Thursday, June 20, 2013
06/20/13 Teetering
Australia, Japan, and South Korea off -2%. China and Hong Kong -2.8%. Indonesia -3.7%. France, Germany, and the UK currently off -2.5%. Spot gold opens in London @ 1293/oz! Spot silver 19.81 (remember when it hit 50 last fall?). GDX (miners) back to levels last seen during the 2008 crash. TLT (Long-term Treasurys) bidding with a 109 handle (a 2-year low). Yet the DJIA/SPX remain within spitting distance of all-time highs.
But it's only 3 am pst. I've seen red skies in Asia/Europe launch massive rallies in US markets, and hopefully we see one today. If not, it won't bode well.
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In my opinion, here's what happened yesterday:
ReplyDelete1. The valuation tool for assets was changed. Asset returns will now be measured against a higher risk-free rate, so bonds,etc. will continue downward, but everything will be valued differently.
2. The measuring stick for assets, being the US dollar, went up, pushing everything else down in US $'s. One of the advantages I have as a non-American is I see things from a more global perspective. Sure the US Market was down 1.4% yesterday, but the US $ was up around 2% in Canadian dollars, so I actually made money as measured in Canadian $'s. Pretty sure it was the same for most other countries.
3. The risk of a major negative event was lowered (eg. runaway inflation), so the price of insurance, meaning PMs and to some degree other commodities, went down.
Could take a couple of weeks for the market to digest this, but I really see this as a buying opportunity as the reason for this is the economy is improving and will continue to do so (or they won't stop QE) and the improving economy will drive higher prices.
My personal guess on timeframes is that the market gets this figured out fairly quickly and the upward trend resumes in July. If I was going to worry, I think the major risk time will be in the traditional Sept/Oct.
This assessment is reasonable, IMO.
DeleteWake me up once the silliness is baked in.
>Things do seem to be improving in Europe and could be an area of outperformance going forward. Expectations are certainly low there. I own 4 European stocks and would add to ING if we get a pullback:
ReplyDeleteING Bank (ING)
Iberdrola Power (IBDRY)
Unilever (UL)
FLy Airplane Leasing (FLY)
Eurozone flash manufacturing PMI edged up to a 16-month high of 48.7 in June from 48.3 in May and vs consensus of 48.6; services 48.6 vs 47.2 and 47.5; composite index 48.9 vs 47.7 and 48.1; manufacturing output 48.9 vs 47.7 in May. While business activity contracted, says Markit, "there are reassuring signs that the downturn is continuing to ease" across the eurozone. GDP is likely to have again shrunk in Q2, but "the region could stabilize in the third quarter and return to growth in the fourth quarter."
Proof of concept> Had I not cut losses immediately on EEM/RYWVX, I'd be in Wonderland. As in wondering wtf happened to discipline.
ReplyDeleteGlad I hit the stop yesterday in DANG...saved me big $
DeleteBuying the morning selloff might pay off.
ReplyDeleteBut I don't have the guts.
DeleteYou should have at least played the OGRe.
DeleteThat OGRe didn't last long.
Delete41.75 on the sPXL
ReplyDeleteEEM/PIE/Europe - One of the concerns I have with these is if the currency gains in value, then which way does that impact share price?
ReplyDeleteI expect the euro should rise as Europe recovers(assuming it does).
In the case of miners, it seemed like as the Canadian dollar gained, the share prices fell...
I feel a bit better about equities now that the threat from an $WTIC breakout seems to be subsiding.
Canadian dollar generally trades in the direction of oil and gold, but has been off that track some lately and holding in better due to the strong banks and government position, but this seems to be changing as people start to worry about the Canadian housing market which is estimated to be 50% higher than the US, so more at risk.
DeleteIf you buy Euro stocks now and the Euro recovers, you get a double benefit.
Fairfax Insurance, who are smart, contrarian bottom fishers are buying Greek property:
http://www.reuters.com/article/2013/06/19/eurobank-fairfax-idUSL5N0EV12620130619
"If you buy Euro stocks now and the Euro recovers"
DeleteBy "Euro recovers", I take it you mean the currency.
Greek property - Hmm, yep, I can imagine nearly everything is close to being priced in.
Brandt has made a case for $16.50 silver, I'd probably throw some in the buckboard if it fell below.
ReplyDeleteLife insurer's one one the few green areas today as rising rates help with their reinvestment issues.
ReplyDeleteMost are still cheap on long term valuation basis and I think people see them (most likely correctly) as a way to play rising rates.
Hard part is that they have had quite a good run this year with companies like MET up over 35% YTD.
Wholly molly. I just realized by SNTA filled yesterday @ 3.89.
ReplyDeleteI wonder if Jesse bailed on his GDXJ trade.
Nice, I canceled my SNTA order yesterday b/c I couldn't figure out why I'd placed it (catching a falling knife), Bernanke was about to speak and broad market was weakening.
DeleteI'm just going off all the insider buying. I'll probably hold to long and blow it :)
DeleteOwnership is 13% too. Insider participation is what I like to see, eat your own cooking! ;)
DeleteFMD - Well, here we are at $1.15 as discussed earlier.... Is the business model intact or should FMD consider becoming something else?
ReplyDeleteGot my next purchase pre set at 1.09
DeleteI bought more at $1.15. Definitely feeling queasy about going long but this one is priced for death. Getting to be a very large position for me. My conviction level is pretty high with this one. I could write a book on this business but it boils down to this:
Deletethere are 3 parts to this business:
(1) Offering servicing on loans - i.e., pricing loans, managing payment schedules, etc - to credit unions and banks.
(2) Originating loans and holding them to maturity
(3) Securitizing / offloading the risk of holding the loans to other parties looking for yield.
Part 3 is dead right now and has by far the most upside because when the securitization market is good the capital requirements are low (i.e., there's a lot of leverage to the upside). As I mentioned before there are clear signs of improvement in this market. Just read the comments by the CEO over the past 3 conference calls and look at what FNMA has been able to do with securitizing subordinated bonds (i.e., the riskiest part of the loan). The upside is gargantuan and there's no way in hell this is priced in.
Part 1 and 2 are the boring sides of the business but they're getting closer and closer to breakeven. Look at recent trends in revenues/operating income/loan & deposit growth. Its all there in the financials.
The moves they made over the past 3 years to build out this model after the securitization market collapsed are very smart. First, they bought TMS which services over $1 billion worth of loans, offering payment services and other services. Second, they bought Cology, which is big in the credit union college loan business. this segment of the private student loan (PSL) has grown from 1% to over 7% in just the past couple of years.
With these two businesses and their own origination business they now have a 10% market share in the PSL market. And its my thinking that they bought those two businesses above so that when the securitization market opens up they will have first dibs at helping securitize those loans they are servicing on through TMS and Cology. In my opinion these were brilliant moves.
sorry meant to say "just look at what SLM has been able to do..."
DeleteI WILL buy WY if it gets to 25.64.
ReplyDeleteWe're going to 1580 right?
ReplyDeleteWish I knew the answer to that. Was considering adding to NLY at $12.62 earlier but canceled thinking this could be just another bounce.
Delete1600 - Oops, dipped a little under...
ReplyDeleteIm banking on that 1600 holding for my long day trade here
DeleteRobot flipped short at 1620, he has a bad habit of not taking profits like he should.
DeleteNegligent Robot.... I think he's designed to catch trends, so he'll probably neglect to harvest this gain and flip back long at 1625 or something.
Looking good so far, 1600 long seems to worth a shot here based on prices I see on my screen having lifted off lows and holding.
entered to soon. Was mobile at the time.
DeleteTBT 52 WK high
ReplyDeleteXHB on low of day.
ReplyDeleteIn at 29.60
DeleteTook the SPXL off even. Going with the XHB bet instead.
ReplyDeleteGDP - Rosy FED GDP forecast to a range of +3 to 3.5%
ReplyDeleteChinese liquidity crunch, huh?
Last post regarding FMD - the major concern right now is regulatory:
ReplyDelete(1) what is going to happen with potential discharge of private student loans in bankruptcy that is being proposed?
and
(2) what is going to happen with the interest rates on stafford loans, which are going to reset on July 1.
SLM said they support (1) above so long as the borrower makes an effort to repay. i think this uncertainty is preventing banks from re-entering the PSL market until they know what the regulations will be. this is probably why you don't see FMD signing up partners to offer loans despite the partner pipeline being "extraordinarily active".
So what will be the affect on FMD with that decision....one has to assume the dems will stop the doubling of the rates.
Delete1) I guess those students can't pay or they would, extend the terms and stop interest accrual till they find employment, IRS deductions are forfeited.
Delete2) July 1 is nearly here, thus "extraordinarily active" is certainly one of the terms I'd expect to hear in addition to an extensive list of explicatives. ;) Increased interest only exacerbates the situation, thus some level of compromise will be struck prior to the ending of time and space continuum. ;)
i honestly don't think there is much to worry about with the interest rate resets because the stafford loans have had lower interest rates than private loans for a while so even if the rates were locked in place they wouldn't impact the PSL market.
Deletethe bigger issue is what is going to happen with potential discharge of private student loans in bankruptcy that is being talked about in congress? if this was passed i think the market would initially sell the news on fears that it would kill the private student loan market. FMD's current loan quality is extremely high so there wouldn't be any risk with their current book of business. the risk would lie with whether or not lenders would want to enter the market should this happen. if this is passed there will most likely be strings attached whereby the borrower would have to make many attempts to repay the loans.
however, the impact would be that these loans would be treated no differently than credit card loans which would have to pass through a bankruptcy judge. right now banks refuse to get into the student loan market because of this uncertainty. i think even if this happened the uncertainty would be lifted and banks would get back into it. its counterintuitive, but the market is so huge that financial institutions want to get involved in it. and with increased certainty they would be able to better price in the cost of doing business in this market. and bigger picture, government's role in the student loan market should decrease over time as the default picture is far worse than the private market - default rates are roughly triple the private loan market. the government stepped in to support that market in 2010 but this support will ultimately have to be slowly withdrawn so as to allow the private market to take on more of the risk. anyway, that's my take on this company bigger picture. i think the reason the partnered lending talks that are "extraordinary active" haven't resulted in new partnerships yet is because of this
Anyone else read Cara today?
ReplyDeleteMake it sound like they are happy about the price of gold.
Bet all the people who followed them the last several years wouldn't say the same
I'm glad they're happy, maybe they choke on it.
DeleteGeoff is beginning to sound like Bill did: "It is all coming together according to plan." Didn't he say two weeks ago, when S&P futures first hit 1600 on the way down, that he is smelling a turning point, where equities will start going down and gold will start going up? S&P futures are still at 1600 now, but gold is deep in the toilet... What kind of sick plan is that?
DeleteCheck out the Treasurys (/ZB). Looks like a move down to the March 2012 lows is in exactly where we are: I.e., 135. That would possibly coincide with another test of the 1,600ish area on /es. The weekly RSI_EMA reading is at 21 on /zb which is just above where it bottomed at in December 2010. In fact, in looking back at the RSI_EMA on the weekly chart over the past 10 years – each time there was a reading of 23 or lower there was a bottom within at most 2-3 weeks every single time.
ReplyDeleteSo this would be a logical place for the selloff to stop. I don't know of too many people expecting a bottom here. Most are looking at the 100 DMA or around 1,580. we either stop here or go to the 200 DMA.
Think back on all of the government support programs that ended that were supposed to cause ruin for the markets:
Delete*first time home buyer credit
*cash for clunkers
*bank bailout programs
All of these have been removed, paid in full, and the market and economy are much stronger. Yet the fed supposedly is the linchpin for the past 1,000 S&P points? come on man!
just talking my book of course...alright check you guys later. good luck out there.
DeleteING - Flashing 9.11, how quaint....
ReplyDeleteAs my alter ego was saying>
ReplyDeleteLooking outside. Still raining. Staying inside.
I think Bill's forecast of silver going to $100 in 2013, which he made just before leaving the site, will actually come true. Instead of being ashamed and quitely slipping out of the back door, he should have just changed the units on his forecast and said it was all going according to plan! :)
ReplyDeleteAt least AUMN seems to be leveling out, hope it stays that way.
DeleteOn a more serious note, isn't it curious how the "dumb" money (a crowd of small speculators, who went net short gold first time ever in mid-May) have proved to be smart, and the "smart" money (commercial traders and swap dealers, who reduced their gold shorts in mid-May to a 10-year low) have proved to be dumb?
ReplyDeleteWatching the PM sector now is more shocking and exciting now than watching a magic show in a circus...
Even if something is 100 to 1 odds, it will happen once in a hundred times, so not sure what the odds of this happenning were, but I'd say it was much more that they were lucky than smart.
DeleteAUMN is down 10% so far, but the volume is only 2/3 of the average daily volume! No sellers left? No buyers left to pick up the shares at a 10% discount to yesterday?
ReplyDeleteReally kicking myself on the TBT sale yesterday. I thought if it was going to rocket ship yesterday would have been it....left at the launching pad without the rocket once again. That is why it is good to have a B&H position and a trading position in stocks you have longer term conviction for.
ReplyDeleteThe irony of the situation is that I have 6 puts on SPY with a 156 strike, but they are expiring tomorrow! So unless the market totally crashes tomorrow, they won't be of any use to me...
ReplyDeleteShouldn't higher interest rates lead to a higher inflation?
ReplyDeleteDavid the fed is only letting of the gas....no breaks. LOL
ReplyDeleteThey are not even letting of the gas yet! Didn't FOMC say yesterday that they will keep printing $85B every month? So why are people freaking out?
DeleteBecause they are reading between the lies....I mean lines
DeleteDamn, I wish I'd come up with that line.
DeleteWas pretty good.....lol
DeleteSo both stocks and bonds are down today. What happened with the theory that in this case the money fill flow into commodities???
ReplyDeleteIs ANY asset class up today except $USD?
Deletemakers of custard and exercise machines: GTIM and NLS
DeleteNow's a good time to focus on those stocks holding up well today and over the past month.
ReplyDeleteAnyone going to go long into the close...
ReplyDeleteSold all my B&H port MF's last week. I now have a decent discount to buy up if I want to. Undecided.
SLW down 10%
ReplyDeleteOK, I see the following article at Bloomberg: "Federal Reserve Chairman Ben S. Bernanke will cut the Fed's $85 billion in monthly bond purchases by $20 billion at the Sept. 17-18 policy meeting, according to 44 percent of economists in a Bloomberg survey."
ReplyDeleteDidn't gold & silver start going down the day QE3 was announced? So if gold & silver did not like QE3 in the first place, should it rejoice at the fact that it is ending (because big funds will stop selling gold in order to put that money into S&P)?
How low can the miners go? I'm tempted here. MUX, SLW, GDXJ.....etc, all look tempting
ReplyDeleteDowntown Josh Brown @ReformedBroker 24s
ReplyDeleteThe irony that so many predicted a crash but recommended gold as a defense. It's like ten thousand spoons when all you need is a knife.
How much hate can be left in Gold? I cant believe it is going back to under a 1000
DeleteThey had Tom O'Brien on cnbc an hour or so ago talking 1100 if I heard correctly. With the pressure on EMs too, maybe the buying will really evaporate. It may be 'Broken' for months???
DeleteI'm just glad I neglected to buy PIE.
DeleteDUST...oh my. Stephen Stewart had that one nailed.
ReplyDeletejeez anyone see the move in AMNF lately?
ReplyDeleteTVIX sure looks like an easy trade now. Really wasnt that volatile either and everyone knew this spike was coming.
ReplyDeleteI kept some September VXX calls until I decided that GDX calls will double faster. I made the switch when GDX was at $29...
DeletePutting 20% back to work in B&H with OAKBX
ReplyDeleteGot more FMD at 1.14
ReplyDeleteAMNF - Yeah, it figures.
ReplyDeleteI fell asleep again, more of the same I see so didn't miss much but wish I'd gone short a couple days ago.
SRS was a real winner again.... Banks still have defaulting real estate in their portfolios, or have they passed it all off onto patsies?
sell in may and go away worked yet again this year so far. unbelievable!
ReplyDeleteWell, this year "sell at the END of May" worked well :)
DeleteSell in June and avoid the swoon.
DeleteNOK and GRPN both look strong.
ReplyDeleteGGN - New 52wk low. This one pays a dividend and does move up occasionally, as opposed to some equities that consistently move down.
ReplyDeleteSure can't wait for next week's reports indicating the economy is booming again....
ReplyDeleteGraphene - Looks like they're finally producing those graphene capacitors now, and a few other new and hard to locate items:
ReplyDeletehttp://kalecoauto.com/index.php?main_page=product_info&cPath=8&products_id=21&zenid=udocd3u94k5fgkbkq1amit0k07
Probably the best market navigation device of them all:
ReplyDeletehttp://kalecoauto.com/index.php?main_page=product_info&cPath=11&products_id=38&zenid=udocd3u94k5fgkbkq1amit0k07