Thursday, December 31, 2009

Few things the government does right

I just wanted to list a few more things the government has done right:
  1. The internet (the ARPAnet that preceded the internet) the government had a big part in that.
  2. The military fights wars well.
  3. A lot of research and development that has gone to cure disease, the government was a part of.
  4. NASA, the space program

Wednesday, December 23, 2009

ATHX! What a rush!

ATHX. This stock has had an incredible run in the past few days, but yet I still think it has a ways to go. The major news is:
* Pfizer to develop and market Athersys' MultiStem
* Athersys to get up-front payment of $6 mln
* Athersys to receive milestone payments of up to $105 mln, along with tiered royalty payments on worldwide sales.

On this deal along ATHX will get an up-front payment of 6 million dollars. Last year, the company's total revenue of 3.1 million dollars. This 6 million upfront payment along with increase revenue 200%. This is HUGE! With milestone payments of $105 million dollars, this company should begin posting some healthy profits especially since it appears the R&D work has already been done.

Tuesday, an analyst came out with a price target of $8 / share. I believe this is quite possible just due to the amount of cash that will be infused in this company. Add to that the tiered royalty payments by a company who is a leading pharmacial sales company. ATHX $1/share days for over for a long time to come.

Sunday, December 20, 2009

Government can't do anything right?

Everyone loves to say the government can't do anything right. There are plenty of things the government does right. Let's start off with the roads we drive on. Most of them are pretty good. I believe the Interstate System works very well in this country. It's great being able to drive long distances without having to slow down through towns and deal with stop lights. Most of the Interstate roads are in pretty good condition.

Second, consider the military. We have the strongest military in the world. Something to really be proud of. This is another thing that the government does a good job with. Can you imagine a military that is run my private industry? Trying to keep costs down?

Third, the post office does a great job is making sure my rate jacked Citibank and Amerian Express bills make it to me each month. Since 1987, I haven't missed receiving a single American Express statement!

I'm sure that are many other things that government does well. These are just a few examples.

I mentioned in an exchange with a fellow Twitterer that the government has done a good job preventing the economy from totally collapsing. His response was "correct saved it because they screwed it up in 1st place". The economy's collapse was caused by the government believing in total free enterprise and letting our Harvard M.B.A graduates have more freedom in their businesses by removing the very regulations that would have prevented the economic crises in the first place. So, yes, the twitter poster was correct in his statement, but if the government had not have relaxed their rules, the crises would have been subverted. The very people who pushed to have the rules removed, are the same people who ran to the government for help.

Then, when Obama approves the help, but attaches strings to the deal, all of a sudden months later, these companies 'find' the money to pay back the TARP.

As the child of a retired military soldier, I have had the opportunity to live in other countries and would tell you that there is no other country in the world, I would want to live in than the United States of America. Yes, we have our faults like many other countries, but we have a great country. Instead of just saying the government can't do anything right, use those energies to share your ideas for improving the government with your congressman.

My father always taught me the easiest thing to do in the world is complain! I teach my kids not to complain, but find a solution and share those solutions with us.

Sunday, November 29, 2009

Dubai crisis

Honestly, I don't understand why the Dubai crisis should effect any market anywhere. This country doesn't produce anything but oil. In fact, maybe if Dubai fell, Citibank, an American company, could come in an get some of the oil land as collateral and that would be a good thing for America.

Speaking of Citibank, since they own part of Dubai's debt, will Dubai be hit with their 29.9% penalty interest rate along with a $29 late payment fee?

The timing of the Dubai news was classic. Believe me when I tell you it is no coincidence that the announcement came during Thanksgiving afternoon when mostly everyone was involved in Thanksgiving festivities, except for us Twitter obsessed folks, and yes we need therapy! You can also bet, our government along with other governments were well aware of this development long before it was announced publicly. However, I have to give our government credit, it was a great job in management of the news release. If this news had hit during regular market hours, we would have seen a meltdown. Investors would have sold first and asked questions later. The baby would have been thrown out with the bath water (a smart move to make if you don't want to be left holding the bag -- you can always buy your stocks back).

Dubai is not a major contributor to the global markets. They have no economy, no exports except oil. Their main target is to become a major tourist attraction so when they do run out of oil, they aren't turned into a third world country. Their oil reserves are expected to run out in ten years. This is the reason there is this rush to turn the country into a major tourist attraction. Once the oil dries up, Dubai will struggle to avoid third world status.

"Many of the emirates have found that the development of a tourism industry is their best chance for diversification. Dubai, again, continues to be the leader in this field, punctuated by multibillion dollar projects such as the Burj al-Arab hotel, and offshore reclaimed land projects, including the Palm series and The World islands. It has also been the trailblazer in retail tourism, attracting millions of people for shopping festivals held several times throughout the year." --
The recent news is just blip on the radar screen. Banks with major interest in Dabai may suffer in the short term, but I doubt the UAE will allow any one of their countries to go insolvent at this time. I would be great embarrassment to them. However, if Citibank and other banks do to them like they have done to the American people by raising interest rates and penalties, we may see oil prices spike up so that Dubai can pay for these. So once again, the American people will be penalized again and have to pay for the excessive risks the banks have taken on by higher oil costs which is in essence just another tax!

Wednesday, November 4, 2009

Big Reversal Day on good news

Today's market action started out rather well. When the Federal Reserve announced today that they planned on keeping interest rate low for a long time to come, the market really took off. At some point, however; the music stopped playing and the market had a huge reversal.

The NASDAQ at one point was up 26 points and finished down 2 on a pickup in volume. The S&P and the DOW also reversed. They sold into the move, pretty harshly. This typically leads to more downside testing. Cisco is up in the aftermarket and that may help us today.

The news today was the fed. The same folks who said the economy was fine before the crash is now telling us inflation is fine and everything is in check. There is only one way to accommodate for inflation, interest rates will rise to levels we haven't seen in a while. Just like before when nobody thought house prices could drop 40%, we may see interest rates rise to levels nobody thinks is possible. Go study 78, 79, 80 and what interest rates did and why they occured. Bernanke needs to be watched and reconsidered. We will all pay the price a couple of years down the road.

Sunday, October 18, 2009

Fireworks next week!

Consumer confidence seems to be waning. Who can really say we are surprised? Wait, let me put my surprised look on.

The S&P has had 5 distributions days lately and 4 for the Dow.

Got a busy earnings week next week. The earnings reports will drive the market.

Thursday, October 15, 2009

Retail investors. Late to the game

I learned something interesting today. When we are going into earnings, the retail investor may try to buy the stock before the earnings report to get an 'edge'. Who are they buying the stock from? The people who bought the stock during the dips who are using the run-up into earnings to unload and lock in their profits! The reason for the run up is because everyone is anticipating a good earnings report so the earnings report has to really surprise the street in order for the stock to continue it's advance after earnings. This is the reason Goldman Sachs and Citibank beat the street but went down and the same for IBM today.

This knowledge is basic common sense, but until I actually heard it, it didn't 'hit me'.

Wednesday, October 14, 2009

Ten Years of the DOW 0% return! Long term huh?

They had this guy on CNBC telling us people's wealth has increased substantially since the beginning of this year. Come on folks. I go by the Dollar General everyday. Years ago, that parking lot was always empty. Now, you have to fight to get the parking spot out there. The store is always busy now. I have even found myself shopping there. They have excellent prices.

Like I mentioned in my last blog, the credit is gone. The jobs are gone also. This economy is going to be hard to grow without credit and/or jobs. I heard the Citigroup has moved billions of bad mortgages off their balance sheet over the governments (that is you and me folks). This should bode well for manipulating the earnings report in the morning. They will create an illusion that all is well. So folks who are going in and buying $JPM are paying up for the shares based on an illusion. It's ok to trade and make money on the illusion, but just be sure to Get Out when the before the party is over. Be sure to have your stops in so you protect some of our illusionary gains.

Thursday, September 24, 2009

The Credit is Shrinking!

No one is focusing on this. The expansion of our economy depended on the consumers willingness to go into debt. As the great boom continued, more of the expansion depended on credit, not on increasing wages and at the end it was almost all credit expansion. Consumers weren't earning more money. They were using credit and believed that their houses would continue to increase in value. Without all of this borrowing the economy would not have grown as much as it did. Now people have stopped borrowing and now consumer credit is shrinking, not growing. People are fed with up consuming and now are spending their disposable income on reducing debt.

So, our government has decided to borrow on our behalf. They borrow $1.7 trillion dollars and then announce, “Ok, the recession over.”

Market extended, stretched, and overbought

We have had a few real bad scare days. One on Sept 1st, one on August 17th shruged away.

The market is extended, stretched, and overbought, but refuses to give ground. There are a lot of analyst saying this market cannot be for real, it is government injected. Pundits are saying the market cannot hold this move because of the economy is not up to snuff. This is all good news. There is a clear lack of acceptance and that is what makes bull phases continue.

I have no idea how lost this lasts or how far it goes. However, we do know if they can't sell it, they will buy it. This is the nature of the market that many fail to understand. Whatever the market is saying, I really can't call it. It is what it is and there is no use fighting it. I have tried and I've lost. It's been a very painful lesson. Case closed!

Wednesday, September 16, 2009

VVUS Letter to SEC

The actions of the CEO of Vivus, Inc are in my opinion criminal. I have sent an email to the SEC regarding this matter. Hopefully, they will look further into this. Actually, they probably won't, but I've done my part.

I wish to ask that an investigation be opened against the CEO of Vivus, Inc. ticker: VVUS.

Two days ago, Mr. Leland F. Wilson sold over 2.2 million dollars worth of stock in this company. Today, after the market closes, he announces a secondary offering of over 9 million shares. There is no doubt that Mr. Wilson knew of the secondary offering when he sold his shares. Mr. Wilson was also well aware of the effect that a secondary offering would have on the share price. It is my belief, he sold his shares intentionally at the higher price with material knowledge that the share price would drop upon the announcement of the secondary offering. This is a blatant case of insider trading and must be investigated.

Why wouldn't Wilson do that most companies do during a secondary? Offer his shares during the secondary?

Polar Opposites

There was an article written 2 days ago. The highlight was how commercial real estate is in big trouble. In fact, a fed head came out to say commercial real estate is the next shoe to drop. The question to answer is: Why are commercial real estate stocks going up?

Kind of like the opposite of what we say in 07. Stocks kept going down while everybody said things were fine, now we have the reverse situation where everything is going up while everyone thinks the end of the world is still at hand. This is a great lesson for all of us. Polar opposites...extremes on both ends. And how do we harness it going forward? It's called watch the tape. Watch the market and try to stay in gear and it still isn't easy. It is work. It is not for the meek and mild, but let's hope it continues. We are all surprised by this movement and the persistence. And since a lot of people are thinking this too, it is good for the markets.

Sunday, September 13, 2009

Tea Party ....

Could it be that the Tea Party supporters have finally found a place to express their anger?

When the housing market went bust and the value of their homes dropped significantly and the value of the 401k's dropped considerably, maybe they were mad about it, but didn't know who to blame. Now, with government spending out of control and a new president increasing government spending they finally have a place to vent their anger and place blame on somebody.

It looks like Obama and the 'libs' as they like to call them are firmly in their sights.

Consumer Spending Could Boost Markets?

CNBC reports on Sunday, September 13th, that consumer spending could boost markets. This is hard to understand! Across the nation credit limits on credit cards are getting slashed, interest rates are rising on consumer credit cards, and monthly minimum payments for many are also rising. (And as I write this blog, the S&P futures are falling like a flying monkey).

How can the consumer keep the market going when the consumer is getting the triple squeeze? CNBC reported a few days ago that the savings rate was going up. This doesn't support their own report for consumer spending. In addition to these items, stores such as Dollar General are reporting triple digit growth in sales. There are more higher value cars seen in the parking lots of Wal-Mart, Dollar General, Family Dollar, etc. than seen in the past.

Geithner, Gold, and Goldman Sachs

Geithner and the big boys are making a lot of money in this market, with our money, the taxpayers money. When they get ready to roll out and pull the plug on this market, a lot of investors are going to be left holding the bag.

I'm getting conflicting views on the gold thing. We know Goldman Sachs does not want gold at these levels competing with the dollar so it is wise to wonder if Goldman Sachs will pull the rug out from gold anytime soon since they do own the largest commodity trading center in the United States and maybe the world. They can order large trades to get the prices moving in their favor.

On the other hand, gold has been in an 18 month trading range base. It has just broken out which means gold has a ways to go. Last time gold was in a 16 month trading range base, gold broke out for a 50% run up. The real issue is: Will Goldman Sachs let the market do what the market wants to do or will they run in and interfere with the normal patterns of the market .... We shall see!

Wednesday, September 2, 2009

Don't go near the market! Go for the AU?

On this pullback, they will try to get you in so the big institutional guys can get out. You will hear this is the pullback. Do NOT put any money into this market until the S&P can hold 1035 for at least 2 weeks.

Oddly enough, although the Feds have officially called the end to the recession, there is the opinion that once the stimulus packages have run their course, we could be headed into a double dip recession. This isn't good news to hear.

It may be time to head the GOLD! You can use GLD or IAU. There are also a few Gold ETF/ETN funds out there that can multiply your returns (i.e. DGP). You may also want to consider the GDX. It is the gold miners ETF. Everything related to gold today performed well. Eventually, all of the stimulus this market has been receiving will revive inflation. Going with gold will allow you to hedge against that. I cannot figure out for the life of me why anyone who buy the actual gold bullion. You actually have to find a place to store it and it can also end up stolen.

Seeing massive volume and strong moves on GDX. You must follow the money to make money in stocks.

Tuesday, September 1, 2009

Market breakdowns on great economic news

The news today was

The Good....
•"Manufacturing Index Expands for First Time in 18 Months"
•Pending home sales rise to 2 year high
•Manufacturing sector shows growth as ISM index at 52.9
•Ford Motor's US Auto sales leaped 21.5% in August

The Not So Good...
•Construction spending down in July

The market opened down this morning which is a bullish sign after a down day, based on past patterns. For the short seller, he wants to see a pop up on the day following a down day. I forgot the psychology behind the pattern, but I know the pattern! The market opened down and immediately turned upward. It was moving pretty strong and had very strong bullish pattern going. After the above news came out at 10am EST, the market make a quick move down, then recovered, and then tanked! The first sector to go red was financial and then the rest of market went with them.

I think today's action is the market fooled everybody. Great numbers, good recovery this morning and more evidence the economy is getting better is the reason a lot of investors bought stocks today. Besides over the past 4 to 6 months, the rule has been buy on the dips. However, it looks like 'the music may have stopped playing'.

The pending home sales number is very suspect considering the government is giving people $8,000 to go buy houses. The number from Ford came out about 2 hours later which coincided with the next big move down. It was a great number. Auto sales up 21.5%! But wait, then again the government has given consumers money to run out and buy cars. This will take away from future growth. After the government stops handing out money to buy houses and cars, what do you think the next numbers will look like. They will go down again.

Monday, August 31, 2009

Barney Frank, Federal Reserve, and undermining the world confidence is the US Financial Markets

The below article is from Reuters. There is nothing good about this at all. During this time of fragile markets, the last thing we need to do is make public the frailties of our government. Somebody better start talking to Barney Frank. These are the types of investigations you do AFTER the economy has recovered and is on solid ground. And to think WE elected these folks.

WASHINGTON - By Tim Ahmann

Rep. Barney Frank, the chairman of the U.S. House of Representatives Financial Services Committee, said he plans legislation to restrict the Federal Reserve's emergency lending powers and subject the central bank to a "complete audit."

At a recent town hall meeting, Frank said the House would pass a bill to use an audit to crack open the central bank's books more widely, but in a way that will not encroach on the central bank's monetary policy independence.

In addition, he said the House would move to rein in the authority that allows the Fed to lend to a wide range of non-bank firms in "unusual and exigent circumstances."

A bill sponsored by Texas Republican Rep. Ron Paul that would allow the Government Accountability Office, a federal watchdog agency, to audit Fed interest-rate decisions has won the co-sponsorship of more than half of the House.

Fed Chairman Ben Bernanke has warned that the bill would compromise the U.S. central bank's policy-making independence and could undermine financial markets and the economy.

Frank said he has been working with Paul on compromise language. "He agrees that we don't want to have the audit appear as if it is influencing monetary policy because that would be inflationary," Frank told constituents. A video of his remarks was posted on the popular video file-sharing website YouTube at .

Steven Adamske, a spokesman for Frank, told Reuters compromise language had not yet been written. He provided no further details. A spokesman for Paul could not be reached.


Frank said the audit and emergency lending provisions would be incorporated in broader legislation to revamp U.S. financial regulation that would likely pass the House in October. By seeking a compromise with Paul, Frank could strengthen the broader legislation's chance at passage.

As chairman of the House Financial Services Committee, Frank is a key player in the effort to overhaul U.S. financial regulation.

The Obama administration has proposed giving the Fed responsibility for overseeing firms whose collapse could endanger the entire financial system. At the same time, it wants to strip the central bank of its consumer protection function, and invest that authority in a new agency.

Frank expressed unease at what he called the Fed's power to "lend money to anybody they want" in emergency circumstances. "We are going to curtail that lending power. We are going to put some restraints on it," he said.

Since the financial crisis struck two years, the Fed has used this emergency authority to prop up a number of non-bank financial firms with billions of dollars in loans, including insurer American International Group.

The Fed's actions have angered many lawmakers who are concerned the central bank has put taxpayer money at risk. Fed officials have defended their actions as necessary to prevent a deeper credit crisis and widespread damage to the economy.

Bernanke, who President Barack Obama nominated this week to serve a second four-year term at the helm of the central bank, told lawmakers in July that the Fed understands the need to be accountable to taxpayers but that monetary policy decisions needed to be shielded from political interference.

In congressional testimony on July 22, he signaled a willingness to work toward a middle ground. "We are quite willing to work with Congress to try to figure out exactly where the line should be," he said.

Frank said the House legislation would pave the way for an audit to look into what the central bank "buys and sells," but he said the data would be released after a period of several months to avoid impacting financial markets.

Bernanke is widely expected to win needed Senate backing for a new term as Fed chairman, but the central bank's aggressive efforts to stem the financial crisis have stirred controversy that is likely to color his re-nomination hearing.

His current term expires on January 31, 2010.

Copyright 2009 Reuters

Sunday, August 30, 2009

Weekend Update for August 29th, 2009

With the current state of the economy we have to wonder why our business leaders had their yearly get together at Jackson Hole, WY. Wouldn't it have made much better since to have their meeting to discuss the economy in one of our small mid western all American towns that have been hit the hardest by the latest recession? But no, they have to go to Jackson Hole where the typical room costs $600 per night.

Fannie Mae and Freddie Mac are soaring while at the time mortgage delinquencies are on the rise, deficit spending is out of control, income is falling, GDP is shrinking but yet the market is rising. Obama's own accounting office said to expect 2.3 million people to lose their jobs next year. The post office is cutting 30,000 jobs, people are having trouble paying their utility bills, the whole world is depending on the American consumer, but yet the American consumer is not spending. This doesn't make sense, but it doesn't mean we can't money on this fraudulent rally by simply following the money flows. There is a record number of empty houses in this nation, but CNBC has you to think everything is fine.

The cash for clunkers program will be used to rig the GDP numbers to come in positive for the third quarter. Every time somebody trades in a clunker, our deficit goes up even more. We are spending 2 trillion more than we are taking in. This will kill the stock market, but not at first. In the beginning the stock market goes up because the government is putting money in the economy. You get this false rally, not a true rally and eventually when they stop, the market crashes. This is called creating a bubble. Remember the .com bubble, remember the real estate bubble. These rallies are good, but you have to know when to get out. You are working in our third bubble right now. The market continues it's stellar rally as volume is coming down. This is a negative divergence.

Here is an example. Suppose a store is selling red dresses that are selling very well. The store will raise the price on the red dresses. As the number of people buying red dresses begins to slow down, what do you expect to happen to the prices of the dresses? Logically, they would decline in price, but this isn't what is happening in the stock market right now, they are continuing to drive the prices up on declining volume.

The housing numbers are only increasing on the houses under $250,000. People buying houses in the $250,000+ range are the "step-up" buyers. Until those numbers get better housing isn't going to get better.

Thursday, August 27, 2009

Dow Log 8th straight up day

The market opened flat for the day and then turned down with heavy volume emboldening the bears. At the one point, the Dow was down 72 points. However, by noon, the Dow had turned positive and the bulls had taken control. The turnaround rally was on light volume and indications are showing that it was on short covering in the financial stocks. The Dow has had it's strongest rally in 2.5 years and this is in the midst of a recession. GDP numbers released today show the economy is contracting.

However, market breadth was negative. On the New York Stock Exchange, losers beat winners eight to seven on volume of 1.16 billion shares. On the Nasdaq, decliners beat advancers by a narrow margin on volume of 2.16 billion shares.
We got that better than expected number for thr GDP this morning.

Wednesday, August 26, 2009


The government is borrowing money to give to people to buy cars from a company the government owns, General Motors. The government is also giving money to people to buy houses and then when the GDP report comes out CNBC will be cheerleading that the GDP came in better than expected!

Will GM because the next Amtrak?

Tuesday, August 25, 2009

Plunge Protection Team Unleases it's Nuclear Weapons to Rescue Wall Street

From Phil's

Dow Logs 6th straight day gain & Vonage???

Once again the DOW goes up! For the sixth straight day since the shake out day last Monday which fooled many investors including the editors of Investor's Business Daily when they switched to 'Market in Correction'.

One stock I noticed at the end of the day was Vonage Holdings. Now this stock is the classic stock of a company you don't want to own. They entered the VoIP (Voice Over Internet Protocol) craze at the end of the cycle offering free long distance AFTER the cell phone companies had already offered the same. They charge for phone service at the same rate most cable companies do. Although, many folks feel the cable company is evil, who would you rather carry your phone service, the cable company down the street or some company you never heard of across the nation... Hmm, that's a easy choice.

Excellent article on Vonage at:

Their stock rose 6 fold today on very little news. I wouldn't be surprised if the SEC puts a trading halt on the stock tomorrow demanding more information for the abnormal trading. The stock has been a disaster since the first day they started trading and is the only stock I've ever seen Jim Cramer literally 'dog out', but rightly so. How does a company offering it's product for free, the international calling plan, warrant an increase in share price. That makes about as much sense as borrowing your way out of debt.

Consumer Spending

Do we really believe the consumer will start spending in the third quarter of this year?

With the new credit card legislation coming out, a lot of credit card companies are increasing monthly payments, increasing interest rate charges, and reducing credit lines. Add to this increasing unemployment, and it is hard to understand how the consumer will increase their spending. Sure, the $8,000 housing credit and the Cash for Clunkers program will provide a little boost to spending, but that is artificial growth. Not organic growth. With these 2 programs we are paying people to spend money...and you call that a good economy?

Consumers are busy right now paying for things they have already bought! And consumer spending accounts for 2/3 of all economic activity.

Monday, August 24, 2009

Housing Sales - Recovery Postponed.

We keep hearing all the good news about the housing recovery. Here's the real news you don't get on CNBC. Let's put this in perspective.

The first time home buyers credit coupled with bargain basement prices have really driven home sales. Sales of homes below $100,000 surged 39%!, bump up to $200,000 and we are up 9%. When you cross $250,000, it all goes south and the higher the price, the more sales drop off. Over a million and sales are down 23%. Over 2 million, down 32%. Sales are sluggish on the high end real estate agents say if the home buyers tax credit isn't extended, we can see the surge in sales turn the other direction.
If you are going to have a real estate market that is good, it is measured by 'step up sales'. Not the first time home buyer buying $100,000 houses. We are looking for people stepping up to their 2nd or 3rd house. The press should have said

Since the surge in new home purchases is localized to the $250,000 under market, the recovery will be postponed.
If you are underwater with your house, you can't afford to sell your house to buy a larger house because you'll have to come to the closing table of both transactions with a lot of money.

Put Option Short Position

I wanted to share with a Twitter friend a strategy he said was too sophisticated for him. I mentioned that I purchased a put option on the $TNA. It is an 3x inverse ETF. I chose to go with the short side instead of going long his cousin the $TZA because I've noticed that these ETFs seem to have a propensity to go down faster than they go up. Look at FAS and FAZ (when one goes up the other is suppose to go down), both of them are lower today than they were when they came public. It have something to do with a tracking error, but that's a whole other story. Well, for about a dollar a contract, I was able to buy a put on the $TNA with a strike price of $41. Since the TNA closed under $41 a share, when it exercised my broker sold 100 shares of TNA at $41/share. But there is a problem.... I don't own TNA, so my broker goes out and borrows 100 shares from somebody with a margin account and give them to me so I can sell them! Now I'm short TNA. Here were my risks:
  1. If TNA were to close above $41 a share on Friday, my losses would have been limited to the premium I paid for TNA
  2. If TNA were to close below $41 a share on Friday, I get my exercise and short the stock. Then last weekend, let's say news comes out which causes the market to rally hard, I would end up in bad shape because TNA would have opened much higher, but I would be sitting in a short position. (this is the real risk, it happened a few months ago when I tried something similar with Bank of America, luckily I had an offsetting position in Citibank which saved me)
Here is something interesting that I just had to find out for myself. Since you cannot short stocks in an IRA account, what happens if our put option expires in the money and you don't own the stock? You still get the sale and depending on your broker, he gives you a chance to buy it back in 3 days T-3 rule (E*Trades style) OR they auto execute a buy order to settle your account (Fidelity's style) and you take a 90 day free riding trading restriction.

Now for my history lesson:
Years ago, my friend and I were trading stocks with a hot shot stock broker in town. He was all into the high octane stocks. Trade after trade, we were making money (didn't have the good sense to realize we were in the midst of a market rally and everything was going up). Then one day, our broker told us we could make 10 times the money we were making with options. To this day, I'm not sure if I curse that day or not! Our eyes got big and instead of doing the same research we did before we got into stock investing, we took the 30 minute short course and dove into the deep end and we got burned bad. Really bad. I swore off options for years. Before you get into options realize this:

With stocks time works with you. With options time works against you. With options, you can lose your shirt with no rags left, with stocks at least you have the rags!
Our problem was not that we chose the wrong stocks, our timing was off.

Sunday, August 23, 2009

Income Tax Voluntary

I was listening to an interview with Senator Harry Reid. He was explaining to a journalist that our income tax system was voluntary. When the reporter continually pressed him on the issue, he told him that in other countries, you cannot go out and buy a house to deduct the interest against your taxes and you don't have to file an income tax return (therefore taxes are mandatory), but because in America we have tax deductions and have to file an income tax return our taxes were voluntary. I wonder if I can write a letter to the IRS explaining to them that since taxes are voluntary and in these economic times things are hard if I can forgo my voluntary contribution this year.

Can you believe these are the people we have representing us in Congress?

I still can't get over our Senator, Sessions, who told us that he was part of the executive branch of government! What is even more surprising, we keep sending him back up there. I have taken the time write to both of my senators and congressman. I've always received a response from Senator Shelby, but our congressman and Mr. Sessions, I've never heard back from them.

IBD - back in uptrend!

IBD admits they were wrong

"In Tuesday's Big Picture, IBD judged the market to be in a correction based on five distribution days in the S&P 500 and negative action in leading stocks.

In most cases, this precedent leads to a worsening in the market. Yet, the indexes have rebounded and climbed to new highs, proving us wrong. It is pointless to argue with the market, which is why today's Market Pulse reflects the fact that the uptrend has indeed resumed.

With the market in an uptrend, purchases of fundamentally strong stocks can be made as they break out of sound bases or other bullish chart action.

Keep in mind, though, that there's reason to be cautious. As The Big Picture noted last week, past bull markets that followed major bear markets often faced bigger intermediate-term corrections than what we have seen so far in the current uptrend."

In the past,it has never paid to argue with Investor's Business Daily. It has always proved financially painful to do so. However, it is good to see that they admit when they are wrong unlike other market pundits who shall remain nameless, but we all know who I'm am referring to.

The S&P 500 is 52% up from it's March 9 low. It appears the market is really over extended and overstretched at this point, but that doesn't mean it can't become even more over extended and more overstretched.

Health Reform and the Public Option

I am beginning to change my opinion on Health Care Reform. I agree that it is necessary, but I'm not sure if the public option, as it is written, is the way to go. In 1995, I had an interview with a local company. I was told during the interview that as long as my spouse had a job and her employer offered health care, I could not add her onto my health care plan with the company. However, if we was not employed or her employer didn't offer health care, she could be covered under mine. This was shocking news for me.

Recently, I was inquiring about my wife's health care insurance and she informed me that they changed the policy where she works. She cannot add me onto her health care insurance because my employer offers health care to their employees. This makes 2 companies with the same policy. I wonder how many more there are?

This leads to the government plan. Why would an employer pay for health care benefits if his employees can get it through the government? It also leads to the question...When did we get the idea that employees should expect health care from their employers?

Back during World War II, as the U.S. became involved in the war, with the goal of ensuring that production of weapons and supplies for our soldiers would not be disrupted by labor disputes or cause economic problems such as increased inflation and war profiteering. The War Board decided that it is was in our country's best interests to freeze wages and establish price controls, at least for the duration of the war. Unfortunately, the wage freeze made it much more difficult for employers to attract employees from a workforce that diminished as more and more workers were sent overseas for battle. In order to attract employees, company decided to offer fringe benefits and health care was one of the major attractions. At the time health care was relatively cheap and the benefits were tax deductible. Now we have become accustomed to employer offered health care.

One of the major problems with employer offered health care is that the public doesn't understand how much health care cost. People are aware how much they pay for their health care, but don't realize how much their employer subsidizes their premium payment. When my left my last job, I was informed that I could go on Cobra. The health care premium was $1,002 per month! I only paid $300 per month when I was working there! I'm sure the $1,002 was the group rate. I wonder what the individual rate would be? The dental premium was $80 per month. I chose to keep the dental since I our dentist told us our son would need extensive dental work soon and my new employer wouldn't cover major dental work until we had been in the plan for at least one year.

So for dental and health care, I would have been looking at premiums of $13,000 per year. For many that exceeds the cost of their rent or mortgage payment. Should we pay more for health care than we do housing?

Sure health care reform is needed and there are a lot positive things in the bill, but should we invoke the law of unintended consequences where employers decide to drop health care coverage since we can get it from the government?

Another issue is non-American citizens. Should they be covered? Aren't they covered now? When people go to the emergency room, they have to be seen. Who do we think pays the bill? We all do through higher health care costs. If the patient is unable to pay, the hospital has to aborsb the loss. When the hospital absorbs the loss, they have the charge higher fees to recoup the loss from their paying customers. An E.R. visit runs me $300 with insurance, I don't know what the regular cost is. This is one of the main reasons, we go to the 'doc in the box' for emergencies on the weekend. It's a regular doctors visit there and then visit our regular physisian if needed.

I have two more issues that have really bothered me. When my son had his oral surgery (this was when I was with my previous employer when their insurance company actually paid for the pain killers that go with the fillings), the total bill was $3,000. The first insurance paid about $1,000, but the secondary insurance paid $1. They said that since he was a preferred dentist, he agreed to accept $1,001 was total payment for his services. So this means, that non-insurance holders and non-MetLife insurance holders get stuck paying more for the same services we received.

When my son had with ear tubes put in, we got a bill for $7,000. The insurance company only paid about $3,000 and said that the hospital has accepted their payment as payment in full. Which means if we didn't have insurance we would have had to pay $7,000. These are practices I wonder about.

Mr. Illegal Immigrant is going to have more than a $3,000 dentist bill and a $7,000 hospital bill because he doesn't have insurance and lets things get really out of control and the public is left with more cost when he finally rolls into the E.R.

Friday, August 21, 2009

Options expiration stragedy

I noticed a pattern that has worked out well for the past 18 months. I have noticed that on the third Friday of each month, a pattern has developed with the Russell 2000 index. If a person purchases the Russell 2000 call option on the Thursday afternoon preceding the third Friday of the month (options expiration), 5 out of 6 times, the call option will close a few points higher in the money. The Russell 2000 options are European style options which mean their cash value is determined by the opening price of each individual security in the index on the first trade of that morning. Many times, it is possible your cash settlement value is higher than any price the index itself traded that day since all securities don't start trading at the same time.

I thought for sure the pattern would be broken today. The index traded lower after hours, and was looking pretty sad overnight, but just like several times last year, something happens late in the night or early in the morning to reverse those indices. Is this market manipulation, I don't know, but it is a way to make money.

Treasury Paulson was particularly good at doing this. He always timed with Fed announcements of cash infusions in the markets on these days. Maybe he was helping his buddies out at Goldmach Sachs.

Market Still in Correction

We are still in a market correction according to Investor's Business Daily. Lately, the up days we have been have been on low volume. Options expiration is tomorrow so look for increased volitaility and wild price swings throughout the day. These low volume days tell us money is not coming into the market and as always, in America, you must follow the money.

I have no opinion on the market in general. Partly because the action I am seeing in the market doesn't make sense. The economy isn't in the best shape, earnings are coming in very poor, especially in retail, the jobless claims numbers are coming in higher than expected, bankruptcies are up. The Federal Reserve chairperson is lowering the public's expectations of a rebound, but yet the market continues to hold up. The one issue that really has me scratching my head is: PMI was up big today, while at the same time foreclosures are hitting all time highs. If someone can leave a comment solving that riddle for me, I would really appreciate it.

Insiders are dumping 300 shares for every 1 share they are buying. They are using this rally to get rid of their shares. This can be seen in the secondary offerings that we are seeing. I worry that the pattern we are seeing is the same pattern we say in 1929. They had a big rally and then 2 years later, the real crash came. Retail sales are still falling despite this 'cash for clunkers'. There is one dealer in New Hampshire that had to file for bankruptcy because he could not get paid by the government.

Tuesday, August 18, 2009

Low volume up day, not a bullish sign

I'm pressed for time, but IBD had a some great information. I've noted it below:

Source: Investor's Business Daily, August 19th, 2009. Page A-1.

After the Nasdaq surged 59% in just 24 weeks, a correction is not shocking.

Indeed, a consolidation may be healthy for the market. Remember, the best stocks often build new bases during weak markets.

For some perspective, let's look at the bull markets that followed bear raids in modern history that cost the averages at least 50% — situations that were similar to today's.

There were four such rallies: The Dow Jones Industrials from July 8, 1932, to July 21, 1933; the Dow again from April 1 to Nov. 11, 1933; The S&P 500 from Oct. 4, 1974, to July 18, 1975; and the Nasdaq from Oct. 11, 2002, to Jan. 30, 2004.

Each of these bull periods sat through just one or two moderate corrections until the next major downturn.

The worst was the 1932-33 Dow's 39% retreat, but the others ran just in the midteens. These corrections lasted four to 15 weeks, except for a 25-week fall for the 1932-33 Dow.

When stocks do return to an uptrend, how much more can we expect? Let's gauge where these other bulls stood after 24 weeks, which is where the current correction began.

The 1932-33 Dow had already climbed 49%. It would ultimately rise 173%. So, after 24 weeks, that uptrend was at 28% of its course. The 1938 Dow had traversed 60% of its eventual run in the first 24 weeks of its run.

The 1973-74 S&P 500 found itself 64% along the way, and the 2002-04 Nasdaq just 26%.

So, if history is any gauge, the bull run has more room to go. After 24 weeks, the prior four post-meltdown bull markets had notched, on average, just 44.5% of their eventual gains.

Monday, August 17, 2009

Rally officially over (IBD reports)

The market is now officially in a correction according to Investor's Business Daily. It's now a time to raise cash. It's more probable the market has experienced a key reversal. We have had a string of higher volume down days which indicates the 'big money', the money that actually moves the market, is pulling their money out. Once again, after CNBC and everybody else has been telling people to get into the market (entering the market during the bubble), the big money/smart money has been pulling their money out.

It's almost like the big money crowd wants CNBC to pump up the market so they can dump their shares on the unsuspecting public and leave them holding the bag. Then we hear the same old song. It goes....

Why is it every time I get into the market it goes down, and every time I get out it goes up?
It's because CNBC gets everybody excited and thinking, the rally is real, we got to get in. We can't miss it this time. Jim Cramer comes on the TV telling everybody, they have to get in. They pull out the pom poms, you see the market reaching new recent highs everyday. You hear about your friend, neighbor, etc. talk about the big money they recently made so you get in. There is nothing wrong with chasing the market, just make sure you aren't the last one in. And if a trade starts to turn against you...
Don't sit there like you are on the stupid bench and do nothing. And please don't sit there saying, "I'll wait until it comes back." It may never come back.
Just as soon as you sell that stock, you may see it go back up, but don't worry about that one. Worry about the ones that continued to go down. Also, when you sell a stock, you can always buy it back. Your broker may tell you, "What! You are going to get out now? You are down." That thinking is a recipe for disaster.

How do you prevent a small loss from becoming a big loss? Keep your loses small. Consider your small loss an insurance policy premium. Remember, you can always buy a stock back.

Once you are out of stock, you can think more clearly before repurchasing. It's hard to think clearly when you are sitting there watching the stock go down hoping it comes back up. If hope worked in the market, a lot of stocks would never go down.

Another rule, don't sit there and let a large gain turn into a loss!!! You may feel stupid watching your stock go from $50/share to $60/share and back to $50. You'll feel even worse if you let it drop down to $40/share so sell it if it drops back down. Nobody has ever gone broke selling a stock at a small profit.

We are in a correction. We are a minimum of 4 days away from another confirmed rally or uptrend. Raise cash, keep your eyes on your current winners and for those of you who must buy stocks because of the recent dip, keep your stops tight. I favor a more diversified approach. Diversify by shorting or for those with IRAs, consider an inverse ETF. For those who cannot sell their shares due to the tax consequences, they should really consider an inverse ETF to hedge against a downturn, but then again, if the market goes low enough, you want have to worry about any profits to be taxed against.

The Healthcare Debate

I know this is not directly related to the market, but health care will affect the economy so I'll comment on the bill.

The republicans tell us how they are very much upset at how fast Obama wants to move this health care bill. They are really upset the democrats want to push this bill right through and that they are hiding the cost of the bill. Guess what...They should know... They are experts at that. Isn't it funny how we soon forget that the Bush administration did the same thing in 2004 with the Medicaid Prescription bill. In fact, they enacted the same rule for the 15 minute rule vote. That's right. No copy of the legislation, nothing to read, they put in a vote in 15 minutes. That's exactly what the Bush administration did for the Medicaid Prescription bill. In fact 41 of the republicans asked could they please get 3 days to read the bill and Bush said, "No, apply the 15 minute rule." And now they criticize the democrats? Also, the republicans talk about the democrats lying about the cost of the health care bill, what about the Medicaid Drug bill? After it was safely signed on January 31, 2004, the Washington Post came out finally with the truth. The real cost for the first 10 years was not $400 billion, it was $580 billion. In fact the entire bill they said would only be $2 trillion dollars, but it was really $21.9 trillion!!! And 16 trillion was unfunded and now they are getting grumpy about the democrats?

Rally over?

Recently, this market has had every reason to go down, but has continued its upward momentum. Since March 9th, the market is up 50%. That is a historically big climb. We have seen stocks in the financial sector go up over 200% and 300% in months. These are the old stoggy companies where a 15% yearly gain is generally great news. What has fundamentally changed since March 9th? Not much. It's been only 5 months. Credit card defaults are still rising and Americans are still losing jobs.

Historically, 'V' shaped rallies always turn into 'W''s before a good rally. Expect a pullback to at least S&P 950 before jumping in if you believe the market is bullish. This morning, the market will pull back sharply. If it recovers by the end of the day, that will be an extremely bullish sign that the market uptrend should continue, however, all three recent levels of support have been broken this morning.

Sunday, August 9, 2009

1929 vs 2009 stock market patterns

I'm posting 2 charts. One from 1929 and the other from 2009. I'll let you draw on own conclusions. These are from

247,000 Americans lose jobs ... CNBC celebrates

Getting kind of frothy!!! CNBC is celebrating.

The stock market is getting kind of frothy. It is very overextended, overbought, and every other type of over you can think of. With the news Friday from Freddie Mac that they actually turned a profit, it may continue it's upward march Monday morning.

Friday, CNBC was celebrating the fact that another 247,000 Americans lost their jobs. We are still in a period of job loss. The employment numbers rose, but we must consider how many people fell of the jobless roles. Once your unemployment benefits run out, you aren't considered unemployed anymore.

The crooks on Wall Street will most likely take this market to 10,000, but if you aren't in the market, you don't want to chase it. It may be wise to wait for a pullback to the 950 range for the S&P if you are looking for an entry point.

Friday, August 7, 2009

This is a must read. Is the big bad bear coming?

I can't take any credit for this thoughtful insight, but feel it is a must read.

Bear Market Coming
-or -

Thursday, August 6, 2009

$FUQI, BZH (Twitter was down too!)

I found it interest that IBD didn't mention the FUQI news in it's Big Picture, but they made the following statement on page 2 of the paper.
Fuqi tops views, guides above
The Chinese jewelry maker’s Q2
EPS jumped 80% to 45 cents, 45%
over views. Sales grew 51% to $101
mil, above views. Fuqi Int’lFUQI credited
demand for luxury goods in
China, which has 1.3 bil consumers
and a growing middle class. It sees
Q3 EPS of 40-44 cents vs. views for
37 cents, andQ4EPSof 52-59 cents,
above views. Shares gained 12%.
BZH also reported after hours. Even though they last money, they beat expectations on earnings by 81 cents! But still fell shy on revenue expectations. It's up 6% in the after hours.

I had to live a day without Twitter. I felt somewhat lost without the opportunity to hear the daily noise from StockTwits all day long. I was unable to get a feeling for the market so I had to resort to the 'old way' of doing things and just analyze the volume patterns of the market today. Actually, I choose to wait to see what the government has in store for us in the morning with the jobs data.

The jobs data should set the tone for the market tomorrow and let me know if I need to diversify my portfolio by going short a few of the weaker issues. It isn't wise taking a huge short position given the fact that the market is in a confirmed uptrend, albeit extended and stretched.

Wednesday, August 5, 2009

Obama and the bailouts

There are many people who are against President Barack Obama. We hear that he is a socialist. We hear that he wants to take over the all private entities among other things.

There is a passage in the Bible that states that the borrower is slave to the lender. When you finance a house or car, you don’t actually own the house or car, the lender does. Nobody has a problem with this understanding. When companies ran into trouble and the government stepped in to bail them out, shouldn’t the government own a portion of the company? It’s the same deal. If you don’t want government help, then don’t take the government funds and file for bankruptcy or whatever else you must do.

The companies that needed a government bailout were probably expecting a bailout from the government with no consequence. Obama is a neophyte, he doesn’t know what he is doing was the thought. He’ll do probably what McCain would have done. Give the companies our money, with no strings attached and no collateral. Continue to let them operate as a private entity. Let the companies give the money back when they get around to it. It’s quite amazing how fast these companies wanted to pay back the money, when they found out it wasn’t free money. It’s quite amazing that a few months ago, these companies were on the brink of collapse and needed the money and now (nothing in the economy has fundamentally changed) they have rushed to give the money back. Makes one wonder if they really needed the money in the first place. This was actually a smart move by our President. It gave the companies an incentive to pay the taxpayers back.

A word on Goldman Sachs

Let’s talk about Goldman Sachs. As a young man in college, I had the opportunity to co-op with this company, but turned it down because I had no interest in living in New York City. At that time in my life, I didn’t know a stock from a money market account. I was studying for my Master’s Degree in Computer Science and that’s all I knew. I remember talking to a very attractive lady who was telling me all about the company. She then mentioned moving to New York. I told her, “Your sign here says you have opportunities worldwide.” She responded, “But our opportunities for you are in New York.” I lost interest after hearing that. If I knew then what I know about Goldman Sachs now, I would have jumped at the opportunity. The company is incredible.

However, the company has some very questionable practices. How is it that less than a year ago, the company was in such dire straights that it had to borrow money from the government? Now, the company has just reported robust net earnings of $3.4 billion for the second quarter, soon after repaying a $10 billion bailout received from the U.S. Treasury's Troubled Asset Relief Program. Hmm……. And it gets even better….

The firm set aside $6.65 billion in the quarter for compensation expenses, adding to a firestorm of criticism about pay practices on Wall Street. So far this year Goldman has set aside $11.3 billion for compensation. This is a lot of money for a company that just needed a bailout of us, the taxpayers. Hmm….. and there’s more….

“The turnaround for Goldman, though, largely resulted from its trading desks, which produced 46 days of more than $100 million in trading revenue during the second quarter, according to the filing. Trading losses were reported on only two days.” Guys, nobody is this good. This brings me back to the following story that appeared a few weeks ago. It was about a guy who copied Goldman’s Sachs proprietary trading software to some other computer systems overseas.

Goldman wants to "put away" a criminal that has certainly eroded its trading advantage, and worse, made a fool of it. Goldman is even willing to have the prosecutor allege that the stolen advantage would be "unfair" in the wrong hands. In doing so, it acknowledged the possession and creation of an advantage that presumably would be unfair in the "right" hands. In seeking to condemn a THIEF, Goldman basically condemned ITSELF.

Maybe this is how they produced a 96% positive trading streak with their trades. Nobody is right on their trades 96% of the time and if they are, how did they ever get in a situation where they needed a government bailout.

A strange thing happened in the market; major stock indexes declined in higher volume

IBD says: “A strange thing happened in the market Wednesday; major stock indexes declined in higher volume.”

Although today created a distribution day for the Nasdaq and Dow, the market could have done very much worse today. We started the day with a bout of bad news.
• Private job losses were more than the expected 345,000 as ADP reported 371,000 shed in July
• The Institute for Supply Management's services index declined, also worse than views

With this news, we could have expected a deep sell off in the market, but it didn’t happen. The market closed well off of its lows. One thing I did notice today was that the financials were very strong today. The XLF, the index that I use to track the performance of the Dow Jones Financial Index was up a big 3.45% today. Considering all 3 major indexes were down today, this is quite impressive. Most market rallies are lead by the financials. Although most of us believe this rally in a fraudulent rally, it doesn’t mean we can’t make money on it and as long of the financials are performing, stay long stocks. If the financials start to crack, get the heck out of the way. We are up 50% over the past 5 months; we are way overdue for a significant pullback. A few financials of note today:
• Bank of America up 6.52%
• Citigroup up 10.15%
• CIT group (on the brink of bankruptcy a few weeks ago) up 37.62%
• PMI group up 19.03%
• Wells Fargo up 5.74%

These are defiantly not the type of earnings you expect when people are still losing jobs. But then again, the market is a forecaster of the future.

There is really no take-away for today. Looking at the very big picture, it is a distribution day, a bearish sign, but it’s the first one we have had in weeks, so it is of no consequence unless we start to get more of this. I believe there are still a lot of shorts in the market who are very frustrated at this point, but the market may not go down until every last short has covered.

Monday, August 3, 2009

Jim Cramer curse hits again!

The Jim Cramer curse hits again! The victim this time is Starent. I was trying to figure out why STAR was down when the market was rallying. I knew the cause of GMCRs demise, but couldn't figure out STAR until I discovered that on Friday, Mr. Cramer makes the following statement: "I think Starent is terrific. I think it's pulled back and this is a great level to get in." If you got in based on that statement, you are now down 4%. I suspect the stock popped up in the aftermarket after that statement was made which would mean you are down much more than that if you just 'had to listen' to Cramer.

GMCR investors rewarded?

After investors sat through GMCRs earning debacle, they were rewarded this morning with dilution. The company announces this morning, they are going to add 4 million more shares to the pot. After a glowing earnings report, this action leaves me scratching my head.

Saturday, August 1, 2009

The Jim Cramer curse - SYNA gets smacked!

I'm not a fan of CNBC's Mad Money program. This is because Jim Cramer is consistently wrong about his stock picks. He is correct on fundamentals, the reason why an investor should buy a stock, but is almost always wrong on the technicals which tell investors when they should buy a stock and he almost never tell investors when they should sell a stock. The problem with most investors is that they stay in a stock to long never knowing when to get out.

This brings up Synaptics (ticker: SYNA). Up until a few weeks ago SYNA was acting well. It was a leading stock with good fundamentals and a great growth rate. I turn on CNBC and there he is ... Jim Cramer telling all of his listeners they should go out and purchase the stock. At that point, I thought, this isn't good. For those of you who follow my twitter posts, I mentioned it the next next day. I got a response back from a user stating that he didn't understand why one would sell SYNA. Jim Cramer had the CEO on his show telling us how rosy things were.

I don't know the reason why, but I know the pattern. Anytime Jim Cramer pushes a stock or has the CEO of the company on his show, the company's share price almost always goes down. It doesn't matter how well the company may seem to be doing. It's almost like a curse OR maybe these CEOs get on his show to tout their company so they can sell their shares and get out while telling investors how great things are going. I don't know.

SYNA was no exception. Within a week, notable weakness in SYNA started to show up. A clear sell signal for those following technical analysis. The stock was acting very weak. While the market was rallying hard, SYNA was barely moving. Those holding on and waiting for the earnings report were rewarded with a 30% whack on the opening the next morning along with the following news:
  • SYNA missed their earnings numbers
  • SYNA is guiding lower
  • SYNA CEO is retiring
I would not be surpised to see some shareholder lawsuits over this. At the time the CEO was on Mad Money, he should have known they would be having trouble meeting thier own expectations they feed to the analyst. He also knew he would be leaving. Both of these put pressure on shares prices.

I choose not to listen to Cramer because he makes sense and he starts to take 'parking space in my brian' and investors start making bad decisions because what he says makes sense. A friend of mine came up with a great suggestion. There should be a mutual fund that short sells all of Jim Cramer's recommendations. It would do well.

Thursday, July 30, 2009

Second stage bases...IBD TV

IBD TV mentioned GMCR tonight. They said the stock continues to be caffeinated, the stock gapped down on better than expected earnings, but lower than expected revenue for the quarter, but investors soon changed their view higher along with the company’s increased guidance. It is a very bullish sign. It’s up 8% from the buy point of the cup shaped pattern. They also said that the stock doesn’t quite meet the criteria of being a railroad track pattern, which is a bearish pattern. The next thing to look for is for the stock to pullback and offer an alternate buy point assuming the stock advances some more.

OK, folks we have a few stocks setting up second stage bases. For you William O’Neal Investor Business Daily people, second stocks that surge out of second stage basis tend to be the most powerful. GMCR, NTES (Netease), and STEC all seem to be meet this criteria.
If the market refuses to go down, it is going up.

GMCR turns around

I can't believe what I saw today. Yesterday, I wrote:
Of course, we never know what tomorrow could bring. A few weeks ago a company missed their numbers and opened down hard the next morning, but by the end of the day closed up.
Today, that happened. Green Mountain Coffee Roasters went down 8% in the after hours after their earnings release. This morning, the stock was set to open down around $59 a share when I checked the morning bid. Before noon, today, the stock was reaching a new 52 week high. Not only had it reverse all of it's loses, it soared! GMCR has very high short interest so I suppose many of the short sellers were covering their loses. This may have been a simple short squeeze. Nevertheless, the stock performed well today considering the after hours action yesterday. Simply amazing to me.

The overall market was very strong today. The Dow Crossed the 9200 mark for a short time and the 1,000 psychological target for the S&P was almost reached before the market pulled back to settle into the close.

In the after hours, Disney reported earnings. They were not great, but it was no surprise to me considering we just vacationed there 2 weeks ago and did not have any lines longer than 30 minutes to ride a single ride at the Magic Kingdom! No crowds anywhere. We had a great time, but I knew sales would suffer. Room rates at the Holiday Inn were $30 a night! That was another tip that things were not going well there.

Wednesday, July 29, 2009

Oil, markets, and the economy

CNBC is really getting on my nerves with this oil business. Last year, they told us that the high price of oil is hurting the stock market. High oil prices is like a tax hike. Oh, how bad high oil prices are says CNBC.

Then oil prices drop hard.

Now CNBC is saying that oil prices are dropping due to the economy. Since the economy is so bad, the demand for oil is low. On those days oil prices go up, they say, since the economy is improving, the demand for oil is increasing.

CNBC needs to make up their mind. Is high oil good or bad for the economy? You can't have it both ways.

2007 Summer Earnings Reports

I have noticed that many companies are meeting or beating their EPS numbers, but missing their revenue numbers. This has me concerned about the health of the market in general. Although we are currently in a confirmed uptrend according the Investor's Business Daily, those top line revenue numbers have to increase in order to EPS numbers to stay high. The numbers seem to suggest that companies are trimming expenses to keep their earnings up which is a great thing, but you can only trim expenses so much and if the revenue isn't increasing eventually, the EPS numbers will start to suffer because you can only trim expenses so much.

GMCR earnings release

Today, the long awaited Green Mountain Coffee Company reported their earnings. The first odd thing I noticed was the 3:48 ET trades, had set GMCR back about $2 per share. I sent out a Tweet stating that I wondered if anyone 'knew' something ahead of earnings since the activity seemed odd.

Sure enough, after the bell, the earnings report came out GMCR beat the bottom line, missed on revs and said it would meet or beat expectations for the next quarter. The stock initially dropped 8 points in the after market. It appears to have closed down 5 points for the night from the 4pm close. After viewing PEETs earnings report the night before, I was concerned this would happen, but didn't alter my positions because of the following reasons:
  1. They have a Wal-Mart deal, PEET doesn't
  2. The company would not have done a 3/2 stock split if they knew wouldn't have a great earnings report
  3. I've seen GMCR in several stores, I've never seen PEET anywhere.
Looks like my analysis was very wrong. If I could have done it all over again, my thinking should have gone as follows:

  1. Sell all my position in GMCR to lock in my earnings.
  2. Buy small near the money call options with some of my earnings
  3. Sit back and watch
If GMCR were to report good earnings and soar, I can eventually exercise the call options to get back into the stock OR if we got action like today, just enjoy the earnings I had already locked in and consider the call option purchase an insurance premium.

Of course, we never know what tomorrow could bring. A few weeks ago a company missed their numbers and opened down hard the next morning, but by the end of the day closed up.

Thursday, July 23, 2009

Just Starting

The purpose of this blog is for me to share my ideas and my trading strategies including lessons learned, mistakes, etc.

As of today, the stock market has had the largest run it's had since 2002. I just got rid of the last of my short positions this afternoon (SPLS). However, it appears that the market run is tired right now and even though BIDU beat expectations, it was down in the after market. MSFT reported today and missed expectations which has put pressure on the market.