Tag Archive for Stocks

Stocks Up On Oversold Bounce, Fundamental Vs. Technical Analysis, and Investment Ideas

June 8, 2012 Equities

We didn’t bottom tick it exactly, but we almost did with our market model switch to neutral… we also got lucky exiting SIVR at around $29 after buying it for around $28 or so…All in all, the bears are running scared right now because of the TA and the chart setup… We will likely see some more action at the 50 day moving average and could very well see a resumption of the bear leg down toward more reasonable price to peak earnings multiples… Until we get a break either way we are sticking with our “sidelines” call.

I saw nothing in this weeks “Just For Men Ben” minutes that excites me regarding the money printing so I cannot recommend that people speculate on a fully valued stock market even though the technical chart signals look quite promising for a continued rally as we have discussed here for some time.

Look, many of the best and brightest in the hedge fund community think technical analysis is a complete waste of time and a total joke. I think that it works because enough traders and robots think it works and their thinking makes it so… Either way we want to blend solid fundamental and technical analysis here for our readers. Look for a new series of SeekingAlpha.com articles by us in the near future as we will be returning to our desks for the rest of the sleepy summer trading session and the fireworks that this fall’s election season should bring to the stock, real estate, currency, and commodity markets.

Right now our favorite place to invest is in real estate. If you are super wealthy, consider buying a private company where management is willing to stay on board for a few years. Also, don’t buy something that is “for sale” — many times the guy trying to sell you the hardest is desperate because he knows business is slowing just around the corner and wants to find a bagholder. In other words, it’s very easy to sign up a seller who knows the end is near for their enterprise.

 

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Hedgephone Market Model is Neutral

May 29, 2012 Equities

We are switching from slightly bearish to neutral in our market model though from a trading perspective I myself have been less than fully invested for a while now. Though I think stocks are oversold and could fly on more pump-u-lous from the feds, I am not intrigued enough with equities to be a long term investor in most stocks at these levels. That said, I am also concerned with paper currencies, so investing right here seems pretty difficult (hence the 1.7% return on the 10 year)… As for me, I am chopping wood up in the hills but pop out occassionally to observe the stock market (the stuff market aka commodities have been getting bludgeoned) and to check the tape and the technicals.

Currently, the stock market is at an interesting junction. The valuations and fundamentals look pretty weak from a cheapness perspective relative to other assets like farmland or private middle market businesses. That said, we have to maintain a “cash is trash” perspective because of high unemployment and the following central bank response of more and more stimuli.

From a purely technical perspective, however, the market looks short term promising for those willing to take some speculative risk on here (maybe buy some front month DIA or SPY slighly in the money call options????) as the RSI is around 20 and very oversold while the MACD and Slow Stochastics are starting to signal a buying opportunity.

All in all, stocks look a little oversold, the dollar looks a little overbought, and the market will do what 99% of traders don’t expect. While I have to admit I am a bearish/conservative/skeptical investor by nature, the tape is what moves stocks in the short run.

NOTE: RSI oversold (BULLISH) MACD crossing over, Slow Stochastics oversold… Looks like it’s an OK time to try to bottom fish here for a trade (1% of your overall portfolio is placed in SPY call options sounds ok if you are 100% in cash — I would at least hedge some of my bearish exposure for a few weeks)…

We are still over the 200 day moving average as well… Remember, stocks are actually going to rise on a nominal basis over time because the Fed is printing money.

 

Chart forSPDR S&P 500 (SPY)

 

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The Neverending Pump

November 11, 2011 Macro Economic Viewpoint

It looks as though the stock market will forever ignore reality and churn higher indefinitely. I would be in cash, foreclosed real estate, color diamonds, gold, silver, currencies, and commodities. Farmland is my favorite investment right now because it is something Bernanke cannot print yet it also does not rely on middle managers for a longer term profit.

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Today in Stocks: Levered Beta Festival

August 29, 2011 Equities

If you owned a high beta, high risk overvalued technology company you made money today. Meanwhile if you owned Walmart, J&J, Pepsi, etc… you likely made 1/5 of what you made owning the scams out there. The tension in the market between return chasing computer programs and the humans who have experienced the past 5 years of directionless markets is thick, but most of the conservative money managers out there are already out of business and what is left is the levered hedge fund extravaganza we have today. Scalp machines, beta buyers, correllation algo tradebots, squeezebots, and many other program trading algos out there were killing the “evil” short sellers and hedgers (think conservative investors) meanwhile the suckers at the poker table buyng Amazon, Chipotle, Sina, Linkedin, CRM, etc… with no knowledge of PE ratios were handed cold, hard cash…

This has been the texture of the overall market for the past two years. With that said there are some undervalued pockets in the markets. Life insurance companies, Berkshire, AIG, HES, DNR, KO, PBR, COP, GS, VOXX, OSK, etc… look quite reasonable at current valuations.

Looking forward, I think focusing your longs on the undervalued names while selling bear call spreads on overvalued stocks or index funds looks to be a good way to hedge risks. Covered calls also seem wise here given elevated levels of volatility. Those who sold premium as the Vix peaked made out quite well over the past couple of weeks.

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Oil Prices Going Up, Stocks Going Down, Gold Going Up, Economy Continues to Suck Wind… Buy Real Estate?

July 16, 2011 Macro Economic Viewpoint

I would normally be getting bullish on real estate, but the oil prices and gasoline prices make suburbia look unsustainable. If you want to buy a house make sure to buy in a market where prices are down 50% or more from the peak… I think the stock market bubble is finally about to pop, but there is no objective way to predict the exact timing of the ultimate collapse.

What’s clear to me is that there will be a stock market collapse but this time oil and commodity prices will not fall along with stocks. The reason for this is the debasement of currency along with the economic collapse. Real estate would normally be a safe place to invest, and if interest rates go up with higher inflation then buying a house in Florida that is down 65% from the peak would seem like a good place to invest. That said with Freddie and Fannie in freefall and with the banks holding years of inventory on their books it’s clear that the supply and demand factors are in control of the pricing mechanism and that higher interest rates may not actually help this “inflation hedge.”

The reason that real estate is not working as an inflation hedge this time around (RE was a great investment in the 1970′s and 1980′s for example) is that the banking system is nearly insolvent and the demographic situation in America has completely changed. The US is not producing enough children to replace the elderly who are dying off and the boomers are heading towards old age.

Gen X and Gen Y are not having kids at the same rate as the boomers. Times have changed. The younger generations grew up with fear mongering, the cold war, environmental concerns, nuclear fears, etc.. etc… They are less likely to have kids because of some of these fears and that fact has made real estate a less attractive investment than past recessions.

I still believe real estate will be a better long term investment than equities, for example, as the recent pump and dump QE policies have simply created a bubble again which will pop. Ultimately, those with dry powder in a diversified basket of commodities, cash, gold, foreign stocks and bonds, foreign currencies, etc… will be able to buy stocks on the cheap, but in my view real estate at present levels makes more financial sense.

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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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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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Yesterday’s Suckers’ Rally Turned Into Buyers Remorse Today

June 15, 2011 Equities

The markets headed for new lows on the Nasdaq 100 today which is trading for 23X earnings ex negative earnings — IE it’s still REALLY expensive… I don’t know about you but fancy buzzwords like “Cloud” “Social” and 1000 PE ratios just don’t do it for me. I need earings and cash flows…. Anyways, yesterday we said of the Futures Ramp Job Rally:

“That said, this bounce here looks kind of sketchy because it was a gap up — gaps usually get filled. In other words, because the rally was a late night futures driven “ramp job” and not a gradual ease higher, this type of action might easily be reversed”

Robert Shiller’s admonition that by PE 10 standards stocks are still 40% overvalued is what most investors should focus on — sure, in the short term stocks could go up, but over the long term you don’t want to own them. Cash under a mattress, physical gold and silver, or a long/short approach makes a lot more sense considering Wall Street is unloading a bunch of overvalued tech bubble IPO’s right now, some of which you may want to short (I am still short some LNKD calls here)…

In any event, don’t rush out and buy this dip just yet — some names are reasonable, but I think we will have another huge selloff in which case holding cash is king — those who remain solvent will be made richer… Don’t invest on hopium, invest on facts!

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Fundamental Viewpoint: Saturday June 4, 2011

June 4, 2011 Macro Economic Viewpoint

     Recently, the stock market has been under pressure as the market has begun to discount the withdrawl of QE and many of the fiscal stimulus measures that have boosted corporate earnings and share prices in the shorter term (think NOL’s and one time gains here) while potentially permanently reflating the prices for commodities and precious metals. The stock market has had a good run, up almost 30% from the lows on the S&P and even more for the Russell 2000 and the QQQ, but as fundamental, bottom up investors we must ask ourselves if the valuations are merited given higher oil and gas prices, larger debt to GDP ratios, a stagnant labor market, and the coming claims to Social Security and Medicare by retiring baby boomers.

       Indeed, the CAPE or PE 10 for the stock market is still over 23X which is a level historically associated with market tops and crashes, while oil prices and gold values are hitting very high levels, with gold making new highs on a monthly basis. Silver is up over 100% since I recommended putting a full 30% of investable assets in the metal last summer and again on the blogosphere on September 7, 2010 in my article “Valuing the U.S. Market, Forget Stocks Buy Stuff.” The rally in the metals looks to continue and sadly this no longer appears to be a temporary increase in the nominal price of the metal but a larger symptom of a diseased currency market for all FIAT paper currencies around the globe.

      Moreover, the decline in the value of the dollar versus gold has not been helpful to the export base of the U.S. economy as the central banks of most nations around the world have simply responded by printing more money of their own to combat the devaluation policies of the Federal Reserve. In essence, food prices, oil prices, medical costs, education, gold, silver, gasoline, and other prices have risen at an alarming rate while wages and incomes have remained stagnant at best. Unemployment is high and likey not going to be helped by McDonald’s announcement that they will be replacing humans with machines at their drivethru windows…

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Update: Market Looks Ugly, Expect the Government to Pump It Back Up

June 1, 2011 Equities

But I doubt they can do anything about it right this second… The “Humpty Dumpty” stock market is in a bubble and all of the King’s horses and all of the King’s men cannot put this ponzi scam back together again…

So find yourself a hedge and if you think we are in a 30 year bull market for stocks you may need to change professions (kidding, but seriously, this thing looks scary here) — IE don’t stick with asset management but diversify, lol, just my opinion but then again I believe that $900 is a fair price for the S&P as does Jeremy Grantham!…

Stocks are overvalued here and it’s super annoying that the momo junkies keep buying the market’s biggest “scams at this price” names right now so do yourself a favor and look at PE ratios… If there is a number OVER 10 on the PE ratio, SELL SELL SELL… The economy sucks and there are plenty of cheaper stocks out there that offer better risk/reward profiles than CRM and NFLX… (nice call on LNKD and CRM for us BTW… pat on back for making you readers “mad money” lol…)…

Anyways, don’t believe the hypesters here, this stock market is a PIG with LIPSTICK all over its snout… Make sure to play defense and if you want to buy something buy gold or silver or agricultural commodities or raw land… Just don’t buy the IWM at the double top.

PS: VMW broke below $100 and as readers know, we only like this as a pair trade for a CRM short… And also, we don’t really like any names with huge PE’s, BUT if VMW goes over $100 again you can buy it again following the Livermore rule of buying over psychologically important levels when dealing with leading stocks…

I have been bearish on CRM for a while now, so it’s nothing new, but today’s action was pretty awesome from my perch at Hedgephone.com — ORCL and VMW are just so much less hyped and much better investments if you really “Believe” the growth story… I am not a Jim Jones cult type, so for me I’ll stick with empiricism and fact — like the fact that LNKD is a bubble and still a good intraday short even though Altucher got me to cover for less of a daily profit than I usually make from shorting it, LOL….

If you are buying stocks like LNKD it’s because you don’t understand PE ratios… Do yourself a favor and put your money in cash or in a bond fund or in an index fund like SPY but realize that the SPY is likely 40-50% overvalued here as well! The PE 10 is still insane here.

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