Saturday, October 19, 2013
10/19/13 Compared To What
http://www.youtube.com/watch?v=hRONbnyNpu8
Once in awhile, I look back and ask where I'd be had I taken the 'other road.' At the end of Q2 (June 28) I transitioned to a La-Z-Boy portfolio> equal percentages in VXTMX/ITOT (total US stock market) + VGTSX/IXUS (total international stock market) + VIPSX/TIP (inflation-protected securities). I opened these positions following the overnight plunge in global markets on June 24.
As of October 18, the La-Z-Boy is up +7.3%. Not bad!
I hopped off the La-Z-Boy following what felt like a blow-off top on July 11, for a gain of +2.85%. The markets did in fact go on to correct twice (late August and early October), but in neither instance did I feel compelled to buy in. Instead, I traded a mix of commodities + stocks + bonds for a net gain of just +0.3% over the next three months. Total gain since the end of Q2 = +3.15%. So I 'gave up' 50% of potential gains by taking the other road.
That's OK.
Looking ahead, I'm not going to argue with the new highs being hit on above-average volume. So I don't plan to short. On the other hand, (a) I think current sentiment is unsustainably high, (b) insider sales spiked last week (http://online.barrons.com/public/page/9_0210-instrans.html), and (c) with yields heading south, bond traders don't appear to concur with stock traders.
The plan? If stocks correct, I'll look for opportunities on the long side. Should bonds pull back, I'll be looking for another ride on the long bond.
Gold? It's hard to ride that bronco, but if I had to guess, then despite another high-volume rally last Thursday, the sector continues its multi-year slide. That probably means I'll be wrong. But having side-stepped a -60% ride down, I don't really mind missing a rally.
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Carpon Bubble:
ReplyDeletehttp://finance.yahoo.com/blogs/daily-ticker/al-gore-carbon-bubble-going-burst-avoid-oil-121707563.html
Carpon...Is that a car sold cheap on Groupon?
DeleteSkimmed the article. Do you believe it?
Is there any reason why we shouldn't believe it? Personally, I don't see it and even if there was more carbon in the atmosphere, there are other greenhouse gasses that are more persistent, others are higher volume, such as water vapor trails from aircraft and steam driven turbines.
DeleteJust b/c I don't see it doesn't mean it's not true, what probably counts most is which direction the market takes and which side of the trade we're on?
There is no other atmospheric gas that will acidify and destroy ocean fisheries though. The threat of global climate change involves more than temperature, it is also a chemistry problem. We are already seeing ocean acidification due to high levels of carbon dioxide.
DeleteWell I guess I'm just stupid then, eh? Isn't CO2 in the ocean naturally, and doesn't the concentration vary with temperature, depth, and current? It's not unthinkable to me that CO2 concentrations in ocean water don't vary depending on conditions, the earth is billions of years old, not thousands of years, certainly CO2 seawater concentrations have been as high or higher at some other period in history?
DeleteI'm not trying to say concentrations aren't rising as a result of human activity, it would make sense considering man is increasing fossil fuel consumption and the result is certainly increased CO2 emissions. But hell, why is so much gas still just flared into the atmosphere, why not start implementing some restrictions there too, and how about some emphasis on conservation? Why is it we're consistently spoon fed only part of the story, always the part someone wants us to consider?
I'm not saying anyone is stupid. Yes, there is and has always been CO2 in ocean water, the sea is afterall, the largest buffer of atmospheric carbon, but there is also a limited supply of calcium carbonate to buffer atmospheric CO2 concentrations without using the content of shells and corals which form the foundation of the fisheries and seal life. This is just basic chemistry. There have been historic cycles in CO2 but those also correspond with similar cycles in, and destruction of, coral reefs and the small arthropods that form the basis of the oceanic food chain. In addition, rising sea levels will put additional pressure on corals that rely on sunlight for their existence. As to the remainder of your response, I couldn't agree more.
Delete"Why is it we're consistently spoon fed only part of the story, always the part someone wants us to consider?" Exactly. That's why I brought up ocean acidification. The conversation people seem to concentrate on is "global warming" "climate change" while in the meantime something easily verifiable (and perhaps of greater importance) is ignored.
DeleteRight, so what's it gonna be...... Fossil fuels, wind, solar, nuclear? Looks like emerging markets are going for fossil fuels but that's going to have to change. Wind and solar can only take us so far, converting sunlight is a long slow process and wind is well, there's not enuff wind here today to power my heat pump no matter how large the propeller.
DeleteSo nuclear, modular reactors, like those FLR is working on, these are similar to those used on US aircraft carriers and are self-regulating by my understanding, they shut down when cooling supply is inadequate.
I have a pretty strong comprehension of chemistry and engineering IMO, so no worries there.
I think it will have to be a combination of centralized and decentralized clean sources. As usual there will be attendant risks of some of these. Batteries can have issues for example. Wind is going to be much better where pump up hydro is a possibility over wind for immediate use. Centralized solar via the grid is fine but there is a hell of a lot of roof space that is under utilized. The fight there is of course profit. The powers that be don't want to promote something they can't meter, or worse, that get's metered back to them. Some business models will be broken in this process. Small nukes will have to play a part, but they will have the usual issues of waste storage, etc. So in the long run I envision a variety of solutions. One that is clearly needed is efficiency of currently produced power. We have MORE than enough power currently, we are wasting vast sums of what we produce through inefficiency. We have to find a way to monetize that.
DeleteI am aware that the overwhelming bulk of my gains in the third quarter were made sitting in the La-Z-Boy. I think we have an unexpectedly 'interesting' Q4. By that, I mean a few of the underperforming hedge funds will be repositioning and/or chasing in vain attempts to reach presentable performance numbers. I think they pull out the stops.
ReplyDeleteOne way to play it might be the VIX.
DeleteThere are an entire slew of stocks out there which have doubled, and others which have taken major hits based on illogical, inexplicable, unproven fear.
DeleteSilver and gold seem like dead money as the global corporate story resumes making the world spin, developed markets and emerging markets, these corporations will be there.
The thing about 'looking back' is to look back and then move on. It's no different than what we all do in every other part of our lives. Look back and move on.
ReplyDeleteI still like bonds here.
You know what? I'm starting to look at IBM as well.
$160 to $164 looks good.
DeleteWouldn't be surprised to see a lot of hedge funds chasing this market given their drastic underperformance this year. This could drive a melt-up type market where every 1%-2% pullback gets bought and we have a very strong Q4.
ReplyDeletePlus with seasonality being good and the fact that markets which are strong through Q3 tend to have a strong Q4 all bode well for a strong finish.
That's a good possibility. I've been thinking about European banks and how that subject might impact the market.
DeleteOn the road today. Hope it's a good one for y'all.
ReplyDeleteDo any of you guys follow IRM? They are the paper storage company that has evolved into a data management company. They have huge storage facilities where they warehouse huge racks for data storage and are trying to become a REIT. They are arguing that since the racks are permanent fixtures within real estate that it is part of the building and should qualify them as a REIT. There is a lot of skepticism about it which is why the stock is depressed. If they are granted REIT status from the IRS then they should be able to pay a dividend of around $2.00ish based on FFO accounting rules. This would result in a dividend yield of at least 8%. Additionally the stock would jump to the mid $30's at least.
ReplyDeleteMy old boss is a tax partner at a big 4 firm and he said they will get approved as a REIT. Just curious if any of you guys follow it.
Nope, but it's a really long process isn't it? I know it was for WY, but that's a huge one.
DeleteThere's expectation of a ruling by the end of the end of year. How long did it take for WY? Did they win?
DeleteI think once they went 'public' with the process, it took 2 years.
DeleteAnyone notice how the Chinese internet stocks are clearly going through a 1999 style meltup?
ReplyDeleteQIHU
YY
VIPS
SINA
YOKU
CTRP
NQ
and many more
These are all up huge over the past 10 days. Huge. 25% or so in a many cases. Valuations are not insane. Could we see a massive blowoff top in these? I wouldn't be shocked to see this happen over a period of several months.
China seems to be getting popular again. Still holding SORL. Tempting to sell, but only reason is because it has doubled since start of August. Fundamentally and valuation wise, still worth holding. If it was a bigger position though, I'd probably trim.
DeleteI mean even REDF is going off!
DeleteI noticed SORL earlier. Looks excellent. When did you first start buying that?
I bought SORL back when David recommended it back in January, 2012 for $2.46. Had some chances to sell earlier this year in the high $3's, but fortunately resisted. I' m thinking of a target of $8.
DeleteYRCW- Thought a lot about this one today. I actually pulled over and sold it at 12.40ish. I saw the 10% owner sale on Friday and there wasn't a huge reaction. I guess that's what moved it today. I didn't want to hold through earnings anyway. Thankfully it was only 4K shares.
ReplyDeleteHey CP, looks like CCL is making the turn. $33.48 today.
ReplyDeleteYeah man, NICE! I'm really happy about it too! :) Thanks, BB!
Delete(a) The long bond did indeed pull back (RYGBX -0.41%).
ReplyDelete(b) Miners, however, continued to rally (+2%).
(c) The indexes closed mixed (DJIA negative, NDQ/SPX positive).
(d) JCP sold off another -8% to 6.42. I closed my latest position this morning @ 6.77 before hitting the road. The stock actually hit a low of 6.27 in the afternoon! I don't waste time debating 'fair' value, as any price at which a buyer and seller agree to exchange shares is considered by both to be fair at that point in time.
Still thinking about IBM. It's one of Buffett's largest holdings, and the company's latest revenue miss has the stock trading at Buffett's average purchase price: http://www.forbes.com/sites/gurufocus/2013/10/21/2711/
EMC- This one never goes anywhere does it?
ReplyDeleteLooks like a miss on earnings from EMC this morning, even with their majority owned VMware doing so well.
DeleteSeems like pretty much all the traditional, enterprise tech stocks are getting hurt these days.
Cloud computing and mobile shift is causing real industry changes. If companies are in the cloud, how much EMC high-end storage do companies need?
WHR - Earnings pretty decent, eh? Any interest here?
ReplyDeleteNLY - Back to $12 almost, ARR shooting up. Guess ARR got away from me.......
ReplyDelete1800 - Looks like we may arrive soon, possibly by today's close?
ReplyDeleteVMW - Big day there too, such a weird stock.........
ReplyDeleteBlow off top, at least IMO. Money rushes in from the sidelines, shorts get squeezed, and performance anxiety + greed run rampant. Those of you in the La-Z-Boy, enjoy the ride! One ETF that appears reasonably priced at this juncture is VXX, which tracks short-term futures on an underlying volatility index (VIX).
ReplyDeleteCautiously opened a position @ 12.81.
DeleteOff 13.
DeleteNot bad considering it's about .40 from the 52wk low.
DeleteSold RH. +8%
ReplyDeleteNice!
DeleteNQ @ 22.71.
ReplyDeleteOff 23.21.
DeleteIn case you're wondering, it was RevShark's stock of the week. He was waiting for an entry around 24. I had it on the watch list and just happened to see it plunge.
DeleteANGO - Yet another good day.
ReplyDeleteWonder if this one can double from here?
DeleteCouple of good charts from Mebane Faber which show
ReplyDelete1. Why broad markets could fall, but stockpickers could still do fine
2. Perhaps why guys like Hussman think the market is so overvalued, even though we can find lots of stocks to buy
http://www.mebanefaber.com/2013/10/21/the-dividend-challenge/
http://www.mebanefaber.com/2013/10/10/the-biggest-problem-with-buy-and-hold/
Tempting to short some of these high-yielder ETF's, but I lost a lot of money trying to short the financials in 2005 / 2006, so am cautious about timing this better.
DeleteIn that case and ignoring the possibility that overvalued can become more overvalued, (assuming US is fairly valued) how about Indonesia (IDX)?
DeleteVIG is a high payer? It's less than the 10yr, so I'm not connecting the dots....
DeleteIt invests in high-yielding stocks.
DeleteDon't know anything about Indonesia.
Right, I get that part but it escapes me as to why a company or group of companies wouldn't be capable of outperforming 10yr T yields.......?
DeleteWhat about nuclear power?
ReplyDeleteAA - This one has clearly broken out........
ReplyDeleteUp almost 10% since earnings and lots of room to go higher.
DeleteGold - Up strongly, this is driving me nuts.......
ReplyDelete1741 - This is the level to short, assuming today is a reversal day.
ReplyDeleteJNPR - Reports in AH, looks like.
ReplyDeleteIDX - Needs to retake 25.15, not happening. NVDA not joining in today's party either, I'm getting a toppy sensation since we really don't know what the FED's plans are, can't we expect the market will use this worn-out excuse again to justify taking profits? Or the Jan budget negotiation, will Grover Norquist's TEA PARTY try to scare us all again once more for their personal gain?
ReplyDeleteAA looking awesome. I'm always tempted to sell when I'm up but I'm going to try my best to hold it for the longer term.
ReplyDeletePNRA earnings after the close. I really really want to hold through earnings but I'm 99% sure I will bail as usual.
Screw it...sold at $164.3
DeleteReally tempting to sell AA up 18% in like 2 weeks.
DeleteThat's a crazy move for a stock like that. Might want to.
DeleteCould do a partial sell and put the rest away and not look at for a year.
DeleteIt's built a 2 year base, so if it really is breaking out, could go a very long way.
If you look at the very long chart for AA, it was in a pretty solid uptrend for around 30 years, going from under $1.00 in 1972 to $40 in 2008. And that period covered both the commodity bear and bull cycles, so it show the ability to make money under any conditions and conditions do seem to be building for a good aluminum pricing market.
AA - Looking like a delayed earnings reaction, sheesh!
ReplyDelete02-Oct-13 Downgrade Deutsche Bag Bank Hold → Sell $9 → $5.50
DeleteCould be the new wheel news or the Russian joint venture too.
DeleteI tend to think it's the alloy, the internal combustion engine famously was improved once silica/alumiunum alloys were announced, big time improvement. New alloy announcements are/can be big news, and an advantage when it comes to a company that has R&D capability or the ability to acquire technology.
DeleteSCTY - Well, this one also began moving again, haven't heard anything about it in quite some time so I decided to take a look.......
ReplyDelete