Tuesday, March 27, 2012

Who is Fed up?

Warning - this is a rant. The takeaway for your portfolio is to remain on high alert.  As trader friends of mine said after talking with BATS, another flash crash is inevitable.

Also, this rant is not meant to endorse any political view because all of them suckle at the teat of hypocrisy.  Vote for me and I'll tell you whatever you want to hear!

Here is a quote from this morning's Quick Takes Pro newsletter:
The prospect of the Fed keeping the free money pump a-pumpin' was like the shock they used to start up the former Veep's new ticker. Fed Head Ben Bernanke spoke and stocks took off. Of course, the dollar tanked and gold now looks like it has finally bounced off its long-term trendline.

There were two other bits of news although free Fedbucks trumped them.
I know I am totally fed up with the Fed. Zero percent interest rates are not boosting the economy.  The little guy is not getting that mortgage. The dollar remains weak although its ugly sister the euro is making it look better. That helps keep gas prices high (yes, I know it is not the only reason). "I don't care, Mr. Little Guy, core inflation is very low. Put some algae in your tank and off you go." 

And who can borrow money from the Fed for free and invest it in Treasuries for a cool 2% risk-free spread? Why the evil banks! No wonder they camp out in Zuccotti Park.

While I, as part of the 99%, sympathize, the villains are not the banks. They are just acting as they should when offered a bounty. Do you begrudge the lion for killing the zebra? The occupiers are focused on the wrong entity.

Who is engineering the problem? It is the Fed. And it is the rest of the government - both side of the aisle - that are bloating the debt. Be mad at the entity that is giving the lions food, clothing and free iPads. "We are feeding the lions so they don't eat the zebras and we do not understand why there are more Zebra killings."  Uh, stronger lions? More lions?

And not only do I not like established politicians, I am saddened to say I am fed up with the Tea Party. The mission was noble but they caved to the establishment.


So, let the stock market rally continue. I know I have been fighting it and it may be painful for weeks to come but I am so convinced that one day - maybe next week, maybe in the summer - there will be a very nasty sell-off and this time the markets will not respond to more free money. Free is never free.

Tuesday, March 20, 2012

Chinese food market

Hearken back to the days of your youth when your Dad took you and your unwilling Mom, brothers and sisters to the Chinese restaurant for Sunday night dinner. For you whippersnappers still in your youth, Chinese food here in suburban New York back then was Cantonese.

Szechuan? What's that? Hunan? Well, maybe you saw a dish called Hunan beef with its sort of spicy sauce. The only thing really hot, and I mean atomic, was the mustard they served next to the duck sauce and crispy yet greasy noodles. I do not recall ever seeing anyone, including my Dad, eat that mutant paste.

No, grasshopper, it was sub gum chicken chow mein, sweet and sour pork (with pineapple chunks in a glowing red sauce) and chicken almond ding.  We liked that name. Ding!

Also back then, after wontons, the biggest ingredient in the food was good old mono-sodium glutamate, better known as MSG. Who can forget getting "Chinese Restaurant Syndrome" after eating too much of this additive.

But whether you were light-headed after a meal or just full, the old joke was that you were hungry an hour after eating. Perhaps because we fat Americans were not used to meals consisting of more vegetables than meat. Or drinking 25 glasses of water because every time you polished one off, the man in the bow tie and vest came to fill it back up.

Where the heck is this going, anyway? Well, I did not intend to go one for quite so long but once the memories came flooding back I could not stop myself.

Anyway, just today, the headlines were still rife with commands to "buy the dips." Or "here are three stocks that will....."  You fill in the blank as long as it means rally.  An hour after you buy stocks you are hungry to buy more. Certainly, nobody is sated with their purchases. And everybody wants the free fortune cookie telling them what will be the next stock to embark on a relentless journey northward (like Chipotle, aye caramaba!).

VIX in the 15s. Sentiment surveys bullish. And, as Alan Newman wrote in his CrossCurrents newsletter earlier this week, with added dramatic flair because he is that kind of guy, "Everywhere we read, even the bears who make the most sense and deploy indisputable logic are afraid to declare an imminent reversal."

That reads like capitulation to me. Even I cannot bear, er, bring myself to write more bearish columns because nobody wants to read the boy crying wolf any more. 

This is from ChineseFood.About.com:

Unfortunately, Cantonese cooks have had difficulty reproducing their native cuisine in a foreign land. As cookbook author Eileen Yin-Fei Lo points out in an interview, the first immigrants were men, coming from a society where women traditionally did all the cooking. Furthermore, faced with unfamiliar ingredients, they made adaptations that were less than successful. 
 
Dispensing with the step of blanching vegetables prior to stir-frying resulted in soggy vegetables, which they covered up by adding extra cornstarch. To hide the lack of natural flavor in the dish they overcompensated with seasonings such as sugar and soy sauce. American-style Cantonese cuisine was born. Of course, the fact that westerners gradually developed a fondness for "Chinese junk food" didn't help matters. 
Read that closely, especially the second paragraph.  Then substitute zero percent interest rates for cornstarch.  And quantitative easing for sugar and soy sauce. 

The market is not what it was back home (in the first half of the last decade) yet everybody has developed a taste and a hunger for it. Sooner or later, the pukefest will begin as it always did when somebody scarfed up that last quart of shrimp in lobster sauce.
 
Now, somebody get me a scoop of pistachio ice cream with the big chunks of cherries.

Monday, March 12, 2012

Gift Fee - huh?

Portfolio effects after the rant.

Next weekend, my son will be coming home for a few days from college. Since he has been here quite a bit he thankfully tried to save us some money and take the bus from Boston to NY. He usually flies but believe it or not it usually works out to be cheaper.  Not so next weekend.

He gets the Greyhound website and finds something interesting. Some of you, including your truly, might say "disgusting" instead. It seems that if you buy a ticket for someone else with your credit card they slap om an $18 gift fee. This is where you cut to the animation of a cartoon character violently shaking his head side to side with jowls flying and hair popping off his head. Huh?  Gift fee?

As a parent, it is completely normal to buy a ticket for a student who does not have a job and therefore no credit card of his own. Basically, it sets a higher price for students. I'll let you leap to the argument that it hurts the poor, too.

Here is an article I found from 2010 detailing Greyhound's big swinging, er, nerve.
http://articles.latimes.com/2010/sep/14/business/la-fi-lazarus-20100914

So, how does this affect your portfolio? Think about how you pull back when you feel like you are getting nickel and dimed.

We refuse to fly Spirit Airlines (carry-on baggage fee). If we are stuck on Delta we only take carry ons (checked baggage fee). Do you search for certain gas stations that do not charge more when you pay with a credit card? When paying certain bills online do you opt for the bank check option over the credit card when the latter results in a 2% fee? Screw the airline miles. I've only used them twice in thirty years anyway.

The point is we alter our buying behavior to avoid fees. Merchants take note. And investors, you better figure out who is going to get hurt with the mass exodus of fee avoiders.  NetFlix anyone?

Friday, March 9, 2012

Sponge Worthy

Over the past week or so, I have had precious little to say about the markets, save for the one day of excitement Tuesday. I even resorted to running a long-term chart on the front page of the newsletter today where I usually rant about market events and offer up some less emotional observations.

Since I have not blogged in two days I felt the need to do so. But about what? Greece? Boring. Jobs? Same old excitement over something that is quite sad. Market movements? Zzzzzzzzz.  Then Seinfeld came to mind and I thought I'd write about not having anything to write. No soup for you! Yada, yada, yada.

Then it hit me. I had to figure out if something was sponge worthy. Did anything that happened this week deserve me spending time writing and more importantly you spending time reading? What was worthy of our limited supply of intellectual resources?

Well, gold found a floor and even rallied Friday as the dollar soared. Crude oil successfully tested its breakout. Cotton got a temporary bump on India export news. If I were to write about futures then coffee plunging to new lows would really make my day.  Maybe that's why Starbucks wanted to invade my K-cup maker.

No, that's not it. What might be worthy is the idea many people have that all dips should be bought. About the inevitability of higher prices because Greece has (another) deal, jobs seem to be growing and the fundamentals of oil say it should not be trading where it is. As soon as the fear subsides - after all, nobody is going to actually attack anybody (eyeroll) - then oil can settle back down and the economy gets another boost.

Tuesday was indeed a wake-up all. Hey, stocks can actually go down!  But it seems that traders never met a dip they did not like this year and sentiment rages bullish. The current trend is being extrapolated out into the future as if it must happen. My fellow bears are mighty quiet these days.

Now that is sponge worthy.

Wednesday, March 7, 2012

Sentiment

I noticed a headline in the financial press this morning - the day after the Dow lost 200 points in its first real down day of the year. It read, "Bulls Repair Street Breach."  At the time, the Dow had regained a whopping 30 points.

Why talk about the bulls? Why call such a tiny rebound a repair? Why call it only a breach instead of a more negative word such as "drubbing?"

The answer, in my opinion, is a bullish bias in the reporting. Not that the headline writer is biased but rather he/she and the editor agreed that was what would bring in readers - bullish readers - of which they assumed were the majority. Make that "still" the majority despite the technical damage that was done the day before.

Sentiment. A subjective art within the world of technical analysis.

Tuesday, March 6, 2012

This is what we are up against

I loved to make fun of bad fundamental calls but since 2008 everyone wears facial egg. Up is down. Black is white. Wednesday is Sunday at Carvel.
But this is still kind of funny - at least to those of us not long the stock.

Semis Crack

This is a chart we ran Monday before the open in Quick Takes Pro.
It shows a small head-and-shoulders top with a double left shoulder. While its shape may be out of the ordinary it has a classic bearish divergence in RSI (momentum).

Last year, industrials broke first before the market did. This year, it may be the semiconductors.

Friday, March 2, 2012