Saturday, June 8, 2013
The 15,000 mile service
The DJIA managed to close the week above 15,000, with most other global indexes bouncing off one-month lows as well. But let's take the portfolio in for a multi-point inspection.
(a) Long-term Treasurys (TLT) closed at 52-wk lows. The asset class traditionally used to safeguard portfolios is coming apart at the seams. I prefer seatbelts and airbags composed of legal tender.
(b) SLV closed at a 52-wk low. GLD is barely 2% above its own nadir. An asset class meant to protect against erosion via inflation has itself taken a beating. We can get by without rust-proofing in this environment.
(c) What about the turbocharger under the hood? Hey, emerging markets have done nothing but suck the oxygen out of my portfolio.
(d) Japan even tried using ethanol to boost performance, but a dramatic +23% spike in the Nikkei unraveled with a -20% crash.
(e) Real estate? A +50% rally in homebuilders over the past year appears to be unwinding: http://finance.yahoo.com/echarts?s=xhb#symbol=xhb;range=1y;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;
Until the indexes retreat to lower elevations, I plan to park in cash with short trips to the market only when necessary.
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Isn't reality the opposite of what sheep are led to believe?
ReplyDeleteAnyway, our references are always so chart dependent.... Assuming we practice to deceive, shouldn't we also take into account observations outside from charts?
ReplyDeleteVery clever and well written bro.
ReplyDeletePAL - Notice the May gap down was closed...
ReplyDeleteWe've all been waiting years for bonds to tank, and it looks like they are, and we're not going to do anything right? Just checking.
ReplyDeleteIf we were interested in shorting bonds, then why weren't we having this discussion at recent highs?
Deletebring up a five year chart for TBT. There is plenty of time. It reached a new 52wk high intraday today and has a hell of along way to go.
DeleteFD: position in TBT. Gotta buy a long ass basing chart. Jessie nails this one.
If this were a stock you would be all over it.
I think I understand the concept, but do you short something just because it's at new highs, or do you wait for the trigger? I think the argument could be made coming off of 132 for the TLT down to 112 today, but we were seeing some caution in the indices at new highs too, so I'll bet everyone was asking the same question....where do we go for safety and yield? I suspect the Fed's continuing purchase of T's and MB securities had something to do with that deer in the headlights look on traders faces. I'm pretty sure that has been their intent.
DeleteDrive down PM's, don't let bonds get away up or down, and let equities take care of themselves. They've completely F'ed up anything resembling a free market.
Today's open was $69.87, I still don't see anything wrong with buying TBT at recent lows, seems to me that's where risk is lowest.
Delete"do you short something just because it's at new highs, or do you wait for the trigger?"
DeleteTo answer that, I think it depends on the circumstances. To illustrate the concept: Oil for instance at $200 is a pretty safe short and T's at twice face value would qualify as well.
Triggers can be false, traps are set everyday. It's said the FED owns a large percentage of T's, could be they're planning on taking a hit as part of their helicopter program, so yeah, maybe someday but a new 52wk high doesn't tell me much or give me any especially warm fuzzy feelings, more like a caution warning than anything.
As far as TBT goes, it's going to zero on a longer time horizon so can't just buy and hold till the day of reckoning (TOG is a nebulous concept).
As much as I admire Dianne Fienstein, it's time for her to go. Just saying.
ReplyDeleteInteresting analysis of the extremes we are seeing now in COT reports on gold futures:
ReplyDeletehttp://www.zealllc.com/2013/congfut3.htm
Some comments on a possible way ahead ...
ReplyDeletehttp://www.thewavetrading.com/2013/06/09/weekly-analysis-0609/
RKUS- Not exactly the ruckus the were hoping for. Looking into it. The product seems first rate.
ReplyDeleteMaybe we can catch a move in this one, we missed a big move in ORBC
DeleteCPST too. Which reports tomorrow.
DeleteHa, ha, wouldn't it be funny to make your year on something like CPST?
DeleteSame old stuff....
ReplyDelete"WARNING! HOUSING BUBBLE! SELL NOW!"
"This disparity is going to be resolved via significant losses for assets including utilities (XLU), consumer staples (XLP), health-care stocks (XLV), real estate investment trusts (IYR), and telecommunications shares (IYZ)."
Healthcare stocks, huh? Okay bring BMY back to me beatchez! I won't hold my breath.
"Buy gold!"
Oh please, umm, isn't gold trading at 2x pre-crisis range and silver, 1.6x pre-crisis range? What about the 5yr lows, eh, no chance of a retest? Sure.....
One real estate investment trust I know, is trading at a 33% discount from 2011 prices, and 12% off 5yr lows, not at three year highs LOL
Who's BS is this, gold bugs, Tea Partiers, Republicans? Republicans will say anything to advance their agenda, they're so clueless they haven't even caught on that we've figured this out.
Telecom - VZ has it going with their fiber network. Not saying it can't trade down but there's no reason it wouldn't become buyable if it were to, the company has the right stuff. Comcast ain't no slouch either, IMO.
Buy gold if you must, but it sure sounds like the same old promotion as last month and the month prior.
GDXJ/SLW et. all are kinda forming the right should of the inverted variety.
ReplyDeleteAre you referring to the one that projects GDXJ to $14.xx, or another IH&S?
DeleteCECO- That sure is a well formed handle.
ReplyDeleteThen again MUX was flagging nicely too until Friday.
ReplyDeleteCould just be coming back to test the 50SMA.
Deletehttp://www.finviz.com/quote.ashx?t=mux&ty=c&ta=1&p=d
ALDW - One heck of a juicy dividend, must be too good to be true.
ReplyDeleteVE - Pretty well defined channel going back to Nov., just tested the 50SMA at the bottom of channel.
ReplyDeleteOn Jesse's missive....
ReplyDeleteI was having this discussion with my brother as he was putting the stop on FGP just before the recent dividend payment. (He bought at 15.25, yes, that was my call). What do you do when you have rising interest rates, bonds off the highs but not at the lows, indices at new highs, the Fed jawboning exiting T's and mortgage backed paper, and gold and silver driven down to 2011 levels? Which one has to give? If you squeeze a balloon it has to go somewhere.
Maybe commodities are the new store of value? The problem is they don't pay a yield and old folks want yield. It will take time for CD's, MM's and savings accounts to get there. I don't see how "investors" are going to bail on div payers unless it's wholesale slaughter. Then again, the street always finds a way to do just that. Along that line, still a lot of pressure to sell reverse mortgages, I suspect there is a long way to go on RE, even with higher rates.
The street wins that game. They buy at 1.5-2%, hold while the market is driven to a frenzy while renting, then sell into the highs. Same for reverse mortgages.
Last night's missive was definitely negative real estate investment trusts, so to say something like "I suspect there is a long way to go on RE, even with higher rates.", one could claim "he saw it coming" several months from now.
DeleteLet's set the expectation clearly up front, whatever happened to plain language, can we have some of that please?
I'm not making definitive statements because emotions will rule the markets and that is as definitive as it gets. If the street is buying Re at very low rates outright and through reverse mortgages, then there is a reason.
DeleteCan interest rates go lower? Not likely so draw your own conclusions. It's pretty plain.
RE trusts and other interest rate sensitive investments are going to decline as rates and yields rise. It isn't rocket surgery. I don't care what the fundamentals are, they won't matter. I agree with what was written. The fundamentals may be great but you have to live through three years of down prices to have it matter.
If interest rates and easy money drives markets higher, then interest rates and tight money will also drive them lower. In the age of us old folks, yield is king.
Jeeze... just shoot me.
ReplyDeleteRAD - Bull flag after bull flag, followed by yet another bull flag.
ReplyDeleteOwned it a couple of years ago. Seemed like it was well-positioned to be a good turnaround story. If they are starting to execute well (and I haven't looked), could be lots of upside in this.
DeleteIf you look at multi-yeat charts, bonds have had a huge bull market for 30 years, commodities have had a huge bull market the last 12 years, emerging markets up huge for the last 10+ years. Even countries like Canada with our commodity focus have done well the last 12 years.
ReplyDeleteWhat really hasn't done much is mature, non-commodity stock markets like the U.S. which have gone up and down, but are still pretty much where they were in 2000.
Even though things like bonds and commodities have come down, I think markets like the U.S. and Europe are still relatively much, much cheaper and where you want to be.
I think the long term chart of bonds has to revert. It was driven to extremes by outside forces, not really fundamentals, so the reversion to the mean, once the outside force is gone or reduced, will happen faster than if it were a fundamental reason than simple demand for credit/money.
DeleteThat alone will have a huge impact. You may be right in that the companies that have stockpiled huge sums of cash won't need to borrow and so they may be in great positions, but that doesn't protect the interest rate sensitive sectors overall.
Ceco picked up on the 2.97 dip with a auto order in the que. Sold at 3.15.
ReplyDeleteRinse repeat.
Eagle will probably hit my stop loss today.
We really need a high conviction big bet on this board to ride for the buy and hold port the rest of 2013.
DeleteThought it was gold and miners in early 2013....got that wrong. Cash is getting moldy.
I'm going with FMD on the high conviction bet. As far as big goes I have issues buying anything near highs, tends to ruffle my blood in the streets feathers.
DeleteBought 1/3 position in WLT at 15.20 Friday, 2/3 position for net loss at 15.60 today.
ReplyDeletestill holding 1/3 position from much higher prices.
Sold more REDF today in 2.8X for lunch money,
A few stocks that I own or am interested in:
ReplyDeleteFMD
REDF
CECO
DRAM
ACTS
EGLE
All of these have fundamental reasons and catalysts to move much higher. I would consider all of them to potentially be buy and holds for several months to a year. I think FMD is probably the one with the best long term buy and hold characteristics just because the securitization market will take some time to play out. The comments by the CEO on the last CC are incredibly bullish though.
TBT - I like the setup but I just think there are better ways to play potentially rising interest rates. I believe energy and tech stocks do best in a rising rate environment. Of course, the latter is skewed by the biggest bull market of all time but individual stocks in sectors that outperform with rising rates in my opinion would do much much much better than just shorting treasurys. It's all about trying to figure out what will outperform the most. I think too many people focus on being right/smart.
FD: I bought DRAM this morning at $3.83. Was only able to get 6700 shares before it took off but it's enough skin in the game to watch this potential 10 bagger. DRAM prices have risen 70% in the past 5 months. This put in a very powerful initial thrust higher off a huge downtrend on very very heavy volume. I did a screen for these over the weekend and this one stuck out as the best out there. They recently expanded upon a deal with AMD that got the stock moving a month ago.
DeleteThis is an extremely low float, volatile stock but I did a quick calc of what a 70% improvement in prices would do to EPS and it would result in EPS of $0.30 to $0.40 a quarter. Not bad for a $3-$4 stock. If that happens it could be in the $20's on a momentum rally.
Another one that came up in my screen was ACRI. Not as high conviction on this one but it's a potential multi-bagger.
Sorry $3.833367 avg. WTF. I bought a few chunks of 600 shares around $3.75 and then bought like 5k shares around $3.88. Very tough stock to get in.
DeleteI don't think there is any doubt interest rates have to revert. As a position of the port I think TBT at $68 with the potential for the former $300 is a low risk play. Of course I'm going to have higher volatility picks that may well outperform TBT, but it's an ultrashort (2X) so a potential four or five bagger is fine with me. I don't need to be right on a call, I just need to make $$$. I can't take any credit for the short bond call, but it is likely to happen for the reasons Jesse cites. The first being, it isn't expected right away. The chart is suggesting it is sooner rather than later.
DeleteGGB - This commodity producer has gone off the cliff. Are Chinese government owned entities supplying the world with iron ore from Mongolia, or what?
ReplyDeleteLOL, let's not set expectations too high, we're still accumulating:
ReplyDelete"Mortgage Finance Industry: Difficult May, but June could reverse trend.
May 30, 2013"
DANG is taking off again.
ReplyDeleteThis one will beat TBT by a lot. Another 5 bagger?
i'm still kicking myself for choosing REDF over DANG a month ago. I'm in REDF at $2.94, not horrible, but could have been in DANG at $4. Yikes!
DeleteAlthough I do believe REDF has as much justification for going higher as DANG.
DeleteSLM - If they're splitting off the government backed division, which is in runoff over the next 15 years, from the private student loan division, its important to keep this bigger picture idea in mind:
ReplyDeleteSallie Mae Bank which does the loans has about $10 billion in assets and they expect to originate $3 to $4 billion a year going forward. This was stated publicly. It's hard to get to that number on that asset base. The only way they can get to it is with securitizations.
FMD's CEO stated that the securitization market has basically come roaring back. The cost of funding and the returns on securitizations are light years better than they were in 2008 and significantly improved since this time last year. Each securitization trust has multiple tranches on it: each tranche comes with varying risks. The subordinated tranche is the tranche with the most risk because the payments consist primarily of interest and not principal until later down the road. So investors are lower on the totem pole in terms of repayment.
The subordinated tranches at SLM were done at LIBOR + 120 bp per the FMD conference call last month. This compares with LIBOR + 1300 at the height of the crisis but its still above the LIBOR + 30 bp pre crisis. The trend, however, is clearly in the right direction.
And more importantly is the timing of this split. Clearly SLM has to have confidence that the securitization market is back to do the split now and to make comments that they expect to originate $3 to 4 billion annually on an asset base of $10 billion. Additionally, they have to have confidence that the private loan market is going to be growing over time. From the articles that I've read, the default rate on loans backed by the government are significantly higher than the rates issued by private lenders. If that's the case then the pressure to expand the private market and move the risk away from taxpayers will only grow over time.
The only issue I have with FMD right now is their asset base needs to expand significantly for the stock to go multiples higher. I think FMD will need a combination of the following to occur for them to be successful:
(1) increased lending partners - CEO stated on last conference call "Well, that's a forward-looking statement, Ann. But I will tell you that we have found that the pipeline conversations have been extraordinarily active of late."
(2) tap into securitization market - CEO: "We believe that the private student loan asset-backed securities markets appears healthier now than at any point since 2007. In both primary and secondary markets, bonds are being placed and traded with increased certainty".
(3) continued expense management - expenses were down 14% y-o-y last quarter and net operating cash usage went down 36% y-o-y.
(4) cross sell their services (loan management, etc) into credit unions, a growing source of private student loans - they purchased Cology in 2H2012 which gives them a toehold into 200+ credit unions.
Robot - Just noticed this thing flipped long Friday at 1633, forgot to check this till now.
ReplyDeleteMM still looks good.
ReplyDeleteLooks likely Feb gap down is destined for closure, at least.
DeleteRENN looks awesome too.
ReplyDeleteTBT bowtied on 5/15 and is breaking out this AM. Free air until about $86 where there is some overhead from March 2012. Should be interesting to see what it does if the market turns down.
ReplyDeleteSeems 1639 is the current line in the sand for S&P.
DeleteSOSDD, this sounds familiar don't it?
Delete"QE Quicksand Puts Bernanke in a Corner, Says PIMCOs Gross"
Added a little more DRAM at $3.7. Want to have a small chunk to sock away in the event it does a 10 bagger move. Basically it's a lottery pick with much better risk-reward.
ReplyDeleteI like the chart. A little overhead from last year but it can work through that. I bought a small position for S&G's.
Deleteyeah if you look at the volume above $5 last year it's about 150k shares. I give it about 3 more weeks before it makes another run, if it does. If DRAM prices continue to remain elevated, and it seems they will, then this could take off. Shares outstanding have only gone up about 20% since 2007 and yet the stock is down from $25ish. Revenues are roughly the same as they were back then. If the DRAM price increases stick just the perception of that alone should get momentum traders in the stock.
DeleteTaking off for awhile should be back by mid July. Good Luck to all in their trading and life.
ReplyDeleteHere's a take of the current view from Carter Worth. Unfortunately it comes out scrambled and cannot fix it. You will just have to work thru it if interested. Peace!
T
he big question in all quarters heard from
is whether or not t
he selloff
is
over
?
Is the
11
-
session
, 5.27%
decline
from
the high of
1687.18 on Wednesday, May 22
nd
to
the
low of 1598.23 last Thursday
,
June 6
th
...
from which we
ricocheted
dramatically
and
continued higher
on Friday
...
is
that it? Is the selloff
over?
There are, of course, many ways to
approach
the question and today's piece attempts to answer it three
ways.
The first
simply is to look at precedent... to look at the cold hard data relating to all past corrections in the
market greater than 5% to determine the odds and probabilities that the current
5.27%
selloff is at an end
.
A
nd by this
approach
, the answer is no,
it is
unlikely that the selloff is over. Indeed, history shows that the
median 5%+ correction since 1927 actually
is
-
8.31% while the mean 5%+ correction is
-
12.21
%
. There
have
been
206 correction of 5% or greater
since 1927 and data is what it is.
O
nce you'
re down more than
5% you end up going down f
urther, more often than not.
And then there's the matter of duration. The
current 5.27% selloff was/is
11
sessions. A mere two weeks
in the making
. By comparison, the median 5%+
correction since 1927 unfolded
over 23 days while the mean 5%+ correction took 4
2
days to run its course.
(Please see these data points and others relating to past 5%+ corrections beginning on page
2.
)
The second
way
to answer the question
is to look at the chart of the market its
elf, the chart of the S&P 500...
and by this measure, one
could
make a credible case that the selloff
is
over (
and many market participants
no doubt will
be
mak
ing
just this argument).
B
y our work,
however, by our analysis of
the
chart of the
S&
P
500, the selloff
likely
is
not
over.
(
Please
see discussion beginning on page
8.
)
The third
way
to determine whether the selloff is over is the bottoms up approach... the examination of
several thousand individual chart patterns. And by our work
, the ci
rcumstance of
great damage done
to
many market leaders
juxtaposed against
the
circumstance of
no damage
done
whatsoever
to other market
leaders renders t
h
e current selloff "incomplete"
...
and therefore likely
not
at an end
.
(Please see discussion
beginning on page
9
).
The remainder of
today's
report consists of
a BUY
List (141 names)
and
a
SELL
L
ist
(135 names) selected
from
the 2,500 stocks composing our regular weekend universe. And on the last page
of
the report, page
1
9, you will find an
update of the AAPL/SPX "duel" featured each week since late January.
Trade well,
-
Carter
Damn, t3d. That was a difficult read.
DeleteDidn't even try.
DeleteNot that hard IMO, selloff likely incomplete is what I took away from it.
DeletePz, I'll take that moldy cash off your hands!
ReplyDeletei gave some away with last weeks f ups all on my own.
DeleteSo did I, dammit.
DeleteTLT (long term Treasurys) continue to trend lower. EEM (emerging markets) off another -1.25% (taking losses immediately was the correct move). EWJ (Japan) up another +1% (so buying the +4% move on Friday, as difficult as that would have been, is unexpectedly being rewarded> a typical ‘market move’). And Brazil, for the same reason, is barely above water today. There are no ‘easy’ trades. No positions right now.
ReplyDeleteRight O'....nothing easy. I'm going with the trend, that's as 'not difficult' as we can hope for.
Delete"So what do we do? It's good to see the market continuing to bounce. We still don't know for sure if it is just bouncing or if it is resuming its longer-term trend. This doesn't mean you can't trade it. As I have been preaching, you want to err on the side of the longer-term trend. This is especially true with the major indices only 1-2% off of their old highs. There are some caveats though. Waiting for entries will help to keep you out of new trouble if the market turns back down. And, stops on existing positions will help to mitigate losses if that occurs. I wouldn't completely eliminate the short side just yet. I think areas such as the REITs might continue to implode. Just make sure you wait for entries there too. Again, letting the ebb and flow ebb of money and position management help to keep you on the right side of the market. And once again: It is not difficult. Notice I said "not difficult" and not easy."
fmd @ 1.20 waited a good a few days for a 1.19....never happened. I caved in. Now it can dip below.
ReplyDeleteGood luck Pz. Definitely a trading stock at the moment.
DeletePUT A SECOND ORDER FOR 1.09.
DeleteCC - http://www.bloomberg.com/news/2013-04-24/chip-shortage-looms-as-samsung-courts-rival-to-fill-orders-tech.html?cmpid=yhoo
ReplyDeletepertains to DRAM
Feast to famine. Wonder if they're including these outsourced devices into a single package and calling it system on chip, or if they're really separate on PCB? The industry should be moving to system on chip(single die) but heck they really seem to have hit the wall concerning device shrinks. Instead it remains multi-core(multiple die) and even separate DRAM, eh?
DeleteSide note: I'm not sure anymore how copper integration worked out either, or whether it was worth the trouble but a tiny bit of copper in the wrong place can kill the entire line b/c Cu ions are highly mobile.
Heck, I didn't realize INTC has adopted TSMC's business model.....
Deletehttp://www.businessweek.com/articles/2013-03-14/intel-takes-on-chip-production-king-taiwan-semiconductor
Going to try some TBT @ 69.75. Been a long time since I traded it.
ReplyDeleteI have a suspicion we revisit something under 1333 and it proves to be a buying op, unless we've already topped and are returning to the abyss.
ReplyDeletegold or s&p?
DeleteI was thinking S&P 1333 then up, truth is it's all a mystery to me anymore.
Delete1333? - LOL, I meant 1633.....
Deletenew post
ReplyDelete