Monday, December 08, 2008

We have now entered the phase of this bear cycle when the news gets worse and the stock market goes up. Most will be scratching their heads not realizing that the market is a discounting mechanism, always looking forward not at the past or even the present. Couple this with the year end incentive to prop the market up to save some face and we could get a nice December. In 2009 all bets will be off as more businesses fail and we may get a test of the lows again. But lets enjoy this disconnect for now. The S&P needs to stay above 870, and a close above 900 will trigger higher levels, perhaps even to 1000. The Dow has drawn a line in the sand at 8000 with resistance at 9000 then 9400.

Monday, December 01, 2008

An official recession was declared today by the bozos of the National Bureau of Economic Research. They are a year after the fact. Why employ over educated no nothing economists who live in a bubble to look at data all day and make worthless forecasts? Just ask the cab drivers, truck drivers, Fedex and UPS drivers, retail clerks, hotel maids, etc..... What a novel concept-- ask real people about real issues. They would have told you we were in a recession in 2007 when it mattered and when you could have done something about it.

Friday, November 21, 2008

The NYC Real Estate market is officially kaput. It has long been exempt from the nationwide downturn, from subprime, etc. Until now. Buyers are scared, banks are not lending. Layoffs from Wall Street abound. Foreign buyers have shunned the Island of Manhattan. Game over. The residential real estate market is on the brink of a severe downturn. And the bigger they are the harder they fall.

Monday, October 13, 2008

This was the biggest one day gain ever by the Dow. 29 of the 30 Dow stocks were up except for GE--which speaks volumes about the sustainability of this rally. It seems clear to me that GE is now being used as the institutional money fund yielding close to 6%. Money comes out of GE and into other stocks, then back to GE when the rally fizzles. In other words there is no new money coming into the market, existing money is just being redistributed seeking higher short term trading returns. This rally can have legs, days, weeks or a couple of months until prices move to a level of important resistance and the sellers come out of the woodwork again. Enjoy today. For those nimble enough to trade this rally promise yourselves that you will not give back any of those hard to come by gains, if and when the market has another leg down.

Monday, October 06, 2008

Fear is rampant on Wall Street. The Dow breaks 10,000. At one instance today it was down over 800 points. The VIX (volatility index) reached 58 an extremely high number. There were 1364 new lows on the NYSE vs. 3 new highs. Technically, its as extreme as it gets. Cramer the clown is now telling people to sell after most major averages are down 35% from their highs. Until this new philosophy, his mantra was "There's always a bull market somewhere" And he is right, only now in hindsight, his bull market was in stupidity.

The perma bulls even recognize we are in a bear market. Pollyanna economists now admit the economy is in a recession. The great unwind is upon us and it is in its most violent phase. Those that have kept cash waiting for this "rainy day" are licking their chops. GE yielding over 6%; FCX trading around 37 down from a high of 127; Apple Computer from 182 to 87. Start loading up on the long side, but with quality. The crap will never come back.

Thursday, September 18, 2008

Yesterday and today GE was yielding close to 6%, Goldman Sachs this morning sold at around $86 below its book value of $100. Ben Stein the Pollyanna economist finally threw in the towel. Its also option expiration week and nobody uttered the word "bottom" today on CNBC. So this can only mean one thing, Buy! Buy! Buy! Buy quality names, not the dogs.

Tuesday, September 16, 2008

A glaring example of how we got into the trouble we are in is personified in an article in today's NY Post. A "Wealth Manager" and I use the term lightly, lost more than $6 million dollars of his own personal money in Lehman stock. Talk about not practicing what you preach. How did this guy get a job, let alone accumulate $6 million? These are the imbeciles we entrust with money? To read the entire article, click on this link, its too funny for words.

Monday, September 15, 2008

It has come to my attention that my posts have become too dark, too serious. Its time for me to lighten up. So here's food for thought: The zit faced long haired teenager donning a Grateful Dead T-shirt who mows your lawn has a better business model than the Ivy Educated pinstriped suit complete with tortoise shell glasses and a Blackberry. The gap toothed freckled faced pig tailed 7 year old takes in more profits from her lemonade stand than Lehman, Merrill and AIG combined.

More questions to ponder--Are the new baseball stadiums being built by the Mets and Yankees in trouble? How many cancellation notices will the Mets and Yankees receive from season ticket holders who can no longer afford those over priced season plans for 2009? How many strip joints will be closing? How many charitable donations will be reneged?

Sunday, September 14, 2008

"You've got to accentuate the positive Eliminate the negative Latch on to the affirmative Don't mess with Mister In-Between You've got to spread joy up to the maximum Bring gloom down to the minimum Have faith or pandemonium Liable to walk upon the scene" written by Johnny Mercer/Harold Arlen.

The above lyrics sum up the Pollyanna talking heads on CNBC. Buy, Buy, Buy!!! Its a bottom! I have heard more about bottoms than in a J. Lo music video. Then when something tragic happens its a surprise, because Wall Street is programmed to lie. Lie about solvency, lie about risk, sweep all potential negativity under the rug. Well now Lehman is belly up, Merrill is taken over, Wamu is on the ropes as is AIG. But if we went to the videotape and pulled the CNBC appearances over the past 12 months, all you would hear is, "There's value here. Its an overreaction. There is plenty of capital available. Buy! Buy! Buy! This watershed event will convert the Pollyannas, make them panic. Then and only then can we buy, buy buy---when these shameless imbeciles are on the unemployment line.

Friday, September 05, 2008

In this vicious hedge fund unwind liquidation phase of the bear market, even stocks I thought might be enticing on a pullback have gone through my pullback numbers like a hot knife through butter. For example AMED is now around 48 and AFAM has pulled all the way back to its 50 day MA around 35. In the case of AMED it is now almost 30% off its 52 wk high, and AFAM is now in the middle of a 21% correction. Hence the dangers of trying to catch a falling knife. And a great lesson for those who try and play upside momemtum in a bear market. DON'T try this at home!

Sunday, August 24, 2008

There was an article about hedge funds in Barron's this weekend and its the kind of article you are sure to see repeated by various media outlets in the coming months. Hedge fund investors want their money back before it evaporates completely especially in the poorest performing Hedge Funds. But Hedge Funds are changing the rules on them. They are putting a moratorium on redemptions to stem the tide of money out of these funds. So here is a valuable lesson about hedge funds in a bear market--they are like the proverbial "Roach Motel" you can check in, but you cannot check out.

Sunday, July 27, 2008

In these troubled times it is difficult to search for the bright spots of the business scene. We previously pointed out pawn shops as an obvious choice. Here is another--Home Health Care. The aging population of the U.S. demands home health care services for the foreseeable future. The leader in this field is Amedisys, Inc. symbol AMED. AMED is very overextended. Do not buy this at its current $62 area. Wait for a pullback into the $53 to $57 area. Another company is AFAM, but I did not do enough research on this one yet. These companies are showing very good relative strength vs. the rest of the market, so the group is not a secret to professional money managers. But I do believe that this story has legs, and with the proper entry point, there is still good money to be made.

Friday, July 25, 2008

The market loves Qualcomm $54.24 (QCOM). QCOM holds many wireless patents. They just settled a long running patent dispute with Nokia (NOK). Immediately upon the news the stock broke above $50 and the buying pressure continues. The market likes the news. QCOM is a great way to play wireless. You dont need to anticipate who will produce the next cool handset: Nokia, Motorola, Apple, Blackberry, Samsung, etc. etc. QCOM rakes in the roylties regardless.
In a classic sell on the news, EZPW announced good earnings then reversed from its high over $18 to $17.24 on twice its normal average daily volume. Because we have over a 40% gain in little over 4 months, I would take 33% off the table, and manage the rest of the position. As a general rule of thumb whenever I have a 25% profit in a position, I sell 20% and manage the rest. If I have a 50% profit, I sell at least a third to 40% of my position. If I am lucky enough to have a 100% profit, I sell half and play with the house's money.

Sunday, July 20, 2008

In a scene reminiscent of a 1930's Depression era run on the banks, Indymac depositors angrily lined up earlier last week to demand their money after the bank was taken over by the FDIC. Adding credence to the theory that money and brains are mutually exclusive, it was reported that at least 10,000 of Indymac's 275,000 accounts had in excess of the federally insured limit of $100,000. How can someone who was able to accumulate over $100,000 be so dumb and leave savings exposed like this? But the best part of the story carries a "What goes around comes around" plot. It is best summarized by the following commentary from the Huffington Post: black people involved in this riot?.... Of course not! Not many people of color have neglected bank accounts with balances over 100 grand. I must admit to a wee bit of schadenfreude watching these very well-heeled, overwhelmingly white Republican Ditto-head supporters of McCain/Bush & Co. and their "free-market", no government oversight or regulation, every man for himself brand of capitalism, out there shoving each other around like a bunch of rowdy anarchists and whining for the government to step in now and give them their entitlement of the amount of their fortune that they knew was not insured. They have finally reaped what they have sewn!

Sunday, July 13, 2008

Update on pawnshop operator EZ Corp (EZPW), originally recommended around $12 on March 23rd. As of Friday July 10th close it is now $16.36 having pre announced higher earnings for the quarter ended June 30th. Earnings are due out July 24th and there will be a conference call on the web. Unfortunately pawn shops are thriving in this very poor economy. This company seems to be a needle in the haystack of stocks which are suffering.

Tuesday, July 01, 2008

There are three phases to a bear market--denial, acceptance and capitulation. Last summer when Citi fell from 55 to 45 then to 35 analysts were pounding the table begging anyone that would listen to buy, buy, buy. This was the denial phase. Now we are hearing in the general media that we are in bear market territory down 20% on the Dow. Who ever came up with this stupid benchmark should be shot, but thats for another discussion. So now we are entering the acceptance phase, albeit reluctantly. Hey even GM was downgraded to sell by Goldman after making a 53 year low. You will hear the parade of talking heads on TV telling us "Don't Panic", there's "value" its close to the "bottom", yada yada yada. The same talking heads that thought that the housing sub-prime credit crisis was "contained" are now urging us not to panic. Funny isnt it???? After several months of acceptance we will be ready for the capitulation phase which will include more scandals, suicides and arrests, a forced liquidation of some more hedge funds that bet wrong, and stocks selling for seemingly unthinkable levels---Citi $5 anyone? Then and only then will the next fortunes be made. There will be light at the end of the tunnel and this time that light will not be in the form of an oncoming train.

Saturday, June 28, 2008

The Dow undercut its March and then its January lows settling around 11,346. The Dow is down almost 1700 points since mid May. The transports have cracked 5000 though this index is holding up much better. Banks and GM are finally being downgraded to sell. Only weeks ago you heard the mantra, stocks are cheap, its close to the bottom and all that other crap. Now reality has set in. Some hedge funds which are highly leveraged and bet wrong have to be in trouble. The VIX is no where near panic levels. Barron's has resigned itself to the belief that the financials won't recover until 2010. Wall Street analysts are biased, and therefore worthless. The only truth is in the charts. While a rally could surface some time in July, it should be a bear market rally which should be used to sell stocks and originate new shorts. A Dow rally into the 11,800 to 12,100 area would be the sweet spot for this action plan.

Saturday, June 21, 2008

We had our 800 point plus rally to over 13,000 on the Dow from the Bear Stearns panic bailout low in the low 12,000's. Now the Dow has dropped under 12,000 down over 1,000 points from mid May. We are teetering on the brink once more. The second half of this year in the stock market may very well be decided in the next 2 to 4 weeks.

Sunday, June 15, 2008

Big Brown and the stock market. Before the Belmont Stakes everyone was convinced that Big Brown would be the first horse in 30 years to win the Triple Crown. When reporters questioned why Big Brown would succeed where others have failed they were told, "Big Brown is different". In 1999 when internet stocks without earnings were selling for 140 times earnings (if they had earnings at all) and some companies with no sales had market valuations 10 times that of General Motors, journalists were told, "this time its different" Well the lesson of Big Brown as the lesson of the stock market is that its never different.

Sunday, April 20, 2008

Friday April 18th, the Dow closes over 12,800, the Dow Transports close over 5,000. At the same time new highs on the NYSE dwarfed new lows by 3 to 1. Bad new predominates, but the market does not care, it wants to go higher. For example HOG announced sharply lower slaes and layoffs, but its stock is in the same 37 area as it was a couple of months ago when we told everyone to cover their short. The market is sold out for now. Whether this up move is sustainable--only time will tell. We will not know this until Memorial Day. However, you cannot be short this market yet..... Trust the market, but as Reagan used to say, "verify"

Sunday, April 13, 2008

April will be the most important month in the stock market for 2008. It will resolve the issue as to whether the rally of the past two months was the beginning of a new up move, or just a blip in an ongoing bear market which started in the fall of 2007. So far the first 10 trading days in April goes to the bears. Especailly because GE a company who has gamed earnings for years, missed its estimated. GE is a bellwhether of the economy because of its broad industry reach. The market is failing and failing badly at a key technical juncture. Every rally into resisitance is met with failure. Unless the Dow can break above 12,800 along with a move by the Dow Transports above 5,000 it is still a bear market.

Tuesday, March 25, 2008

In this horrendous economy who profits? Pawn shops and pay day loan companies. Any business that provides temporary relief to struggling every day lower middle class working stiffs down on their luck. Demand for cash is great, and the cost of capital is ever being lowered by the Federal Reserve. Check out Cash America International on the NYSE (Symbol CSH) and EZ Corp on the Nasdaq (Symbol EZPW) Both companies are the prime benificiary of the current economic crisis.

Monday, March 03, 2008

What little respect I had for CNBC I lost today. This morning when Warren Buffett told Becky Quick that we are in a recession, she looked at him incredulously. Two seconds later, the bottom of the screen flashed a red "Breaking News".....Buffett says we are in a Recession. Duh!!!!!!!!!!!! Do these people live in the same world as the rest of us? I am tired of listening to these nitwits tell an unsuspecting public that---1. The subprime mess would not carry over into the general economy;and 2. That those who sold stocks last summer were stupid "lemmings" (according to Erin Burnett). I have learned more about the market from Tori Spellings reality show than from the biased talking heads on CNBC. Becky Quicks ignorance has personified this today and this speaks volumes about the financial media in general--they offer absolutely no value to an investor and probably detract from the sum total of all knowledge. What I do know is that we will probably have a nice tradeable bottom from here which is around DOW 12,200.

Tuesday, January 22, 2008

Todays Federal Reserve emergency action cutting the discount rate 75 basis points inter-meeting (the first time since 2001 such an inter-meeting action was taken) is nothing more than the Bank America Bail Out Plan. Last week, BAC took on the rest of Countrywide (CFC) and now the Fed has helped them by softening the cost of taking on the carcas of this crappy company. Almost 6 months to the day, we told you to short Harley Davidson (HOG) in the mid 60's. Well this morning HOG opened at 34.75!!Because of the fed action and because we have over 30 points in the trade, it is now time to cover the short. I think, err.... I know that HOG is going lower, but take the money because you never know how long this fed induced counter trend rally can last. You can always reshort after the gittiness ends. HOG has already bounced to the 37-38 area off the lows. So take that great trade off now.......