4.93. They also like it and have it as a 4-star buy.

      S&P has it as a sell and rates it 1- most overvalued and says:

      Revenues in FY 2016 (Sep.) are likely to fall 16%,
      following the 27% decrease in FY 2015, due to
      milder weather in FY 2016 and lower propane
      prices. Weather is a major factor in demand for
      propane, and colder winter temperatures typi-
      cally lead to volume gains for propane and oth-
      er fuels. We see a 15% rise in FY 2017 revenues
      helped by stabilizing prices and higher demand.
      ä
      EBIT totaled $201 million in FY 2015, $202 million
      in FY 2014 and $199 million in FY 2013, with cor-
      responding EBIT margins of 14.2%, 10.4% and
      11.7%. We see EBIT margins falling in FY 2016
      to about 12%, before rebounding in FY 2017 to
      about 15%. We see lower propane prices more
      than offsetting cost reduction efforts in FY 2016.
      Interest expense will likely remain flat in both
      FY 2016 and FY 2017.
      ä
      Our FY 2016 earnings per unit estimate, exclud-
      ing $0.07 of net nonrecurring charges, is $1.22,
      down 31% from FY 2015's $1.76, which excluded
      nonrecurring net charges of $0.38. We forecast
      FY 2017 EPS of $2.02, up 66%

      Delete
    2. Steady growth in revenues / earnings and free cash flow tend to yield huge winners. Stocks like MLAB, BCPC, ANIK. With smaller companies definitely more volatile from year to year but if the trend in all 3 are good then most likely the stock is a good one.

      Delete
    3. If we were earlier in the cycle or had more attractive valuations in the overall market I would be keying in on these kinds of companies and holding them for several months at a time. But I prefer sticking with the index etfs for the time being.

      Delete
    4. Alright, thanks guys. I'm not so bearish on this b/c I believe consumption is going up. Lower propane prices probably equate to a better spread both on the LPG and on number of new installations. Higher prices should squeeze the spread.

      That said, I'm out to protect a nice gain and wait in hopes of a pullback.

      Delete
  68. "Thinking about this some more - if everyone is looking for some sort of a pullback/downturn, pretty good odds we just continue upwards and people end up being forced to chase."

    Hope you're wrong. I bought a sizeable position in SDS at $19.13 after hours.

    A few things concern me, fundamentals (ie high valuation) aside:
    (1) Utilities broke out to new all time highs in this latest rally, much like they lead into the 2000 and 2007 peaks after the general market peaked.

    (2) RSI daily readings are over 70 for S&P futures which makes it harder to rally further in the short term. Not impossible, but odds favor a pause at least.

    (3) I typically have seen major moves occur in waves of 3. I don't follow EW theory but my biggest winners all had three moves up (and I've seen market downturns typically occur in 3 waves down). We have yet to see wave 3.

    (4) Not much changed earnings-wise in this move up. We still have some of the largest companies in the world talking about weaker demand (e.g., AAPL, INTC, BA).

    I'm taking a stab here. If we gap up 1% tomorrow I'll lose 2% or so of my gains. Oh well.

    ReplyDelete
  69. RIP Andy Grove. I remember reading all about him back in the 90's when I started getting into stocks and listened to a lot of interviews with him. Can't believe it's been almost 20 years since he was last CEO.

    ReplyDelete
  70. TOF- Feeln' the Bern tonight??

    ReplyDelete
    Replies
    1. Holly crap is that TOF running across the stage in his underwear???

      Delete
    2. Is this a debate reference?

      Hey what businesses would be good for recurring revenue business that can't be outsourced. I'm looking to buy something and am brainstorming ideas. I've seen some things like concrete paving and other niche type businesses that would be in this line that I could keep the exiting owners in place of hiring s manager to run it....

      Delete
  71. Mark - just wondering if you have come across any biz ideas in your line of work or other that you have thought to yourself is a good biz to be in

    ReplyDelete
    Replies
    1. Plumbers seem to do well for themselves, new construction and lots of repairs there's always a leak somewhere in those old rusty galvanized pipes?

      Delete
    2. The HVAC guys up here appear to do very well, and the heating/AC companies never seem to go out of business. Could be worth buying something like that.

      Delete
    3. Although HVAC probably won't be as good in Southern California, just like a surf shop probably won't be as good in Canada.

      Delete
    4. I did find one:
      http://www.bizbuysell.com/Business-Opportunity/Highly-Profitable-Commercial-HVAC-Contractor-in-San-Diego/1213504/

      One of the things I've found is keying in on the reason its for sale. I talked to a broker representing a business for sale and the owner said there were family issues (he started the biz with his fiancée and they called off the wedding and he had a falling out with other family members in biz with him) but after I signed the NDA and looked at the financials it was clear business was deteriorating and he was trying to get out at any cost. If an owner is moving out of state and it's a local biz then that's another story. That's the case with the one above.

      Lots of fraud in small business sales so its important to be cautious.

      Delete
    5. Wow - wish I could buy a stock like that business - $600,000 with cash flow of $370,000.

      Assume you could pay a high-quality, licensed manager $170,000 per year to replace the owner and run the business and you've got it paid off in 3 years.

      Makes sense it is a commercial installer as commercial would need central air conditioning and some heating as well. But what do you do for residential in Southern Califorina? Most hot climates I've been to like Florida and Arizona have central air conditioning. The place I rented down there had room units, which was fine for a 1 bedroom apartment, but I would think most standard homes would need central air conditioning too.

      Delete
    6. Exactly. You have to be careful with the actual numbers being far different than what they say they are (by looking at tax returns, bank statements, scrutinizing add backs, etc), but typically you can find businesses selling for under 3x cash flow. Granted most of them add back the amount they pay themselves to arrive at the cash flow. But like you said, pay a licensed mgr $150k or so and you still have a business selling for 3x cash flow. Its riskier (and more time consuming) than owning the S&P 500 but provides freedom from an office job and an income stream.

      Delete
    7. How about solar installs? I'm sure you thought of that already...

      Delete
    8. I hear Syrian refugees are hard workers and willing to accept low pay, might consider assembling a crew?

      Delete
  72. Just another red morning if like previous red mornings, miraculously turns green before close.

    Sheesh.... BUT, terror attack is such a great excuse for implementing agenda and hiding the real reasons.

    ReplyDelete
  73. From Ryan Detrick - positive stats on what we've seen so far this year

    http://lplresearch.com/2016/03/22/could-the-sp-500-make-history/

    ReplyDelete
    Replies
    1. “With wages picking up but productivity growing in slow motion, margins are likely to continue their declines, which have historically signaled an expansion near its end,” JPMorgan economist Jesse Edgerton wrote in a March 21 research note.

      Delete
  74. Sold TNA after hours for a 3.5% hit. Ouch. I bought it on an hourly oversold signal but they just sold it all day long. Was thinking they would bounce it at some point.

    Other than that I've been in cash and really don't have much desire to buy up here yet other than day trades.

    ReplyDelete
    Replies
    1. Wait...that's not right. I think it was a 2.7% hit. Bought it around 54 and sold at 52.55.

      Delete
  75. I suspect this selloff isn't a one day thing. I wouldn't be surprised to see a -2% day tomorrow.

    ReplyDelete
    Replies
    1. Meant another 2% or so downside. Take out the lows from the Fed day and get everything thinking the Fed bounces are over, then we rally to new highs.

      Delete
    2. Apparently the FED talking heads have been out on TV talking up rates again, scaring everyone.

      Delete
  76. Bidding UGAZ at $20.63 after hours.

    ReplyDelete
    Replies
    1. Filled. I'm the proud owner of a 3x leveraged instrument on a POS commodity with limitless supply.

      Delete
  77. Added a little more UGAZ at $20.55. Someone is panicking after hours

    ReplyDelete
  78. NS - Nice to see this one getting whacked, got my eye on it...

    ReplyDelete
  79. VA - I didn't realize this had fallen to $28m I don't think.

    ReplyDelete
  80. POM - The vote was approved, apparently.

    ReplyDelete
  81. I still think we get a period like the 1940s at best...ie another 2 years or so of sideways trading to work down the overvaluation. From 1945 to 1949 the Dow essentially went nowhere. The market multiple started at 19 but dwindled to 6 by 1949 due to outsized growth. Keep in mind this was during a time when the 10 year was at 2.2%.

    ReplyDelete
    Replies
    1. In this environment I'm paying close attention to RSIs on the daily charts. Whenever we hit 70 I'm looking to stay in cash and try shorting the market. When we hit the 25-30 level I'll do the opposite.

      Delete
  82. Mike

    Interesting chart from Factset showing how all the decline in earnings is basically in the energy sector. They also state that they expect margins to increase from 9.3% latest quarter to 10.1% next quarter and then 10.5% next.

    So, if we assume these analysts are correct, that implies a 9% to 13% increase in earnings the next 2 quarters, assuming flat sales, just based on margins improving. Would help address some of your valuation concerns and provide a catalyst for an upwards move. Lots of variables of course, the main one being if energy can regain profitability at $40 oil.

    http://www.factset.com/insight/2016/03/earningsinsight_03.18.16?referrer=E-mail&email=brianglm@trinityasset.com&domain=companies#.VvPcN_krKUk

    ReplyDelete
    Replies
    1. Nice, thanks for keeping your eye on the ball. Good job.

      Delete
  83. There's going to be a lot of money spent on water infrastructure (this $$$ includes treating effluent), wonder if NWPX will be involved to any great degree?

    XYL/DHR/???____???

    ReplyDelete
  84. Seems to be some recovery off the lows in progress. Is it really any wonder bears took their shot as we approached upper SPX 2,0xx?

    ReplyDelete
  85. Bill Murray 21 minutes ago

    They don’t make pizza or beer out of celery. And that is all you need to know about celery.

    ReplyDelete
  86. Regardless of cost, wouldn't you rather own a Power Wall (TSLA), than a Energy Solution (ENPH)?

    ReplyDelete
    Replies
    1. What are these going to do for me that a GNRC won't, besides suck my portfolio dry? Simple question.

      Delete
  87. YHOO - Whats the feeling guys, I thought YHOO owns a ton of BABA?

    ReplyDelete