Tag Archive for QE2

Overheard… From Virtue Of Selfish Investing…

March 12, 2012 Equities

www.virtueofselfishinvesting.com

VOSI is a great service and a must for traders — way better than IBD by the way!

Quantitative easing (QE) has been with us since early 2009. It has rendered many tried-and-true market indicators impotent since price/volume action in leading indices has become somewhat less reliable. Stock market timing techniques since 2009 have been more or less decimated with only the exception of this website and a couple of others, and that said, it has not been an easy environment. One key is to capture the big gains when they occur http://www.virtueofselfishinvesting.com/results while keeping losses to a minimum on false signals which is done by the fail-safe built into the model. Further, pyramiding trending vehicles such as silver (SLV, AGQ) and a couple key stocks in 2011 made all the difference. In 2012 (as of this writing, March 12, 2012), jumping on board a basket of leading stocks we reported on in real-time puts 2012 in a much better light than 2011, which was a year of trendless, news driven, gap-up/gap down volatility.

QE is an effective manner to manipulate the stock market higher, often on anemic volume, creating the illusion of wealth and an improving economy. And since people vote with their portfolio pocketbooks, such investors are more likely to buy stocks in such a stealth bull market environment, creating a further illusion of wealth. Meanwhile, the slow destruction of the dollar and other currencies ensues, as central banks around the world continue to print money. Further, fictitious privatized profits are paid out in the form of bloated bonuses to the financial illuminati while massive losses, most of which are hidden from the general population, are nationalized. The hard working taxpayer is ultimately left holding the bag as their precious savings become worth less and less while their tax rates go up more and more. And such tax rates are not overt, per se, on a federal level, but come in all shapes in sizes across many levels- small business taxes, city taxes, excise taxes, and so on. And this is all because of too much debt and the drive to rescue zombie banks and zombie businesses in the name of “too big to fail.”

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Q3: Judment Day or Rise of the Machines?

July 3, 2011 Equities, Macro Economic Viewpoint


Over the holiday weekend, I have been going back over my trades and posts to see what worked and where I have made mistakes. Over the past year, investors who didn’t jump onto the “disruptive technology” theme have gotten crushed. I know it seems hard to believe, but just watching Cramer and buying his picks has worked much better than actually working (hard to believe because Cramer reminds a bit too much of Damon Killian, the host of the Running Man game show: http://www.youtube.com/watch?v=tiIFgtfl2rE )

Seems pretty ironic that the running man was about a military chopper pilot who wouldn’t fire on a crowd of people involved in a “food riot” let alone that it takes place in 2017….

I have to give credit where credit is due, and Cramer has been spot on so a Booyah is in order here even though as a value investor I wouldn’t buy most of these names if you put a gun to my head. Shares of Netflix, Chipotle, Green Mountain, Amazon, Lululemon, Under Armor, Travelzoo, Salesforece, VM Ware, Riverbed, and Acme Packet have soared while the blue chip value stocks like Microsoft, Berkshire, Goldman, Johnson and Johnson, Gilead, Cisco, and others have badly underperformed.

Growth investing is all that investors seem to care about at present with an eye toward new media and disruptive business models. This “Rise of the Machines” mentality has been quite swift and with new HFT program trading algorithms, an earnings beat and raise has trumped all else in the current investment climate. Robotics, Cloud Servers, new technologies, and first mover advantages are that have driven the “recovery” thus far.

Are the disruptive technologies driving the stock market recovery and benefiting from stimulus actually making the problems worse? I think so and this is why I am very skeptical of the recovery and also of the major stock averages at present. Companies involved in disruptive business models often require no employees, meaning that even though Wall Street is booming, Main Street is actually suffering as new technologies allow corporations to drive profits without actually creating any jobs. This “productivity” is not coming from workers putting in more hours as much as it is from automation and computing advances which help businesses earn money without having to employ a labor force. If indeed we are involved in a “jobless recovery” disruptive technology is at least partially to blame. IE, the same stocks driving investor profits on Wall Street are crushing jobs on main street.

Without regulation or taxation based on employment levels, the machines are going to defeat the humanoids both on Wall Street and on Main Street. Handing our data to servers on the Cloud and creating robots capable of warfare and intelligent decision making is putting us on par for some type of “T2 Judgment Day” type of society at some point.

While this all sounds a little bit too much like the Matrix, I assure you I am not wearing a tin foil hat — more U.S. citizens are on food stamps than ever before with some 44MM of us receiving financial assistance at the grocery store. While the stock market is up some 30% since August, unemployment is roughly flat over the same period of time as the Fed’s balance sheet expansion has helped the machines and their masters far more than the “Humanoid Ca ca.”

While I am not saying that there is some type of conspiracy out there against the humanoids, I should say that D.A.R.P.A.’s announcement on Friday that they are developing “super-soldiers” which are part man and part machine is a bit disturbing. I loved Robocop the movie but a real life Robocop is just creepy. Darpa’s new soldiers can fly a plane using their mind, run upp building walls, sprint for 200 miles at 20 miles per hour, and they can even fly. The new technologies can stop soldiers from feeling pain for a month and gives them a heightened ability to see and hear things. I can’t decide if they borrowed this technology from the Matrix, Predator 2, Robocop, Transformers, or Terminator but in any case it appears that companies and the governments of the world possess technologies that are far more advanced than any of us humanoids have previously fathomed.

All in all valuations here are at nosebleed levels, as this uneven recovery sputters forward. Innovation is actually hurting the main stream economy while benefiting the elite class and the thinking robots out there, so make sure to have some tech longs to hedge your short positions on the IWM and QQQ against. Q3 will either be a continued Rise of the Machines or it will be Judgment Day for the stock market, as stocks and the economy at some point intersect and we are at CAPE and Tobin’s Q ratios that are found at market tops.

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Last Day of 2nd Quarter/QE2 Update on Markets

June 30, 2011 www.hedgephone.com/network

Lots to discuss here…

Interesting discussion on valuations given by Leon Cooperman on CNBC… Hard to argue with his logic, however, I also tend to agree with the bears here who say that this rally of 30% since the Jackson Hole Fed meeting has been driven primarily by QE2. So what does this mean for the rest of the year? The question is very relevant because we have rallied 4% in the past 4 days.

As a momentum/technical analyst I would have to be shorter term bullish and longer term bearish here for many reasons. On the shorter term, we are now above all of the moving averages… Unless we gap below the 50 and 100 day in the next week or two this “signal” for systems traders means that they are getting long the market here. The most important thing to focus on is that we have window dressing and also that QE2 is over.

As I am invested in small businesses and not too involved in trading the market personally, I am agnostic. My investments tend to be recession resistant, but then again there is not telling what the future holds.

Relying on QE3 is quite risky, but I have to agree that the government prefers an inflation approach to a deleveraging approach.

The charts here are getting redundant — we all know that the S&P is above the 50 and 100 day MA which SHOULD be bullish but with no more QE2 I say “Caveat Emptor” — Money Managers are under pressure as many of the hedge funds are still below high water marks and have huge overhead. This is why I am more interested in taking a longer term private equity approach myself and managing my own and family assets which are more long term oriented.

Looking forward, we can see that the government wants lower commodity prices and higher stock prices. I don’t think that it’s possible here because of the CAPE PE 10 and the Tobin’s Q but then again anything is possible.

If I was fully invested long the market, I would consider shorting bonds here and buying IWM and QQQ put option spreads. That means buying an October $85 IWM put and selling a July $81 put option for a hedge. I would be trying to match my exposures here. I would also watch the 100 and 50 day moving averages and the 200 day with a view that QE2 is over and the overall momentum is likely not going to be to the upside without more intervention.

One thing is certain. the government loves intervention. One way to play this trend of money printing and interventionism is to own silver and gold, though the end of QE2 is also a risk for both of these metals.

My feeling is that one shold be hedged here depending on their portfolio’s discount or premium to intrinsic values.

I also feel that bond yields could rise. I am long some TBT here and I think we could move higher over the longer term in yields.

That”s my update for now.

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Bounce Looks Sticky, but Having Long-Short Portfolio is Advisable

June 20, 2011 Equities

The markets rallied with fierce determination today, but the gains may not hold over the longer term. The withdrawl of QE will likely put stocks under pressure. that being said, having an eqal amount of long and short positions (with a dollar for dolla long-short exposure) looks like a smart way to invest right now. Although many pundits and sell side analysts are pumping the heck out of the market, the interview given by Robert Shiller recently is really all you should focus on here — most stocks are trading for a high PE10 or CAPE price/earnings as well as a historically high Tobin’s Q…. The 13X earnings numbers being touted are based on NOL’s one time gains, profit margins that have never been higher, etc… etc…

The meltup begun with the announcement of QE2 in August will likely continue until the end of the month, but I expect the luster to wear off once QE ends.

Your levels to watch:

IWM: $80 for resistance, $78 for support

QQQ: $55 resistance, $54 support

SPY: $130 for resistance, $127 for support

All in all, I feel holding cash, covered calls, some physical silver, etc… make a lot of sense here but as we are over the 200 day we have to respect this bounce… The market is still oversold and the final pump may not end until the end of money printing….

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Ugliness Continues: IWM Levels To Watch

June 10, 2011 Equities

The Russell 2000 is nearing the March Lows at $77.70 and I will be watching this level very closely. Looks to me like we will need some type of QE or we can’t catch a bid. That said, we are extremely oversold on most index funds. I would be looking to add to shorts as they cross below their 200 day MA and using the 200 day MA as a stop loss once you short the stock below its 200 day MA. OPEN below $79.65 for example looks to be a low risk/high potential reward short under the 200 day MA….

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For the S&P ($SPX.X) watch $1275 and $1270 for a breakout either way… For the S&P 500 we have the 200 day sitting around $1253 and the March Low stand at $1249 — I believe these levels will hold and will give investors a short term buying opportunity/short covering opportunity… That said, we will let price and volume decide how we are positioned in our market hedge positions (shorts)… PRetty wild markets, but we predicted this because the QE2 ending was pretty obviously bearish along with bad GDP predictions.

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Memorial Day Mining Stock Due Diligence

May 29, 2011 Commodities, Equities

So while most investment managers are out touring their Bentleys and Rolls Royces around Bevery Hills or the Hamptons right now, our team of overly-ambitious analysts are hard at work finding the most undervalued names in the hard asset space for Hedgephone.com readers and letting investors and money managers know about our top picks in the mining and hard asset space. Here are our 7 very best ideas for hard asset investing:

FCX — Freeport is dirt cheap on net assets in the ground with over 4 billion pounds of copper and gold and silver deposits that are worth more than the company’s enterprise vale. FCX is trading for less than ten times operating cash flow and for a forward PE ratio of around 9X. The stock is cheap, but we like selling the January 2012 $50 put options for an additional margin of safety

VALE — Vale is our favorite idea in the mining space at just 6X earnings. Brazil is crashing with the rest of the Brics right now, but we think the stock is oversold and offers investors solid upside potential. Like FCX, we prefer selling the $30 January 2012 put options against VALE to capture theta decay and option premium while we won’t be “put” the stock unless VALE drops significantly from current levels.

NEM — Newmont is too cheap to ignore on a Net asset value basis with gold in the ground worth significantly more than the company’s current market capitalization. We like NEM and again recommend selling January 2012 at the money puts here.

TOT — Total is dirt cheap while paying a solid dividend. Covered calls look the most interesting to us for a longer term position and we think that at 8X earnings the stock is a true bargain.

STO — Priced in Norwegian Kronors, we think STO is a cheap name at under 9X forward earnings while helping to diversify investors out of U.S. Dollar denominated assets. STO offers a rare blend of currency hedge, oil assets below intrinsic value, and a strong management team with proven assets.

COP — too cheap to ignore here with a price to operating cash flow of less than 8X… COP is truly cheap here and again we like selling the January 2012 $72.50 puts for around $6.60 for a return of roughly 10% between now and january of next year, or an approximate 1% per month return. If the stock shoots up, we are happy with our payout of 1% a month and if the stock drops we are happy to own the name at a cheaper valuation.

CVX — Chevron is another cheap oil and gas name here and again we like the idea of selling a longer dated at the money put option against the name. The stock has run a bit from our initial buy target of $100.50 but we still think the name has a long way to run given the boost in oil prices we expect from the summer driving season and the last month of QE2.

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Pomo Rally Rampjobs the Market up .8% on QQQ

May 18, 2011 www.hedgephone.com/network

CVX, COP, RIMM, FCX, NEM, outperfomed so we are happy today… Yesterday I took profits on short positions and sold off the longer dated puts on my calendar put spreads on the IWM… Today, I have closed out a good deal of my incremental long exposure as the 1.5BN days are usually red ones… With that said the market will likely stay pinned for options expiration, using CRM’s “beat” to pump the stock market a little higher on Friday… I think we are going to test the old highs possibly, but we will again fail at them and will selloff again…

All we need to know is to buy PM’s and Stocks before the 6-7BN days and short index funds on the day before the 1.5BN days… it’s not purely that simple, but pretty darn close… I will keep readers posted, but light POMO for the next few days will likely be a bigger factor in markets than an oversold stochastic on the daily charts…

RSI is not too low, and the market is overvalued… In essence, the government has to print money to keep stocks up, but pretty soon that trick will not work any longer… It’s a tough environment just remember not to be short on the 6-7BN days!!!!!!!!!!! (like today)

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Macro Monday: Buy Physical Silver and Gold, Short Treasuries and Stocks, Long RJI, Short IWM QQQ and CANDIES/FADSCAN (FADSCAM?)

May 15, 2011 www.hedgephone.com/network

So there you have it, by gold and silver and put it in your safe at home, short the TLT or buy TBT, buy RJI and buy IWM put options… QE2 POMO is going to be light tomorrow and tuesday, the debt ceiling fears will manifest in the market, discounting of the end of QE will be played out, but the longer term trend is for inflation and weak economic data such as employment and wage data… A barbell approach in options may be appropriate here…

In other words, a large chunk of TBT calls, a large chunk of SGOL calls, a large chunk of SIVR and SLV calls, and a large chunk of IWM put options may be appropriate with an eye towards shorting stocks as your hedge for QE ending discount – no doubt in my mind that the end of QE is not factored into the market enough at this point with valuations as high as they are currently…

Having farmland, real estate, gold, silver, etc… is a good way to play it while shorting the IWM and QQQ…

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