Saturday, July 6, 2013
07/06/13 I Can See For Miles
I think what trips up strategists like John Hussman is the inherent 'illogic' in crowd behavior. He is correct in using historical comparisons (it's difficult to fight human nature, and traders take advantage of predictable emotional responses), but only to the extent that history repeats in broad strokes. Within each swath, however, there is often serious distortion.
Right now, I think the market 'wants' to move up. It will continue to move up until a majority of investors are fully invested. At that point, the market will have no choice but to move down. Institutional investors (according to TSMIGCM) are little more than 'half in.' http://www.minyanville.com/business-news/markets/articles/The-Smartest-Man-in-Global-Capital/6/27/2013/id/50567?page=full
Individual investors? I'm not sure, but anecdotally I seriously doubt they're anywhere close to being 'all in.'
Don't let Hussman deceive you. We're still miles away from 'fully invested.'
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I agree. No way individual/retail is all in. Not even close...However, I kinda wonder if they ever will be again. And if not, what should we shift that percentage to?
ReplyDeleteMom and pop won't ever have the trust for Wall street again. Not sure what the percent would be, but maybe 70%?
DeleteThat's exactly what TSMIGCM mentioned in his concluding remarks:
Delete'I stated in my last missive that the major US brokerages had approximately 40-42% of total private banking assets invested in equity securities (versus 70% in the '80s-'90s). At mid-year 2013, some of those brokerages report aggregate equity allocations in the range of 52-58%; therefore, the "wealth effect" of higher equity prices is more prevalent now than it was six months ago. Of course, the opposite holds true as well. We need -- and we will (in my view) -- get higher equity prices by year's end.'
Of course, 70% is an average. I would imagine that in 1999 the number was much higher (no way you could be a brokerage and not be chasing the NDQ at that point). For individual investors, the percentages would have been much higher by the late nineties, as self-directed trading using discount brokers and day trading really began to take off.
I love contemplating the psychology/sentiment of investors since in my opinion this is at the heart of what investing is all about. Whether it's trading an individual stock or the market as a whole, you have to know not only your own sentiment but that of other traders/investors. I can spend hours at a time looking very closely at charts and trying to visualize the sentiment of traders at each moment of time, usually my own personal experience as a guide.
DeleteIt's my concern still that there are fairly high odds that we will see one more sizeable pullback some time over the next year or two before we move to a new mega bull market within the next few years. I'm probably 70-30 tilted toward us seeing 1,700 to 1,800 first. The only reason I put 30% odds on this happening is I'm using history as a guide. Major trading ranges after new bull market tops all took at least 16 years...we're in year 13:
1906 to 1925 - 19 years
1929 to 1956 - 27 years
1966 to 1982 - 16 years
2000 to 2013 - 13 years
It's too small of a sample size to put much merit in it, though, which is why I'm keeping it at 30%. There's a solid chance we do continue higher and the investing public gets swooped up again. In reading "The Money Game" the writer mentions several times about the skepticism caused by the Great Depression that kept the investing public out of markets for 25+ years. Same with books and articles you read from the 80's. I don't think the skepticism is high enough just yet. It's close but there are still a good deal of people playing the markets. That's why I think a small part of me sees one more bear market coming.
There's no doubt in my mind. You're probably correct in targeting 1700 to 1800, maybe within the next twelve months. At that point I would suggest taking some/all off the table. A correction will likely enuse- then, and only then, would it make sense to plow money back in for a multi-year hold.
DeleteFox in the hen house???
ReplyDeleteGOLDEN, Colo., June 27, 2013 /PRNewswire/ -- Golden Minerals Company (NYSE MKT: AUMN; TSX: AUM) ("Golden Minerals" or "the Company") is pleased to announce the appointment of Andrew Pullar, Chief Executive Officer and a Director of The Sentient Group, to serve on the Company's Board of Directors effective July 1, 2013. Mr. Pullar has over 20 years of experience in the mining industry including previous senior investment management positions with Sentient and other fund managers and investment funds, as well as mining engineering and production experience at De Beers and Gold Fields in South Africa. Sentient is the Company's largest stockholder holding approximately 19.9% of the Company's outstanding common stock.
Got to do something to protect their investment. Hopefully they can make something happen.
DeleteSFO plane crash
ReplyDeletehttps://www.facebook.com/sheryl/posts/10152997724435177
http://www.sfgate.com/bayarea/article/South-Korean-passenger-jet-crashes-at-SFO-4650259.php
DeleteI personally think Husman's biggest failure was placing far too much reliance on the 10 years earning metric - CAPE. But also, statistics can Tell you anything you want And I think he was looking for negative.
ReplyDeleteWhen Buffet said buy in 2008 for the first time in 25 years, It was because he recognized the market as being dramatically undervalued. Sometimes. A computer misses that.
The other thing I find is that pretty much everyone I talk to is buying dividend paying stocks - telcos, pipelines, utilities, banks, etc. without putting much thought into the risk. I'm sure a lot of people had a rough June and Q2, so it will be interesting to see if this changes. But I do think many of these high-yields are still over valued and you are better to look in other areas.
ReplyDeleteAlso, in Canada at least, still a big focus on commodities. The commodity stock run peaked in 2007, so you have to be going elsewhere to outperform. That is why a lot of people I know are down this year, even with the SPY up 15%.
So, to summarize, I think you see a pullback in dividend payors and a rise in small/non-dividend stocks. This could mean the overall indexes like the s&p 500 go down as the high-yielders are overrepresented in here, but lots of opportunites to buy still.
One other thing - ECRI still saying the US economy is in recession. Interesting that this organization, which claims never to have called a recession wrong before, appears to be wrong this time.
ReplyDeleteMaybe they are using the same data as Hussman?
The hardest part about educated guesses for a living is admitting you're wrong. The fear is that people will perceive you as being uneducated.
DeleteWhat's happened to the sis? Used to be the gal next door, now she's selling what she has. I wouldn't recommend paying up unless you practice 'safe trade' each and every time. I see too many with acquired portfolio deficiency syndrome.
ReplyDelete"now she's selling what she has."
DeleteNo longer the nimpho next door?
Incomplete thesis' aren't worth paying for.
"$1.3 trillion into bond funds past 7 years. Only 2% ($32B) left in June. $611 billion out of stock funds 07-12. Only 1% came back in '13."
ReplyDeletehttp://stocktwits.com/RyanDetrick
"Barron's A mid-June survey of 1k Charles Schwab customers showed nearly one in five has moved money into cash over the past three months. And just 49% think it's a good time to invest in the stock market.
DeleteBarron's Bank of America Merrill Lynch tracks the suggested allocation to stocks at Wall Street firms and while that target recently ticked up to a 13-month high near 49.8%, it's still well below the long-term average of between 60% and 65%."
http://stocktwits.com/RyanDetrick
If you read Buffet's stuff, it is history repeating itself. From his 1979 Forbes article:
DeleteIn 1972, when the Dow earned $67.11, or 11% on beginning book value of 607, it closed the year selling at 1,020, and pension managers couldn’t buy stocks fast enough. Purchases of equities in 1972 were 105% of net funds available (i.e., bonds were sold), a record except for the 122% of the even more buoyant prior year. This two-year stampede increased the equity portion of total pension assets from 61% to 74%–an all-time record that coincided nicely with a record-high price for the Dow. The more investment managers paid for stocks, the better they felt about them.
And then the market went into a tailspin in 1973-74. Although the Dow earned $99.04 in 1974, or 14% on beginning book value of 690, it finished the year selling at 616. A bargain? Alas, such bargain prices produced panic rather than purchases; only 21% of net investable funds went into equities that year, a 25-year record low. The proportion of equities held by private noninsured pension plans fell to 54% of net assets, a full 20-point drop from the level deemed appropriate when the Dow was 400 points higher.
SFO - Boeing 777 crashes... From the short blurb I heard didn't sound good, "managed to recover flight recorder".
ReplyDeleteAlso they made it sound like airspeed was insufficient to make runway, I guess this plane landed in the bay?
TSLA - BACML says - "We continue to view TSLAs current $120 share price as overvalued and maintain our $39 PO. We estimate that a $120 share price implies over 321K vehicle sales in 2020, which appears optimistic."
ReplyDeleteLINE - Buy
ReplyDeleteFMD - $1.29 Interesting, huh?
ReplyDeleteMe thinks we go up, kinda looks that way. So is this real?
$1.29 - Thought I saw this print, maybe not though according to high of day. Sorry for false alarm.
DeleteI have 1.27.
DeleteNo, you don't! ;)
DeleteWLT - "Miles and miles" or "Is this the end"?
ReplyDeleteOkay, I'm nearly prepared for the regularly scheduled offending insult and attack on long positions.
ReplyDeleteFMD off @ 1.40.
ReplyDeleteNicely done Mark,
Delete30% move for you huh? nice entry/exit.
DeleteSomeone is a believer. That was a huge volume spike! May have to reacces my buy back for completion of the position. Held the remaining....hoping I dont regret selling it in the 1.4X area.
ReplyDeletenot selling rather
ReplyDeleteI really want to see GRPN pull back. I've completely changed my opinion of this company longer term and think it has a ton of room to the upside. I think at $3 it was like buying AMZN in 2002.
ReplyDeleteCECO killing it.
ReplyDeleteno coubt. keep missing fills by pennies
DeleteSold my KNDI at $4.91. Position was tiny so it was basically a bored trade. Will bounce really hard when it does.
ReplyDeletei got hoodwinked!
DeleteKNDI - What a fine girl.
DeleteWow AMNF really took off this year huh? Another microcap I've liked for a while is BKJ. Great little regional bank with regular divvy + special div they pay every yr that amts in total to around 4%. insiders just continue to buy small chunks every month or so for a few years.
ReplyDeleteDumped the FMD at 1.36.
ReplyDeleteAdded CHCSP @ 32.10
MLER - I dunno guys, does a 20% lower market cap on 740 shares traded indicate the sky car might not be all the rage?
ReplyDeleteFMD - PNF objective changed to $1.97
ReplyDeletehttp://stockcharts.com/def/servlet/SharpChartv05.ServletDriver?chart=fmd,pepmdanrbr&pnf=y
GRPN - the next Amazon? I'm not so sure. They've got to do a lot of things right.
ReplyDeleteIf I wanted to play a stock like that, I think TRIP is better positioned with stronger customer lockin.
But, I haven't really looked into GRPN, it just seems to be an easy to replicate business model, whereas TRIP has a real network effect where more users increase the value, driving more users, etc.
Gold/silver - Look at them taunting us, do they really think we're gonna bite?
ReplyDeleteWLT - The volume finally returned, those volume spikes from last month seem to have slowed the descent.
ReplyDeleteMUX- Kinda strange today.
ReplyDeleteSheesh... Cowen Starts SLW @ market preform. PT 15.96
ReplyDeleteis that worse than market perform?
DeleteKiss my ask.
DeleteSCO - Boing?
ReplyDeleteWhere the good jobs are - my daughter just got back from Calgary. Her husband is 24, took a 2 year college course on how to fix machines and is making $150K per year. In Calgary, not way up in the oil sands. My daughters friend gets paid $20 per hour to babysit one 3 yearold child.
ReplyDeleteGuess you can see why the Alberta/Dakotas/Texas economies are doing well.
"fix machines and is making $150K per year."
DeleteSounds good to me, some of that can be heavy work but his pay seems very good to me. Hopefully he likes it.
VE - Looks like this one MIGHT finally begin moving...?
ReplyDeleteFMD - Yesterday's move was associated with an SA-Pro article?
ReplyDeleteSLM - This one might be poised for a big move as well?
DeleteAEG - This one's been kicking butt too.
ReplyDeleteMark, you planning on getting in at some point?
I don't follow this one. What is it?
DeleteAegon NV insurance
DeletePIE - The market has made mincemeat out of this one, that can't continue much longer, can it?
ReplyDeletehttp://www.tradingcommentary.com/the-good-the-bad-and-the-ugly/
ReplyDeletehttps://www.youtube.com/watch?feature=player_embedded&v=y7Kg_H1dGqI
NWLI, still my largest holding, breaking solidly through the $200 mark today.
ReplyDeleteBut on along term basis, still, very cheap:
http://www.gurufocus.com/chart/NWLI#&serie=,,id:pb,s:NWLI
NIce charting feature at gurufocus now where you can plot price and metrics on the same chart - definitely take a look!
Darn, it only let me run 3 charts and now wants to charge me.
DeleteToo bad, is a great feature. Anyone know of anything similar for free?
This site is buggy as hell. It has two "severe warning signs" and three medium warning signs that appear to be linked to this stock and when you look at them they are for First Solar.
DeleteI thought I was looking at National Western Life?
Is p/b price to book?
OH! I see, they want to CHARGE me to see the warnings and the First Solar warnings are their example.
DeleteWell heck and dang, how are those warnings working for ya? Sure, FSLR has pulled back like everything else, but it's tripled in the last year. Give me more of those warning stocks if that's what they are looking at.
P/B is price to book. The great thing about NWLI here is it is breaking through $200 which is a round number resistance and also where it stopped back in 2009 / 2010, but it is still as cheap as it has been in its history (other than the last couple years) on a P/B basis which is how insurance companies get valued. So, it really doesn't have to do anything to move upwards at this point other than have the market revalue it, which it is in the process of doing to all insurance companies.
Deletelooks awesome man. i thought for a second i was looking at the chart of YRCW. speaking of which...friggin A.
DeleteTITN/WLT - Short covering, I guess. What a dish of BS the market insists on serving, WTF...
ReplyDeleteFMD - Based on previous other breakouts, seems like the next couple of days might offer an opportunity to add.
ReplyDeleteNSPH - Wonder if Hitachi will offer a buyout?
ReplyDeleteJapan is moving to restart nuclear reactors (10 of the 48 offline)?
ReplyDeleteHXM - Will the short covering ever begin, or has this company gone over the deep end?
ReplyDeleteBB - Sorry meant to get back to you on GRPN. The more I think about their business, the more value I see in the tens of millions of users on their site. They're rapidly expanding into a retail presence and are going to be the go to provider of liquidation services for every major business in my opinion. I envision them being able to offer a platform similar to the Amazon marketplace for vendors of overstock products, whereby they can get a cut of every sale. There's a lot of power in their business model in my opinion. I missed the boat on this one but I think it still has a ton of long term value.
ReplyDeleteAnother 12 points, eh? Not sure where the ugly went but there's not much doubt in my mind it hasn't gone away for good. Just sucking in a new batch in preparation for the regularly scheduled fleecings as index's continue their ascent.
ReplyDeleteCSTR is now Outerwall (OUTR)? Just get with the program and call yourselves Redbox.
ReplyDeleteat some point in this bull cycle they will price this at 20x EPS and it will trade in the triple digits. i know, i know DVD's are going away.
Deleteoops gotta go. just got a text ad for the latest redbox rentals.
I still like the redbox model, myself. You were bashing it last week.....???
Deletei was? no man i love it.
DeleteYou posted a question asking why you wasted time contemplating a POS DVD rental business model......
Deleteoh no i was just kidding cuz i think Jesse was bagging on me for buying it when it was like $40 in 2011. it actually held up well during that crash over the summer. i like the business. it's dirt cheap.
DeleteBKS - Bankrupt soon, or turning the page?
ReplyDeletenew post
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