Archive for Equities

Will Google Eat Apple’s Lunch?

February 7, 2013 Equities

Many have argued that the IOS will beat Android over the long run, but the cheaper and more standardized Android platform looks to be taking a greater share of the pie. While Blackberry certainly has some chance to re-gain lost ground, the Android phones have almost completely crushed the Canadian key-pad contender that was RIMM (now just Blackberry).

With Apple stock on the ropes (I like it better than AMZN that’s for sure) the company is facing a dilemma as David Einhorn is suing Apple in order to force the company to pay a dividend. I think this greenmail tactic will likely work to get the stock moving or at least stabilized and that paying a dividend makes a good deal of sense for Apple.

Google (GOOG), at least in my view, made a great buy when it purchased Motorola because they now pretty much own the smartphone category entirely and the integration has been smooth and solid from a user interface perspective. Certainly Google’s navigation and GPS systems are better received, and many people buy smart phones simply for the in car GPS navigation service (including me).

In the end, the company with the best products and services will win. I don’t see much room for any new entries so it’s pretty much Google versus Apple, and in my mind Google wins. That said, trading the stocks is a different animal altogether. I think a long GOOG short AMZN trade will work quite well as a pairs trade in the cloud space. I wouldn’t want to be naked long without a hedge if the market rolls over here, though I do think the economy is slowly (snails pace) improving.

 

 

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Short TZA and TNA for $$$

February 4, 2013 Equities

(TNA) and (TZA) are the triple levered, rock and roll “index” funds associated with the movements in the Russell 2000 (IWM). TNA is the 3X bullish Russell 2000 fund while TZA is the 3X bearish fund. The bottom line for investors is that it is better to be short these funds than to be long them over time because of leverage costs like interest and slippage.

The problem for investors in these funds comes from the stated objective these funds have to mimic a three times leverage position in the short run (daily movements) of the Russell 2000 either up or down. The funds deliver on their promise of providing short term hedging or a day trading vehicle for speculators looking to make a quick buck. Investors, on the other hand, can be the house by shorting both sides of the trade via a TNA and TZA short. Take a look at the longer term price charts for TZA:

(click to enlarge)

“Investors” in TZA need to take a long hard look above. No matter how far the Russell drops, over a ten year period investors should expect any long term TZA investment to eventually become completely worthless. That’s why shorting TZA and TNA makes some sense. Even if you are wrong on the TNA side of the transaction, because you are buying longer dated, slightly in the money put options your risk is limited.

If I wasn’t so skeptical of the recent parabolic ramp up in equity prices, I would simply suggest an outright short on TZA and would leave TNA alone. Because I am quite cautious on stocks in general, shorting both via put options is a more conservative approach.

Keep in mind, you must stay vigilant in resizing your positions so they offset each other or you become extremely net long or net short the stock market. This may work to your advantage, however, if you are correct on the overall trend of the market.

The triple leveraged VIX fund (TVIX) and (FAZ) are also good places to look at for terminally ill short candidates. The triple levered bear funds seem to become worthless even in the worst of times. Likewise, the triple levered bullish funds continue to lose track of rallies over the long term, which makes these funds a good bet for a long term short position.

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Market Model Turns Bearish — Hold Cash?

December 31, 2012 Equities

mortimer

Our Market Model which has been whisper quiet all year is now resolutely bearish. WE suggested selling your stocks and holding cash. Because of changing cap gains rates, buy and hold is stupid now anyway. Once the rest of the market figures it out it will likely be too late. The Fiscal Cliff looks like a planned take-down of the American economy.

I would be fully short stocks here or in cash but I wouldn’t want to be long equities. My target is $1150 or so on the S&P with $1100 being fair value and $1000 being a reasonable “start buying” point for stocks.

All the kings horses and all the kings men couldn’t put Uncle Ben’s failed science project back together again. Just don’t be naïve and buy and hope…. Efficient market theory is stupid. If you believe in it, don’t ever put a dollar into equities!

Real estate looks OK but only in the hard hit places and those are already up a bit off of the low. It’s also a much more hands on asset class… I recently built a cabin (very small) and was amazed at how framing lumber and nails really aren’t all that expensive relative to the market price of the typical structure like the one I built is going for — translation; real estate has some bubble elements still as well. Thanks Ben!

Anyway, enough with criticizing people who are planning the new currency or what-have-you and on to figuring out how to invest despite them. Keeping your money out of Wall Street unless you straight up exude 666 and “know people” seems wise to me… Not that I believe in the whole New World Order deal but hey, if you gotta pay respects to Satan to be rich I say F that and move to Colorado or Washington and tune out legally instead, lol…

Sure, chicks dig guys with money and hate stinky hippies but at least you will be able to live with yourself as a Christian man.

OK, ranting here a bit — I would stick to shorting the IWM and QQQ here. SPY is cheaper and better (though with a 50% dividend cut, it also looks crappy!)

SELL MORTIMER SELL

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End Of The World Check…… Check One…… Check Two…..

December 21, 2012 Equities

Big Update: World has yet to end and it’s getting late in New Zealand right now…….. Hoping for the best and prepared for the worst (my doomsday prepping today involved going to the pet store, doing some recycling, and cleaning up after my dog)

Anyways (and yes I left the “s” there intentionally :) the world is not ending just yet apparently. Will keep you posted throughout the next 23 hour period which is pretty critical. I wish the Mayans could be more specific on scheduling because I have fairly full day ahead of me tomorrow.

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S&P 500 Trading Below 200 Day Moving Average

November 14, 2012 Equities

Hold the phone folks! This could be the big one… I wouldn’t own the market index funds if I were you, instead I would be looking for some short ideas like CRM, AMZN, LNKD, etc… We were pretty “lucky” with our calls so far and we still feel the “Hyper-Stagflation Trade” is due for a serious comeback (IE don’t sell your hard assets but short some stock with a tight stop order right at the 200 Day Moving Average on the SPY 1 year chart).

I may have toked a joint or two in my day and maybe Arizona State is not the Ivy League but I do have a degree in Finance, 10 years plus of financial market knowledge and the wisdom to say “hey, diversify a little out of those crappy slips of paper you own known as technology stocks.”

Look, investing here on the long side in anything other than gold or whatever is probably a total longshot. Given that every single Algo-Bot in the entire world is going to short the market beneath the 200 day moving average, you are fighting the smart money. With that being said, while we feel feel Bernanke is close to running out of bullets, we also feel he is skilled at creating one-day melt-up traps for short sellers. I secretly feel Dr. B loves nothing more than disrupting the natural flow of the stock market and the power that his market manipulations command, but we’ll never know his frame of mind when he decides to rip the faces off of some shorts.

The RSI is too oversold for the market model to switch to short here, though we certainly think the evil robots will send the markets into the abysmal pit of a deep bear market in the medium term. All in all, hold your gold and buy some puts on CRM, QQQ, and AMZN.

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Post Election Selloff: What You Need to Know

November 8, 2012 Equities

So the markets are tanking with the S&P below 1400 which is a pretty big psychological blow to the momentum of the bulls. Reality is setting in and it looks to me like the S&P is worth about $1100 or so in my view based purely on valuations given the macro backdrop.

At some point the long stuff/short stocks stagflation trade may start working again.

Things to watch:

The 200 day Moving Average on the 1 year chart sits about 2% or so below current levels… Any violation of the 200 day should be followed quite closely.

Silver and Gold: watch for a breakout on fiscal irresponsibility… Romney was a threat to the metals, but Obama not so much. The fiscal cliff may actually end up slamming stocks and the Dollar at the same time so hedge accordingly.

Watch your savings closely…. The scammers and thieves are working around the clock and they are the wolves in sheep clothes when it comes to the stock markets.

Take everything on Hedgephone with a grain of salt… THis blog is part satire and part financial porn… Never forget that this is one man’s free speech at work and nothing more! Do your own DD dangit

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The Bernank Speaks, Silver Leaps…

August 31, 2012 Equities

The ultra inflationary policies of the FED which has created an unprecedented explosion of the money supply means that with the threat of even more funny money investors may want to consider buying metals while shorting the Nasdaq as a hedge. Certainly, the trade is not without risk. However, with a horrid economy and more printing, I would continue to think hard assets should outperform most asset classes. We like timberland and farming here, but in that respect we are outcasts in the financial world. That’s okay… we don’t want to be popular or our ideas to be well received (if agreeing with everyone is your goal you’re probably on the wrong side of trade).

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Even Though Technicals and Fundamentals Remain Dicey

August 2, 2012 Equities

we are sticking on the sidelines in our model… That said, more aggressive traders may want to take out a small short position on the QQQ via put options as a directional bet or as a hedge against existing long positions.

Hedgephone has been MIA this summer, as I am deep in the forest working on real estate holdings (think log cabin and other improvements). I will even post a pic when I get things finished.

As an aside, the Presidential election is coming up and of course there should be some serious and severe fireworks ahead. Another reason to consider owning some volatility. One way to play it would be to buy QQQ puts while shorting the VIX exchange traded ETF (I think its TVIX or whatever)…. Triple levered funds always blow up when the stuff hits said fan.

All in all, we have a fairly overbought RSI at around 58 or so, a slow stochastic in the overbought range, and a FED that appears to be sitting on its hands (probably a good thing considering the market is much higher than many future free cash flows analysts are valuing the S&P when those free cash flows are discounted to a present day value.

We think $1362 for the S&P is a little rich, but this is a political animal controlled by bankers, the FED, the Treasury, and by partisan politics. (Politics as usual!)…

So whatever you do, don’t get too emotional around election season. Things may end up going to the extreme either one way or another. Interesting to see the Facebook (FB) implosion… Could our prediction about Facebook’s stock price drop be correct and the broader market is the next proverbial shoe to drop? I sure hope not, but hope is a pretty crummy investment strategy!

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Own Things Which are Outside the Wall Street Game

August 1, 2012 Equities

Investors are turning to things Like farmland, residential real estate (rentals), commodity producing businesses like gold and silver mines, etc… to hedge their inflation risks without throwing money at paper assets like stocks. I think the risk of inflation is becoming more and more obvious to the FED and that stock traders should be trading from the short side here.

The Hedgephone Market Model is still in NEUTRAL!

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Is This a Buy Signal? Buffett’s Still Long and Strong

July 12, 2012 Equities

Warren Buffett has changed his view on the U.S. economy.

In a live CNBC interview from Sun Valley with Becky Quick of “Squawk Box,” Buffett says the general economy’s growth has “tempered down” so that it is now “more or less flat.”

He does, however, see a “noticeable” pickup for residential housing from a “very low base” that “doesn’t amount to a whole lot yet, but it’s getting better.”

For months, Buffett had been seeing general U.S. economic growth held back by a weak residential housing market.

Buffett also says things are beginning to “slip pretty fast” in Europe, especially over the past six weeks. He’s confident “they’ll get it worked out” by ten years from now, but right now there’s no obvious answer. A big part of the problem: it’s not clear who is in charge, if anyone, and Europe doesn’t have its own “printing press.”

[More From CNBC: Berkshire Hathaway's 15 Biggest Stock Holdings]

Buffett says he “doesn’t know” if the euro will still be a currency ten years from now. He thinks the euro zone can’t exist as “originally designed.”

Despite the slowdown, Buffett says the U.S. economy is still doing better than “virtually any other big economy” around the world.

He says that “to some extent,” he is in a wait and see pattern on where the economy will going.

Asked about the scandal surrounding interest rate manipulation by Barclay’s and other banks, Buffett called it a “big deal” and “can of worms” that “shakes your faith in certain institutions.”

He believes Barclays CEO Bob Diamond had no choice except to resign.

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