Friday, July 6, 2012
07/06/12 Too many bulls
Sure, I know what the sentiment surveys say. I still think way too many bulls on this train, bro. We need another trip to Desolation Row, another tour in the TL. We don't necessarily need to wrap our hands around handles caked with human feces or sleep under the stars on blankets of bird droppings. I'll settle for a few nights in an SRO.
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I honestly think a drop to 1250 would fuel a move to 1500. Simple as that.
ReplyDeleteIn four years, we'll look back on 2012 and the 'Euro Crisis' as another blip. The Spaniards, the Portuguese, the Italians, the Irish, the Greeks- even the French- they'll settle into a newly discovered tolerance for taxes and 'austerity.' They have no choice. The younger ones will pick up the mantle.
DeleteIn other words, I'm basically bullish. But I need more elbow room prior to boarding the train.
DeleteGMO - Special meeting called by County of Eureka Commissioners, scheduled for Tue July 10th, 09:30:
DeleteCONSIDER APPEAL OF DISTRICT COURT OPINION
1. Discuss and consider appeal to the Nevada Supreme Court of the District Court Opinion denying Petition for Judicial Review of State Engineer Ruling 6127. (Action)
http://www.co.eureka.nv.us/comish/agendas/07-10-12%20Comm%20Agenda.pdf
TEF - Here's one for consideration...
ReplyDeletehttp://www.objectivetrader.com/2012/07/end-of-day-6-july-2012.html
ReplyDelete"David - Welcome home. Where's your rental, near Wall twnshp, or Brick twnshp?"
ReplyDeleteIt was on the Seaside Island in South Jersey. Excellent beach with fine white sand that stretches for miles... Went swimming with my family twice a day, in the morning and in the evening.
I am in CA now, with a full access to the computer. I will check up now on what *really* happened in the markets while I was away... :)
I see that a major declining wedge formed in GLD and SLV charts over the past year. It should resolve one way or the other over the next couple of weeks. Watch it closely for a trade of the generations. :)
ReplyDeletehttp://blogs.stockcharts.com/chartwatchers/2012/07/gold-a-caged-animal-.html
DeleteKass jumped to 20% net short at last Friday's open.
ReplyDeletehttp://seabreezepartners.net/letters&id=1230&catid=15
GLD...Shot the chit with a dad from a team Kendra plays with sometimes. He was a full time trader at a hedge fund and now trades for himself. He's a believer like David. Say's GLD has one moon shot left in it..He also did say he's never been this disconnected from the market. 100% cash.
ReplyDelete"He's a believer like David."
ReplyDeleteMark, I am not a believer. I don't want to be proven right -- I just want to make money. And my cold and detached analysis shows that there is no way for US to stop the growth of its debt/GDP ratio in the years to come, which implies that, all else being equal, an upward pressure will exist for PMs.
Mark, was out golfing with a couple of gold bug friends on the weekend and same thing - think the price of gold is being suppressed by the monetary authorities, but eventually this has to give and, when it does, watch out!
ReplyDeleteThe other thing that is interesting is how many people think the markets "are bad" in a year the S&P is actually up 8%. Seems like the "smart" traders are get played by the market and the "dumb" buy, hold and forget about it type of investor is winning in 2012.
I bought a small amount of NOK at $1.88...I honestly don't know why but it's in complete free fall and the fact is they still have a gigantic amount of cash.
ReplyDeleteWow - EV of $800 million. Still the 2nd largest phone maker in the world. Hard to see not worth more than this. RIMM up 15% in the last 3 days.
DeleteBB - Yeah that's my thinking man. Someone has to see some value in this no? They have I believe like $2.20 in cash and have slashed the crap out of expenses.
DeleteKaas is short LOPE. Kinda interesting.
ReplyDeleteREDF - Refusing to drop under $4
ReplyDeleteany of you guys know anything about this NSPH company?
ReplyDeleteNo. Whats the story?
Deletehttp://seekingalpha.com/article/687961-nanosphere-receives-approval-for-gram-positive-blood-stream-test?source=yahoo
DeleteI've been following them for the past week. Stock won't give up.
CEO bought a shit ton of stock at around $2
DeleteCEO bought like 800k shs in past month. They got FDA approval just a couple of weeks ago. I wonder if this sucker flies. Some pretty insane projections the company made.
DeleteReformed Broker has a good writeup on why stocks shuold do well second half of 2012"
ReplyDeletehttp://www.thereformedbroker.com/2012/07/09/ten-reasons-i-like-stocks-for-the-second-half/
Speaking of peak profit margins...check this chart out...from the 1940's to 1980s margins dropped yet the market went up big:
Deletehttp://static6.businessinsider.com/image/4e11b8a249e2aedf69060000/margins.jpg
From this, it looks like margins were below average from the 1980's till the mid-2000's. Perhaps those years were the exception due to very high interest rates and the current margins are more in line with long term averages.
DeleteScrew it...picked up a little NSPH. $3.38
ReplyDeleteMEOH - Okay well, is this thing ever going to close the $22.5 gap or not?!?!????
ReplyDeleteI'm not getting any younger here!!!!
alright i doubled down on NOK at 1.86/7. now about 10% of port. i refuse to buy anymore and will just try to keep this in the port for as long as possible, which most likely means a week after it moves up or down 25%. for the past 4 years this has moved down from $42 to $1.85. they have over $2/share in net cash. they are most likely in their AAPL type moment where the market perceives them to be on the brink of bankruptcy. maybe they are with all of this debt...who knows.
ReplyDeletemeant to say "maybe they aren't with all of this cash...who knows."
DeleteTOF- Take a look at GEVO. Got to run...
ReplyDeletei can't buy into the biofuels space. seen too many of them crash and burn.
DeleteTOF,
ReplyDeletejust saw WNC down at $6.25. Hit $5-ish last fall, but not sure if we will see again. Good leverage if you believe economy is improving.
yeah man i've been eyeing this one for a while. just like some other plays better right now.
DeleteProbably being unrealistic, but would love to get around $4.00. Might get there if the market continues to drag.
Deletewow...someone dumped 1.7 million shares of NOK at the bid. someone big wants out.
ReplyDeleteWTIC is up, back to $85. Maybe it's just b-ouncing and this means we get ta buy it much lower?
ReplyDeleteI'll buy lower, f'in-a-right you know I will so go a-head and tank da be-atch. Tank gold and silver too, okay?
Just placed a buy limit order for 5000 shares of PNPFF at $0.87. It's 1-year chart gives me a clear feeling that it has bottomed.
ReplyDeleteBB - Check this article out on NOK:
ReplyDeletehttp://techcrunch.com/2012/07/08/nokias-richard-kerris-people-wont-remember-our-troubles-by-next-spring/
Interesting quote from Hussman this weekend regarding QE:
ReplyDelete"Remember that quantitative easing “works” through central bank hoarding of long-duration government bonds, paid for by flooding the financial markets with currency and reserves that essentially bear no interest. As a result, investors in aggregate have more zero-interest cash, and feel forced to reach for yield and speculative gains in more aggressive assets. Of course, in equilibrium, somebody has to hold the cash until it is actually retired (in aggregate, “sideline” cash can’t and doesn’t “go” anywhere). Increasing the quantity simply forces yield discomfort on more and more individuals. The process of bidding up speculative assets ends when holders of zero-interest cash are indifferent between continuing to hold that cash versus holding some other security. In short, the objective of QE is to force risky assets to be priced so richly that they closely compete with zero-interest cash.
Understanding this dynamic, it follows that QE will have its greatest impact on financial markets when interest rates and risk-premiums have spiked higher. If interest rates are low already, and risky assets are already priced to achieve weak long-term returns (we estimate that the S&P 500 is likely to achieve total returns of less than 4.8% over the coming decade), there is not nearly as much room for QE to produce a speculative run."
Conclusion:
ReplyDelete"The key point is this – QE is effective in supporting stock prices and driving risk-premiums down, but only once they are already elevated. As a result, when we look around the globe, we find that the impact of QE is rarely much greater than the market decline that preceded it.
...
The effect of quantitative easing has diminished substantially since 2009, when risk-premiums were elevated and amenable to being pressed significantly lower. At present, risk-premiums are thin, and the S&P 500 has retreated very little from its April 2012 peak. My impression is that QE3 would (will) be unable to pluck the U.S. out of an unfolding global recession, and that even the ability to provoke a speculative advance in risky assets will be dependent on those assets first declining substantially in value."
http://www.ritholtz.com/blog/2012/07/operation-twist-market-impacts/
DeleteAdded a decent amount of DECK at $44.1
ReplyDeleteSince people like to trash Hussman regarding his fund's performance, he made a note about performance this weekend:
ReplyDelete"A quick note on performance – as we’ve noted since the inception of Strategic Growth Fund in 2000, our investment horizon is specifically focused on the complete bull-bear market cycle, measured from bull-market peak to bull-market peak, or bear-market trough to bear-market trough. My view that stocks have entered a new bear market makes it reasonable to examine the most recent cycle, measured from the bull market peak of October 9, 2007 (on the basis of total-return) to the recent peak on April 2, 2012.
During the 2000-2007 peak-to-peak cycle, Strategic Growth outperformed the S&P 500 by a cumulative margin of 119.79% vs. 20.70% (11.46% vs. 2.62% on an annual basis). During the 2002-2009 trough-to-trough cycle, Strategic Growth outperformed the S&P 500 by a cumulative margin of 37.95% to -1.25% (5.10% vs. -0.19% on an annual basis). As I observed in numerous annual reports, that full-cycle performance margin was “as intended” – neither extraordinary nor disappointing from the standpoint of our long-term expectations.
In contrast, the most recent peak-to-peak cycle from 2007 to 2012 was challenging. For most investors, everything went wrong in the downturn and then everything went right in the recovery. For us, everything went reasonably as expected during the downturn, but my insistence on making our methods robust even to Depression-era data led to a significant “miss” of the market’s recovery in 2009 and early 2010 that will not be repeated in future cycles even under identical conditions and evidence. Largely as a result of that miss, Strategic Growth lagged the S&P 500 during the most recent cycle, by a cumulative margin of -12.91% vs. 0.08% (-3.01% vs. 0.02% on an annual basis). The Funds page includes full historical performance data on all of the Funds, as well as annual reports and other information.
In every cycle, Strategic Growth has experienced just a fraction of the downside experienced by the S&P 500 (-6.98 vs. -47.41% for the S&P 500 in the 2000-2007 cycle; -21.45% vs. -55.25% for the S&P 500 in the 2002-2009 cycle). I recognize that nobody can feed a family with reduced downside. It does, however, make it far easier to recover from difficult periods. The most recent market cycle was an outlier on nearly every basis that investors can imagine. It was – and I am confident it will remain - an outlier from the standpoint of our own full-cycle performance as well."
this fund has done well:
Deletehttp://finance.yahoo.com/q/pr?s=HSTRX+Profile
the other one not so much.
http://finance.yahoo.com/echarts?s=HSGFX+Interactive#symbol=hsgfx;range=my;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;
The other point Hussman is conveniently overlooking is that the 2000 - 2007 peak cycle was a super-easy beat for value investors. Value guys underperformed from 1998 - 2000 as value stocks tanked and tech stocks took off. In 2000, the S&P was very overvalued due to the tech stocks, so all you had to do was avoid them (which every value guy was doing) and you outperformed.
DeleteEven in 2002, we were still working off the overvaluation of the market from 2000, so again, an easy beat.
To be fair to Hussman, most of the value guys have underperformed this last cycle. Not sure if it's because AAPL contributed so much or something else? I just don't like Hussman's arrogance that he is right and the market was worng -> "recent market cycle was an outlier on nearly every basis that investors can imagine".
AAPL My assessment tells me AAPL has had a profound impact.
DeletePAL - Looks like the dwarfs have run out of shares to sell.
ReplyDeleteAA - Wonder if this one closes better than $8.64 and tomorrow becomes a broad rally on AA's beat? I can see an immediate rally setting up to at least $9.80 for this one as the June gap up was closed today it appears.
ReplyDeleteI agree that NOK looks like a good buy and almost certainly will be at some time (maybe now). I just don't know how you time the buy. I like to buy stocks like that when I know they are very undervalued and NOK probably is now, but can't say for sure as the business is in so much flux.
ReplyDeleteYou are much better at stocks like this than I am, but what makes you think the months long downtrend is ending here and is different from when it was $4.00?
The only difference is they are now trading below cash...significantly below. With no bounce for the past 65% I think it's due for at least a substantial bounce, if not a bottom. Even Kodak and Palm had huge rallies as they were downtrending and NOK has enough cash to survive for at least a few years. I think the market is ahead of itself.
DeleteSomehow I'm getting the impression today COULD be the day to pick up some good stocks while prices are still near lows.
ReplyDeleteIf only I could locate my nutsack.....
2nd, not sure if you follow Kass on twitter, but so you know, he tweeted he is back to flat now and aggressively buying oil services (OIH).
ReplyDeleteNOK - For the record - BofAML Rating: Last updated 05/11/2012 - Underperform
ReplyDeleteSince nobody wanted to sell me PNPFF at $0.87, I raised my bid to $0.88 and got a fill for all 5000 shares.
ReplyDeleteGWW - Looks like bull flag to me, fellas. OBV is strong IMO. Of course I don't have the nutz for buying it...
ReplyDeletehttp://stockcharts.com/h-sc/ui?s=GWW&p=W&b=5&g=0&id=p17743081632
DeleteLooks good to me. Just not enough upside potential for me.
Agreed, upside potential does appear limited. P/FCF seems to indicate upside limitation.
DeleteDavid - PNPFF - Does the On Balance Volume give you any cause for concern?
ReplyDeletehttp://stockcharts.com/h-sc/ui?s=PNPFF&p=W&b=5&g=0&id=p41509722462
CP - I think this is a low risk point to go long stocks. I'm using 1,335ish as a support point. If we close below 1,330 for more than a day I'll be looking to lighten up some.
ReplyDeleteAA - Okay, now I feel even more certain in a positive sense, after having a peek at OBV:
ReplyDeletehttp://stockcharts.com/h-sc/ui?s=PNPFF&p=W&b=5&g=0&id=p41509722462
AAPL/NOK/RIMM, etc... I can't ignore a trend, nor do I care to predict a reversal.
ReplyDeletethis NSPH is strong man...no pullbacks in sight. wonder if this can do a PCYC. watch tomorrow will be a secondary offering day. however, the CEO seems to have a ton of conviction. upped his ownership of the company 50% in June.
ReplyDeleteSPY - A close better that 135.38 would be helpful.
ReplyDelete"David - PNPFF - Does the On Balance Volume give you any cause for concern?"
ReplyDeleteOBV is highly correlated with the share price. Looking at GDXJ, OBV declined sharply into the May low and then rebounded sharply. PNPFF is a long-term growth stock. About 1/2 of their current portfolio consists of PM stocks, and I think the chances are pretty high that this sector has bottomed. Besides, they invest in good companies with internal growth potential, and the market currently doesn't give any benefit of the doubt to such companies (AUMN should be trading at multiples of where it is now). So, looking 1-2 years ahead, PNPFF should be trading much higher than were it is now. Over the past 5 years, it was trading lower than now only for a few months in the Fall of 2008. It's current price to NAV ratio is 0.5, which is the lowest it has been over the past 8 years. So I think buying PNPFF here is a great value.
There's no doubt the PM stocks are discounting a much lower gold price. Either it is a great time to buy or the price of PM's is coming down a lot. I keep thinking I should do a pairs trade (long GDX, short GLD), and it should work out regardless.
DeleteI still have a hard time buying into a huge cyclical industry/sector that has had a bull market for over 10 years.
DeleteBB- If you come up with the right amount, I might follow that trade BB. Maybe 2X short GLD?
DeleteTOF, the cycles in the PM sector correspond to the long cycles in the ratio of the rate of economic expansion to that of monetary expansion. The current cycle is far from bottoming (the bottom will be in when all the extra debt is written off, and economic growth will greatly pick up unencumbered by the debt burden).
DeleteI can understand that TOF, I think the key is looking at the amount of exploding debt throughout the world and ask yourself how can this be resolved by governments?
DeleteTwo ways:
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In either case hard to come to the conclusion that gold is not a winner regardless of either outcome above. People need at the least an insurance policy of bullion or the way David is playing it with assests in the ground. The pairs trade also makes sense.
Do you think GLL would do the trick?
DeleteGLL is an ultra short gold, so not for me unless you want a straight short or to use with a pairs trade per BB.
DeleteGLL tracks futures gold at 2x's pretty good most of the time and does not seem to ever get really out of whack.
I'm assuming the ulta short means 2x's gold, Is that correct?
DeleteAgain though it tracks well.
What do traders have against AUMN today? SLV and GLD are up, S&P and GDXJ are barely down, but AUMN is down 6%! The prices of these thinly traded junior miners really move in mysterious ways...
ReplyDeleteSince you asked, my guess is its the cash costs that bother investors. But as we all know JV gold is a tough sector.
DeleteDo you mean the cash costs of AUMN in particular? I don't think these were ever disclosed... For MUX, the cash costs are around $10-$15 for silver, I think...
DeleteYes AUMN specifically, they were disclosed in one of their presentations that a looked at awhile ago when I mentioned Droody.
Deletehttp://www.goldstockanalyst.com/
Aumn's cash costs were through the roof compared to most on Droody's list and average cash cost's for the sector. FWIW
That may be the case because of the very small volumes that AUMN currently produces. By 4Q 2012, they plan to expand their production sufficiently to become cashflow positive, and then keep expanding their production so as to keep increasing the profit margin.
DeleteGreat, I'm sure it will work out for you.
Delete"I can understand that TOF, I think the key is looking at the amount of exploding debt throughout the world and ask yourself how can this be resolved by governments?"
ReplyDeleteI understand this argument but I don't think it's totally accurate from what I remember. I remember reading up on this correlation and it didn't work because there have been times in the past when govt debt was expanding and gold was going down.
No problem TOF, that's just the template I use. There are always trading opp's for gold, but generally when I have tried to trade gold aggressively I was always better off if I just held, but you are a better trader.
DeleteGenerally, if I become uncomfortable I will just hedge it out, but again the ultimate resolution, so far, has always been that I would have been better off if I just waited. At some point this relationship will not hold, but I think its a ways off.
PCX, files for chapter 11 down huge.
"I remember reading up on this correlation and it didn't work because there have been times in the past when govt debt was expanding and gold was going down."
DeleteThat was the case when the total debt/GDP ratio was at much smaller levels when it is now, and when the overall situation was far from the "Endgame" as John Mauldin puts it. Right now, however, Endgame is upon us, and increases in debt/GDP levels will no longer be overlooked.
All coal companies collapsed at EOD, and are down even more after hours. The brave souls out there might want to pick up some BTU, since it will only benefit from the bankruptcy of its competitor...
ReplyDeleteAll coal stocks will get hit further. However, one small thing I noticed is ACI is actually trading above the panic low late in the afternoon. I believe they are a direct competitor of PCX in the region they mine from.
DeleteEither way there is still most likely further downside for coal stocks. BTU is the one to watch for stability, though...if it can hold it's most recent lows, which I doubt.
FSLR - I'd like to see it trade similarly to Nat Gas. I'm hoping for a retracement back to the $12 area which could be a good point to buy.
ReplyDeleteNOK is up after hours for some reason.
ReplyDelete