Investing Strategies v.2010

Having a Hard Time

Posted by admin under Original Pages

I’m having a hard time on what positions to put on, everyone thinks that we’re due for a pullback and I agree, but everyone is usually wrong. I’m watching the Euro and it seems as though it’s trading in a range right now. I almost pulled the trigger yesterday to short it at 1.4445 and I didn’t, boy don’t I feel stupid. I just need to go with my setups and my gut, that’s usually the best way for me to trade. Put my stops in and let them do the work. I usually have good setups and entries, it’s my exits that need work.

JA Solar Holdings, Co., Ltd.

Posted by admin under Trading Longs

I’m watching JASO a solar holdings company for a breakout. $6.40 has been resistance the last 2 times and if it clears that level, then I will be buying above and any pullbacks. Volume is picking up as well.

JASO

Holy Shit, it’s 2010 already

Posted by admin under Original Pages

This is my 1st post for 2010. I haven’t posted much in 2009, but I did trade a bit. I discovered the futures market and will be writing about it here as well as ETF and stock trades.

Kass: 20 Surprises for 2009

Posted by admin under Original Pages

Without further ado, here is my list of 20 surprises for 2009. In doing so, we start the new year with the surprising story that ended the old year, the alleged Madoff Ponzi scheme.

1. The Russian mafia and Russian oligarchs are found to be large investors with Madoff. During the next few weeks, a well-known CNBC investigative reporter documents that the Russian oligarchs, certain members of the Russian mafia and several Colombian drug cartel families have invested and laundered more than $2 billion in Madoff’s strategy through offshore master feeders and through several fund of funds. There are several unsuccessful attempts made on Madoff and/or his family’s lives. With the large Russian investments in Madoff having gone sour and in light of the subsequent acts of violence against his family, U.S./Russian relations, which already were at a low point, are threatened. Madoff’s lawyers disclose that he has cancer, and his trial is delayed indefinitely as he undergoes chemotherapy.2. Housing stabilizes sooner than expected. President Obama, under the aegis of Larry Summers, initiates a massive and unprecedented Marshall Plan to turn the housing market around. His plan includes several unconventional measures: Among other items is a $25,000 tax credit on all home purchases as well as a large tax credit and other subsidies to the financial intermediaries that provide the mortgage loans and commitments. This, combined with a lowering in mortgage rates (and a boom in refinancing), the bankruptcy/financial restructuring of three public homebuilders (which serves to lessen new home supply) and a flip-flop in the benefits of ownership vs. the merits of renting, trigger a second-quarter 2009 improvement in national housing activity, but the rebound is uneven. While the middle market rebounds, the high-end coastal housing markets remain moribund, as they impacted adversely by the Wall Street layoffs and the carnage in the hedge fund industry.

3. The nation’s commercial real estate markets experience only a shallow pricing downturn in the first half of 2009. President Obama’s broad-ranging housing legislation incorporates tax credits and other unconventional remedies directed toward nonresidential lending and borrowing. Banks become more active in office lending (as they do in residential real estate lending), and the commercial mortgage-backed securities market never experiences anything like the weakness exhibited in the 2007 to 2008 market. Office REIT shares, similar to housing-related equities, rebound dramatically, with several doubling in the new year’s first six months.

4. The U.S. economy stabilizes sooner than expected. After a decidedly weak January-to-February period (and a negative first-quarter 2009 GDP reading, which is similar to fourth-quarter 2008’s black hole), the massive and creative stimulus instituted by the newly elected President begins to work. Banks begin to lend more aggressively, and lower interest rates coupled with aggressive policy serve to contribute to an unexpected refinancing boom. By March, personal consumption expenditures begin to rebound slowly from an abysmal holiday and post-holiday season as energy prices remain subdued, and a shallow recovery occurs far sooner than many expect. Second-quarter corporate profits growth comfortably beats the downbeat and consensus forecasts as inflation remains tame, commodity prices are subdued, productivity rebounds and labor costs are well under control.

5. The U.S. stock market rises by close to 20% in the year’s first half. Housing-related stocks (title insurance, home remodeling, mortgage servicers and REITs) exhibit outsized and market-leading gains during the January-to-June interval. Heavily shorted retail and financial stocks also advance smartly. The year’s first-half market rise of about 20% is surprisingly orderly throughout the six-month period, as volatility moves back down to pre-2008 levels, but rising domestic interest rates, still weak European economies and a halt to China’s economic growth limit the stock market’s progress in the back half of the year.

6. A second quarter “growth scare” bursts the bubble in the government bond market. The yield on the 10-year U.S. Treasury note moves steadily higher from 2.10% at year-end to over 3.50% by early fall, putting a ceiling on the first-half recovery in the U.S. stock market, which is range-bound for the remainder of the year, settling up by approximately 20% for the 12-month period ending Dec. 31, 2009. Foreign central banks, faced with worsening domestic economies, begin to shy away from U.S. Treasury auctions and continue to diversify their reserve assets. By year-end, the U.S. dollar represents less than 60% of worldwide reserve assets, down from 2008’s year-end at 62% and down from 70% only five years ago. China’s 2008 economic growth proves to be greatly exaggerated as unemployment surprisingly rises in early 2009 and the rate of growth in China’s real GDP moves towards zero by the second quarter. Unlike more developed countries, the absence of a social safety net turns China’s fiscal economic policy inward and aggressively so. Importantly, China not only is no longer a natural buyer of U.S. Treasuries but it is forced to dip into it’s piggy bank of foreign reserves, adding significant upside pressure to U.S. note and bond yields.

7. Commodities markets remain subdued. Despite an improving domestic economy, a further erosion in the Western European and Chinese economies weighs on the world’s commodities markets. Gold never reaches $1,000 an ounce and trades at $500 an ounce at some point during the year. (Gold-related shares are among 2009’s worst stock market performers.) The price of crude oil briefly rallies early in the year after a step up in the violence in the Middle East but trades in a broad $25 to $65 range for all of 2009 as President Obama successfully introduces aggressive and meaningful legislation aimed at reducing our reliance on imported oil. The price of gasoline briefly breaches $1.00 a gallon sometime in the year. The U.S. dollar outperforms most of the world’s currencies as the U.S. regains its place as an economic and political powerhouse.

8. Capital spending disappoints further. Despite an improving economy, large-scale capital spending projects continue to be delayed in favor of maintenance spending. Technology shares continue to lag badly, and Advanced Micro Devices (AMD Quote – Cramer on AMD – Stock Picks) files bankruptcy.

9. The hedge fund and fund of funds industries do not recover in 2009. The Madoff fraud, poor hedge fund performance and renewed controversy regarding private equity marks (particularly among a number of high-profile colleges like Harvard and Yale) prove to be a short-term death knell to the alternative investments industry. As well, the gating of redemption requests disaffects high net worth, pension plan, endowment and University investors to both traditional hedge funds and to private equity (which suffers from a series of questionable and subjective marking of private equity deal pricings at several leading funds). Three of the 10 largest hedge funds close their doors as numerous hedge funds reduce their fee structures in order to retain investors. Faced with an increasingly uncertain investor base, several big hedge funds merge with like-sized competitors in a quickening hedge fund industry consolidation. By year-end, the number of hedge funds is down by well over 50%.

10. Mutual fund redemptions from 2008 reverse into inflows in 2009. The mutual fund industry does not suffer the same fate as the hedge fund industry. In fact, a renaissance of interest in mutual funds (especially of a passive/indexed kind) develops. Fidelity is the largest employer of the graduating classes (May 2009) at the Wharton and Harvard Business Schools; it goes public in late 2009 in the year’s largest IPO. Shares of T. Rowe Price (TROW Quote – Cramer on TROW – Stock Picks) and AllianceBernstein (AB Quote – Cramer on AB – Stock Picks) enjoy sharp price gains in the new year. Bill Miller retires from active fund management at Legg Mason (LM Quote – Cramer on LM – Stock Picks).

11. State and municipal imbalances and deficits mushroom. The municipal bond market seizes up in the face of poor fiscal management, revenue shortfalls and rising budgets at state and local levels. Municipal bond yields spike higher. A new Municipal TARP totaling $2 trillion is introduced in the year’s second half.

12. The automakers and the UAW come to an agreement over wages. Under the pressure of late first-quarter bankruptcies, the UAW agrees to bring compensation in line with non-U.S. competitors and exchanges a reduction in retiree health care benefits for equity in the major automobile manufacturers.

13. The new administration replaces SEC Commissioner Cox. Upon his inauguration, President Obama immediately replaces SEC Commissioner Christopher Cox with Yale professor Dr. Jeffrey Sonnenfeld. The new SEC commissioner recommends that the uptick rule be reinstated and undertakes a yearlong investigation/analysis into the impact of Ultra Bear ETFs on the market. Later in the year, the administration recommends that the SEC be abolished and folded into the Treasury Department. Dr. Sonnenfeld returns to Yale University.

14. Large merger of equals deals multiply. Economies of scale and mergers of equals become the M&A mantras in 2009, and niche investment banking boutiques such as Evercore (EVR Quote – Cramer on EVR – Stock Picks), Lazard (LAZ Quote – Cramer on LAZ – Stock Picks) and Greenhill (GHL Quote – Cramer on GHL – Stock Picks) flourish. Goldman Sachs and Citigroup announce a merger of equals, but Goldman maintains management control of the combined entity. Morgan Stanley (MS Quote – Cramer on MS – Stock Picks) acquires Blackstone. Disney (DIS Quote – Cramer on DIS – Stock Picks) purchases Carnival (CCL Quote – Cramer on CCL – Stock Picks). Microsoft (MSFT Quote – Cramer on MSFT – Stock Picks) acquires Yahoo! (YHOO Quote – Cramer on YHOO – Stock Picks) at $5 a share.

15. Focus shifts for several media darlings. Though continuing on CNBC, Jim “El Capitan” Cramer announces his own reality show that will air on NBC in the fall. At the time his reality show premieres, he also writes a new book, Stay Mad for Life: How to Prosper From a Buy/Hold Investment Strategy. Dr. Nouriel Roubini continues to talk depression, but the price of his speaking engagements are cut in half. He writes a new book, The New Depression: How Leverage’s Long Tail Will Result in Bread Lines. “Kudlow & Company’s” Larry Kudlow proclaims that it’s time to harvest the “mustard seeds” of growth and, in an admission of the Democrats’ growing economic successes, officially leaves the ranks of the Republican party and returns to his Democratic roots. Yale’s Dr. Robert Shiller adopts a variant and positive view on housing and the economy, joining the bullish ranks, and writes a new book, The New Financial Order: Economic Opportunity in the 21st Century.

16. The Internet becomes the tactical nuke of the digital age. The Web is invaded on many levels as governments, consumers and investors freak out. First, an act of cyberterrorism occurs that compromises the security of a major government (similar to the attacks this year emanating from the Chinese military aimed at the German Chancellery) or uses DoS against media and e-commerce sites. Second, a major data center will fail and will be far worse than the 1988 Cornell student incident that infected about 5% of the Unix boxes on the early Internet. Third, cybercrime explodes exponentially in 2008. Financial markets will be exposed to hackers using elaborate fraud schemes (such as liquidating and sweeping online brokerage accounts and shorting stocks, then employing a denial-of-service attack against the company). Fourth, Storm Trojan reappears. (Same as last year.)

17. A handful of sports franchises file bankruptcy. Three Major League Baseball teams fail in the middle of the season and seek government bailouts in order to complete the season. The Wilpon family, victimized by Madoff, sells the New York Mets to SAC’s Steve Cohen. The New York Yankees are undefeated in the 2009 season, and Madonna and A-Rod have a child together (out of wedlock).

18. The Fox Business Network closes. Racked by large losses, Rupert Murdoch abandons the Fox Business Network. CNBC rehires several prior employees and expands its programming into complete weekend coverage. Two popular CNBC commentators “go mainstream” and become regulars on NBC news programs.

19. Old, leveraged media implode. The worlds of leverage and old media collide in a massive flameout of previous leveraged deals. Univision and Clear Channel go bankrupt. The New York Times (NYT Quote – Cramer on NYT – Stock Picks) teeters financially.

20. The Middle East’s infrastructure build-out is abruptly halted owing to “market conditions.” Lower oil prices, weakening European economies and a broad overexpansion wreak havoc with the Middle East’s markets and economies.

Potential Trade Setups for me

Posted by admin under Original Pages

Shorts

AZO
BA
CL
CNI
CNQ
COH
CVX
DO
HPQ
LH
MMM
MON
NKE
POT
QQQQ
TGT
UNP
UPS
VZ
WYNN
XOM

LONGS

APOL

APWR

AUY

BHI

BWA

CBS

CCO

FCX

AKS

KBR

MOS

Fear Meter

Posted by admin under Investing

http://zignalsblog.blogspot.com/2008/10/s-moving-average-behaviour-revisited.html

Official Announcement: in light of the ‘bailout’

Posted by admin under Inspired

The Black Swan

Posted by admin under Investing

With Yesterday’s Massive Drop in the DOW, S&P and NASDAQ, some might say a Black Swan event occured. Taken from Wikepedia. “The black swan theory refers to a large-impact, hard-to-predict, and rare event beyond the realm of normal expectations.”

Dan Fitzpatrick’s Take on the Credit Crisis

Posted by admin under Investing

Dan Fitzpatrick

The magnitude and complexity of the issues currently facing our global capital markets is unprecedented.  Comparisons are being made to 1929, but I think that misses the mark because of the intricate and far-reaching financial relationships between public and private institutions across the globe.

Simply put, this isn’t just a case of some bad market bets made by a big hedge fund run by a bunch of Nobel laureates.  It’s much more than that.  It runs deeper than that — by billions (if not trillions) of dollars!

If you really want a non-partisan grasp of the things that led to this, try reading this article in the Financial Times.  The author holds Alan Greenspan largely accountable.  Certainly Greenspan–despite his recent and consistent attempts to revise statements made during the glory years–was a key player in what has certainly damaged our financial markets forever.  Frankly, the extent of the damage remains unknown because there is no assurance that the current “fixes” being proposed by the folks who are now holding the bag will be anything more than a longer fuse on a bomb that they are now packing with more explosive.  Might work…might not.

It seems to me that the actions taken by Paulson, Bernanke, et al., have a great chance of making the best (a relative term, to be sure) of the worst situation I’ve seen in my life.  Reducing risk through decreases in leverage — a good thing, since those who were so highly leveraged have provided irrefutable evidence that their degree of competence was woefully inadequate relative to their degree of financial firepower.  You can dispute this if you want, and rationalize that all these Wall Street brainiacs just got themselves into a bad situation.  But such a conclusion flies in the face of the the facts.  These (expletive deleted) raped the financial landscape in ways that directly impact the global economy and created what I believe amounts to a national security problem with a breathtaking combination of greed, arrogance, hubris, and more than a modicum of bullshit.

Let’s face it — the only folks who are certain that the wide-ranging and unprecedented steps being taken by the government will actually work are lying to you.  They are doing the best that they can…but the linchpin in the current approach is regaining the confidence of the investor; of the consumer, and of the banks!  If the consumer doesn’t buy the story, the consumer doesn’t buy.  And if the banks decide to hoard the cash rather than loan it out — the banks don’t lend and the borrower can’t borrow.  And, of course, that old saying that we should “never underestimate the power of the American consumer” really means that we should “never underestimate the blind willingness of the American consumer to borrow funds to finance a lifestyle that they are unable to afford rather than to save for retirement.”

Be that as it may, we do need a major uptick in consumer confidence to right the ship.  And when things are so skewed that no simple or short-term approach will work, the best chance to get the consumer on board is to include a healthy heaping of B.S. on top of the best plans they can come up with.  That’s what’s happening now.  Paulsen, Bernanke, et al., are doing the best that they can, but their success depends on hoodwinking the public into believing in their solution, even though it is far from certain that the solution will right the ship…and right it quickly.

But the genesis of our current situation goes much deeper than the hubris of Greenspan or the greed of bankers.  Instead, this is a tale of intellectual laziness and greed on the part of our politicians, lobbyists, regulators and common citizens.

Few things in life are free, and riskless prosperity is a myth.  It was always a myth, despite the indulgent and self-promoting speeches by our former Fed Chairman who continually bragged about the new complex derivatives that essentially allowed lenders to lay off their risk and create a never-ending stream of cheap money for all who wanted it.  It sounded great and there was ample reason to buy into this.  In fact, there was every reason but one to accept what Greenspan was saying as gospel.  The one fly in the ointment was that it just wasn’t true.  Getting rich requires taking risk.  Take risk out of the equation, and the opportunity for wealth dries up.  Greenspan was hawking prosperity without risk.  And man, was he popular for doing so!  We had the “briefcase indicator” on CNBC when the guy walked across the street.  The markets would pause when he was giving a speech.  The entire financial world revolved around Planet Greenspan.

But it’s not the guy’s fault as much as it is the fault of the special interest groups, politicians, bankers, mortgage brokers, and borrowers in search of quick bucks and lots of votes and PAC money.  The list of accomplices is long.  The list contains both honest folks and criminals alike.

It’s enticing to blame the crooks.  Let’s just blame the predatory lenders who sold borrowers bad loans.

Well, that doesn’t work.  There are crooks everywhere and there are ample laws on the books prohibiting unlawful lending practices.  Those who broke the law will get their comeuppance.
But placing the blame on crooks, while appealing to the intellectually lazy, is silly, pointless and unhelpful.  Why?  Because the crooks that made out in the years that led up to where we are now were just exploiting the situation.  That’s what crooks do!  They exploit opportunity.  No exploitable opportunity, no crime.

Want to avoid having your car stolen.  Then don’t leave it unlocked in an unsavory part of town with the engine running while you stroll down the street looking for a pack of smokes!

Remember Willie Sutton, the famous bank robber from the 1930’s?  When asked why he robbed banks, he said, “Because that’s where the money is!”  He also carried a gun.  Why?  “Because you can’t rob a bank on charm and personality.”

Well, with so much dumb money flowing into an industry flooded with unsophisticated and poorly capitalized (read: “broke”) borrowers, Willie Sutton could have left his gun at home.  All that was needed over these past several years was charm and personality.  If you were a likeable person who could build trust on the strength of your personality, then you had a job in the loan business.

But forget the lenders.  What about the borrowers?  If you bought real estate that you could not afford for the sole purpose of flipping it for a profit, then one of two things happened.  Either you made money on the deal [Congratulations on a great trade], or you are upside down.  And if you’re upside down, you may be facing foreclosure or at least a long holding period.  In that case, you deserve what you get.  Period.  This is a free country, my friend.

You make your own choices and reap the profits or losses that flow from those choices.

The Trading Connection

There are a several takeaways from this that we can all learn as traders.

1. The Problem with Leverage: If you buy low and sell high, you’re a winner.  If you use more leverage, then you make even more money.  But if you buy high and sell low, you lose money.  And if you use more leverage than you can handle, then you’re out of the game.  That’s trading…and that’s life!
2. Logic Applied to Information Ferrets Out The Risk: Read as much as you can about the issues that impact your financial decisions.  Then apply your own logic.  If something seems too good to be true, it probably is.  There is no such thing as a sure thing…as a riskless trade.  If it seems riskless, you don’t understand the risk.
3. Watch How Stocks React to Information Flow: Stocks of homebuilders began rolling over in mid-2005.  The ultimate depth of the real estate crisis was not known at that time (though guys like Doug Kass had certainly been warning of the impending fiasco during the boom years.  Few listened.).  Once you see the high fliers starting to roll over despite the drumbeat of good news, take a cue from the price action.  You don’t make much money reporting the news.  But you can make a lot of money trading the reaction to the news.  Lazy traders believe the news and base their trades on the news.  Good traders absorb the news, and base their trades on whether stocks are believing the news.
4. Be True to Learning and Profits Will Come.  Trading is hard and you’ve got to take on risk to succeed.  This is a skill game.  While there is an aspect of luck in every facet of life, basing a trade on whether you feel lucky is to disrespect your future prosperity.  The real estate conundrum is no different — folks put all their eggs in a bunch of overpriced baskets.  The problem is that there are plenty of empty baskets now.  Your trading behavior should be geared towards improving your future prospects, not towards the instant gratification derived from “being in the game!”  Every trade offers an opportunity to learn.  Improvement requires learning.  If you don’t learn from your prior trades, you’re just going to repeat your mistakes.  And since the odds are typically with the House, you’ll ultimately lose your money.  Focus on building a future as a successful trader and you’ll become a successful trader.  Focus on finding the sure thing and you’ll pop every bubble that comes along.  The only “sure thing” is that there is no sure thing.

Final Point

I receive a lot of feedback from our members.  Some of it revolves around money that has been made because of trading ideas shared by some of the great traders in the Community Forum, or around losses that have been avoided or minimized due to the discipline that has become a cornerstone of this community.  But the most rewarding feedback I receive doesn’t concern winning or losing because I know that stuff is transient and cyclical.  We’ll all have profits and losses throughout our trading career.  That’s cyclical.  The most rewarding feedback I receive is when I hear how much a member is learning from the association with the Stock Market Mentor.

Unlike profits and losses, learning doesn’t have to be cyclical.  Learning can be the trend that never ends.

Let’s strive to continue learning.  And as for the credit crisis that’s getting so much attention.  Let’s learn all we can from it so that we can avoid falling prey to the next financial fiasco.

And trust me — there is another one right down the road.  How do I know that?  Because everyone is always looking for a quick buck.  And there is no such thing as a quick buck.

–Dan

I held nothing longer than 30 minutes.

Posted by admin under Original Pages

So this week was very interesting to say the least… I’ve never seen so much volatility in the market. The VIX rocketed to 42.16 on Thursday morning as everyone puked up nearly everything they had. The VIX hasn’t been that high since October 2002. WOW. With the government bailout of 85 Billion to Insurance Giant / Insurance Failure AIG The volume of shares traded was Insane! On Tuesday the stock traded over 1.2 Billion shares. This became an awesome day-trader and seemed as if everyone was trading it this way. With wild swings of 300% during the day it was easy to get in and out of this stock for 10% gains in less than 30 minutes. I day-traded AIG 3 times this week.