I think that we should attempt to skew the way news is relayed to us, the information consuming public. The news networks keep saying that the reason they report what they report, when they report it is that they are in tune with what people want to watch.
Witness the latest news du jour.....the Libby/Rove indictments.
By every indicator I have, no one really knows or cares about this issue. I have not yet met anyone who can articulate the situation (outside of partisan "spin-based" sound bites) properly or accurately. I say this since not even the most unbiased of news organization can give "one" unified explaination of the issue (skewing either left or right).
Empty Meme = (adj.) An issue designed to carry the message of a partisan argument disguised as a relevant issue.
I don't know about you, but I find this insulting. Given the above, we can only conclude that this issue is what I would call an "Empty Meme". An issue designed to carry the message of a partisan argument. I mean, since when do we have the news networks telling us that someone "couple possibly be indicted in a few days?". No one seems to want to tell us about all the child molesters that "could possibly be indicted in the next few days!". In this case, the Dems use it to say that "The whole Iraqi war is a farce", the Repulicans use it to show case partisan spin and lack of control of the big picture. The networks seem to be the only people who care about this issue, and unfortunately that says a lot more about their partisan slants as news organizations than it does about their will to publish facutal reporting.
So I say that we really do "Vote with our Remotes". Every time you see an "Empty Meme" being reported on, like the Libby/Rove indictments, change the channel. While I do not think that the ratings are granular enough to see shifts in behavior based on news segments, the volatility between networks would be enough to make a case. If enough people did this, we could actually shape the way stories are reported to us. Imagine if news directors had to consider the "Empty Meme" dilemma and were forced to report facts based on thier own form of measurment.....ratings.
Remember! "If its an empty meme, change the screen!"
Sunday, October 30, 2005
Monday, May 16, 2005
The Importance of Being Earnest....or.....Not Letting Things Hit You Over The Head
It is coming. You can hear it. You can see it. You can even taste it in some instances. All you know is it is going to hit you hard when it gets here. It really dosn't matter what "it" is. It just matters that you see "it" before "it" hits you. "It" could be a baseball, a margin call, or a disgruntled employee. The only thing that matters is that you see "it".
Something that I see on the horizon of the markets is fear. I really don't think we have fully recovered from the idea that the fear bid is in the market forevermore. If they go down some gully in Pakistan and actually find Osama, that fear trade ain't going anywhere. Why? Because terror is now fully institutionalized.
You see, "it" in this case is fear. We are all fully invested in it. What Im wondering is what does that do to bonds and fixed income? If, indeed, fear is now with us forever, does that mean bonds stay here to, and any movement in this fear laden space is doomed to a trading range forever keeping the ten year under 5%? It certainly seems like it.
This all leads me to the conclusion that fear is a tax we have to level on everything form the GDP to the Fed Funds Rate. A modifier that ensures we dont get ahead of ourselves. It also creates an environment that I dont think any of us have ever had to deal with. An evironment based on the intangible nature of human fear response. The cure to which is only one thing. Politics and the leadership provided by the government. It is only with this that the fear trade disappears. Never before have politics so intertwined with finance.
Something that I see on the horizon of the markets is fear. I really don't think we have fully recovered from the idea that the fear bid is in the market forevermore. If they go down some gully in Pakistan and actually find Osama, that fear trade ain't going anywhere. Why? Because terror is now fully institutionalized.
You see, "it" in this case is fear. We are all fully invested in it. What Im wondering is what does that do to bonds and fixed income? If, indeed, fear is now with us forever, does that mean bonds stay here to, and any movement in this fear laden space is doomed to a trading range forever keeping the ten year under 5%? It certainly seems like it.
This all leads me to the conclusion that fear is a tax we have to level on everything form the GDP to the Fed Funds Rate. A modifier that ensures we dont get ahead of ourselves. It also creates an environment that I dont think any of us have ever had to deal with. An evironment based on the intangible nature of human fear response. The cure to which is only one thing. Politics and the leadership provided by the government. It is only with this that the fear trade disappears. Never before have politics so intertwined with finance.
Monday, May 02, 2005
Oil - The big head fake
"Oil is going to kill our economy."
"We are addicts, and the Saudis are the pushers."
You hear commentators saying this all the time these days. Amazing to me how if you live long enough, you see things repeat themselves endlessly. Doesnt it feel like the 70's gas crunch is right around the corner?
If you read way back in my blog, you see a theme that suggests that the most evident meme in the news cycle is almost always false. It is the head fake of all head fakes. Yes. At this point in the game, the news media seems all too easy to manipulate. This is why one has to go a bit deeper.
There are three things you have ask yourself when you consider Oil.
1. Why doesn't the government raise the tax on Oil to a point where we HAVE to conserve? They force us to do other things, why not something so basic?
2. If we are so desparate for Oil, why do we allow Oil companies to have a choke hold on our import by accepting far too few REFINERIES.
3. Why do the economic models of most alternative fuel types fail miserably. BioDiesel (a full replacement for Diesel fuel) has been around since the 80s and can not be produced for less than 4.50 a gallon!
It all smells of manipulation. Dont forget, we have had a decade of Oil doing nothing so there has been ample time to rig the system up right with hedges, non-compete deals, and inventory grabs. Yes. Manipulation.
Now, please do think me one of these conspiracy theorists, nor to I think this is a way to simply bilk the American wallet. I feel like in free markets, a certain amount of manipulation is appropriate. However once you start manipulating at the level where national economies are affected, the story has to change. Yes. Oil has always been about power, and in times of contention becomes the central player (Vietnam). So here we are, another thing you can tie back to the global war on Terror.
Finish terrorism, and you will finish this Oil hoard.
"We are addicts, and the Saudis are the pushers."
You hear commentators saying this all the time these days. Amazing to me how if you live long enough, you see things repeat themselves endlessly. Doesnt it feel like the 70's gas crunch is right around the corner?
If you read way back in my blog, you see a theme that suggests that the most evident meme in the news cycle is almost always false. It is the head fake of all head fakes. Yes. At this point in the game, the news media seems all too easy to manipulate. This is why one has to go a bit deeper.
There are three things you have ask yourself when you consider Oil.
1. Why doesn't the government raise the tax on Oil to a point where we HAVE to conserve? They force us to do other things, why not something so basic?
2. If we are so desparate for Oil, why do we allow Oil companies to have a choke hold on our import by accepting far too few REFINERIES.
3. Why do the economic models of most alternative fuel types fail miserably. BioDiesel (a full replacement for Diesel fuel) has been around since the 80s and can not be produced for less than 4.50 a gallon!
It all smells of manipulation. Dont forget, we have had a decade of Oil doing nothing so there has been ample time to rig the system up right with hedges, non-compete deals, and inventory grabs. Yes. Manipulation.
Now, please do think me one of these conspiracy theorists, nor to I think this is a way to simply bilk the American wallet. I feel like in free markets, a certain amount of manipulation is appropriate. However once you start manipulating at the level where national economies are affected, the story has to change. Yes. Oil has always been about power, and in times of contention becomes the central player (Vietnam). So here we are, another thing you can tie back to the global war on Terror.
Finish terrorism, and you will finish this Oil hoard.
Tuesday, April 26, 2005
Back After a Year of Nothing
Back!
After a full year, Ive come back to continue my markets insight in this blog.
I found it immensely helpful to go back to this blog to see where my trading style has led me, and to see if my predictions were correct. I feel quite vindicated on both fronts. My endless rantings about the incorrectness of the media, and the herd mentality of the markets (both needing to be shunned) seemed to pay off well. Please read the blog posts from last year. Yes there are some dog calls in there, but there are also some great picks.....like KMRT....which at this point, many are saying is the next Berkshire Hathaway.
But that was then and this is now. I dont intend to do the morning/afternoon stuff like I used to. Ill be posting at least twice a week with more macro views on the direction of the most liquid markets in the world......the US equity and bond markets. I also intend to write a bit on the venture capital scene and deals that are getting done that interest me.
See ya in the blogosphere!
Gerry
After a full year, Ive come back to continue my markets insight in this blog.
I found it immensely helpful to go back to this blog to see where my trading style has led me, and to see if my predictions were correct. I feel quite vindicated on both fronts. My endless rantings about the incorrectness of the media, and the herd mentality of the markets (both needing to be shunned) seemed to pay off well. Please read the blog posts from last year. Yes there are some dog calls in there, but there are also some great picks.....like KMRT....which at this point, many are saying is the next Berkshire Hathaway.
But that was then and this is now. I dont intend to do the morning/afternoon stuff like I used to. Ill be posting at least twice a week with more macro views on the direction of the most liquid markets in the world......the US equity and bond markets. I also intend to write a bit on the venture capital scene and deals that are getting done that interest me.
See ya in the blogosphere!
Gerry
Monday, May 24, 2004
Meme Watch - The Iraqi Effort is Falling Apart
If you watch a broad spectrum of the media news outlets, I really don't know how you can tell WHAT is happening in Iraq. I watch NBC and they have all but written the effort off, acting as if we should be getting out immediately. Then I turn on Fox and actual soldiers are on TV saying that Iraq really isn't that bad. How in the world can you gauge the geopolitical risk?
While listening to a popular radio program the other day, I heard a soldier tell the host that he is 3 times as frightened about Iraq while watching the news media in the US, than he is while he is actually in Iraq. What is that saying? How are we to react to a news media that seems to want to hold us hostage to the lens with which they view the situation?
Is it just politics? Are we merely moving through a political cycle where everything (including the disruption of a nation) is fair game? Would this have worked during World War 2? Could we have fought a World War while obsessing about abuses in one prison camp? How many prison camps were there in World War 2? Do you mean to tell me this is the FIRST time this has happened? I say no. The only thing different is that the media has become ubiquitous. It seems wrong to me.
Not my job to judge here though. My job is to game this. So, as in any game I have to believe that you have to play this AWAY from the major networks. There is clearly a disconnect with their base when they feed this constant slam on the US administration. They forget that Americans always fall back on pride. Telling them that they have nothing to be proud of is a losers game. This will affect their revenues and further decentralize the average viewer. Making them more niche oriented as Cable variety moves in to fill the void (the harbinger of all this being the Fox New Channel).
Short and sweet. Here is how I would play this:
1. Short the networks and their associated stocks. They will loose viewers as alternatives from cable grow stronger. Mis-steps like their current jag only serve to further destabilize their base.
2. Buy cable companies with broadly diversified offerings for subscriber revenue. They will be the benefactor of the major network exodus.
3. Sell Major Advertising concerns. They will be faced with a landscape of smaller "cable savvy competitors as the network loose their clout. Their contracts with the major networks will render them useless.
4. Buy Niche oriented content plays. Buy networks, both interactive and cable video that cater to wide niches of people that have been overlooked by the networks.
5. Do not buy Network Sponsored entities. These are cable and content outlets that are owned by the networks and thus tied to their downward spiral. Buy scalable pure plays.
That is how I would play it.
DISCLAIMER: I own some stock that fit the above categories. However I do not own many and may have positions that contradict the above advice.
While listening to a popular radio program the other day, I heard a soldier tell the host that he is 3 times as frightened about Iraq while watching the news media in the US, than he is while he is actually in Iraq. What is that saying? How are we to react to a news media that seems to want to hold us hostage to the lens with which they view the situation?
Is it just politics? Are we merely moving through a political cycle where everything (including the disruption of a nation) is fair game? Would this have worked during World War 2? Could we have fought a World War while obsessing about abuses in one prison camp? How many prison camps were there in World War 2? Do you mean to tell me this is the FIRST time this has happened? I say no. The only thing different is that the media has become ubiquitous. It seems wrong to me.
Not my job to judge here though. My job is to game this. So, as in any game I have to believe that you have to play this AWAY from the major networks. There is clearly a disconnect with their base when they feed this constant slam on the US administration. They forget that Americans always fall back on pride. Telling them that they have nothing to be proud of is a losers game. This will affect their revenues and further decentralize the average viewer. Making them more niche oriented as Cable variety moves in to fill the void (the harbinger of all this being the Fox New Channel).
Short and sweet. Here is how I would play this:
1. Short the networks and their associated stocks. They will loose viewers as alternatives from cable grow stronger. Mis-steps like their current jag only serve to further destabilize their base.
2. Buy cable companies with broadly diversified offerings for subscriber revenue. They will be the benefactor of the major network exodus.
3. Sell Major Advertising concerns. They will be faced with a landscape of smaller "cable savvy competitors as the network loose their clout. Their contracts with the major networks will render them useless.
4. Buy Niche oriented content plays. Buy networks, both interactive and cable video that cater to wide niches of people that have been overlooked by the networks.
5. Do not buy Network Sponsored entities. These are cable and content outlets that are owned by the networks and thus tied to their downward spiral. Buy scalable pure plays.
That is how I would play it.
DISCLAIMER: I own some stock that fit the above categories. However I do not own many and may have positions that contradict the above advice.
Thursday, May 20, 2004
Cruelty- The ultimate backhand from the Market
Yesterday was just a cruel day for equities. Just cruel. We started the day up big, held it all day long, only to be sold off to a down 30 on the Dow by the time it was all over. Volume surged in the last hour as well, lending an exclamation point on this market that said "Nope, everyone is still too happy and optimistic for the market to move higher.". For those of us who are long, days like yesterday hold an irony reserved only for fools who try to divine the future.
Another funny thing I'm beginning to observe is the complete lack of reference for the type of movement we are seeing. Well respected writers I follow say things like "Why is this happening? I don't know." or "I have no idea who actually buys and sells these types of moves, but I'm sure glad they are there.". A complete lack of perspective.
Most say it is because Oil continues to make higher highs, the 10 year is now hovering around 4.80, and there is a general lack of urgency coming from the Fed.....Not to mention Iraq. I'm sure it is all of those things, but I'm starting to feel like we need to simply game the psychology and forget about fundamentals. When I get to this point, I always stop and remind myself that I'm not in this to fall folly to that markets whims. I'm in this to grow my investments at a more aggressive pace than a bond or a mutual fund. So I sit back down, take my hands off the keyboard, and stop trading. Which I will not do until some semblance of order comes back to this market. I suspect that the reason we can't break support or surge past resistance is because my view is a popular one.
Another funny thing I'm beginning to observe is the complete lack of reference for the type of movement we are seeing. Well respected writers I follow say things like "Why is this happening? I don't know." or "I have no idea who actually buys and sells these types of moves, but I'm sure glad they are there.". A complete lack of perspective.
Most say it is because Oil continues to make higher highs, the 10 year is now hovering around 4.80, and there is a general lack of urgency coming from the Fed.....Not to mention Iraq. I'm sure it is all of those things, but I'm starting to feel like we need to simply game the psychology and forget about fundamentals. When I get to this point, I always stop and remind myself that I'm not in this to fall folly to that markets whims. I'm in this to grow my investments at a more aggressive pace than a bond or a mutual fund. So I sit back down, take my hands off the keyboard, and stop trading. Which I will not do until some semblance of order comes back to this market. I suspect that the reason we can't break support or surge past resistance is because my view is a popular one.
Tuesday, May 18, 2004
Trading Track - A glimmer of hope in K-Mart
Ed. Note - We have added the ability to comment on these posts. Please let me know your thoughts! Just click on the comments link below each post, scroll to the bottom of the next page and add a comment! - GJL
Check out the action in K-Mart. Just bursting upward with no restraint. I'm encouraged by this since K-Mart got relentlessly pounded last year for poor management, slow growth, and underperformance in comps. The reason I'm encouraged is that K-Mart seems to be a bottom low enough for investment, and thus starts to show us where stocks need to be valued in order to move up in this market.
I'm sure you are going to stare in disbelief when I write that I'm hoping we go down further. K-Mart is WAY DOWN, and it now has upward momentum. The rest of the market, unfortunately, is not WAY DOWN enough to equal where K-Mart is rebounding. So we continue to drift around, never creating enough down draft to create a sustainable rally. I believe in this ideal fully. Market momentum is perhaps the most powerful thing it can provide us.
Heres hoping for Dow 9000!!! I hope I'm wrong, but without geopolitical catalysts, and without significant changes in business momentum, I'm afraid all we have is market momentum.
Check out the action in K-Mart. Just bursting upward with no restraint. I'm encouraged by this since K-Mart got relentlessly pounded last year for poor management, slow growth, and underperformance in comps. The reason I'm encouraged is that K-Mart seems to be a bottom low enough for investment, and thus starts to show us where stocks need to be valued in order to move up in this market.
I'm sure you are going to stare in disbelief when I write that I'm hoping we go down further. K-Mart is WAY DOWN, and it now has upward momentum. The rest of the market, unfortunately, is not WAY DOWN enough to equal where K-Mart is rebounding. So we continue to drift around, never creating enough down draft to create a sustainable rally. I believe in this ideal fully. Market momentum is perhaps the most powerful thing it can provide us.
Heres hoping for Dow 9000!!! I hope I'm wrong, but without geopolitical catalysts, and without significant changes in business momentum, I'm afraid all we have is market momentum.
Monday, May 17, 2004
Trading Track - Gaming the 1990 Scenario
I'm hearing that traders are starting to compare this market to the 1990 scenario (Post War Daddy Bush's long slide into oblivion). The idea is that we have to price in a complete rollback of the last year to the beginning of the war, because inflation will kill the consumer, and the banks, and everyone is coming along for the ride. It is at times like these when we question the nature of our recovery in the US, and indeed the world.
I've always found that it is best to stop and take a pause at this type of juncture. We have been here before...Recently...From the 1987 crash, to the first Iraqi War, to the Dot Bomb Bubble, to 9/11, to Madrid. You have to look at the world and ask yourself if doomsday is actually around the corner, and make your trading judgments as a result of what you see. Right now I see instability. That is for sure. A geopolitical situation fraught with uncertainty and the ability to spiral out of control at a moment's notice.
I urge you all to see that while we seem to be teetering on the brink of something we all have no clue how to game, we have never actually gone over the brink. Right now the market is pricing in some sort of cataclysmic crush of problems that will seem to actually defeat our economy soundly. This is an extreme sentiment to say the least. The strength of the US business landscape is great enough to overcome this type of crush. The question is, when will the markets decide that they are at a level low enough to stop the onslaught of selling.
Indexes - Not even thinking about this yet.
Bonds - Had some trading activity here. Took advantage of some of the higher yields in the 18 year range, and took down a block of Floaters with good structure. I have a feeling that these trades are going to look even better once we start seeing the fear bid come back into bonds.
Equities - I'm getting shelacked. That's all I can say. I'm almost fully committed with about 3% cash left. If I try to take advantage of lower levels, I will have to start liq'ing down positions. I don't feel comfortable with that, particularly since this is clearly an exercise to wipe out all the bravado that was in the market. I feel like we can ride it out and not liq anything. Yes. I'm getting killed on all plays from raw materials, to the cable plays to the tech, to the advertising. Scaling into oil stocks over the last three weeks has been a buoy and kept the PF from falling. Right now I'm about to take the stance that most of my stocks pay divs and I'm just going to get paid to wait this one out doing no activity at all. Somehow I think that some angles will materialize and Ill start trading around the market again. Nothing right now.
I've always found that it is best to stop and take a pause at this type of juncture. We have been here before...Recently...From the 1987 crash, to the first Iraqi War, to the Dot Bomb Bubble, to 9/11, to Madrid. You have to look at the world and ask yourself if doomsday is actually around the corner, and make your trading judgments as a result of what you see. Right now I see instability. That is for sure. A geopolitical situation fraught with uncertainty and the ability to spiral out of control at a moment's notice.
I urge you all to see that while we seem to be teetering on the brink of something we all have no clue how to game, we have never actually gone over the brink. Right now the market is pricing in some sort of cataclysmic crush of problems that will seem to actually defeat our economy soundly. This is an extreme sentiment to say the least. The strength of the US business landscape is great enough to overcome this type of crush. The question is, when will the markets decide that they are at a level low enough to stop the onslaught of selling.
Indexes - Not even thinking about this yet.
Bonds - Had some trading activity here. Took advantage of some of the higher yields in the 18 year range, and took down a block of Floaters with good structure. I have a feeling that these trades are going to look even better once we start seeing the fear bid come back into bonds.
Equities - I'm getting shelacked. That's all I can say. I'm almost fully committed with about 3% cash left. If I try to take advantage of lower levels, I will have to start liq'ing down positions. I don't feel comfortable with that, particularly since this is clearly an exercise to wipe out all the bravado that was in the market. I feel like we can ride it out and not liq anything. Yes. I'm getting killed on all plays from raw materials, to the cable plays to the tech, to the advertising. Scaling into oil stocks over the last three weeks has been a buoy and kept the PF from falling. Right now I'm about to take the stance that most of my stocks pay divs and I'm just going to get paid to wait this one out doing no activity at all. Somehow I think that some angles will materialize and Ill start trading around the market again. Nothing right now.
Saturday, May 15, 2004
Meme Watch - Rebound and The Election Year Media
Rebound
Watch carefully. There are a lot more signs that the market is bottoming out from this recent sell off. Did I get caught by surprise? Yup. Was I 80% committed at Dow 10,500? Absolutely. Do I have average downs the whole way back through 10,000. Most definitely.
Why? Because the sell pressure is subsiding. Things just cant go down much further without taking out stops that will bring us to Dow 8500. No one thinks we are going back there with an earnings picture like we have, and with economic indicators coming in the way they are. Even Inflation seems to be capped with a Fed number of about 2.5 to 3. That says we have a floor, and a top. A range that we are at the bottom of.
I know. I'm a bull. I can't help it. Believe me, two years ago, I was holding dividend paying stock only and not trusting market action at all. I guess you could say that I traded my way through the bad, and this is nothing compared to the market in 2001 and 2002. Back then we had to trade against abysmal earnings, and even worse economic numbers.
The Election Year Media
This can not be discounted the way everyone seems to be going along with it. Lets face it, the main media outlets are gunning for Bush. They report all of the bad and let the good bubble up every once and a while. Is it our fault? They seem to think that we WANT to hear this scandalous stuff. When I talk to people and read the blogs I read, I don't see that. I see people who want to have pride in their country as we are under siege and turn away from news that makes us feel shame. That's all I hear from the news outlets. Shame on the military, shame on Bush, shame on Rumsfeld, shame on the greedy CEOs, and on and on and on and on.
They are either working for the terrorists, or they want to change the political picture. Since Tom Brokaw wouldn't be able to survive in a cave without his "product", I have to believe that they are trying to affect politics. That is manipulation, and we have to turn away from it. Yet the markets seem to want to react to it. The trader in me KNOWS I have to game it that way, but the citizen in me, the US citizen who has invested in both the economic, municipal, and political landscape wants to expose it and bring it down. I have a feeling that it is going to have to be a little of both for me for now.
Watch carefully. There are a lot more signs that the market is bottoming out from this recent sell off. Did I get caught by surprise? Yup. Was I 80% committed at Dow 10,500? Absolutely. Do I have average downs the whole way back through 10,000. Most definitely.
Why? Because the sell pressure is subsiding. Things just cant go down much further without taking out stops that will bring us to Dow 8500. No one thinks we are going back there with an earnings picture like we have, and with economic indicators coming in the way they are. Even Inflation seems to be capped with a Fed number of about 2.5 to 3. That says we have a floor, and a top. A range that we are at the bottom of.
I know. I'm a bull. I can't help it. Believe me, two years ago, I was holding dividend paying stock only and not trusting market action at all. I guess you could say that I traded my way through the bad, and this is nothing compared to the market in 2001 and 2002. Back then we had to trade against abysmal earnings, and even worse economic numbers.
The Election Year Media
This can not be discounted the way everyone seems to be going along with it. Lets face it, the main media outlets are gunning for Bush. They report all of the bad and let the good bubble up every once and a while. Is it our fault? They seem to think that we WANT to hear this scandalous stuff. When I talk to people and read the blogs I read, I don't see that. I see people who want to have pride in their country as we are under siege and turn away from news that makes us feel shame. That's all I hear from the news outlets. Shame on the military, shame on Bush, shame on Rumsfeld, shame on the greedy CEOs, and on and on and on and on.
They are either working for the terrorists, or they want to change the political picture. Since Tom Brokaw wouldn't be able to survive in a cave without his "product", I have to believe that they are trying to affect politics. That is manipulation, and we have to turn away from it. Yet the markets seem to want to react to it. The trader in me KNOWS I have to game it that way, but the citizen in me, the US citizen who has invested in both the economic, municipal, and political landscape wants to expose it and bring it down. I have a feeling that it is going to have to be a little of both for me for now.
Wednesday, May 12, 2004
Trading Track - What more is there to say?
Many of you have emailed me wondering about my thoughts with this market. I haven't posted because I don't think anything has changed since my last post. We are getting the thing that I always knew we would have to face, the interest rate motivated selloff. The knee jerk reaction that most traders get when faced with a new interest rate environment. I was expecting it AFTER the Fed started to tighten, but I have to say I'm glad we are getting it out of the way. I know, this is exceptionally painful for the longs out there (of which I am now fully 100% a member of).
The nice thing about this move down is that we are wringing out a lot of the weak hands involved in the last run up. Many of whom were wondering if they should sell weeks ago, now see themselves at breakeven or a little worse and just capitulating. They have now had enough pain and want to make it stop.
I believe that this sets us up for a big run north after all the capitulation is done. But then again, I've been saying that for two weeks now (thus the lack of posting). Here is the fundamental thesis that works the same way that saying the jobs numbers were wrong when everything else was pointing to a better economy. This is economy is now solidly growing and expanding. This is something that was not present when we crashed so hard in 2000. Everything looked like it was behind us then. Now everything is in front of us and we have the economic engine to participate. People may be selling, but it sure isn't because business is bad. That is flawed logic, and I have to buy that.
The nice thing about this move down is that we are wringing out a lot of the weak hands involved in the last run up. Many of whom were wondering if they should sell weeks ago, now see themselves at breakeven or a little worse and just capitulating. They have now had enough pain and want to make it stop.
I believe that this sets us up for a big run north after all the capitulation is done. But then again, I've been saying that for two weeks now (thus the lack of posting). Here is the fundamental thesis that works the same way that saying the jobs numbers were wrong when everything else was pointing to a better economy. This is economy is now solidly growing and expanding. This is something that was not present when we crashed so hard in 2000. Everything looked like it was behind us then. Now everything is in front of us and we have the economic engine to participate. People may be selling, but it sure isn't because business is bad. That is flawed logic, and I have to buy that.
Thursday, May 06, 2004
Meme Watch - Inflation - Again
I'm getting very concerned about the future for growth in the stock market. Although a healthy dose of human nature should cure the condition, I feel like once interest rates ACTUALLY start rising, everyone is going to loose their heads. We have not even had ONE FED TIGHTENING, and everyone is acting like this is the end of things for stocks. What happens when things actually start going up and stay up? Its like watching a junkie wean off crack.
How do we play this? I've got some good sized bets on raw materials, cable, tech, and ad spending for medium term turns in stocks, and I'm starting to nibble at some bonds again. As yields perk up, there are some good deals in the "slightly under 20 year" range in munis so I picked some up yesterday with some new dollars from the stock PF. So, in a word, this next stretch in the market is going to be selective stock picking and a migration to better yields.
How do we play this? I've got some good sized bets on raw materials, cable, tech, and ad spending for medium term turns in stocks, and I'm starting to nibble at some bonds again. As yields perk up, there are some good deals in the "slightly under 20 year" range in munis so I picked some up yesterday with some new dollars from the stock PF. So, in a word, this next stretch in the market is going to be selective stock picking and a migration to better yields.
Wednesday, May 05, 2004
Trading Track - Uneasy relief
I really don't like what the general markets meme likes these days. I ask myself all they time why I feel different about it but I cant seem to work it through. Yesterday, the Fed came out and said that they were not raising right now, but that that they may act soon and in small "measured" levels. Meaning they would start tightening in .25 or .50 bp moves over a protracted period of time. The markets liked this because, while they don't like higher rates, they favor a slow, inch by inch approach.
I continue to wonder why the market feels this way. I wonder why we are paying attention at all until the fec gets to 2.5 or 3!!! That would put us in the mid range. For those of you counting, that would mean the Fed will need to do FOUR tightenings at .50 or EIGHT tightenings at .25! Eight tightenings would last two years using this approach. Even THEN we would still only be at a nominal FF rate. I don't think that the world is going to wait this long and the forces of inflation will creep up on the Fed and overwhelm it.
This says two things to me....Change the stock strategy, and wait for higher rates because they are right around the corner. Inflation isn't in check folks, and just because the government says that food, gas and general services costs are not part of inflation doesn't mean that the consumer doesn't get hit.
So....
Indexes - Still dormant here. Cant game a 10,000 to 11,000 range on the Dow when you are in the middle of it.
Individual Stock - Commodity recovery seems to be taking on some steam. Steep recovery in PD and a slight one in AA. CHRT getting hit but I remain steady on it and am looking to buy more at 3.5 if I get the chance. CMCSA recovering nicely after they dropped the Disney bid. About to go positive on CMCSA. Nice gain and holding in Estee Lauder. Going to liq it soon. EMC still down but inching back. Jury is still out on this one.
Bonds - Had a setback on a new CMO I was purchasing, had to bust the trade. Now have more FX cash than I'd like. Trying to hold out for a nice 5% muni. Going to wait as long as I can before the income picture starts to bother me. Gave up on trying to do a Treasury. Rather buy a muni instead.
I continue to wonder why the market feels this way. I wonder why we are paying attention at all until the fec gets to 2.5 or 3!!! That would put us in the mid range. For those of you counting, that would mean the Fed will need to do FOUR tightenings at .50 or EIGHT tightenings at .25! Eight tightenings would last two years using this approach. Even THEN we would still only be at a nominal FF rate. I don't think that the world is going to wait this long and the forces of inflation will creep up on the Fed and overwhelm it.
This says two things to me....Change the stock strategy, and wait for higher rates because they are right around the corner. Inflation isn't in check folks, and just because the government says that food, gas and general services costs are not part of inflation doesn't mean that the consumer doesn't get hit.
So....
Indexes - Still dormant here. Cant game a 10,000 to 11,000 range on the Dow when you are in the middle of it.
Individual Stock - Commodity recovery seems to be taking on some steam. Steep recovery in PD and a slight one in AA. CHRT getting hit but I remain steady on it and am looking to buy more at 3.5 if I get the chance. CMCSA recovering nicely after they dropped the Disney bid. About to go positive on CMCSA. Nice gain and holding in Estee Lauder. Going to liq it soon. EMC still down but inching back. Jury is still out on this one.
Bonds - Had a setback on a new CMO I was purchasing, had to bust the trade. Now have more FX cash than I'd like. Trying to hold out for a nice 5% muni. Going to wait as long as I can before the income picture starts to bother me. Gave up on trying to do a Treasury. Rather buy a muni instead.
Sunday, May 02, 2004
Meme Watch - America is bad
First off, I believe in America and the American way of doing things. I'm a free markets kind of guy and would be pleased if absolutely EVERYTHING was open to a free and open marketplace. In this meme-watch, Id like to examine the prevalent, recurring meme (as opposed to a single, fading meme) that America, on a global scale equals domination, corruption and greed. This meme is affecting our markets in the terrorism/fear bid that surfaces in safe havens at the slight hint of geopolitical discord. Therefore it is important to develop a thesis about the meme and apply it to our trading methodology.
Here is what I feel the big secret is about "The America is Bad" meme. I always ask myself the question "As opposed to what?"......As opposed to Saddam? Nope. As opposed to the EU? The ever-capitulating, ever transient polices of the EU? Nope. As opposed to the Spanish Socialists? I'm not even going to answer that. As opposed to Putin? I think he has his own issues. America isn't bad, America is a mirror. America lets you see what happens under the covers whether you like it or not......And here is the big pitch, the big irony of this whole meme......It goes on EVERYWHERE, all the time, in all forms of badness. No one is immune, no country rules or governs better than the other....It is all messy, ugly, and insults the sensibilities. America is the ultimate victim of its' freedom. BUT THAT DOES NOT MAKE IT BAD.
This is why when we get these panic selloffs because of this meme, we should buy the weakness with both hands. Because the reality of it is, while we may seem bad for the moment, most realists examine the situation and realize that there isn't anything better than American freedom, which is why even though selloffs are bleak and the bears wring their hands. Dollars ultimately come back to the American markets. Always have, and always will until there is a better form of freedom. I wont hold my breath, and neither should you.
Here is what I feel the big secret is about "The America is Bad" meme. I always ask myself the question "As opposed to what?"......As opposed to Saddam? Nope. As opposed to the EU? The ever-capitulating, ever transient polices of the EU? Nope. As opposed to the Spanish Socialists? I'm not even going to answer that. As opposed to Putin? I think he has his own issues. America isn't bad, America is a mirror. America lets you see what happens under the covers whether you like it or not......And here is the big pitch, the big irony of this whole meme......It goes on EVERYWHERE, all the time, in all forms of badness. No one is immune, no country rules or governs better than the other....It is all messy, ugly, and insults the sensibilities. America is the ultimate victim of its' freedom. BUT THAT DOES NOT MAKE IT BAD.
This is why when we get these panic selloffs because of this meme, we should buy the weakness with both hands. Because the reality of it is, while we may seem bad for the moment, most realists examine the situation and realize that there isn't anything better than American freedom, which is why even though selloffs are bleak and the bears wring their hands. Dollars ultimately come back to the American markets. Always have, and always will until there is a better form of freedom. I wont hold my breath, and neither should you.
Friday, April 30, 2004
Trading Track - Winning the mental tug of war.
Jim Cramer said it best "....Did you really think that after a week like this, that we would rally into the weekend with every potential for bad news available and at the ready?".
Still taking massive amounts of pain, but Im winning the mental tug of war to cash it all in and go to bonds. Portfolio is off 5% at this point, and I have no reason to believe that Monday will bring new positive catalysts. In fact the ONLY catalyst out there is the fact that people might just get tired of selling eventually. I'm not swayed, and my hands remain strong. I'm a bull at heart and I continue to look at pullbacks like this as working off the outstanding year we had last year. Although I must admit that this selloff is stinging a lot worse than the last two. Our economy is working like gangbusters and we are emerging from a tough recession. The action this week seems to assume that we are going back to 2002. No way....Didn't work last year, wont work now.
Individual Stock - Let go of the last bit of Echostar for a loss. I couldn't in all good faith carry it any longer with the bets I've made on CMCSA and CHTR. Plus I don't need the extra drag right now. CHTR is getting hit, but I'm only a buyer under 4. If we get to 3.5, Ill take down another 500 shares. Took down another hundo IR today about 2% under my cost basis. PD and AA continue to get hit but are showing bottoming support (no consolation here since we are off big numbers right now), so I feel like we are getting stable with raw materials. FOLKS!! THERE ARE MORE GROWING NATIONS WHO NEED METALS THAN CHINA!! These stocks have become sources of huge amounts of pain.
Bonds - Liq'd nice chunk of cash representing my total realized gain for the year out of the stock PF and Im starting to look at a muni to replace it with. I'm not going to pull the trigger until I can get a +- 10 year muni in the high 4s. Want to buy the 10 year at 5 as well if it can get there. Saving floater income for that. CMO paper seems stable for now and are paying down nicely. Had some big paydowns last month for some and my principal came in quite a bit. Resisting the urge to do any more right now and saving it for the Muni or the T-Bill.
Index - My Q long that was so close to 2080 is now also producing pain. We really didn't see this slide coming so everywhere I look on the indexes are lost opportunities. May consider doubling down the Q stake soon if we get any more oversold. If the market gets too ridiculous, Ill get back into index moves, however right now I'm not going to do anything that produces anymore pain potential.
Still taking massive amounts of pain, but Im winning the mental tug of war to cash it all in and go to bonds. Portfolio is off 5% at this point, and I have no reason to believe that Monday will bring new positive catalysts. In fact the ONLY catalyst out there is the fact that people might just get tired of selling eventually. I'm not swayed, and my hands remain strong. I'm a bull at heart and I continue to look at pullbacks like this as working off the outstanding year we had last year. Although I must admit that this selloff is stinging a lot worse than the last two. Our economy is working like gangbusters and we are emerging from a tough recession. The action this week seems to assume that we are going back to 2002. No way....Didn't work last year, wont work now.
Individual Stock - Let go of the last bit of Echostar for a loss. I couldn't in all good faith carry it any longer with the bets I've made on CMCSA and CHTR. Plus I don't need the extra drag right now. CHTR is getting hit, but I'm only a buyer under 4. If we get to 3.5, Ill take down another 500 shares. Took down another hundo IR today about 2% under my cost basis. PD and AA continue to get hit but are showing bottoming support (no consolation here since we are off big numbers right now), so I feel like we are getting stable with raw materials. FOLKS!! THERE ARE MORE GROWING NATIONS WHO NEED METALS THAN CHINA!! These stocks have become sources of huge amounts of pain.
Bonds - Liq'd nice chunk of cash representing my total realized gain for the year out of the stock PF and Im starting to look at a muni to replace it with. I'm not going to pull the trigger until I can get a +- 10 year muni in the high 4s. Want to buy the 10 year at 5 as well if it can get there. Saving floater income for that. CMO paper seems stable for now and are paying down nicely. Had some big paydowns last month for some and my principal came in quite a bit. Resisting the urge to do any more right now and saving it for the Muni or the T-Bill.
Index - My Q long that was so close to 2080 is now also producing pain. We really didn't see this slide coming so everywhere I look on the indexes are lost opportunities. May consider doubling down the Q stake soon if we get any more oversold. If the market gets too ridiculous, Ill get back into index moves, however right now I'm not going to do anything that produces anymore pain potential.
Thursday, April 29, 2004
Meme Watch - Pain
Okay. Those of you who have been reading me for a bit know that I called for a second decline, similar to what we are now experiencing. The selling, the dirge of selling, is scary, and the fearful rule on the street this evening. The averages are down big at this point, we were oversold days ago and now we are worse.
One might think this is it. This is the big flush.... It is all downhill from here.
Thats why tonight's Meme Watch is Pain. The state of pain that the news, your broker, your portfolio, and pretty much anyone who is following the market wants you to reflect. Down here is where pain is produced. We need pain to ensure that stock changes hands and builds a base to move higher. We had no pain at all up until a day ago. Now we have real pain and those who are weak will capitulate. This is why this is NOT the big flush, but the forced rush downward in order to coil the spring.
The reason I want to highlight this very prevalent meme should be obvious. You buy when there is blood in the streets and you sell when euphoria is highest. I believe that the markets are beginning to pay their final penance for the stellar year they printed last year. Yes, I believe that when the pain is this intense, you force yourself to buy.
Here are my catalysts, one by one:
China - Everyone thinks that the government there is going to slam the brakes on the growth, forcing Asia into a recession. Just like all the other one day wonders that the news produces, this theme is being over reacted to. We now have PD and AA selling down huge (talk about pain), and all for what? A promise from a previously inept government to reign in the overwhelming forces of capitalism? No way. I'm sticking with my raw materials focus which at this point is a large part of my PF.
The 10 Year - 4.52 makes me smile. Id like to see it move higher but I really want the sell off in bonds to take a breather for a minute. In the grand scheme of things, we are going to 5 on the 10 year by year end, but I would like to see the bond market sell off more orderly. I'm still on the sidelines here. This erratic move higher is also spooking the markets something fierce.
Earnings - I really don't know what to make of this. By all accounts, earnings were out of the park outrageously great. Yet we have this continued selloff. This brutal, unrelenting selloff. My confusion is not why this is happening ("sell the news"), but how to price these great quarters and guidance into a market that cant keep a bottom. I believe that this is going to ultimately be a catalyst higher if we can mount an upward move any time soon. Let me tell ya though, the economy is back big.
One might think this is it. This is the big flush.... It is all downhill from here.
Thats why tonight's Meme Watch is Pain. The state of pain that the news, your broker, your portfolio, and pretty much anyone who is following the market wants you to reflect. Down here is where pain is produced. We need pain to ensure that stock changes hands and builds a base to move higher. We had no pain at all up until a day ago. Now we have real pain and those who are weak will capitulate. This is why this is NOT the big flush, but the forced rush downward in order to coil the spring.
The reason I want to highlight this very prevalent meme should be obvious. You buy when there is blood in the streets and you sell when euphoria is highest. I believe that the markets are beginning to pay their final penance for the stellar year they printed last year. Yes, I believe that when the pain is this intense, you force yourself to buy.
Here are my catalysts, one by one:
China - Everyone thinks that the government there is going to slam the brakes on the growth, forcing Asia into a recession. Just like all the other one day wonders that the news produces, this theme is being over reacted to. We now have PD and AA selling down huge (talk about pain), and all for what? A promise from a previously inept government to reign in the overwhelming forces of capitalism? No way. I'm sticking with my raw materials focus which at this point is a large part of my PF.
The 10 Year - 4.52 makes me smile. Id like to see it move higher but I really want the sell off in bonds to take a breather for a minute. In the grand scheme of things, we are going to 5 on the 10 year by year end, but I would like to see the bond market sell off more orderly. I'm still on the sidelines here. This erratic move higher is also spooking the markets something fierce.
Earnings - I really don't know what to make of this. By all accounts, earnings were out of the park outrageously great. Yet we have this continued selloff. This brutal, unrelenting selloff. My confusion is not why this is happening ("sell the news"), but how to price these great quarters and guidance into a market that cant keep a bottom. I believe that this is going to ultimately be a catalyst higher if we can mount an upward move any time soon. Let me tell ya though, the economy is back big.
Tuesday, April 27, 2004
Trading Track - Range Bound starting to move to upside
The PFs are pretty stable in here. I have a raw material, advertising, cable/entertainment, tech, mix going on and the current action keeps it pretty steady in the middle. I'm looking for an upside break past earnings on economic news that further supports what we are seeing in earnings. I feel like everyone is looking at the run we had in the beginning of 2004 and saying that we priced great earnings in. They seem to forget the slow painful Naz selloff, but that's okay.
- Index - Still holding the Q long trying to get out at the 2080 level. No Diamonds or IShares positions.
- Individual Stock Highlights - Not much trading action. Waiting for my big PD bet to start moving higher on realization of the shortage in copper. My HAL position is finally rocketing higher. People need to realize that HAL earns their money the hard way and is a great American institution. Can't figure out the DD position. 25% increase in earnings and they sell it off. Not like they ran it up to high to begin with.
- Bonds - Unwinding the inverse floaters....Moving some of the principal into the 10 year above 4.50 (still waiting). Sniffing around for good Muni yields.
- Index - Still holding the Q long trying to get out at the 2080 level. No Diamonds or IShares positions.
- Individual Stock Highlights - Not much trading action. Waiting for my big PD bet to start moving higher on realization of the shortage in copper. My HAL position is finally rocketing higher. People need to realize that HAL earns their money the hard way and is a great American institution. Can't figure out the DD position. 25% increase in earnings and they sell it off. Not like they ran it up to high to begin with.
- Bonds - Unwinding the inverse floaters....Moving some of the principal into the 10 year above 4.50 (still waiting). Sniffing around for good Muni yields.
Saturday, April 24, 2004
Meme Watch - Inflation
I like to watch "memes" work their way through the media. A "meme" is a fairly recent phenomenon. As far as I can tell, a "meme" is a general ideal or theme prevalent in the current news cycle. Ya know how sometimes it just seems like all the media is talking about the same thing? That's a meme. Some of them impact that markets, and some of them don't.
One current meme I'm tracking is the Inflation meme. This is the story that takes a look at isolated numbers and attempts to show that Inflation is in danger of getting out of control. This is a very new meme for our economy since only months ago the Fed regarded Inflation risks as equal to Deflation risks. However this meme has found it's way into the psyche of the stock trader's head and the talking head alike. Why would we be getting the best earnings reports in years, yet have the stock market seem downright uninterested? The Inflation meme.
Now I've been on what seems to have been a never ending search for inflation for the last two years and I feel very comfortable in reporting that there IS core inflation going on (raw materials, hard goods, et al). However the real measure of inflation, the cost of money, is still quite low and likely to move slowly up the inflation scale. Imagine a big jumbo airliner taking off at super slow motion. So the truth is that inflation is coming, but it is coming at us slowly giving us enough time to reposition and prepare.
The moral of this meme? Get ready to get ready, and be forewarned, but don't jump off a cliff.
One current meme I'm tracking is the Inflation meme. This is the story that takes a look at isolated numbers and attempts to show that Inflation is in danger of getting out of control. This is a very new meme for our economy since only months ago the Fed regarded Inflation risks as equal to Deflation risks. However this meme has found it's way into the psyche of the stock trader's head and the talking head alike. Why would we be getting the best earnings reports in years, yet have the stock market seem downright uninterested? The Inflation meme.
Now I've been on what seems to have been a never ending search for inflation for the last two years and I feel very comfortable in reporting that there IS core inflation going on (raw materials, hard goods, et al). However the real measure of inflation, the cost of money, is still quite low and likely to move slowly up the inflation scale. Imagine a big jumbo airliner taking off at super slow motion. So the truth is that inflation is coming, but it is coming at us slowly giving us enough time to reposition and prepare.
The moral of this meme? Get ready to get ready, and be forewarned, but don't jump off a cliff.
Friday, April 23, 2004
Trading Track - Current Market Strategy
Trading Track is going to be a new ethi-Letter feature. It is a quick, memo-style analysis of current trading strategies I'm employing broken up by Index, Individual Stock, and Bond plays. Kind of like a quick temperature of my trading activity.
1. Index - Long QQQ Looking to bail on some at 2080 Naz
2. Individual Stock - Picked up a bunch of PD at 68...Halved my cost basis. Caught a 1.75 updraft the next day. Went deeper on CHTR, waiting for convertible refunding to wash out the shorts and go higher. FRX is disappointing after a similar low end double and lost almost 3 points, not sure I want in anymore. Holding over 2000 IACI on a breakout yesterday on the Amazon numbers, looking for big upside here.
3. Bonds - Shut down and not doing anything. Waiting to see where interest rates shake out over the near term (Oct). Have a large stake of Inverse Floaters (CMOs) that I want to let unwind for a while. Not too worried about Rates getting out of control since we have no reason to believe that things wont be as orderly on the way up as they were on the way down. This says my floaters can unwind fully just in time to turn over some refunding next year and go straight into 10 year Munis.
1. Index - Long QQQ Looking to bail on some at 2080 Naz
2. Individual Stock - Picked up a bunch of PD at 68...Halved my cost basis. Caught a 1.75 updraft the next day. Went deeper on CHTR, waiting for convertible refunding to wash out the shorts and go higher. FRX is disappointing after a similar low end double and lost almost 3 points, not sure I want in anymore. Holding over 2000 IACI on a breakout yesterday on the Amazon numbers, looking for big upside here.
3. Bonds - Shut down and not doing anything. Waiting to see where interest rates shake out over the near term (Oct). Have a large stake of Inverse Floaters (CMOs) that I want to let unwind for a while. Not too worried about Rates getting out of control since we have no reason to believe that things wont be as orderly on the way up as they were on the way down. This says my floaters can unwind fully just in time to turn over some refunding next year and go straight into 10 year Munis.
Taking a victory lap...
Yesterday the Dow, Naz, and S&P blew the doors off. Huge gains across the board...2, 3 percent in some cases. This is the moment when buying at the bleakest possible moment pays off and you watch your hard work pay off. I sometimes think of this exercise as the "price" I pay to actively trade the market. The act of overcoming fear and doubling up your position on a stock that is already down 10 points (Phelps Dodge for me, Alcoa for others yesterday). Having enough courage and conviction to hold everything all the way through a down turn. Wondering, "Does the market have a bottom close to where I've made this huge bet?".
But then a day like yesterday happens. You feel the palpable turning of the tide and realize that you just paid your price and now you can take your profits.
Looking for a big follow through today to put us on a path up. Interest rates seem to have worked their way through the news "meme" cycle and we are now left with a slew of outstanding earnings reports to propel the market for a bit. I'm hoping for a couple days of upside before we try to work anything off. I still think we have one more big down turn to go before we go for Dow 11,000.
But then a day like yesterday happens. You feel the palpable turning of the tide and realize that you just paid your price and now you can take your profits.
Looking for a big follow through today to put us on a path up. Interest rates seem to have worked their way through the news "meme" cycle and we are now left with a slew of outstanding earnings reports to propel the market for a bit. I'm hoping for a couple days of upside before we try to work anything off. I still think we have one more big down turn to go before we go for Dow 11,000.
Subscribe to:
Posts (Atom)
