Saturday, May 14, 2011
05/14/11 Mona Lisas and Mad Hatters
While Mona Lisas and Mad Hatters
Sons of bankers, sons of lawyers
Turn around and say good morning to the night
For unless they see the sky
But they can't and that is why
They know not if it's dark outside or light
BB- Thanks for the links to countervailing market opinions by Michael Santoli and Jeff Saut, reproduced here:
http://online.barrons.com/article/SB50001424052970203286304576313262992330454.html?mod=BOL_twm_col
http://www.raymondjames.com/inv_strat.htm
A ton of (seemingly) sophisticated bloggers proclaiming an imminent end to the QE2-inspired rally can only mean one thing- improved odds on Dwyer's SPX 1575.
Indeed, I'm always on the alert for well-intentioned alarmists. For most of my life, they've been full of ---t. The one thing these personalities never 'get' (aside from the fact that they don't get it) is that the human psyche is inherently optimistic. Nothing is accomplished without optimism. The stock market indexes will move up. End of story.
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RoBear,
ReplyDeleteI generally hold stocks for a year or two. I try and buy them either really cheap or with a strong growth profile and sell them when I think they are getting overvalued.
Yea, I remember a back and forth you had with VAD on CC. It was amusing.
ReplyDeleteBB or anyone, whats your opinion on cheapness of CSCO and MSFT at present. I think they are both cheap and now own both (picked up softie Friday near the low; CSCO keeps getting cheaper). Morningstar has CSCO at 5 stars (highest value category) and Microsoft at 4*. I believe 5* has to be at least 15% undervalued to gain that rating. I don't know their exact estimate because I am not a paid subscriber.
ReplyDeleteI used to follow Morningstar regularly but know their fair value ratings can be wildly wrong. Such was the case with BSX and FITB, even well before the great crash of 08.
ReplyDeleteCSCO & MSFT -- some comments on Macke's new show... http://finance.yahoo.com/blogs/author/jeff-macke/
ReplyDeleteI'm watching the giants/cubs - looks like it might snow!
ReplyDeleteTour of California starts tomorrow, unless there is heavy snow in Tahoe.
Kyle--- glad to see the guy with the accent is on board. I am not a frequent investor in tech stocks but now they may be value plays. JNJ, a non-tech favorite, has gotten away. I do not chase so presently hold a large % in cash.
ReplyDeleteThat guy with the accent made total sense. Yet the question I raise is the same one that I did with 2nd. Is MSFT and CSCO going to out perform the QQQs. Why not buy the ETF and get exposure to APPLE and Amazon as well as those laggards? Until facebook goes public AMZN has to be the best large cap tech stock. Sure they are at all time highs, yet they are going higher. How is it possible that AMZN is the #1 provider of CLOUD services. Where the F--- is CSCO. Reorganizing? IMO if you cannot bring yourself to buy stocks at alltime highs get the best of both worlds and buy the ETF. QQQ
ReplyDeleteQQQs compared with CSCO AND MSFT 1YR, 5yr, 10 YR.
ReplyDeletehttp://tinyurl.com/68a4as4
http://tinyurl.com/6ymbza2
http://tinyurl.com/6d8o6mn
Those charts didn't work disregard.
ReplyDeleteTry this. AMZN VS QQQS VS CSCO VS MSFT. 1YR, 5yr, 10 yr.
ReplyDeletehttp://tinyurl.com/6bjyea9
http://tinyurl.com/6eylyyq
http://tinyurl.com/62vk5v7
IMO AMZN is a cheap stock. CSCO and MSFT are expensive. Those charts prove it. What is going to possibly change in any time frame?
AMZN, may very well be a cheap stock.
ReplyDeleteEverything you wanted to know but were afraid to ask about AMZN.
http://www.ritholtz.com/blog/2011/05/amazon-com-the-hidden-empire/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheBigPicture+%28The+Big+Picture%29
t3d
WOW! that power point is so positive and so convincing! Amazon must be the best large cap. Strangely it really makes me want to short it at the moment. :) There is something seriously wrong with me.
ReplyDeleteps Thanks Joe!
Took a day off from the market. My emotions were getting in the way of my trading. Scrolled through a few charts. The current chart pattern in the majors is IDENTICAL to the chart pattern the weeks leading up to the flash crash exactly one year ago.
ReplyDeleteThe thing is that markets never rhythm exactly. There are too many patterns (to me) suggesting a market downtrend to post here.
Since I'm a big time contrarian, if we gap up on Monday, my guess is that its up, up and away.
If we gap down, my guess is we hit 1215-1230 in a "flash".
So..... in that light, for me, Monday's open is K-E-Y w/ a capital K....
FYI-For the first time in 2+ months, the smart $ is declining while dumb money is increasing. At the same time, the CSFB fear index (price of OEX puts - smart $) is spiking.
But, as I've said all week, the smart $ % isn't low enough (mid-high 20's) for me to start buying puts aggressively.
I just looked at the GMO chart since March 09 and it looks VERY impressive technically -- a steady sequence of higher lows, and the current low at $4 lies exactly on the straight line connecting the lows. Now couple this with the amazing potential of this stock to go up 20x in several years (GMO will be making $8/share between 2014 and 2020 if moly averages at $30/lb), and you'll see that GMO is the stock to buy now.
ReplyDeleteI opened a small position (1000 shares) at $5.12 a few months ago (and reduced through a little trading and put selling their cost basis to $4.35), then sold 10 September $7 puts for $2.25 a few weeks ago and then also sold 10 June $5 puts last week for $0.9. Now I think the price is so good that I should buy more shares outright, since GMO can easily end up above $5 by June OpEx, in which case my June puts won't get executed and I will not add the desired 1000 shares at $4.10. So, in order to make sure that I take advantage of the current "sale" price in low 4's, I just placed a buy stop limit order for 1000 shares at $4.20/$4.25. In order to raise cash for this purchase, I decided to cancel my buy limit order for 7000 shares of ECUXF at $0.65 (I have almost 200K shares of ECUXF now, and some risk diversification into GMO makes total sense). If GMO stays in low 4's for a week (or hopefully goes even lower), then I'll buy another 1000 shares right after May OpEx, after some of my May 11 short puts will hopefully expire and my margin buying power goes up.
GMO CHARTS: Weekly/ Monthly
ReplyDeletehttp://www.finviz.com/chart.ashx?t=GMO&ty=c&ta=0&p=w&s=l
http://www.finviz.com/chart.ashx?t=GMO&ty=c&ta=0&p=m&s=l
I still have a tough time w/ the argument that the market is apathetic and investors are still on the sidelines.
ReplyDeleteNewsletter bullish % is at a 20 year (YES, that goes back BEFORE Milli Vanilli)high and small position (dumb $) speculators are piling in.
Per ST:
Large and small speculators in the major stock indexes bumped up their exposure last week by a sizable amount.
The nominal dollar value of speculators' net position in both the full contracts and e-minis for the S&P 500, Nasdaq 100 and DJIA jumped to $29.6 billion. That's the highest since December 2008 and one of the highest all-time.
The breakdown of the positions are $16.1 billion in S&P futures, $7.3 billion in the Nasdaq 100 and $6.2 billion in the DJIA.
There have been four other times in history that have matched or exceeded this kind of exposure for speculators. None of them were particularly appealing.
* Late November 2000 through mid-March 2001 (stocks tumbled for the next few months)
* Mid-November 2004 through mid-January 2005 (stocks chopped lower for the next few months)
* Late October 2006 through late February 2007 (short-term gains were given back in late February)
* Most of December 2008 (stocks tumbled for the next few months)
I haven't been a huge fan of this Commitments of Traders data for stock indexes for a few years, especially with regard to the S&P 500 (Nasdaq 100 and DJIA have been better). And a better contrary signal tends to be when speculators go net short, or close to it, as a buy signal for stocks. But this latest surge is unusual, and at least worth a mention based on the precedents.
Two interesting articles. One on NAT DEBT with a unique take if we have a minor default the other is our favorite. "Price of oil".
ReplyDeletehttp://online.wsj.com/article/SB10001424052748703864204576317612323790964.html?mod=wsj_share_twitter
http://tumblr.com/xrr2iq1yd5
Jesse The bull case that seems more convincing isn't that Joe 6 pac is going to come in and raise the market. It is the froth from Heli BEN and more recently Bank of Japan which could be considered QE3. Remember the 2007 carry trade? That is alive and well. This unnatural monetary environment may throw off the sentiment indicators you mention.
ReplyDeleteFor those chartists out there.
ReplyDeleteJust take a look at the weekly charts of VIX, VXO, and VXN.
A little flaggy??
I have to remind myself about what William O'Neil said about momentum stocks. They always break out ..... and break down....well before the general market.
ReplyDeleteI just looked at the entire list of all of the momentum stocks on a site that I follow. The market was flat on the week.
The Bigs:
mcp, redf, sfun, yoku, tzoo, sgi, wprt, panl, renn, shs, nxpi, bsft, webm, stvi, pot, sndk, xlf, tdsc, open, tzoo, lvs yoku goog, bidu
all down pretty big for the week.
Except for MITK!!!
Jesse I kind of agree that the market looks weak...
ReplyDeleteAnd please don't include mitk in that list of momos...I take it personally man! Seriously tho mitk is going up regardless of the market...
There is no doubt most of the old tech guard - CSCO, INTL, MSFT, etc, is cheap.
ReplyDeleteThey used to have strong growth profiles which have undoubtedly weakened and their stock prices needed to come down to reflect this. At this point, they are probable good buys as their valuations are much better. A lot of the S&P 500 is in the same situation. Take a look at WMT for a completely different stock with the same investment profile.
For CSCO, http://quicktake.morningstar.com/StockNet/Valuation10.aspx?Country=USA&Symbol=csco and you can see how it has gotten progressively cheap over the last decade and if you click on the financials tab, you can see how their sales and EPS are increasing.
I think the best value in the market now are the insurance companies. A lot of them are at historical cheap valuations with improving earnings and investors seem overly worried about them.
RoBear, not sure if you are a trader or investor, so my comments may not be relevant if you are a trader.
My personal issue with the QQQ's and ETF's like this is you really don't know what you own and I find it easy to get shaken out at bad times. For example, if I were to buy CSCO, I'd know the valuation is good, earnings should increase as the restructuring proceeds, competition is tough, but manageable and you've got a bit of a yield to protect you. You can monitor their progress and if the stock goes down for no reason, buy more, or if the business gets weaker, sell. With ETF's I find it harder to have conviction and sell because the market "knows something" at a bad time.
The other issue with most ETF's is you are actually buying high as the percentage of a particular stock in the ETF goes up as their value goes up. This worked great in the 1990's when the fast growers kept increasing their share price faster than the market, but isn't in the current market. If you want to see this in a chart, run a compare of the RSP (Equal Weight S&P500) against the SPY and you'll see since the March, 2009 bottom, it has outperformed by 60%.
I think ETF's are great for trading or for exposure to difficult markets (eg. Brazil) or for investors who don't have time to spend on their investments.
BB: I understand. You have more conviction holding a stock that you know is undervalued, low PE ect. CSCO certainly is a ultra low risk play at these levels. If we enter a bear market it will lose less money then all its QQQ peers.The flip side to that is that we are in a historical Bull market. If it continues CSCO will still under preform. From the 2009 bottom to date the qqq are up 100% and csco is up 20%. That is why I say CSCO is expensive. ITS price under performance makes CSCO expensive to own.
ReplyDeleteI am an an investor at heart and a value oriented stock picker. When we are in the late stage of a bull market with numerous corrections, which I think is presently the case, then I tend to trade more. CSCO is deep value and a hold for me.
ReplyDeletemaybe the world is really ending - ToC stage one cancelled due to snow and t-storms here in madera...in May!
ReplyDeletegoing to trade the globex, opens at 3 pdt
Part of the reason I think a correction may be coming is watching the commodities and the momentum stocks tank...I've been watching the markets on and off from afar (vegas and now miami) and not watching every tick is kinda giving me a different perspective. I've actually been staying away from trading for a few weeks now just to enjoy life and not pay my broker as much...but if I was id say we're not going much higher until those above mention sectors rebound...
ReplyDeleteThat doesn't mean mitk is going down though...its in a bull market all of its own.
ReplyDeleteTF - I agree that MITK is following a different piper. I am in and holding. A slightly bigger position than before when I traded it. Not large yet compared to your own. Watchful waiting.
ReplyDeletenew post
ReplyDeleteRoBear, sounds like you are more of a momentum trader and I am a reversion to the mean trader.
ReplyDeleteI would look at CSCO as likely to be cheap because it has underperformed for 10 years.