Friday, October 12, 2012
10/12/12 View from the summit
A time series of any stock chart is a series of peaks and valleys. Reasons for thinking the indexes may head down over the next several weeks:
(a) High levels of insider selling, especially in the NDQ. http://www.marketwatch.com/story/insiders-betting-on-a-market-decline-2012-10-10
(b) Yin and yang. We've had a pretty nice run since early June. A healthy pullback would be expected.
(c) The election. It would make sense to see prices move lower on uncertainty, followed by a sharp rally once the outcome is clear.
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June, very good point. And gold led the way both up, and down.
ReplyDeleteThree certainties in this life
ReplyDelete1. Death
2. Taxes
3. Anytime I sell something after a +10% run, it will easily go up another +5% the next day. IF I don't sell it drops. Mark my words.
All i did today was sell the Nov 35 strike TBT calls against my long TBT shares for $1.13. Maybe that gurantees a TBT bottom?
ReplyDeleteStill have my SSO, RIMM, and DSX shares, none of which have been stopped out yet surprisingly.
Whoops, make that the Nov 65 strike TBT calls.
DeleteI see FXI closed up a bit today, I hope that keeps going. Not much movement in my long FXI calls because I bought them after FXI traded above $36.00 yesterday.
ReplyDeleteInteresting that the more general insiders are selling, but the TSX mining company insiders are buying.
ReplyDeleteIf CP is correct and gold leads market changes, bodes well for a mining rally, then a stock market rally.
http://www.theglobeandmail.com/globe-investor/markets/market-blog/insider-trading-points-to-rally-in-mining-stocks/article4601128/
Did you, folks, catch the fact that the AAII numbers today showed that the bull/bear percentage changed from 33/33 to 30/39 this past week? People became quite pessimistic even though S&P did not have a large decline. This is an example of how the overbought/overbullish situation can be corrected by a sideways motion. With this data, we might very well have a nice rally next week in all risk assets.
ReplyDeleteA funny title for an article from ZeroHedge: "Beta Testing QE 4 - "Large Amount" Of $100 Bills Stolen From Federal Reserve"
ReplyDeletehttp://www.zerohedge.com/news/2012-10-13/beta-testing-qe-4-large-amount-100-bills-stolen-federal-reserve
This is probably what has been holding up gold and silver after QE-infinity was announced: due to the extended settlement period for MBS purchases, the Fed balance sheet basically did not change since September 13:
ReplyDeletehttp://www.istockanalyst.com/finance/story/6088309/did-bernanke-bluff-about-qe3
Maybe next Thursday's data will finally show some balance sheet expansion...
The power of the 'net: We traded in the 4Runner for a Camry XLE Hybrid this weekend, and 'saved' about 10% on the purchase price due to (a) refusing to budge from Edmunds' 'True Market Value' for a purchase price + (b) the ability to bargain for a significantly higher trade-in price based on info from the same site.
ReplyDeleteA full tank of gas now gives us an estimated driving range of 640 miles. Awesome.
Deletehttp://www.hussmanfunds.com/wmc/wmc121015.htm
ReplyDeleteLook, I know Hussman has been wrong. But given his extreme views, he only needs to be right once to redeem himself. And the time may be nigh for a correction of the magnitude he foresees.
Well Cramer says buy WPRT, so I guess that's what everyone's gonna do.
DeleteHussman -> "On the basis of normalized earnings (which correct for the cyclicality of profit margins over the business cycle, as stocks are very, very long-lived assets) our projection for 10-year S&P 500 total returns is lower than it has been at any point prior to the late-1990’s bubble, with the exception of 1929."
DeleteThe Dow P/E in 1929 was around 30, it is currently less than half of that.
I'll say it again - I think Hussman is missing the boat by looking at CAPE and 10 years of earnings history when they include the financial crisis and huge bank writedowns. Many other commentators I respect talk about how cheap the market is and how financial conditions (ie. low interest rates) are very supportive for the market.
We'll see - I think Hussman has painted himself into a corner and at the point has to ride it out and would otherwise loose all credibility and investors - if he's wrong, he's probably still made millions off management fees keeping the investors in his fund. If he's right he's a hero and makes 10's or 100's of millions in management fees.
Cara agrees with Hussman, the difference is Cara has a time horizon in mind for when the crash comes.
DeleteMy observation is if these guys are correct, it's not positive news for a buy and hold portfolio...
Still a big seller in NSPH. So what's our PT guys. 3.00/2.90?
ReplyDeleteI see major support @ 2.60. If I had no position and no axes to grind on this stock, I would sit back and wait for 2.60. If it gets there, I have a trade with pretty good odds. If it doesn't, I haven't missed anything. Insiders bet big btw 1.70 and 2.40, and as far as we know, haven't unloaded any shares.
Deletei agree 2.60s look like major support. i suspect if it does come down further it stops short of that because it's too obvious.
DeleteIt's somewhat reliant upon the general market but ~$2.75 might bring buyers?
DeleteGold mining shares (especially the 'juniors-' GDXJ) are often characterized as 'the last to leave the dance floor' (signaling an end to the party in risk assets), and also occasionally as the 'the first to complete a top prior to a bear market.'
ReplyDeletePersonally, I think there's too much bearish sentiment for a major (>5%) drop this fall, but a 'significant' correction between now and Thanksgiving may be on the table. The divergence this morning between the rally in European bourses and US indexes v the drop in gold prices/gold mining shares is likely to be won by gold. It's too early to tell, and I have no bets either way. But odds favor a red close.
http://www.marketwatch.com/story/rolling-stones-announce-new-tour-2012-10-15?link=MW_home_latest_news
ReplyDeleteNLY - Still moving against longs.
ReplyDeletefio tanking.
ReplyDeleteYep, the $32 level proved too much. Considering we've got "maybe another year before the next crash comes" then why concentrate on getting long as opposed to getting short at/near the top instead?
DeleteMITK pullback could be viewed as just one in a series of higher lows since May.
ReplyDeleteAnyone know of a good source of info on US convertible bonds? I've done well with some of these in Canada and wanted to take a look at U.S. ones.
ReplyDeleteI don't, sorry.
DeleteGMO - Holy-moly.......
ReplyDeleteBB- You've done well with buy-and-hold for over 3 years. Today's rally might be a selling opportunity? Just sayin'...
ReplyDeleteJust sold at $3.53 1K shares of my GMO (out of 7K shares I have).
ReplyDeleteCP -- any ideas what is driving the GMO rally today?
I suppose a delayed reaction to progress concerning the environmental impact statement in addition to momo players jumping in.
DeleteLong term I think it's gonna happen but there are contractual penalties for delayed permitting which I don't know how to evaluate.
How much are the penalties? If they are on the order of $1M, then it is peanuts in comparison with the cashflow they'll get once their mine gets going, so they can just borrow a little more now to cover those penalties...
DeleteThe details are buried in the Posco and Hanlong contracts somewhere, and some of them have been renegotiated over the past couple of years.
DeleteI was unable to determine the level of detail to my satisfaction, aside from determining the clauses would in fact trigger due to the delays experienced in the permitting process.
These involved considerable amounts best I could tell, not just $1M or so.
I have a better question: what's up with ANR being up so much today, with UNG down big time and BTU being also down? Is it up only because I sold it last week?
ReplyDeleteSame thing happened to me with AGO, stopped out at $13.90 Friday
DeleteOne more down day for SLV and it will meet its 50-day MA. Supposedly, buying an uptrend when it comes back to kiss its moving average is not a bad entry...
ReplyDeletethe market ain't crashing. all we have done over the past month is trade sideways digesting a move from 1,260 to 1,470. that's very bullish. look at the amount we gave back: 23.6% of the gains.
ReplyDeletein my opinion the economy continues to gradually improve with housing affordability providing a ton of support for this economy. in many areas its cheaper, and even significantly cheaper, to own than rent. with home ownership comes many expenses that stimulate the economy.
of course i'm entitled to change my opinion at any time
Yes true, currently we're not crashing. I'm just trying to PLAN AHE
DeleteAD.
It appears both Hussman and Cara do have similar expectations though, that's my point:
Cara - "To sum up my thoughts after going through the data and the indications for global QE, I think the market Bull has another year to run, with about +15% capital growth likely before the Great Reflation becomes the Great Collapse."
A lot can happen in a year. Take the 15% and decide in a year if you want to sell.
DeleteHow uncommon is it to see that 15% in lass than 24 hours? More common than I'd like to think.
DeleteS - Today's big Japanese investor also has a large position in Zynga?
ReplyDelete2nd, the way I trade is to look at each individual stock and buy if I think it is cheap and prospects are good and sell when it is getting fair value to expensive. If I look through the list of stocks I currently own, I am pretty happy with their upside potential and risk level. I got a few that I'm thinking about selling as they have gone up or their business is not doing as well as I thought, but I would redeploy that money pretty quickly as I still see lots to buy (I would wait for pullbacks).
ReplyDeleteI've done a lot of trading to try and time the market and have lost money and have pretty much given up on trying.
I also have no real issues with holding stocks through a 25% pullback if I think it will do well long term.
I am in agreement with TOF that the economy gradually improves, due in large part to improved housing. I think we see a long, multi-year bull market as things improve for years. People can say we've had a poor recovery from the 2009 lows and that is true, but in my mind, that leaves more potential for growth over the next few years and few excesses in the system that need a recession to wipe out.
2013 could be an interesting year and it is hard to call the overall market. I could see high-market cap tech stocks like AAPL and AMZN pullback, but financials do very well, thereby offsetting each other in the broad indexes, but giving the opportunity to make good money in the right stocks. I still think there are lots of good opportunities in financials.
DeleteBB Canada -- I have converged to your style of investing as well. Almost all of my portfolio is concentrated in AUMN right now, and at $4.50 I feel that it is *unbelievably* cheap. It has a market cap of $170M, $50M in cash, no debt, at least 500M oz of AgEq in the ground and a mine that will produce at least 2M oz of AgEq between the summer of 2013 and that of 2014 at the cost of $15/oz (for a total cashflow of at least $50M, given my expectations of gold/silver prices going forward).
DeleteThe market seems to be very myopic now, valuing stocks only based on the 1-year forward EPS (sometimes even 1 quarter EPS). Until the summer of 2013 AUMN will not make much money. But during that summer, we know that the myopic market participants will be valuing the stock based on the expected 1-year cashflow until the summer of 2014, and that valuation will be MUCH higher than the one they are giving to AUMN right now (since cashflow over the next year will be minimal). So we know that in one year from now AUMN should be MUCH higher.
Then, by late 2014, AUMN is expected to increase its production to 4M oz of AgEq annually at the cost of $7/oz. So that will give AUMN another HUGE up year between the summer 2013 and 2014. Hopefully in late 2014 the market participants will also realize that the 500M oz of AgEq that AUMN has in the ground (for which it is getting NO credit now) can be extracted with a cash profit of at least $40/oz (given my expectation of silver prices after 2014), which will mean that AUMN has another $20B in cashflow coming to them -- the company can easily have a total market cap of $2B at that point, which will be a 10X jump in the share price over the next 2 years... Let's just hope that the Great Collapse that Bill is predicting won't happen until I am able to sell my AUMN at 10X the current price...
And, unfortunately, you never know when the market will decide when the price of a stock will get upgraded, so you have to just hold on take it when it comes.
DeleteGot it wrong. No positions, no worries, and no interest in being long at this point.
ReplyDeleteApparently Lagarde wants to address negative feedback loops and thus, supports delaying of European Austerity:
ReplyDeletehttp://www.imf.org/external/np/sec/pr/2012/pr12391.htm
But isn't this just an admission of reality which we already has predicted?
$AONE enter waiver pact. Expects be in default under certain of its material debt agreements, may need BK protection
ReplyDeleteTheir batteries are out of juice?
DeleteYou wouldn't know it by the sounds of the press, but:
ReplyDeleteIt's very, very early but 38 S&P 500 companies have reported earnings so far and 27 have beaten estimates.
Contrary to Hussman, here is one of the guys I read who is positive:
ReplyDeleteIt gets back to the same old discipline of looking at what history tells us it means. Looking at past instances in which our model saw Psychology at P3, Monetary at M2, and Valuation at V1, in the next 12 months, the S&P 500 experienced a median return of about 19.86%, with 86.7% of returns positive. Also, for the same time period, the minimum return for the S&P 500 has been -2.61%.
=> So, how can Hussman call it one of the worst times of the last 100 years to invest, yet this person (http://blog.haysadvisory.com/) who has been investing for over 40 years, says we have a +20% year in front of us with very low odds of a negative return? Even is he was cautious, I could buy it, but so negative makes no sense to me.
I bet studies are written when this is over about how CAPE fails during times of financial crisis.
These guys use different forecasting models...
Delete"Significant changes in the growth rate of money supply, even small ones, impact the financial markets first. Then, they impact changes in the real economy, usually in six to nine months, but in a range of three to 18 months. Usually in about two years in the US, they correlate with changes in the rate of inflation or deflation." -Milton Friedman
ReplyDeleteDebating CAPE.
ReplyDeletehttp://www.nytimes.com/2012/10/14/your-money/debating-cape-a-10-year-prism-for-valuing-stocks.html?_r=1
Thanks CC - hadn't seen that and it is good people are starting to think about CAPE a little more intelligently than just blindly following. Interesting that all those quoted in the article are reasonably bullish, even using CAPE.
DeleteHere's the thing I think - if you had bought the S&P at the bottom in 2002, you'd have double the money as investing in Hussman Strategic Growth. The only time Hussman was ahead was during the depths of the 2009 crash. That's a pretty heavy price to pay for less volatility. I think at this point in the market cycle, you can read Hussman to understand his point of view, but he is not helping you to make any money.
AAPL, GOOG, AMZN all red?
ReplyDeleteINTC is running.
DeleteCSTR - Is there something wrong with this one? If there is, I don't know what it is.
ReplyDeleteWPRT - Hmmm....
NSPH - LOL, why is it I always manage to own the stock that participates in the downside but not the upside days?
ReplyDeleteAUMN - Looks like a good day to buy, perhaps especially if you think Romney will win the election. Based on the news that Reps have committed to a panel to investigate bringing back the gold standard.
ReplyDeleteThey desperately need Ron Paul voters, so they will say anything. I notice you use the word "investigate".
DeleteDoes anyone really think the gold standard would have prevented the systemic bank credit crisis or made it easier to recover from it? A debt crisis is a debt crisis.
"Does anyone really think the gold standard would have prevented the systemic bank credit crisis or made it easier to recover from it? A debt crisis is a debt crisis."
DeleteI believe elimination of the gold standard provided the banking industry license to socialize their losses.
Yeah, I really believe they cannot be honest enough to bring back the gold standard by making the currency convertible.
We've had massive debt crisis when we had a gold standard. It's never stopped the banks from F'ing us over before.
Deletehttp://www.ritholtz.com/blog/2012/10/reinhart-rogoff-explain-everything/
http://www.bloomberg.com/news/2012-10-15/sorry-u-s-recoveries-really-aren-t-different.html
Got to run. Placing 30,000 stink bombs on NSPH in the low 2.90's.
ReplyDeleteALU - OMG, I see this thing went all they way to $1 today!
ReplyDeleteXPP - Nice breakout, huh?
ReplyDeleteBTW CP, nice trade on INTC if you got in at 21.40 something.
ReplyDeletePicked up a little more YRCW today at $6.9 and $6.8. Pissed about not buying YOKU. I think that one could go on a nice BIDU-like run over the next few years.
ReplyDeleteBTW I bought the iPhone 5 over the weekend. It's really a tremendous little machine. As fast as my computer. Huge upgrade over the Droid but that's probably in large part due to the LTE network.
ReplyDeleteCool, maybe someday I'll break down and get one of them.
DeleteMy wife has the iphone 4 and I have the dual-core Motorola Droid 2 and even that iphone was a much more responsive device than my Android - the rotate, camera, etc. all are faster. her keyboard is better. her GPS is more accurate (my gives me an extra 10% on runtracker). her battery lasts longer.
DeleteThe big advantage to the android is the Google integration, especially google maps and the talking GPS, and better environment control.
First time I've seen decent sized orders go through on YRCW in a while.
ReplyDeleteMET on a nice run today up over 4% on news - could be just due to rates maybe starting to rise, but still at 60% of book and P/E of 6. Hopefully this is the real move this time and gets it up to the $50's.
ReplyDeleteThat's a relief, I was freaking out over what looked like an H&S on that one.
DeleteMy stupid broker doesn't even have a rating on MET, pretty sad commentary.
DeleteStrange what brokerages do sometimes - MET is a top 100 stock company.
DeleteAnother great day at CNBC - they've got Wilbur Ross on talking about Nat Gas opportunities in China (something noone knows much about and a potential great investment opportunity) and they cut him short so Maria Bartiroma can talk about her phone call with Vicrim Pandit leaving Citi. Talk about beating a topic to death - he quit, they've got a new CEO, move on.
BB - I basically have stopped listening to CNBC for that reason alone. I'll tune into Lose Money Fast show from time to time to see what the emotional traders are saying just to get a sense of the sentiment of traders but that's it.
DeleteNSPH - Well, maybe this SOB will finally return to it's channel???......
ReplyDeleteI'm not counting on it!
PAL - When it rains, it pours.
ReplyDeleteAAPL - Looks like TOF's iphone purchase lit a fire under this one!
ReplyDeleteJust sold 1K more shares of GMO at $3.76 -- raising cash in order to buy more AUMN...
ReplyDeletePlaced a buy limit order for AUMN 10 April $2.50 calls at $1.80.
DeleteBB - I basically have stopped listening to CNBC for that reason alone. I'll tune into Lose Money Fast show from time to time to see what the emotional traders are saying just to get a sense of the sentiment of traders but that's it.
ReplyDeletePAL - I guess that's the bottom, but it's not low enough for me.
ReplyDeletedid u buy NSPH?
DeleteNah, I didn't add. I wanted to see a $2 handle.
DeleteDipped my toe in NLY during yesterday's panic, though.
Market still isn't putting in new highs, rates were up today so I guess that's relief for NLY.
AONE traded at $0.06 today, lead balloon.
i keep watching FIG. really like that one.
DeleteOpened UNG @ 22.20
ReplyDeleteinteresting. just drew a trend line off the april lows through the bottoms for /ng. that should have been used to trade the bottom a month or so ago. the trend line extends to around $2.90 right now.
DeleteTOF,
ReplyDeletewish now I had looked closer at AIG when you suggested it. Saw a writeup from the Value Investing Congress (http://www.valuewalk.com/2012/10/glenn-tongue-presenting-2-time-arbitrage-ideas-at-vic-2012-live/) and have done some more digging and it's not as messy as I thought and better value than I thought.
Will put it on my watch list to try and get on a pullback, but it does seem like the story is becoming better known, so we probably won't get this (like AMNF!).
BB - Take a look at YRCW man. It's another really hated stock but there are some glimmers of hope that could make it a huge turnaround story.
DeleteI looked at YRCW some after reading your posts.
DeleteDo you think they've turned the corner? I could easily see them going bankrupt, but if the economy continues along and they've actually done the right things, there's huge upside leverage. They've got negative equity and huge debt, but losses are decreasing, so the turn could be close.
Kind of reminds me of WNC back when it was under $1.00 in 2009.
BB - I believe they're close to turning the quarter. The first quarter of operating profits in over 4 years is a start. The company is massive so I'd have to imagine that with the right team in charge, which I think they have, there is at least a chance they can find enough fat to cut and enough ways to make a profit. At a $50 Million valuation and with at least a slim shot of a turnaround, I think the upside could be huge. when you look at WNC / SIRI / LVS / BONT etc in terms of what also looked like a crushing amount of debt and losses each one of those turnarounds started with a return to operating profits. We shall see. I think the risk reward is pretty tremendous. Scary but tremendous. Would like to see another round of insider buying like they had in August.
Deleteturning the corner that is.
Deletehttp://www.zerohedge.com/news/2012-10-16/equity-traders-longest-2008-will-history-repeat
ReplyDeleteAfter verifying a very tight relationship between net long position of small speculators in silver futures and the subsequent return in silver prices, I would take the current COT data point (about net long position of small speculators in S&P futures) very seriously if I were investing in S&P...
sorry i just can't take anything on ZH seriously.
DeleteWe can't sell off until after AAPL fails to recapture the 50SMA!
DeleteNLY - Announces buyback:
ReplyDeletehttp://blogs.barrons.com/incomeinvesting/2012/10/16/annaly-announces-1-5-bln-share-repurchase/?mod=yahoobarrons
Another turnaround: CPSS. Look at those awful financials.
ReplyDeletehttp://financials.morningstar.com/income-statement/is.html?t=CPSS®ion=USA&culture=en-US
4 Years of huge losses, negative equity. Stock is now up 5 fold from bottom.
FSLR broke above it's 200 DMA today
ReplyDeleteAdded small positions in TZA/QID @ 14.87/28.03
ReplyDeletenew post
ReplyDelete