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STOCKS - An Intro Tutorial & Ongoing Discussion * 8
    #7827359 - 01/03/08 12:56 PM (16 years, 28 days ago)


Note:  If you are looking for current stock recommendations, please refer to my most recent posts at the end of this thread.
This first post will serve as a stock market primer for beginners, which I will add to as I continue to learn new things.



Geo's Stock Market Primer


I started this topic in January of 2008 when the S&P sat perched upon high in the 1400's, from which we have since fallen some 50% at our worst and then witnessed a substantial recovery with one of the best stock market performances in history following the late 2008 crash.  Though the markets continue to be plagued by uncertainty, there are lucrative investment opportunities for those of you with the stomach, perspective and diligence to personally allocate your assets and faithfully manage your risk for the potential of great reward.

Many have been told that "buying and holding" is the only way to win in the stock market, but due to recent world market developments, this conventional wisdom no longer holds the same level of truth as it once did.  Given how volatile the market has become, it can definitely pay off to take a more active approach to your investments.  You must continually manage your risk by understanding your own tolerance for capital loss, and thereby creating a discipline for yourself that allows you to define your risk (or maximum loss) before entering any investment.  By preparing yourself for a tolerable downside and clearly defining that level where your investment thesis will be proven wrong, you will be able to cut your losers quickly while allowing the upside to take care of itself.

New investors often seek out penny stocks (stocks priced at $1 or less per share) because they figure that they can own a whole bunch of shares and the darn thing only needs to move a few cents in order to achieve a good return.  However, it is important to understand that losses can compound just as quickly as gains, and that penny stocks are inherently risky because they are not very liquid and will often trade solely on hype.  Generally speaking, low dollar stocks are low dollar stocks for a reason.  “Cheap” does not equate to the price per share when it comes to the real value (and potential reward) behind any given stock.

The dollar price of a stock is largely irrelevant; it is the Price to Earnings (PE) multiple that must be used to evaluate whether or not a stock is cheap within the context of the company’s underlying stability, growth and future earnings potential.  The PE multiple is the relationship of a company's individual share price divided by that company’s real (current) or expected (future) earnings per share.  The Price to Earnings Growth (PEG) multiple can also be useful to find the best relative value among the stocks of growing companies.  It is generally understood that a growth stock with a PEG of 1 is fairly valued.  Therefore, stocks with a PEG less than 1 may be considered cheap, and those with a PEG greater than 1 may be expensive.  PE and PEG are most instructive for companies that are profitable and growing, and certain stocks such as REITS or other high dividend stocks will have to be judged on different metrics. With experience, you will come to understand which situations or stocks should be judged by which metrics.

Stocks are a tricky game that can frustrate even the brightest of minds.  The stock market attempts to be anticipatory and forward looking, but it is not a perfect pricing mechanism and often does not react to obvious reason.  It is susceptible to manipulation based upon a number of factors including not only macroeconomic and company specific data, but also human psychology and technical analysis of the price action.  It will take some time to understand how these themes play together.  Once you do, you will be able to hold a higher degree of confidence in your investments, in order to avoid large losses and/or being shaken out of what could ultimately have proven to be a big winning position in the longer run.

So forget about the hype.  You don't need stock picks, you need an understanding of what the market reacts to, and you need to take the time to stay in sync with its cyclical nature.  If you aren't able to do that, you should forget about individual stock picking and will instead do much better by simply investing in a diversified ETF or mutual fund that mimics the S&P 500; or a combination of a few funds that include exposure to the S&P 500, growth sectors, growth regions, and/or a basket of dividend paying stocks.

If you have a limited amount of capital to work with (or if you want market exposure without having to do any homework!), consider investing in a low-fee S&P 500 Index Fund (such as the Vanguard 500 - VFINX).  Exchange traded funds such as SPY and DVY are also good choices for hands off market exposure.  This will leave you with a diversified portfolio that mimics the overall market benchmark.  Using this strategy, you won't have to worry about underperforming the market, and since the average 20-year market return has beaten any other asset class for the better part of the past century, this is not just a convenient way to gain market exposure, but a fairly sound investment strategy.  Doubly so, when you consider that the majority of individual investors as well as actively managed mutual funds in fact fail to beat the average market return!

To those of you craving a little more risk for the potential of great reward, you may want to focus on a specific basket of stocks.  If you'd like to do this but don't have the time to pick and keep up on the individual stocks yourself, you might consider investing in an actively managed mutual fund.  There are countless managed funds out there, but for this example let's consider the CGM Focus Fund - CGMFX.  This fund returned over 79% in 2007, a year where the average market returned about 4%.  Unfortunately, when the commodity value of oil crashed in 2008, it led shares of the then-heavily-oil-weighted CGMFX down a delirious 63% in November from a high set as recently as the prior summer season.

As evidenced, an actively managed mutual fund like CGMFX may be able to produce fantastic returns by using a sector specific strategy when that sector is in favor, but also carries significantly more downside risk when compared to the diversification offered through an S&P 500 index fund, since the specific sector(s) the fund is focusing on may fall out of favor faster than the aggregate market.  Even so, having your money actively managed by an experienced and high quality manager may be appropriate for the risk-tolerant (typically younger) investor who won't panic when taking hard hits to their portfolio over the short term.  But because a managed fund is only as good as its manager, you'll need to make sure that the fund manager hasn't left or been replaced.  If you do decide to invest in an actively managed fund, I would strongly advise spreading your capital among at least a few different funds that focus on different sectors or regions of the world economy.




"That all sounds groovy, but I want to pick my own stocks!"


Actively trading individual stocks can be a fun, exciting and profitable experience; but it will require your regular attention and discipline.  Ideally, you should have at least $10,000 of capital to work with, as having less will make it more difficult to scale into and out of positions incrementally while maintaining a diversified portfolio.  You should begin by observing the market for at least a few months.  Setup an account with a discount online brokerage (typically charging $5 - $10 per trade) such as TDAmeritrade, E*Trade, Charles Schwab, ScotTrade, Fidelity, TradeStation, or Interactive Brokers.

Create a model portfolio or watch list before you start playing with your own money.  Remember that limiting your downside is the most important thing you can do for yourself.  If you close a losing position for an 8% loss, you only have to make an 8.7% return to break even on your next trade.  But if you close a position for a 50% loss, you'd have to make a 100% return on your next trade just to break even!  How about an 80% loss?  You'd need to make a practically unobtainable 400% return just to break even.  This should help to illustrate the incredible importance of cutting losing positions early and focusing on risk management.

Your individual trading strategy will be just that, an individual strategy.  There is no strategy that will suit all investors.  If it were that easy, we'd all be rich!  You must weigh your level of capital commitment (how much money can you comfortably set aside for investing and for how long?), the amount of time and interest you have in actively managing your money, as well as your risk tolerance (how much day to day fluctuation in portfolio value can you stomach without panicking?).

Some of these questions you probably won't have a reliable answer for immediately, so I would suggest that once you allocate some capital for investing, do yourself a favor and sit on a good portion of it.  Start by investing only a portion of your available investment capital for several months before you fully commit yourself.  During this time, you will build your understanding of investing and learn more about your own personal psychology with respect to your individual investor profile.  It's easy to have a few trades go well, think you're a genius and harbor thoughts like "wow I can't believe how fast I'm going to be a millionaire!", and then pile all your money into something that ultimately might break your account - believe me, I've been there!

Unless you are unbelievably lucky, trading over any appreciable length of time is not easy.  It takes commitment and stringent discipline to perform well over the span of a lifetime.  You'll also notice that your trading style is likely to change several times over.  While you are young, you will likely find yourself taking on greater risk than as you grow older.  You'll also deal with periods of emotional confusion and frustration where you may become paralyzed, panicky or (on the flip side) overconfident as a result of the interplay between fear and greed.

In order to become a successful investor, you must learn the fundamentally cyclical nature of investing.  Stocks do not tend to go up or down in a straight line.  There are periods of buying, and subsequent periods of selling in even the strongest of stocks.  Watch the market, teach yourself how the market tends to react to events both geopolitical and financial.  Once you feel comfortably in sync with the market, start to place your bets.  Equally as important as understanding the cyclical nature of trading is to understand your own emotions.  How often I've let a good trade go bad because of my own gut wrenching emotions that constantly attempt to justify the world in front of me to my favor.  News flash: The world doesn't always work in one's favor and you simply aren't as smart as you might think you are.  One key to being a good investor is to quickly acknowledge when your thesis is wrong (don't attempt to rationalize a sudden change in your thesis in order to keep yourself in any given investment), simply get out and await the next opportunity.

This is your money.  You've worked hard for it and you must respect it.  Money that you do not respect will be money that is no longer yours.  Always remember that those who last in this game focus a lot more on the downside risk (how much money could I lose?), rather than on the upside potential (how much money am I going to make?).  Protect your capital, guard it, know how much you stand to lose before you ever enter a trade.  Risk management is the only reliable way to survive in this market.  If you can effectively manage your risk and stay involved, the upside will take care of itself.  Now that I've hammered that point home, allow me to present to you some broad guidelines that will help make you a better investor.


Diversification.  Don't keep all of your eggs in one basket!  This will help protect you from painfully steep losses whenever a specific sector falls out of favor.  Ideally, you should own at least 4 or 5 stocks for companies in different sectors in order to distribute your risk across different areas of the economy.  Even if you know that one sector is absolutely on fire, you should still keep some of your money spread around in case that hot sector falls out of favor - momentum stocks often fall even faster than they had risen!  Diversification is one very important part of effective risk management, but there is a practical limit for the individual investor; Try not to get involved with more than 10 stocks if you are only a part-time trader, as doing so will make it difficult to stay up to date on the news and price action that affects each of your positions, which is absolutely necessary in order to make timely decisions and avoid costly mistakes.  Likewise, don't buy stocks in a sour sector just to be diversified; concentrate your focus on sectors that are working.


An example of a Well Diversified Portfolio:
  • Gold/Mineral/Mining - Freeport McMoran Copper & Gold (FCX)
  • Oil/Energy - Transocean (RIG)
  • Agricultural - Monsanto (MON)
  • Consumer Staples - Proctor & Gamble (PG)
  • Telecommunications - Verizon (VZ)
  • Technology - Riverbed (RVBD)
  • Healthcare - Humana (HUM)
  • Defence - Raytheon (RTN)
  • Retail - Walmart (WMT)
  • Financial - JP Morgan (JPM)


Do your Homework.  Expect to spend at least one hour per week per stock that you own; keeping up to date on the price action, general news, press releases, earnings reports, etc.  The market moves fast and you need to stay on top of it if you want to make some serious money.  If you don't have the time to do this, hand your money over to an actively managed mutual fund or index fund, where you can still reap the rewards of one of the most lucrative asset classes without the stress and time requirement of managing your own money.  You cannot skimp on this if you want consistent returns!  When a company reports earnings or a major news release hits the wire, you need to digest the news in a timely manner and make a decision whether to buy, sell, or hold.  This includes redefining your risk (maximum loss) and/or protecting profits by raising your sell stop for example.

Only own stocks that you can understand.  Can you wrap your head around what a company actually does to make money?  Don't buy into hype!  Develop a solid thesis for why you believe the company or sector you are investing in will do better than expected in the future, as well as what could potentially go wrong to cause the company to produce weaker than expected results.  If you don't know how a company makes its money, you won't know how to react to breaking news.  Make sure you can understand what it is that your company does, and recognize the downside risk. 

Understand a stock's risk/reward ratio before you buy.  How much upside versus downside can you expect if you were to buy in at the given price level?  Identify areas of support and resistance on both the daily and weekly price charts for each stock you are following.  Remember that support and resistance isn’t always a horizontal line on the chart.  Often, support is found on various “key” moving averages such as the 20, 50 and 200 day moving averages. 

The weekly chart is your decision time frame, the daily and intraday charts are your action time frames.  A stock is a longer term buy candidate when its weekly chart shows a strong uptrend.  Once you recognize a strong stock, you should zoom in to the daily chart in order to identify the shorter-term support levels, which will ultimately become your buy levels.  Unless you are planning to flip the stock as a day trader, zoom back out once you have built your position.  This will help you to retain perspective, in order to prevent you from being shaken out of a good position amidst short-term jiggles in the market that could freak you out even though the longer term trend remains intact.

Position Size.  Maybe there's a stock that has reported great earnings and jumped 10%, blowing past your ideal buy level.  You understand that stocks ebb and flow and that you should try not to chase strength, but you don't want to be left behind either!  In situations like these, buy just a little bit to get involved, and keep your position size small enough so that if the stock were to pull back to an identifiable level of support, it won’t hurt you or cause you to panic.  If you get the pull back, you can plan to add to the position and effectively lower your average cost basis.  If you don’t get the pull back, well at least you are still making some money with the small position you do have.  Staying involved will help keep you in tune with the market and aware of opportunities as they are developing.  Managing position size is a form of risk management that keeps you involved.  You don't need to (and generally shouldn’t) buy or sell your position all at once.

Do not buy (or sell) all at once.  No one can reliably and repeatedly time the precise top and bottom in a stock's trajectory.  Therefore, it is often advisable to scale into positions over time.  Take advantage of unexpected/overdone weakness to add to your winning positions, and likewise use exaggerated strength to book some profits.  I have found the use of sell stops to be a tremendous asset in helping to define my risk when entering a trade as well as to protect profits on winning positions.  It is not uncommon for me to have two or three sell stop levels for each stock position I’m holding, and will adjust these levels according to the prevailing price action on at least a weekly basis.  In this way, I am managing my risk by taking some of it off of the table whenever support levels are violated on the stocks I own.

Don't buy the best house in a bad neighborhood.  At least half of a stock's movement comes as a result of the performance of the sector within which it resides.  If a sector is doing well, it will tend to lift the stocks of most companies operating in that sector (a rising tide lifts all boats).  The inverse also holds true.  This is one reason why it is important to have a clear understanding of the company behind the stock that you own, and why you should avoid sectors that are out of favor.  If a sector is falling off of a cliff, even the best company in that sector is going to be under massive amounts of selling pressure.  The only time where it may be appropriate to invest in the "best house in a bad neighborhood", is if you believe that a turnaround is imminent based upon a specific variable such as pending political legislation or where we msy find ourselves in the current economic cycle.  So far as I’m concerned, it is far preferable to miss the early part of the move by waiting for signs of strength before entering a position.  This allows you to set a stop loss just below that sign of strength, effectively defining your risk while allowing you to catch the majority of major moves.

Don't fight the trend.  Just as humans can be completely irrational, so can the market.  Human psychology cannot be ignored or separated from how the market works.  No matter how strongly you may feel about the direction a stock should be going, discipline will trump conviction always!  You might have several reasons for why a stock should be going up, but if that stock is being sold down on heavy volume, it doesn't really matter what you think because you are losing your money.  Keep an eye on the trend of the individual stocks you own, their sectors and the market as a whole.  Use weekly charts to identify longer term trends and try not to overthink this rule.  The market often operates in extremes, so even if you think a stock or sector has fallen as far as it will go, prepare for it to fall even further.  Likewise as they rise, they will often overshoot to the upside.  Therefore, make an effort to trade in and out of your positions incrementally, setting and adjusting stop levels in accordance with the prevailing price action.

Volume tells truth.  Volume is the number of shares traded over a specific time period.  It is an excellent indicator of the validity behind a stock's movement.  High volume (greater than the 10 day average for the issue observed), will help to validate the direction of the trend.  Likewise, one should not place the same level of faith in the movement of a stock on low volume.  This is why the holiday season or shortened trading weeks tend to experience higher volatility (erratic price action).  Simply stated, there are not as many market participants on these days, and therefore smaller amounts of money can have a greater influence on the movement of individual stocks due to the overall lowered liquidity.  This in turn can lead to the manipulation of certain stocks, which can reverse quickly once the big players are back in business and the volume picks up again.

Learn how to read a balance sheet.  Every company trading on a major US exchange provides public financial documents such as their balance sheet, which will provide valuable information regarding the health of the company in question.  Avoid companies that are loaded down with debt.  Look for companies that have consistent or growing earnings & revenue, low debt with respect to cash, and good cash flow.  Many online brokers will conveniently display these key data points for you, but you can also find what you need at the Securities & Exchange website.  I highly recommend that you study How to Read a Balance Sheet, making sure to follow the "More on reading a balance sheet" links, as that's where the meat of the information is located.

Don't turn a trade into an investment. If you buy a stock for a specific catalyst (anticipating a new product announcement, takeover, merger approval, drug approval, positive government action, etc), don't turn that trade into an investment by holding onto it if your catalyst does not come to fruition.  Learn to recognize which trades you are entering for short-term catalysts and which investments you are holding for their long term potential.  There are of course confluences where short-term and long-term objectives are not mutually exclusive.  But nine times out of ten, you should stick with your original game plan and don't be afraid to sell at a loss if things are not playing out the way that you had anticipated.  There is no sense in hoping that a stock will come back up, not all stocks will recover and some will even go to $0.  Limit your losses by cashing out if your catalyst or thesis fails to materialize.

Always keep cash on hand!  This is one of the biggest and most common mistakes made by new investors (I learned this the hard way!).  If you keep all of your cash committed, you are basically saying that you don't believe that the market can drop for any reason at this point in time.  With no cash on the sidelines, you will not be able to take advantage of buying your favorite stocks on sale when the market has a bad day/week/month.  So keep at least 10% of your portfolio (the money you have immediately available for investing) in cash, so that you can put it to work when there are unexpected drops in your favorite stocks.  If the market has taken an unusually strong advance, start booking some profits because there will eventually be a pullback.  In a sideways or down-trending (bear) market, keeping even higher levels of cash on hand is important so that you don't get washed out amidst the grinding volatility and overall choppy negative price action.  You want to have that cash on hand in order to take advantage of rapid spikes downwards, also known as capitulation.  You also want that cash on hand to put to work when low risk trades with clearly defined support present themselves.  The disciplined use of sell stops will allow you to build up your cash position automatically whenever the market starts getting dicey, since you will be selling the stocks in your portfolio that are breaking support, thereby replenishing your cash reserves in wait for the next opportunity.

Dividends.  A company that pays a dividend is giving you a specified cash payment for each share of the company that you own, typically distributed directly to you four times a year (once each quarter).  If a company has a safe dividend, it could make a fantastic long-term investment as you not only receive cash flow and income on a regular basis through the dividend, but you may also capture additional upside that comes from the underlying stock's capital appreciation - in a sense, you are getting paid to wait for further upside!  Since a dividend is paid as a specific cash amount, let’s say $1 annually for a $10 stock, the dividend yield will increase as the stock's share price goes down.  That $10 stock yields 10% annually ($1/$10), but if the share price drops to $8, the yield is now 12.5% annually ($1/$8).  Since the yield rises as the share price falls, dividends act as a cushion on the downside by attracting more buyers as the stock gets cheaper and the dividend yield grows larger.  When the market has a serious swoon, buying the stocks of companies who have consistently paid high dividends can result in a HUGE payoff over time; with the peace of mind that even if the stock price isn't appreciating, you will still receive viable cash flow.

Dividend safety.  Of course, you need to make sure that a company will continue to be able to pay its dividend, as not all dividends are to be trusted!  This can be done by reviewing three key factors that may indicate when a dividend is at risk of being cut or eliminated.  It is not necessarily any single rule that will determine a dividend's absolute safety, but these three elements taken together will give you a high level of confidence in the safety of a dividend (or lack thereof):
  • Earnings - Earnings should ideally be at least two times the amount of the dividend payout.  If a company consistently has earnings per share (EPS) that are two times or more than the per share dividend payout, you know that they should have no trouble covering the payout even during troubled times.  Note that certain partnerships such as Real Estate Investment Trusts (REITS) are required to pay out the majority of their earnings to shareholders every year, and that therefore the "two times rule" will not apply to these holdings.

  • Cash Flow - If the earnings metric doesn't quite work out, a company could get around it by having ample cash flow; higher than its reported income.  But pay attention to where the cash comes from and make sure that it is not coming from delayed debt or early receipts as those are not sustainable sources for funding a dividend over the longer term.

  • Balance Sheet - Be very cautious when a company's balance sheet shows more debt than cash.


I am not a professional, but I have been at this for several years now and I feel that I am getting a better handle on it
with each additional day of experience.  It is not easy, but it is viable, and can even teach you a great deal about
yourself and your own emotional tendencies throughout the process!  By following the advice I've laid out in this guide,
staying involved and focusing on risk management, you can make some serious money in the stock market.

Just remember...

  • Be patient and opportunistic; never attempt to force a trade.

  • Trade the market that is in front of you, not the market that you wish or hope were in front of you!

  • Always define your risk (maximum loss) before opening a new position, and adhere to that discipline.

  • Learn to manage risk through the religious use of position sizing and stop loss management.

  • Learn to differentiate between your longer term positions and your short-term trading positions.

  • Discipline trumps conviction.

  • Hope is NOT a strategy.

  • Don't be afraid to take a loss as soon as your original thesis for a specific trade is proven wrong.

  • Don't be afraid to give your winners room to run, but continually redefine stop loss levels to protect profit.

  • Don't rely on one resource; Gather information and data from multiple sources.

  • Read some books: Jim Cramer's Real Money, John Bollinger's Bollinger on Bollinger Bands


I will use the remainder of this thread to post commentary on some of the stocks I am watching and moves I am making with my own money.  So please follow along and give me some feedback, ask questions, share your ideas.  I welcome any suggestions or concerns you may have about any statements I may make.  Give me your contrary opinions… It is through constructive criticism and subsequent analysis that we can all become better investors.  Also realize that this thread was started years ago, so fast forward to the most recent posts for relevant stock discussion and market analysis.















Original Post:



Happy New Year everyone.  As anyone who has held even a tepid ear to the goings on of the world economy and the US stock market in particular, you know that there is a lot of uncertainty in the air, which has resulted in some wild volatility (up and down movement) in the markets.  Oil is at $100, gold is over $850, domestic residential housing is in the pits, consumer sentiment is down as a direct result of the housing and credit related problems, and banks are struggling to maintain capital as they realize a good lot of their investments are practically worthless (they just can't sell them).

With that in mind, and considering the potential for continued volatility and widespread economic recession (indeed certain sectors such as housing and financials are already in recession), medical related companies are a good place to keep your capital working for you, with limited downside risk even as sales of discretionary retail items may be falling off a cliff. I think we can all relate to the simple fact that people still need their drugs!

Medical stocks are defensive. Therefore, I will present three ideas for the avid investor to consider in 2008 (and a bonus speculative pick for you risk takers).
  • St. Jude Medical (STJ) - Currently Trading @ $40.25 / share

    Develops, manufactures, and distributes cardiovascular medical devices.  The principle products produced are tachycardia implantable  cardioverter defibrillator systems (ICDs) and bradycardia pacemaker systems (pacemakers); mechanical and tissue heart valves and valve repair products; neurostimulation devices; closure devices, guidewires, hemostasis introducers and other interventional cardiology products, and electrophysiology (EP) introducers and catheters, advanced cardiac mapping and navigation systems and ablation systems.



  • Schering-Plough Corp (SGP) - Currently Trading @ $26.70 / share

    A global science-based health care company with prescription, consumer and animal health products.  Schering-Plough has three segments: Prescription Pharmaceuticals, Consumer Health Care and Animal Health. The Prescription Pharmaceuticals segment discovers, develops, manufactures and markets human pharmaceutical products. The Consumer Health Care segment develops, manufactures and markets over-the-counter (OTC), foot care and sun care products. The Animal Health segment discovers, develops, manufactures and markets animal health products. In November 2007, the Company completes acquisition of Organon BioSciences N.V. from Akzo Nobel N.V.  This acquisition should help SGP generate above-average earnings growth over the coming year.



  • CVS Caremark (CVS) - Currently Trading @ $36.50

    Operates in the retail drugstore industry in the United States. As of December 30, 2006, the Company operated 6,202 retail and specialty pharmacy stores in 43 states and the District of Columbia. The Company operates in two segments: Retail Pharmacy and Pharmacy Benefit Management (PBM). The Company sells prescription drugs and an assortment of general merchandise, including over-the-counter drugs, beauty products and cosmetics, film and photo finishing services, seasonal merchandise, greeting cards and convenience foods, through its CVS/pharmacy retail stores. The PBM business provides a range of prescription benefit management services to managed care and other organizations. In March 2007, CVS Corporation completed the acquisition of Caremark Rx Inc. The combined company is named CVS/Caremark Corporation.

    This one is special, as numbers came out this morning that have showed lower than expected "same store sales growth" - which is the key metric in evaluating companies that operate retail stores.  It has been particularly hard hit on the news, as soft numbers also came out for Walgreen and Rite Aid... and CVS is down over 7% this afternoon.  The best news here, is the Caremark Pharmacy Benefit Management acquisition, which should set it apart from the other retail drug stores.  As more drugs come off patent and generic equivalents are made available, CVS Caremark will make higher profits on the sales of those generics than they would have made for the name brand drugs.  Here is the research that caught my attention:
    "Despite a slow start to the flu season, [CVS] will very likely see strong
    demand on the retail side in this area over the next couple of months.  More
    and more prescriptions are also moving over to generic alternatives, which
    carry higher margins for CVS.  Finally, slower retail sales will not affect
    the secular growth of the company's pharmacy benefits management arm,
    Caremark.  And rather than paying 25 times expected 2008 earnings for
    similar businesses like Express Scripts (ESRX) and Medco Health (MHS), we
    can get the same business embedded in CVS Caremark at 16 times next year's
    expected profits."


For those interested in taking on a lot more risk (with potentially fantastic reward), I would look into First Solar (FSLR).  This is I believe the only company that builds solar modules without the use of silicon, and therefore is not at the mercy of the commodity price for silicon wafers.  Additionally, it has great visibility in terms of future contracts, and a lot of room to grow on top of what it has already booked in its backlog (secured future contracts).  If FSLR drops back to $250 (currently trading at $267.50), I'll initiate a position of 25% of what I intend to ultimately invest in the name, with a time horizon of 1 - 3 years.  Given its astronomical run over the last year, I would start picking away at it slowly, hoping that it comes down even more so that you can get a better price.




Disclosures:
Initiated a 30% position in shares of SGP last month at $26.71.
Initiated a 50% position in shares of STJ for my Roth IRA retirement account last week at $40.65.
Initiated a 50% position in shares of CVS today at $36.50.




Here's hoping 2008 will be a profitable year for you and yours! :beer:


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··∙   long live the shroomery  ∙··
...π╥ ╥π...


Edited by geokills (03/09/11 11:06 AM)


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OfflineThe_Ghost
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Re: Stock Picks for January 3rd, 2008 - STJ, SGP, CVS [Re: geokills] * 1
    #7827392 - 01/03/08 01:06 PM (16 years, 28 days ago)


Hmm...


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Re: Stock Picks for January 3rd, 2008 - STJ, SGP, CVS [Re: OneMoreRobot3021] * 1
    #7827537 - 01/03/08 01:42 PM (16 years, 28 days ago)

Dude!




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Re: Stock Update for March 20, 2008 - HCBK, MOS, MO [Re: geokills]
    #8174479 - 03/21/08 12:10 AM (15 years, 10 months ago)

Hola, I dont know if you guys are aware of Star Tech Environmental Corp, but I've been looking into them for sometime, and they are actively seeking investors. What they are doing is developing the first waste-to-energy using high powered self efficient plasma arc technology, its very fascinating stuff. Basically they're machine which is no bigger then a garbage dumpster, it takes almost any material other then that of radioactive waste and nuclear bombs, and sends it threw a vessel which includes a plasma torch, that burns the material at temperatures hotter then the sun, but thats not the amazing part, they have developed away to use the gases that come off of it, to produce power, not only that but alot of power. The thing becomes self sustaining, so it would operate even in black outs, and all it would be needed to keep it running would be too feed it garbage of any kind. Its fascinating stuff, and there technology is developing quick. There stock's have ben up in down over the past two years. But remain high and open to the public;




"Startech Environmental Corporation was incorporated in 1993 in Colorado and is currently listed on the OTC Bulletin Board stock exchange under the ticker symbol STHK.OB. Our cusip number is 855906103 and there are approximately 3,000 Startech shareholders. Startech stock can be bought or sold through a stockbroker, or generally through a financial institution that provides brokerage services."

how it works ;
Quote:

Plasma is simply a gas (air) that the Converter ionizes so it becomes an effective electrical conductor and produces a lightning-like arc of electricity that is the source of the intense energy transferred to the waste material as radiant energy. The arc in the plasma plume within the vessel can be as high as 30,000 degrees Fahrenheit ... three times hotter than the surface of the Sun. When waste materials are subjected to the intensity of the energy transfer within the vessel, the excitation of the wastes' molecular bonds is so great that the waste materials' molecules break apart into their elemental components (atoms). It is the absorption of this energy by the waste material that forces the waste destruction and elemental dissociation. The Plasma Converter is computer controlled, easy to use and operates at normal atmospheric pressure, very safely and quitely.




Efficiency
The following is an example input-effluent case:

(Source: Scott Budich, Executive Sales Manage, StarTech; Jan. 15, 2007)
IN:
[9.3 million BTU (inherent content of solid waste)]
1.8 million BTU electricity
subtotal: 11.1 mil BTU
OUT:
8.1 million BTU
Conclusions:
Electricity-to-fuel efficiency: 4.5-fold
Waste-to-fuel Conversion efficiency: 73%





Here's some basic information on there corporation and how things work;
Quote:

Feed System

The feed mechanism can simultaneously accommodate any proportion or combination of solid, liquid and gaseous feedstock. Solid wastes, depending upon their composition, can be pumped, screw fed, or ram fed into the plasma vessel. A shredder ahead of the feed system may be appropriate to achieve size reduction or object separation prior to direct system feed.

Liquid wastes, including sludge, can be pumped directly into the PCS through the wall of the plasma vessel through a special in-feed nozzle. The liquid feed system is designed to also accommodate any entrained solids that may be present. Similarly, gaseous feedstock may also be introduced into the plasma vessel through a specially designed nozzle.

Plasma Vessel

The plasma vessel is a cylindrical two-part container made of stainless steel with an opening in the roof through which the plasma torch is inserted. The vessel is lined with insulation and refractory to allow both maximum retention of internal energy and to protect the stainless steel container from the intense heat inside the vessel. The plasma vessel is equipped with inspection ports (including a video camera so the operator can see real time images inside the vessel to assist in PCS operation), openings for introduction of feedstock, and an exit port for removal of excess molten material. The smaller vessels are designed to remove molten material periodically through an automated tipping mechanism during which time the vessel may or may not remain in continuous operation. A design enhancement incorporated into the most recently constructed system is a continuous melt extraction feature which maintains the level of molten material in the plasma vessel at or below a preset limit without interrupting the operation of the system. This melt extraction system can be deployed with all sizes of Plasma Converters.

The plasma vessel is specially designed to ensure that no feedstock material is able to reach the exit port without first passing through the plasma energy field and undergoing complete molecular dissociation. The method by which this is accomplished forms a part of Startech's intellectual property. In addition, the plasma vessel is maintained at a slight negative pressure to ensure that no gases can escape to atmosphere.

The plasma torch system is a commercially available product that Startech can purchase from any number of reputable vendors. Comparable plasma systems have been used extensively in the metallurgical industry for decades. The most maintenance-intensive aspect of the PCS is the need to periodically replace electrodes, which occurs approximately every 300 to 500 hours of operation (typical). Electrode replacement can be accomplished in approximately 30 minutes thus ensuring minimum downtime of the PCS.

The PCS is also equipped with a torch positional system that allows the operator to aim the torch at different points within the plasma vessel. This aspect of the PCS allows the operator to quickly and efficiently treat feedstock as they enter the vessel and move around inside the vessel to avoid any build-up of solidified melt that may occur on the vessel walls.

Return to top

Gas Treatment System

The gas treatment system is comprised of six stages:
High temperature cyclone separator to remove particulates
Quench stage (with heat recovery, if desired)
Cartridge dust collector to remove particulates
Selective catalytic reduction to remove NOx
Packed column scrubber to remove acids and volatized metals
Final polishing
High Temperature Cyclone Separator
The initial step of the gas treating process is a pre-quench in which the PCG is cooled from approximately 1000°C down to 650°C by direct water injection with a conventional spray dryer arrangement. The PCG then flows through a refractory lined pipe into a conventional, insulated cyclone fabricated with high temperature alloy and designed to operate at high temperatures. The purpose of the cyclone is to remove particulate matter, which is then collected and batch-fed back into the plasma vessel.

Quench
PCG then flows to a spray dryer designed to rapidly reduce the gas temperature from approximately 650°C down to 120°C. The importance of this temperature reduction is to ensure that dioxins and furans, troublesome by-products of incineration, do not form. In order for dioxins and furans to form, the gas would need to remain in a specific temperature zone (e.g., 190°C to 330°C) for some period of time - conditions which are precluded by the quench.

Cartridge Dust Collector
PCG then flows to a commercial pulsejet cartridge dust collector with high-temperature cartridges and heating elements to prevent condensation. This unit is capable of automatically "blowing back" collected solids that are collected and batch-fed back into the plasma vessel.

Selective Catalytic Reduction (SCR)
Upon exiting the dust collector, the PCG is reheated to approximately 310°C for selective catalytic reduction of NOx in a standard unit designed for this application where hydrogen present in the PCG reacts with NOx to form atmospheric nitrogen and water. During periods where there is no hydrogen in the PCG (e.g. during start-up, when processing materials that do not contain carbon), urea is added to reduce the NOx.

Packed Column Scrubber
Upon exiting the SCR, PCG undergoes a final quench with direct water injection to reduce the temperature below 50°C. This prepares the PCG for acid gas removal, which is accomplished in a standard horizontal packed column scrubber. Other inorganic species dissolve into the scrubbing liquid as common ions including chloride, fluoride, sulphate, phosphate, sodium and calcium. To manage the build-up of salts, the scrubbing solution is removed and replenished with fresh water. The wastewater typically requires no further treatment prior to discharge to sewer, except in the event there is a high concentration of heavy metals entering the system as feedstock. Approximately 75% of metals go into the melt with the remainder being volatilized and entrained in the PCG where they are captured in the scrubber and carbon filter (see below). The wastewater also contains particulates below one micron.

Finally, a standard variable speed fan at the exit of the gas treatment train pulls PCG through the entire system and maintains a constant, slight negative pressure within the plasma vessel.

The system has been designed so that it is comfortable, intuitive, and easy to use. The skill level of the operator need not be any higher than one having a reasonable technical aptitude.






Here is a newswire from Star Tech;

Startech Environmental Sells Plasma Waste Converter To Process Chemical Industry Hazardous Waste in Taiwan

    WILTON, Conn., July 22 /PRNewswire/ -- Startech Environmental Corp.
(OTC Bulletin Board: STHK), a fully reporting company, announced today that it
has signed the contract for the sale of a 10-ton per day commercial Plasma
Waste Converter system (PWC)(TM) with the Meridian Industrial Solutions
Corporation, a U.S. corporation with offices in New Jersey, California and
Taiwan.  The contract provides for significant down-payments and manufacturing
progress payments.  Meridian, the Startech exclusive distributor for Taiwan,
has asked that the financial details of their purchase be confidential.
    Dr. H.E. Wu and Mr. Jose A. Capote, Principals of Meridian said, "The
10-ton per day PWC that will process chemical industry hazardous wastes will
be followed by several 50-ton per day systems for a plant that we will build,
own and operate to process a wide variety of solid and liquid industrial and
hazardous wastes.  Beyond chemical and industrial wastes, we are also focusing
on utilizing the PWC system to destroy military wastes.  Incinerators should
not be used in these applications."
    They also said, "Over the last several months, we looked at many companies
and technologies from different parts of the world.  We chose Startech because
the PWC system gives us the unique capability to destroy a wide range of
wastes, using a single unit.  Startech's achievements in safely destroying
military and chemical weapons for the U.S. Army gave us the highest level of
confidence in the PWC's ability to do it all."
    Mr. Longo, President of Startech, said, "Meridian is a full-service
environmental engineering/construction and waste management firm.  Their team
is made up of experienced executives with solid engineering and management
backgrounds in the environmental and waste management businesses.  Meridian's
partners also include leaders in the Taiwanese environmental, waste management
and recycling industries."

    Startech is an environmental equipment company whose Plasma Waste
Converters remediate and safely process hazardous and non-hazardous wastes
comprised of organic and inorganic solids, gases, and aqueous and non-aqueous
liquids by its proprietary method of molecular dissociation and closed-loop
elemental recycling.  The PWC system can convert many hazardous and
non-hazardous wastes into commercially useful commodity products. It is not an
incinerator.


Here's a list of recent press release's;

http://www.prnewswire.com/gh/cnoc/comp/113537.html


and finally a qoute from the ceo himself;
Quote:

Startech VP and CFO, Peter Scanlon, said, "With sales in Asia, Europe
and North America, and manufacturing well under way, the Company has never
before been as strong as it is today, and getting stronger. We're all very
optimistic about Startech's future.
"







    •••• 


personally I find this all to be very fascinating technology, especially at this point in human history, where we no longer desire such efficient but we almost require them at this point, so I can only imagine great things in store for this corporation.
 


Cheers ~ ursa :boobs:

http://peswiki.com/index.php/Directory:StarTech_Environmental_Corp

http://www.startech.net/plasma.html


--------------------



I am incapable of conceiving infinity, and yet I do not accept finity.
- Simone de Beauvoir -


Edited by snoot (03/21/08 12:17 AM)


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Re: Stock Update for April 10, 2008 - SIRI [Re: Liquidkick]
    #8269696 - 04/11/08 02:27 PM (15 years, 9 months ago)

Here's a dumbed down version of the business cycle chart for reference:




Unfortunately, the cycle isn't 100% fail proof, and our current cycle is a little different from the generic cycle depicted in Jim's book (Page 115 of Jim Cramer's Real Money). This is because our downtrend is being driven by problems largely specific to the financial, housing and credit systems - and especially due to the fact that we are experiencing new secular growth trends in industries that were previously more cyclical.

To note, secular growth = sustained growth independent of the economic cycle.

We are obviously on the down leg of the curve approaching the trough, as our GDP growth is definitely decelerating and the Fed has been easing interest rates for some time now. Going by Jim's chart, this is the point in time where you might consider scaling into banks & financials, as well as retailers and housing stocks. I don't think that's a bad plan (which is why I currently own Hudson City Bank and Jones Apparel) - but we must be very careful in choosing specific names, due to the central role the financials have been playing in the current crisis, making them considerably more risky than during a typical economic contraction. Also due to tightening credit and home mortgage related problems, consumers are increasingly strapped for cash, which can result in extended retail weakness beyond what a typical business cycle may predict.

Likewise, recent moves by congress in efforts to grant tax breaks to home builders, will probably end up creating even more inventory (too much home supply), which will further devalue home prices since demand for homes will not rise accordingly. In other words, actions by congress independent of the business cycle would seem to be making housing stocks vulnerable to continued losses at this point, and I wouldn't be buying them quite yet (though recent price action has shown that some people have indeed started to pick at these names).

As for tech, this is just a bad time for technology in general. There will be few catalysts ahead until we get into the summer, at which point tech's will likely start to see more life in anticipation of the upcoming holiday seasons and new product cycles. For a few more months, tech is likely to be rather stagnant as people worry that a soft consumer in conjunction with corporations reducing their capital expenditures, will hurt technology sales.

Also as Jim's chart suggests, we should be selling our machinery, infrastructure, metals, and minerals stocks... But the new secular growth trends in industries that were previously more cyclical is a major reason why you don't see many of these names (including commodities) getting hit right now. I'm talking specifically about oil, infrastructure, metals and minerals, and agriculture. Even though in the past it has been wise to sell these stocks as our domestic GDP declines; the international markets are so well connected that many of these sectors are experiencing continued secular growth on account of international exposure to and demand from high growth markets in Brazil, Russia, Eastern Europe, India, and China, as well as the secular trends regarding the need for agricultural feed stocks, fertilizers, and seeds due to rising world population and increased demand for foods.

The business cycle, while valuable as a general guide to where we are, cannot be relied on blindly. We must understand that Jim's chart pertains largely to a historical US-centric economy, and as we move forward with so many companies not confined by borders, in addition to more and more growth outside of the US, it becomes more important to consider each stock as it is connected to the worldwide economy instead of only the US economy.


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Stock Update for November 12, 2008 - GS, PWR, SDS, FSLR [Re: Luddite]
    #9231635 - 11/12/08 03:56 PM (15 years, 2 months ago)

Quote:

Luddite said:
Jim Cramer and some other people talk about dividend paying stocks.  What do you think about them.  Look at NAT and FRO, for example.



I think dividend paying stocks should be the primary focus of any portfolio at this juncture,
well, at least any long portfolio.  A collection of dividend payers and short positions is
what I'm focusing on.  But you need to make sure that the dividends are safe.  I worry
about the tanker/shipping companies, as the Baltic Freight Index has fallen off a cliff:



This is a direct measure of shipping prices, and indicates that companies like NAT and FRO may experience serious reductions in revenue and cash flow over the current and coming quarters.  Because of this, I would not trust their dividends as they will likely be cut.  However, if you can find companies that are not in need of financing, and that are making at least twice as much money as would be required to pay their dividend, you should be able to consider those dividends safe, and they should be the companies you invest in.  To use examples from my own portfolio, I'm thinking here of Altria (MO), Kinder Morgan (KMP), McDonalds (MCD), JP Morgan (JPM), and maybe Freeport McMoran (FCX) (though this one involves significantly more risk that the others).  Those are the most bountiful dividend players in my portfolio, but I also hold Proctor & Gamble (PG), Walmart (WMT), and Goldman Sachs (GS) - the former two hold extremely safe dividends.  In fact, eight of my eleven long positions are dividend paying stocks.



Now for a mid-week update of my own trading activity:
  • Goldman Sachs (GS) - Bought 36 shares @ $77 & $65

    I didn't post an update for a purchase I made on November 7th, at $77 a share.  Unfortunately, the stock is down 14% from that level, which is why I made another purchase today at $65.  The banking sector is still facing strong headwinds, and even though Goldman may post its first losing quarter in its history as a publicly traded company, I still believe that this bank/broker will emerge as one of the stronger players when we see through the current crisis.  Now this doesn't mean I won't flip some shares on strength (you just have to in this unpredictable and volatile market), but I do like the company, and being able to purchase it below its IPO price and at 0.8x book value seems like a solid choice.  A well known analyst at Sandler O'Neil Investments has suggested that GS would have to see nine consecutive quarters like the current fourth quarter in order for its tangible book value to drop to where the stock is currently trading.  Though that risk is very much on the table if we were to plunge into depression, I don't think it has a high likelihood of materializing.


  • QuantaServices (PWR) - Bought 100 shares @ $13

    It is really amazing how bad this market is.  If you are going long, you literally have to expect your stock to go down, which is why it is so important to move in small increments while volatility is at such extreme levels.  This specialty contractor which primarily services the electric power, gas, telecomm/cable TV industries and should benefit handsomely from the move towards wind power over the coming years, is down a whopping 24% from where I initiated the position only last week!  While it will be a rocky road, I have lightened up on energy and really like the long-term story here, especially with an Obama administration, which should place greater focus on alternative (and especially wind) energy.  This is not a quick flip, though I will of course trade around the position as the market permits.


  • UltraShort ProShares S&P500 (SDS) - Sold 10 shares @ $97, 10 shares @ $100, and 10 shares @ $105

    Remember that this investment returns two times the inverse movement of the S&P500.  As we are nearing the bottom of the trading range which has developed over the past month (between 850 - 1000 on the S&P), I am lightening up on this UltraShort.  Now, to be sure, we could break through these levels and experience another leg down.  While I acknowledge the possibility, my discipline would have me lighten up on this position now in order to protect the 10% gain I've earned here.


  • First Solar (FSLR) - Bought 10 shares to COVER at $115

    I initiated a margined short position on this solar energy stock last week at $143.  This means that I had borrowed shares and sold them, betting that they would be going down, so that I could buy them back to "cover" my borrowing.  This trade has worked out very well so far, with the stock down some 23% by the close today (meaning I am up 23%).  I covered a little less than half of the position, as shares were hit an exceptionally painful 16% today alone.  I will continue to cover this position as shares near $100.  The stock has such a high multiple, and with other energy sources coming down in price, the drive to solar power may not occur as quickly as people had been anticipating.  While the stock may see a bit of a relief rally along with the broader market and any alternative energy talk coming out of Washington, I don't believe it will have legs for a sustained rally for quite some time. 


  • Genworth Financial (GNW) - Considering a short-term flip

    As per phi1618's recent actions, I like the idea of playing flips on depressed stocks that - while the companies are in serious trouble - should be able to survive for at least a few weeks or months longer.  These slow and painful deaths can allow for opportunities in playing the volatility before their ultimate demise comes to fruition.  Below $0.95, I am interested... though make no mistake, this is an extremely speculative and high risk play.


  • Altria (MO) - Considering Adding to Position

    This stock is getting SO darn appealing, with its juicy 7%+ dividend which is very safe.  Smokers smoke in hard times as good.  With its recent acquisition of UST Smokeless Tobacco, Altria stands to benefit from synergies and increased market share.  This is already the largest position in my portfolio, but I would be happy to add to it at $16.25.


Discretionary Portfolio as of 11/12/2008:
  • 24.3% Cash
  • 14.9% Altria (MO)
  • 10.1% Walmart (WMT)
  • 9.5% Proctor & Gamble (PG)
  • 8.7% Goldman Sachs (GS)
  • 7.7% Quanta Serivces (PWR)
  • 7.3% Celgene (CELG)
  • 5.6% JP Morgan (JPM)
  • 5.3% SPDR Gold Trust (GLD)
  • 5.0% Kinder Morgan (KMP)
  • 4.7% McDonalds (MCD)
  • 4.2% Freeport McMoran (FCX)
  • 3.4% UltraShort S&P500 ProShares (SDS)

  • 3.1% equivalent Margin Short First Solar (FSLR)
  • 6.3% equivalent Margin Short Deere (DE)


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Stock Update for November 28, 2008 - GOOG, TBT, GS, SDS, MO [Re: geokills]
    #9327079 - 11/28/08 12:41 PM (15 years, 2 months ago)

The market has continued to hold its gains of the last several days, but we are approaching key levels of resistance and I am taking precaution.  Following are my trades from the last two trading sessions (before and after Thanksgiving):


  • Google (GOOG) - Margined SHORT on 12 shares @ $280

    Google - while it is undoubtedly not going out of business - derives the vast majority of its revenue through advertising.  In a slowing economic environment, advertising will be cut back in great proportion and therefore Google's revenue and growth rate should stagnate until the economy improves.  Though shares have fallen quite a bit, its recent break below $300 would signal the potential to test the $200 level, as the stock flew from $200 to $300 in early 2005 after its initial public offering (IPO).  This indicates that $200 is the next significant support level, and that is why I am shorting this stock, betting that it can retest that level in the near future.  However, it is worth noting that the market is in the midst of a bear market rally, and if we break above resistance levels on the major market averages (900 on the S&P - we closed today at 896), then GOOG could be carried back up above $300 a share.  I will stop out this short position (i.e. buy back the shares) if share price breaks above $305.



  • ProShares UltraShort 20+ Year Trsry Bond (TBT) - Bought 75 shares @ $51

    This fund shorts US treasury bonds.  It will return two times the inverse of the TLT (which is the long form of the Treasury bond fund).  You can see the spike on the TLT, and it is unlikely that it will be sustainable.  Jeff Dorman outlines the rationale behind this short better than I could:
    There has been a lot of talk about shorting US Treasuries by either shorting TLT, or buying TBT or PST
    (the ultra-shorts). I agree with this trade for the obvious reasons mentioned by other contributors:

    1) The US Govt will have to start funding all of these purchases through the issuance of new bonds

    2) The deflationary trend will come to an end

    3) The "safe haven" bid to US Treasuries is a pure technical bid and will end as soon as stability
    returns to equities and investors continue to put money into munis and corporate debt.

    But what hasn't been mentioned is that the US Govt is no longer a "risk-free" asset even though it
    continues to trade like it is. 5-yr Credit Default Swaps (CDS) in US Govt debt used to trade between 2-
    4 bps (essentially risk-less). This risk more than doubled to 6-8 bps between July and September
    2008, but you could argue this was still essentially riskless. But US Govt 5yr CDS currently trades
    around 35-40 bps, and reached as high as 50 bps when equities were at their lows. This clearly
    indicates that the US Treasury is no longer a "risk-free" rate, and Treasury yields must go wider.

    To put this in perspective, one year ago the Investment Grade CDS Index (which is comprised of 125
    North American companies rated between BBB and AAA) traded at 35 bps, and in June 2007, 2-year
    swap spreads (which is an indicator of risk for AA-rated US banks) traded at 40 bps. So the US
    government is currently perceived to as risky as Investment Grade corporate bonds and US bank
    bonds were one year ago. Current 10-yr and 30-yr US Treasury yields of 3.1-3.6% are not
    compensating you for the risk.




  • Goldman Sachs (GS) - Sold 13 shares @ $76

    Financials have participated heavily in the rally this past week, after news of the Citigroup bailout.  I still like Goldman, but I wanted to build up some cash and Goldman had risen some 50% off of its lows.  I figured it would be a good time to trim a little bit off of this position.  If the stock trends back towards its lows around $50, I will be very likely to buy more on the way down.



  • UltraShort S&P500 ProShares (SDS) - Bought 40 shares @ $89.50

    This fund returns two times the inverse of the S&P500.  The S&P as of today's close is sitting right at its resistance level of 900.  Likewise, the SDS is sitting at support of around $90.  The trends are still intact for the SDS to maintain its upside (and the aggregate market to maintain its downside), however I have a fairly tight stop in place here to help limit my potential losses.  If the SDS falls below $87.50, this would indicate the S&P500 rising above resistance and could lead to a rally from the 900 level all the way up to 975 - 1000.  At $87.50, I have a stop limit order to sell 50 of my 80 share position in this ultrashort.  The following charts should clearly indicate the current support and resistance levels on the SDS and S&P500 respectively:





  • Altria (MO) - Sold 100 shares @ $16

    Altria is and will remain my largest position, with its especially sweet 8% yield and defensive posture.  However if the market does continue to rally, institutional investors may begin to move out of these "safe recession stocks" and begin to put their money back into their favorite growth stocks.  You could see this happening over this past week with the weakness in Proctor & Gamble (PG).  This is why I am lightening up a little bit on this position, and is the same reason I have a stop limit in place on my Google short... as continued market upside will keep pressure on MO while at the same time helping to lift GOOG.  My most recent purchase of MO was at $15, so this can be considered an incremental trade around my core position for a small profit.


Discretionary Portfolio as of 11/28/2008:
  • 15.1% Altria (MO)
  • 13.6% UltraShort S&P500 ProShares (SDS)
  • 12.1% Cash $$$
  • 9.5% Walmart (WMT)
  • 8.8% Proctor & Gamble (PG)
  • 8.6% Quanta Services (PWR)
  • 8.5% Kinder Morgan Energy Partners (KMP)
  • 8.0% Celgene (CELG)
  • 7.0% ProShares UltraShort 20 year+ Treasury Bond (TBT)
  • 5.0% Marathon Oil (MRO)
  • 4.6% JPMorgan (JPM)
  • 4.5% McDonalds (MCD)
  • 4.3% Gilead Sciences (GILD)
  • 4.1% Goldman Sachs (GS)

  • 6.75% equivalent margined SHORT Google (GOOG)
  • 6.86% equivalent margined SHORT Henry Schein (HSIC)



And in the spirit of Thanksgiving, I would like to share this heartwarming piece posted by the Rev Shark over at TheStreet.com's RealMoney subscriber section:

Quote:

Taking a Moment to Reflect and Give Thanks
By Rev Shark
RealMoney.com Contributor
11/26/2008 11:37 AM EST 


Although we are dealing with the worst stock market and economy since the Great Depression, it is
particularly important this time of the year to take the word "thanksgiving" literally and reflect a bit on
the positive things in our lives. Most everyone who is reading this is touched in some way by new
problems, issues or stresses caused by this economic meltdown. It is something truly historic, and it is
so easy to focus on all the negatives that we lose sight of the positives.

Once again, I'm going to share my story. I've done so every year since I started writing for
RealMoney back in 2002, so forgive me if you have read it before, but writing about it is one of my
ways of reflecting on my many blessings. I'm hopeful that the story of what I went through may be
helpful to others who are facing adversity. We all have challenges in our life, and they can beat us
down or make us better. The key is to never give up.

Back in the early 1990s, I was feeling pretty optimistic about my life. I was a CPA, I had business and
law degrees from the University of Michigan and was anxious to start building my career as a
corporate attorney. It wasn't easy, but I was making progress and even had started my own law
practice when I started having an annoying problem with my ability to hear.

There was a history of hearing loss in my family, and had some minor problems with it as I grew up,
but it suddenly was becoming much worse. I started to worry that I might be in an important meeting
or a courtroom and would not be able to hear. I tried hearing aids and various things, but eventually it
progressed to the point where I was no longer able to talk on a telephone or have a normal
conversation.

My hearing continued to rapidly decline, and before I could even process what was happening to me I
was at a point where all I could do was try to lip-read and rely on handwritten notes. It became
impossible for me to continue to practice law, and I soon lost the few assets I owned as I struggled to
find a way to survive.

I was deeply depressed, isolated and lonely. I was recently divorced and had absolutely no idea what
I might do with my life. I couldn't interact with people and couldn't find a job as menial as serving fast
food because I couldn't hear a thing.

One day I stumbled across this new computer service called Prodigy, which to my delight allowed
people to interact online without having to hear. I started exploring what was available and eventually
discovered some stock market message boards. I had some general knowledge about the stock
market from some classes in business school, but this was much different from the theoretical
discussions of Modern Portfolio Theory, and apparently some of these people actually made some
money now and then by actively trading little-known stocks.

I was living on disability insurance and had pulled together a small stake from an old IRA and a couple
other places, but there was no way I could afford to lose this money. My financial security was
extremely precarious, and if I could find a way to make any extra money it would help tremendously.

I opened an account at a broker who I could visit in person and communicate with via notes, and I
immersed myself in the online stock market discussions. At first, I had some very poor trades,
especially when I was focused on some crazy stories and didn't pay attention to the stock price. Very
slowly I started to learn that this was all about psychology, emotions and being disciplined. Balance
sheets and fundamentals didn't matter in the short term. I had to trade the other investors and traders
and their emotions.

I gradually began to develop an approach and style that made me a little money. I continued to read
and study everything I could find on the stock market and attacked it daily with great energy and a
positive attitude. My small stake soon doubled, tripled and continued to compound. In the late 1990s,
the momentum style that I had taught myself worked extremely well, and I soon had surpassed my
goal of making over a million dollars from my investing.

Not only was I enjoying tremendous financial success, I loved what I was doing. I wanted to know
everything I could about the market. I was always looking for ideas and new stocks, but it was the
methodology that was the most important. During the collapse of the Nasdaq in 2000, my discipline
prevented me from losing any significant money, and over time I continued to grow my financial stake
to levels I never dreamed of.

Not only was the financial success satisfying, I greatly enjoyed sharing the knowledge I had gained in
my struggles. I started posted on message boards owned by the Motley Fool and eventually started
my own Web site at SharkInvesting.com, and that led to the great honor of being asked to write for
Jim Cramer's RealMoney.com.

A couple years ago, an editor from FT Press read one of my prior Thanksgiving columns and asked me
to write a book. Shark Investing. How a Deaf Guy with No Job and Limited Capital Made a Fortune
Investing in the Stock Market was named the second-best investing book of 2007 by Amazon.com.

So here I am, a guy who not so long ago was completely lost, terribly depressed, alone and couldn't
even find a job. Now, not only have I made a lot of money doing something I love, I am able to help
other people do so as well.

Not only was my financial life doing well but my personal life greatly improved also. After a few painful
failed romances, I finally met a woman who learned rudimentary sign language who could talk with
me. Thirteen years ago yesterday we were married, and we now have the greatest loves of my life:
our children -- Anneliese who is 7, James III who is 3, and little Samuel, who has his first birthday on
Friday.

Medical science also came to my rescue. A number of years ago I received a cochlear implant, which
has greatly restored my hearing. Although it is not perfect, I can now carry on conversations without
too much trouble.

I never dreamed that losing my hearing and everything I owned would turn out to be one of the best
things that ever happened to me. If it hadn't happened, I'm sure I would not be where I am today.

I share this story with you not to brag but so that you too can be confident that no matter how bad
your life may seem, amazing things can happen if you don't give up. Every one of us has obstacles
and challenges, and if I can overcome what was facing me, I'm sure you can do so as well.

God bless, and happy Thanksgiving




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Re: Stock Update for December 22, 2008 - [Re: LunarEclipse]
    #9511874 - 12/29/08 11:38 AM (15 years, 1 month ago)

> Were you aware of the big dividend coming the next day after this post on your SDS?

No, unfortunately I wasn't.  That was a bummer, but I have plenty of losses to offset those short-term cap gains.  ...Not that I'm really happy about that either! :wink:

Though not specifically related to the index ETF's, here's an interesting article by Eric Oberg, "Why Short Sector ETFs Aren't So Smart":

Quote:

This article is by Eric Oberg, who worked in fixed income, currencies and commodities
for Goldman Sachs for 17 years before retiring as a managing director.

What would you say if you bought an index fund, only to find out that it
lagged the benchmark by 30%? 80%? Over 100%? I am sure you'd be
dismayed, disappointed and disgruntled.

What if you had perfect foresight and decided at the beginning of this year to
go short U.S. real estate and short financials? What if I told you about an
easy way to implement these trades, and to implement them with two or
three times leverage? You'd expect to clean up, right?

What if I told you that if you were spot-on with your market call, positioned
half of your portfolio in each short, you would still be down 23.4% year to
date?

That's better than the overall market, sure, but still a little perplexing, I
mean, how could you be down for the year with one of the most prescient
market calls of all time?

Yet this is exactly what would have happened if you were long the double-
levered short-biased ETFs on the U.S. real estate and financial sectors year to
date. In fact, one would have been better off being short the double levered
long funds vs. long the double levered short funds to implement this strategy.

Given that the double-levered long-side ProShares Ultra Real Estate ETF
(URE) was down nearly 80%, one would expect its complement (the
ProShares UltraShort Real Estate ETF (SRS) ) to be up 80% instead of losing
nearly half of its value, given they are based on the exact same index, right?

The same goes with the financial sector ETFs. Given that the double-levered,
long-sided ProShares Ultra Financial ETF (UYG) was down nearly 85%, you'd
expect its complement (the ProShares UltraShort Financial (SKF) ) to be up
85% rather than flat. As the car rental commercial says, "Not exactly..."



What makes this even more bewildering is that ETFs, with their
create/redeem process, should eliminate or curtail arbitrage, so there should
not be any significant net asset value distortions, and that indeed does not
appear to be the case.

To be fair, these funds do exactly what they set out to do -- track the daily
changes in these indices. But that is also their fatal flaw as any sort of long-
term investment or portfolio hedge. It is the daily rebalancing of the portfolios
in combination with the market volatility and the leverage that has eaten into
the returns of what appeared to be a savvy bet. And the irony of it all is that
these funds, due to their structure, actually contribute to the volatility, thus
directly contribute to their own failure as instruments for anything other than
a day trade.

The following is a little bit of an over-simplification, because there are
elements of path dependency, the element of compounding slight NAV
deviations that affect returns and a few other technicalities, but let me try to
explain how on earth it is possible to be double short an index that is down
40%, yet still be worse off than if you were long that index.

I am sure most people are familiar with the concept that if you go down 20%
one day, then up 20% the next, you are still worse off than when you started
(100 times 0.80 equals 80, and 80 times 1.20 equals 96). This is similar to
what happens with these double-levered short side ETFs (the two-times long-
side ETFs look like they do what they should), you get shorter on the way
down, making bounces hurt more, because you lose more of your capital
account.

So when you're frequently rebalancing, volatility nibbles away at your
returns. When volatility goes to extreme levels, it eats away at your
returns ... and with leverage, it devours your returns. This is essentially a
short volatility position, and the short volatility position can outweigh the short
index position, as evidenced by the returns in the chart. So these ETFs are
not quite as effective as one would think as a mainstay in the portfolio, as a
hedge or otherwise; in fact, they may be completely ineffective, or even
counterproductive, at achieving objectives.

What's worse, though, is that by their very construct, these ETFs exacerbate
the volatility. By bifurcating an index into long side and short side ETFs, they
eliminate an "out" for the market maker, causing the market maker to
actively hedge in the underliers. With a normal security, all buyers and all
sellers come to a central meeting place, and buyers can be matched easily
with sellers, and we reach price discovery. But when you set up a specifically
one-sided instrument, rather than one common product that people can be
either long or short, you contribute to dislocations.

Very few people would decide to go long an index by shorting the short-sided
index ETF -- they'd just go buy the long-sided ETF. These products
purposefully segment the longs and the shorts, and that, by definition,
creates illiquidity. (Although I have to admit, this is an ingenious idea for the
fund manager -- if they just had one product where longs and shorts could
meet, some of those would cancel each other out, and they'd have less
assets under management than they get by herding the bulls and bears into
different products.)

So if someone buys that short-sided ETF from a market maker, the market
maker does not really have "the other side" to mitigate his risk, thus he
either waits for someone to unwind a pre-existing position or he goes out and
shorts the underlier. This puts pressure on the underlier, which creates more
interest in being short. This, magnified by the leverage, magnifies the
volatility, which magnifies the negative convexity, which eats into returns.
Thus the "savvy trader" who thinks he or she is doing a "smart trade" is
contributing to his or her own underperformance while still having the right
idea -- the wrong execution of the right concept.

Now here is a key point: This short-volatility position is kind of a
compounding issue. If you compound at low yields, it is only slightly
noticeable. If you compound at high yields, it becomes meaningful. Only in
this case, instead of yield, think volatility. The more volatility, the more these
levered short ETFs get clipped.

So if I look at a broad index, such as the S&P 500, and then look at the
returns of the two-times levered long and two-times levered short ETFs, the
returns are more or less mirror images, with the two-times short fund only
slightly underperforming. This is because the volatility of the S&P 500 on a
daily basis is not extreme.

Another way of saying it is that these two-times long and short funds are
small fish in a much bigger pond -- the water is so deep, these barely cause a
ripple in the much larger market (not to mention that the intraday hedging
can be done in a liquid futures market). The activity in these funds does not
influence the broader market; the tail does not wag the dog.

But these smaller sub-index funds are much bigger fish in a much smaller
pond. The tail does wag the dog, and there is not a deep futures market with
which to hedge. And here is where you begin to see significant
underperformance in these levered short-sector ETFs, likely because these
funds are having an inordinate effect on their sectors -- and the volatility they
help create leads to their own demise.

I took two recent trading days looking at the SKF (the ProShares Ultrashort
Financial, SKF, the two-times levered short financial sector ETF), and just at a
high level looked at the dollar volume in the ETF traded that day, and
compared it with the dollar volumes traded in some of the underliers. Note,
that isn't to say that every dollar traded in the ETF translated directly into
dollars traded in the underliers, but the results were pretty staggering.

The SKF closed Wednesday, Nov 19, at $222 and change. Daily volume has
averaged 31.5 million shares (volume was actually slightly lower than that on
the 19th). Now, this is not scientific (or indeed even accurate), but it just
gives you a sense. At $222 and average volume of 31.5 million, that means
(if every share sold at the close, which it didn't, but again this is just to
illustrate a point) that the day's dollar volume in this short ETF was close to
$7 billion. Since this is double levered, that is really close to $14 billion in
volume in the sector. I understand that each trade represents a buyer and a
seller of the risk, but bear with me here.

The same day, Goldman Sachs (GS) closed at $55, with roughly 30 million
shares changing hands, representing 1.65 billion of dollar volume. Citigroup
(C) closed at $6.40 with a (then) whopping 340 million shares changing
hands, representing 2.2 billion in dollar volume traded. JPMorgan Chase (JPM)
traded 90 million shares and closed at $28 and change, so roughly $2.5 billion
to $2.6 billion in dollar volume. Merrill Lynch (MER) had about $1 billion in
dollar volume. The volume created by the SKF swamps all of these.

On Dec 4, assuming average price of $135, the SKF traded 29,248,827
shares, representing just shy of $3.95 billion in dollar volume traded. Since
this is a double-levered product, that represents just under $7.9 billion of
volume in the underliers. Goldman Sachs traded 23,838,644 shares at an
average price of around $68, giving us roughly $1.6 billion in volume.
Goldman accounts for 2.59% of the index associated with SKF. That means
that basically, $204,610,000 of the $7.9 billion in SKF was associated with
Goldman Sachs, or roughly one-eighth of the day's volume in Goldman.

Again, these are rough calculations and just two random days, but I think you
get a sense of the size of the fish relative to the size of the pond. There are
by far more scientific ways to establish whether or not these influence the
daily price discovery process -- but as a hint to those that may look into this,
just start by looking at the sectors that do not have symmetric returns
between the two-times long and two-times short ETFs, as those are the
sectors where volatility has reigned. I must admit, there is a delicious irony in
the fact that if indeed these ETFs have contributed to the extremes we have
seen in these sectors, that those that caused the volatility have also paid their
price.

So why do these products exist? Well, if you read the marketing literature, it
says that these products "make it simple to execute sophisticated strategies,
like shorting or magnifying your exposure to major indexes. No margin
account. No margin calls. It's as simple as buying a stock." Basically, that is
just another way of saying these ETFs are an easy way to get around the
margin rules.

These products, contrary to popular belief, are not made for professionals; in
fact if you talk to most institutional ETF desks on the Street, they will tell you
they see very little activity from institutional investors in these products. That,
in fact, makes sense, because an institution can find more efficient ways to
be short or to be leveraged. Actually, anyone with a margin account can find
more efficient ways to be short or leveraged (unless they are really ramping
up their leverage by buying these on margin). The only reasons I could think
of that someone would "invest" in these products would be because they a.)
expressly lacked sophistication, b.) were trying to skirt the margin rules, or
c.) were attempting to manipulate the markets.

To be sure, some institutional investors appear on the shareholder rolls of
these products. (Would you be surprised if I told you Bernie Madoff shows up
as a holder? He held 7,638 shares of SKF as of Sept. 30, 2008). But if I were
an investor in a hedge fund that was short the market in such an inefficient
manner, I'd either question their due diligence if they thought this was the
best way to effect a trade, or I'd question their scruples if they were
attempting to manipulate the market. Either way, I'd really question paying
them "2 and 20" on top of the 95 basis points in fees that the ETF is taking
out. If you have hedge fund investments that hold these securities, ask them
for a return attribution.

According to a December 1995 piece in The Journal of Finance, an article by
Mayhew, Sarin and Shastri, "Federal Regulation of Securities margins was
mandated by Congress in October 1934 to promote market integrity and curb
excessive volatility" [emphasis added] . So again, why do these products
exist when they seemingly do neither?

If you wish to add leverage to your portfolio, you typically need to do so in a
margin account, which means you need to meet suitability requirements and
sign a hypothecation agreement. If you wishes to short a security, you need
to establish a margin account, meet the suitability requirements, sign a
hypothecation agreement, plus obtain a borrow. Yet these ETFs can be traded
in a cash account, effectively sidestepping the margin requirements -
remember, "It's as simple as buying a stock"!

Hmmm ... providing leverage and easy access to shorting the market ... that
doesn't exactly sound like promoting market integrity and curbing excess
volatility now, does it? The fact that so much expected return on these
instruments gets eaten away by the volatility should tell you something about
their efficacy.

The magnified volatility has also rendered moot many long standing market
practices -- for instance, with these things it would be very difficult to
reinstate the uptick rule, and they make it difficult to regulate naked short-
selling, because "It's as simple as buying a stock." Furthermore, for those
who follow technical analysis, cycles become much more compressed, and
Fibonacci levels are no longer sacred because there is no speed governor
when indiscriminate two-times and three-times levered index products are
involved (and this counts in up markets just as much as in down markets) --
thus, "signals" really aren't signaling anything.

These levered and short sided ETFs are an endless series of paradoxes. They
are set up to benefit from market moves, but the more volatility, the less
accurate they are in achieving that objective. They market themselves as an
easy way to provide sophisticated trading strategies, yet the true
sophisticated investor can implement more effective trading strategies
themselves. They do their job following daily moves, yet they make for a
lousy long term hedge or trade. They offer the layman investor a chance to
protect against volatility, yet they help contribute to and exacerbate that
volatility because of their construct.

The double-levered short financials ETF is backed by -- you guessed it -- a
swap with a financial. Despite having margin requirements to "promote
market integrity and curb excessive volatility," these somehow have been
allowed to proliferate in the market. And the biggest paradox of all is that you
could have been spot-on accurate with your bearish call, yet still ended up in
the red.

I realize some may say, "I hear you on that, but these just make it so easy
for me to implement my strategy." OK, maybe so. But if you would have just
been short the two-times long Ultra Real Estate instead of long the two-times-
short UltraShort Real Estate since the beginning of the year, you'd have three
times as much capital in your account right now. That's some price to pay for
ease of use! At least the offering documentss state, "There is no guarantee
[these products] will achieve their investment objective." You can say that
again.




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Stock Update for January 20, 2009 - JPM, BP, WMT [Re: geokills]
    #9651272 - 01/21/09 10:31 AM (15 years, 10 days ago)

Yesterday was a waterfall of a day, down right from the get go and continuing to fall all day long.  While I believe that we are likely to revisit our November lows, I did some nibblin' at some high yielding stocks at the close.  Didn't get a chance to post an update yesterday because I was busy throughout the afternoon and evening, but here's what went down:


  • JPMorgan (JPM) - Bought 55 shares @ $18.15 / Sold 50 @ $20.15

    With the shares marking a new 52-week low yesterday, I was happy that JPM
    has been my smallest position in the portfolio for some time.  Nevertheless, I do
    believe that they can emerge from this crisis as a financial leader, and though
    their dividend could very well be at risk, it is still going to offer some support in
    the meanwhile (at over 8%).  Additionally, the BKX (bank index) is sitting at a
    strong support trend level from which it has bounced three times over the past
    year.  We should also bear in mind (though there is certainly no guarantee), that with
    the arrival of a new SEC chairman, there is the potential for Mark-to-Market
    rules to be repealed, which would likely cause the financials to rip violently to
    the upside.  Even so, I flipped these shares today for the quick 11% gain.






  • BP Inc (BP) - Bought 30 shares @ $41.50

    I closed a position in BP at $71.77 last May, and am now reinitiating the position
    (albeit a very small one), given that the stock is now some 42% lower.  Granted
    for good reason, but oil has not been able to breach the $30 level, as it seems
    that China is buying again all the while the Middle East is tightening up their
    production.  Furthermore, BP has an aggressive cost-cutting program underway
    and their problems with the Russian government seem to be less of a concern. 
    With the stock now yielding over 8%, and with a mind to believe that oil may be
    making a "W" shaped bottom here, I am going to increase my exposure to the
    sector (given that I already own a small position in Marathon Oil (MRO) which I
    have been scaling out of for a profit, and which is still 30% above my cost basis.





  • WalMart (WMT) - Bought 20 shares @ $49.76

    Should've waited instead of buying at the open this morning as the stock is still
    under pressure thanks to a downgrade due to December's sales falling below
    expectations in addition to expected competition from Target.  Remember
    however that December sales were still UP, even as practically every other
    retail was showing declines.  Retail is certainly not a strong sector to be in, but
    WalMart should remain able to take share.  Thanks to Target's weaker balance
    sheet, they shouldn't be so much of a threat to Walmart.  The trade down thesis
    is still in effect, as unemployment rises and confidence deteriorates, consumers
    are likely to look for better bargains.  WalMart offers low prices, large selection,
    and nearly 50% of its products are food/consumables.  I'm stickin' with it.



Discretionary Portfolio as of 1/21/2009:
  • 21.0% Cash
  • 15.4% UltraShort 20-Year Treasury (TBT)
  • 15.3% Altria (MO)
  • 12.1% WalMart (WMT)
  • 7.9% Kinder Morgan Energy Partners (KMP)
  • 7.5% Proctor & Gamble (PG)
  • 5.8% Celgene (CELG)
  • 4.5% Gilead Sciences (GILD)
  • 4.5% iShares FTSE/Xinhua China 25 Fund (FXI)
  • 4.0% Quanta Services (PWR)
  • 3.6% Maraton Oil (MRO)
  • 3.0% JPMorgan (JPM)
  • 2.2% BP (BP)

  • 6.7% margined short equivalent Henry Schein (HSIC)


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Re: Stock Update for February 10, 2009 - GS, MS, VZ [Re: geokills]
    #9773874 - 02/10/09 07:02 PM (14 years, 11 months ago)

This is awesome, Geo.  I'm going to start checking in to this thread now.  Thanks for posting your stocks specifically.  That's cool.  :thumbup:


PS - :lol:@"a sexy 6% dividend" 








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Edited by Learyfan (02/12/09 03:14 PM)


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Re: Stock Update for February 23, 2009 - SSO [Re: Hotnuts]
    #9851524 - 02/23/09 05:25 PM (14 years, 11 months ago)

Ah yes, technology may be a problem.  I'm still holding a weak hand in the Powershares QQQ Trust
(QQQQ), a Nasdaq 100 equivalent, but it may not stay in my portfolio for long at this rate.

On another note, I would like to share the following article that came out shortly after I made my update
today, supporting my comments regarding the potential for a bear market rally in the near future.

Quote:

Selling May Be Losing Steam
By John Hughes and Scott Maragioglio

RealMoney.com Contibutors
2/23/2009 4:36 PM EST 

Every day it's one bad piece of news after another. It's another government program spending too much money with little economic benefit, and more actions that don't address the real problems. In response, we have been in a situation where traders are left with absolutely no reason to buy.

Even if there isn't a large amount of selling, with no buyers the impact is still lower prices. As we fall further into the abyss, the rope we are hanging on to is slowly slipping from our hands, or at least it feels that way. The interesting paradox of the stock market is that sometimes it needs to get bad or really bad in order for it to get good.

If we use the expression "It's always darkest before the dawn" to describe the current market situation, we could argue its pretty dark right now, and hopefully that means the dawn isn't too far away. Here is the objective argument for why the market may be approaching another low or may be in the process of making one. After the November lows, the market was at oversold levels. We evaluate such a condition on the basis of our SRASI indicator, which tracks liquidity flows into the indices and various sectors. This indicator reached an overbought level on Jan. 9. Since then, we have been trading lower in the indices, and last week this indicator reached oversold levels for the first time since this selling began.

That simply says the selling has accelerated and is now reaching extreme levels, levels where we typically see the selling exhaust itself, and as a result, this is the background from which we typically see rallies emerge.

Liquidity Flows Into Indices 



We can add to that positive a few other bullish divergences that are in place. Despite the indices being at or close to new lows, violating the November lows, the broader market, as measured by breadth, is not making new lows. This suggests the selling has not been as broad-based as during previous declines. Volume has been lighter during this leg down as well, a further indication the selling is lacking intensity. Finally, we can throw in new 52-week lows, which, despite increasing of late, are nowhere near the levels that were reached the last time the indices were trading near current levels.

These are the types of indications we look for to signal that the selling is climaxing or has at least run its course. It is not a guarantee of a rally, and it does not say ultimately how low the indices will trade down before rallying. However, consider that all the previous conditions are typically necessary conditions to be present if there is going to be a change of trend and a rally of some magnitude. From that standpoint, the pieces of the puzzle are falling into place, and we should be cautious of a rally emerging over the next few days.




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Re: Stock Update for February 23, 2009 - SSO [Re: geokills]
    #9851691 - 02/23/09 05:56 PM (14 years, 11 months ago)

If you read the shameful post that i'm replacing, I was incorrect. For some ODD reason I thought the S&P wasn't in divergence when it clearly is. I was looking at the trend too close. When I smoke pot, I get all out of wack sometimes.

Anyways. Here's the S&P500. The divergence you see labeled along with the failure swing point at the end of November is a good buy/sell signal (or trend reversal signal), but failed to rally well, even though it did rally some. As you can see with the bottom indicator MACD, the indicator is rising well, while the trend is not. It's a trend following indicator that can show you trend reversals, along with strength if you know how to use it. See the blue lines. MACD is much steeper than the trend's is, pointing to a weak trend. See how the support levels in that area are clearly rounding over as well? Another good way to tell when a trend reversal could be coming. You can see how both indicators (RSI and MACD) at present time still have room to roll to the downside.



Edited by Hotnuts (02/23/09 09:03 PM)


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Re: Stock Update for February 27, 2009 - PEP, GE [Re: Stonehenge]
    #9886091 - 02/28/09 06:07 PM (14 years, 10 months ago)

I also have some GE.  I got 400 shares at $10.90 (doh!) and 300 shares at $8.50.  I've been thinking about selling it soon because I think my money is better spent on some of the cheap bank stocks right now.  Geo, how long do you estimate that it will take for GE to go up a couple dollars or so? 








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Stock Update for March 11, 2009 - No Action [Re: geokills]
    #9954628 - 03/11/09 08:56 PM (14 years, 10 months ago)

Quote:

The rubber band continues to stretch...




But it didn't break...
                                I'm cautiously optimistic!
:awebig:






Yesterday, we found the market rising over 6% on the second highest volume in 20 years!  Volume tells truth, so this should be a pretty big deal.  The markets are still oversold and we still have a hugely disproportionate number of bears out there.  Consumer credit has been showing signs of improvement and we are well on our way toward working off excess housing inventory.  Couple this with the fact that institutional investment funds have weighted themselves heavily towards fixed income over the past year and it is plain to see that the table has been set for a sustained advance as big money is re-allocated back into equities; as more bears are converted to bulls and as we work off our extreme oversold conditions. The icing on the cake is that we held our support today even after such an extreme bounce yesterday.  This is exactly what you want to see when developing a solid base upon which to move higher, and it's exactly what's been missing from every other UP day we've had over the past month maybe more.

There are admittedly a lot of negatives still present, with strong unemployment numbers, federal legislation that is not friendly to the market, not to mention the very troubled financial system.  Even today, oil reversed to the downside and gold started to move higher.  As oil is an indicator of global economic productivity and gold is an indicator of fear and uncertainty, this action is negative and worth keeping an eye on.  However, with various government stimulus programs going into effect and especially if we get a modification of mark-to-market rules from the government, it is not unreasonable to consider that the current quarter or next could be the trough in earnings.  Goldman Sachs (GS) and Morgan Stanley (MS) both reported good news regarding profitability last month, and even Citigroup (C) of all banks followed suit this week by indicating a profitable two months to start their quarter.  JPMorgan (JPM) said much the same, a stock I've already been building a position in.  With the S&P 500 typically trading at 15 times normalized (trend line) earnings and 12 times earnings during the trough (over the past 70 years), it's not a long shot to see how Monday's 10 times earnings S&P managed to break out to the upside in a big way on HUGE volume.

So what does all this mean??

The bulls have been given a chance to produce a sustainable rally to the upside. 

For my part, I'm holding 14% cash, which is just about as low as I feel comfortable going.  As we continue to post gains, I will be trimming my less favored positions.  Frankly, I'm holding just way too many stocks right now and its a burden to keep up with 'em all.  The important takeaway here is that I believe we will continue to post gains, perhaps for several months.  I'm anticipating reaching 800 on the S&P 500, some 11% higher than where the market went out today.  And if we get revised mark-to-market rules and dare I say the uptick rule reinstated, financial stocks would definitely explode to the upside.  Afterall, they are borrowing money from the government for practically nothing, have been increasing their deposits and when they do lend, get to take home a very nice spread as profit.

The stage is set, and I am tentatively looking to swap out of my positions in Hatteras Financial (HTS) & General Electric (GE) in order to put that money to work in Bank of America (BAC) & Wells Fargo (WFC).  I will maintain my position in JPMorgan (JPM).  I think the time is nearing (if not already here) where it makes sense to start positioning oneself for a recovery.  I would love to be in Goldman Sachs (GS), but I will wait until the stock falls below $80 before making it a reality.  Industrial stocks like Caterpillar (CAT) are still not the best place to be.  They will be carried up with the market, but will find little support beyond that.  Major industrials simply have too much inventory to work through.  As OPEC slows oil production and China ramps up economic activity, I like solid dividend paying oil stocks such as BP plc (BP) and Marathon Oil (MRO).

For those of you who are reading into my excitement and might be asking yourself, "Is this the bottom? Should I go all in?!"  Take a step back and realize that the economy is still in dire straits, and that the stock market is likely to have some very wild swings left in store for us ahead.  While the stock market is a forward pricing mechanism that will recover well before the actual economy picks up; if you need your money within the next 3 - 5 years, don't put it in the market, there is simply too much that remains unknown. 

If you don't mind committing for several years, I'd say that this is an absolutely fantastic time to start investing.  I see the market in favor of the bulls near-term, though that's not to say we won't revisit our lows at some point in the intermediate-term.  It's going to be a bumpy ride to be sure, but if you have the time, inclination (and stomach!), it could prove to be a very lucrative opportunity!

As we near 800 on the S&P, I will be closing my Ultra S&P500 Proshares (SSO) position and looking for opportunities to short the stocks of companies that were carried higher in the updraft, but that continue to face debilitating fundamental problems.  At the top of my Short List sits two casino/entertainment operators: MGM Grand (MGM) and Las Vegas Sands (LVS).


Discretionary Portfolio as of 3/11/2009:
  • 14.3% Cash
  • 12.7% Altria (MO)
  • 9.5% WalMart (WMT)
  • 8.8% Kinder Morgan Energy Partners (KMP)
  • 6.2% UltraShort 20yr US Treasuries (TBT)
  • 4.4% iShares FTSE/Xinhua China 25 Fund (FXI)
  • 4.4% Marathon Oil (MRO)
  • 4.3% Nordic American Tanker (NAT)
  • 3.9% BP plc (BP)
  • 3.9% Gilead Sciences (GILD)
  • 3.7% General Electric (GE)
  • 3.7% Powershares QQQ Trust [Nasdaq 100 equiv] (QQQQ)
  • 3.6% Verizon (VZ)
  • 3.5% Celgene (CELG)
  • 3.4% Hatteras Financial (HTS)
  • 3.3% PepsiCo (PEP)
  • 3.3% JPMorgan (JPM)
  • 3.2% Ultra S&P500 Proshares (SSO)


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Stock Update for March 12, 2009 - WFC, GE, MO, VZ [Re: geokills]
    #9958858 - 03/12/09 03:03 PM (14 years, 10 months ago)

It looks like my cautious optimism is continuing to pay off here, with the markets up a whopping 4% today with excellent breadth (even though volume was a little lighter than the 10-day average).  All of the things I've mentioned in my last several updates are holding true, with the S&P well on its way up to its 50-day moving average which stands around 800 (another 6.6% above today's close).  Importantly, we closed today above the 741 level which was last November's extreme low.  This was an important area of resistance and if we stay above it tomorrow the bulls will have strengthened their advantage, up to the 50 day moving average where I believe we will get hit with some pretty massive selling pressure.

While I do not advocate chasing stocks, I did want to increase my financial exposure a bit, as all of the major banks have made positive comments recently and the government looks ready to provide some mark to market rule modifications as well as a reinstatement of the uptick rule for short sellers.  Furthermore, there is a rumour that Raymond James Financial will no longer allow retail (non-institutional) investors to use the 2x leveraged ETF's like the UltraShort Proshares Financial (SKF).


  • Wells Fargo (WFC) - Bought 90 shares $11.52

    The stock had already had a very nice move above its lows around $8... and while I couldn't get in at that time with my bid at $7.75, I decided that the high volume buying in conjunction with the near-term macro picture will support further advances in the stock.  Wells Fargo has traditionally been a conservatively run institution that was able to dodge much of the sub-prime mess that has crippled so many other banks.  Their recent dividend cut will further support their balance sheet, and government programs are adding additional support.  Since my financial exposure is small, I wanted to add this high quality bank to my portfolio - albeit at a measured pace.  My purchase this morning afforded me a 20% move higher in a single session!  I am maintaining this position and will add on weakness, as I believe this stock is very capable of reaching its 50 day moving average standing around $17.50 (25% higher than where shares went out today).  If we see the anticipated revision of mark to market rules along with reinstatement of the uptick rule, I could see WFC recovering to $20 in fairly short order.  I will not chase the strength however, looking for another entry at around $12 where the 20 day moving average is sitting (which the stock was able to break through today).



  • General Electric (GE) - Maintaining Position

    This one was almost as good as Wells Fargo, up nearly 13% on the heels of an impressive rally two days ago.  I mentioned yesterday that I was thinking about swapping out of this one, but the action was too positive to let go just yet.  The intrinsic value of GE's industrial division is $11 to $12 a share, and that's if you value the GE Capital (financial) division at $0!  GE's credit was downgraded today to AA+ from AAA, still maintaining the highest rating relative to most other financials, and the stock exploded higher.  This was probably because people were expecting a harder downgrade, and are finally realizing that though the shorts were trying pretty damn hard to break the company last week, GE is going to be sticking around afterall.  Obviously GE Capital is worth something, and probably quite a bit.  My current target to begin selling my position here is around $11 - $12.



  • Altria (MO) - Sold 75 shares @ $16.30

    Just doing a little house cleaning here.  This position has outsized most of my positions for a long while now, and while I appreciate the dividend income and respect that Altria is focused on strong pricing with majority market share, I believe that the stock will underperform nearterm as people focus on equities that have been beaten down more and appear to offer better upside potential.  Altria will remain one of my largest positions, but I wanted to take something off today and this one seemed to have the most limited upside in the near term.



  • Verizon (VZ) - Sold 75 shares @ $28

    More house cleaning.  I am selling this one at a small loss in my discretionary portfolio, because I am concurrently holding it in my retirement portfolio with a $27 basis.  I don't need to have the stock in both places, and am comfortable with the position in my retirement portfolio.  I still hold the PowerShares QQQ Trust (QQQQ), which is a Nasdaq 100 equivalent, which gives me some exposure to VZ as well as APPL, GOOG, and AMZN.



For tomorrow, I am actually hoping that the market won't rally too quickly, instead wishing that it simply maintains its gains and stays flat on the day.  This is important in developing a longer term base, as if we fly too high too fast we are at risk of sharp selloffs down the road as traders make their exists and the shorts pile on.  I want to see how the bulls react to some selling pressure, so it would be nice to see a little consolidation here.  A slow but sustained ramp higher will keep the shorts at bay and help us repair some of the damage that the charts have incurred over the past month.  If we do end up ramping huge tomorrow, I am likely to sell a little bit into the upside even though I maintain that we will approach 800 on the S&P within the next month give or take.

I've been posting quite a lot of third-party commentary in this forum over the past couple of weeks.  Not sure if people are enjoying it or ignoring it, but I read this article focusing on technical analysis today and would like to share it, as it lends further support to the "generational bottom" call that Doug Kass made last week, which I informed members here about last week:
Quote:

Still Bullish, but Not Buying
By Harry Schiller

RealMoney.com Contributor
3/12/2009 3:44 PM EDT

As many of you know, I am a big believer (and trader) of retracements. One of my favorite retracement patterns is one that we are witnessing right now.

This one is pretty easy to spot, and you don't need any complicated measuring devices to see it; in fact, it doesn't even require arithmetic. All you do is look for a selloff below a major low to a new low, and then look for a recovery back up to the prior low. It's that simple. Nothing arcane about it.



The prior November low in the S&P cash was 741.02. The high so far today, as of 2:00 p.m. EDT, has been a couple of points above this level. Now we wait to see if it continues much above this level or stalls here and turns back down. Either way, I am not risking much, as I remain in bullish positions that I added to on the recent decline and am now simply cutting back into this sharp recovery, but I still remain up to 50% long.

A close above the 741 level of the cash points higher, and if it looks like we are headed for a strong close above this level, I likely won't do any additional selling today.



Speaking of retracement patterns, there is a pretty good one shown [above] in the long-term chart of the SPX. This one requires a little arithmetic. It is based on the rally off the 1982 low at the 102 level in the SPX. If you start there and go up to the all-time high in October of 2007, you get 1,474 points. The 0.618 retracement of that advance returns the SPX to 665.23, which is a virtual bull's-eye with last week's lows at 666.79. Close enough for government work.

This suggests that perhaps we have seen the low. I mean THE LOW. Of course, that doesn't preclude some retests of that low, but it's possible that we have put in a bottom and, accordingly, I am maintaining bullish bets.

For now, the trend line off the 1982 lows in the SPX (shown at right), currently at the 700 level, is also providing some support. Breaking below 700 at this point would not be good news for bulls.

As for the bigger picture, I continue to be encouraged by several things, not the least of which has been the relative strength of the Nasdaq, and more recently, the resurgence of the banks and financials. I am still holding positions in these areas.

As noted in last week's column, I also hold positions in the emerging market funds and related ETFs (iShares MSCI Emerging Markets (EEM) ETF) and options. This sector continues to outperform, up almost 3% today so far. As protection, I am still holding my SPDR Trust (SPY) put spreads with limited risk -- both March and April put spreads -- and buying some today as the market pops.



In the Dow, the next upside objective is the 7200 level, which marked the prior 2002 lows. If it gets through there, then yes, even the Dow should be able to return to its Nov. 21 lows of last year at the 7449 level. But for now, that may be the best case.

Again, there is much to like about the action in the bigger picture. Short term, it's a little dicey, as this important resistance level at 741 in the SPX has now been achieved.



Another problem for the short term is the increasing bullishness and complacency, as evidenced by low put/call ratios and the continued collapse in the VIX, now to the 41 level. Given these considerations, I am turning increasingly cautious in here, though still maintaining bullish positions.

But add to my bullish bets here? Not a chance.





I'm with him on all of that except for the VIX.  While I respect that a lowered VIX does begin to exhibit complacency and may lead to a selloff, I am also mindful that there is frankly a lot less capital trading in the market presently.  Therefore we have a lower base off which to gauge the Volatility Index, and that could indicate that a low reading is not as significant as it has been earlier on during the recession (though still a factor worthy of taking into consideration).  The only reason I did do some buying today in WFC was because my financial exposure was too limited and the financials have the best upside at this very moment.  Note that even though I did buy a chunk of WFC, I sold shares in two other positions, bringing my cash position higher than it has been over the past couple of weeks.


Discretionary Portfolio as of 3/12/2009:
  • 17.6% Cash
  • 10.1% Altria (MO)
  • 9.5% WalMart (WMT)
  • 8.9% Kinder Morgan Energy Partners (KMP)
  • 5.9% UltraShort 20yr+ US Treasuries (TBT)
  • 4.4% iShares FTSE/Xinhua China 25 Fund (FXI)
  • 4.4% Marathon Oil (MRO)
  • 4.3% Nordic American Tanker (NAT)
  • 4.1% General Electric (GE)
  • 3.9% BP plc (BP)
  • 3.8% Gilead Sciences (GILD)
  • 3.8% Celgene (CELG)
  • 3.7% Powershares QQQ Trust (QQQQ)
  • 3.6% JPMorgan (JPM)
  • 3.4% Ultra S&P500 Proshares (SSO)
  • 3.4% Hatteras Financial (HTS)
  • 3.3% PepsiCo (PEP)
  • 2.1% Wells Fargo (WFC)


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Stock Update for March 16, 2009 - No Action [Re: geokills]
    #9982098 - 03/16/09 02:17 PM (14 years, 10 months ago)

Sitting on my hand for today.  The market is digesting some of its recent run, though up for most of the day it is now ending down a mark.  This is constructive, as the resolve of the Bulls must be tested in efforts to confirm a lasting base for the market.  Just as important as going higher, is how market participants react when some of the steam is blown off.  Will they come back in to support the market by making new purchases on weakness?  Or will they panic out on a quick flip and sell?  The key level to watch here on the S&P 500 will be in the 740's (741 especially).


       


I have seen incredible gains in my portfolio over the past five days, as evidenced in the above graphs.  While I perhaps should have cut my recently initiated Wells Fargo (WFC) position in half when the shares topped $15 today (closing below $14), it is such a small hand and my financial exposure is so minimal that I am going to hold on for now.  No question that several stocks (particularly the financials) are starting to over-extend themselves.  But the shorts have their work cut out for them as we are getting more positive comments out of government; from Ben Bernanke's positives on 60 minutes last night, to pro-business commentary out of Obama this morning and more details of the bank plans from Treasury Secretary Geithner as well.  If this continues, we could see the banks maintain their ramp.  If it doesn't, my positions are small enough that I don't mind surfing the waves in the meanwhile.  It should be noted that the late-day pullback today was on fairly light volume.

Since I don't have anything else to report with respect to my own positioning, I would like to share with you this article posted earlier today by Doug Kass, the same guy who I have been posting about for a while now, and whom made the call two weeks ago that we would be likely to see a 2009 market bottom within the following week.  So far, he has been right on target and given his history and level of expertise, I think it is important that we listen to what he has to say.

Though this piece is very bullish, I am not in a rush to buy anything right now.  The market has run by a large margin over the past week, and while I am still counting on the S&P to reach 800 in the near term, I am mindful that we will have down days throughout the process and am in fact looking to lighten up on various positions here soon.  For those who are underinvested (or not invested at all), I would advocate using these down days to start slowly building some positions.

Quote:

It Ain't Heavy, It's a Bottom
By Doug Kass, posted on The Edge @ RealMoney Silver

3/16/2009 8:28 AM EDT

QuickTake
Bullish SPY GE
  • A deep oversold, worsening sentiment and positive internal divergences spell a continued market recovery.
  • If 1937-1939 provides a template for 2008-2009, stocks have likely made a 2009 low and possibly a generational low.
  • My most optimistic scenario is that the SPDRs could fill the October 2008 gap of $107 by late summer 2009.


    The road is long
    With many a winding turn
    That leads us to who knows where
    Who knows where...
    If I'm laden at all
    I'm laden with sadness
    That everyone's heart
    Isn't filled with the gladness.


    -- The Hollies, "He Ain't Heavy, He's My Brother"

It ain't heavy, it's a bottom.

Today's opener is ambitious and some might think reckless in its objective of introducing an optimistic market forecast and the logic behind my S&P 500 -- and SPDRs (SPY) -- price targets.

My view of a meaningful upside stock market trajectory in the months ahead is clearly a variant view, but I am familiar with that terrain as I have consistently expressed a negative (if not dire) baseline assumption for credit, the world's economies and stock markets for much of the past three years.

To add to my relatively bold and audacious expectations and presentation, I will attempt to be precision-like in exhibiting a chart that most closely represents that promising market outlook over the next several months.

Bottoms Up, Mr. Market

Nearly two weeks ago, I suggested that a 2009 market bottom had been put in, and last week I surmised that, in the fullness of time, a generational market low might have been put in for the U.S. stock market.

At inflection points gauging the market's technical bearings is often useful as is a history lesson, so let's travel that route.

The Foundation to a Stock Market Recovery

A deep oversold, worsening sentiment and positive internal divergences almost always provide the foundation to stock market recovery.

The move from the October lows to the March lows indicated growing fear and gave way to rising cash positions and the loss of hope, but the market's internals were improving. November's DJIA low of 7,552 was nearly 11% below the October low of 8,451 and the March low of 6,547 was 22.5% under October's low. While each new low was more frightening than the prior one, however, there were improving technical and sentiment signals -- for example NYSE volume at the October low expanded to 2.85 billion shares; at the November low, volume dropped to 2.23 billion shares; and at the March low, volume was only 1.56 billion shares. As well, new lows traced decreasing levels: At the October low, there were 2,900 new lows; at the November low, there were 1,515 lows; and at the March low, there were only 855 new lows on the NYSE.

From a sentiment standpoint, the March low marked an unprecedented number of bears, according to the AAII Survey. (I have recently addressed one of the only debatable sentiment indicators -- namely, a stubbornly low put/call ratio -- as increasingly inconsequential, owing to record low net long positions for hedge funds and more limited individual investor exposure, which negates the need for put protection.)

Last week (and right on cue!), we witnessed conspicuous breakouts and strengthening momentum off of Monday's bottom. The combination of Tuesday's 12:1 ratio of advancing stocks over declining stocks coupled with that day's 27:1 up-to-down volume ratio has not occurred in almost 65 years. The 9% three-day rally and rising volume on two 90% up days was very encouraging. I was also inspired by the improving conditions of my watch list, particularly the strength of financial stocks and the ability of many stocks (e.g. General Electric (GE)) to advance in the face of bad news. (In the case of GE, there was a Fitch downgrade late in the week.)

Most strong rallies don't let investors back in easily and get overbought quickly. I expect the current one to be sharp initially and to continue without much of a retest over the next week, creating a short-term overbought by month's end.

So, how now, Dow Jones?

The 2008-2009 Stock Market Most Represents 1937-1939

"History doesn't repeat itself; at best, it sometimes rhymes."

-- Mark Twain


As a template, I expect the 2008-2009 stock market price pattern to most resemble the 1937-1939 period. The technical parallel mirrors a similar fundamental backdrop.
Let's first examine 1937-1939 S&P chart.

Dow in the 1930s & '40s vs. Nasdaq Now
Very similar patterns



The 1937-1938 period holds a number of similarities to the current period:
  • 1. The stock market decline followed a four- to five-year rally, after a three-year decline of greater than 80%, which is similar to the Nasdaq experience.

  • 2. Worldwide industrial production collapsed in 1937.

  • 3. Commodities crashed in 1937.

  • 4. The markets spent five years consolidating the declines.

  • 5. Massive government spending pulled the U.S. out of The Great Depression. (Back then, it was preparing for WWII; this time, it will be government stimulus/infrastructure.)

The 50% drop over a five month period in 1937-1938 holds a similarity to the market's recent drop in that neither had a high-volume selling climax. The market's 1938-1939 recovery, perhaps like 2009's, had four legs and lasted about seven months.

Leg one of the 1938-1939 rally was brief and intense; it lasted only about 12 trading days, and the indices rose by 19%. Leg two was an approximate 60-day consolidation that corrected half of the initial gain. Leg three was about a six-week rise of 30%. Leg four consisted of another two-month consolidation and retracement followed by a 22% six-week rally, serving to mark a multiyear high in the averages.

I expect a similar pattern (as in the late 1930s) to be traced ahead in 2009.

An Audacious Forecast

In the months ahead, the fear of being in will be replaced by the fear of being out.

Here is a chart of my expectation for the SPDRs in the months ahead.

SPDR Trust (SPY) -- Expectations



A poorly positioned hedge fund community, with an historically low net long exposure and rankled by negative investment returns and the fear of continued redemptions, should provide the initial thrust to the S&P's 50-day moving average of about 810. It is important to recognize that, historically, strong rallies that have durability (like in 1937-1938) but, as previously written, typically don't let investors in during the first advancing leg. With such a clear burst of momentum, the fear of being out could drive the S&P 500 as much as 15 to 40 points above the 50-day moving average, paralleling the 20% third-quarter 1938 move and producing a short-term top and a temporarily overbought market.

The spring should be characterized by a backing and filling as the sharp gains are digested, similar to the the September-October 1938 interval. Sloppy second-quarter warnings will weigh on the market during the April-May period, but the markets could move sideways, bending but not breaking. Signs of market skepticism, sequential economic growth and evidence of a bottoming in the residential real estate and automobile markets (after a sustained period of under-production) could contain the market's downside, providing a range-bound market with a firm bid on dips. As well, the results from the bank stress tests and the release of a more coherent and detailed bank rescue package could provide further support to equities.

By June, economic traction should begin to take hold from the accumulated fiscal and monetary stimulation coupled with the large drop in energy prices. While it will be too early to demonstrate a broad economic recovery, evidence of stabilization will be clearly manifested in improving retail sales, and stocks will take off for their final advancing phase. With fixed income under increasing pressure, large asset allocation programs at some of the largest and late-to-the party pension plans (out of bonds and into stocks) could trigger an explosive rally in the middle to late summer. This move by July or August could close the October 2008 gap in the SPDRs at around $107.

Position: Long SPY and GE stock; short SPY puts




Discretionary portfolio as of 3/16/2009:
  • 17.4% Cash
  • 10.4% Altria (MO)
  • 9.3% WalMart (WMT)
  • 8.9% Kinder Morgan Energy Partners (KMP)
  • 6.1% UltraShort 20yr+ US Treasuries (TBT)
  • 4.6% iShares FTSE/Xinhua China 25 Fund (FXI)
  • 4.5% Marathon Oil (MRO)
  • 4.2% Nordic American Tanker (NAT)
  • 4.1% General Electric (GE)
  • 3.9% BP plc (BP)
  • 3.7% Gilead Sciences (GILD)
  • 3.7% Celgene (CELG)
  • 3.6% Powershares QQQ Trust [Nasdaq 100 equiv] (QQQQ)
  • 3.5% JPMorgan (JPM)
  • 3.4% Hatteras Financial (HTS)
  • 3.4% Ultra S&P500 Proshares (SSO)
  • 3.3% Pepsico (PEP)
  • 2.1% Wells Fargo (WFC)


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Re: Stock Update for March 17, 2009 - WFC, JPM, MGM, LVS [Re: geokills]
    #9989149 - 03/17/09 02:52 PM (14 years, 10 months ago)



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Re: Stock Update for March 12, 2009 - WFC, GE, MO, VZ [Re: geokills]
    #9989217 - 03/17/09 03:02 PM (14 years, 10 months ago)

Quote:

geokills said:


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Stock Update for March 19, 2009 - NAT, QQQQ, CELG [Re: Stonehenge]
    #10006666 - 03/20/09 09:09 AM (14 years, 10 months ago)
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That's some good advice there Stonehenge... I just don't want to have to deal with more numbers than I have to!  The whole options thing is a little much for me to wrap my head around, but I can admit that there's a good possibility I'm just being lazy about it and set in my ways.  I will have to try it one of these days.  For anyone else interested in options trading, download the PDF attached to this post: Characteristics & Risks of Standardized Options.

On that note, I did make a couple more sales yesterday as I'm going to have a lot going on this weekend and probably into next week... so I just don't want to stress about what's going on in my portfolio during this time.  The market is still acting very well, with underlying support on pullbacks.  Of course, this is options expiration week and that often pegs stocks near their strikes.  More often than not, the market has given back a bit in the week after options.  And if that happens this time, I will surely be stepping in to buy some shares back.

  • Nordic American Tanker (NAT) - Sold 50 shares @ $27.85

    This position has shown me 18% upside in little more than a week's time.  I'm selling half of the position to book profits on this run.  Enough said.


  • Powershares QQQ Trust [Nasdaq 100 equiv] (QQQQ) - Sold 75 shares @ $29.60

    This one was a wash, but I wanted to get out of it for now as all the major indicies are at significant resistance levels.  While I believe we can break through them in due time, I am mindful that after such a sharp run over the past week, we are likely to trade sideways and succumb to some profit taking after options expiration.






  • Celgene (CELG) - Sold 22 shares @ $46

    This one's been a stinker ever since healthcare names fell out of favor on news out of the Obama administration about cutting healthcare costs.  While I love the idea of cutting healthcare costs, obviously health care providers are anticipating a pinch.  I don't think Celgene will be all that adversely affected, since its cancer drugs are so life saving... but I can't fight the trend on this one.  Celgene made a 62% retracement (that's the same Fibonacci retracement number I brought up in support of 666 being the S&P 500 bottom a couple of weeks ago) from its February highs to its March lows, stalling at its 50-day moving average.  Technically, this doesn't bode well for the stock, and since I have another biotech name in my portfolio (GILD), I'm happy to lighten up on this one, and will buy it back if the shares fall below $40.



I am totally loaded up on firepower (cash) now after our sweet 20% run over the last two weeks, ready to deploy when opportunity strikes!


Discretionary Portfolio as of 3/19/2009:
  • 42.2% Cash
  • 10.2% Altria (MO)
  • 9.5% WalMart (WMT)
  • 9.0% Kinder Morgan Energy Partners (KMP)
  • 4.5% iShares FTSE/Xinhua China 25 Fund (FXI)
  • 4.0% BP plc (BP)
  • 3.8% Gilead Sciences (GILD)
  • 3.3% Pepsico (PEP)
  • 3.2% Hatteras Financial (HTS)
  • 3.1% Marathon Oil (MRO)
  • 2.3% Nordic American Tanker (NAT)
  • 2.2% JPMorgan (JPM)
  • 1.9% Celgene (CELG)
  • 0.8% General Electric (GE)


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...π╥ ╥π...


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Stock Update for April 19, 2009 - JPM, PVH, & Vacation! :) [Re: royer]
    #10194868 - 04/19/09 12:13 PM (14 years, 9 months ago)

Thanks royer! I'm keeping this journal mainly for my own review and learning, but if other people are enjoying and learning from it as well, the more the merrier!
:sunny: I have obviously not been as active over the past week.  The market has held very well above key levels (800 on the S&P, 8000 on the Dow).  Indeed, it seems like the previous notions expressed by Doug Kass a month ago when we were at 666 on the S&P are coming to fruition.  Pullbacks have been shallow and buyers quickly step in, as the fear of being IN the market is starting to be replaced by the fear of being OUT of the market.

For my part, I am content to be taking a breather here.  I've sold about half of my portfolio into the ramp over the past several weeks, and am enjoying the peace from being largely in cash as the market churns about these new levels seeking further direction.  While it would seem that we are due for a pullback, this market is a strange one... I do not feel a need to capitalize off of every minute the market is open, and will patiently await better opportunities as they present themselves.

I will be leaving for vacation on Tuesday, driving up through California with my sweetie to visit her family outside of San Francisco and then my family in southern Oregon.  I will likely not be doing much trading during this time, which is another contributing factor as to why I have not been building positions over the past week.  I don't want to be worrying about the money I have in play while I'm on vacation, so I've taken a lot of it out!


I did however, make a couple of small moves toward the end of last week...

  • JPMorgan (JPM) - Bought 33 shares at $33

    The 3's just looked so nifty!  But seriously, JPM reported an impressive quarter last week that would seem to confirm my earlier suspicion that JPMorgan Chase will emerge from this crisis as one of the, if not the strongest bank in the country and perhaps even the world.  Shares have had a mighty run, and as you might recall I closed out my position at $28 last month after having bought down at $19.50.  Though the stock is now almost 18% higher than where I closed my position, the quarterly report compelled me to put a piece of this position back on my books.  I'm scaling in very lightly, and would be happy to build this position up to 10 times its current size if a good buying opportunity presents itself.  I had hoped for a pullback after my sale at $28 (and indeed, there was an opportunity to get back in at $25 which I missed).  But as the sector's strength has been so impressive, I simply wanted to add back some financial exposure to my portfolio in order to position myself for an eventual recovery  (which may apparently be in its earliest stages already).  Of course, as many banks have doubled from their lows in the past month, it is prudent not to be too aggressive here and I will wait for weakness to add to this position.


  • Phillips Van Heusen (PVH) - Sold SHORT 100 shares @ $28.51

    I'm betting against this stock, but only for a short term trade.  This is based on the near term volatility and the huge move the stock took on Thursday and Friday, gaining over 15% in two days.  I can see the stock headin' back to $26 (its 200 day moving average) pretty easily, and perhaps even down to $24 - $25.  I will be using protective stops on this position, as the strength in the stock has been impressive and it is often unwise to step in front of a freight train even as it travels up hill (i.e. a stock up nearly 10% on heavy volume).  So why even implement this short?  In part as a hedge against my other long positions.  This will be the only short I currently carry in my portfolio, and should help reduce my downside exposure in case the market takes a hiccup next week while I'm traveling.  I will have an active trailing stop of $2 on this trade, which limits my downside risk to 6.5% given Friday's closing price of $28.37.  On the upside, I am looking for 9 - 16% (covering the short between $24 - $26).  Check out the following chart I rigged up to see how I reached the conclusion to cover between $24 - $26.




Discretionary Portfolio as of 4/19/2009:
  • 63.3% Cash
  • 9.3% Kinder Morgan Energy Partners (KMP)
  • 7.8% WalMart (WMT)
  • 4.1% BP plc (BP)
  • 3.9% iShares FTSE Xinhua China 25 Fund (FXI)
  • 3.8% Marathon Oil (MRO)
  • 3.8% Gilead Sciences (GILD)
  • 3.6% Pepsico (PEP)
  • 3.5% SPDR Gold Trust (GLD)
  • 1.9% JPMorgan (JPM)

  • 4.8% margined short equivalent Phillips Van Heusen (PVH)


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··∙   long live the shroomery  ∙··
...π╥ ╥π...


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