Friday, February 26, 2010

Credit Default Swaps needed!

Sorry for the late post today but there is a foot of snow out my window. Yesterday, my part of the world had about sixty feet of rain and it all ended up in my basement.

I am reading more and more about debt downgrades, currency plunges and civil unrest (Greece and Turkey). The Socionomics crew would say that the latter is just a result of the declining stock markets in many places but the point is that a lot of bad stuff is happening.

I do not have a Bloomberg so if anyone can suggest a place to find CDS charts, I'd be much obliged. Rumor has it that the Elliott Wave boys and girls down in Gainesville just published a list of countries (and states) with rather scary looking CDS charts.

Even thought the stock market is still holding on, I am holding a huge percentage of cash right now.

Wednesday, February 24, 2010

Emerging Markets redux

The Dow is up 3/4% today while Brazil is down about 1/3%. (All of Latin America is down). And half the PIIGS were down, too.

That was today's column topic. Investors are running from risk - either real, as it the PIIGS are in trouble, or potential, as in the true emerging markets are still riskier than good old Uncle Sam and all his G-whatever buddies.

Here is another. Vietnam was supposed to be a really young emerging market and it had a very rough week. Very rough.

Stodgy old Switzerland (sorry, we will not divulge our bank clients' names) is actually close to new highs.

Poll results

Well, it was a tiny poll but here are the results. It is too hard to read the blogger display to the right.

11% - like it was in July, ready to rock
38% - just relieving oversold
50% - not going anywhere soon

Toss in the rounding error and we can see the majority of readers with an opinion think the market is just in chop city for the near-term. And why not? Interest rates are being held low, the economy is seemingly rebounding sans jobs but inflation is peeking through. Consumers are not confident any more and even HR Block took a hit as more people are doing their own taxes to save money (yuck!).

Don't take this as a contrarian indicator. For starters, there is no track record. Next, the sample size is tiny and readers of a technical analysis blog are likely a bit more sophisticated than the average investor. Not because of me but for the topic.

Anyway, I find it interesting that the analysts and economists are bullish yet only a fraction of readers agree.

Tuesday, February 23, 2010

The Age-Old Arguement on Buy and Hold

First of all, the poll to the right is still open --->

We've gone over this in technical circles ad nauseum but John Bollinger posted the following in a technical chat room this week and it is crystal clear. Unless you think we are in a secular bull market - that means like 1982-2000 - then this is for you.

All you money managers and RIAs - take note. Now you can tell your clients how you add value.

"What happens if you miss the best and/or worst days?"
(study period, most recent 20 years )

All days, $100 invested at the open of 1990 becomes $304.33
Miss the best 200 days and $100 becomes 87 cents
Miss the worst 200 days and $100 becomes $134,251.48 <---(hello! do you see this?)
Miss both the best and worst days and $100 becomes $385.53

For me (meaning Bollinger) the most surprising result is that missing both the best and worst days is better than buy and hold.

Monday, February 22, 2010

Poll time

Time frame is "near term." You can interpret any way you like because the market does not care what we think anyway.

Friday, February 19, 2010

This little piigsy fund

Over the years, I, like many of you, have had business ideas that I never attempted. One was a simple ice cream shop in my home town where there were none. Of course, a year later Swenson's moved in. That they failed is not my fault.

In 2009, I thought that someone should start a bank fund and buy the 30 worst names in the biz. Remember, Citigroup was trading under under 5 bucks and more than a few experts thought it was about to go under. What would happen if we owned 30 names at such prices and a full 25% of them went bankrupt? The other 75% were going to survive and probably double. Seems like a good portfolio to me.

Well, Citi doubled before reversing and Wells Fargo tripled. Talk about buying when there is blood in the streets!

Now I'd bet that a piigsy fund of the best names in the PIIGS countries would make for a good portfolio. Even if one country went "under" all the companies within would not go to zero. And what if these countries survive financially? Well, you know.

Is this the right time to dance in this party? It may be early and we'll probably need to see some more market damage. But if any of you, dear readers, put such a fund together, I want to get in at insider prices.

Thursday, February 18, 2010

Courage of my convictions

OK, I watched too much Glenn Beck this week but the Fed's after market move made me feel better. I stuck to my guns concerning resistance in the market despite the Nasdaq flipping me the bird earlier in the week. And after I filed my column this afternoon - before the market scooted higher - I still had faith that the market was not looking like it did in July. This was more than just a "healthy correction."

Here is the text that I left on the cutting room floor before submitting the column to my editor. Yes, I am asking you to believe that it was written this morning and not after the Fed's move.

We all know that one day the Fed will wind down its low rate policy but news or rumor that it will happen sooner rather than later has already given investors pause on several occasions. Events in Greece and elsewhere in Europe still hang heavy, too.
End Quote

This was the shock from outside to which the weak technicals left the market vulnerable. The Fed just told us that they are starting to wind down sooner and stocks gave up the entire day's gain in short order.

Of course, even I am not fool enough to extrapolate too far beyond this one hour's worth of post market trading. But to me, it is another bit of fuel for the "where there's smoke, there's fire" line I wrote in this morning's Quick Takes Pro.

Wednesday, February 17, 2010

State your case

I think my readers know where I stand but here is a chart that can go either way.

The NYSE composite bounced off critical support (as drawn plus the 200-day average) but remains below critical resistance (the earlier Feb high and 50-day average). Volume on the big push Tuesday was weak. Volume during a similar push in July was also weak.

Basically, I can make this chart say what I want it to say.

What do you all think and why?

Tuesday, February 16, 2010

It's started

ATHENS, Greece -- Police in the Greek capital say a bomb has exploded at the offices of American financial services firm J.P. Morgan Chase Co., causing no injuries.

The blast occurred early evening Tuesday in an upscale area of central Athens, following a warning telephone call to an Athens newspaper.

The extent of the damage was not immediately clear.

- WSJ Online

Just Like July!

The fiduciary hairs on the back of my neck stand on end when I read analysis comparing the January-February pullback with the June-July pullback. No wonder people lose money listening to sound bites.

Last summer, the market made its first significant corrective decline since the Armageddon low of March 2009. Fear was palpable. But volume was light. Hmmm. Light volume on a pullback with an extreme level of fear? Sounds like a buying opportunity and even Mikey the Bear (uh, that would be me) had to jump on the rally bandwagon, albeit after a few days of gains were foregone.

Right now, the shape of the pullback may be the same but it began with an extreme in optimism, and so far has not morphed into fear. It has also come on heavy volume. In fact, days like today when the market rallied came on lighter than average volume.

What else is different? How about a mini-death cross of the 20-day exponential moving average below the 50-day expo? Did not happen last summer.

Or emerging markets underperforming now and not in July?

Or good, and especially bad earnings news resulting in clock cleaning in the offending stocks?

Conditions now look are similar to what they were last July - not!

Sunday, February 14, 2010

Spirit Airlines - bad news

While not directly affecting your portfolio, flying Spirit Airlines is just bad for you, your business and your attitude. Aside from nickel and diming you during the ticket purchase process, their fee structure incents passengers to push the limits of carry on luggage and use airline people-resources at the terminal. Of course, they only provide one dedicated ticket agent to help so it is not pleasant.

I have never spoken to anyone who had a good experience on this loser of an airline. After paying for the ticket, the checked luggage and yes, the online seat reservation, they are the same price or higher than the competition. The seats are not human adult sized and the rows are jammed together so heaven help you if you drop your book in flight. You will never be able to contort enough to pick it up from around your feet.

There was one positive - the flight itself, other than the cramming, was fine and the crew was helpful. It was the rest of the system, from the booking process to the absolutely lousy gate area at LaGuardia (fault both airline and airport) that was a misery. Fort Lauderdale was better.

I get paying for food on the plane. I get paying for excess baggage (but not the first piece). I get paying to reserve seats at the gate/ticket counter but online? Come on, fellas. During my one and only trip I had a family of five. Do you really think there would be five seats together at the gate/ticket window?

So when my young daughter wanted to take a trip with a friend and they tried to hit me for an additional $100 at the ticket counter, I lost it. Supposedly, for that money they walk the child to the plane, give special seats (the passengers already in those seats would love to hear that), give them a snack and then walk them off the plane. I can see my Blackberry using, (age appropriate) club going, advanced class taking, career minded young teenager loving the ID they would make her wear around her neck during the flight. And yeah, I believe (not) they would actually watch over her as they said they would for the C-note. (I was there to take her to the gate and her friend's parent would be at the arrival gate and nowhere was it made clear that there was this extortion to come.)

Let's just say we resolved this matter before the flight took off.

But if you are into aggravation, by all means pretend you got a good deal at Spirit. If you want to be fresh for a meeting or start a family vacation, please - fly JetBlue, Southwest, Delta, American (I have not been on the others in years so I cannot list them, too).

Friday, February 12, 2010

Let's go out for Chinese, no Greek, no Californian

Let's see, were to begin. Greece is a lightweight on the global economic scene so why is it causing such a fuss? We'll, heavyweights own a lot of their bad debt and the European Union itself is threatened. It is also causing us to take our eyes of our own debt issue - as in "they" stopped buying that debt. China flipped the bird's nest soup at us this week with its reserve requirements and lackluster participation on the Treasury auctions.

And then there's California. Sorry, New Jersey, you are not known for your take-out cuisine. California would be a G-something country if it were a country and that is a big deal. It won't threaten the American Union (USA) but financially it is is big problem.

Bull market in stocks? Perhaps. But the rally we've seen discounted the recovery we've had. If there are real problems ahead then the stock market will react sooner rather than later.

Do you believe there are problems ahead? Go ahead and scare yourself with the MarketWatch gem - our-debt-time-bomb-is-ready-to-go-ka-boom. Be forewarned that the author has a rather dramatic flair - all the time.

Thursday, February 11, 2010

Quote of the day

From the Financial Times (sent in by Mike Larson at Weiss Research):

“U.S. government debt is a safe haven the way Pearl Harbor was a safe haven in 1941.”


Wednesday, February 10, 2010

Emerging Markets

One speaker at the Money Show was a portfolio at Aberdeen Funds. They run global fixed income funds, among some of the more popular country ETFs.

Basically, his point was that we yanks (take that, Red Sox fans) are woefully underexposed to emerging markets. The big deal is that they are where the growth will be in the next several years.

I countered with risk. They do not have the same standards, I protested, therefore we don't know if we will truly be paid.

As I wrote that line I thought - and our standards are good? After all, here is where sub prime, CDOs and other assorted junk was born. The fund manager put it another way, saying that the reporting in most places is indeed up to snuff - China excepted - so that worry goes way down.

I am not timing emerging markets in this post but given his view that inflation will not be the "print more money" problem there as it is here I do agree that owning emerging markets stocks and bonds for the long haul is a good idea.

Tuesday, February 9, 2010

Greece is the Word

It took a few minutes not to pun put with Greecing the skids and other such nonsense. Apparently, the short coverers last Friday got it right as word spread across the street that Germany was coming to Greece's rescue.

Of course, there is no confirmation that this is happening but since when does the market need confirmation? Predictably, the euro soared and that means the US dollar sank.

Meanwhile, back in the jungle, er, outback, check out this controversy. No hard proof or official word is offered so get out the grain of salt.

Australia close to defaulting on debts: Senator Joyce

Any individual country, save for China and the G7, would not take down the global economy. But When it moves from small countries like Greece to infect a small batch of others then we've got problems.

Monday, February 8, 2010

Where's the bounce?

I read in one of the many chat rooms that I follow that Friday's afternoon recovery was due to short covering ahead of the weekend. After all, what would happen if they decided to bail out Greece? A stocks rally? Perhaps.

Today's column talked about a candlestick pattern called a falling three methods. I usually confuse the rising and falling names as the "methods" are the little candles in the patterns middle that are rising or falling. In a falling-3 pattern, the little candles rise (for real!) but the entire pattern is a bearish continuation pattern if found in a declining trend.

Check out the QQQQ chart. It's better than the Nasdaq's.

Hammer Friday? Hammer Schmammer. Where is the spirit of the pattern that is supposed to have a tide rushing out and then tide rushing back in feel? It was like the tide rushed out then it rained. Sure, the water level was unchanged but the source was not the bulls.

Thursday, February 4, 2010

MoneyShow 1

Here's the poop from the MoneyShow so far. First, the organizers tell me that traffic is strong and attendees are buying stuff(newsletters, etc). The public is back?

Next, there were a ton of listed companies pushing their stocks and visions. More than I can remember. Gold and REITs were very well represented.

The average age seems to have dropped a touch. Less of the older demographic and bit more of the middle aged.

Finally, one of the public companies - in the health care field - had a nurse character (can't say of she is an RN) dressed in a nice short white nurse's outfit administering some sort of health test. Eye candy, indeed.

Wednesday, February 3, 2010

On the road again

I am off the the MoneyShow in Orlando this afternoon. I am sure I will have observations that play to sentiment when I get there.

One of my presentations will be posted at later.

If you are in the area, come on down (Gaylord Palms hotel). Entrance is free although they get you for parking.

Trim Tabs expects a bomb

Re-post. The quote was missing!

I got this from a corporate communications release this morning.

=== TrimTabs using real-time numbers estimates that job losses for January were 105,000, much higher than Wall Street expectations that the BLS on Friday will report 5,000 January job losses. TrimTabs warns the BLS estimates are highly inaccurate because of incomplete survey data and illogical seasonal adjustments, among other things. Which means government policy, business and
investment decisions based on these numbers are useless, and in fact, dangerous.

I am way out of my comfort zone with this sort of economic stuff but it has the potential to create some disappointed bulls.

Monday, February 1, 2010

Dead Cat Bounce

Yes, once again I'll trot out the old joke that most investors prefer the dead analyst bounce but I digress.

Today's Barron's Online column is about a part of the equities landscape that got hit particularly hard. But after the damage it became very, very oversold, as was the broad market. So with today's ISM report showing the economy expanding like it did in August 2004 (don't you love economic wonks?), it was no surprise to see the market rally.

But as they say, if you drop a dead cat from a high enough perch it will bounce. Check out this chart of US Steel (not in today's column).