Here are the top 5 sectors ranked by the percentage of the group reaching new highs
1- Retail- 25%
2- Chemicals / fertilizers- 17%
3- Internet-isp- 13%
4- Apparel-shoes- 12%
5- Electrical, military systems- 12%
Saturday, June 9, 2007
Top 5 Sectors with Highest Return!
Here are the top 5 sectors YTD ranked by return.
1- Chemicals / Fertilizers +68% (13 stocks)
2- Steel Producers +30% (22 stocks)
3- Trucks & Parts Heavy +45% (13 stocks)
4- Food- Dairy Producers +30% (9 stocks)
5- Transportation / Ships +20% (49 stocks)
Rankings are done by price performance of all stocks in the group. So, a sector that has 5 stocks, one up 100% and 4 up 1% will not be ranked as high as a sector that has 5 stocks all up 15%, thus the differential in rankings vs return.
1- Chemicals / Fertilizers +68% (13 stocks)
2- Steel Producers +30% (22 stocks)
3- Trucks & Parts Heavy +45% (13 stocks)
4- Food- Dairy Producers +30% (9 stocks)
5- Transportation / Ships +20% (49 stocks)
Rankings are done by price performance of all stocks in the group. So, a sector that has 5 stocks, one up 100% and 4 up 1% will not be ranked as high as a sector that has 5 stocks all up 15%, thus the differential in rankings vs return.
Many News Refering To Pharma Industry!!!
* SCOTUSblog reported on Wednesday that the Supreme Court has denied Pfizer's emergency application for relief from the Federal Circuit's ruling in the Norvasc case. TheStreet.com also has an article on the Supreme Court's decision.
* On Tuesday, the Federal Circuit granted Mylan's motion for summary reversal of the district court decision that had found Pfizer's Norvasc patent valid and infringed by Mylan. The Fed. Cir. also reversed and vacated a separate district court decision finding the Norvasc patent valid and infringed by Synthon. Both decisions came without opinion.
* FDA Law Blog reports today that a provision of the FDA Revitalization Act will reform the citizen petition process.
* The Washington Post on Monday reported on continued wrangling between the DOJ and FTC on the legality of reverse payment settlements, such as the one in Joblove.
* Via SCOTUSblog, here is petitioner's supplemental brief in Joblove, responding to the Solicitor General's recommendation that the Court decline to hear the case.
* Barr Labs announced earlier this week that Barr and Lilly agreed to dismiss their litigation over Prozac Weekly.
* Kaisernetwork.org reports that the markup session for the Waxman-Schumer follow-on biologics bill has been delayed to June 20. Supporters of the bill still hope to attach it to the FDA Revitalization Act and pass it into law this year.
* On Tuesday, the Federal Circuit granted Mylan's motion for summary reversal of the district court decision that had found Pfizer's Norvasc patent valid and infringed by Mylan. The Fed. Cir. also reversed and vacated a separate district court decision finding the Norvasc patent valid and infringed by Synthon. Both decisions came without opinion.
* FDA Law Blog reports today that a provision of the FDA Revitalization Act will reform the citizen petition process.
* The Washington Post on Monday reported on continued wrangling between the DOJ and FTC on the legality of reverse payment settlements, such as the one in Joblove.
* Via SCOTUSblog, here is petitioner's supplemental brief in Joblove, responding to the Solicitor General's recommendation that the Court decline to hear the case.
* Barr Labs announced earlier this week that Barr and Lilly agreed to dismiss their litigation over Prozac Weekly.
* Kaisernetwork.org reports that the markup session for the Waxman-Schumer follow-on biologics bill has been delayed to June 20. Supporters of the bill still hope to attach it to the FDA Revitalization Act and pass it into law this year.
Thursday, June 7, 2007
Stock Market Prognosticator and Festival of Stocks
Rick
The 34th edition of the Festival of Stocks appears today in Stock Market Prognosticator, a blog written by Eric J. Fox.
Eric has done a great job in highlighting some interesting posts of the past week covering a wide range of topics from uranium stocks to opening a zero commission brokerage account. Eric has been kind enough to include one of our posts last week, Private Equity Envy.
Eric is a hedge fund manager who seems to focus on deep value, somewhat obscure stocks. A terrific universe that can result in some outstanding returns. Managements frequently forget that they still have a public constituency. Read Eric's post on Biloxi Marsh Land. The financials may be intriguing, the assets may appear interesting, but management clearly does not want to divulge, let alone disclose anything based on Eric's experience.
Years ago, I went through a similar experience with International Speedway (ISCA) while it still lived as a pink-sheet company. Similarly, St. Joe Paper, now known as St. Joe Company (JOE) hardly gave outside investors much disclosure when it lived in the "pink."
Both ISCA and JOE turned into real goldmines as their management discovered that open disclosure and a broadened sharebase actually could help others recognize the intrinsic value. I am sure there are many pink sheet names that also gained "legitimacy" or at least broader recognition as they were launched on more more actively traded platforms and developed fuller disclosure requirements and standards. The Detroit and Canada Tunnel Company for years was OTC-pink and for years, the true value seemed unattainable. After being taken over some years ago, the tunnel is now owned by a fund of Macquarie Bank of Australia.
Enjoy Eric's version of the Festival of Stocks and have a look around his website. In my view, Eric has a great handle on value.
Disclaimer: I, my family, and clients do not currently own any of the securities mentioned in this post.
The 34th edition of the Festival of Stocks appears today in Stock Market Prognosticator, a blog written by Eric J. Fox.
Eric has done a great job in highlighting some interesting posts of the past week covering a wide range of topics from uranium stocks to opening a zero commission brokerage account. Eric has been kind enough to include one of our posts last week, Private Equity Envy.
Eric is a hedge fund manager who seems to focus on deep value, somewhat obscure stocks. A terrific universe that can result in some outstanding returns. Managements frequently forget that they still have a public constituency. Read Eric's post on Biloxi Marsh Land. The financials may be intriguing, the assets may appear interesting, but management clearly does not want to divulge, let alone disclose anything based on Eric's experience.
Years ago, I went through a similar experience with International Speedway (ISCA) while it still lived as a pink-sheet company. Similarly, St. Joe Paper, now known as St. Joe Company (JOE) hardly gave outside investors much disclosure when it lived in the "pink."
Both ISCA and JOE turned into real goldmines as their management discovered that open disclosure and a broadened sharebase actually could help others recognize the intrinsic value. I am sure there are many pink sheet names that also gained "legitimacy" or at least broader recognition as they were launched on more more actively traded platforms and developed fuller disclosure requirements and standards. The Detroit and Canada Tunnel Company for years was OTC-pink and for years, the true value seemed unattainable. After being taken over some years ago, the tunnel is now owned by a fund of Macquarie Bank of Australia.
Enjoy Eric's version of the Festival of Stocks and have a look around his website. In my view, Eric has a great handle on value.
Disclaimer: I, my family, and clients do not currently own any of the securities mentioned in this post.
Making Sense of Deborah's World
Rick
Deborah is a teacher on call out in the unbelievably beautiful city of Vancouver, British Columbia. Education, she claims, is her primary calling.
However, she has an excellent blog called, "Making Sense of My World" a very thoughtful and fundamentally based view of mining stocks.
Many blogs which espouse mining stocks tend to be written by inflationistas or crazies who view every upward jiggle in the yellow metal as portending the death spiral of the US dollar. Having no trust whatsoever in paper currency, their blogs tend to be rantings about Argentine and German inflationary experiences. Every financial crisis takes on epic proportions as a struggle between good and evil. Deborah avoids these histrionics.
Instead, she provides level-headed, soundly reasoned analysis of mining stocks. I value her analysis and recommend it to you!
Please find her link in the right hand column.
Deborah is a teacher on call out in the unbelievably beautiful city of Vancouver, British Columbia. Education, she claims, is her primary calling.
However, she has an excellent blog called, "Making Sense of My World" a very thoughtful and fundamentally based view of mining stocks.
Many blogs which espouse mining stocks tend to be written by inflationistas or crazies who view every upward jiggle in the yellow metal as portending the death spiral of the US dollar. Having no trust whatsoever in paper currency, their blogs tend to be rantings about Argentine and German inflationary experiences. Every financial crisis takes on epic proportions as a struggle between good and evil. Deborah avoids these histrionics.
Instead, she provides level-headed, soundly reasoned analysis of mining stocks. I value her analysis and recommend it to you!
Please find her link in the right hand column.
Economic Worries and Marathon Running
Rick
It is easy to take a dim view of equity markets when we read today's economic report showing US GDP slowing to a lethargic 1.3% pace for the first quarter, well below the expectations of most economists at 1.7%.
It's a good time to remind people of what I view as truism, the economy per se has nothing to do with the stock market, the biggest factor is what price you pay and what level of profitability you are attaching yourself to. You will find I refer to this truism quite frequently, most recently here.
It's easy to get bogged down in the noise, to get spooked by the media's fear-mongering. or news creation Sub-prime mortgage failures prompt curiosity much like rubber-necking a car accident. For the individuals or families, they represent a financial train-wreck and a horrible event. In aggregate however, even with one quarter of last year's originations being sub-prime, and even with defaults potentially hitting 20% rates, we are still looking at only 5% of mortgages that are afflicted. It is also easy to forget about the number of homes that are actually owned "free and clear" a figure that encompasses most of the baby boom generation.
As a value investor, I have little regard or time for most economic forecasts. Avoiding trouble (aka preserving capital) is first and foremost on my agenda. Some of my friends are far better at developing an aggregate stock market view. Let me cite a couple of them that I recommend highly. They have been kind enough to allow me to write occasional guest commentary for them.
Henry To of marketthoughts.com views markets as somewhat overbought, but remains bullish on a market that remains well-supported by private equity buyouts and insider buying as well as numerous other factors that he provides his faithful subscribers.
Another friend, David Korn of BeginInvesting.com remains bullish as well citing bullish insiders, as well as a host of evidence from sentiment indicators. I recommend both of these subscriptions as ways to improve your financial acumen from writers who are far better equipped than I to provide aggregate viewpoints.
Elsewhere in the blogosphere, I have found Interactive Investor Blog's recent post to be quite interesting.Q In a well-balanced post that cites bears such as Barry Ritholz in "The wall of worry now looks like the Great Wall of China " he also cites the very optimistic Ken Fisher, the Forbes columnist, money manager, and yes, Forbes 400 list.
Fisher's optimism is predicated on the spread between earnings yield and government bond yields in markets around the world. In what sounds like a physics argument relating to potential energy, he writes:
" At the beginning of the year the forward earnings yield was 2% higher than the 10 year government bond yield in the US and over 3% in the UK, France, Germany and Japan, yet over long periods the spread between the two has been close to zero. The theory is that when one asset pays more than another, money will flow to it and prices will rise."
Fisher continues,
“This is the beginning of a process that no-one has ever seen before,” says Ken, “In the past, when the earnings yield has been above the bond yield it’s either been in a single country… Or it happened for a very short time. This is the first time in modern history when the earnings yield has been above the bond yield all around the world.”
I am not sure that I am quite this optimistic. Nevertheless, I find it very odd that corporate balance sheets in general have failed to adequately respond to continued low rate opportunities. In a recent screen of S&P 500 non-financial names that I did, fully 30% of the companies had cash plus cash equivalents in excess of total debt. A year ago, the result was similar at about one-third. Looking at all North American companies covered by Reuters, there were 4,334 companies that passed this very far from robust screen. Financial leverage is only appropriate for companies that generate returns on investment above the cost of debt and can do so through cyclical ebbs and flows. Like the fellow who has discovered a hammer and thinks the world is covered in nails, financial engineering by blindly buying back stock willy-nilly can be a prescription for disaster.
Bottom-line, don't let economic aggregate numbers influence your investment thinking. The upside to any turbulence created by such releases is that fear or conversely, bravado creates opportunities.
In looking back at a week of earnings releases, (and remember it is only looking forward that makes you money) I am gratified by results at companies we hold such as 3M (MMM), Aetna (AET) , Harman (HAR), NCR (NCR), National Instruments (NATI), Microsoft (MSFT).
What a strange hodgepodge of businesses, you may think, but several characteristics define them...an attention to return on invested capital, a discipline in running the franchise, and a return of capital to the shareholder.
Some years ago, I trained and completed the New York marathon. Though distance running is portrayed as being very solitary, successful training was easiest when you ran with a partner. The same is true for successful investing. Don't let the short-term economic stats worry you, find yourself some decent businesses to partner with for the long run.
Disclaimer: Either I, my family, or clients own a current position in the securities mentioned in this post.
It is easy to take a dim view of equity markets when we read today's economic report showing US GDP slowing to a lethargic 1.3% pace for the first quarter, well below the expectations of most economists at 1.7%.
It's a good time to remind people of what I view as truism, the economy per se has nothing to do with the stock market, the biggest factor is what price you pay and what level of profitability you are attaching yourself to. You will find I refer to this truism quite frequently, most recently here.
It's easy to get bogged down in the noise, to get spooked by the media's fear-mongering. or news creation Sub-prime mortgage failures prompt curiosity much like rubber-necking a car accident. For the individuals or families, they represent a financial train-wreck and a horrible event. In aggregate however, even with one quarter of last year's originations being sub-prime, and even with defaults potentially hitting 20% rates, we are still looking at only 5% of mortgages that are afflicted. It is also easy to forget about the number of homes that are actually owned "free and clear" a figure that encompasses most of the baby boom generation.
As a value investor, I have little regard or time for most economic forecasts. Avoiding trouble (aka preserving capital) is first and foremost on my agenda. Some of my friends are far better at developing an aggregate stock market view. Let me cite a couple of them that I recommend highly. They have been kind enough to allow me to write occasional guest commentary for them.
Henry To of marketthoughts.com views markets as somewhat overbought, but remains bullish on a market that remains well-supported by private equity buyouts and insider buying as well as numerous other factors that he provides his faithful subscribers.
Another friend, David Korn of BeginInvesting.com remains bullish as well citing bullish insiders, as well as a host of evidence from sentiment indicators. I recommend both of these subscriptions as ways to improve your financial acumen from writers who are far better equipped than I to provide aggregate viewpoints.
Elsewhere in the blogosphere, I have found Interactive Investor Blog's recent post to be quite interesting.Q In a well-balanced post that cites bears such as Barry Ritholz in "The wall of worry now looks like the Great Wall of China " he also cites the very optimistic Ken Fisher, the Forbes columnist, money manager, and yes, Forbes 400 list.
Fisher's optimism is predicated on the spread between earnings yield and government bond yields in markets around the world. In what sounds like a physics argument relating to potential energy, he writes:
" At the beginning of the year the forward earnings yield was 2% higher than the 10 year government bond yield in the US and over 3% in the UK, France, Germany and Japan, yet over long periods the spread between the two has been close to zero. The theory is that when one asset pays more than another, money will flow to it and prices will rise."
Fisher continues,
“This is the beginning of a process that no-one has ever seen before,” says Ken, “In the past, when the earnings yield has been above the bond yield it’s either been in a single country… Or it happened for a very short time. This is the first time in modern history when the earnings yield has been above the bond yield all around the world.”
I am not sure that I am quite this optimistic. Nevertheless, I find it very odd that corporate balance sheets in general have failed to adequately respond to continued low rate opportunities. In a recent screen of S&P 500 non-financial names that I did, fully 30% of the companies had cash plus cash equivalents in excess of total debt. A year ago, the result was similar at about one-third. Looking at all North American companies covered by Reuters, there were 4,334 companies that passed this very far from robust screen. Financial leverage is only appropriate for companies that generate returns on investment above the cost of debt and can do so through cyclical ebbs and flows. Like the fellow who has discovered a hammer and thinks the world is covered in nails, financial engineering by blindly buying back stock willy-nilly can be a prescription for disaster.
Bottom-line, don't let economic aggregate numbers influence your investment thinking. The upside to any turbulence created by such releases is that fear or conversely, bravado creates opportunities.
In looking back at a week of earnings releases, (and remember it is only looking forward that makes you money) I am gratified by results at companies we hold such as 3M (MMM), Aetna (AET) , Harman (HAR), NCR (NCR), National Instruments (NATI), Microsoft (MSFT).
What a strange hodgepodge of businesses, you may think, but several characteristics define them...an attention to return on invested capital, a discipline in running the franchise, and a return of capital to the shareholder.
Some years ago, I trained and completed the New York marathon. Though distance running is portrayed as being very solitary, successful training was easiest when you ran with a partner. The same is true for successful investing. Don't let the short-term economic stats worry you, find yourself some decent businesses to partner with for the long run.
Disclaimer: Either I, my family, or clients own a current position in the securities mentioned in this post.
District Court Invalidates Merck's Formulation Patent on Pepcid Complete, Relying on KSR v. Teleflex
Aaron Barkoff
In an opinion released Tuesday, Judge William H. Pauley III of the U.S. District Court for the Southern District of New York ruled that Merck's patent on the formulation for Pepcid Complete is invalid as obvious, clearing the way for Perrigo Co. to sell its own generic version of the medication. The decision is one of the first pharmaceutical patent decisions to rely on and quote extensively from the Supreme Court's April 30 decision in KSR v. Teleflex.
The patent-in-suit was Merck's U.S. Patent No. 5,817,340. Claim 1 of the '340 patent recites a solid oral dosage form comprising impermeably coated famotidine granules and aluminum hydroxide or magnesium hydroxide. Pepcid Complete comprises coated famotidine granules (to inhibit stomach acid secretion) and magnesium hydroxide (to neutralize stomach acid already present). The coating on the famotidine granules is important; without it, magnesium hydroxide would cause famotidine to degrade upon contact. Additionally, the coating masks the bitter taste of famotidine.
According to Judge Pauley's opinion, two prior art references, "Davis" and "Wolfe," had previously taught the use of famotidine with magnesium hydroxide in a pharmaceutical composition. Moreover, according to the opinion, two prior art patents, the '072 and '114 patents, taught coating of famotidine granules in order to mask famotidine's bitter taste.
Judge Pauley began his analysis by referring to the "teaching, suggestion, or motivation" test as follows: "Until recently, the Federal Circuit had employed an additional test for determining the obviousness of combining prior art references." Then, after reviewing the scope and content of the prior art, he stated: "Under KSR, 'the combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results.' The '340 patent does no more than combine the predictable results of Davis and Wolfe with the predictable results of the '072 and '114 patents."
Judge Pauley went on to imply that even pre-KSR, he would have found the '340 patent invalid as obvious, since one of skill in the art "would have been motivated to use impermeable coating to improve the palatability of a chewable tablet comprised of coated famotidine and antacids." Nonetheless, the decision is still informative of how district courts are applying KSR to pharmaceutical formulation patents.
Ortho-McNeil, a unit of Johnson & Johnson, markets Pepcid Complete in partnership with Merck. Pepcid Complete is an over-the-counter product intended for the treatment of heartburn, with annual retail sales of about $90 million. Perrigo reportedly plans to begin selling its generic version sometime next year, and expects to have 180-day exclusivity when it does.
In an opinion released Tuesday, Judge William H. Pauley III of the U.S. District Court for the Southern District of New York ruled that Merck's patent on the formulation for Pepcid Complete is invalid as obvious, clearing the way for Perrigo Co. to sell its own generic version of the medication. The decision is one of the first pharmaceutical patent decisions to rely on and quote extensively from the Supreme Court's April 30 decision in KSR v. Teleflex.
The patent-in-suit was Merck's U.S. Patent No. 5,817,340. Claim 1 of the '340 patent recites a solid oral dosage form comprising impermeably coated famotidine granules and aluminum hydroxide or magnesium hydroxide. Pepcid Complete comprises coated famotidine granules (to inhibit stomach acid secretion) and magnesium hydroxide (to neutralize stomach acid already present). The coating on the famotidine granules is important; without it, magnesium hydroxide would cause famotidine to degrade upon contact. Additionally, the coating masks the bitter taste of famotidine.
According to Judge Pauley's opinion, two prior art references, "Davis" and "Wolfe," had previously taught the use of famotidine with magnesium hydroxide in a pharmaceutical composition. Moreover, according to the opinion, two prior art patents, the '072 and '114 patents, taught coating of famotidine granules in order to mask famotidine's bitter taste.
Judge Pauley began his analysis by referring to the "teaching, suggestion, or motivation" test as follows: "Until recently, the Federal Circuit had employed an additional test for determining the obviousness of combining prior art references." Then, after reviewing the scope and content of the prior art, he stated: "Under KSR, 'the combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results.' The '340 patent does no more than combine the predictable results of Davis and Wolfe with the predictable results of the '072 and '114 patents."
Judge Pauley went on to imply that even pre-KSR, he would have found the '340 patent invalid as obvious, since one of skill in the art "would have been motivated to use impermeable coating to improve the palatability of a chewable tablet comprised of coated famotidine and antacids." Nonetheless, the decision is still informative of how district courts are applying KSR to pharmaceutical formulation patents.
Ortho-McNeil, a unit of Johnson & Johnson, markets Pepcid Complete in partnership with Merck. Pepcid Complete is an over-the-counter product intended for the treatment of heartburn, with annual retail sales of about $90 million. Perrigo reportedly plans to begin selling its generic version sometime next year, and expects to have 180-day exclusivity when it does.
Worrisome Wednesday
Phil
Shanghai Surprise?
Hardly. We’ve been saying for weeks that there are forces aligned trying to take down the China markets and yesterday the Chinese government tripled the "Stamp Tax" on stocks in a move to "cool off" the market. While much is being made of this, it’s still only a .3% tax ($3 per $1,000) on each end of the transaction, so I think this may be much ado about nothing. Steven Sun, an equity strategist at HSBC in Hong Kong, said in a note that the government is "clearly worried about the A-share bubble" but isn’t aiming to substantially hurt stock prices. "Hence the grand ’strategy’ is to gradually deflate the bubble but not to prick the bubble," he said.
Notice they are worried about "the A-share bubble," not the B-shares they sell to us foreign devils. As I’ve been saying for weeks now, the growing disparity between the A and B shares is not sustainable. B-shares continued their decline, down another 9% yesterday to 302 after peaking out at 371 on the 21st, the same day I warned:
"Even Hong Kong tycoon Li Ka-shing, one of the richest people in Asia, expressed concerns this week over the stock gains, saying he is worried about high price-to-earnings ratios that have created a "bubble." What is troubling is that most of these investors are new to trading stocks, yet they are going after lower-quality shares without considering the downside risk. "In the case of a severe correction, this could lead to social instability," warned Credit Suisse economist Dong Tao, in a report to the investment firm’s clients this week."
We put our money where our mouth was last week, by pulling our long-held FXI leaps at what turned out to be a nice top, leaving just the covered play of the Jan $120s (basis $4.90) against the June $110s, which we sold for $3.70 and should get a nice payoff today. That being said, I may be flipping to a buy if Europe holds up as I think this sell-off is a bit of an overreaction to a tax that is less than a broker’s fee to small players but let’s see how our own markets hold up and, much more importantly, how they react to the 2pm FOMC minutes.
China’s trade surplus is projected to almost double this year, to $300Bn and there is no denying the underlying strength of the economy. The National Development and Reform Commission said neither a stronger yuan nor cuts in export-tax rebates would shift export orders away from China, as the world’s fourth-largest economy enjoys pricing power in the global market. "It’s hard for importing nations to find replacements for [Chinese] manufacturers," the commission said. "It will be impossible in the foreseeable future to shift orders away [from China] on a large scale." That means Chinese producers can transfer most of their increased costs to importers (that would be us!). The yuan rose 3.25% last year while Chinese export prices increased 4.2%, the commission said.
Unlike our last China meltdown, today’s drop was taken pretty much in stride by the Hang Seng (down .86%) and the Nikkei (down .48%) while India dropped a point after 3 very strong days. If Europe can hold it together we may have to zero in on some China-specific stocks for a rebound. CHL is often my favorite of the group and we’ll see how they handle the $45 line but I was already liking the $45s yesterday as they dipped to $1.25, at $1 I consider them a worthy risk (using our momentum trade rules).
Another not so surprising move came out of Europe as ONE country refused to accept a climate change treaty that was backed by the EU, China and India with the goal of putting a 3.6 degree cap on average global temperatures before taking emergency measures. Who could be against stopping global warming before temperatures rise 5%? Was it Russia (that Putin doesn’t care about the rest of the world)? No, they backed it. Was it Japan (they make all those cars and kill whales)? No, Japan was on board. Was it France or Italy (crazy socialists)? No, they signed. Surprise (or not) - it was US! James Connaughton, chairman of the White House Council on Environmental Quality, said the U.S. is not against setting goals but prefers to focus them on specific sectors, such as reducing dependence on gasoline and cleaner coal. "The U.S. has different sets of targets," he said. A different set of targets than 5% above the already rising average global temperature?!? We are so doomed!
European markets are down about a point as they prepare to crank up their air conditioners in another hot summer in early (8am) trading. We already lost the FTSE but now I want to see the DAX hold 7,700 and the CAC hold 6,000.
Our markets are down in early trading too but the China sell-off is a pretty thin premise for taking the markets down so I’ll be considering this a shake-out ahead of Fed evidence to the contrary this afternoon. We still have our stops and I don’t mind letting go of some weaker positions, especially with lots of good buys shaping up. MU was a good one yesterday but MRVL got away from us and hopefully we’ll get a shot at them on a dip this morning. If not, then we will be VERY glad we got our MU’s!
Day’s
Must
Comfort
Break
Next
Index
Current
Move
Hold
Zone
Out
Goal
Dow
13,521
14
12,468
12,600
13,000
13,500
Transports
2,912
31
2,825
2,900
3,000
3,250
S&P
1,518
2
1,430
1,460
1,500
1,550
NYSE
9,892
16
9,218
9,465
9,600
10,000
Nasdaq
2,572
14
2,454
2,500
2,600
2,750
SOX
483
2
477
490
500
560
Russell
837
7
803
820
850
900Hang Seng 20,293 -175 20,200 20,600 21,000 22,000Nikkei 17,588 -84 17,400 17,500 18,300 18,500BSE (India) 14,411 -96 13,200 14,000 14,725 15,000DAX 7,700 -80 6,900 7,000 7,400 8,000CAC 40 6,003 -52 5,650 5,800 6,000 7,000FTSE 6,549
-57 6,325 6,450 6,600 7,000
This could turn pretty ugly so let’s be careful. We are almost certain to give back the green we gained yesterday on the Dow and the Transports early on but none of our other indices are likely to cross today so I’ll be looking to see if we get more than halfway to danger without a bounce on today’s moves. We really, really don’t want to see 2 European indexes turn red but that will be resolved at noon, well ahead of the Fed minutes.
PHM announced they will cut 1,900 jobs in a restructuring and, for some reason, barely budged yesterday but Barry Ritholtz has the right title as he says the: "Housing Freefall Continues Unabated." I will, at this point, warn homeowners with small children to have them leave the room before you look at this chart, which may cause you to say something you don’t want them to hear:
Photo
Gosh that’s a steep decline, gee I hope they don’t raise rates… Too late sucker, they already raised rates as the 30-year note has passed 5% for the first time in ages and the 10-year note looks to test that level as well. Anything less than soft language from the Fed this afternoon is likely to break that critical barrier, effectively adding even more pressure to housing prices.
Zman was on a tear yesterday about the insane (and unsustainable) refiner crack spread and we’ll see today how TSO responds to their new split price (big sell-off PLEASE!). This morning he is on top of things ahead of tomorrow’s delayed inventory reports (those one-day holidays make it impossible for them to add it all up by Wednesday I guess, not that they’re accurate anyway…) where our man Flynn predicts a 2Mb draw in gasoline as ZMan theorizes: "..hoping to create a buying opportunity when the number comes out and it’s bigger and drives gasoline prices down (like last week). At that point you go on CNBC, who conveniently forgot how off your number was, and attempt to drive RBOB back up with tales of doom and gloom while videos of refineries burning are played just over your shoulder."
We’ll see how this little drama plays out tomorrow morning but for today we will watch the dollar, as no 82.50 will mean no major downturn (I know, it’s all so counterintuitive) and gold below $666 means don’t worry, be happy as copper is sure to follow ($315 is the break point).
Be careful out there today!
Shanghai Surprise?
Hardly. We’ve been saying for weeks that there are forces aligned trying to take down the China markets and yesterday the Chinese government tripled the "Stamp Tax" on stocks in a move to "cool off" the market. While much is being made of this, it’s still only a .3% tax ($3 per $1,000) on each end of the transaction, so I think this may be much ado about nothing. Steven Sun, an equity strategist at HSBC in Hong Kong, said in a note that the government is "clearly worried about the A-share bubble" but isn’t aiming to substantially hurt stock prices. "Hence the grand ’strategy’ is to gradually deflate the bubble but not to prick the bubble," he said.
Notice they are worried about "the A-share bubble," not the B-shares they sell to us foreign devils. As I’ve been saying for weeks now, the growing disparity between the A and B shares is not sustainable. B-shares continued their decline, down another 9% yesterday to 302 after peaking out at 371 on the 21st, the same day I warned:
"Even Hong Kong tycoon Li Ka-shing, one of the richest people in Asia, expressed concerns this week over the stock gains, saying he is worried about high price-to-earnings ratios that have created a "bubble." What is troubling is that most of these investors are new to trading stocks, yet they are going after lower-quality shares without considering the downside risk. "In the case of a severe correction, this could lead to social instability," warned Credit Suisse economist Dong Tao, in a report to the investment firm’s clients this week."
We put our money where our mouth was last week, by pulling our long-held FXI leaps at what turned out to be a nice top, leaving just the covered play of the Jan $120s (basis $4.90) against the June $110s, which we sold for $3.70 and should get a nice payoff today. That being said, I may be flipping to a buy if Europe holds up as I think this sell-off is a bit of an overreaction to a tax that is less than a broker’s fee to small players but let’s see how our own markets hold up and, much more importantly, how they react to the 2pm FOMC minutes.
China’s trade surplus is projected to almost double this year, to $300Bn and there is no denying the underlying strength of the economy. The National Development and Reform Commission said neither a stronger yuan nor cuts in export-tax rebates would shift export orders away from China, as the world’s fourth-largest economy enjoys pricing power in the global market. "It’s hard for importing nations to find replacements for [Chinese] manufacturers," the commission said. "It will be impossible in the foreseeable future to shift orders away [from China] on a large scale." That means Chinese producers can transfer most of their increased costs to importers (that would be us!). The yuan rose 3.25% last year while Chinese export prices increased 4.2%, the commission said.
Unlike our last China meltdown, today’s drop was taken pretty much in stride by the Hang Seng (down .86%) and the Nikkei (down .48%) while India dropped a point after 3 very strong days. If Europe can hold it together we may have to zero in on some China-specific stocks for a rebound. CHL is often my favorite of the group and we’ll see how they handle the $45 line but I was already liking the $45s yesterday as they dipped to $1.25, at $1 I consider them a worthy risk (using our momentum trade rules).
Another not so surprising move came out of Europe as ONE country refused to accept a climate change treaty that was backed by the EU, China and India with the goal of putting a 3.6 degree cap on average global temperatures before taking emergency measures. Who could be against stopping global warming before temperatures rise 5%? Was it Russia (that Putin doesn’t care about the rest of the world)? No, they backed it. Was it Japan (they make all those cars and kill whales)? No, Japan was on board. Was it France or Italy (crazy socialists)? No, they signed. Surprise (or not) - it was US! James Connaughton, chairman of the White House Council on Environmental Quality, said the U.S. is not against setting goals but prefers to focus them on specific sectors, such as reducing dependence on gasoline and cleaner coal. "The U.S. has different sets of targets," he said. A different set of targets than 5% above the already rising average global temperature?!? We are so doomed!
European markets are down about a point as they prepare to crank up their air conditioners in another hot summer in early (8am) trading. We already lost the FTSE but now I want to see the DAX hold 7,700 and the CAC hold 6,000.
Our markets are down in early trading too but the China sell-off is a pretty thin premise for taking the markets down so I’ll be considering this a shake-out ahead of Fed evidence to the contrary this afternoon. We still have our stops and I don’t mind letting go of some weaker positions, especially with lots of good buys shaping up. MU was a good one yesterday but MRVL got away from us and hopefully we’ll get a shot at them on a dip this morning. If not, then we will be VERY glad we got our MU’s!
Day’s
Must
Comfort
Break
Next
Index
Current
Move
Hold
Zone
Out
Goal
Dow
13,521
14
12,468
12,600
13,000
13,500
Transports
2,912
31
2,825
2,900
3,000
3,250
S&P
1,518
2
1,430
1,460
1,500
1,550
NYSE
9,892
16
9,218
9,465
9,600
10,000
Nasdaq
2,572
14
2,454
2,500
2,600
2,750
SOX
483
2
477
490
500
560
Russell
837
7
803
820
850
900Hang Seng 20,293 -175 20,200 20,600 21,000 22,000Nikkei 17,588 -84 17,400 17,500 18,300 18,500BSE (India) 14,411 -96 13,200 14,000 14,725 15,000DAX 7,700 -80 6,900 7,000 7,400 8,000CAC 40 6,003 -52 5,650 5,800 6,000 7,000FTSE 6,549
-57 6,325 6,450 6,600 7,000
This could turn pretty ugly so let’s be careful. We are almost certain to give back the green we gained yesterday on the Dow and the Transports early on but none of our other indices are likely to cross today so I’ll be looking to see if we get more than halfway to danger without a bounce on today’s moves. We really, really don’t want to see 2 European indexes turn red but that will be resolved at noon, well ahead of the Fed minutes.
PHM announced they will cut 1,900 jobs in a restructuring and, for some reason, barely budged yesterday but Barry Ritholtz has the right title as he says the: "Housing Freefall Continues Unabated." I will, at this point, warn homeowners with small children to have them leave the room before you look at this chart, which may cause you to say something you don’t want them to hear:
Photo
Gosh that’s a steep decline, gee I hope they don’t raise rates… Too late sucker, they already raised rates as the 30-year note has passed 5% for the first time in ages and the 10-year note looks to test that level as well. Anything less than soft language from the Fed this afternoon is likely to break that critical barrier, effectively adding even more pressure to housing prices.
Zman was on a tear yesterday about the insane (and unsustainable) refiner crack spread and we’ll see today how TSO responds to their new split price (big sell-off PLEASE!). This morning he is on top of things ahead of tomorrow’s delayed inventory reports (those one-day holidays make it impossible for them to add it all up by Wednesday I guess, not that they’re accurate anyway…) where our man Flynn predicts a 2Mb draw in gasoline as ZMan theorizes: "..hoping to create a buying opportunity when the number comes out and it’s bigger and drives gasoline prices down (like last week). At that point you go on CNBC, who conveniently forgot how off your number was, and attempt to drive RBOB back up with tales of doom and gloom while videos of refineries burning are played just over your shoulder."
We’ll see how this little drama plays out tomorrow morning but for today we will watch the dollar, as no 82.50 will mean no major downturn (I know, it’s all so counterintuitive) and gold below $666 means don’t worry, be happy as copper is sure to follow ($315 is the break point).
Be careful out there today!
PSW Contest - Closing Out the Very Merry Month of May
Phil
We had a fantastic May and made a lot of good picks and had tremendous returns on our members site.
We closed 263 positions during the month with a 186% average gain and a gain on capital of 299% - that’s what we call a great month!
Our members already know what a great job we do and support the site. Now I would like to ask those of you who read us for free to do me a favor: This site is supported by advertising and advertising is supported by people like you coming to www.philstockworld.com and reading our site or signing up for the FREE EMail Subscription through FeedBurner, at the top right-hand corner of the free site. Those of you who do subscribe already know that we never give out your names or Emails to anyone and we don’t even ask you to join - I’m not asking you to join now - what I am asking for is for you to help us move this site up to the next level.
We will be closing to new subscribers shortly for the summer as we revamp the site, add some features and launch our first paid newsletter service. Those of you who are FeedBurner subscribers will get a mailing when we reopen the site, as memberships will be limited, and will get an opportunity to receive the newsletter at a discount. Right now though, I’m asking for your help in bringing some more people over to the free site so, if you enjoy reading my daily commentary and find the information useful, please do me the small favor of sending this invitation to subscribe along to 5 friends or family members (hopefully not mutually exclusive!) who you think would find this useful as well.
We had a fantastic May and made a lot of good picks and had tremendous returns on our members site.
We closed 263 positions during the month with a 186% average gain and a gain on capital of 299% - that’s what we call a great month!
Our members already know what a great job we do and support the site. Now I would like to ask those of you who read us for free to do me a favor: This site is supported by advertising and advertising is supported by people like you coming to www.philstockworld.com and reading our site or signing up for the FREE EMail Subscription through FeedBurner, at the top right-hand corner of the free site. Those of you who do subscribe already know that we never give out your names or Emails to anyone and we don’t even ask you to join - I’m not asking you to join now - what I am asking for is for you to help us move this site up to the next level.
We will be closing to new subscribers shortly for the summer as we revamp the site, add some features and launch our first paid newsletter service. Those of you who are FeedBurner subscribers will get a mailing when we reopen the site, as memberships will be limited, and will get an opportunity to receive the newsletter at a discount. Right now though, I’m asking for your help in bringing some more people over to the free site so, if you enjoy reading my daily commentary and find the information useful, please do me the small favor of sending this invitation to subscribe along to 5 friends or family members (hopefully not mutually exclusive!) who you think would find this useful as well.
Contingecy Plans
Phil
Most traders I encounter are what I call ‘binary’ traders. They have a win-loss attitude. Either a trade goes as expected and they make money or a trade moves against expectations and they suffer losses. This approach to trading requires good timing on the part of the trader to stay in the game and indeed good discipline. Investor’s Business Daily, for example, imparts an approach of letting winners ride and cutting losers short. While this approach has its benefits, I tend not to be a huge fan of it because, by definition, it implies you must accept losses and (if your timing is wrong sufficiently often) those losers, though small in percentage terms, on an individual basis can add up to some hefty losses!
I prefer trading with what I call contingency plans. Contingency plans take your trading to the next dimension. It’s like only being aware of 3 dimensions and the finding out there are 10 - like in this video. Suddenly you realize a world of possibilities exist that had not been countenanced before! Contingency plans are strict rules that I follow in the event that a trade moves opposite to that which I expected. You will find Phil has contingency plans in place too for the same reason I do - neither of us are arrogant enough to believe that the market will do exactly what we want it to do 100% of the time and so we have to account for the times when we are wrong! For Phil, this might include following basic rules for position sizing. For example on the $25,000 account he discussed in this week’s wrap-up that means no more than 10% in a position, 5% for contracts under $1. You will see his rules for doubling down in his Strategy section too. We are both aligned in remaining flexible in the market and accounting for surprises and new trends should they occur unexpectedly.
An example of where contingency plans offer you the opportunity to mitigate loss or indeed maintain profitability is an iron condor. In this week’s wrap-up Phil commented on the BIDU iron condor from a few weeks back “I vetoed Options Sage’s iron condor example that weekend but the lesson on condors is great to reread at this point, following through on the trade (which still might work out but I’m sure glad I skipped it!" Of course Phil vetoed the iron condor that had short options at strikes 120 and 140 which in fact, the article itself vetoes! For greater symmetry, in fact, short strikes at 120 and 145 were considered a preferable trade based on a probability argument but I stated that we still had reasons to be concerned about that trade.
Does that make it a bad trade?
Answer: Yes if you have no contingency plan & No if you do have a contingency plan!
Recall an iron condor makes money if the stock remains between the short option strikes - in this example between 120 and 145. With the stock currently at $140 a binary trader would be getting concerned at this point. The stock only needs to run another $5 before the short call starts to move in-the-money and potentially move the trade into real trouble. BUT, if you really believe the stock is going to run above the short call strike price, why would you ever leave the iron condor in place to run into trouble? This is the deer in headlights approach to trading that involves taking no action even though danger is apparent and potentially imminent!
In speaking to Phil this weak he explained to me that his primary concern was that many people reading that trade as a recommendation would be those proverbial deer as we have a hard enough time getting the members used to the idea that their positions are not fixed in stone and can be adjusted on the fly. Just because most of us have been conditioned to take losses when positions go against us doesn’t mean we have to!
In fact, options are so dynamic that all we need to do in the above example is consider the addition of a long call option to the existing position. That turns the bear call part of the iron condor into a ratio call backspread. This simply means we have more long options than short options in play. In fact, when I enter iron condors, I like nothing more than for the stock to blow through the short option strikes because I know I can often make more money adding long options to the original position than if I were to simply profit from the short options expiring worthless.
The question might then arise “Well what if you add the long call and then the stock reverses back down on some surprisingly bearish news?” Again at that point there is no reason again to sit on a losing trade. In fact, at that point a short call could simply be added at a lower strike to the new long call and another bear call formed. You can simply iterate through this process until at some point the bear calls expire worthless or the bullish stock movement has made you oodles of money on the long calls and turned the entire trade profitable. Either way, the knowledge and enforcement of a contingency plan means that you can significantly reduce your stress levels in holding a position because you will know exactly what to do to mitigate risk. This is a key component to successful trading and diminishes the possibility of greed and fear dominating your trading decisions.
Key Learning: Manage fear and greed by defining your target profits and clearly define what action you will take if a position does not move as you expect.
During the week, we will feature discussions about trades we are "saving" on the member site as we position ourselves for the new options period, both Phil and I feel we need to be prepared for a market downturn (just in case!) and we want to make sure everyone is thinking in terms of contingencies for their portfolios.
Have a fantastic week!
Most traders I encounter are what I call ‘binary’ traders. They have a win-loss attitude. Either a trade goes as expected and they make money or a trade moves against expectations and they suffer losses. This approach to trading requires good timing on the part of the trader to stay in the game and indeed good discipline. Investor’s Business Daily, for example, imparts an approach of letting winners ride and cutting losers short. While this approach has its benefits, I tend not to be a huge fan of it because, by definition, it implies you must accept losses and (if your timing is wrong sufficiently often) those losers, though small in percentage terms, on an individual basis can add up to some hefty losses!
I prefer trading with what I call contingency plans. Contingency plans take your trading to the next dimension. It’s like only being aware of 3 dimensions and the finding out there are 10 - like in this video. Suddenly you realize a world of possibilities exist that had not been countenanced before! Contingency plans are strict rules that I follow in the event that a trade moves opposite to that which I expected. You will find Phil has contingency plans in place too for the same reason I do - neither of us are arrogant enough to believe that the market will do exactly what we want it to do 100% of the time and so we have to account for the times when we are wrong! For Phil, this might include following basic rules for position sizing. For example on the $25,000 account he discussed in this week’s wrap-up that means no more than 10% in a position, 5% for contracts under $1. You will see his rules for doubling down in his Strategy section too. We are both aligned in remaining flexible in the market and accounting for surprises and new trends should they occur unexpectedly.
An example of where contingency plans offer you the opportunity to mitigate loss or indeed maintain profitability is an iron condor. In this week’s wrap-up Phil commented on the BIDU iron condor from a few weeks back “I vetoed Options Sage’s iron condor example that weekend but the lesson on condors is great to reread at this point, following through on the trade (which still might work out but I’m sure glad I skipped it!" Of course Phil vetoed the iron condor that had short options at strikes 120 and 140 which in fact, the article itself vetoes! For greater symmetry, in fact, short strikes at 120 and 145 were considered a preferable trade based on a probability argument but I stated that we still had reasons to be concerned about that trade.
Does that make it a bad trade?
Answer: Yes if you have no contingency plan & No if you do have a contingency plan!
Recall an iron condor makes money if the stock remains between the short option strikes - in this example between 120 and 145. With the stock currently at $140 a binary trader would be getting concerned at this point. The stock only needs to run another $5 before the short call starts to move in-the-money and potentially move the trade into real trouble. BUT, if you really believe the stock is going to run above the short call strike price, why would you ever leave the iron condor in place to run into trouble? This is the deer in headlights approach to trading that involves taking no action even though danger is apparent and potentially imminent!
In speaking to Phil this weak he explained to me that his primary concern was that many people reading that trade as a recommendation would be those proverbial deer as we have a hard enough time getting the members used to the idea that their positions are not fixed in stone and can be adjusted on the fly. Just because most of us have been conditioned to take losses when positions go against us doesn’t mean we have to!
In fact, options are so dynamic that all we need to do in the above example is consider the addition of a long call option to the existing position. That turns the bear call part of the iron condor into a ratio call backspread. This simply means we have more long options than short options in play. In fact, when I enter iron condors, I like nothing more than for the stock to blow through the short option strikes because I know I can often make more money adding long options to the original position than if I were to simply profit from the short options expiring worthless.
The question might then arise “Well what if you add the long call and then the stock reverses back down on some surprisingly bearish news?” Again at that point there is no reason again to sit on a losing trade. In fact, at that point a short call could simply be added at a lower strike to the new long call and another bear call formed. You can simply iterate through this process until at some point the bear calls expire worthless or the bullish stock movement has made you oodles of money on the long calls and turned the entire trade profitable. Either way, the knowledge and enforcement of a contingency plan means that you can significantly reduce your stress levels in holding a position because you will know exactly what to do to mitigate risk. This is a key component to successful trading and diminishes the possibility of greed and fear dominating your trading decisions.
Key Learning: Manage fear and greed by defining your target profits and clearly define what action you will take if a position does not move as you expect.
During the week, we will feature discussions about trades we are "saving" on the member site as we position ourselves for the new options period, both Phil and I feel we need to be prepared for a market downturn (just in case!) and we want to make sure everyone is thinking in terms of contingencies for their portfolios.
Have a fantastic week!
Monday Morning Markets
Phil
Something’s wrong today. Something is missing from the markets this morning and it’s about $50Bn worth of merger money - where’s our mergers??? Is it just one of those random slow days or is this the beginning of the end?
With $496B worth of deals in May we expect a lot EVERY Monday and we do have AV ($7.5Bn), SLR ($3.6Bn) and a couple of small ($2Bn) European deals (AXA & SGRO) but that’s a far cry from the $130Bn WEEKLY pace we’ve been on.
All is quiet on the far eastern front as Shanghai drops another 8% on both the A&B side, the worst drop for the A shares since the February 27th catastrophe that triggered a 500-point drop in the Dow. This is the second biggest loss of the DECADE (Feb was #1) and $350BN worth or shareholder value was lost TODAY. Unlike February, other Asian markets are weathering the storm well on the heels of Friday’s strong US market, the Dollar moving up against the Yen and very strong (up 13.6%) Japanese business spending.
All was not quite on the political front as the Dems had a debate yesterday that followed the great Republican philosophy of Abraham Lincoln who said "A house divided against itself cannot stand." Senator Obama laid down the gauntlet and said he was campaigning for "a different kind of politics that brings Americans together" as he seized on the question put to the candidates when the Democrats were asked for a show of hands for making English the nation’s official language (a Republican cause).
With some agitation in his voice, Obama interjected to moderator Wolf Blitzer of CNN, "This is the kind of question that is designed precisely to divide us….The issue is not whether or not future generations of immigrants are going to learn English. The question is: How can we come up with both a legal, sensible immigration policy? And when we get distracted by those kinds of questions, I think we do a disservice to the American people."
Led by Sen. Clinton, the candidates staged a mini-revolt against Mr. Blitzer over the subject of using military troops to quell the bloodshed in Sudan. Mr. Blitzer, picking up on Sen. Biden’s advocacy of sending troops, asked for a show of hands on using force there. An hubub broke out among the participants as they sought to qualify their responses. After a few moments, Sen. Clinton snapped, "We’re not going to engage in these hypotheticals.'’ Several of her rivals applauded.
NothingDemocrats presenting a united front this early in the campaign is very bad news for the Republicans and even worse news for the administration, who hoped the election would distract the majority party while they conduct some house cleaning. There are literally too many scandals to mention but Slate has come up with a very useful interactive guide ordered by scandal category: Sex, Conflicts of Interest, Politicking, Gonzales (rates his own section), Greed, Snooping, Big Business, Abuses of Executive Power, Press Manipulation, Secrecy, Karl Rove (also scores his own section), Favoritism, The Hammer (it’s like an all-star team!), Military, Prisons and Lobbyists.
Even if you are a Republican and, like 23% of your fellow Americans, approve of the job the President is doing, you have to appreciate the excellent graphics and this great use of a Web 2.0 environment to summarize such a vast quantity of scandalous behavior.
Europe is not taking the Shanghai drop as lightly as Asia and markets there are off about 1/2 a point with no news to speak of. At home this week we have a pretty light data schedule ahead of next week’s Retail Sales, CPI, PPI, Beige Book, Industrial Production and Cap Utilization reports - all during options expiration week coming into the end of the second quarter - Wow!:
* Factory Orders at 10 am today o we need an upside surprise, over 1.5% * ISM at 10 am tomorrow o this is a random number that should be ignored but isn’t * Productivity and Crude Inventory reports on Wednesday o wages are way up so we’d better be producing! * Jobless Claims, Wholesale Inventories and Consumer Credit on Thursday o inventories should give us a boost but watch out for Consumer Credit! * Trade Balance on Friday o no points for guessing which way this is going…
We’re supposed to (according to me anyway) be consolidating into next week’s expirations so we’re not going to worry about a little pullback. We are very well covered to the downside but we won’t be treating this pullback as a buying opportunity until we start seeing some real breakouts:
Day’s
Must
Comfort
Break
Next
Index
Current
Move
Hold
Zone
Out
Goal
Dow
13,668
40
12,468
12,600
13,000
13,500
Transports
2,972
13
2,825
2,900
3,000
3,250
S&P
1,536
5
1,430
1,460
1,500
1,550
NYSE
10,042
63
9,218
9,465
9,600
10,000
Nasdaq
2,613
9
2,454
2,500
2,600
2,750
SOX
489
1
477
490
500
560
Russell
853
6
803
820
850
900Hang Seng 20,729 126 20,200 20,600 21,000 22,000Nikkei 17,973 14 17,400 17,500 18,300 18,500BSE (India) 14,495 -75 13,200 14,000 14,725 15,000DAX 7,964 -23 6,900 7,000 7,400 8,000CAC 40 6,129 -39 5,650 5,800 6,000 7,000FTSE 6,654
-22 6,325 6,450 6,600 7,000
Not the kind of chart that inspires panic selling is it? If the NYSE holds 10,000 I can’t see being the least concerned and if the SOX can fight the tape today and close positive, I may start loading up in that sector as they clearly have a lot of ground to make up but today is a day to go with the flow and not try to outthink the market.
The roaches will try to keep oil up at $65 despite declining fundamentals. I couldn’t tune into a financial channel this weekend without being forced to endure a lecture from T. Boone on why $70 oil is right around the corner. ZMan pointed out over the weekend that US righ count is at a new record (only kept since 1987) and MEND (Nigerian Rebels-R-Us) agreed to a one-month ceasefire, so it might be tough for Mr. T to have his way this week, especially with the dollar on the MEND.
wrap-060107.jpg
Note on the chart that Crude Oil hasn’t budged since December 29th yet the refiners are charging you 20% more for the gasoline they make out of it. That’s $277M PER DAY more than they were charging in December for the same gasoline, refined in the same refineries that they’ve been neglecting for 20 years in order to keep them in such disrepair that it’s news when they DON’T have an outage.
WAKE UP CONGRESS!!!
I’ll tell you one thing, $277M a day in price gouging sure buys oil companies a lot of airtime for their PR people and lobbyists so they can tell you how there’s no price gouging going on!
The only line in the sand is the forced perkiness of the 50 dma at $64.33 but let’s keep an eye on the declining 200 dma at $61.75 to the downside. We’ve lightened up on our oil puts and I’ll be off this sector through July if we don’t get a nice down move soon. At this point nothing would thrill me more than seeing TSO go to $70 ahead of earnings where we can see how well they justify a near triple off their September lows (not to mention the 5-fold increase from the ‘05 open, in a year the company earned just 37% less than they did last year).
Let’s see if Gold can hold $670 this week as the dollar makes yet another attempt to conquer 82.50 but our Friday Trade numbers could stick a nail in that coffin. Long term rates are firmly over 5% and shorter rates are catching up so we’ll watch the housing sector today for signs of danger.
One play we are going to be watching this morning will be RHT, which was suggested by Mike this morning. I like them a lot and NOVL already gave a good report on the Linux segment. LNUX shot up last week too. Earnings are on the 27th and expectations are pretty low. Earnings are after expiration so you can take the Sept $25s for $2.25 and sell the June $25s for .60 and then sell the July $25s, now $1.50, which should hold their value with earnings coming up for a pretty free look at earnings.
Of course, we need to see how the markets hold up in general but I’d feel good about picking this one up on a dip, especially if we can get a good retest of $24.
Let’s be careful out there!
Something’s wrong today. Something is missing from the markets this morning and it’s about $50Bn worth of merger money - where’s our mergers??? Is it just one of those random slow days or is this the beginning of the end?
With $496B worth of deals in May we expect a lot EVERY Monday and we do have AV ($7.5Bn), SLR ($3.6Bn) and a couple of small ($2Bn) European deals (AXA & SGRO) but that’s a far cry from the $130Bn WEEKLY pace we’ve been on.
All is quiet on the far eastern front as Shanghai drops another 8% on both the A&B side, the worst drop for the A shares since the February 27th catastrophe that triggered a 500-point drop in the Dow. This is the second biggest loss of the DECADE (Feb was #1) and $350BN worth or shareholder value was lost TODAY. Unlike February, other Asian markets are weathering the storm well on the heels of Friday’s strong US market, the Dollar moving up against the Yen and very strong (up 13.6%) Japanese business spending.
All was not quite on the political front as the Dems had a debate yesterday that followed the great Republican philosophy of Abraham Lincoln who said "A house divided against itself cannot stand." Senator Obama laid down the gauntlet and said he was campaigning for "a different kind of politics that brings Americans together" as he seized on the question put to the candidates when the Democrats were asked for a show of hands for making English the nation’s official language (a Republican cause).
With some agitation in his voice, Obama interjected to moderator Wolf Blitzer of CNN, "This is the kind of question that is designed precisely to divide us….The issue is not whether or not future generations of immigrants are going to learn English. The question is: How can we come up with both a legal, sensible immigration policy? And when we get distracted by those kinds of questions, I think we do a disservice to the American people."
Led by Sen. Clinton, the candidates staged a mini-revolt against Mr. Blitzer over the subject of using military troops to quell the bloodshed in Sudan. Mr. Blitzer, picking up on Sen. Biden’s advocacy of sending troops, asked for a show of hands on using force there. An hubub broke out among the participants as they sought to qualify their responses. After a few moments, Sen. Clinton snapped, "We’re not going to engage in these hypotheticals.'’ Several of her rivals applauded.
NothingDemocrats presenting a united front this early in the campaign is very bad news for the Republicans and even worse news for the administration, who hoped the election would distract the majority party while they conduct some house cleaning. There are literally too many scandals to mention but Slate has come up with a very useful interactive guide ordered by scandal category: Sex, Conflicts of Interest, Politicking, Gonzales (rates his own section), Greed, Snooping, Big Business, Abuses of Executive Power, Press Manipulation, Secrecy, Karl Rove (also scores his own section), Favoritism, The Hammer (it’s like an all-star team!), Military, Prisons and Lobbyists.
Even if you are a Republican and, like 23% of your fellow Americans, approve of the job the President is doing, you have to appreciate the excellent graphics and this great use of a Web 2.0 environment to summarize such a vast quantity of scandalous behavior.
Europe is not taking the Shanghai drop as lightly as Asia and markets there are off about 1/2 a point with no news to speak of. At home this week we have a pretty light data schedule ahead of next week’s Retail Sales, CPI, PPI, Beige Book, Industrial Production and Cap Utilization reports - all during options expiration week coming into the end of the second quarter - Wow!:
* Factory Orders at 10 am today o we need an upside surprise, over 1.5% * ISM at 10 am tomorrow o this is a random number that should be ignored but isn’t * Productivity and Crude Inventory reports on Wednesday o wages are way up so we’d better be producing! * Jobless Claims, Wholesale Inventories and Consumer Credit on Thursday o inventories should give us a boost but watch out for Consumer Credit! * Trade Balance on Friday o no points for guessing which way this is going…
We’re supposed to (according to me anyway) be consolidating into next week’s expirations so we’re not going to worry about a little pullback. We are very well covered to the downside but we won’t be treating this pullback as a buying opportunity until we start seeing some real breakouts:
Day’s
Must
Comfort
Break
Next
Index
Current
Move
Hold
Zone
Out
Goal
Dow
13,668
40
12,468
12,600
13,000
13,500
Transports
2,972
13
2,825
2,900
3,000
3,250
S&P
1,536
5
1,430
1,460
1,500
1,550
NYSE
10,042
63
9,218
9,465
9,600
10,000
Nasdaq
2,613
9
2,454
2,500
2,600
2,750
SOX
489
1
477
490
500
560
Russell
853
6
803
820
850
900Hang Seng 20,729 126 20,200 20,600 21,000 22,000Nikkei 17,973 14 17,400 17,500 18,300 18,500BSE (India) 14,495 -75 13,200 14,000 14,725 15,000DAX 7,964 -23 6,900 7,000 7,400 8,000CAC 40 6,129 -39 5,650 5,800 6,000 7,000FTSE 6,654
-22 6,325 6,450 6,600 7,000
Not the kind of chart that inspires panic selling is it? If the NYSE holds 10,000 I can’t see being the least concerned and if the SOX can fight the tape today and close positive, I may start loading up in that sector as they clearly have a lot of ground to make up but today is a day to go with the flow and not try to outthink the market.
The roaches will try to keep oil up at $65 despite declining fundamentals. I couldn’t tune into a financial channel this weekend without being forced to endure a lecture from T. Boone on why $70 oil is right around the corner. ZMan pointed out over the weekend that US righ count is at a new record (only kept since 1987) and MEND (Nigerian Rebels-R-Us) agreed to a one-month ceasefire, so it might be tough for Mr. T to have his way this week, especially with the dollar on the MEND.
wrap-060107.jpg
Note on the chart that Crude Oil hasn’t budged since December 29th yet the refiners are charging you 20% more for the gasoline they make out of it. That’s $277M PER DAY more than they were charging in December for the same gasoline, refined in the same refineries that they’ve been neglecting for 20 years in order to keep them in such disrepair that it’s news when they DON’T have an outage.
WAKE UP CONGRESS!!!
I’ll tell you one thing, $277M a day in price gouging sure buys oil companies a lot of airtime for their PR people and lobbyists so they can tell you how there’s no price gouging going on!
The only line in the sand is the forced perkiness of the 50 dma at $64.33 but let’s keep an eye on the declining 200 dma at $61.75 to the downside. We’ve lightened up on our oil puts and I’ll be off this sector through July if we don’t get a nice down move soon. At this point nothing would thrill me more than seeing TSO go to $70 ahead of earnings where we can see how well they justify a near triple off their September lows (not to mention the 5-fold increase from the ‘05 open, in a year the company earned just 37% less than they did last year).
Let’s see if Gold can hold $670 this week as the dollar makes yet another attempt to conquer 82.50 but our Friday Trade numbers could stick a nail in that coffin. Long term rates are firmly over 5% and shorter rates are catching up so we’ll watch the housing sector today for signs of danger.
One play we are going to be watching this morning will be RHT, which was suggested by Mike this morning. I like them a lot and NOVL already gave a good report on the Linux segment. LNUX shot up last week too. Earnings are on the 27th and expectations are pretty low. Earnings are after expiration so you can take the Sept $25s for $2.25 and sell the June $25s for .60 and then sell the July $25s, now $1.50, which should hold their value with earnings coming up for a pretty free look at earnings.
Of course, we need to see how the markets hold up in general but I’d feel good about picking this one up on a dip, especially if we can get a good retest of $24.
Let’s be careful out there!
Will You Change Your Oil As Often As Recommended? My Weekend Roundup
Silicon Valley Blogger on Money Articles/Blog Carnivals
Awesome Articles From Last Week
Gen X Finance gives us this advice: Don’t Be Fooled Into Thinking an Oil Change Every 3,000 Miles Is Necessary. Looks like this post was polarizing enough to spark a lot of interest, so check out the comments as well! He states that the oil change costs do add up as evidenced here:
So let’s take a look at an example to see what this can really cost. Let’s say you own a vehicle and drive it 150,000 miles for the time you own it. And let’s also assume you go to a place that charges $25 per oil change. Here are the total costs over the 150,000 mile period:
Every 3,000 miles: $1,250 Every 5,000 miles: $750 Every 8,000 miles: $468.75
We typically get our oil changed between 3,000 and 5,000 miles and we’ll probably keep doing it that way to keep with the recommended maintenance schedule. It’s worth it to us to spend that money to ensure a well-running vehicle.
Money, Matter and More Musings went on vacation and came back with Interesting Money Photos From New York City! Makes me want to go out on a break myself, but our schedule’s tight with little ones to handle.
Lazy Man and Money wonders this: Retire on 80% of Your Income? I’m hoping we’d be able to someday. Maybe sooner than we think. But at this stage in our lives, it isn’t realistically possible.
The Sun’s Financial Diary has his First Trading Experience with Zecco, and offers some constructive criticism for the company. Zecco, are you listening?
Binary Dollar reminds us to Pay More Than The Minimum on our credit cards and loan statements. Paying only the minimum will keep you in debt for way too long, as it did a friend of mine who eventually ended up in debt counseling to help structure her loans. If you can, paying more will help chip away at the burden at a more favorable clip.
More on the subject of debt with Money Smart Life, who writes about How To Talk Your Way Into Debt, where he tells the story of an unfortunate guy he met at the UPS store.
Five Cent Nickel shares more insights on net worth with Cash Out Roth IRA to Pay Off House? Even if it’s doable, should you do it? But if you didn’t have an IRA to source, you’d need to look for assistance elsewhere. Why not look into this idea from Free Money Finance: Need Help with a Mortgage Loan? Try the Bank of Mom and Dad.
Consumerism Commentary ruminates the question Should You Pay Your Mortgage With a Credit Card? Intriguing, to say the least — if my credit card issuer makes it easy for me to do this, then it’s something I’d try, but I’d schedule auto payments for my credit card, in full (!), just to make sure I don’t incur interest and penalties on a forgotten or late bill!
Blueprint For Financial Prosperity asks How Big Is Your 401K Balance? If you want to know how a lot of people responded, then check it out! He lists everyone who’s confessed.
Mighty Bargain Hunter gives us some Commentary On What Minimum Wage Would Buy. His discussion was triggered by Money Musing’s post, 1973 vs 2007: What Minimum Wage Would Buy. It appears that minimum wage today will buy you more than in 1973, affording more people better access to more stuff. Should we stop yelping about higher prices for movie tickets?
The Simple Dollar shares this cool story: The Simple Dollar Convinces Someone To Quit Their Job. Reading this reminds me of why it’s fulfilling to be a finance blogger. I’m aiming to help someone else out via the stories I tell, or at the very least provide some cheer. Still, it’s always better if someone comes away changing their lives for the good based on something they’ve learned.
Awesome Articles From Last Week
Gen X Finance gives us this advice: Don’t Be Fooled Into Thinking an Oil Change Every 3,000 Miles Is Necessary. Looks like this post was polarizing enough to spark a lot of interest, so check out the comments as well! He states that the oil change costs do add up as evidenced here:
So let’s take a look at an example to see what this can really cost. Let’s say you own a vehicle and drive it 150,000 miles for the time you own it. And let’s also assume you go to a place that charges $25 per oil change. Here are the total costs over the 150,000 mile period:
Every 3,000 miles: $1,250 Every 5,000 miles: $750 Every 8,000 miles: $468.75
We typically get our oil changed between 3,000 and 5,000 miles and we’ll probably keep doing it that way to keep with the recommended maintenance schedule. It’s worth it to us to spend that money to ensure a well-running vehicle.
Money, Matter and More Musings went on vacation and came back with Interesting Money Photos From New York City! Makes me want to go out on a break myself, but our schedule’s tight with little ones to handle.
Lazy Man and Money wonders this: Retire on 80% of Your Income? I’m hoping we’d be able to someday. Maybe sooner than we think. But at this stage in our lives, it isn’t realistically possible.
The Sun’s Financial Diary has his First Trading Experience with Zecco, and offers some constructive criticism for the company. Zecco, are you listening?
Binary Dollar reminds us to Pay More Than The Minimum on our credit cards and loan statements. Paying only the minimum will keep you in debt for way too long, as it did a friend of mine who eventually ended up in debt counseling to help structure her loans. If you can, paying more will help chip away at the burden at a more favorable clip.
More on the subject of debt with Money Smart Life, who writes about How To Talk Your Way Into Debt, where he tells the story of an unfortunate guy he met at the UPS store.
Five Cent Nickel shares more insights on net worth with Cash Out Roth IRA to Pay Off House? Even if it’s doable, should you do it? But if you didn’t have an IRA to source, you’d need to look for assistance elsewhere. Why not look into this idea from Free Money Finance: Need Help with a Mortgage Loan? Try the Bank of Mom and Dad.
Consumerism Commentary ruminates the question Should You Pay Your Mortgage With a Credit Card? Intriguing, to say the least — if my credit card issuer makes it easy for me to do this, then it’s something I’d try, but I’d schedule auto payments for my credit card, in full (!), just to make sure I don’t incur interest and penalties on a forgotten or late bill!
Blueprint For Financial Prosperity asks How Big Is Your 401K Balance? If you want to know how a lot of people responded, then check it out! He lists everyone who’s confessed.
Mighty Bargain Hunter gives us some Commentary On What Minimum Wage Would Buy. His discussion was triggered by Money Musing’s post, 1973 vs 2007: What Minimum Wage Would Buy. It appears that minimum wage today will buy you more than in 1973, affording more people better access to more stuff. Should we stop yelping about higher prices for movie tickets?
The Simple Dollar shares this cool story: The Simple Dollar Convinces Someone To Quit Their Job. Reading this reminds me of why it’s fulfilling to be a finance blogger. I’m aiming to help someone else out via the stories I tell, or at the very least provide some cheer. Still, it’s always better if someone comes away changing their lives for the good based on something they’ve learned.
Receive A Windfall and Treat It Right
Silicon Valley Blogger on Money Management
There’s a new money question up over at Lazy Man and Money. It’s a three part series (Part 1, Part 2, Part 3) that asks what some of us bloggers would do if $50,000 just happens to fall on our laps.
Here’s what I said:
For our particular case, I have two options that come to mind with regards to what I can do with an extra $50,000 or even $100,000. The first is to follow in the footsteps of Ben @ MoneySmartLife with a similar strategy: use the money to help continue financing the startup our family is trying to build at the moment. It would help us delay having to acquire any additional external investments that would dilute our ownership: self-financing would potentially allow us to reach a critical mass that could keep the business running on its own with positive cash flow. Of course, that’s a dream at this point, but that additional $50K would get us there!
Secondly, I could also consider using the windfall to fund my second child’s 529 account. Since my child is still very young, we would have almost 18 years before we would draw on this money. By virtue of a lump sum investment into a more aggressive area of the stock market, such as US small cap stocks or a combination of US small caps/emerging market exposure/foreign REITs, we may possibly fund his entire education on this one lump sum investment if the markets continue to be favorable.
To be honest, I can think of a lot more I can do with the bucks, such as earmark it for some home repairs for the next couple of years (invest in the house!) or simply and quietly include it in our given asset allocation mix for our longer term goal of retiring early. But those are lower down our list of priorities, as the kids and the business take our focus and first dibs at the funds at this point.
There’s a new money question up over at Lazy Man and Money. It’s a three part series (Part 1, Part 2, Part 3) that asks what some of us bloggers would do if $50,000 just happens to fall on our laps.
Here’s what I said:
For our particular case, I have two options that come to mind with regards to what I can do with an extra $50,000 or even $100,000. The first is to follow in the footsteps of Ben @ MoneySmartLife with a similar strategy: use the money to help continue financing the startup our family is trying to build at the moment. It would help us delay having to acquire any additional external investments that would dilute our ownership: self-financing would potentially allow us to reach a critical mass that could keep the business running on its own with positive cash flow. Of course, that’s a dream at this point, but that additional $50K would get us there!
Secondly, I could also consider using the windfall to fund my second child’s 529 account. Since my child is still very young, we would have almost 18 years before we would draw on this money. By virtue of a lump sum investment into a more aggressive area of the stock market, such as US small cap stocks or a combination of US small caps/emerging market exposure/foreign REITs, we may possibly fund his entire education on this one lump sum investment if the markets continue to be favorable.
To be honest, I can think of a lot more I can do with the bucks, such as earmark it for some home repairs for the next couple of years (invest in the house!) or simply and quietly include it in our given asset allocation mix for our longer term goal of retiring early. But those are lower down our list of priorities, as the kids and the business take our focus and first dibs at the funds at this point.
Berkshire Hathaway (BRK.a) (BRK.b) Breaks Record -- Six Digit Share Price
Eric Schleien
It was announced on CNBC today that Berkshire Hathaway is the first stock to ever hit a six-digit share price. A single share of Berkshire will now cost you around $101,000/share now. Warren Buffett, Chairman, originally bought into Berkshire Hathaway at around $7/share.
It was announced on CNBC today that Berkshire Hathaway is the first stock to ever hit a six-digit share price. A single share of Berkshire will now cost you around $101,000/share now. Warren Buffett, Chairman, originally bought into Berkshire Hathaway at around $7/share.
Portfolio Update -- Up 37.5%
Eric Schleien
Well I decided to check out my performance the other day since I hadn't really calculated it in several months. I am pleasantly suprised. First of all I just sold my latest "cigar butt" investment, Euroweb, and it gave me a nice 30% puff as you could call it. That's all I was looking for. As some of you may know I have a large amount of my net worth in Mod-Pac and have the loss of Vistaprint to blame for the insanely good price I got on those shares. So even though Vistapring hurt Mod-Pac's business temporarily, I would like to thank them as well. Fortunately my big bets have done well this year. At the beginning of the year I put nearly 80% of my net worth into the most profitable, in my opinion, publicly traded steel company in the world (IPSCO is up there too though). To top that off the company is a monopoly and was also trading below book value. Pohang Iron and Steel in South Korea was the start to another year of outperformance. Unfortunately along the way I made a lot of very mediocre investments which had a slightly negative impact on my portfolio. Luckily I was able to get out of Handleman and Dominion Homes before the shares tanked and things got worse. Both of these companies are still cheap but I honestly have no idea if they will make good investments or not. I hate risk and sold these securities. I also haven't been patient enough. I sold out of Lazare Kaplan very early and missed it's true "cigar butt" last puff. Like many of these last puffs the companies shares again deflated on a bad quarter. If things get worse I might take a position in Lazare Kaplan as it's diamonds are worth more than it's market cap. (Maybe Lazare Kaplan should just pay a diamond dividend and liquidate). Currently I have a very small investment in a small holding company whose marketable securties made up of mosty muni's and other low risk securities are worth more than the market cap. As it isn't as much as a discount as I like, the management is buying back shares therefore I will allow for a smaller discrepancy in liquidation value as the mgmt recognition of the shares being undervalued gives me a larger margin of safety. I also screwed up with my Parlux Investment as I sold it for a loss after Ilia Lekach's nephew was blabbing about some deal. Being the ethical investor that I am, I sold my shares in Parlux as I want nothing to do with insider information. I would advise Ilia to stop blabbing as well. My favorite investment right now is a company which trades way below liquidation value. It has assets worth anywhere from 40 to 400 million dollars and the current market cap is under 10 million dollars. I honestly don't know what a catalyst for this company's share price is but I'm not much for investing with the need of a catalyst in the first place. The share price eventually becomes efficient the question is rather how long eventually is. I also recently purchased shares in a company that does food processing and shipping. Management is top notch and they know how to weather out cyclical downturns (such as this year). The stock is flat with their industry having a decline this year. And of course I will now say how pissed off I am I sold Scottish Re as early as I did as it is up well over 100% since my purchase.
Here's how I have fared compared to the S&P 500 since I have started this website.
In 2005 I was up 13.3% and the market was essentially flat.This year I am up 37.5% and the market is up roughly 10%.
Of course I do not expect my returns to be sustainable as I don't always expect to find the stocks I have been finding. I feel one day these situation might go away but until then I will keep doing what I do.
Well I decided to check out my performance the other day since I hadn't really calculated it in several months. I am pleasantly suprised. First of all I just sold my latest "cigar butt" investment, Euroweb, and it gave me a nice 30% puff as you could call it. That's all I was looking for. As some of you may know I have a large amount of my net worth in Mod-Pac and have the loss of Vistaprint to blame for the insanely good price I got on those shares. So even though Vistapring hurt Mod-Pac's business temporarily, I would like to thank them as well. Fortunately my big bets have done well this year. At the beginning of the year I put nearly 80% of my net worth into the most profitable, in my opinion, publicly traded steel company in the world (IPSCO is up there too though). To top that off the company is a monopoly and was also trading below book value. Pohang Iron and Steel in South Korea was the start to another year of outperformance. Unfortunately along the way I made a lot of very mediocre investments which had a slightly negative impact on my portfolio. Luckily I was able to get out of Handleman and Dominion Homes before the shares tanked and things got worse. Both of these companies are still cheap but I honestly have no idea if they will make good investments or not. I hate risk and sold these securities. I also haven't been patient enough. I sold out of Lazare Kaplan very early and missed it's true "cigar butt" last puff. Like many of these last puffs the companies shares again deflated on a bad quarter. If things get worse I might take a position in Lazare Kaplan as it's diamonds are worth more than it's market cap. (Maybe Lazare Kaplan should just pay a diamond dividend and liquidate). Currently I have a very small investment in a small holding company whose marketable securties made up of mosty muni's and other low risk securities are worth more than the market cap. As it isn't as much as a discount as I like, the management is buying back shares therefore I will allow for a smaller discrepancy in liquidation value as the mgmt recognition of the shares being undervalued gives me a larger margin of safety. I also screwed up with my Parlux Investment as I sold it for a loss after Ilia Lekach's nephew was blabbing about some deal. Being the ethical investor that I am, I sold my shares in Parlux as I want nothing to do with insider information. I would advise Ilia to stop blabbing as well. My favorite investment right now is a company which trades way below liquidation value. It has assets worth anywhere from 40 to 400 million dollars and the current market cap is under 10 million dollars. I honestly don't know what a catalyst for this company's share price is but I'm not much for investing with the need of a catalyst in the first place. The share price eventually becomes efficient the question is rather how long eventually is. I also recently purchased shares in a company that does food processing and shipping. Management is top notch and they know how to weather out cyclical downturns (such as this year). The stock is flat with their industry having a decline this year. And of course I will now say how pissed off I am I sold Scottish Re as early as I did as it is up well over 100% since my purchase.
Here's how I have fared compared to the S&P 500 since I have started this website.
In 2005 I was up 13.3% and the market was essentially flat.This year I am up 37.5% and the market is up roughly 10%.
Of course I do not expect my returns to be sustainable as I don't always expect to find the stocks I have been finding. I feel one day these situation might go away but until then I will keep doing what I do.
Warren Buffett (BRKA) and ConocoPhillips (COP)
Eric Schleien
A lot of people have been asking me about the Buffett's investment in ConocoPhillips. First of all it's cheap by the common metrics:
Price/Earnings of 5.5Price/Book of 1.28EV/Revenue of 0.72EV/EBITDA of 3.8Return on Equity of 25%Return on Assets of 13%
I think this could be more of a Buffett type trade (Such as investing in Gap) than his buy and hold forever investments (Such as Coca-Cola or GEICO).
I think investing in Conoco is Buffett's way of buying in at a good company at a cheap price with a particular catalyst, the price of Natural Gas will rise.
Now of course, I can't get into Mr. Buffet's head but this is why I would suspect someone would buy a company who has a tremendous exposure to natural gas. Again, he's doing this with a margin of safety as the company he's investing in is cheap by a valuation standpoint.
I myself think natural gas is cheap and you can see my reasoning here.
Also the guys at Chesapeake Energy (CHK) thinks so too
A lot of people have been asking me about the Buffett's investment in ConocoPhillips. First of all it's cheap by the common metrics:
Price/Earnings of 5.5Price/Book of 1.28EV/Revenue of 0.72EV/EBITDA of 3.8Return on Equity of 25%Return on Assets of 13%
I think this could be more of a Buffett type trade (Such as investing in Gap) than his buy and hold forever investments (Such as Coca-Cola or GEICO).
I think investing in Conoco is Buffett's way of buying in at a good company at a cheap price with a particular catalyst, the price of Natural Gas will rise.
Now of course, I can't get into Mr. Buffet's head but this is why I would suspect someone would buy a company who has a tremendous exposure to natural gas. Again, he's doing this with a margin of safety as the company he's investing in is cheap by a valuation standpoint.
I myself think natural gas is cheap and you can see my reasoning here.
Also the guys at Chesapeake Energy (CHK) thinks so too
Book Review: Bull! by Maggie Mahar
Eric Schleien
Bull!, Maggie Mahar is an excellent book for anyone interested in learning about the stock market, business cycles, busts, booms, etc. It goes behind the scenes of Wall St. and takes a look at stock market cycles, commodity cycles, etc. Now this book isn't about charts or short term market timing but very very long term market cycles. We aren't talking about four quarters or four years but more of what goes on during a cycle of 40 years. This book will get any investor prepared as well as understand what might come in the future. Of course you can' t prognosticate the future of equities or commodities but you can better predict what will happen in my opinion. Bull! takes a look at the most recent boom and bust which lasted from approximately 1982-2004. Anyone who has some interest in business, investing, etc, would in my opinion get a real kick out of this book. I know it opened my eyes to many things I hadn't noticed in the past.
Bull!, Maggie Mahar is an excellent book for anyone interested in learning about the stock market, business cycles, busts, booms, etc. It goes behind the scenes of Wall St. and takes a look at stock market cycles, commodity cycles, etc. Now this book isn't about charts or short term market timing but very very long term market cycles. We aren't talking about four quarters or four years but more of what goes on during a cycle of 40 years. This book will get any investor prepared as well as understand what might come in the future. Of course you can' t prognosticate the future of equities or commodities but you can better predict what will happen in my opinion. Bull! takes a look at the most recent boom and bust which lasted from approximately 1982-2004. Anyone who has some interest in business, investing, etc, would in my opinion get a real kick out of this book. I know it opened my eyes to many things I hadn't noticed in the past.
Berkshire Hathaway shares cross $100,000
adesigar
Around 1:20 PM Eastern. Berkshire Hathaway class A shares crossed the $100,000 mark for the first time ever. This has been a resistance level for the stock for a few years. Berkshire Hathaway is a holdings company run by Warren Buffett. The company which started out in 1965 has never split its shares.
Around 1:20 PM Eastern. Berkshire Hathaway class A shares crossed the $100,000 mark for the first time ever. This has been a resistance level for the stock for a few years. Berkshire Hathaway is a holdings company run by Warren Buffett. The company which started out in 1965 has never split its shares.
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