Saturday, November 5, 2011
11/05/11 It's cold and dusty but I let it be
One month ago I would have laughed at the likelihood of a +20% gain in the port by end of month. Yet that's what the market delivered.
I'm able to put myself into (at least) two pairs of shoes here:
(a) The guy who sold at the October 4 low. Make no mistake, there are a ton of guys walking (definitely not running) around in that pair of green Pumas- http://www.shop.puma.com/Faas-500-Running-Shoes/pna185160,en_US,pd.html&q=green%20running%20shoes#!i%3D1%26color%3D05%26size%3DUS_7
(b) The guy who held on at the October 4 low, thinking it would be awesome to make +20% by year-end. Alright, so I'm wearing that pair of black Saucony Kinvaras- http://www.zappos.com/saucony-progrid-kinvara-2-black-grey~2?zlfid=111&recoName=zap_pdp_sub
Now, why would I want to mess with that kind of gain? The plan right now is to stay in cash until sentiment turns bleak once more.
Feedback, anyone?
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I've heard good things about Limitless, rb.
ReplyDeleteCREE - What's up with this chart?
ReplyDeletePANL - Nice day there...
We played the best (undefeated) team in the local league today...and tied! In fact, we would have won but for two goals voided due to offsides penalties (the offsides player was completely uninvolved in either goal).
ReplyDeleteNot bad. One more regular season game, then on to the playoffs.
limitless was a decent movie. could of been great if it focused more on the main premise instead of making 4 other movies with in it.
ReplyDeleteAnyway i went back to red box and the kiosk was closed! To avoid the extra buck I had to risk my life and go to walley world to return it. Not happy. I am now watching All The Pretty Horses streaming on a site called Crackle.For free. Quality is awesome. RedBox is dead to me.
2nd_ave, do you remember how extreme the AAII bullish sentiment figures were after QE2 was announced and how long they stayed that way? For months! Same thing happened in the summer of 2009. Given how extreme the pessimism was this summer and the amount of outflows from equity to bond funds, it is possible that the market will be going up for months without a major sell-off (and hence without the sentiment getting bleak). There is still a large wall of worry for the market to climb:
ReplyDelete1. There is not enough growth in Europe, and many people believe that Europe will thus eventually fall apart.
2. The leading indicators in the US are down to the levels seen only prior to recessions, and so the possibility of a US recession is weighing on everyone's mind.
Is it absurd that the market would rise above the QE2 in this environment? Well, since the peak of QE optimism, the Fed made a promise of 0 Fed funds rate for two more years AND substantially brought down long-term yields. Who knows, but maybe these factors can outweigh the slow economy in Europe and US and push the market above 1350?
2nd, going all or nothing is a tough way to invest. Increases the risk because if you are wrong, you either take a big hit or miss a big move up.
ReplyDeleteI look at stocks and they are still cheap, the economy is improving and sentiment is still poor on a longer term basis. Either stocks will be substantially higher in a year or two or something really bad will happen.
I always recommend to friends that they grow into their position. Buy 25% this week, then the next 25% on a pullback and so on. Either that or trade like TOF, if you can do it.
cp - speaking of CREE, I was noticing several bottom-dwellers moving up a bit...
ReplyDeletehttp://www.screencast.com/t/Z0jwT50s
David/BB- Good comments! I might change the strategy as follows:
ReplyDelete(a) Use ST sentiment indicators. Hulbert qualifies. That shortens the time frame to days/weeks.
(b) Scale in/out of positions as I arrive at decision points.
2nd_ave -- scaling in/out is THE way to invest for a long-term investor. I was surprised you didn't start scaling in on Thursday when S&P was at $1220...
ReplyDeleteLooks like the situation in Europe might fall apart much sooner than we think. John Mauldin collected some interesting essays last Monday, giving us reactions from some smart people to the proposed Greek bailout plan. Here are a few:
ReplyDelete****
From Dennis Gartman:
Firstly, for example, the 50% "haircut" is apparently only going to apply to the Greek sovereign debts that the private institutions own; that which the "public" of government institutions own shall be left with the 21% "haircut" previous agreed upon. We are now being told that the €150 billion held by the "Troika" and the ECB will not be included in the "haircut." As we understand the numbers, Greece had approximately €350 billion in outstanding debts, so already the haircut is far less than had been initially thought. The market was convinced as of late last week that Greece's outstanding debts had been… or would eventually be… cut to €175 billion and at that level perhaps Greece could be made fiscally stable over time. Now, however, we see that Greece's outstanding debts had been cut to €275 billion… far less than the market had thought. At that level, Greece will never be returned to solvency.
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From David Zervos (of Jeffries and Company):
[after a few paragraphs of Greek history]: With this political backdrop, the endgame for Greece is extremely complex. Austerity will not last in Greece, and the threat of exit will ultimately be used by the citizens of Greece to attempt to secure a continuation of the welfare state. The stakes are high, and Angela Merkel is no Jaques Delors. The next chapter for Greece will be exit, and the losses to Western creditors will be seen rightly or wrongly – in Greece – as just part of the payback. Good luck trading!
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On the other hand, Big Boyz know all that, and they still closed S&P above 1250 on Friday. So should we trust the evolution of price (which is definitely bullish since October 4) or should we worry about what might happen?
ReplyDelete2nd -- Not sure how the 'Scaling OUT' part is going to work for you (it doesn't for me). From what I've seen in your trading, when you decide you've had enough of a position then you're OUT (as in 'Hit-the-Eject-Button'). Sometimes our instincts just r what they r...
ReplyDeleteSold my 5 SPY nov19 122 strike puts on Friday at $1.86. SO I closed out the 5 lot strangle with $214 gain. I sometimes have a hard time putting my thoughts down in words. What I'm really looking for in the strangles/straddles is an oversized moved. My bias is down but we could just as easily ramp up 500+ Dow points too.
ReplyDeleteUnfortunately, I also bot 300 SDS at $20.51 on Friday with a stop, then I left work and forgot allllll about the market and my stop didn't get hit. I don't know how to interpret the news this weekend and I could easily see us coming in with a big gap up. If we do gap up then I'll sell out of this position after the first hour.
Since I was nowhere near a computer at the close on Friday I didn't put on another strangle/staddle. If we open tomorrow close to flat, I'll buy another DEC strangle biased to the upside, meaning the calls are more in the money than the puts. If we open down then I'll buy a Jan bull call spread.
2nd - your strategy seems fine to me. It's hard to argue about gains. I think its good to shut down and get away from the market at times.
I've often wondered how would I do if i just did say 10 trades a year, just wait for the setups instead of getting bored and trying to make something happen. Hmmmmm. I bet I would do better.
FSLR - Does this thing looks like it's put in a bottom?
ReplyDelete"Brazil, China and other emerging markets trail US"
ReplyDeletehttp://finance.yahoo.com/news/Brazil-China-and-other-apf-1029221502.html?x=0&sec=topStories&pos=1&asset=&ccode=
The main reason emerging market stocks have suffered deeper losses isn't because their economies are suddenly sluggish. Analysts say it's because people have been worried about the European debt crisis and a possible recession in the U.S. It may seem unfair, but when fear of another financial crisis strikes money managers, they tend to flee emerging markets and stay closer to home.
Consider the collection of emerging-market rising stars known as the BRICs, which stands for Brazil, Russia, India and China. All have economies whose growth exceeds the U.S.
-- Brazil: The economy has expanded 3.1 percent over the past year. The benchmark Bovespa has lost 15.3 percent.
-- Russia: Economic growth of 5.1 percent. The Micex has dropped 11.1 percent this year even after a 10 percent rebound in the past month.
-- India: Economic growth of 7.7 percent. The BSE Sensex index is down 14.4 percent.
-- China: Economic growth of 9.1 percent. The Shanghai Composite has slumped 10 percent this year.
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So that's where the growth will come from now, as the trailing stock markets catch up to S&P
Some quotes from BC's "Week in Review":
ReplyDelete****
Amid the swirl of negative news, the equity market has been up since then, which is why I close my ears, and stick to prices.
As you know, when capital is flowing into Treasury bonds, the yield falls, which was clearly the trend from April into late September. When that happens; capital flows into Bonds and comes out of the global equity market ($DJW).
In late September, a reversal occurred as capital flowed into equities. This week capital flowed from equities into bonds, not so much I think because of the G-20 decision to look to Eurozone countries to solve their own problems (Canada’s Prime Minister saying that Europe has the wealth to do it on their own), but because of the Corzine Affair, which saw his earlier massive purchase of Italian bonds by MF Global go bad, shooting yields higher than Italy could afford on their debt roll-overs.
MF Global is now bankrupt, the FBI is investigating co-mingling of client funds with the company funds, and John Corzine has resigned and retained criminal counsel. Worried about market settlement risk, traders have jumped out of commodities and futures, upsetting the market. I think this action is temporary, but we have to wait for more information.
Here is where each of us has to make a personal judgment as to why the Euro weakened. I made mine based on the Italian bond exposure by MF Financial, and the forced selling involved. The market is not a benevolent playground; it’s a war. As soon as the MF Global issues came to light, the Italian banks and the Italian bonds started taking hits. You saw it with the banks as I was showing the Euro bank monitors. If MF Global was a small player, their default would be a ripple; but MF Global was like a Bear Stearns.
The question now is whether there is a Lehman type failure coming up. I think the G-20 and the ECB will step in to prevent that. In doing so, they will print money and help the banks buy the Euro and hold their Euro debt. That ought to be a plus for $GOLD.
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We all know BC likes to speculate a lot, but this time I hope his speculations turn out to be correct, since I closed all my downside hedges on Tuesday...
The S&P futures have just started trading and shot up by 0.5% -- a good start, I should say. :)
ReplyDeletecp - many of the solar stocks had a bounce...except ESLRQ of course...:-)
ReplyDeleteFSLR - This looks like one of those charts with a perpetual pinch, balance sheet seems decent but there's something troubling here:
ReplyDeletehttp://stockcharts.com/c-sc/sc?s=FSLR&p=D&yr=0&mn=7&dy=0&i=p99295968853&a=217994610&r=7 736
Kind of like this one, back in May:
http://stockcharts.com/c-sc/sc?s=GNK&p=D&yr=0&mn=7&dy=0&i=p99295968853&a=217994610&r=7 736
AEM - I like this one better but fearful of the fundamentals surrounding the mine closure:
http://stockcharts.com/c-sc/sc?s=AEM&p=D&yr=0&mn=7&dy=0&i=p99295968853&a=217994610&r=7 736
Does this piss you off?
ReplyDeleteJack Abramoff - With an annual budget of just $1M/yr, held "major influence" over as many as 100 Congressional offices.
According to Mr. Abramoff, the Capital Hill lobbying community still flourishes to this day...
"I've often wondered how would I do if i just did say 10 trades a year, just wait for the setups instead of getting bored and trying to make something happen. Hmmmmm. I bet I would do better. "
ReplyDeletePort - I've already done this analysis on my own portfolio, but with Options. So while it's not the same, technically, whenever I did options trading I also traded a lot...it impacted my thinking overall.
Over the course of the past 7 years had I eliminated options trading and just stuck with stocks I would have had more than enough money to "retire" (i.e, work full time on my own businesses and have enough money to earn enough in dividend income to cover my expenses assuming a portfolio earned 4.5% annual dividend income). Right now I'm probably still another 200% away from that.
2nd - I think the odds of us slowly going up on a daily basis just like we did last fall and on up until February is highly likely. Is there risk in the world? Absolutely, but the market is pricing in a good deal of risk, barring an unforeseen collapse in the economy. I doubt that will happen because, again, we just too close to the last one and every company has really taken on a bunker mentality. Hence the reluctance to hire and the desire to hoard cash.
ReplyDeleteHaving said that, it could be difficult to find the right candidate for the Italian Job.
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