Wednesday, March 31, 2010

The sellers waited until the last 90 minutes of trading, but we finally had some end-of-the-quarter profit-taking. Usually they don't wait until the very last minute, but with the way this market has been acting, no one has been in a rush to recognize gains. The uber-bulls might love this action, but this has been a tough market for just about anyone else. The bears are finally getting a late-day fade, but they have surely earned every penny of it. For the trend-followers and momentum mavens, this market has just been too extended and too lacking in strong emotions to be aggressive. We consistently have upside follow-through in the indices, but it has been lackadaisical and mixed as to individual stocks. The weak finish today was a slight change in character, but it is tough to draw any conclusions when we have end-of-the-quarter pressures at play. The trend is still up, and we haven't broken any important support levels, but we are still extended and in need of a better shakeup to reset things. There usually are some cash inflows at the start of a new quarter, but since we have only one day before the long weekend, I suspect the trading is going to be very quiet tomorrow. The bulls are still in control of this market, but there are an awful lot of market players who don't seem very happy with this action, which is offering so few opportunities.

Just Wondering

Sellers of gold always tell you that the dollar is going to be worthless.  I wonder why they are willing to trade their inventory of gold for our dollars.....

Tuesday, March 30, 2010

Tech Doo-Dads

AAPL is giving those that still want in a gift on this sloppy day. I've said all along that a firm deal on VZ distribution is worth $10-15 minimum; now I'm thinking maybe $25 to $30.....This would double the sales base in the US; and would also position the iPhone more strongly in the global CDMA market. I believe this could also be a precursor to a VZ deal on an ipad data plan. Lastly, it seems many more analysts are now echoing my initial 7.5mm or greater call on iNetbookkiller (Ipad) sales in the first 12 months.....The news yesterday makes me think my price target could be low, but I'll stick with it and if AAPL blows through it then I will have to raise my low $400's target.....

Not tech, but GS is finally cracking lower; and I like the stock below $168.

And MS is possibly the best value in the space.

 HIG at current prices resembles AAPL when it was about $144.  It's not crazy cheap anymore, but it still has massive upside. That stated, I'm still severely underweight finance until I have FASB clarity.....

I need to start something in CTV; I think this is the best of breed in wireless infrastructure.

long AAPL

Not A Normal Market

It was yet another day of mild action and minor gains. It certainly wasn't bad or bearish action, but it sure didn't offer the traders many new opportunities. In fact, to them, it was downright boring and it is going to remain that way until we have a good shake up and reset things a bit. I've been thinking we would have at least one bout of selling as the quarter comes to an end, but the little dip we had this morning barely pushed us into red and, of course, didn't last long. Breadth ended up slightly positive and volume was nothing special. The dollar bounced and bonds were strong early in the day, but the market just shrugged and remained extremely complacent. Many casual market observers don't understand why traders would complain about this market action. We are up just about every day and have slowly, but steadily, climbed higher. Just buy a stock and watch it rise. The problem is that it just isn't normal for the market to act in this manner for so long. It seems like some have been saying that for a month now, but that argument just continues to grow stronger and the market more difficult to trade with each successive days of gains. Maybe the end of the quarter will finally produce a change in the action, but so far, that sure hasn't been a very smart bet......

Monday, March 29, 2010

Tech Ponderings

I think IPOs will be strong this year, especially in tech-land.  Why? 

Well, one such piece of evidence is this story on ORCT.  When I see a ne'er do well like ORCT price a private secondary, this tells me that the market is again hungry for technology solutions and investment opportunities (not to mention deals like FNSR's, a name I like much better). That was way over-subscribed and has traded great since the deal.

Another point is that I don't think anyone realizes the amount of traffic the iNetbookkiller, lesser netbooks, handheld 3G and 4G devices will generate. And that combined with high def and 3D video over whole system will meld with various BB stimulus plans being promulgated in the coming quarters.

Bottom line, the Tech/comm Renaissance is still in its early days.

By the way, anyone else notice that Chrome's browser market share is already nearing 8%? That's simply astounding.......

long AAPL

Of Course, Eventually Some May Want REALIZED Profits....

It was one of those days when we gapped up to start the day and then just drifted around and did nothing after the open. We held on to the opening gain, but we didn't gain any further momentum after that. Breadth was solid once again, but volume slowed quite a bit. Our minor selling to end last week was forgotten and the action, once again, felt extremely complacent. There were no real worries or concerns, and we even had talk about the virtues of buy-and-hold-investing. This market is apparently never going to go down again, so why wouldn't we just load up and enjoy the ride? The difficulty is that even the non-technicians are aware that this market is very extended. However, we aren't pulling back, so that keeps sucking in those who are tired of underperforming. There are only two more trading days left in the quarter, and there is some tremendous anxiety among money managers who can't keep up this market that never turns down and allows them to buy. I believe there is a good chance of some profit taking before the quarter ends. Most of the window-dressing pressure has come to an early end, and there are market players who want to actually lock in gains rather than just have unrealized profits on their sheets. The market continues to do nothing wrong, other than to act very complacent and stay very extended. It is hard to be aggressively bearish when the action is like this, unless you are a contrarian, and the contrarians have been fighting this upward drift for weeks now........

Friday, March 26, 2010

A Few Tech Items For A Boring Day

* BIDU is being stubborn though I think it really wants to fold. However, cult stocks are often treated as "my precious" as folks are loathe to part with them.....

* I’m still thinking ISRG and maybe CREE are shorts as well....

* Maybe I should change my mind on FSLR for the time being, as I think a big solar ramp will commence in the coming weeks/months and the market needs a leader.  It's likely FSLR would be the anointed leader in the group for just a while longer. So this has me looking at the long side on this name.

* I believe jobs will be meaningfully better quite soon, but I think a good number of retailers have risen too far too fast.

* AAPL's my biggest position by far and my target has been moved from the mid $300's to the low $400's. However, here is a different way to look at AAPL and why the double off of the $115 level isn't a huge move.

Think back to when AAPL was at $120. The stock was a $120 stock with a 30 PE and equal growth rate. Yes, those were the posted numbers, but the reality was that AAPL was really a $75-80 stock with a six month forward P/E of around 8! The reason is it had $40-50 per share in net cash and investments that was producing little of the company's earnings. That, combined with the fact that it was growing at 30% give or take, made for a massive catch-up move on the stock.

Also, non-GAAP was way higher, but was widely discounted. Needless to say it has done the $10 in EPS, it has grown more cash and the growth rate has held, and is actually accelerating. So what we have seen is a grossly undervalued stock until just recently. However, even now it's still cheap. Before cash the PEG is 1 and the forward PE is 17. So the forward PEG is actually well under 1. Now with the massive cash hoard AAPL's forward goes to under 14, the PEG is about .35 and growth may even accelerate further for a few quarters with what I've termed the iNetbookkiller or iPad to avoid any confusion.

* NVDA is one name that seems to have stalled but is very well positioned for all the new netbooks and super-charged phones that have now passed the point of the early adoptee stage.....

* SOHU is up and grinding higher; and I don't see much resistance until $61.

long AAPL

A Boring Day

That was a painfully boring ending to the day. There was a bit of life in the energy plays and gold miners toward the close, but I think that was a combination of some shorts taking profits off the table and a few bottom-fishers. All in all, the market was a bit weaker than I thought it would be, but all it did a whole lot of nothing, which was my other thought. I believe this sets up a very interesting Monday and Tuesday. As of late, most Mondays have been strong, but two of the last three have been flat with the other being higher. The month and the quarter are coming to a close, and "tape-painting" may be all but done.  For those that care, the technical picture is much more muddled now and even showing a few bearish divergences. Going into the week, it was obvious that someone would have rather been long than short. I'm not so sure that is the case now right at this moment. It's not that I feel people would prefer to be short; however, I believe the complacency and comfort of being long is no longer as strong. We spent the last four days in a fairly tight range, which leads me to believe we are setting up for a decent-size move in the near future. Anybody else notice the slow press releases on the charges that companies are taking in relation to the health care bill?  T is taking a $1 billion charge. That's a "b" for billion. This isn't the first company I've seen make such a release, but that number was glaring. I'm not sure how charges like this are going to help recovery in the short run. Although I'd prefer to have some brilliant strategy to lay out for next week, or some witty anecdote to throw out right now, it just isn't there. That's how painfully dull this afternoon's action was. It just sucked the life out of me. Time to rest up on the weekend. Catch up on some research, have some fun and see what next week brings us.

Thursday, March 25, 2010

Tech Stuff

* I'm close to adding QCOM - shoulda done it sooner....

* Many I'm reading would love to see AAPL get to $225, as they would like to add at $225 and ride to $275......I'm just looking forward to seeing $275, frankly....

long AAPL

Productivity, Okun's Law and Cash Flow Suggest Positive Employment Surprises

Labor productivity and cash flow have been surging. These factors are key for the employment outlook. Here is why:

   1. Productivity tends to accelerate above trend at the trough of a recession and especially in the first phase of the growth cycle. The reason is that companies fire people in a recession and when production picks back up people are working to the max of their capacity. But that type of productivity uptick is not sustainable. It is merely a cyclical phenomenon typical in the early phase of recovery.

      A glance at the empirical data supports this view. In 2009 unemployment rose by double the amount implied by Okun’s Law. Okun’s law states that there should be a 1% increase in the unemployment rate for every 2% that GDP falls below trend. Okun’s law would have predicted a 1.5% increase in the unemployment rate in 2009 but it turned out to be a 3.0% increase. The Okun’s Law relationship has held remarkably steady for over 60 years. Unless one believes that there has been some sort of remarkable advance in productivity, this unusual rise in the unemployment rate will not be sustainable and will soon revert.

      Productivity grew 5.1% for all of 2009 and surged to 6.2% in the fourth quarter of 2010. There can be no question that in 1Q 2010, productivity will again be extremely high as jobs have been shed and the economy has been growing nicely. The fact that productivity is surging so strongly is a great sign. Why? Because it means that companies probably overdid it on layoffs. In other words, employment levels are unsustainably low relative to the level of sustainable structural demand. That means that companies may need to pick up the pace of hiring soon as the payroll is unsustainably low.

   2. The strong growth in free cash flow that companies are reporting certainly confirms this hypothesis. If companies were not generating above trend free cash flow (relative to sales), it would suggest that their payrolls are about where they need to be. But the strong cash flows they are generating (relative to sales) could be indicating not only that companies have the financial capacity to hire, it is also probably indicating that they will need to start hiring soon. In other words, they are enjoying a surge in cash flow that is paralleled by the unsustainable uptick in productivity growth. It indicates that headcount may be unsustainably low.

Given the low head count at companies, strong free cash flow, the pick-up in consumption and relatively low inventory levels, positive surprises in employment could be coming down the pipeline in the not too distant future.

If so, look out above on the S&P, because if there is one thing that most economists seem to agree on these days is that there will be either a “jobless recovery” such as the one in the early stage of the last cycle, or that the recovery in employment will be slow. A vocal but influential minority actually think that there will be no reductions in unemployment at all.

A Shakeup Today

Many have been bemoaning the lack of volatility lately, as it makes for poor trading, but we finally had a good dose of it today. We had a downright buying frenzy going at midday, with the big-cap technology stocks leading the way. But news of a bailout deal for Greece caused the euro to reverse sharply and that triggered a good bout of selling. We also had another poor bond auction, but what sealed the deal for the bears was that a brief bounce attempt in the final hour failed. Once we took out the opening lows, another wave of selling hit, the dip buyers stood aside and we actually ended with a little red in the S&P500 and the Nasdaq. If you just glance at the indices, it looks like some mundane, flat action, but under the surface, we had a very big intraday reversal -- and that is significant. It is the first one in a very long time and it illustrates that the bulls don't have unlimited buying power. The news flow was actually quite good today, and the Greece bailout wasn't a big surprise, but sooner or later, market players were going to find an excuse to lock in some gains, and that is what they did. This sort of intraday reversal in isolation isn't that big of a deal, but it can be a good first step if a change in trend is developing. What the bears need now is some follow through to the downside and some unsuccessful bounce attempts by the dip buyers. A top will be a process that will take some time to develop, as the bulls are not just going to suddenly go away. While you might want to be more defensive and lock in gains, there still isn't sufficient reason to expect a major reversal. It was not a pretty day, but many wanted it, so we got it.  They say it will lead to much more interesting trading and better opportunities when we finally have something other than thousands of extended charts without good entry points.......Maybe; suppose so.  

Wednesday, March 24, 2010

Tech Stuff

I've been looking at both SNDA and SOHU for some time, as both have sold off on last quarter's guidance, and are well off year highs (SNDA from the mid $60's and SOHU from the low $70's). Interestingly, they have sold off this week on the GOOG news. Again, if GOOG really loses some or all the search revenues (a whopping couple hundred million), then someone is going to get it. Both SNDA and SOHU sell in just the couple billion marketcap range, so a few tens of millions might actually have some meaningful relevance to boost their respective values.

Not tech, but BX is the next to really take off again.

QCOM is set to dominate 4G on multiple fronts. Snapdragon in the non-Apple net book food chain will be tremendous. (No, the i-Net-book-killer won't take more than 50% or more of the net book market, though I do believe this will become AAPL's first share leading product in a category). The traditional 4G integrated circuit sales and the whopping 4G IP portfolio will also be stunning.

long AAPL

A Little Selling Today

It was an uneventful day for the major indices, but we did have some interesting action. The most important was a big spike down in bonds, which means that interest rates moved up. The move was prompted by a strong dollar, some hawkish comments from Kansas City Fed President Thomas M. Hoenig and a poor 5-year auction. Overall, the market took the move in bonds in stride, but it is something that we need to monitor very closely. Low interest rates have been the tailwind driving this market for the past year and if we start seeing them inch up, we are going to need some extremely good economic news to offset that impact. The market hasn't been concerned much at all about inflation or interest rates, but the action today in bonds was significant. The slightly negative price action today helps a little in dealing with our extended technical conditions.  There was some very weak action in gold on the dollar, and commodities in general were weak, but it was the pullback in semiconductors and retailers that we have to focus on. Retailers have been a leaders lately, and chips have shown signs of taking the lead, so weakness in those two groups would be a problem. Until this market is shaken up more severely, the supply of opportunities is going to be small. A minor correction like we had today helps a little, but it is just a small blip after the run we have had. The uptrend is still in place, but there are a few cracks developing......Maybe....

I Think I've Changed My Mind About GOOG

I think I've changed my mind about GOOG as an investment; I now think it may be a better short at $500+ than a long.  More later.  

Looks Like Bank Bonds Are Pointing To A Huge Rally....

Is there a big bank stock rally coming?  When analyzing the group, always figure out how the bank bonds are doing.  These bank bonds are on fire, just a very big run. Some bonds, like the leftover BSC bonds, just put on 5 points, taking them to par in the last week. That's an extreme example but they are all on the move. We saw this same kind of move in ZION, the best performer in the S&P 500, when the bonds zoomed ahead of the stock itself. 

To me that means we are shortly about to see a powerful rally in the common. It makes so much sense, too, when you think about it, because so many people are worried about punitive banking regulation that now seems like a thing of the past. No more dilution, no need for more offerings for now for most banks, maybe we are home-free. I think C could be ready for launch, and I think the government won't start selling until we get to a 52-week high.  JPM seems to be breaking out right now and represents great value. I think that BAC and WFC are going to show that this quarter showed a definitive peak in bad assets. In the meantime I think that HBAN and FHN make a great deal of sense as specs and BBT could be the big growth story out there.  This move should be swift. It should be in conjunction with the passing of financial legislation. Get ready for it. We are on the verge of it happening.  It's been my experience that the bank bonds never lie. Who knows, by this time next year we could see big earnings, a reversal of reserves and the beginning of the dividend comebacks! 

long C calls 

Partisanship All The Time, Everywhere

Our President has crossed the Rubicon with the health care vote. The bill was not really about medicine; after all, a moderately priced, relatively small federal program could offer the poorer not now insured, presently not on Medicare or state programs like Medicaid or Medical, a basic medical plan.

We obviously have no interest in stopping trial lawyers from milking the system for billions. And we don’t want to address in any meaningful way the individual's responsibility in some cases (drink, drugs, violence, dangerous sex, bad diet, sloth, etc.) for costly and chronic health procedures.

No, instead, the bill was about assuming a massive portion of the private sector, hiring tens of thousands of loyal, compliant new employees, staffing new departments with new technocrats, and feeling wonderful that we “are leveling the playing field” and have achieved another Civil Rights landmark law. (Here's some math: add higher state income taxes in most states; the new Clinton-era federal income tax rates to come; the proposed lifting of limits on income exposed to FICA taxes; and now new health care charges — and I think you can reach in some cases a bite of 65%to 70% of one’s income.)

So we are in revolutionary times in which the government will grow to assume everything from energy use to student loans, while abroad we are a revolutionary sort of power, eager to mend fences with Syria and Iran, more eager still to distance ourselves from old Western allies like Israel and Britain.

There won’t be any more soaring rhetoric from Obama about purple-state America, “reaching across the aisle,” or healing our wounds. That was so 2008. Instead, we are in the most partisan age since Vietnam, ushered into it by the self-acclaimed “non-partisan.” But how could it be anything else?

No, Obama has thrown down the gauntlet, and is trying to reify the sloganeering of the 1960s. He apparently reasons along the following lines: that centrist talk was campaign fluff; the voters fell for it, and now it’s his turn to remake America with 51% of the House and 44% of the people. Think Sweden, or, better, Greece as our model at home, and something like America as Brazil in matters of foreign policy. Apparently, Obama figures that people now may not like the present partisanship, but they didn’t like FDR at the time either. Yet whom do they associate their Social Security checks with? Hoover? Coolidge? Harding?

I don’t see why the ram-it-through, health care formula won’t be followed by similar strategies for blanket amnesty, cap and trade, and expansions of the state takeover of cars, banks, student loans, and energy.
Remember, all these will be packaged as “comprehensive” reform — comprehensive health care, comprehensive immigration, comprehensive energy, comprehensive monitoring of even the banal decisions we make. So what does comprehensive really mean, other than all of us are going to get even more official looking letters in the mail, advising us to fill out a form, pay a fine, and be warned that a new regulation or tax is on the way — followed by the usual state/federal representative’s newsletter bragging about some new entitlement that he “won” for us with our borrowed money?

I expect a lot of the following in the next three years.

1) Them!: More Obama soaring speeches about some  “historic” crisis that needs “comprehensive” solutions (e.g., more of “this is our moment” banalities). Those introductions will be followed by alternate praise of some heroic individual who lost her health care, struggled to unionize, breathed some sooty air, was deported while cooking the evening meal, etc. These gripping narratives will be mixed in with ‘Them!’ demagoguery (e.g.,  the health care industry, the big corporations, the polluters, the nativists and racists — all of “Them” are standing in the way of hope and change, and, together, yes, we can! defeat them. Oh yes, there is going to being even more sermonizing, and shriller human interest portraits about “Them” smashing poor five-year-old Billy Jones from Topeka who flew up to DC to find Harry Reid for “help”; or “Them” denying Herlinda Lopez from Fresno her college dreams, who then wrote a letter pleading to Michelle for assistance; or “Them” absolutely crushing the mother of Bobby Smith for no other reason than sheer greed, who then took the Greyhound to Nancy Pelosi’s office!
2) The Fedopus has far more than eight tentacles: More letters in the mail from more state and federal bureaucracies (both broke, and searching for billions of dollars for millions of workers who need to be paid). The official looking stationary letters will be advising us that there is a new fee, surcharge, rule, regulation, etc. — mostly in the context that we have already in some way violated something.  Expect in such writs to see your name misspelled, your address garbled, one letter canceling out the one of the prior month, and semi-threatening language demanding compliance.  

3) More cynicism: The more Obama talks about the greedy and selfish in society who “take” from others, the more the public will understand that they are in fact the greedy in these crosshairs. Costly health problems that originate with obesity, smoking, alcoholism, unsafe sex, violence, law-breaking, etc. are really due to lack of scheduled office visits. One missed colonoscopy — not 50 extra pounds or 1000 Big Macs over the years — causes cancer. People always ache due to a dearth of medical advisors and outreach counselors — or the diet and prescription drugs pushed on the victim by the profit-mongering corporation. In other words, the old days of a kindly, but tiny government politely advising us about what not to do have now transmogrified into a brave new world in which there is no individual. Instead, there exists only collective responsibility — a creed that assumes those in rehab or on parole or fighting weight-induced diabetes were victims of a system in which those who did not engage in that sort of behavior were culpable in some way and should pony up. Best of all, the system assumes we are greedy, cruel, and selfish for writing things like the above.
4) Pelosism: In our brave new world, expect more of the lurid stories about the secretary of the Treasury not paying his FICA taxes. The multimillionaire Madame Speaker will spend more of the state’s millions on private jet travel as she lectures on carbon footprints and a culture of corruption. We will hear more about the chairman of the Ways and Means Committee hiding his income, or a member of the House Rules Committee bragging that, given the historic importance of health care, they are just making up the rules as they go along — and proud of it. Our guardian class has become the new French aristocracy at Versailles. They will rail about Citation jets for the CEO, and then fly federally-owned Gulfstreams; they will put us in Smart cars but limo in Yukons and Tahoes on “official business.” Our lifestyles will be as monitored as much as those who do the monitoring will not be at all.
5) Greedy and Not-So-Greedy Capitalists: And there are “bad” and “not so bad” capitalists too. The CEOs for GM are trying to help America out with green designs and fair wages — so unlike those at Ford and Toyota. Bill Gates and Warren Buffett are the model execs, quite unlike the yokels who run Caterpillar and whine about health care. In every statist society, large corporations either resist or join. For the latter, the machinery of government reinvents them as part of the solution rather than the problem — in the way that Al Gore really doesn’t really guzzle electricity, or John Edwards never really lived in a mansion. The transition to a Ministry of Industry requires a Ministry of Truth. With the Obama media we are already half there.

I understand the reasoning behind Obamism and am familiar with the feel-good, this-is-our-moment rhetoric of egalitarianism. But please at least spare us the fictions and simply be honest: it's my opinion Obama wants a state-run America, somewhere to the left of France or Denmark, a United States unexceptional and merely one of many nations at the UN. This vision follows an existing, decades-long encroachment of government. And it requires all sorts of highly credentialed overseers monitoring and at times justifiably attacking the upper middle class for its deplorable treatment of those below it.

This new America is ultimately predicated on the notion that we were born equal and must die absolutely equal as well. And this is entirely within our grasp, if we just understand that individual responsibility, talent, natural endowment, chance, merit, luck, tragedy, and a dozen other variables far too complex for government to imagine, much less solve, in fact, are not the real obstacles to ensuring equality.

Instead, it is simpler than that: greed, selfishness, racism, sexism, classism, and not niceness on the part of a few really are the culprits. How lucky we are that a few rare souls like Obama fathom that. And how lucky we are, again, that it will take a singular humanitarian and genius like Obama to make us denser folks see it and do something about it.

That’s about where we are.

Subscript:     Do Democrats realize that we really have crossed the Rubicon? In the future when the Republicans gain majorities (and they will), the liberal modus operandi will be the model—bare 51% majorities, reconciliation, the nuclear option, talk of deem and pass, not a single Democrat vote—all ends justifying the means in order to radically restructure vast swaths of American economic and social life. Is someone unhinged at the DNC? They just blew up any shred of bipartisan consensus when their President polls below 50%, the Democratically-controlled Congress below 20%, and health care reform less than 50%. Usually unpopular leaders and their unpopular ideas seek the shelter of minority rights and prerogatives. What will they do when they are in the minority—since they’ve entered the arena, boasted “let the games begin” and shouted “by any means necessary”?

Tuesday, March 23, 2010

Some Tech Stuff

Good grief, GS upgraded BIDU to $675....I'm quite happy I'm not short it yet....While many would quake and shudder at this, I see both sides and while Goldman may be correct - I also keenly remember Goldman saying OIL was going to $200 when it was at $138-145 in 2008.....

I need to add some GOOG in the 530s/540s  -  this is getting ridiculous....

Need to buy some UTEK soon - I especially like the fact it is again selling very cheaply to net cash.

As opposed to many others, I do not see the market as over valued at all and can still find 100's of stocks selling very cheaply with solid growth.

EZCH is simply flying though I’m not involved currently. Again, my mistake of late has been selling too soon on several positions well below levels I felt they would reach given time......

If You're Fighting The Market Momemtum, You're Losing....

The unrelenting strength of this market is now at the point where you have to make jokes about it. It is truly remarkable and tough to navigate for anyone who isn't wildly bullish.   It is a Toyota "stuck accelerator" market, and it is showing no signs at all of slowing....

What is driving this market is a combination of complacency, momentum, benign news flow and probably some heavy duty "machine" action as well. Other than being extended and without rest, there just hasn't been any good reason to sell this market. One of these days we will have a catalyst for profit-taking, but when and what it might be are the billion-dollar questions.

Almost everyone is very aware that this action is unusual. Market players keep looking for some sort of top or at least a rest, and the frustration over not being able to keep up with this market keeps them doing enough buying to keep us running. The performance anxiety is tremendous and creates constant pressure to keep buying, regardless of how extended we might be.

I'd love to provide some earth-shaking insight about this market, but the truth is that we have limited choices right now. The momentum is just too strong to fight, but are market conditions too extended for us to be putting new money to work?  The odds simply don't favor this rally to last that much longer, but you can suffer tremendous damage if you try to short it.

Stay tough and keep on plugging away. If you are feeling frustrated, I can assure you that you are not alone....

Monday, March 22, 2010

Tech Stuff And Maybe A Bank...

I like the action in AMAT; Very cheap, as the solar biz has held these shares back.

RMBS should provide a little more exiting action this week. I'm still amazed that a near billion dollar deal from Samsung hasn't boosted the price more of late.....

AKAM was downgraded and is selling off a bit. This should be tempting me more in the $29's.

 I'm moving closer to a BAC purchase again but am really nervous about the upcoming FASB meetings and feel that is the biggest looming threat to the bull run by far......


I've got to get a short on BIDU quick! 

GOOG  redirects traffic to or Hong Kong from China.

Again, I think people have overestimated the amount of restrictions you can place on GOOG as well as overestimated the net revenue gain to BIDU.  After all, you can access the main page anywhere in the world and turn on language translation....

Moreover, BIDU has risen nearly 50% or a $6.5b in market cap on what will likely be a $100-200m increase in forward revenues (if even that much) so people are paying 35-50 times sales on incremental revenue that may or may not even fully materialize.

Indeed, life is stranger than fiction.....

Including Debt In Your Stock Screen

I'm always on the hunt for new ideas, and one of the screens that I like to use from time to time identifies companies trading at relatively low multiples of enterprise value (EV) to earnings before interest, taxes, depreciation and amortization (EBITDA).

Use enterprise value as the starting point to measure the value that the market is currently placing on a given company, instead of market capitalization alone. While market cap measures the value of the common equity, it ignores the capital that debt holders have also provided to companies. Enterprise value considers debt along with equity market cap and preferred stock, and subtracts out cash, so it is sometimes used as a proxy for the takeover value of a given firm. Enterprise value, which measures the value of the entire firm (in terms of capital structure), is more encompassing than market cap.

Enterprise value to EBITDA can act as a better indicator of a firm's profitability than the price-to-earnings ratio alone, especially for companies whose capital structure includes debt. All else being equal, of course, the lower the EV/EBITDA, the better.

Here's an example, using companies with the following attributes:

    * Market cap greater than $250 million.
    * EV to EBITDA of less than 10.
    * Total debt to equity less than 50%.
    * Price to book value less than 2.
    * No financial companies.

This search revealed a somewhat disappointing 18 names (that is, I was disappointed by the low number of names, not necessarily the quality).

Here are some of the more interesting names:

HP:  Primarily an onshore contract driller, this company has been around since 1920, and it was founded by the grandfather of current CEO Hans Helmerich. The company uses interesting drilling technology that was developed in-house called FlexRig, which allows for greater flexibility in drilling depths and also reduces the time it takes to move a rig to a new drilling site.

The balance sheet is strong and asset-rich. As of Sept. 30, 2009, the company owned 201 U.S. and 44 international land-drilling rigs, and nine offshore platform rigs. Helmerich & Payne also owns some real estate in Tulsa, Okla., including 210 acres of land, a shopping center with 441,000 square feet of leasable space, and 990,000 square feet of warehouse space. Helmerich & Payne also has long-term investments on the books with a market value of $367 million. This includes holdings in two other publicly traded companies: 8 million shares or 12.4% of Atwood Oceanics (ATW) , and 967,500 shares of Schlumberger (SLB) . HP currently trades at about 6.2 times EV to EBITDA.

FL :  This company has a very wide reach, with more than 3,600 stores in 21 countries.

Foot Locker was actually a net-net (trading below its net current asset value) in late 2008 when the stock price dipped below $6. Since then, it's been off to the races, but this company is still attractive. Foot Locker ended the fourth quarter with $589 million in cash, or $3.75 per share, and just $138 million in long-term debt. It currently trades at about 7.8 times EV to EBITDA and 1.17 times book value per share. The company also gives back to shareholders in the form of a 15-cent quarterly dividend, which makes for a nice 4.1% current yield.

Some of the other companies that made the cut include home improvement giant LOW, PFE, AAN and convenience store operator CASY. 

Could AAPL Shoot Over $400/Share In The Next Year?

Morgan Stanley analyst Katy Huberty tells clients in a research note that China represents AAPL's next major geographic growth opportunity, and that Apple’s plan to open 25 retail stores in China, announced during its shareholders meeting in February, could help drive Apple’s share price  — in her “bull case” scenario—as high as $435 within a year.

As reported by Fortune, Huberty expounds a positive correlation between Apple store expansion and the increase in Mac market share. Correlation does not mean causation, of course, but the trends do seem clear, notes “Fortune.”

Apple opened 123 stores in the U.S. between Sept. 2003 and Sept. 2009 while the Mac’s domestic market share grew from just over 3% to as high as 9% (before dipping below 8% last summer).  I fully expect AAPL's stock to continue rising....

long AAPL

So Does The Health Care Bill Matter.....?

The financial headlines are going to claim that passage of the health-care legislation and the end of that uncertainty is responsible for the positive market action today. It is a neat and clear cause-and-effect relationship that makes for easy headlines. Other than the action in some hospitals and a few medical-related stocks, today's market didn't have much to do with the health-care bill at all. Once it became clear the bears couldn't keep the pressure on after the open, we returned to the exact same type of action that has dominated for weeks -- highly complacent and low-volume, but steady buying. It wasn't a Street celebration of the health-care bill. Given the ineptitude of the bears, the market had no choice but to stay with this dramatic, month-long uptrend. I don't believe you will find many folks who jumped in because they viewed the health bill as a positive catalyst. What choice did they have, when the market is acting like this? Whatever the reasons, the quick resumption of buying puts us right back to where we were last Thursday: quite extended and in need of consolidation (according to some), even though there are few, if any, signs of weakness. The bears were simply run over. If they had any effect on the market, it was to provide some short-squeeze fuel.    One of these days, things will shift. For now it's all good, and there isn't a worry in sight.........

Friday, March 19, 2010

A Few Tech Items

SPWRA got smacked hard today on terrible guidance; SPWRA's current quarter isn't relevant to the long term thesis. With that being said, I'll bide my time to see if the $18.50 area holds. That's a double bottom and if it breaks, I'd rather scale in at $17.50 and every dollar below that......

Not tech, but MS still looks like a steal here. I see $40 before $25.....

I will not be following PALM any longer and feel that a buyout is their last probable chance at stock performance glory. The AAPL/GOOG mobile device machine is in the full death squeeze for the industry. Is RIMM next?  I think we will need at least 3-4 more quarters to know for sure (and I do think it will report strongly in a couple weeks), but I'm more inclined to start looking at RIMM mostly on the short side now. Especially on moves in the $80's and higher. The only other big shop I see competing is NOK, and it has to prove it via nanotechnology and the Morph or whatever it will be calling their space age phone in a couple years.

Again, not tech, but I'm warming up to BAC again, though I wish we had FASB clarity. It strikes me, with all the populist/media ire directed at GS, or Bernanke, or even folks like Dick Fuld at LEH -- where is the ire at the board at FASB as they caused far, far more real damage with FAS 157 than almost any other factor?

The shorts will be wrong as long as they are fighting my highly variant thesis of higher than "normal" post recession economic growth. However, all they need is a bad FASB decision combined with a transaction tax and they will have a massive bear market again to short to their hearts content. And I will be with them!

By no means am I wishing for the above scenario to come to pass.  However, I'm sadly prepared for it.

long AAPL

Even After Today, Not Much Technical Damage Done....

After weeks of slow, but steady gains, even the bulls have been rooting for some downside. The market finally cooperated, but it wasn't exactly a major meltdown. The DJIA was only down 40 points and the S&P500 six points. The small caps suffered the most and that was reflected in better than two-to-one negative breadth. Volume picked up and produced a technical distribution day, but that was mainly a function of busier trading due to options expiry. If you take a step back and look at the charts, the selling today is just a little red blip and doesn't do anything much to change the overall technical pattern. It wasn't a big dose of volatility, but it was a start. So, now the big question is whether the selling will pick up steam or whether the dip buyers will become aggressive and quickly push us back up? Some folks are looking at the passage of the health-care bill as a possible catalyst for more selling. That makes sense, not because the bill is such a debacle, which I think it is, but because it provides a very convenient excuse for sellers to lock in gains more aggressively. Whether a news event is positive or negative depends to a great extent on the technical condition of the market. This market is extended and vulnerable to more selling, which increases the odds that any major news event will be perceived as a negative. Another news event we have to be on the watch for is a change in interest rates. There was a surprise rate hike in India last night, and there is talk that both China and the Fed are considering some tinkering with rates as well. Any rate hike would be an ideal catalyst for more selling at this juncture. After suggesting tight stops and short time frames as we become more and more extended, it finally paid off today. Disciplined traders should have a lot of cash on hand and be well positioned for the next move in this market. 

Looks Like It Will Pass......And On Sunday Too.....

Looks like the health care bill/fiasco - sorry, editorializing - is set to be voted on and pass on Sunday.  I'm reading it's about an 80% chance.  For some time now, I've been reading many, many different opinions about this bill, and what many are stating is that this health bill is simply a redistribution of wealth.  And that's how I see it. That's how I see most government meddling/programs.  Maybe I'm missing something, but when government sticks its fingers in things it doesn't create any value - it just redistributes it. Nothing more. I find all these programs as just redistribution. Oh, and the bad part is they skim money off the top of whatever they do to regulate and enforce the policies they create.  Waste.  Inefficiency.  All great empires eventually failed as a result of government largess and waste over time. Maybe I'm getting too philosophical here, but our founding leaders created a constitution which I believe should still be adhered to.  And of course the vast majority of all the programs we see our government involved in are not covered in that constitution. I would rather government decisions be pushed back down to the lowest level - a local level. I would like to see us become simpler, not more complex. Simplicity is a jewel and unfortunately we are far from that state.  We should always strive for simplicity, for efficiency, over complexity. 

I get the "good" side of this.  Many don't have a job.  Many don't have health care coverage. Many own no stocks, directly or indirectly.  If this bill is enacted into law, it MIGHT prove to be a good thing for them.  However, millions have a job; millions own stocks.  This bill becoming law, in my opinion, is a disaster because Washington is trying to accomplish something that will either raise taxes or raise the cost of health care for all who make money or have health care.  And, what many don't seem to understand or believe is, this legislation becoming law will stifle the jobs recovery; will cancel alot of plans to hire more workers or create a new business.  

If this bill passes, then the likelihood of the millions out of work now finding a job goes down, maybe significantly.....

Thursday, March 18, 2010

A Little Consolidation Today...

The DJIA and the Nas continued their winning runs, but the action under the surface was a bit weaker today. The small-caps underperformed, and breadth was quite poor, with about 2,400 gainers to 3,300 decliners. Oil in particular saw some profit-taking, but many other recent winners saw some selling as well. Given how strong this market has been for so long, it is a bit ridiculous to consider the action weak when the S&P 500 is down just 0.03%, but it is the first sign of any slowing in quite a while. Even the most rabid bulls are rooting for some consolidation at this point, and this market seems determined not to cooperate......

Wednesday, March 17, 2010


WFR is cheap even in the high $20s; I continue to be stunned that people don't see the solar explosion that I see coming. Again, I think MEMC Electronic Materials (WFR) is still cheap in the high $20's. And I see an emerging breakout in WFR and other high quality solars of late.

I really thought AAPL was going to peel a good $7-10 on those supposedly "muted" preorders - not so far though.......

long AAPL

A One-Way Market....

A downgrade of the financial sector by Citigroup took the indices off their highs, but it was still another day of gains for the bulls. Breadth was solid, with regional banks, oil and coal leading the way while biotechnology, gold and steel struggled. I could go on at length about how remarkable this run-up since early February has been, but I think everyone is very aware of that. The more important issue is, how do we deal with a market that acts like this one? Obviously, trying to call a top has not worked, but how much longer can we expect this market to run up without at least one or two days of profit-taking?  The AAPL sell-off was frustrating too.....

long AAPL

Tuesday, March 16, 2010

Tech Stuff

I'm thinking the Fed may give us 50 basis points by year’s end; Longer term I'm most worried about the FASB meetings to look at mark-to-market. And I don't count on them to see and do the right thing so that means the Senate oversight committee will have to step in. All this makes for an easy trade once the decision comes through but very dicey leading up to that point......

PMCS reports tonight and I'd be a strong buyer on any meaningful weakness following the report; I'd add AONE on anything under $14.50; I'd be buying NSM right now too.


The market continues its seemingly unending move upward. The FOMC interest-rate decision gave us a small burst of volatility for a few minutes, but then it was back to the same old pattern of moving straight up in lifeless fashion. The buy-and-hold mutual funds must be quite pleased today. The big winners were traditional fund holdings like GE, WMT, INTC and SBUX.  There is just an amazing level of complacency in this market right now and nothing seems to bother it. The buyers just keep in coming and there is no worry, even though we haven't had any consolidation in weeks. Apparently, there are folks who are happy to buy GE up 10%, or DPS after a 20% jump. Sooner or later, we will have a decent shake-up that will give us more interesting patterns, but in the meanwhile, there isn't much we can do but continue to respect the strength of this uptrend. It is a bit tiresome when it's the same thing every day, but it isn't the market's job to make it easy. 

Monday, March 15, 2010

Tech Randoms; Quick Takes; Thoughts on BIDU

Reports of AAPL ipad pre-sales of 120k seem to be hurting the stock; I have no idea whether that number is valid or not, but I do think we will see much better sales once the product is out for a few weeks or more. As more people see the feel and use it, the better it will sell....

Is a trade war with China brewing? I'll take my usual variant stance and say this is a long time coming and would be one of the better economic developments for our country. This is one reason I like GOOG's stance so much. We have for far too long provided too much technology for far too little return.......Expect more RMBS action later this month.......More on AAPL - I suspect they will try to make iPad sales look weak, but I'm in the name until at least the mid $300's if not low $400's......

While traders always have to face facts, the news today for BIDU shorts wasn't good news, but I'm sticking with my view that I'd like to short BIDU very shortly.  Luckily I've have not shorted it yet.  My view is the GOOG pullout is largely priced in (85-90%), and this news may hurt short term but doesn't dramatically change what was already known -- especially given that we have had a substantial buy the rumor run.  If BIDU were to attain the $580/590's and hold in that range I may finally pull the trigger short with puts.

long AAPL

Is A Shakeout Still On The Way?

I guess a correction that lasted for the full day would have been too much to ask of this market. After a bit of profit-taking in the morning, the dip-buyers found their footing after the lunch hour and took us back up close to even for the day by the close. Volume was very light, but we had a different mix of action today. Leadership came from normally stodgy stocks such as WMT, GE and MCD.  Retailers continued to act as though consumers can't spend their money fast enough, but overall breadth was negative. The dollar was stronger, and that weighed on oil, coal, steel and commodities, but gold has come uncoupled from the dollar lately and traded up. I'm sure the buy-and-holders are pleased with how quickly we bounced, but this sort of action sure isn't yielding many good trading setups. We are still too extended and haven't got sufficient volatility to give us better entry points. It isn't easy to load up longs here, but trying to short this market has been far more difficult. Last week a columnist on Real Money talked a little about a quick "whack" to help shake out some of the complacency. I think conditions might still support something like that this week, and I'm keeping a close watch on my long positions. It is a tricky environment, and we have to make sure we stay on guard........

Friday, March 12, 2010

Tech Stuff

The research I've seen and my checks are saying that AAPL iPad pre-orders are strong......I've got to get into NVDA right here.............The UK is looking to be the next scare story and is that what we need to get to eliminate CDS's without "insurable interest"?  It seems this concept is heating up rapidly but called naked swaps......We are going to see a whole lot of novel tech hit the broadband sector fairly soon again......3D TV's are heating up, there could be some opps in the chip space.......Now combine, always-on iPad's, iPhones, streaming video proliferating and now 3D TV over the big fiber pipes and the amount of data traffic is set to re-explode......BRCM sits right in the middle of all this but so do a few other chips

long AAPL

Mild Profit-Taking.....

We were due for a rest and maybe some end-of-the-week profit-taking, but all the bears could manage was a close just a few pennies into negative territory. It was a flat day of action, but breadth was weaker for the first time in a while. Volume picked up a little, but for a market at its highs, it was a very quiet day. The dollar has some notable weakness, but that was not a market driver like it has been in the past. Oil and steel did well, but gold was in the red. Retailers were strong on good sales news, but there has been a tremendous run in the group, and it looks extremely extended at this point. 

Of course, almost everything is extended after the market run over the past month. It has made for some challenging trading if you don't like to chase stocks that have made big moves. Unfortunately, for the bears, there are still very few signs of weakness. Other than being overextended, there are no glaring negatives in the technical action. Of course, there are there are plenty of very bearish fundamental arguments that can be made, but that has been the case for a year now, and it just hasn't mattered very much. You would think that we have already priced in all the possible positives, but arguing with this market is not a good way to make money. Almost all of our big rallies over the past year have started at the beginning of the month and then we would struggle in the last week or two of the month. September, October and November last year are particularly good examples. We reach the midpoint of March next week, so I'll be watching for this pattern to repeat itself. 

Turn your clocks ahead this weekend! 

Thursday, March 11, 2010

A Rally With No Joy.....

The most bullish thing about this market is that just about everyone is mystified by the very persistent strength. Even some of the perma-bulls are declaring things too extended to buy at his point. For a while, it looked like we might actually end up with a little red on the screen, but with so many folks rooting for some weakness, it wasn't too difficult for the bulls to pull off a late-day squeeze that took us out at the highs. The Russell 2000 is now up nine straight days in a row and 20 of the last 22 days, while the Nasdaq 100 is up 11 days in the row. 

The move today was small and came on declining volume, but anyone trying to call a top was very frustrated once again. One of the most interesting things about this market is that there sure doesn't seem to be a lot of joy or excitement. It often felt the same last year when these sharp upside moves were more a cause of frustration rather than celebration. It is a much different feeling than what we had back in the bubble days or when we had some big rallies a few years back. I'd love to provide some fresh new insights about this market, but the situation has been the same for over a week now. We are very extended and have had no consolidation, and we are showing no signs of weakness at all. I think the bulls were on a mission for the S and P 500 to make a new high over 1150. We did manage to close just a few cents above that level, so now we have a new high for the year in that index. The 1150 level is the very obvious place to set buy stops. 

The classic scenario is that we break to a new high and trigger the buy stops, and that causes shorts to cover and new buyers to jump in, and then we reverse. Nothing about this market has been very logical lately, so I'm not too quick to embrace that scenario, but if we are ever going to reverse, you have to be looking for a situation like that. Trading this very lofty market is not an easy task, but it is the nature of the beast, and we just have to keep at it. The key to success is to just keep plugging along......

Wednesday, March 10, 2010

Still Chugging Along...

Although the gains weren't that big, the winning streak continues. The IWM is now up 19 out of 21 days and for eight days straight.  GOOG was the main driving force behind the Nasdaq 100 today, the second-best index of late after the Russell 2000. The S&P500 is next and it stalled right under the recent highs at 1150. The DJIA is bringing up the rear, but is in very good shape, at just under 10,600. All these indices are strong, but they are also all extended to some degree, though that has been the case for a while and is starting to sound like a quaint, but meaningless label. Breadth was quite good once again, with about 3,800 gainers to about 1,950 decliners. Volume even picked up today, which is something we haven't seen too often during this run. 

Even though the action was very upbeat, there wasn't any group that really distinguished itself. Semiconductors and small banks were the leaders, but oil bounced around and there wasn't any group that market players chased aggressively. This whole run over the past month hasn't really had any red-hot pockets of momentum. A lot of things have acted quite well, but there isn't any one group that is attracting the hot-money players. Another positive day obviously doesn't do much to alleviate the overbought technical conditions, but the pace of the advance has slowed a little and that is helpful. The market doesn't have to go down for us to become less extended. All we need is it for it to churn for a while and not do a whole lot. That sort of consolidation is healthy, because it allows for stocks to move from weaker hands inclined to take profits into stronger hands trying to build longer-term positions. When we don't consolidate, there is a greater risk that a flurry of profit taking will hit and produce a sharp dip lower, keeping new buyers on the sidelines for a while. Although all those up days in a row sound very good, it isn't an easy market to navigate for the active trader. We'll have a shake-up at some point, but for now we just have to keep chugging along and stay very vigilant......

Tuesday, March 9, 2010

Some Random Tech Stuff/2010 Themes

So NVDA is higher on tight chip supplies? We've know that for weeks if not months. I think NVDA should be much higher on these chip constraints. However, they are in the RMBS crosshairs though I doubt the net impact to NVDA is nearly as robust as many of RMBS’s other targets.

I like both of the above names. The stock just has barely responded to incredible news. This is akin to how AAPL traded post earnings and initial iPad news and now it's exploding. I expect RMBS and NVDA to follow suit in the coming weeks.

Web-based video (3-D TV?), bandwidth, and touch-screen technologies are coming to the fore again in 2010 as the promise of 2000 will become realized in 2010.  Too early to see this yet, but I think we will hear about a very compelling broadband stimulus package within weeks/months.....

long AAPL

Are We Extended? Maybe, But That Doesn't Mean We Can't Go Higher....

The dip-buyers pounced on a little gap down this morning and were buying relentlessly until about 2 p.m. EST, when a little profit-taking finally hit. That pushed the Naz back into the red momentarily, but once again the dip-buyers showed up, and we managed a close in the middle in the intraday range. Market players are so used to this market that never seems to dip that our little afternoon swoon actually felt more significant than it really was. Overall, it was still a victory for the bulls. Breadth was positive, and there wasn't any real notable weakness. Retailers, oil and semiconductors lagged, but financials were perky on rumors about possible restrictions on shorts. 

The technicians are out there saying it just isn't possible to be wildly bullish when we "need" consolidation so badly, but the old adage about not fighting the trend can't be overlooked. We really need a better shakeout to set up some better opportunities, but this market seems to be in no hurry to make things easier for anyone......

Monday, March 8, 2010

Same Stuff

It ended up being a pretty flat day, but the IWM is now up 18 of the last 20 days and we are still extremely overbought. Just about everyone agrees that this market could use a little rest ... which is probably the main reason that we aren't getting it. Although the major indices were slightly red and volume was light once again, we still had good breadth and little notable weakness. The dollar bounced back intraday, which put a little pressure on gold and oil but steel, homebuilders, retail and technology stocks offset weakness. So once again we are in this position that we found ourselves in many times last year: We have gone straight up on light volume, have cut through resistance with barely a pause and are technically overbought but we are showing no signs of weakness. The easiest thing in the world to do here is to look for some weakness or profit-taking, but that has been the easiest thing to do for a week now. 

Sooner or later we will pull back, but a lot of bears have already gotten in deep trouble by jumping in too early.  Many bears see the China stocks providing some good opportunities, but until we actually see some selling they're not pressing the dark side. Shorts may look to hit the CSCO news, but I'm not so sure they'll be successful......

AAPL Is A Hedge Fund Battleground Stock....

For hedge funds, AAPL is the battleground of a broad market war. If they can move Apple up, the rest of the market will follow. If they can move Apple down, the rest of the market will follow.

Since October, this Apple slingshot action has happened six times; it's time to document a seventh. On Feb. 25, Apple was at $196. and it jumped $23 in the next six trading days. The slingshots move in approximately $20 increments.

So what should we do now? Will AAPL drop $20 like it normally does, or is this finally the run that takes Apple up to higher levels? One of these times Apple will break the trend and won't selloff. The strong fundamentals of this stock are based on its increasing rate of earnings per share that is being generated from market-share gains of the iMac and iPhone; as well as the introduction of the iPad.

Earnings growth is reason enough for the stock to go up. What makes the Apple story especially intriguing is the valuation. Casual investors tend to think that the current price is high. Nothing could be further from the truth.

From a valuation standpoint, this stock hasn't been lower since Steve Jobs returned to the company more than 10 years ago. The recession punished Apple by taking away its P/E multiple. If the market decides to return the Apple multiple back to its norms, it will cause Apple stock to receive a double whammy of improved earnings and an increasing multiple at the same time.

Earnings per share of $14 in 2010, in addition to a P/E multiple of 25, brings us to a stock price of $350. Apple at $350 wouldn't even be expensive. My definition of expensive would be a P/E multiple of 40 - based on AAPL's expected growth rate. Consider that AMZN has a current P/E multiple of 63, with a lower growth rate than AAPL.  Apple with a P/E multiple of 40 would equal a $560 stock price and if they got the Amazon 63 it would put Apple at $882. Will Apple get their cake (earnings expansion) and eat it too (multiple expansion)? We shall see. This is setting up to be the trade of the year.....

long AAPL

Friday, March 5, 2010

Lowered Expectations Do Help Quite A Bit....

Lowered expectations for the monthly jobs report due to poor weather set the stage for a gap-and-run reaction to a decent report. Once again, it was straight up on good breadth but mediocre volume. That has been the case every day this week, as an overbought market become more overbought. If the buyers have any worries or doubts, they aren't showing them. There isn't much new that can be said about this amazingly strong market. Any and all bearish fundamental and technical arguments are just plain wrong. It doesn't matter who you are or how smart you are, if you don't love this market, then you are on the wrong side of the action. 

The problem is: There is no way to be logical about when we might see a possible top. We are already past the logical points were we should have reversed course, or maybe struggled a bit. If you can't use logic, then the only alternative is to have faith, and that seems to be the best investment approach right now.  This parabolic move has picked up steam all week, but we are heading into a Monday, which has been the best performing day of the week by far, over the past year. The way to make the big money in the market is to ride the trend, but if you aren't at least a little nervous when we are this extended, then you probably weren't trading to the bottom last March. The bulls certainly deserve respect. Still, you have to wonder how much longer they can continue this sort of action........

Thursday, March 4, 2010

Will We Sell The Job News - Or Is It A Bear Trap?

For the third day in a row, we had some mildly positive action, which means that the IWM is now up 15 of the last 17 days.  The senior indices haven't done quite as well, but they sure aren't pulling back much. Once again, we had good breadth, but volume was lighter on the Nax.  The higher dollar was the biggest negative today, but market players shrugged it off and loaded up on retailers instead. Buyers continued to chase some very extended charts and didn't seem to be at all worried about the jobs report that is due in the morning. The Obama administration has already lowered expectations with comments that poor weather may affect the numbers. I don't know if that is true, but it makes it easy for the bulls to dismiss a soft number. So the pattern of an extended market just becoming more extended continues. With the way retail stocks are acting, you would think we are in a booming economy that is creating tons of new jobs rather than losing them at a slower rate. The best way to deal with this is to ignore any logic that leads you to a bearish conclusion. This market has very stubborn and persistent buyers, and they are not going away just because some bears happen to believe that the economy isn't really all that great. We are set up fairly well for a sell-the-news reaction to the jobs report in the morning, but I'm not sure that's going to happen.  My gut tells me we won't sell off tomorrow.....If the news is better than expected and we gap up, many technical dudes out there will definitely be looking at selling and shorting though.....

The President's Against Real Health Care Reform

Unnoticed at the summit was a diatribe in which President Obama showed he has no patience for any kind of health-care reform that most Republicans, most economists and many non-ultra left Democrats believe in—namely the kind that corrects the incentives that inflate costs.

Back in 1992 there were an epic series of Senate Finance hearings. They represented a remarkable meeting of minds across a broad swath of health-care wonks and economists (not interest groups) that the original sin was the exclusion of employer-provided health insurance from taxable income—imposed carelessly by the IRS in 1943 so defense contractors could compete for workers without transgressing Roosevelt-era wage and price controls.

Everybody knows this turned "insurance" into something else. Call it prepaid health care, as Milton Friedman did. Call it a giant tax Laundromat for the nation's private health spending.

It became a massive subsidy to third-party payment, an incentive to channel every ache and pain through an "insurance" bureaucracy. It became an incentive for the most economically competent Americans—the secure, high-earning employees of corporate America—to overspend on health care, treating it as a free good.

What a surprise that the medical-industrial complex reorganized itself in light of this central driver. Nobody was looking for price tags so price tags disappeared, as did any competition on price, and any clarity on price versus value.  Simple.

To Mr. Obama, however, such insurance is insurance—the way it's supposed to be, and anybody who doesn't agree must be smoking something.

Self-evidently idiotic, he indicated at the summit, is the idea that health insurance might go back to being "the equivalent of Acme Insurance that I had for my car. . . . It's basically not health insurance. It's house insurance. . . .

"I'm buying that to protect me from some catastrophic situation; otherwise, I'm just paying out of pocket. I don't go to the doctor. I don't get preventive care. There are a whole bunch of things I just do without. But if I get hit by a truck, maybe I don't go bankrupt."

We won't unpack the assumptions in this rant: That the affluent, educated beneficiaries of this tax loophole aren't capable of spending wisely on their own health care.

Mr. Obama hereby chucks over the side virtually all creative thinking about our health-care predicament, not to mention the single worthwhile policy innovation of the past two decades, the health savings account. In an unwisdom that he will probably come to understand only in his later years, Mr. Obama wastes the umpteen months his predecessor spent stumping the country for HSAs as a way to give consumers some financial "skin in the game." It was a theme voters could grasp because it made sense, unlike the Rube Goldbergism of Mr. Obama's health-care plan.

This week even Warren Buffett called the Obama plan "2,000 pages of . . . nonsense," adding, "The problem is incentives."

Here, Mr. Obama squanders the opportunity his presidency represented. For it's entirely possible to visualize incorporating this insight about the proper role of insurance with a system of guaranteed coverage and individual mandates à la ObamaCare, and indeed back when Mr. Obama was believed to be smart, we would have guessed this was the direction in which he would head.

Like any real reformer, he would have challenged both parties down to their ideological socks. Republicans would have had to swallow a universal mandate in return for an across-the-board tax cut to compensate workers for loss of the health insurance loophole.

Mr. Obama says he's content to be a single-term president. The soonest, then, we can hope for real progress on health care is three years.

His failure calls for some historical perspective. An enduring mystery is why Jimmy Carter insists on preaching about foreign policy when his real achievements were in the realm of domestic deregulation. OK, the ideas were hatching away in the back of the Nixon administration, brought forward by Ford and continued into Reagan's first term with the defeat of inflation and passage of the 1986 tax reform.

But altogether it was a period of the greatest domestic policy innovation, based on a profound bipartisan learning about the defects of what went before, namely 90 years of the "Progressive" regulatory urge.

Mr. Obama is turning out to be Jimmy Carter on foreign policy, but he's no Jimmy Carter on domestic economic policy.

In fact, he's turning out to be exactly what you fear getting when you elect a glossy unknown: a gift to the world (in his own eyes) with no real grit.

It's going to be a long three years.......

Wednesday, March 3, 2010

Pretty Good

This morning, our overbought market seemed set to get even frothier, but after a bout of profit-taking , we ended mostly flat. Breadth was still quite positive on the Nasdaq, which also boasted higher volume than the NYSE, where breadth was around even. I don't know what accounts for this difference in the NYSE and Nasdaq volume patterns of late, but it certainly makes the latter look better. Some market players cited the Beige Book for the selloff, while others blamed President Obama and the proposed "Volcker Rule" for bank regulation. I believe we were simply due for a rest; we would have found a reason, no matter what the news. Even with the softer action this afternoon, it is hard not to be impressed by the strength of the action lately. We easily broke through overhead resistance, and the pullbacks have been very mild. I'm amazed at the number of parabolic moves I'm seeing. If there is much worry out there, the action sure doesn't reflect it. With the IWM up 14 out of the past 16 days, you aren't going to find a lot of easy buy points, but this action has the same character as what we saw last year, and it has persisted to a much greater extent than nearly anyone had expected.  Bulls seem to have control right now.

What A President We Have.....

GS and JPM are selling off again because Obama is sticking with the Volcker "plan."  This president of ours is placing bets on the Colts in the Super Bowl and on 'Nova against Syracuse. It is ridiculous. Is he wagering on the U.S. against Canada in ice hockey? Does he think it is all a game? Does he just want the stock market to go down? What is he all about? Who is advising this guy? Why does he want to make himself irrelevant? THE VOLCKER RULE HAS NO CHANCE TO SUCCEED. None. Shorts now banging down GS and JPM again.  This is pathetic.  I think I'm gonna buy some GS and/or JPM leaps and just wait for some sanity.  GS has to be looking very hard right now at going private......

Tuesday, March 2, 2010

Extended (Maybe), But Not Showing Much Weakness Yet

It has been a while since we have had a weak finish, but the buyers finally ran out of steam and gave back some of the day's gains. Even so, it was still a mostly positive day. Breadth was solid at close to 2 to 1 positive, and the "weak dollar" plays, particularly gold and oil, led to the upside. Lately we haven't been hurt much by a stronger dollar, but when it is weak, it is still a positive. Small-caps have been the leaders of this market for some reason that escapes me, but it was the strength in some of the bigger caps like AMZN and GOOG that has driven the broader market the last two days. 

Small-cap indices are near highs while the senior indices still face technical overhead on the underside of the January highs. Given how easily the small-caps have overcome the same levels, I'm not sure how significant that overhead is. The market is back in a very familiar place with a straight-up move and some overbought conditions but few signs of weakness. It is quite easy to make good arguments for why we should pull back, but the market doesn't much care how smart the bears are. If we are going to pull back, we are at a point where it seems logical, but that was the case on Friday as well. Just sitting and holding is the approach that works, but for active traders it isn't easy when you have a market in the position that we are in now.....

Monday, March 1, 2010

The Return Of Mo

The bulls really came to life today, and although the DJIA was only up about 75 points, the action under the surface was much stronger. Small-caps and big-cap technology led the way on 3-to-1 positive breadth. The inverse correlation with the dollar didn't apply today, and we saw good moves in oil, coal, steel and various commodities. The bears focused on the underperformance of financials, but there just weren't too many negatives to be found. Most interestingly, there wasn't any obvious catalyst for the strength. Some news agencies used the AIG, MIL and OSIP deals as an explanation for the jump, but there really wasn't any obvious factor for such energetic action. Technically we have been struggling right around the 50-day moving average but we cut through that with the gap up open and kept ramping up the rest of the day. The action today is very reminiscent of what we had in 2009. Underinvested bulls had to suddenly scramble to add long exposure and the bears had to run for cover. We even had light volume on the NYSE again as the Naz saw a solid increase. The momentum is back, and while you might come up with some very good argument why you don't trust it to last, you can't be very confident trying to fight it. This market has consistently run over anyone who doubts its ability to bounce. The bounce over the last three weeks has not been as vigorous as what we had seen last year, but the action today made up for it. Once again the bulls have regained the upper hand - it would probably be best to respect that fact.