Tag Archive for hedge

Window Dressing or Mr. Market’s Blessing?

July 2, 2012 Equities

So was last weeks whipsaw Friday some typical “Big Boy” manipulation game which conveniently occurred on the last day of the quarter or are things really that much better on Main Street and Wall Street…? I’ll let you be the judge, but the last day of the month and the first day of the new trading month are usually pretty interesting and enjoyable to watch… from the sidelines… The big action in oil and commodities also suggests that the strength in the Dollar may be waning.

Of course, anything can and will happen in markets and Hedgephone has been admittedly slacking on its duty to keep readers ahead of the tape. That said, it is summer, I am chopping wood on my spread here and frankly am not all that      intrigued by the long or short side of this market. The stock game is dominated by robots and their twenty something hipster programmers today so unless you are an HFT gobot you really have to wonder whether investing in the stock market for the long term is actually an investment rather than speculation….

We still like the KO, BRK.A, PG, MCD, PEP, SEB, COP, CVX type of stuff right now and we would stick with a dividend portfolio like this with covered calls written against the portfolio if we wanted more equity exposure….

Currently, the small Jag fund is 80% in cash (SNOOOOOOOOOOOR) and 20% in silver (hedging our cash? maybe…)

In any event, we will be updating this page more frequently… If you get super bored check out the music section for some tunes or the video page for some good old fashioned mid west conspiracy theory knowledge!

Till next time…. (We are still neutral but leaning bearish based on trading ranges)

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Latest John Hussman Read…

April 18, 2012 www.hedgephone.com/network

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April 16, 2012

No… Stop… Don’t. John P. Hussman, Ph.D. All rights reserved and actively enforced. Reprint Policy

As of Friday, the S&P 500 was at about the same level as at the end of February. I noted then that our estimate of potential market losses over an 18-month window was in the worst 1.5% of historical observations. More recently, we’ve observed a marked deterioration in our measures of market internals. As a result, our estimate of potential market losses over a 6-month window is now in the worst 0.5% of historical observations. In particular, we’re seeing a very broad-based downward shift in market action across nearly every industry group. While the depth of the breakdown is still fairly shallow, the uniformity of the signal suggests significant information content (for more on this distinction, see the note on extracting economic signals from multiple sensors in Do I Feel Lucky?). Though our market concerns are independent of our economic concerns, we see essentially the same downward uniformity in leading economic measures across the industrialized and developing world (for example, see the charts near the end of last week’s comment Is the Fed Promoting Recovery or Desperation?).

Of course, our risk estimates are based on the average market outcomes that have followed similar evidence over the past century, and this particular instance may be different. Regardless, I remain in the uncomfortable position of having to express our concerns with the word “warning.”

This is not an appeal for investors to sell, or even reduce their investment exposure, but is rather an appeal for investors to carefully examine their exposure to market risk, and to consider their willingness to adhere to their existing investment discipline through a steep and potentially extended market decline. We are enormous advocates of investment discipline, but we also know how uncomfortable that can be during various points of the market cycle. For buy-and-hold investors, the main thing to examine is the extent of loss you can tolerate without abandoning that strategy, in recognition of the actual size of the losses that investors have regularly experienced over time. It is best to ask that question when you are experiencing strength. You never want to be in a position of abandoning a sound long-term discipline because of discomfort over some portion of the market cycle.

Read More Here:http://www.hussmanfunds.com/wmc/wmc120416.htm

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Sirius XM: Should You Sell or Short SIRI?

April 17, 2012 Equities

Sirius XM (SIRI) investors have been on quite the roller coaster ride lately, and at 32x earnings many investors think the stock is too expensive and risky to own. In my view, however, the stock is too cheap to short, based on cash flows as well.

You see, Sirius has managed to stage an impressive come back over the past three years. Back in 2009, Sirius XM posted a $329MM loss. In 2011, the company posted an impressive $426MM profit. Clearly, this is not a utility stock and is not for the faint of heart. Sirius bears will point to the Pandora revolution, the lack of a need for the service thanks to Apple‘s I Tunes, the slowdown in subscriber growth etc, as reasons for the stock to tank, but some of these fears are already factored into the price of the stock.

What I think the bears are missing is that Sirius is still growing and the stock is arguably cheap based on enterprise value to EBITDA. Sirius has an EV/EBITDA of just 11x – which is the type of multiple given to a boring oil stock like Exxon or a staple stock like Procter & Gamble. While Sirius XM may be in trouble because of technological advances, the stock is still a growth name trading at reasonable multiples. Unless the bear case plays out perfectly, the stock could squeeze unsuspecting shorts and move substantially higher over the medium and long term even with all of the headwinds and uncertainties the company faces.

The best argument for shorting SIRI, however, is the company’s large tangible deficit and shaky balance sheet. That said, Sirius managed to pay off some $550MM of debt last year and the momentum on the bottom line is starting to tick up. With a negative tangible book value of $3.7 Billion, however, Sirius XM is a serious candidate for bankruptcy protection at some point in the future if it can’t spit out large profits and cash flows over the next few years.

Read More Here: http://seekingalpha.com/article/493911-sirius-xm-looks-tough-to-short-and-a-turnaround-is-always-possible

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We Hate Being Right About the Wrong Things

April 10, 2012 Equities

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But stocks make lousy long term investments at current valuations and we think stocks have a lot further to fall, possibly sending the S&P 500 under $1250 or so during the summer months. We often are bullish on equities, but usually that’s because of an undervalued, underbought condition in the market. Today, stocks are trading to rich multiples of book value, sales, and earnings. Price to free cash flow multiples are quite high while profit margins are generally at mult-decade highs for most large cap stocks.

In other words, the momentum appears to be favoring the bears, but of course one should expect a sharp “snap-back” rally at any point to clear out the shorts and stick new longs in at the tops. It’s the same old “parting the sucker from his money” trick that the market has always played on investors, except that this time it really is different — buy and hold stock investing could produce negative real returns over the next year or two. Over the next decade, I expect stocks to put up 4-6% returns annually.

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Markets, Hedgephone, Real Estate, Etc…

April 3, 2012 Equities

Well, NSL has put his money where his mouth is, and no he didn’t pull a Paul Wall and buy a diamond grill for $30K although that may somehow actually make a ton of sense as an investment during quantitative easing and in an environment of rising commodity prices.

Still, we stuck to our guns and bought real estate. We like to buy low and sell high, so to us picking up some rental property in South Florida makes sense. Anyways, our market model is still sidelines but looking to go short here on any confirmed selling pressure. So far, we have been quiet after the model was stopped out last month at around 1340 or so on the S&P… We think the markets will give us a nice trade-able opportunity on the short side either sometime this Spring or Summer or into the Fall’s election madness.

For now, we like real estate, real assets, gold, silver, commodities, some undervalued stocks, and farm land. Continue investing wisely and always hold some emergency cash around as you never know when you will need it! Be ready for the market model to go short again and as always, place stop loss order at 2% from where you enter your trades!!!!

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Why You Should Listen to My Bearish Calls and Hold Cash or Buy Puts

June 13, 2011 Equities, Macro Economic Viewpoint

                                             

      Below is a Youtube video of another very good macro call by Marc Faber about the many Bentleys and Rolls Royces being driven by those with stock market bubble wealth — it looks too much liek the 1920′s right now from my perch in Palm Beach — many a $30MM house, Maseratis are not even cool, and to be considered rich you have to have $100MM… Ferraris, Bentleys, and opulence among a small group of people means that the economy and the markets are in complete disagreement — it’s time to play defense and brace for a continued correction. We will likely see a crash here, but watch the 200 day moving averages… We almost broke them on the QQQ today but it held — at some point this week, the market will crumble. That’s my view, but eventually I see either a depression or hyperinflation just like Marc Faber… Prices for everything are up while the economy is sluggish.

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SHORTS??????????? We Are Hedgephone.com After All!

June 3, 2011 Equities

It looks like markets are closing below the 50 day moving averages today, and after some hard thinking over the matter I feel as though below these moving averages the stock market is likely going to crumble here. I am worried about valuations, macro economic data, moral hazard, too big to fail, the Quadrillions of off balance sheet derivatives, and the loss of law and order in the financial market — just look at the Chinese fraud rush for an example of this trend.

Here are 5 short ideas for hedging your risk:

SQNS: PE 700, SQNS has risen over 100% in the past couple of weeks. Cramer likes it, but the company is speculative and after we learned that cellphones cause brain cancer I wouldn’t want to much in the way of cellphone exposure (even thinking of going with the old land line here at Hedgephone headquarters… Maybe the dial up business will make a comeback after all, lol.)

NFLX: Sorry NFLX bulls, the stock is just too expensive for my tastes.. The entire home entertainment market generates around $16 billion per year and NFLX is already worth $14 billion and trading for 70X earnings. Cash flows here are also disconcerting with payables and short term liability increases fueling operating cash flows. Book value is negligible so any hiccup and this company could actually be in some financial trouble in my view.

CRM: Still a very expensive name at 320X earnings as cash flow here is fueled from short term borrowing and not earning money — too much excitement from the retail investor here, etc…

DDS: Up from $4 to $56 in a few years, Dillards just doesn’t seem like a sure bet to me at these prices for the long book but set a tight stop if going short. The decision to turn part of the stock into a REIT is great, but I wish they would have done this at the lows of 2008 instead of becoming insular and cold to outside shareholders in the downturn and letting their stock crumple. Yes, for longer term investors, things worked more out fine, but when another crisis hits this stock feels to me to be one of the worst places to hide.

IWM: When shorting stocks against a long book, many times finding a correlated index fund works better than trying to stock pick in reverse. The IWM is overvalued and the run from the lows is nothing short of astonishing. Look at the 50 day and 100 day moving averages to decide whether or not to hedge your holdings against this overvalued (Per Federal Reserve) index fund.

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