Traditional inter-market relationships appear to have entered a turbulent patch this week. However, there is no 'fuzzy math' in human nature- and I derive my entire trading philosophy from an understanding of crowd behavior. Investors haven't changed, so we need to look elsewhere for explanations. Here's my take:
(a) Bond yields have trended lower for six weeks, almost irregardless of market direction. Why? Bond players are smart dudes- they don't buy bonds without a good reason. ATACX fund managers argue that the lower yields presage lower equity prices. Those guys are smart dudes as well, but after notching a +6% lead in late January (a result of a contrarian bet on Treasurys) they've fumbled every trade since (and given back the +6%). My take? With Japanese bonds yielding 0.6% and now German bond yields sprinting lower as well, what's the alternative? US bonds at 2% and change look good!
(b) Are US equities about to resume a 5 1/2 year bull following the latest -5% correction? I doubt it. We're more likely in the midst of a traditional topping process, marked by a series of breakdowns and throwbacks that ultimately take the indexes lower. Friday's sharp plunge (an 'expected' decline for which the Ukraine response was less a 'reason' than an 'excuse') sets up a positive scenario for Monday. Beyond that, I'll take it one day at a time.
I'm positioned for an overnight rally in equities + a retrace in bond yields (ie, a move lower in the long bond). Price movements may on the surface appear to 'stop making sense,' but investor behavior always makes sense.
I agree with your longer term take 2nd. I have been meaning to look at the relationship between Japanese equities and bonds closer after bonds inched down below 2%. Part of me wonders that we could run into some trouble
ReplyDeleteTOF, re your post from yesterday, I know a bunch of guys who made huge money in the 1999 dot-com bubble and pretty much everyone gave it back. One of the hardest things to recognize in investing is that the market goes through cycles and you have 2 choices:
ReplyDelete1. Wait or play small until your style comes back
2. Change your style to match the market
The guys I knew who were super aggressive and made the huge cash were generally not astute enough to recognize the market had changed in 2000 and kept playing aggressively, which of course killed them.
I think 2 of the keys to long term success are:
1. Maintain detailed information and tracking of your results and monitor constantly and if things stop working, take hard look at why. Too many people are haphazard about things and are down 15% before they realize the market has changed.
2. Constantly be questioning things, which you look to be doing a good job of.
2nd,
ReplyDeleteon the other side of this you have Warren Buffett who is saying stay away from bonds:
"Fixed-income assets made up 14 percent of investments at the insurers as of Dec. 31, according to the company’s annual report. The year-end figure has typically been 20 percent to 25 percent since 2002, according to Berkshire documents. The $186.8 billion portfolio included $114.8 billion of stocks."
Sure, his timeframe is longer than most and a 6 week move means nothing to him, but his record on long term calls is very, very good.
Bond managers can be momentum players too and, if you look back at the large money guys like pensions, they have a poor record of being too long at the highs and not long enough at the lows, so I wouldn't place a lot of money on them being right, especially when we seem to have the economy changing for the better and many crosscurrent in the world politics.
Funny, but probably pretty accurate market report:
ReplyDeletehttp://www.fool.com/investing/general/2014/08/12/an-honest-stock-market-update.aspx
From the Globe and Mail (behind paywall):
ReplyDeleteWhat correction? Stocks look attractive, says Richard Bernstein
Sunday, August 17, 2014
TIM SHUFELT
Print this article
The average investor has been diagnosed by many Wall Street watchers as suffering from a bout of complacency, but Richard Bernstein has a second opinion.
The veteran strategist said he sees no signs of the kind of investor behaviour typical of stock bubbles, no stubborn faith in the market despite portents of doom.
On the contrary, volatility has been so low because investors have been consistently cautious, he said.
“We don’t see anybody being aggressive. We can find no investor group that is complacent,” he said. And it’s the prevalence of risk aversion that might actually sustain the bull market and keep a correction at bay.
Mr. Bernstein spent two decades at Merrill Lynch, rising to become chief investment strategist before starting his own investment management firm – Richard Bernstein Advisors – in 2009. He uses a top-down approach to investing, the first step being a broad assessment of the market. And in today’s market, in contrast to the late stages of a market cycle, he still sees fear playing a prominent role.
For individual U.S. investors, there have been 15 straight weeks of outflows from mutual funds. Hedge funds are skewing slightly bearish. Wall Street strategists are recommending going underweight on equities. And, citing a recent Financial Times article, he said institutional investors have reduced their U.S. equity allocation for 11 straight quarters.
He said this is a much healthier bull market than those concurrent with economic booms. “People get lured into booms. They lead people to do silly things that sow the seeds of the next recession.”
Some market observers have become concerned that investors have pushed valuations too high, but Mr. Bernstein sees average price-to-earnings multiples on U.S. stocks as appropriate, given the low level of inflation.
“We’re having a tough time figuring out why we’re in the final minutes of the bull market,” he said. “What really causes bull markets to end is a significant withdrawal of liquidity or deteriorating fundamentals. We don’t have either of those.”
Decidedly bullish on U.S. stocks, Mr. Bernstein has identified industrials as his sector of choice, playing off what he calls an “American industrial renaissance.”
The resurgence of U.S. manufacturing, he said, is predicated not only on the North American energy boom, but on a sector that has made itself leaner and more productive.
To concentrate his exposure to the United States, he favours small and mid-cap manufacturers, rather than larger companies with foreign sources of revenue.
He wants limited exposure to emerging markets, which he sees as stricken by high inflation, excess money growth and, in many countries, “a miserable secular outlook.”
He doesn’t like Europe much right now, either, unimpressed as he is by the European Central Bank’s inaction, despite the threat of deflation and pockets of recession.
His interest in Canada, meanwhile, is limited to his product offerings, having launched a fund this week with Toronto-based Redwood Asset Management.
But Mr. Bernstein doesn’t have much interest in actually investing in Canada, which he sees as a commodity play.
“As the cycle matures, there will be plenty of time to play commodities,” he said. “We don’t think it’s the right part of the cycle to play Canada.” Instead, investors might be wise to wait until later, when credit growth spurs commodity prices, he said.
His bet is on the continuation of the U.S. bull market. Now in its sixth year, many are nervous that the market is overdue for a correction, but the duration of the rally alone doesn’t ensure its demise, he said. Plus, that nervousness has served to deter irrational exuberance and keep valuations in check.
“Yes, it’s up dramatically, and yes, we can have corrections, but we still argue that stocks are at least a reasonably, if not very attractive asset class.”
Good comments guys. Thank you.
ReplyDeleteBeen doing some more thinking. It looks like I was wrong in not buying this last dip as it seems to be rebounding nicely and we are 2.5% up off the lows and have a nice little uptrend in place for the last week. It sill makes sens to me that we continue this bounce for the next few weeks and get above S&P 2000 and get people all excited about the market, then something unexpected/bad happens which causes a Sept/Oct pullback which is buyable for a strong finish into year-end.
ReplyDeleteI think we then finish well above S&P 2000 by year end.
I agree with this BB. It just kinda feels like we're flaring off excess gas until were ready to move higher.
DeleteGood article on credit spreads and equities and how we are at the part of the cycle where credit spreads (the difference between corporate rates and government rates increase), so bond prices go down, but equity prices continue up. I'm not sure if we are fully there yet, but I think we are very close:
ReplyDeletehttp://ftalphaville.ft.com/2014/08/15/1931182/the-leverage-clock-tolls-for-thee/
Global equities took another 16 months to rise 30% in the 1980s Phase 3. They took 32 months to rise 50% in the 1990s version. But Phase 3 in the last cycle was very short. Equities peaked only 4 months and 3% higher after credit spreads bottomed in June 2007.
While equity returns can be healthy in Phase 3, they become increasingly unstable. We have previously noted a close relationship between equity market volatility and credit spreads. As spreads rise, so we would expect the Vix to follow.
Bb regarding Bernstein I think he's a good voice to listen to I just wonder how he views the extraction of $1 trillion a year from the mortgage / treasury market as the fed tapers fully in light of this comment:
ReplyDelete"“We’re having a tough time figuring out why we’re in the final minutes of the bull market,” he said. “What really causes bull markets to end is a significant withdrawal of liquidity or deteriorating fundamentals. We don’t have either of those.”
On the flip side the Chinese Japanese and Europeans are all stimulating and this is the main reason I decided back in March to shift to things impacted favorably by these moves...particularly lately with Chinese equities.
DeleteThe china trade (at least china internets) is getting crowded though as evidenced by the chart of BITA but there's still some really good value in there (leju /ej particularly). I'm warming up to VE and some European stocks like ire as well. I just wonder if we don't go through a 1981 style market where a reduction of $1 trillion worth of fed stimulus doesn't act much like volcker style interest reset hikes, creating tempered enthusiasm and an extended sideways / down market before bulls come back in 2016
DeleteActually that's funny bro. I've also thought the same thing and it's consistant with my previous comment to BB only the time frame is a little longer.
DeleteI also agree we are on the verge of a huge manufacturing revival where higher level blue collar jobs will be.
DeleteI personally don't think the fed tapering is a big deal. They have been cutting back on buying for a long time now and long and short term interest rates are still low. Plus, the Fed is not looking to dump all this paper back on the market, but just let it come off naturally over many years. It seems that interest rates are being driven more by fundamental factors - if you look at Canada for example, which has had no Central Bank buybacks, our interest rates are lower than the US.
DeleteI think the scenario that plays out is we get the manufacturing revival Mark mentioned, and this drives higher wages, which drives higher demand and a virtuous cycle ensues which helps the economy and stock market. Interest rates normalize during this period and the economy absorbs them. Eventually, probably in a few years, maybe not till 2020, these higher wages feeds into higher inflation and which drives rates to the high side and then we see the next stock market bear and recession.
Europe - I'm pretty sure this one is beat down in large part due to concerns over Russia? Subtract out Russia and how does it look? I tend to agree with TOF, seems like when the FED takes the punch bowl away US markets get clobbered?
ReplyDeleteWell, maybe the FED won't really take the punchbowl away like they keep promising?
The US Fed is for sure ending the bond market purchases, but going to try and keep rates low. Europe, on the other hand, may begin a bond purchase program. I think they look at the success the US and the UK have had.
DeleteI think it's a good time to put some money to work in Europe - I purchased that DB recently. A lot of their markets are down 10% for several reasons (Russia, middle east, energy, the economy), so maybe it's the bottom, or maybe not, but if you buy some here and keep some cash in case it goes down further, I think you will do well.
European markets up strongly this morning, wiping out the losses from Friday - not sure what happened (I was at a friends cottage), but if I look at many of the Euro-ETF's like EWG, EWN, EWI, EWQ, they had good-sized moves down, but now appear to be bouncing.
DeleteNWLI up almost 7% in the last 2 days - very weird for a low volume stock which doesn't move much. Maybe we just had a determined buyer or a seller who finished?
ReplyDeleteYes, it appears that is the case, once again! Surprise, surprise! I didn't think that would happen given the long end has fallen, some folks see good risk/reward apparently..
DeleteMark,
ReplyDeleteWe are redoing our kitchen and my wife keeps pushing me to hire a contractor. To me it seems like a straightforward job, no structure changes.
Basically, get an electrician, plumber, fireplace and tile guy. Have the flooring company put in the new floor and the cabinet company do the cabinets and the 4 guys do the rest. Any little tweaking like fixing drywall and moving the central vac I can do myself.
Am I missing something? What would a contractor do above and beyond this?
Thanks
Positive article on BXE - http://seekingalpha.com/article/2425605-bellatrix-exploration-deeply-undervalued-and-likely-to-achieve-significant-price-appreciation
ReplyDeleteShows the great value, plus a lot of comments, so there are people interesed
The action Friday seemed positive, I thought b/c oil gained but perhaps the downside is complete. Want to watch a couple of days and see how she goes.
DeleteDB - I'm considering this one currently, have some PIR and regretting not buying ROLL a week ago. DB seems to have leveled off here.
Ivanhoe Mines lloking for partners for 2 of its 3 major mining projects - http://seekingalpha.com/news/1939865-ivanhoe-mines-hires-banks-in-strategic-review-of-congo-copper-projects
ReplyDeleteI still own this (small position) as a high risk/reward bet on mining.
(a) US indexes gapping up. Unloading RYTNX @ the 1030 am est window.
ReplyDelete(b) TLT off -0.5%. I'll probably unload RYJUX (Rydex Inverse Long Bond) at the close.
(c) UGAZ off @ 14.05 for a +1.3% gain.
I think if US based manufacturing does kick into gear then it will have something to do with cost of energy and hydrocarbon based manufacturing, the increased activity should be good for restaurant chains, small retailers, banks, etc.?
ReplyDeleteThere will be many benefits. I think you want to look at other industry dynamics to determine which is best. For example, the restaurant business seems very competitive now and people are trying to eat healthier, so while an improving economy should be good for restaurants, I think restaurants may be harder than many industries.
DeleteMy personal choices (which work for me, but it's best to figure out ones you can understand and follow) are:
1. Autos - cars are old on average, technology is improving in new cars and people will want to buy with improved incomes
2. Travel - people will want to take more vacations as incomes improve and the air industry is acting rationally and the hotel industry is still underinvesting (I think because the last cycle was very difficult), so occupancy and rates are staying high
3. Energy - I think energy usage increases in general with the economy, but this is also a play on emerging markets
BXE - Needs to hold $6.92 today.
ReplyDeleteDG - Wow, quite a change of heart?
ReplyDeleteToday makes like last week seem like a knockout?
BDI - Up over 1000 now, despite more ships were deployed with the earlier rally from months ago. Surely those ships weren't mothballed yet?
ReplyDeleteMaybe seasonality?
DeletePIR - Turns out I shoulda loaded the boat Friday, now I'm approaching break even on my starter position. Friday's news feed sure seemed FISHY.
ReplyDeleteGEVO - Not looking good, but I think it's ready for a great day real soon.
CIE - Don't forget about this one, wonder if MOG still likes it?
Bought a big stake (almost a 50% position) in GM this morning at $34.15. I figure the stock has bottomed and it should resume its rise back up to the $40's. Valuation is very attractive and you have the support of a smart guy like Buffett buying it up.
ReplyDeleteI sold down my LEJU to around a 9% position but increased EJ up to about 25%. The reason is exactly what we discussed two months ago. EJ's stake in LEJU plus their net cash ($480 MIllion) combines for a total greater than their market cap. They get the upside of the coupons / listing business but are also not binded by a non compete agreement which is laid out in LEJU's IPO filings. This allows they more flexibility to get into things like a Yelp-like local service business that they partnered with SINA on. I think the upside is fine with both but the downside is much more limited than LEJU. And they are trading at 14 times this year's earnings, which are expected to grow 40% next year. The PEG of 0.59 is very low.
RE: The Fed - I never implied that they have had anything to do with rates being lower. In fact, I've always thought they would head lower as the world is saturated with high levels of debt and the demand for more just isn't there. So when they're gone I think there's a chance they head substantially lower - i.e., mid 1's. But I don't really know much about it.
ReplyDeleteI think the bigger issue is the Fed has most likely substantially improved sentiment by traders. I worry about the impact this will have on sentiment as sentiment is what drives valuations. I think the market can survive but I would have to imagine things could get increasingly unstable.
I just realized I bought a bunch of GM in my furniture account and my in-laws account on Friday. Got lucky with both of those. My thinking is this is an ideal time to buy a stock like GM as it is beaten down but the valuation is low. Momentum names are resuming their uptrend but valuations are still very difficult to justify, so if sentiment drops after the Fed is done tapering then those will get hit again. Stocks like GM should weather a storm better as it trades at 8 p/e on next year's earnings and has a sizable dividend. Plus, uncle warren is bullish on it.
ReplyDeleteThe China internet stocks are absolutely en fuego - see BITA (RSI 7 of 95 today). They will most likely lead to higher prices but at some point fairly soon there will be a nasty shakeout. I'd rather be positioned for avoiding that shakeout. I think some areas in that space will be untouched, though...i.e., stocks like EJ/LEJU that have very reasonable valuations due to huge concerns about Chinese real estate.
I like the GM trade. Opening a position @ 34.31.
DeleteI added more as well...$34.31 and $34.35.
DeleteSo a potential 75%+ upside move in a blue chip stock in 12 to 24 months. That's pretty hard to beat. Sure we could get that from a few high flyer / momo stocks but we would be taking on far greater risk, especially in the spectrum of where we are in this bull market cycle.
ReplyDeleteGM - Thumb's up on that idea!
ReplyDeleteDB - Needs to close better than $33.30
I have a tough time understanding these larger financial companies like DB. I understand the thinking behind going long it but have you ever tried to read their 10k? It's nuts man.
DeleteIn the financials area I like IBKC the best. Very simple regional bank business that took huge advantage of the FDIC closings of banks in 2009-2011.
I'm glad you showed us the math, I appreciate that a lot! :)
ReplyDeleteDid anyone hold on to PCRX? That sucker is a beast.
ReplyDeleteX pulling a AA. I suspect we see a similar move to GM at some point.
ReplyDeleteMITK- What a freaking disaster.
ReplyDeleteReopened UGAZ @ 14.03.
ReplyDeleteOk who's going short?
ReplyDeleteI was thinking about how tame this rally has been for a while and sure enough Ryan Detrick put out stats on when the last +2% day was.
Deletehttp://stocktwits.com/message/25865807
214 days. Wouldn't surprise me if tomorrow is the day.
http://www.stockwisedaily.com/american-airlines-group-inc-aal-general-motors-company-gm-citigroup-inc-c-appaloosa-managements-top-holdings/234721/
ReplyDeleteLooks like GM is Tepper's 2nd largest hold at over 6% of his port.
(a) TLT closed at the day's low, off -1%. RYJUX closed up +1%, erasing virtually all of my paper loss on Friday. I cleared the position.
ReplyDelete(b) ATACX closed down -0.95% today, which tells me they rotated into bonds last Friday. Their once-weekly timing strategy leaves much to be desired, but the ATACX switch into defensive mode adds valuable information. The SPX has now retraced most of its decline (from an overnight low of 1890 to 1972, a +4.3% throwback). What's next? My guess is that the SPX resumes its decline- but not before inflicting more pain on shorts.
TOF, you might be right about trader sentiment and the Fed. I don't think too much attention to trader sentiment - I guess I look for stocks which are beaten down and therfore out of favour with traders, but I don't think about how traders are feeling (maybe I should).
ReplyDeleteMy thinking is that the market will see the economy continuing to do well without the Fed's bond buying and in fact improving with jobs especially, so will be willing to pay a higher multiple for better earnings prospects.
The thing I have been continually surprised by is the level of skepticism even after such an amazing run. I'm also still finding enough "cheap" stocks to think this isn't the top. But I think it's reasonable to understand that a lot of traders feel better with a highly accomodative Fed supporting things, even if it doesn't really impact the fundamentals. I would expect a lot of volatility of econ reports weaken slightly. I just think it could present a lot of bumpiness
DeleteHaving Tepper and Buffet, 2 of the best, on board with us on GM, is certainly a plus.
ReplyDeleteRe DB, I didn't actually read their SEC filings. I'm not great at understanding bank financial statements, but I did look at their so decided to buy DB based on:
1. Morningstar report that I could understand and their current valuation
2. Fear in the German market due to Russia which I think goes away and we get a bounce
3. Improving prospects for investment banking around the world
4. The completed capital raise which should be the last big negative hopefully
But maybe I jumped a little quickly. I will try and take a look at their filings tonight.
Sorry I didn't mean to second guess you. I personally have had little luck understanding the financials of those big banks.
DeleteNo probs, I appreciate the comments. I always like to see varying opinions on my stocks. If you just read what agrees with you, you'll never get better.
DeleteGood post from Ryan Detrick showing we are in the strongest period of the 4 year presidential cycle. And as we move forward, buying for 6 months starting in November, December of January has been up 16 out of 16 presidential cycles and 6 month average returns of between 13% and 16% - the best of anytime.
ReplyDeletehttp://ryandetrick.tumblr.com/post/95120785855/welcome-to-the-worst-six-months-of-the-year
I really see no reason to think we see anything different this time as valuations are reasonable, interest rates are low, inflation is low and there are few excesses in the economy which need to be squeezed out.
BXE - 4x volume last session! I'm finally reading that SA article BB posted, BXE is trading at half it's value, there isn't much about commodity price risk, though.
ReplyDeletehttp://seekingalpha.com/article/2425605-bellatrix-exploration-deeply-undervalued-and-likely-to-achieve-significant-price-appreciation
BXE looks to be up again this morning - probably because of the following from the Globe and Mail:
ReplyDeleteBellatrix becomes U.S. activist investors’ latest target
Tuesday, August 19, 2014
BOYD ERMAN
Print this article
New York-based Orange Capital is set to begin a public push for a revamp at Bellatrix Exploration Ltd., the latest in a series of campaigns led by activist shareholders looking to Canada for underperforming companies they can press for change.
Orange, which has been buying Bellatrix shares, is expected to shortly file with the Securities & Exchange Commission to say its stake is bigger than 5 per cent, and that it plans to ask for changes at the Calgary-based natural gas producer, said a person familiar with the situation. The company, with a market capitalization of $1.5-billion (U.S.), trades at a discount to many of its peers. The hedge fund wants Bellatrix to hire a financial adviser to look for strategic alternatives, as well asking the company to look at a sale or initial public offering of some of the so-called midstream assets it owns, such as pipelines and gas plants. Orange is also seeking renewal of the board, better communications with investors and a plan for future outlays of capital.
The filing is unlikely to be a surprise to Bellatrix, as Orange has contacted the company and has been apprised that the hedge fund would be going public with its concerns via the SEC document, the person said.
Bellatrix is just the latest in what is becoming an increasingly long list of companies in Canada that have caught the eye of activists. Companies here were the targets of 6 per cent of all publicly known activist campaigns globally last year, according to Activist Insight. Considering the country accounted for about 3.4 per cent of the world’s stocks by market capitalization, Canadian companies are getting serious attention.
Orange has been among the busiest activists in Canada in recent months, taking on companies such as Newalta Corp. and InnVest Real Estate Investment Trust. In both of those, Orange got results in the form of new directors. Orange also recently invested in Tuckamore Capital Management Inc., helping management in its bid to settle a proxy fight there and gaining a seat on Tuckamore’s board. Orange did not have as much luck with Partners REIT, where it withdrew its nominees for the board and failed in its attempt to use a novel bid for part of the company to win votes.
Orange and its founder, Daniel Lewis, appear to like Canada for the same reasons that so many activists do. The country has a friendly activist environment, where it is easy to call shareholder meetings and push for change. Canadian disclosure rules also allow shareholders to build up bigger stakes than in the U.S. before being required to go public – enabling potentially bigger gains. (In this case, however, Bellatrix is listed in New York as well as in Toronto, hence Orange’s disclosure to the SEC of its 5 per cent stake.) The fact that Canada is a popular place for activism has also helped to create a specialized group of lawyers and other service providers that can help investors wage campaigns for change. All of that helps to keep the country front and centre when activists are looking around the world for places to put money to work. As long as Canada keeps its shareholder friendly policies, there’s no reason to expect investors like Mr. Lewis to stop coming back.
Part 2:
DeleteAt Bellatrix, the issue is the company’s valuation. The company is popular with analysts as a value play – 15 of 16 tracked by Bloomberg rate it a buy – because it controls promising natural gas fields and trades at a discount to its peers. The issue is how to close that gap.
The gains could be significant if Mr. Lewis’s proposed changes can help push Bellatrix’s valuation up. Depending on the metric, Bellatrix trades at something like 20 per cent to 50 per cent below other companies that do the same thing. At 5 per cent ownership, Orange now has a stake worth at least $75-million based on Bellatrix’s closing price Monday. The stock jumped about 5 per cent on Monday, with trading much busier than usual.
Analysts point to a number of factors behind the discount, including the fact that Bellatrix has a big expansion program underway that increases risk, and that it has cut production guidance too often. A messy share sale earlier this year, when Bellatrix had to cut the size and the price after investors balked, also led to what analysts at Canadian Imperial Bank of Commerce called “shaken investor confidence.”
On the other hand, analysts at AltaCorp have made the company a “top pick,” citing its asset base, balance sheet and “management’s top tier execution.”
So far, it does not appear that Orange plans a full-on proxy fight, the person said. At this stage, for example, Orange is not expected to ask for a shareholders’ meeting or to nominate new directors, though certainly such demands could come if Bellatrix doesn’t respond to the initial campaign.
Strong housing data, low inflation.
ReplyDeletePlus some retailers doing better than expected. All point to a good overall economy.
DeleteI wonder if retailers have priced in the lower revenue / internet world and are cheap enough to buy?
You wonder how many people are actually doing this and, if it is well understood, it will generally stop working soon:
ReplyDeletehttp://www.businessinsider.com/jeff-saut-on-buying-the-dips-2014-8#ixzz3AqEEold4
Jeff Saut: Here's The Ridiculously Easy Strategy That Professional Traders Are Using To Make Money Right Now
UGAZ closed.
ReplyDeleteRDEN- Stinky people win?
ReplyDeleteBXE- I'm holding but remember what happened to TLM after Icahn disclosed.
ReplyDeleteSchool starts here today. Unreal.
ReplyDeleteBB - I think you really have to know the business of the retailer. I like PIR because they have a very unique niche that most others don't offer...wicker and tchotchkes. It's up nicely today.
ReplyDeleteLooks like the momentum names may be stalling a little bit. See the action in TSLA, BITA, VIPS, and a handful of others. I don't think it's the end but could present a panic selloff entry in a few if you're into more risk.
ReplyDeleteI'm trying to be fancy with my trading. Sold half of GM at $34.63 and hoping for an intraday fade that might last for a day or two. If it doesn't transpire I'll reverse and hop back in.
ReplyDeleteLong SPXS at $24.77 for a trade. Crossing fingers...
DeleteOut at $24.69. No reversal today. In fact, the ones that were reversing (ie China stocks) are now reversing back up
DeleteI hopped in to TZA at $14.68, again for a trade.
DeleteSold TZA. Not seeing any signs of a reversal today. I suspect if we do get a reversal day it will be when the market gaps up high and has a euphoric run in the morning.
DeleteContemplating adding back the GM now. Looks like they went for the gap fill.
I feel like John Kerry with the flip flopping. Back in TZA at $14.71. Basically, I'm seeing some signs of reversals across momo names as well as other stocks. Figure its worth a shot taking a stab at TZA here.
DeleteOut $14.69. Was looking for a break down below $1160 for the RUT futures.
DeleteVery tempting to do some buying as it feels like things are getting better and the market is ready to move up again, but I'm holding off for now. Seems like pretty much every stock that I follow that dipped has now turned back up again.
ReplyDeleteThe other thing is we are going on vacation mid-next week, so I'm hesitant to do too much before that.
Better to have fun on vacation and not worry about your new purchases.
DeleteMark, thinking about BXE versus TLM, BXE has a lot of potential value, whereas TLM was undervalued, but had a lot of operational issues which they had tried to fix for a long time without much success, implying they were hard to fix. And people would not believe TLM was working without proven success as we've heard the TLM story for years up here.
ReplyDeleteBXE has been doing a good job of unlocking value through partnerships, but did a poor equity raise and the stock took the hit from that. I don't see any real problems with the company and perhaps this activist can add value or get the stock up faster.
I still think we see $12.00 in the not too distant future.
The question is, of course, do you buy here after todays move?
DeletePicked up some BALT today at $5.86. I honestly don't know the best entry point on this. Part of me is definitely hesitant to buy after this move but I know how the market works and I know an entry point probably won't be easy. Do we get a retest of the old lows? Not sure. My position is really small so I will be looking to add if it tanks.
ReplyDeleteAlso added some EJ today at $11.55 and bought LEJU at $14.22, both smaller positions. I would like exposure to this heading into earnings tomorrow because I do see sentiment changing surrounding real estate in China. Just look at the moves in HGSH, CHLN and SFUN after supposed weak earnings. The outlier is XIN but I am actually contemplating buying that one as well.
Back in GM at $34.44 as well.
(a) The DJIA continues to rally, currently +90 points. The SPX is up another +0.6%. Shorts are indeed taking heat.
ReplyDelete(b) I reopened a small position in UGAZ last night around 14, which I unloaded this morning pre-market @ 14.45. Naturally, prices hit a high of 15.12 before settling around its current range of 14.7x.
(c) The long bond continues to sell off, albeit a modest -0.31%.
(d) Utilities are strong, with XLU +1.1%.
Based on the ATACX model, markets should be selling off. They probably will, but only after inflicting maximum pain on shorts and late-to-the-party longs. The one sector that has me interested is miners. The GDXJ (junior miners) in particular is pennies away from slicing through its 50-day moving average, which may trigger sell signals for many traders. I’ll be buying into any waterfall decline that may ensue.
What a day for PIR. Unfortunately I sold it in my personal account but the in laws still have some. Classic shakedown on Friday.
ReplyDeleteI maybe have gotten lucky. Bought shares of HTZ at $27.3 after hours. I saw they had weak earnings guidance due in large part to vehicle recalls (think GM). That company is a juggernaut. I may flip it if it recovers after hours...
ReplyDeleteAdded more at $27.75
DeleteRelative valuation (vs CAR) is very attractive. E.g, CAR trades at 18x fwd p/e. That would give HTZ a valuation of $40. I'm not waiting that long but my guess is that gives some support for the stock.
DeleteAlrighty. Sold at $27.90. I'll take the $0.50 gain in an hour.
DeleteThere's been some minor earnings blowups in the Chinese space lately. Gotta wonder if this whole run is not getting too extended. BITA is the poster child of parabolic moves. It hit a 96.5 weekly RSI_EMA earlier today which is about as nuts as it gets. By comparison, AA at its "peak" a month ago had a weekly RSI_EMA of 92.5.
ReplyDeleteYHOO never got higher than 95 in the late 90's. CSCO had a 93. QCOM hit 96.7 at its peak. JDSU hit 97. However, the key is those peaks usually happened well before the price peaks but they did happen just around a nasty shakeout.
So my guess is on a sharp pullback a stock like BITA is buyable. The euphoria surrounding Chinese internet stocks is gaining steam big time and the last stage of this could be nuts.
Small position in SDS. We crash tomorrow.
ReplyDeleteOnly to hit new highs on Thursday, of course.
DeleteThat would be music to my ears especially if leju crashes
DeleteOkay, checking in here and WOW, BXE and PIR both, what a great day! :) I don't even recall how many shares of PIR I bought, it was just a partial position with expectation I would add lower. How sad is that?
ReplyDeleteThis damn market has taught me to buy dips.
ReplyDeleteThe only thing crashing around here is BB on vacation after too many Sam's.
ReplyDeleteBB- You asked me why hire a GC. I'll give you a few thoughts.
1- GC would have a much better pick of subs than you unless you have inside info
2- Gaps in 'who does what' doesn't exist.
3- I charge 10% p/o. Any of my subs that work for a HO would bump thier prices up by 20% at least. I deal with low lifes like you so they don't have to.
4- You only need to yell at one person instead of 10.
5- Something will go wrong and it should be nice to have someone on your side.
6- And most importantly, WTF are you arguing with your wife over this. Let her pick the GC and you go play golf bro.
Hertz is getting whacked hard, baby!
ReplyDeleteHow do you like that parabolic move right into the pre announcement?
DeleteYeah, right from the bottom to the top of the channel in a week.
DeleteWWW - Back to school sale is over?
ReplyDeleteReopened UGAZ @ 14.34.
ReplyDeleteAdded leju at 13.2, 13.35, and 13.95 this morning. I'm going to add to balt today. I don't think the market presents an easy entry
ReplyDeleteRTH - Notice yesterday's move up, gaped through resistance.
ReplyDeletePIR - Out at $16.07, take gain before it vaporizes. Also noticed BACML has underperform and a $14 objective on this one.
DeleteGasoline was $3.14 nearby yesterday.
ReplyDeleteCatch the early action in LEJU? I ALMOST opened at 13.9x, but someone at work distracted me with a question. A moment later, it was bidding 14.4x. Unreal.
ReplyDeleteI was buying in the low $13s but wasn't able to get a ton. I have been buying EJ at $11.28 as well.
Delete15.51. Un-xxxx-ing real.
DeleteYou need to make partial sales here, bro.
DeleteI'll take partial sales when the Zillow news comes out and EJ is at $20 and LEJU is at $25.
DeleteAlright just since its the prudent thing to do. Sold 1/3 of LEJU at $15.7
DeleteSold more at $15.45. Down to 12% position in LEJU. Still holding EJ shares.
DeleteBought BALT today between $5.8 and $5.9. Will most likely buy some SB too.
ReplyDeleteResearch investment committee report: (BACMLRIC): "Major risks for the markets are geopolitical tensions, the timing of Fed hikes, and market breadth. Remain positive on stocks and cautious on bonds because fundamentals are strong and valuations are reasonable. Advances in technology and price declines make solar energy more competitive"
ReplyDeleteCAKE - "We are lowering our rating on CAKE shares from Buy to Underperform and our price objective from $50 to $42. We make these changes in response to persistent sales issues for the casual dining sector of the restaurant industry. CAKE has outperformed in sales but we have lowered estimates in conjunction with the past three earnings releases."
INVN - Recall a few months back this one was $18?
ReplyDeleteYeah absolutely. Big move
DeleteBOBE - Activists making moves.
ReplyDeleteKeep an eye on the retailers guys. Lots of them are setting up for nice moves. PIR, TLYS, ARO just a few
ReplyDeleteYep, looks like a setup for a move up, which is why I booked my gain! (Being a product of my environment, I've been conditioned to buy dips.)
DeleteBALT - What are the chances Europe is turning to coal (and increased alternatives) while Russia is isolating themselves?
ReplyDeleteSPWR - On a tear all month.
Interesting thought CP.
DeleteBAA - 47x volume.
ReplyDeleteFOLD - Never count your money, when you're sittin' at the table.
ReplyDeletePrescription pain medication - They're really cracking down hard on this subject around here, legitimate patients are being told to forget it and learn to live with their pain.
ReplyDeleteSo I suppose illegal alternatives must be booming and DEA agents willing to have their palms greased are raking it in.
I bought some ARO today with the proceeds from LEJU at $3.867 avg. They're in dire straits financially, I understand. Doesn't mean a trade doesn't exist, especially in light of retailers popping tags.
ReplyDeleteTrying TZA again. We'll see...
ReplyDeleteZ - Tough few weeks, does this qualify as a bull flag?
ReplyDeleteHmm, Z has 1000 employees vs LEJU's 4000+...... Interesting, and LEJU has more sales, too.
DeletePKX - iH&S looks about done.
ReplyDeleteRRC - Look at all the recent volume that has tapered off. We've got batman ears in April and June? Not sure what this chart is telling me, if anything.
ReplyDeleteBXE - Mark, looks like we could buy back this one lower if we'd sold $8, what's your crystal ball telling you now?
Okay, I have to go outside and look for my car key chain and FOB, I hid them somewhere b/c I was doing some heavy work and didn't want them in my pocket and now can't recall where I placed them. It's been two or three days they've been misplaced.
ReplyDeletePerhaps Mark's crystal ball can project some insight on this subject as well??? (hope).
Sold TZA for a small loss. Stepping aside on that sucker.
ReplyDeleteBALT - Your $5.10 is looking like it was a fantastic entry call TOF.
ReplyDeleteIt actually had a crazy cut through low on the day of earnings. I wonder if we get back there. It just felt to me like a classic shakeout phase though during that latest downdraft. Look at those moves down with rock bottom rates. Rates are up 50% in the past 3 weeks and I bet they don't pause much at all.
DeleteWeird my post failed. I ended up taking your advice 2nd and sold all of the LEJU and EJ at $15.4 to $15.8 and $11.7 to $12. Took a big day trade on TZA at $14.91.
ReplyDeleteHere's to your crash call
Out of TZA. That's all they're giving nowadays.
DeleteI bought back into EJ, smaller position. LEJU is now worth $2.2 Billion. EJ owns 75% of them. So that's worth $1.6 Billion. EJ has $500 Million in cash. Combine those two and you get $2.1 Billion. EJ's market cap is $1.6 Billion. I bet it pops tomorrow after the dust settles.
ReplyDeleteCP - BXE has to fill its gap, of course! C'mon you know that.
ReplyDeleteYou mean this week's gap or the one from a couple years ago? :)
DeleteIcahn took a stake in HTZ. Wow.
ReplyDeleteLook at this weekly chart for EJ:
ReplyDeletehttp://stockcharts.com/h-sc/ui?s=EJ&p=W&b=5&g=0&id=p20049526187
Four weeks of slightly higher closes after a big move up off the bottom in June tells me that this is getting ready to pop. Add this to solid fundamentals and I think we could see a move back to the prior highs.
Thanks for the General Contractor info Mark. I think we will go it alone. My wife works for a new home builder and has good relationships with most of the people we will be using. Plus, we've got a handyman guy lined up to help with the non-trades stuff, so I think we should be OK. There are no structural changes involved in this project.
ReplyDeletePlus, this kitchen keeps going up and up in cost. We're over 50% over where I thought we'd end up, so adding another 10% is not something I'm too keen on.
New home builder!? Holly crap your in more trouble than I thought :). I'll start some news posts on houses I've built.
DeleteI want before and after pictures!
DeleteWill do.
DeleteWhat do you think about puting a beverage centre in the kitchen? Worth putting in?
Not quite sure what you mean b y beverage center.
DeleteA second under the counter fridge for wine and beer and pop. Saves going to the garage to get drinks.
DeleteAre you doing any of these?
Nice numbers out of NM and a beat on revenues and earnings.
ReplyDeleteIn reading their press release, the really interesting piece of info is that they're contracted business for 2015 is the lowest I can recall for a future year. Their CEO did say she would go short term contracts if she expected shipping rates to rise, so she obviously, she is not willing to lock in at current rates.
Yeah she's been bullish on rates for about a year now. Takes time for a massive shipping co to move to spot rates but this is a good sign
DeleteCleared UGAZ pre-market @ 15.15 for a +5.7% overnight gain (NGas futes spiked +2% for reasons unknown). I think there’s a good chance NGas trends up from here, but the pending Jack Flash report (less than 3 hours away) makes it prudent to take gains here.
ReplyDelete(The above took place around 430 am. UGAZ now trading in the 14.7x range.)
Nice Trader Bite from FT71 this morn ... of the cautious variety ...
ReplyDeleteFuturesTrader71 @FuturesTrader71 · 25m
LIVE Trader Bite starting shortly: http://www.youtube.com/watch?v=iEN0U2ty7U4&hd=1 … #ES_F #FT71
https://www.youtube.com/watch?v=iEN0U2ty7U4&hd=1
https://www.youtube.com/user/FuturesTrader71/videos
One Q, where were you 90 points ago?
DeleteSame place I am now!!! Trying to understand these rotations and not get screwed (too often) ... It did look like 5-waves down though ...
Deletehttp://stockcharts.com/public/1001240/chartbook/233040110
http://peterlbrandt.com/wp-content/uploads/2014/07/7.30_ES_D.jpg
Deletehttp://www.channelsandpatterns.com/ ... 2nd chart down
DeleteGold 1276 - This is the important support level here.
ReplyDeleteMiners starting to look good here.
DeleteSPX - Double topper batman ears fellas?
ReplyDeleteKB/PKX - China news not so bright or what?
ReplyDeleteAny bets on Jack Flash?
ReplyDeleteBack in UGAZ @ 14.08.
DeleteBXE doesn't decay, it just keeps moving lower.
DeleteDB - Moving up, looks like shorts are gonna get the hose.
ReplyDelete$33.20 is the line in the sand today, shorts getting the German circumcision.
DeleteENSV - Looks like bull flag, am I wrong?
ReplyDeleteBXE - Come on, Mr. Orange!!!
ReplyDeleteSLW @ 24.77. Goldcorp @ 27.33.
ReplyDeleteWe had quite the night last night. The little guy is having a tough time sleeping lately. I had a few open on market orders for today that got executed: BALT at $5.81 and SB at $8.39. I love the shippers right now. Just seems like a classic washout scenario with them, not allowing a reasonable entry by traders.
ReplyDeleteOn the flip side my EJ is underwater, having purchased it at $11.77 yesterday. I don't quite understand the discount. Its actually trading around the value of its holding in LEJU so the market is assigning no value to its cash / agency biz / financial service web platform.
DeleteProbably because the momo traders are on LEJU for the fats trades and the value guys look at EJ and say "yeah, looks good, but it's China"
DeleteYeah if this was 2011 or 2012 I would agree. However, the Chinese market and Chinese stocks have been the hottest in the market for the past couple of months. Could just be a rotation out temporarily...also it just looks like a consolidation as it tries to break above $12.
DeleteLong PIR in my in laws account at $15.78. Looks like a backtest of the mini breakout.
ReplyDeleteStill hold JONE and it is down on a recent downgrade from Goldman (or someone). But the story still.holds:
ReplyDeletehttp://seekingalpha.com/article/2441445-jones-energy-a-strong-cleveland-operator-thats-being-overlooked-by-the-street
I wish I knew more about the energy space. I just generally stay away from them. I do still have ENSV and ESTE but they're both smaller positions.
DeleteIn the money on DB now.
ReplyDeleteWent through their Q2 investor presentation and report and it is very complex and I don't claim to understand it all. But I still think it is good to hold, as they have a strong German bank business, have fixed their capital issues (hopefully), are positioned well if investment banking increases and they are very cheap on many metrics, which provides a level of safety.
Maybe the chart is bottoming or maybe just basing for another leg down, but, unless there is more bad news, I feel pretty confident I will do well with this stock.
Out of UGAZ @ 14.71.
ReplyDeleteMy take on the US indexes right now?
ReplyDelete(a) Shorts have taken body blows each day this week. They will probably take a knock-out blow Friday, squeezing indexes even higher.
(b) However, in order to get to SPX 2000, the market will need to suck in more shorts. This will happen with a fake-out move lower Friday morinng.
(c) I’m willing to open a small position on that take: RYTPX, which will be taken off at Friday’s 1030 am est window. I will then reverse direction and simultaneously open RYTNX, betting on a higher close.
What about China? FXI is down -1.2% today. I believe China is about rally hard, even in the face of a major decline in US indexes. EJ/ LEJU/ FXI/ CAF on the watchlist for now.
Miners rallying into the close, but shy of the point at which I’d feel I was chasing. Will open a position in RYPMX at the close.
DeleteI was thinking about you as I was thumbing through the charts and happened on NUGT
DeleteI pared back EJ around $11.70..down to 1/3 of my position and I'm kind of regretting it. My thought process is we get a mini stroke of panic in these China stocks some time here soon. I think the runs in BITA / HGSH / JRJC / etc are all setting the stage for a nice false breakdown. At that point, I will triple my position in EJ which I think is the best positioned stock amongst all of them. I can foresee a price north of $20 within a year. That would put it at 19 times 2015 estimates.
DeleteI actually see EJ getting to all time highs (ie > $36) at some point in the next year or two. I think SFUN would work well too although they're a bit behind the eight ball with no clear cut mobile strategy.
DeleteHave the smoke and radiation cleared, is it safe for me to come out of my hole now?
ReplyDeleteI really have no basis for this call other than I see a lot of retail stocks outperforming lately (contrary to the negative headlines) but I decided to buy ARO again after the earnings "miss". Long at $3.65. Small position and prepare to get an ass whooping on it.
ReplyDeleteAdded some more at $3.63.
DeleteCareful, bro. It's easy to become a little careless after that awesome win on EJ/ LEJU.
DeleteI have 4% in the stock and am sitting on 55% cash :)
Deletenew post
ReplyDelete