WSW, Monday, 14 November, 2011

General Comment

Well, BigCharts looks to have changed a service provider, so all the links are broken and need to be redone with the new names in them. This could take a while (especially to get to the Racing Stocks tab, but it looks like I’m the only one who really uses that tool). Don’t think I’ll go back to all the OLD postings and update them. At least not until I’m incredibly bored.

Not surprisingly, the comment on news flow stays substantially the same as it was about 2 months ago:

The “news flow” is all about the Greek Crisis. With good cause. Greece is doing the hard path of “austerity” and the Greeks are not liking it. The jury is still out on how this will end, but the SHTF moment is coming (no matter how much they “kick the can down the road”). Not only is Germany getting tired of funding Greek excess, but the IMF and other lenders, too, have said “No more cash without balanced books.” Greece has huge debt, but also does not take in enough revenue to fund the government expenditures even if it were not in debt. (Unlike Italy who is in debt, but has enough revenue to break even, just not enough to get out of debt.)

Only real change is now “And Italy is in the soup too!” Things will be volatile and dodgy until that whole mess gets settled some more. So far we have governments turning over fast in both countries. More to come?

Conclusions and Likely Actions

Gently easing into selected positions. Nothing very risky, and ready to get out in a hurry if needed. Holding some cash and selling bonds, mostly, along with a few long term holdings (like BRKA). Adding positions in selected issues as their chart says “OK”. Emphasis out of Europe related…

Found some interesting things to investigate further, but still in the ‘do your homework’ phase (noted in line below) and I’ve finally added the Mo’-MO momentum section. Some interesting individual names there to investigate and vet too.

Pointer To Other Topics

Some general comments on how long term investing differs from trading and my thoughts on things to do for the long term investor, start with this page:

https://chiefio.wordpress.com/2011/06/12/lti-long-term-investing/

If you are expecting global warming stuff, it’s under the “AGW” categories in the right hand margin. Things specific to the NCDC data and GIStemp are under categories with those in their names.

This posting is about the other thing I do, looking at investment markets. Prior postings in this series are available here: https://chiefio.wordpress.com/category/wall-street-week/

Posts with some relevance to trades, but not in the format of a full WSW analysis, are available under this category:
https://chiefio.wordpress.com/category/economics-trading-and-money/

The Nature of the Charts Here

The charts in this posting are usually live charts, so my comments will describe how it is now, but in a week it will be showing new data and a new week. If I capture a “static image” I usually label it as such. You can tell by looking at the date bars on the bottom of a graph. I typically use the live charts since I think it is more important to be in touch with what the market is doing NOW than to preserve the historical chart, this is, IMHO, a reasonable choice. Just don’t be surprised if the chart I describe is not the one you see a few weeks from now! If you would like to see the historical chart, you may enter custom date ranges on the charting tool at www.bigcharts.com

Wall Street Week –
Monday, 14 November, 2011

Long Term Context

I’m promoting this chart to the top for a while, as it is now in control. Look closely at what it’s saying.

This is a very long duration chart (5 years) of NYSE. It will not change much from week to week (just one tick mark) so guides longer term attitude.

5 Years, NYSE

5 years, NYSE

Price is still below the SMA lines. Bear Market, be out of stocks. For traders, you can trade-in and buy the dips, then ride them back up. At this point, that ‘dip’ has reached the SMA stack. Time for traders to step out, too. (At least on this time scale).

The SMA lines say the same as last time:

The SMA lines are converged ( I call that a “weave”). In “corrections” those are times to “buy the dip”, in “tops”, they are times to stay out. Right now, we are not in a confirmed Bear Market (the ‘weave’ has not gone to ‘inverted order’ with longest duration on top; nor have we had the price return from below and fail to penetrate the SMA stack).

I would just point out that right now price has converged with the SMA stack. It’s the ‘make or break’ moment where prices either fall away into a confirmed Bear Market downtrend, or break through to a new Bull Market Rise (or, rarely, stay weaving in a mess and muddle).

MACD is below zero and with ‘blue on top’. Indicating a ‘positive run’ underway, but inside a negative (below zero) context. Slow Stochastic has reached 90 and is poised for a downturn. That ‘swing trade’ from the spike down in October is reaching an end. I’d not be buying in at this point, wait for the Slow Stochastic to reach a low again.

DMI is ‘red on top’, but we’ve had the red cross below the black line. The black line is inflected down. All in all, it’s saying a negative bias ending, but not a lot of positive bias yet present. We need blue on top to have a positive long term investment bias. For now it’s just a ‘traders market’. (You can still make money then. But you need to either go to a faster time scale and trade the ripples, or buy “deep value” stocks on the cheap, or for very selected issues, buy momentum stocks fighting the tide… Broad Index investing ‘has issues’ in this context.)

As prices return to the middle of the SMA stack, we are at greatest risk of a new plunge.

There is no “numerology” nor “voodoo” in this. The price motion captures the decisions of all the fundamental analysts, news hounds, manipulators, hedge fund managers, et.al. All we are doing is standardizing how we read that “tell” on what they are thinking (through how they move the prices).

I’m adding another chart. This one is TLT vs SPY, as the S&P 500 is the basic investment vehicle for most folks (unless you really want to pick sectors or individual stocks, you ought to start with a “SPY / Bond” oscillator, as on this long term chart. TLT is long term US Treasuries, so gives a good view of the major alternative where cash runs during times of doubt. If you plotted a line 1/2 between those two, you would get the performance of a portfolio that was 1/2 in each. A pretty good basic strategy for times that are hard to judge. They form a natural hedge pair during spikes, for example.

TLT vs SPY (20 year Treasury Bonds vs Stocks) with RSI, MACD and DMI

TLT vs SPY (20 year Treasury Bonds vs Stocks) with RSI, MACD and DMI

This chart is interesting as you can see how volatility spikes at BOND market tops (the opposite of stocks, where volatility spikes are at bottoms) and drops lower during times of bottoming actions.

Ok, the indicators. RSI on 80. Saying “top soon, prepare to be out”. MACD well above zero, but looking like a crossover “soon”. Again saying ‘get ready to leave’. DMI with ‘blue on top’ saying ‘be in bonds’, but it has crossed over the black ADX line. While ADX has not inflected, it has gone flat. Not yet saying ‘be out, just be out’, but it’s certainly not time to be buying in (and I’d be scaling out of large positions right now, as that takes time. Scaling out being selling a position in several pieces over a week or three… or sometimes months.) That bond volatility has been very high lately also argues for this being a bond top, of sorts. Prices are well above the SMA stack, so will converge with it. Selling now and buying back into bonds on an SMA touch ought to be a decent trade plan.

The Dollar Lately

Time to measure our Rubber Ruler.

As we said last time, only more so:

The two most dramatic lines on this are the plunge of the FXF Swiss Frank on central bank intervention and the plunge of TBT on long bond strength. Folks will remember I said to watch out for that…

It looks like the Swissy has now converged with the other major currencies, so the central bankers are likely done (for now…) diddling their currency. FXF is back on the “Likely OK to buy” list. The TBT fund has also got a pretty good ‘bottoming look’ to it. Not surprising given the above look at TLT. A fast trader can watch the TBT for a ‘short the bonds’ trade to develop (whenever Europe stops being a conflagration…)

In other notes, FXM Mexico tanked on their having no effective control of large parts of their country (and so, of their economy). Killing tourists is not good for business. Gold took a plunge and recovered. LOTS of volatility to trade, long term stable investment, not so much. Most stable currency with an uplift looks to be the Canadian Looney FXC. All that loverly oil and minerals along with having trimmed back their prior socialist leanings. Also note how the $US line is less volatile than the others. That is part of why I park in $US when I want a break. If I want to NOT TRADE, then I want to NOT trade, and that means picking a low volatility instrument. Everything else is still a trade… So I go to the low volatility stuff. IFF the $US ever goes volatile, I’ll go elsewhere. The Swiss have a small currency, and folks run to it driving it up fast, then they have an interventionist Central Bank that whacks it. Not something you can ignore. Japan has a bank that listens to their industry demand intervention for trade advantage. The Euro was an alternative, and has now gone wonky. Gold always has been wonky volatile… At times I’ve thought that having a basket predefined would be ‘better’. Perhaps a 10% GLD, 10% FXY, 10% FXF, 10% FXE, 60% $USD? But I’ve been too lazy to do the work to figure out if that’s better or worse…

Oh, and notice that FXB the British Pound has been fairly good (stable and higher than USD) and the Aussy FXA has been good, but very volatile. More suited to trades than just ‘park in it’…

OK, our ruler is “OK but a tad biased low over the longer term”, up the last few months.

One Year Daily of UUP Dollar UP, with TBT and selected currencies

One Year Daily of UUP Dollar UP, with TBT and selected currencies

While the indicators are generally saying ‘be long $US’, that ADX line is just laying there dead. Not much movement at all. So it’s OK to be in, but you won’t see anything much happening…

Here’s the same chart with the main ticker being “UDN” the “Dollar Down” ticker and TLT instead of TBT. Note also that the XAU ‘gold and silver stock index’ is swapped for GLD gold metal. The period is shortened to 6 months for a more detailed separation in the recent time periods.

6 Month Currencies and TLT the US Treasury "20 Year Bond " fund

6 Month Currencies and TLT the US Treasury "20 year Bond" fund

Same story, just with inverted indicators and vehicle. You do get a nice view of the Japan Central Bank interventions as the FXY Yen dips down, then drifts back up. The massive gold volatility stands out nicely. Again, good for fast trades, not for ‘sleep well’ nights.

And here is the 10 day Euro chart, with BZF the Brazilian Real added.

Currencies - 10 Day Hourly Interval chart vs US Dollar

Currencies - 10 Day Hourly Interval chart vs US Dollar

Looks like a lot of mindless volatile hash. That happens when folks are getting pummeled by daily Euro-Nuttiness Newsflow…

Were Bonds a good idea?

OK, lets take a peak at the Bonds Race but with TBT (the “long term bonds” short sell ETN – that is, the thing that “shorts bonds”) as the main ticker symbol:

Bonds - TBT to Short Them

Bonds - TBT to Short Them

Last time I’d said:

Bonds were the place to be, and longer term more than shorter.

If The Fed keeps the easy money flowing tomorrow, then bonds will continue to win.

And that was true in the last couple of months. (Yeah, I’ve spent a couple of months not doing a new WSW posting… -slaps hand-…) But that trade has “gone flat”. It’s time to exit a flat vehicle… For TBT, we have MACD “red on top” and below zero, so still not time to put on a short of bonds, just not a lot of reason to be in them. (WIP and TIP, the inflation protected bond funds are a different matter. This is just the US Treasuries long duration…)

Base Metals vs. Precious Metals

Metals 6 month chart

Metals 6 month chart

DBB  - Base Metals ETF
GLD  - Gold (physical metal) ETF
JJU  - Aluminum ETN
JJN  - Nickel ETN
JJC  - Copper ETN
JJP  - Precious Metals ETN
ld   - Lead ETN
JJT  - Tin ETN
SLV  - Silver (physical metal) ETF
PALL - Palladium (physical metal) ETF

A mixed bag. Silver in a nice run. Looks OK to be in (perhaps I’ll do a new SLV detail posting…) but I don’t like the way it flattened at the end… Platinum looks good too. Copper did a ‘pop and drop’ while Palladium did a ‘pop and hold’. I’d buy Palladium ahead of copper on that basis. OK, looks to me like the more ‘rare’ metals are doing better than the more common ones. Palladium and Platinum over copper and tin.

Nickle just laying there on a bottom (but it looks like a bottom that is holding) right next to tin (the green line). The DBB basket indicators are looking like “bottom is in” but upward run not started yet. Long term investors can likely take positions in metals with some safety at this point. It would be good to look at the metals miners, too. As metals prices rise, their stocks will too.

A closer look at gold:

Gold vs Gold Miners vs "Gold and Sliver Index"

Gold vs Gold Miners vs "Gold and Sliver Index"

Just a mess. Weaving SMA lines. Price in the middle of it, but lower than the prior high. MACD just above zero and ‘blue on top’ but the ADX strength line just nowhere, reminding us that this is a positive TRADE run, not a long term momentum action… The ‘gap’ to the miners is also still a bit distressing. All in all, I think I’d rather buy the miners and get the gold ‘cheap in the ground’…

Here’s a little look with a couple of other indicators. Volume+, Volatility Fast, and Momentum. I’ve also put PSAR (the little red dots) on the upper graph. This is a 6 month daily chart so you can see the daily volume bars better.

GLD with Volume, Volatility, and Momentum

GLD with Volume, Volatility, and Momentum

Volume is just dead. Volatility spiky, but fading. Momentum on the skids, headed to a zero cross to negative. Pretty much says “not interested in Gold”… We’ve also got a weaving disordered SMA stack too. Not nearly as interesting as the base metals, or the mixed industrial / precious metals of Platinum and Palladium, IMHO.

Ag Commodities

Last time I’d said we were in a downtrend. That continues.

Ag Commodities 6 month chart

Ag Commodities 6 month chart

DMI cruising along with Red On Top, steady downtrend. We had a one month ‘return toward the 50 day SMA’ line, that never quite got there. MACD went ‘blue on top’ for a while, but never crossed over the zero line into a positive trend, just a counter trend rally, and not much of one at that. COW rising some, as meat prices rise. That and a spiky sugar line that gives regular swing trades is about it.

Looks like Ag is not interesting at the moment. (Though a look at the meat packers might be in order…)

Anying new in the “bottom fishing” waiting game for Brazil. Same as before:

Last time I’d said:

With RSI ‘near 20’, it’s time to start looking at CZZ and Brazil as ‘bottom fishing’ with a potential entry point. Still not liking the politics in Brazil, and their market will generally do worse than ours in a downturn (better in an upturn). But one can still watch for the turn to come, if it comes. And you start watching when it looks the worst.

And CZZ obliged with a very nice bounce off a spike bottom. It is about to touch the SMA stack from the topside and bounce off. With a MACD move to ‘blue on top’ and ‘above zero’, it becomes an OK longer term investment. (But always with an eye on the politics of Brazil and the price of oil…) The BZF line looks like money flowing into Brazil too. Time to look again at Brazil…

CZZ Cosan - Brazilian Sugar vs BZF Real,  EWZ Brazil and SPY S&P 500,

CZZ Cosan - Brazilian Sugar vs BZF Real, EWZ Brazil and SPY S&P 500,

When things are looking bad for the USA, stay completely out of Emerging Markets… BUT when the world lights up, the emerging markets can be a rocket ride…

Monthly Running Stock Sectors

So what “won” and “lost” over the last month? (though remember, they may not be the winners next month… it’s just to provide ‘context’).

One Month

This list is a bit misleading as you had to time the entry just right to capture this one up month after a big drop, but it WAS possible to make money if you did.

10 Best Performing Industries 
Industry Name 	Percent Change (over time selected)
Dow Jones U.S. Pipelines Index 	20.06%
Dow Jones U.S. Consumer Electronics Index 	19.79%
Dow Jones U.S. Exploration & Production Index 	18.31%
Dow Jones U.S. Platinum & Precious Metals Index 	17.11%
Dow Jones U.S. Tires Index 	15.78%
Dow Jones U.S. Hotel & Lodging REIT Index 	15.33%
Dow Jones U.S. Industrial Suppliers Index 	14.27%
Dow Jones U.S. Steel Index 	14.14%
Dow Jones U.S. Oil Equipment Services & Distribution Index 	13.55%
Dow Jones U.S. Home Construction Index 	13.39%

Looks like I left a lot of money on the table by being a lazy bum and not doing that Momentum Posting…

Generally, an ‘industrial recovery’ trade. Metals, with some emphasis on industrial metals like platinum and steel, oil, piplelines, and some construction (homes and industrial suppliers). Some more tires and a bit of the end of vacation season. As Europeans flooding to US Hotels on vacation has likely hit a pause, I’d be careful about the hotels going forward… But the theme of ‘industry will export with a weaker dollar’ looks to have legs.

How about the losers?

10 Worst Performing Industries 
Industry Name 	Percent Change (over time selected)
Dow Jones U.S. Airlines Index 	-5.64%
Dow Jones U.S. Brewers Index 	-2.05%
Dow Jones U.S. Nondurable Household Products Index 	-1.57%
Dow Jones U.S. Mortgage Finance Index 	-1.51%
Dow Jones U.S. Full Line Insurance Index 	-1.44%
Dow Jones U.S. Waste & Disposal Services Index 	-1.33%
Dow Jones U.S. Computer Hardware Index 	-1.02%
Dow Jones U.S. Specialized Consumer Services Index 	-0.99%
Dow Jones U.S. Auto Manufacturers Index 	-0.66%
Dow Jones U.S. Personal Products Index 	-0.35%

Airlines (NEVER own an airline…) largely on oil price hikes (ALWAYS own some oil…) along with brewers ( I guess we’re not drinking as much beer lately). LOTS of household related… Mortgages, insurance, garbage and computers, consumer services, autos, personal products.

Yeah, that ‘fits’. The only inflation destroying folks lives is in the stuff we all buy (food and fuel) and not in the wage we earn (net to zero, so ‘no inflation’ on The Fed level…) while the somewhat buggered dollar makes some exports more sellable and the Euro-Fiasco making it more sensible to put operations in America for folks making an A/B decision… So, “Bugger the population, buy the industry” looks like the theme. Likely to continue, IMHO, as I’m not seeing anything being done to change the trends.

Any change vs. “lately”?

Weekly Running Stock Sectors

The best and worst of the week? Do they tell a different story on the short term trade?

The ‘up / down ratio’ is about flat. Looking at those percents, if you owned the whole basket, not much happened. It’s a flat market, but with selected winners.

10 Best Performing Industries 
Industry Name 	Percent Change (over time selected)
Dow Jones U.S. Brewers Index 	5.53%
Dow Jones U.S. Home Improvement Retailers Index 	5.47%
Dow Jones U.S. Health Care Providers Index 	3.70%
Dow Jones U.S. Home Construction Index 	3.45%
Dow Jones U.S. Travel & Tourism Index 	2.58%
Dow Jones U.S. Health Care Equipment & Services Index 	2.48%
Dow Jones U.S. Telecommunications Equipment Index 	2.41%
Dow Jones U.S. Distillers & Vintners Index 	2.39%
Dow Jones U.S. Railroads Index 	2.29%
Dow Jones U.S. Pharmaceuticals Index 	2.24%

An odd mix. Looks like some short covering in things like Brewers and other consumer related. Some large hedge funds changing bets? Railroads and Pharma look like new players. I’d be cautious about buying a Dead Cat Bounce in consumer related based on one positive week, but it might argue for the short leaving indicating a ‘bottom soon’.

10 Worst Performing Industries
Industry Name	Percent Change (over time selected)
Dow Jones U.S. Coal Index 	-5.96%
Dow Jones U.S. Business Training & Employment Agencies Index 	-4.53%
Dow Jones U.S. Airlines Index 	-4.02%
Dow Jones U.S. Gambling Index 	-3.90%
Dow Jones U.S. Hotel & Lodging REIT Index 	-3.21%
Dow Jones U.S. Toys Index 	-3.21%
Dow Jones U.S. Real Estate Services Index 	-2.89%
Dow Jones U.S. Electronic Office Equipment Index 	-2.87%
Dow Jones U.S. Aluminum Index 	-2.86%
Dow Jones U.S. Leisure Goods Index 	-2.75%

Coal getting whacked? I wonder why… with oil up and an ‘industrial recovery’ bet in place. Sovereign Risk based on Obama pigeon hole of the Canada Pipeline? (IF an already approved pipeline with as low an environmental impact as can be imagined, with union jobs in the mix, and with oil we desperately need; if THAT can be canned, would ANY coal project be approved by His Highness?)

Businesses not investing in training (well, duh.. hire someone from India instead and lobby for H1B visas)

End of the vacation trade, with airlines and gambling ‘coming off’. Hotels too. Folks expecting a Grinch for Christmas with toys and leisure goods in the dumper. Aluminum too (beer cans and autos…)

And nobody thinking real estate is in a good way yet. Quelle Surprise…

Mostly I’m seeing echos of Hedge Funds changing their computer driven trades based on themes that they take from The Trade Book. Not a lot of actual investor driven movement. Not a lot of substance to grab onto in that jello of fickle swing traders.

Momentum Trades

This is a new section and will be a bit of ‘under construction’ for a while. But at least if I put it here, I’ll be motivated to make it better ;-)

First off, the caveat page. Know how to exit before you enter a momentum trade:

https://chiefio.wordpress.com/2011/10/26/when-momentum-fails/

This is NOT buy and hold investing, OK?

The general approach is to find lists of stocks going up, then look at their chart for ‘what is in a good configuration and likely to continue’, then wait for an entry. That last part can be particularly frustrating in stocks with a strong momentum as the ‘dips’ either never come, or come at the eventual blow off top of an exhausted big momentum run. So sometimes I’ll just ‘scale in’ to momentum stocks. Buy some each dip, and exit all of it on a topping indication.

This posting gives an overview of the method of picking:

https://chiefio.wordpress.com/2011/07/20/alpha-bubbles-and-lists/

FINVIZ Daily Bubbles chart right now lists these as the most Mo’-Mo stocks right now (and many more near them, like X as a bottom fish in U.S. Steel):

FINVIZ Bubbles Momentum Chart

FINVIZ Bubbles Momentum Chart

CRM  -  Salesforce.com
AVY  -  Avery Dennison Company
TIF  -  Tiffany
LOW  -  Lowe's
BA   -  Banc Of America
TSN  -  Tyson Foods
SNA  -  Snap On Tools
QCOM -  Qualcom
GLW  -  Corning Glassworks
ETN  -  Eaton

BAC looks like a bottom, but not exactly any upward momentum. AVY too. CRM is more of a flat roller in my view, but near a bottom point. TSN is in a nice rocket up. Meat, where did we see that idea before? (see the rest of the posting, this was added last…) SNA is moving nicely and with a good looking chart. Expecting mechanics to buy some tools to fix all those old cars we continue to drive. TIF doing well after a dip (those little blue boxes for Christmas) and I own some (or rather, my spouse does). LOW looks great (so a check of HD would be in order). QCOM is on a nice new run too. GLW is clean off a bottom, nice ‘bottom fish’, IMHO. Last up we have ETN that also looks like a nice pop off a bottom.

All in all, it looks like a decent list (though I have my doubts about BAC unless you take a 5 year point of view on it…)

FINVIZ 3 Month Chart

FINVIZ 3 Month bubbles stocks

FINVIZ 3 Month bubbles stocks

GR   - Goodrich Corp
FFIV - F5 Networks
SNDK - Sandisk
RHT  - Red Hat
TSO  - Tesoro
EP   - El Paso
GWW  - WW Granger
KLAC - KLA Tencor
ORLY - O'Reilly Automotive Parts
FAST - Fastenal

This is a much more ‘mixed bag’ look. Several look like a big pop, then flat. Some major news driven event that is now long gone. GR and EP are clearly that way. Others have an ongoing ‘run’ that may have some room left, but look like more behind than in front, to my eye. Then again, MO often looks that way… FFIV, SNDK, RHT, TSO (that looks like a tired pop), a few look like a hard run continuing. KLAC, GWW, FAST, ORLY.

In the next posting I think I’ll try a time scale between those two, perhaps a one week scale. For now, this will have to do on the ‘getting started’ with Mo’-MO at FINVIZ.

How about the Barchart Top 100?

The top of their list today is:

Sym 	Name 	                Weighted
                                Alpha 	        Last 	Change 	Percent High 	Low 	Time 	
SIMO 	Silicon Motion Techn 	+313.10 	19.88 	+1.40 	+7.58% 	19.90 	18.15 	11/14/11 	   
QCOR 	Questcor Pharmaceuti 	+210.91 	43.35 	+0.21 	+0.49% 	44.41 	42.96 	11/14/11 	   
EGAN 	Egain Comm Cp 	        +201.70 	5.94 	+0.39 	+7.03% 	5.94 	5.21 	11/14/11 	   
PZZI 	Pizza Inn 	        +189.04 	6.05 	+0.05 	+0.83% 	6.30 	5.86 	11/14/11 	   
ARIA 	Ariad Pharmaceutical 	+180.06 	11.01 	+0.08 	+0.73% 	11.11 	10.77 	11/14/11 	   
VRUS 	Pharmasset 	        +168.21 	68.93 	+1.13 	+1.67% 	69.37 	65.96 	16:00 	   
GLNG 	Golar Lng Limited 	+164.59 	42.36 	+1.46 	+3.57% 	43.40 	40.56 	11/14/11 	   
SPPI 	Spectrum Pharmaceuti 	+159.82 	12.50 	+0.48 	+3.99% 	12.66 	11.98 	11/14/11 	   
COG 	Cabot Oil & Gas Corp +141.90 	86.31 	-1.75 	-1.99% 	87.55 	84.94 	11/14/11 	   
EDAC 	Edac Technologies 	+137.50 	9.11 	+0.04 	+0.44% 	9.27 	8.77 	11/14/11 	   
VHI 	Valhi           	+130.06 	58.03 	-0.09 	-0.15% 	58.75 	56.93 	11/14/11 	   
HSTM 	Healthstream    	+129.33 	16.05 	-0.07 	-0.43% 	16.59 	15.88 	11/14/11 	   
DPZ 	Domino's Pizza Inc 	+125.85 	32.60 	+0.23 	+0.71% 	33.00 	32.30 	11/14/11 	   
SIFY 	Sify Technologies 	+125.72 	4.77 	-0.01 	-0.21% 	4.95 	4.71 	11/14/11 	   
RIC 	Richmont Mines  	+120.50 	11.97 	-0.33 	-2.68% 	12.32 	11.75 	11/14/11 	   
FTK 	Flotek Industries 	+119.37 	8.63 	+0.39 	+4.73% 	8.82 	8.12 	11/14/11 	   
PHMD 	Photomedex      	+114.03 	12.83 	-0.22 	-1.69% 	13.10 	12.83 	11/14/11 	   
MAKO 	Mako Surgical   	+113.40 	33.98 	+1.13 	+3.44% 	34.21 	32.27 	11/14/11 	   
STMP 	Stamps.Com Inc. 	+110.49 	28.38 	+0.06 	+0.21% 	29.36 	28.01 	11/14/11 	   
AMPE 	Ampio Pharmaceutical 	+109.33 	6.85 	-0.22 	-3.11% 	7.06 	6.76 	11/14/11 	   
RGR 	Sturm Ruger & Compan +106.16 	32.08 	-0.15 	-0.47% 	32.52 	31.64 	11/14/11 	   
PSMT 	Pricesmart 	        +104.83 	67.92 	+0.06 	+0.09% 	68.62 	66.92 	11/14/11 	   
TNH 	Terra Nitrogen Compa 	+104.60 	174.74 	-0.48 	-0.27% 	176.95 	174.00 	11/14/11 	   
ULTA 	Ulta Salon Cosmetics 	+104.16 	71.78 	-0.57 	-0.79% 	73.40 	71.21 	16:00 	   

A couple of names there are familiar, like TNH. So lets look at a chart of some of these.

Barchart.com Top 100 top 10

Barchart.com Top 100 top 10

Generally nice looking charts, and more or less what you want to see, rising lower left to upper right.

I note that RSI is getting a bit high (as it does on big movers) for SIMO and that EGAN has had quite a ‘blow off top’ pop and plunge. Clearly there needs to be a bit of ‘post charting vetting’ before you buy one of these things…

Still, all in all, it does look to do a decent job of sorting out the ‘upper left to lower right’ stocks.

OK, that’s all the Mo’-MO I can do in this posting. Folks ought to mine the lists at those sites and chart up the candidates, then ‘vet’ them for things like, oh, over $2 price and not having flaky financials. Basically start with the bigger names that you know and avoid the strange names with penny stock pump and plunge behaviours. In any case, it does look like a good way to find individual names with some momentum behind them, and for the FINVIZ daily to find some bottoming reversals.

With that, on to looking at how the ‘shorts’ are feeling…

Shorting The Broad Market

TWM Ultrashort Russel vs RUT Russel 2000 and S&P 500

TWM Ultrashort Russel vs RUT Russel 2000 and S&P 500

Here we have a Big Short, then a big Short Cover, then a go flat. Looks like the ‘long’ phase is over and a new ‘short stocks’ will happen soon. Unless a load of ‘natural investors’ show up with a bucket of cash to squeeze those shorts, we’re just going to continue to ‘ring’…

All in all, I’m still not enthusiastic about long term investing in this market, only short fast ‘swing trades’. Some individual stocks and sectors can still be winners though.

10 Day Hourly Fast Trader Chart

Bunch of wobble going nowhere the last few days for the broad SPY market. Yeah, a 2% gain over the two weeks, but mostly dominated by spikes and drops. ADX about 12 on an hourly chart is just dead money. That MACD is setting up for a ‘crossover red on top’ and heading for below zero after that says to ‘sit out for a few days’ at least. Yes, it will be ‘news driven’ out of Europe…

Trader Chart - Longs and Shorts of Index Funds  10 day hourly interval

Trader Chart - Longs and Shorts of Index Funds 10 day hourly interval

What about Brazil? Also India and China.

Oddly, looking rather like a bottom…

Brazil the EWZ ETF vs the BZF currency ETF

Brazil ETF vs Currency Race

EWZ  - Brazil
GLD  - Gold fund
BZF  - Brazilian Real currency
IDX  - Indonesia
FXI  - China
EWA  - Australia
EPI  - India - WIsdom Tree fund
EWC  - Canada
EWW  - Mexico
GUR  - Middle East Fund

We have the SMA stack doing a ‘reversal of order’ at the bottom. We’re in a ‘bottoming weave’. Next step is a recovery to the normal bull market order with price over fast over medium over slow… RSI is making “higher lows” off of a ‘near 20’ moment. MACD is above zero (new bull market indication) and while it’s looking like a ‘crossover to the downside soon’, that is more likely the buy moment than a sell. Price needs to kiss the SMA stack from above and THEN move up, so I’d expect a bit more weave and then a new run higher. Time to make an in depth set of Emerging Market charts and pick the best and brightest. IDX is looking good on this chart, as is EWW (but I’m leary of Mexico as they don’t have decent governmental control of their states, so I’d likely skip in in favor of EWA on a mineral play).

VIX the Volatility Index

Oddly, the most interesting thing to me on this chart is the IYT transportation index. Looking at that chart shows a dramatic spike down, then a major spike back up (probably Hedge Fund driven) and it’s now above the SMA stack with positive indicators. OK, note to self, do a Transportation Posting…

Volatility Index and Related

Volatility Index and Related

VIX  - Volatility Index (not a ticker, you can't trade it)
VXX  - Short term VIX futures ETN (a ticker you can trade)
VXZ  - Medium term VIX futures ETN (a ticker you can trade)
FXY  - Japanese Yen
SH   - "Short" sell of SPY
SPY  - S&P 500 benchmark
IYT  - Transports, a leading sector
XHB  - Homebuilders, a leading sector and "canary" 
XRT  - Retail

Still pretty volatile, but volatility dropping. That argues for less of a buy moment than a pause and select to buy on a high volatility down day spike moment… FXY Yen with a nice 8% or so rise as the Bank Of Japan rediscovers that they can’t beat the world by selling yen and buying dollars… (So folks afraid of a dollar inflation plunge ought to look at yen).

XHB, the homebuilders, on a big run up… from a big run down… Yeah, a nice trade, but no reason to invest in them. Just more fingerprints of computer driven hedge fund trading, IMHO.

Volatility Index and Related

Volatility Index and Related

You could make some money on volatility trades (VXZ and VXX), but it’s a dicey fast trade.

Last time I’d said:

Looking like Yen are nice and stable in comparison to just about everything else…

We got some BOJ intervention dips, but other than that (‘buying opportunity’ ;-) it was a nice place to park money. No real gain over the 2 months, but if you didn’t panic out on the BOJ, no significant loss either.

Ideas of the Week

There is a bunch of them scattered through the posting above. Investigations mostly, at this point. Making shopping lists for transports, emerging markets, metals. Park some money in Canada and Japan. Buy some Canadian Oil (and Rail? As they will need to ship all that lovely oil to China as they await His Highness deciding US Consumers have suffered enough and pipeline can be built… so Canadian Rail to the coast, and Chinese boats to China… By By Oil … or perhaps Buy Buy Oil ;-)

Looking to me like “out of the US” is coming back, but perhaps a bit bifurcated. US Consumer being OOTUS, while some selected US Industrials, heavy on exports, might be OK. Chemicals on cheap natural gas? A “dig here” idea.

Exit bonds, they are ‘toppy’.

That’s the big lumps. Now I just need to do it rather than talk about it ;-)

Last time I’d said:

Only real difference is that oil is likely to keep dropping for a while as economies continue to do nothing much. Metals demand down implies shipping down implies oil demand down too.

That didn’t hold up for 2 months. Oil is rising. Why? Libya is a mess, and will be for a while. Syria is out at the Arab Union (so tensions are rising) and rumors are that Israel may need to nuke Iran before Iran nukes them… Now THAT will put a spike in oil prices… So I need to do a better job of watch oil on a fast political / war news driven basis. No vacation for me…

But I did say:

Blend in some ‘hide in Yen and TIP/ WIP’ and that’s about if for now.

WIP didn’t do as well as TIP (taking a Euro hit) but both are presently in nice up trends. A blend of the two generally does make a nice place to hideout.

Oil And Fuels?

About 1 1/2 months back you can see a very nice ‘entry’ moment. MACD goes ‘blue on top’ and crosses the zero line to positive. Price crosses the SMA stack. RSI does a ‘higher low’ off of a ‘near 20 touch’. DMI goes “blue on top”. Just a stellar example of ‘buy now’. Just wish I’d looked at it a month ago instead of now. Then again, a month ago I was driving cross country after exiting from work… not exactly a great time to be focused on oil. That, BTW, is a great example of ‘know yourself’. I know my failure mode it so ‘stop looking’ when I’m distracted. If I had the discipline to get past that, I’d do much better…

At any rate, it’s looking like the Oil Trade is on and running. Natural gas continues to plunge on excess supply (so much for ‘energy shortage’…) which means US Chemical companies have cheap feed stock and US Electrical Generators have low fuel costs. They are worth a look. Coal does a plunge / bottom bounce. Probably why coal companies tanked… that and the Obama Put on coal. Watch coal for an election bounce if a Republican looks to be leading.

USO Oil, KOL coal, UNG Nat Gas, UGA Gasoline with a Golden ruler

USO Oil, KOL coal, UNG Nat Gas, UGA Gasoline with a Golden ruler

And with gasoline ‘surfing down’ in waves, while oil spikes up, look for refiners to fade as their ‘crack spreads’ compress.

The 10 day chart:

USO Oil vs KOL Coal, UNG Natural Gas, and UGA Gasoline

USO Oil vs KOL Coal, UNG Natural Gas, and UGA Gasoline

Nice two week run. Looking a bit tired to me. So I’d likely wait for a better entry into oil, as it returns to the SMA stack from above on that longer time cycle chart.

So what happened in the Tech Market relative to world markets?

Generally ‘best of the bunch’ but looking like it’s gone flat lately. Indicators say that too.

Tech vs Other Markets

Tech vs Other Markets

QQQQ  Nasdaq 100 mostly Tech companies
DIA  Dow Jones 30 Industrials
SPY  S & P 500 largest companies in the U.S.A.
MDY  Midcap  (Middle sized in terms of market capitalization)
RUT  Russel 2000 - a collection of 2000 companies from small to large.
EWZ  Brazil fund
EWA  Australia fund
EWO  Austria fund
EWW  Mexico fund

What About Oils?

Not oil per se, but the companies that produce and process it.

Some Selected Global Oils:

The Oil Majors Race

The Oil Majors Race

XOM  Exxon Mobil - Largest, U.S. / Global
COP  Conoco Philips - U.S.  with Russian exposure
CVX  Chevron Texaco - U.S.
PBR  Petrobras - Brazil
PCZ  Petro Canada HAS NOW MERGED WITH SU SUNCOR
BP   British Petroleum
STO  Norway
E    Eni Italy
TOT  Total - France
RDSA Royal Dutch Shell
IMO  Imperial Oil - Canada Oil and Oil Sands
SU   Suncor - Canadian Oil Sands
SSL  Sasol - South African Synthetic Oil Company

Nice rise out of a bottom, but looks to have paused at the moment as stocks in general have paused.

Last time I’d said:

Hmmm…. Exxon and CVX look “bottomed”. Perhaps time for long term value investors to accumulate some. BP and some of the other tickers too. The higher leveraged oil sands companies are still dropping, though. (SU for example).

That was pretty much ‘spot on’. Just a bit ahead of that spike down, about enough time to get the orders lined up and in. I continue to put oils in the ‘buy the dips’ category.

Some Near Oil and Oil Related Comparisions

What about oil service companies? Or that Sugar and CZZ?

Oil Services and Oil Related

Oil Services and Oil Related

Looking like a bit of a bottom. I’d concentrate on the OOTUS deep water drillers.

SGG Sugar vs EWZ Brazilian stock market, SPY and BZF the Real currency

SGG Sugar vs EWZ Brazilian stock market, SPY and BZF the Real currency

Last time I’d said:

Sugar looks like it’s made a ‘double top’. Probably time to exit the sugar trade.

And sugar has nicely ‘surfed down’ since then. Still not interesting… (but folks who BUY sugar might be ;-)

Ag and Ag support / Input companies

Ag Trade 6 Month Daily Interval Mixed Players

Ag Trade 6 Month Daily Interval Mixed Players

TNH is looking a bit toppy, but with an 8% dividend I’ll need to see proof before I give up on it and stop ‘buying the dips’.

TNH - Terra Nitrogen

TNH - Terra Nitrogen

TNH took a dive and recovered. Probably ought to do a news search on ‘why’. It’s a major dividend player, so I’m not real worried about it, though. MON Monsanto doing OK, not great given the volatility in it. Meat (COW) doing well, but not a big win. All in all, not that exciting. We do, at present, have a lower high. So if you are not interested in the dividend clipping, it’s likely over as a momentum trade.

SEE the SEA!

Shipping Comparison

Shipping Comparison

NAT is looking like a bottom. Some of the other shippers not quite yet.

Last time I’d said:

Looks like RCL and CCL may have a bottom in. With the strength in the vacation trade, it’s likely time to revisit them. A couple of the other boat tickers look ‘bottomy’ too.

And they have gone up nicely in the last two months. We’re now in the ‘return to the SMA stack from above’ process. This is the time when long term investment trends can start. I’d take this as a decent time to start ‘scaling in’ for long term holdings.

Royal Caribbean Cruise Lines, Carnival C.L., and SPY S&P 500

Royal Caribbean Cruise Lines, Carnival C.L., and SPY S&P 500

The REITS race – Real Estate Investment Trusts

What I said last time was “Continuing weak.” and it has, and is. We do have some indications of a ‘bottom’ in that we’ve got, for BXP, RSI with a ‘lower high after a near 20 moment’. We have price over the SMA stack and we’ve got MACD above zero. I’d make this a ‘buy the dip’ moment for long term investors wanting dividends and some inflation hedge in real estate. Yes, a bit of risk as the ‘dip’ and bounce were a bit violent (hedge fund folks again?) and yes, you need to run a chart for each fund to find the best and time each individually. Still, it looks like the shorts have exited.

REITS Race

REITS Race

PEI  Pennsylvania Real Estate - Mall REIT (REMOVED to make better graph)
VTR  Ventas - sr. care, nursing homes, hospitals
PSA  Public Storage - junk storage units
BXP  Boston Properties - office REIT on BosWash corridor  
HCN  Health Care REIT -  extended care, senior care, medical offices
HCP  Health Care Properties - ex. care, senior living, Dr. offices
PCL  Plum Creek Timber - lumber and trees REIT
SPY  S & P 500 broad stock market benchmark
RPT  Ramco Mall REIT
PLD  Prologis - logistics 

The Long Term Context

Nothing in this section has really changed. I’ve moved the charts from here to the top for a while, as we’re still in a negative long term context (though potentially near an inflection).

Here is another interesting chart where you can see how volatility spikes at market bottoms and drops lower during times of topping actions. It also has “momentum” on it which can act as a reminder of how much force a trend has, and which way. Slow Stochastic is better for a faster trade behaviour when ADX (of the DMI / ADX indicator above) is below 20 or so.

If this all looks like “too much”, just remember that you don’t need to look at more than the one basic chart. The rest of these indicators give more depth of insight into “why”, but not better answers as to when to be in stocks vs bonds.

SPY vs TLT with Slow Stochastic, Volatility (fast) and Momentum

SPY vs TLT with Slow Stochastic, Volatility (fast) and Momentum

While it generally is giving ‘be in’ indications (momentum positive, volatility dropping but not yet low) that Slow Stochastic is saying ‘expect a dip soon’. That ought to be a buying opportunity (unless things fall apart completely on Europe news or a new war…)

Stock Indicators – what and how

When the long duration charts say “maybe making a top, but perhaps a ‘buy the dip’ moment”, I look at the faster charts and faster indicators and move to a faster time scale with faster trades. But I’m a trader.

For long term investors, you just ride the ride until the chart says “top is definitely in” and “buy the dip” until proven otherwise by a confirmed roll over (price below SMA stack). In general, I’d put very long term bias as “be in”. Trend is up, dip happened. Be in. But you just can’t ignore that the price plot looks very “rolled flat” at least… and we’re all waiting for DC and Germany to “make their moves”… So you must WATCH the chart each week, even if not acting to be out of the market yet.

If all this talk of indicators is leaving you wondering what the heck I’m talking about, hit the link in the heading of this paragraph and there is a bit of an explanation.

Click for Disclaimers, Disclosures, and Where To Get Charts

Remember that on any stock or ticker I say I’m looking at, you don’t just go buy it. You wait for a stock entry indication to get the best possible entry into the position.

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
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21 Responses to WSW, Monday, 14 November, 2011

  1. R. Shearer says:

    The bulls and bears are fighting it out and I guess I like it. After a flat year into the summer, I’ve managed to eke out about 7% gain since, trading less than half my capital. On S&P maybe we can get back to the highs but my bias is still to go short, I just don’t have the conviction to do so. I’ve learned that buy and hold does not work in the market right now, at least this year.

    What do you think of UGA here? I’m thinking at the very least it could take away some of the pain at the gas pump.

  2. E.M.Smith says:

    The UGA chart is looking dead money flat right now. I think at $4 a gallon, folks are just not taking it. Add in rising crude and “something has to give”. Think $5 gas in an election year will be good for the Dems? …

    So I don’t see a lot of momentum nor ‘story’ for UGA right now. I’d be more inclined to buy the Canadian Oil companies or Canadian Rail… CNI for example:

    Best Performing Stocks Symbol Company Name Percent Change
    KSU Kansas City Southern 23.43%
    GWR Genesee & Wyoming Inc. Cl A 21.44%
    RA RailAmerica Inc. 14.30%
    CNI Canadian National Railway Co. 11.62%
    NSC Norfolk Southern Corp. 11.03%
    UNP Union Pacific Corp. 10.96%
    CP Canadian Pacific Railway Ltd. 4.06%
    KSU.P Kansas City Southern 4% Non-Cum Pfd. -0.13%
    CSX CSX Corp. -0.49%
    PWX Providence & Worcester Railroad Co. -10.86%

    Though those western rails are looking nice too… KSU and GWR – though the charts look a bit like a spike on short covering about to drop…

    If you want to hedge oil, hedge oil… Buy USO or just buy oil in the ground via energy partnerships / trusts. With UGA you get refining competition and political gaming inside the USA built in… (as opposed to oil where you only get political gaming outside the USA ;-)

    PGH is yielding 8% and has oil. PWE has about a 5.9% dividend and looks like a bottom on the chart (mix of oil and natural gas). SJT is about 5.9% and more wobbly sideways (and in the USA too). There are others…

    Best Performing Stocks Symbol Company Name Percent Change
    EEGC Empire Energy Corp. International 135.29%
    MNLU Mainland Resources Inc. 131.58%
    IDGG Indigo Energy Inc. 100.00%
    LNG Cheniere Energy Inc. 100.00%
    EDEP Eldorado Exploration Inc. 96.15%
    TAT TransAtlantic Petroleum Ltd. 95.00%
    ZNWAW Zion Oil & Gas Inc. Wt 90.63%
    AZGS Aztec Oil & Gas Inc. 81.25%
    RNCHQ Rancher Energy Corp. 70.21%
    TRU Torch Energy Royalty Trust 70.12%

    but I’m not as familiar with their ‘particulars’ (and with oil production and trusts, the particulars matter… gas vs oil. Old vs new fields. Degree of debt and degree of hedged output. etc.)

  3. Sera says:

    Maersk just bought two heavy lift ships to make the run from Texas to South America. Something like 19000 tonnes. 500′ long, two cranes 240 tons each, 3 hatches with tween decks that can be configured for containers, grain anything. Will mostly be used for oil rig supplies/platforms/drilling equipment and (rumour) windmills. The first one was delivered September 22 and the other one is still in the yard (China). So after my golf buddy gets back from Salala, he will be transferring to one of these ships (as Master) from his container ship (as Master).

    I’m told that the oil companies are moving to S America because of the regulations in the Gulf. That’s all I got ;-)

  4. E.M.Smith says:

    Frankly, If I were an ‘oil man’ I’d be learning Portuguese or Spanish…

    Expect to see the exodus grow larger and expect to see Canadian port traffic rise as they give up on us and start selling to more ‘reliable’ customers…

    “Good stuff”, BTW…

  5. Pascvaks says:

    Don’t expect that the Glorious Omnipotent Super Committee will do anything whatsoever. Or that Herr Presidente will sign anything they do propose. Do the Mkt Numbers, et al, at the bottom of your teacup say any different? Seems the West is stagnating on a tredmill as fast as it can. (This is all starting to look like the view from one of the Titanic’s lifeboats ;-(

  6. E.M.Smith says:

    @George:

    Yes, it’s true. While as a BRKA holder I’m profiting from it too, the fact is that I hate it. This is one of the more smarmy parts of “Third Way Economics”. The subtle corruption of morals that leads to being a profitable tool of the government as the easy path to riches. The “public / private partnership” of Fascism. That “Third Way” does make money. It is very effective (just look at Nazi Germany and their productivity). And it is beloved of The Left.

    Wilson loved it, and lamented that damn constitution that got in his way of doing it.

    Roosevelt implemented large parts of it, constitution be damned.

    Both lauded Mussolini and his successes (as did Hollywood where he was entertained and even invited to have a part in a movie).

    It was only after he hooked up with Hitler (and those racist tones) that Mussolini fell from Progressive Grace.

    Even Clinton has talked about their “Third Way”. He’s not so stupid as to be uneducated as to what that means and it’s history. Madam Clinton worked hard to get socialized medicine (one of the cornerstones of Fascism, BTW) and Obama succeeded at it.

    One sector at a time, more of the economy is being moved into a ‘private / public partnership’ form, the “Third Way”. As of now it’s at least 25% of the economy. (Education. Medicine. Military & material.) and the parts not fully absorbed are being regulated into effective submission. (Finance. Housing.)

    It’s a great way to make a lot of money at low risk of competition. While it lasts…

    Want to know how bad it is? Ask yourself this question:

    What profession or industry can I enter and create a company without government telling me what I can and can not do?

    My mechanic has a few dozen government inspectors (at exorbitant salary) telling him how to clean parts and fix cars. He can NOT even wash a car without special equipment and a license with inspections. Yes, taking a hose and knocking the dust off a car is illegal for him if he does not get the right licenses (in addition to all his OTHER licenses) and buys ‘approved’ equipment. He can not put parts in a solvent bath and clean them without the “approved” solvent and mandated inspections. The solvent must be taken by “approved” vendors and tested to assure he is not using any unapproved cleaners. Oh, and it’s several hundred dollars a year for the license to have a solvent sink over a 30 gallon barrel of cleaner. Want to open a lemonade stand? You’ve got a few licenses and inspections in front of you…

    So go ahead. Just TRY to figure out what business you can enter free of government telling you what to do, and putting it’s hand out to be paid for the “help”…

    BTW, my favorite is the ‘hair braiding license’. Want to braid a friends hair for a couple of bucks? You need to attend an approved hair braiding training program and get the right licenses… To Braid Hair….

    Want to sell motorcycles? You must hand over a set of fingerprints to get the license.

    It’s just incredible, when you start looking into it, how impossible it is to do much of anything without a “private / public partnership” these days…

    So do I fault Buffett for “going along to get along”? No. It’s his job to make money and that’s the system handed to him. But I can stop admiring his investment skill, as that isn’t what’s being used now…

  7. George says:

    Going along to get along is one thing. The biggest problem I have is with his Goldman Sachs deal with the preferred stock paying 10% dividend. He was in a position to not only make a lot of money off TARP, but he in a conference call with Nancy Pelosi and other ranking House Democrats of the day lobbied hard for its passage. He knew not passing it would be devastating to BRKA as he had bet heavily on its passage. Members of Congress were also heavily invested in Berkshire and stood to personally loose a lot of money or gain personally if the passed the bill.

    So it is one thing to see the writing on the wall and to take advantage of it. It is quite a different matter to directly wield one’s influence in Congress making a policy decision in which one is heavily invested in the outcome. He didn’t need to place those investments while TARP was being negotiated. But he DID do so just days before lobbying Congress to pass the bill.

    So he isn’t an opportunist so much as he is a thief, in my opinion. A lot of taxpayer money was, in my opinion, wasted and he ended up directly benefiting from it. There is a difference between being a shrewd investor and seeing what might come over the horizon and actively manipulating what happens.

  8. Pascvaks says:

    @George
    “So he isn’t an opportunist so much as he is a thief, in my opinion. A lot of taxpayer money was, in my opinion, wasted and he ended up directly benefiting from it. There is a difference between being a shrewd investor and seeing what might come over the horizon and actively manipulating what happens.”

    Your statement somehow made me think, “But who isn’t?” It’s not just the top of the pyramid that’s crumbling. It looks like the whole thing is getting pretty flakey. Nope! Not hopeful! Not hopeful at all! Why do economies, parties, governments, countries, and civilizations crash? People, lots of people, making poor, stupid, selfish choices. When you “swear to protect and defend, against all enemies foreign and domestic”, you learn to look at everyone as a potential enemy.

    Probably best to put civilization crashes in the Mother Nature category, she doesn’t like them too long.

  9. George says:

    The biggest problem is fundamentally an ignorance of economics by the majority of the people of our country. But that manifests itself as fear. People are not comfortable with ambiguity and having thousands of little companies operating in a market makes it much more difficult to measure, predict, manage that market. If you have a market segment dominated by only a few players, it becomes much easier to poll four or five companies that account for 90% of the activity in that market to see how it is doing. By the same token, you can more easily institute policies and regulations that directly impact those few companies and have a more direct control over that market.

    If you have thousands of little players, it becomes an exercise in herding cats and the government likes to avoid that at all costs. People aren’t comfortable with that either. But neither are they comfortable with the consequences of it. They decry that industries become dominated by a few mega players. They complain that their small local bank has been gobbled up by some national mega bank or that their small local medical practice has been absorbed by some national HMO. Regulations such as Sarbanes/Oxley prevent smaller operators from competing through increased regulatory compliance overhead cost. They must go out of business or merge with a larger company. That same thing is now happening in the medical services marketplace:

    http://blogs.the-american-interest.com/wrm/2011/11/15/big-oil-big-pharma-big-obama/

    People now look to government to provide the answer to everything where we used to look to the private marketplace. Entrepreneurs would see a need for a service and provide it. Service requirements often come from the barrel of the regulatory pen these days and not from actual customer needs. These large mega operators they basically buy politicians and lobby for even more regulations that act as an even higher barrier to competition and keep upstarts and small operators out of markets. Those regulations enable the large becoming even larger.

    It is very ironic that the very people protesting the accumulation of capital by a smaller group of people would tend to support regulations in particular and the party in general that would make the problem even worse. They do not yet understand that those policies they would enact to “help” people would actually make the problem they are trying to solve even worse.

    California is a perfect example. Business-hostile policies drive out companies that hire the middle class. As a result, California finds itself with an increasing gap between rich and poor. At the current rate, the only thing that will be left are the very poor and the very rich because everyone in the middle have been driven out or made poor by government regulations that have cost them their jobs.

    Having only a few huge players in a market is like having only a few varieties of a crop. A single disease or weather condition can then take out a huge portion of the product. Having thousands of smaller businesses each with their own way of doing things provides the ability to adapt to market changes more quickly and a condition that might kill one firm might not kill another due to some subtle difference in how they operate.

    I’ll bet someone in an industry could make a good business by outsourcing regulatory compliance expertise from smaller operators. This would free them from each having to have their own regulatory compliance departments and would offer an economy of scale to smaller operators. But I also bet the mega operators would somehow get regulations passed that made it impossible to operate such a business. Government would rather get 10 tax filings that represent 90% of the financial industry rather than thousands.

  10. Pascvaks says:

    “People are not comfortable with ambiguity and having thousands of little companies operating in a market makes it much more difficult to measure, predict, manage that market.”

    I think the people you are speaking of, like as not, are lawyer-politicians. I have a feeling that John & Jane Q. Public and family would, soon as not, prefer more opportunity and a bigger, booming, more multi-everything economy. But, in a way, we get what we pay for and we really, honestly, truly do have a government of, by, and for the people. Not all the people. It depends who’s in and who’s out. Right now we have a guy that thinks of himself as President of the Democrats and Warden for all the rest of US.

    As I look back I see so many good intentions and little mistakes, as I look forward I see so many big problems and desperate situations. But who knows, maybe I’m wrong. My wife tells me I’m occassionaly wrong. ;-)

  11. George says:

    What I meant by people not being fond of ambiguity are the actual rank-and-file average everyday folks. They don’t like hearing that economic growth or decline relies on some “invisible hand” of the net of actions by an aggregate of thousands of businesses. They expect someone to simply turn the economy knob up and make things all better. They don’t understand how doing one thing that might seem to improve the economy has a completely unforeseen consequence someplace else. When the do understand it, they don’t like it. It implies that the economy is “out of control” when the reality is that it can’t BE controlled if it is to work.

    There are a lot of people who live their lives in a lot of fear. They fear all sorts of things. They fear what their friends think of them, they fear how their peers at work think of them, they fear what will happen next year or next month. They want things to be known and controlled and that provides them with comfort. They want to believe that if economic activity declines, they can simply blame whoever is President because, after all, we have somehow come to believe that the office of President is responsible for managing the economy of the country. But the more they attempt to control it, the more they will screw it up. Attempting to control an economy is the ultimate “tar baby”. The more you fight it, the more it will engulf you. (anyone not familiar with the “tar baby”, it is an American cultural reference from the Uncle Remus tales and teaches the lesson of something that the more it is fought, the more futile the fight becomes: http://www.youtube.com/watch?v=Xk0u9ygrCYQ )

    When economic activity turns down, in this case due to the evaporation of trillions of dollars of homeowner equity nationally, people simply expect the government to dial the economy back up again. The problem with being that the best way to do that is for government to exert less control over it to begin with. It is all very counter-intuitive for most people and quite scary. This is why I believe that a bachelors degree in economics should be a minimum requirement for anyone serving in public office.

    To the best of my knowledge, we have only had one President with an economics degree, and that was Ronald Reagan.

  12. George says:

    Was just reading this article:

    http://www.bloomberg.com/news/2011-11-16/banks-in-u-s-facing-serious-risk-on-contagion-from-europe-fitch-says.html

    And I thought to myself: Considering that everyone on the planet has been seeing this coming for over two years, why do these banks still have this level of exposure? Surely they could have figured out a way to reduce this exposure by now. Even if it is to simply bundle them up in “junk” class derivatives for highly speculative investors and resell them, or maybe just getting rid of them on the open market. I mean, why would anyone with half a brain have any serious exposure to GIIPS sovereign debt these days?

    It is sort of like walking around with a flask of nitroglycerine and complaining about how potentially explosive it is. Put it down!

  13. George says:

    Ok, I see what is going on. It is the same thing Buffet did with TARP. These banks are buying up the GIIPS sovereign debt while it is dirt cheap, then lobbying the governments for a bailout, then they rake in the cash when the price of the debt goes up post bailout.

    These people are despicable. Let them wallow in it.

  14. E.M.Smith says:

    @George:

    Good Catch!

    I was wondering the other day, too, why so many hedge funds were loading up on Italian and Greek bonds. (One was embarrassed into dumping 40% of their position in one day just to show to the stock pundits how “liquid and deep the market was”. Made me wonder why they wanted to hold it despite pundits talking down THEIR stock because of the holdings.

    I think you’ve got it. Also, I think you’ve got the reasoning right, which leads to a name for the activity. I propose that we call “buying crap then lobbying for a government bailout” to be “pulling a Buffett”. Wadaya think?

    So those folks are just “pulling a Buffett” in the PIIGS / GIIPS bonds…

  15. George says:

    Well, people are going to KEEP “pulling a Buffett” if governments keep enabling it by using taxpayer money for bailouts that should never happen. These people NEED to default. There NEEDS to be a severe consequence for irresponsible actions. You can not simply run up a huge bill, pay off your political supporters, then bail everything out giving your political supporters one last injection of cash.

    It is INSANE, we simply must stop the bailouts. The threat of default and the resulting bailouts are becoming a racket.

  16. P.G. Sharrow says:

    IIRC George Soros is really good at this game of talking down government debt, buying it cheap and then getting the Americans to pay it off. Time to make hedge funds eat it, pg

  17. George says:

    I think the way you fix the “pulling a Buffett” problem with a company is that you freeze the stock with no notice. Issue new stock in a new IPO, and pay off the old shareholders at the previously frozen price of the old stock. In other words, you do not allow anyone to profit from the bailout by bottom feeding and then lobbying for a bailout.

    You also do one more thing: Make it illegal for any member of Congress to hold shares in an individual company or market sector. They can hold shares in broad indices of more than 500 different companies (S&P 500, Wilshire 5000, etc.) but not specific companies or market sectors.

  18. E.M.Smith says:

    @George:

    Even that is not good enough. On one news show tonight I heard of one of the congress critters that did an SPY leverage PUT buy after hearing that there was going to be an action that would drive the market down. Doubled his money on that one trade. Did 30 or so others too, BTW… Assets go in a blind trust (a TRULY bind one, not the semi-blind ones congress critters call blind). They can only be invested in a BANK CD, US Treasuries of less than 5 year maturity, or a TOTAL MARKET INDEX fund – long only. In exactly equal proportions… I guarantee you that banks, the dollar, and the stock markets will do well…

  19. Pascvaks says:

    Let’s see, there a Ponzi, a Buffett, a Soros, a Madoff, a Nixon, a Carter, a Clinton, a Bush, and an Obama, then there’s also things like a GM, a Solyndra, a Chrysler, a Climategate, a Watergate, Anthroprogenic Global Warming, a Jihad, and a 911, and that’s not even a meaningful or really representative sample, no wonder they say English is a living language. Well, if we can’t invent anything else, we’re still good at inventing words. I understand there’s also a pile of dead words in a mass grave somewhere in California, or maybe New York state, or both, or somewhere. Anyone ever heard these, no one remembers what they mean anymore, a Duty, an Honor, a “Mom-and-Apple-Pie”, a “God-and-Country”, an “Old-Glory”, a “Sea-to-Shining-Sea”, a Church, a Synagogue, a Temple, a Meeting House, a Pew, an Alter, a “Money-in-the Bank”, a Hero, a Great Movie, a Good Movie, an OK Movie, a Great Actor, a Good Actor, an OK Actor, a Great Politician, a Good Politician, an OK Politician, a “Ten Cent Cup of Coffee”, a “Three-Hots-and-a-Cot”, a “Lemonaide Stand”, a “Washington’s Birthday”, a “Christmas Break”, an “Honest Wage”, a Great News Paper, a Good Newspaper, an OK Newspaper, a Lady, a Gentleman, a Poet, a Good Priest, a Good Preacher, a Good Rabbi, a Good Mullah, a Good Imam, a Good Monk, a Good Brother, a Good Sister, a Good Coach, a Good Samaritan. I tell you, I haven’t seen or heard some of these words in ages. Maybe it’s just me. Maybe I don’t get out too much anymore. Maybe they’re all not dead. Maybe their just sick or a little out of style.

    I tell you, the longer you live the more things change for the worst. Or is that wurst? Or worse? Words, they can drive you bonkers sometimes.

    PS: What’s all this have to do with “WSW-Monday, 14 November 2011”? Good question. I’m convinced there’s a connection though;-)

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